How to Start a Software Company
Company Dashboard: Altametrics
Founder Mitesh Gala
Location Los Alamitos, California
2008 Revenue $29 million
Start-up Year 2000
Start-up Costs: $600,000 in savings, most of which came from the $1.2 million proceeds of selling a restaurant in Long Beach, California
Breakeven Became profitable one year after start-up; recouped initial investment in third year of business.
Biggest expense Salaries
Qualifications Years of industry expertise needed to identify and solve a common problem.
Red Tape None
Competition: While there are plenty of software companies out there, no others specifically target the back-office needs of large restaurant chains.
It seems that many tech companies can trace their roots back to college dorm rooms and bastions of higher learning (see Gates, William; Dell, Michael; and Zuckerberg, Mark). The same is true of Altametrics. Sort of. Mitesh Gala was only 13 when he became the youngest graduate of what's now called Jack's University, the franchisee-training program run by Jack in the Box, the national fast-food chain. And 17 years later, he would tap those early lessons to launch a software company aimed at pruning some of the more slippery and time-consuming tasks in running a restaurant.
Back in 1983, Gala's parents, both immigrants from India, had tired of their corporate careers (Gala's mother, Rajul, who earned both a PhD and an MBA, worked in the defense industry, while his father, Denny, an engineer, worked for IBM), and decided to go into business for themselves by buying a Jack in the Box franchise in Santa Monica, Calif. Having invested their family's life savings, Gala's mother sent her oldest son off to school to learn how to help run the new family business. "Of course, I started out by cleaning tables and washing trays," says Gala, who was born in Binghamton, New York. "I was basically free labor."
By the time he graduated from college, after majoring in biology and psychology, Gala was running the business full time. As he grew it to 12 restaurants, Gala also began to experiment with ways to make his business more profitable by dabbling with one of his father's old IBM PCs. "Back then, you still had to do everything manually," Gala says. "Placing a [bulk] food order for instance was an extremely scientific process that took hours." So, without the help of so much as a Software for Dummies book, let alone a programming class, Gala created a kind of souped-up spreadsheet he called "Q&D," which was short for "quick and dirty inventory control system," which he used to keep better tabs on things like hamburger patties and slices of cheese. For example, he figures he saved several hundred thousand dollars a year after he began measuring and comparing the amount of fries his workers stuffed into each box with what the franchise specs were.
It wasn't long before other franchisees were asking Gala for a copy of his software, which prompted his girlfriend, Zeenat (who is now his wife and mother of his three children), to ask him why he didn't just start a software company. "I told her I wasn't a programmer," Gala says. "So she said, 'Why don't you just hire a one then?' And I thought, why not?"
Gala learned his first hard lesson about the differences between running a restaurant and building software when, after placing an ad in the Los Angeles Times in November 1999 for a visual basic programmer, he was inundated with resumes. "I was amazed at the range of pay that people expected to work for," he says. "In the food business, you can hire anyone and they can become a pretty good employee in about two weeks. So I thought the same could be true in software. So why hire someone for $80,000 when I could get the same thing for $14 an hour? After wasting three months and several thousand dollars on inexperienced programmers, I realized you get what you pay for."
Gala admits he was tempted to give up his new venture until he was introduced to Ajay Shiv, a programmer who was moonlighting while working at another company. Burned by his past experience, Gala agreed to pay Shiv $40,000 to produce a commercially viable version of Q&D only after it was complete. "Three weeks later, he opens his laptop and shows me something that was 75 percent done," Gala says. "He told me this thing was going to work because, unlike most people who want to build software, all of my years in the industry helped me to know exactly what I wanted to build." Gala would eventually give Shiv a 25 percent stake in the venture.
Gala spent two years and some $600,000 building his Web-software product, which he called e-restaurantservices.com. "The joke was that we were always $100,000 away from finishing," says Gala, who used the proceeds from selling one of his restaurants as seed money. He then faced a common chicken-and-egg scenario -- no one would buy his product until he landed a reference client. To break the cycle, he swallowed hard and offered a deep discount to land his first customer, a Calif.-based chain called Taco Time.
The real turning point for both Altametrics and Gala, however, was two years later, in early 2003, when he received a call that several executives from Wendy's were flying out to discuss buying his software. Rather than take the discount route this time, Gala stood his ground and asked for $100,000 up front (or $5 million, if the execs wanted 2 percent of his company). Four days later, Gala received a FedEx envelope with a $100,000 check inside.
Today, Altametrics software is used in more than 28,000 restaurants around the world. "When I first created Q&D, I had to beg people to look at it," says Gala, who eventually handed over control of the family restaurant business to his brother. "People look at us today, though, and don't realize how long and hard the road was to get here. It only took us nine years to become an overnight success."
Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.