Building a Sustainable SaaS Business: Insight from Jonathan Brun, CEO of Nimonik

I've always had the goal of building an enduring business that lasts long after me and that provides high value to the customers, a good work environment for all the team members, and keeps innovating and, and staying relevant.

Welcome to Scale Like a CEO, the podcast where we sit down with founders and leaders who've been in the trenches scaling their businesses from the ground up. Today we've got an incredible conversation lined up for you. We're joined by Jonathan Brun, CEO of Mnemonic, a SaaS company that's been helping businesses navigate the complex world of compliance, since 2008. Get ready for some real talk about building a sustainable SaaS business, the challenges of leadership, and what it really takes to grow a company over the long haul. Let's dive in.

Jonathan, thank you for joining me on Scale Like a CEO. To get us started, if you wouldn't mind, just give us a 90-second intro to you and your business.

Uh, happy to be here. My name is Jonathan. I am founder, CEO of a company called Mnemonic. Uh, I'm an engineer by, by, I guess I still am an engineer. Uh, we started the company in 2008. And it's a company, it's SaaS, B2B. We offer a product that helps businesses identify engineering standards and laws and regulations that apply to their company, their products, their operations. So basically our product helps medium and large businesses stay in compliance with requirements. And these are requirements coming from engineering standards that are published by various industry bodies like petroleum industry or testing industry. And then laws and regulations published by governments. So whether it's federal government, state level, provincial, all around the world and, and sort of an all-in-one tool. Think of it a bit like an Amazon for compliance.

Great. And tell me what makes you unique in the way that you're, the way that you serve your customers.

I think the most unique element about Mnemonic is it's a vertically integrated business. Sort of SaaS companies in our space tend to focus either on a software tool that has workflows and various things in it, but it's an empty shell. There's no content in it. And then you have content providers out there that sell you documents, sell you data, but you usually have to buy that content, sort of manage it somewhere. What we try to offer is an integrated solution where you've got enough workflow tools that you can handle all this content, because there are about 500,000 industry standards out there, sort of equal number of regulations. So if you're a global company, you're dealing with hundreds of thousands of documents that need to be reviewed and updated. So our tool is this vertically integrated solution with both the content and the software all in one. There's other, you know, things that make us special for sure, but I'd say that's, that's the core differentiator between us and some of the other options in the marketplace.

Jonathan, you've been growing Mnemonic for a while and you started as the founder. I'd love to kind of go back in time and explore as you were transitioning from being a team of 1 or 2 as the founding team to starting to build the team, what are some challenges that you faced in some of that early growth?

They all say, you know, get the right people on the bus before you start driving the bus. There's all sorts of expressions out there. Hire slow, fire fast. And I took a course called Scaling Up. It's like a framework for helping you build up a business. I definitely recommend it. A guy called Verne Harnish. And in there, there's 4 pillars to growing a business: people, cash, strategy, and operations. And they ask in the audience, you know, which pillar is the most challenging for you? And most of you in the audience are running small businesses. I think like 80% said people. So, so I don't want to pretend I have some sort of magic solution because I really don't. It's tough. We've hired people that were great, hired people that weren't great, you know, but in the early days, the people you need in the early days are rather different than the people you need later on. We're now about 55 people, but when we were, when we started, we were sort of 2, And you know, then it went to 3, 4, 5, et cetera. And when you're small, certainly we need people that are willing to do many different things, wear different hats, able to learn on the fly, don't need detailed instructions because we just don't have any. So you need some sort of dynamic people, but then as we got bigger and we got closer to like the 20-person range, some of that less structured behavior started to create problems and started creating you know, it prevented us from growing because when you, once you start growing, you want to have policies and procedures in place that you can sort of duplicate and repeat. So we had to switch out some people, brought in some new folks. So the organization has evolved over time and the people, you know, have also evolved. We have people who've been with us for a very long time, but some learning experiences in that journey going from just 2 to about 55 in 17 years. More or less.

You're definitely describing one of the models that I use when working with people is the grinder model. And it describes that kind of the creativity phase in the beginning where it's just kind of chaos. We gotta figure out, you just figure out how to do it. But as you grow, that creates problems. And so you've gotta transition into some sort of leadership and consistency in the way that you're operating. How did you, how did you successfully navigate that? What if you think about what are some of the key strategies to kind of build some of that consistency? What was there?

I mean, I wish I had some brilliant ideas here. I think it's a lot of learning as you go, some pain, some errors. We started building out policies and procedures, trying to get people to follow them, then realizing that they weren't following them. And then it's like, is it the people's fault? Is it because the procedure wasn't clear enough? And then the systems are changing so fast as well as a growing business. You know, our own procedures are constantly being updated. And I think that one of the biggest challenges is not necessarily writing a procedure on how to do something, it's keeping it up to date and keeping it relevant as the business changes, the customers change, the systems change, but also you, you learn as you do. So we definitely learned a lot from the lean manufacturing movement. So we, we, for a while we, we went deep on like how, how manufacturers grow in a lean fashion. And, and, you know, a lot of it has to do with getting rid of waste, getting rid of things that you don't actually need to do. Balancing the workload, not having huge spikes or ways like working like crazy and then there's a crash afterwards. So we took a lot from lean manufacturing and it's just this iterative process. I think there's a Steve Jobs video out there where he talks about, it was a teenager going to a neighbor's house and the neighbor took a bunch of rocks from his driveway and that he put in like a tin can that just would rotate. And he said to leave, come back in 24 hours and these very rough, ugly rocks that they'd picked up on the side of the road after turning them in this tin can for 24 hours had turned to like polished stones that were really quite look good. Right. And obviously the analogy here is you gotta just knock stuff together for a certain amount of time to polish. And I think that's true of rocks. I think to a certain extent that's true for a company as well. So I think maybe that was our strategy, just like knock stuff together for an extended period of time and things kind of work themselves out if you manage to survive, I suppose.

