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OWNER'S MANUAL

Inside ExactTarget's Journey: From IPO to $2.5 Billion Acquisition
 

CEO Scott Dorsey has guided his company along a path few others reach--from start-up to IPO to getting acquired by a giant. Here, he talks about what he's learned.

ExactTarget rings the bell at the New York Stock Exchange March 22, 2012, the company's first day of trading.

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Thirteen years ago Scott Dorsey and his co-founders used a napkin to sketch out a company. One year ago ExactTarget, an interactive marketing software company, went public with a market cap of over $1 billion (and I wrote about the mental journey from start-up to IPO taken by the company's founders.)

Now the story continues: A few months ago ExactTarget was acquired by Salesforce.com for approximately $2.5 billion.

Very few entrepreneurs manage to take a company from start-up to IPO--much less to acquisition. I talked to Scott about his newest chapter in an incredible entrepreneurial journey.

Let's go back a year. Now that the IPO experience is under your belt, pretend I'm about to take my company public. What advice would you give me?

First, surround yourself with an excellent group of advisors, starting with investment bankers and analysts and advisers at the board level.

We wanted banks that had big brands, big cachet, but most importantly had strong analysts that got our space and got our industry and would be good champions for us in the future. Then we looked for highly collaborative banks with a good cultural fit: Bankers and firms that would work well both with us and with each other.

I also called a numbers of other CEOs to learn from their experience. There's a very small fraternity of entrepreneurs who have gone public, and the cool thing was they all want to talk about it and pay it back to others. Each had such a rich experience, had leaned on others who had gone through the journey. Without exception, everyone I called dropped everything and gave me great advice.

Here's one example. You put tons of time into road shows, preparing, etc, and it's easy to not think about the Q&A. After you get a couple days in to the road show, it's all Q&A. Fortunately many of the CEOs I talked to told me to focus really hard on preparing for it.

One other thing: Make sure you have an amazing leadership team and real scale. Going public is incredibly time consuming and you definitely need leaders who can run the business. At least a third of your time as CEO will be directed to a new place: being a public company CEO.

Was that hard a hard adjustment to make?

For me it wasn't because we had such amazing leaders in place.

In hindsight, had we actually gone public in 2008, I really think we would have struggled: we were a smaller company, we didn't have the breadth of management or the scale. Sometimes circumstance works in your favor. I'm extremely thankful we didn't go public at that time because we may have never achieved the heights we've managed to achieve.

That's an interesting point because you can be ready from a market perspective but internally you may not be ready.

Absolutely. Plus from a market perspective you have to be at a trajectory where you can show incremental profit improvement over time, and that's not always easy for companies.

That's another big learning: I see companies go public too quickly and then feel pressure to show profitability and can't invest in growth the way they could had they stayed private. We had enormous growth heading into the public offering and had developed a clear path where we could show profit improvement over time while still investing heavily in the business.

Another word of caution: Think strategically about the right time to go public. You may want to go public but you need to be ready in a number of different ways.

From a branding point of view, you're ExactTarget, which is part of Salesforce, as opposed to the other way around, which often happens to acquired companies.

We're committed to the brand, to orange, to Indianapolis and Salesforce is committed to helping us maintain that identity. We're the biggest acquisition in Salesforce history by orders of magnitude, and they really want us to keep our identity and retain everything special about the company.

Let's talk about the acquisition. Once you ran your own company so you were the boss. Then you went public which meant you had tons of bosses. Now you have a new boss. How was that transition?

Like Jim Collins says, the role of a leader is to grow great leaders so when you leave the organization doesn't miss a beat. We were venture backed with smart, demanding VCs who became board members, and that not only made us a better company, that really helped prepare us to operate as a public company.

Now, operating as a public company has prepared us to operate under Salesforce. Marc Benioff, the Salesforce CEO, said to me, "I want you to keep running the company. In fact I'm going to give you more to run. Just think of me as your 'board of directors' instead of the board you had previously."

I feel very empowered to keep running the business, and I feel very aligned with broader company goals. So I'm working hard to keep our leaders focused on running the business while I focus on the integration--that way it's business as usual for our customers and our teams.

You're in this tiny little sliver of people who have gone public, and then been acquired. How does that feel personally? You've done what thousands of people hope to do.

I don't think about it very often. We've had very little time to think back and reflect. I'm proud of the team environment and culture we've built: great people who make great decisions and make great things happen.

I'm also very proud that everyone who invested in ExactTarget got a really positive outcome, and every employee who was given equity in the business got a really positive outcome. That's extremely gratifying.

Did the humble days inform everything that was to come?
Definitely. Our culture was not one of entitlement. We were scrappy, bootstrapped, and thankful for anything and everything that came our way.

2008 was also tough. Trying to go public during the financial crisis was like being a public company without any of the benefits of being public: briefing analysts on a quarterly basis, reporting financials--all the encumbrances of  public company but none of the financial benefit. That was tough.

Tell me about your worst moment as an entrepreneur.

The toughest moments were definitely at the beginning. Three of us started the company, we were first time software entrepreneurs, we were starting in a difficult environment in late 2000 when the Internet bubble had burst, we couldn't get funding, we were working without salaries and having no financial cushion... but almost in a linear fashion it just got better and better: more momentum, more customers, better culture, better technology.

If you could go back in time, what would you love to be able to tell yourself 13 years ago?

Salesforce put philanthropy in place right at the very start with their 1/1/1 model: 1 percent of company equity goes into the Foundation, 1 percent of the product goes to community improvement, and 1 percent of employee time goes towards volunteerism.

They did that starting day one, and I would never have thought of that, but if I started a company today I would tear out a page from that playbook.

As a first-time software entrepreneur I also didn't know what I didn't know. I didn't know the importance of a QA group or product management. There were so many things I didn't know I didn't know.

Fortunately we've hired a lot of smart people who have done it before. As a leadership team, we're good listeners: We bring in talent and then evolve and adapt based on what we learn.

 

IMAGE: NYSE
Last updated: Oct 28, 2013

JEFF HADEN learned much of what he knows about business and technology as he worked his way up in the manufacturing industry. Everything else he picks up from ghostwriting books for some of the smartest leaders he knows in business.
@jeff_haden




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