Exit Strategy
When four friends started IRIS on a lark, they did it their way. They never appointed a CEO. And they agreed to sell the company -- the sooner the better. Eight years, 50 employees, and four attempts later, they've finally succeeded
If you were a Hollywood scriptwriter working on a plot about four young friends who go into business together, you'd want to drive about 45 minutes outside L.A. to visit a little software company started by, well, four young friends. The story of Maggie Etheridge, Eddie Ureno, Dan Woolley, and Greg Robertson -- the founders of IRIS (#192) -- is a drama replete with office romance, heroic leading men and women, supernatural acts, a Justice Department investigation, jealousy, a multimillion-dollar stock deal, and maybe, just maybe, a happy ending. Even the "characters" seem made for the big screen. Maggie is the emotional, smoky-voiced "soul" of the company. (Demi Moore?) Dan is the affable technology whiz. (Kevin Costner?) Eddie is the silent but strong operations chief. (Andy Garcia?) And Greg, the larger-than-life sales star at IRIS, says he wants to play himself. Even without a movie deal, one thing's for sure: there's been no lack of conflict at IRIS -- starting with the four founders themselves. From their business philosophies to their religious beliefs (which range from fervent Christian to agnostic) to their temperaments, they are about as different as four people can be. Different but equal. To this day, the four partners are equal in every way: pay, equity, rank. No one is CEO. No one has the last word. The unusual arrangement has been their greatest strength and at times their undoing. So contentious are they that they sometimes come across more like a jury than a management team.
They have, however, always agreed on their exit strategy: sell the company. At least three of them have always agreed on that -- or so they say. Greg, the gung-ho salesman, was the lone holdout. In fact, he was against the plan as late as April, when IRIS, based in Anaheim Hills, Calif., began a second round of talks with a competitor that looked to be the perfect parent. "My attitude was always, We've got to make this company happen ourselves," Greg says. That's because, he admits, "I never thought anyone would ever buy us."
The first suitor came knocking a few years after the company had been founded -- or more accurately, after the company just sort of happened. In 1992, Maggie and Eddie were dating. One night they had a long conversation about Maggie's mom, a real estate agent. Mom was having software problems with a new multiple listings system (MLS). Anyone who's bought a house knows that real estate agents depend on their MLS for printouts of properties for sale. Hundreds of different multiple listings systems exist across the country; each one has its own access software to master. The two Maggie's mom was using in southern California were no romp on the beach.
Being the dutiful daughter she was, Maggie wanted to help her mother by writing a better MLS access program. Eddie, who was crazy about Maggie, jumped at the chance to help her. "She didn't want to start a business; she just wanted to do it for her mom," he says. But he was more pragmatic. "I said, 'No, we're not just going to write it for your mom.' " Besides, starting a company meant he and Maggie could spend more time together. Maggie quickly recruited their friend Dan the programmer.
Providence provided their start-up funds. Maggie, Eddie, and Dan were all working for the same court-reporting-software firm in Irvine, Calif. A customer commissioned them to do a software project on the side. The freelance job paid $7,000 -- enough to buy them equipment and time.
The software that they eventually designed for Maggie's mom would do for real estate agents what browsers do for Web surfers. But back then they had no idea whether the program would sell. Or even how to sell it. They thought about the people they knew. Eddie remembered his old college buddy Greg Robertson, who'd gone into sales. Over beers at a Newport Beach bar, Eddie made his case to Greg. But Greg remained skeptical until April 21, 1992 -- the night everyone met for dinner at Maggie's house. "Maggie's a dreamer," notes Eddie. And her dream sounded good to three young people disillusioned with work. The guys were all 24. Maggie was the oldest at 27.
They thought of themselves as "four punks" who were "up against the man" -- the large MLS companies that controlled access to their listings. Dan gleefully set out to crack the code. He remembers the eerie feeling he had when, after operating in stealth mode for a year, the four unveiled their first product, Lightning, at a trade show in 1993. "I got a chill down my back in the parking lot, and I thought, 'Better watch my back,' " he says.
Management experience? "No one had any," says Dan. They arrived at their job duties "organically." Maggie, who saw her mother in every customer, was the natural choice to head up training and customer support. Her easygoing boyfriend, Eddie, agreed to take care of operations, which, at first, consisted of finding his way around Maggie's garage. Dan, the programmer extraordinaire, showed a flair for business strategy. Greg was a one-man selling band. He'd load up his '67 van with product and drive off with instructions not to return until the van was empty. He did what he was told, and it all started to click.
Still, none of the partners thought the company would last more than 18 months. When it did, "we started to think we were golden," says Maggie. "We were unstoppable."
And then bad things started to happen. Maggie recounts the darkest hour: IRIS received a threatening letter from one of the large MLS companies demanding that IRIS stop selling its software. "We were scared," she admits. Then two things happened that Maggie likens to "acts of God." First a phone call came out of the blue from a woman who represented a large group of real estate agents in Omaha. She wanted 100 copies of the software, which then sold for $99.95 a copy. And then, miracle of miracles, a lawyer took pity on the four and worked at a discount to help them with a variety of legal issues, including fending off possible lawsuits.
October 1995: The first attempt to sell the business
A Dallas software company made an offer the foursome couldn't refuse. They were at a crucial crossroads. They had yet to hire a single employee, and they were tired. Clearly, they'd gone as far as they could as a gang of four. Revenues stood at $230,000. The buyout offer would have put less than that in their pockets. Still, says Maggie, "we thought we should take the money and run." Eddie had visions of sailing to the Bahamas. But there was also a catch: the acquirer wanted complete indemnification from intellectual-property suits. Greg was dead set against the sale for many reasons and fought his partners tooth and nail. "Greg wore us down, and rightfully so," says Eddie. The deal collapsed. Greg felt vindicated, but the others were dejected.