You mentioned that getting the right people on the the bus was one of your, one of the key elements there. Tell me a little bit about, as you're adding people to the team, either back then or even today, what are some of the key qualities that you look for?

Yeah, the metaphor of getting the right people on the bus and then figuring out where to go, I read that many, many years ago when I read the Jim Collins book Good to Great, even before starting the company. I think it took me a long time to really understand the gravity of that and how important it really is. I think I only figured that out sort of in the last few years. And the way I probably realized how important that was was in the last couple years we've hired more senior people who are more expensive. You know, for the— we're a bootstrap company, and so for a long time we were trying to hire people with a limited budget, limited salaries, obviously not necessarily attracting people who had 20 years of experience. But in the last 3 years, as the company's grown and things have shifted, we've done 5 acquisitions, we brought on some more senior people that had 20 years experience under the belt and basically knew exactly what they were doing, and they've been doing it for 20 years. And, and so seeing them operate at a much higher level, it really opened my eyes to, wow, okay, there are people that just know how to get the job done and done properly on time, on budget, et cetera. And yes, they cost twice as much as the other person, but they make way less mistakes and they need way less management and they understand what's happening. That was critical. And could we have done it earlier? Yeah, maybe if it like had more money. So, but, you know, maybe not, maybe we just spent the money on the wrong people because we weren't even knowing what we were looking for. So it's just one of the things is it's hard to disentangle those types of decisions that come over time and come through, basically just get punched in the face a whole bunch of times. But I think though the Warren Buffett quote about like what he looks for in people, I think it's something along like you look for intelligence, integrity, and initiative. You know, if you have the intelligence but you don't have the integrity, you're going to be in big problems. And you know, if you have intelligence, integrity, but no initiative, you got to spend all your time motivating them and managing them. So finding those three elements in, in a person is probably the core. And then everything else is just a question of sort of technical skills and expertise. And, but if they have initiative and they're smart and they have integrity, usually they're going to be a great, great team member.

Um, so that's kind of, I'd say we try and stick to and You mentioned that you made a couple of acquisitions, and that can be sometimes challenging to get companies to kind of merge into the culture and, you know, get them kind of blended together. Tell me a little bit about that process and going through those acquisitions.

So we started the business in 2008. After a few years, one of the realizations I came to was that growing the business was going to be a long, hard slog in the sense that our sales cycle is quite long. The product we sold historically, which was more the regulatory piece, is not a hot seller in the sense that it's not part of people's core business. It's viewed more like by inference, which is not something you really want to do. You kind of do it because you have to. You view it as an expense. You want to minimize the expense. So selling our product is a slow burn. And to get to scale, which is where you start to see profitability, I said, well, let's see if we can do some acquisitions. So in 2013, kind of wrote a little strategy document, said we're going to try and do some acquisitions. And then we started looking around for who could we acquire, very, very small company. And we've done 5 so far, and I'd say they've all been very successful. But to your point, for sure, you need to be very judicious about your acquisition. I think there's a lot of people that do acquisitions because it looks fun, sexy, gets you in the news. It goes to your ego. You have more people working for you. I think there's studies out there that show that most acquisitions, M&A, fail to deliver real shareholder value. And the ones that do deliver shareholder value tend to fulfill fundamentally two criteria. And those two criteria are, one, the company cultures need to be very similar. So if you're like a big bureaucratic company and you're buying a small startup that's innovative and dynamic and not bureaucratic, it's unlikely that's going to be terribly successful. So you want companies that are very similar in culture, and that, that's really critical because you're not going to change all the people. You're not going to change the culture. That's not possible. And then the second element that's super important is the products need to be as similar as possible. At least in our case, we were doing what you call a roll-up, meaning we're buying basically competitors and putting them all onto one platform. We move all the customers over. We have one brand, one company. And so in that case, every single difference in our product Creates exponential amounts of work because you need to adjust the software, need to adjust the training, the support, the customer expectations. And so you really want to avoid differences or substantial differences between the products of the two companies that you're trying to marry, you know, the one you're buying. So I think we've been pretty judicious about that. It's worked out really well for us. But we've definitely, you know, we've turned away acquisitions because the culture wasn't there or the product was just too different from what we offered, even if it was in the same space. I'd say the core thing we're looking for, and then we are looking for businesses that have been around been around for a long time, so it demonstrates a certain staying power. Have good team members. A lot of the great team members we have today at Mnemonic were through acquisitions. So it's a bit of a talent angle. But yeah, we definitely look for culture and then product fit. And if you have those two things, and obviously the price has to be right, it can be very, it can be a very powerful lever for growth, I would argue.

Well, actually, I just recently reposted an article citing some research that I think 70 to 90% of M&A deals actually fail. Because those things that you're talking about, right? They're looking to acquire something about that business, whether it's the people, whether it's the intellectual property or the product that they have. Forget that everything else comes along with it. Whether you're buying it for the product, you also need the people that know that product. And if those cultures don't align, it can really be challenging. I can think a number of years ago when I was leading talent for growing software company. We were about 410 employees and then acquired by Oracle. And I think half the people— not like we transferred almost everyone in the company over to Oracle, but half of them left within the first year just because that wasn't even an environment that they wanted to work in. Quite a difference going from a small, nimble company to huge bureaucratic company.

Too many people look at companies through the prism of a spreadsheet. I mean, they look at it, you know, profit and loss and balance sheet, fine. But they also look at it, how many staff do you have? What are their names? What are their job titles? And that's all they care about. And what are their salaries and compensation packages? And to your point, you know, organizations are fundamentally groups of people doing something. And you can't just transfer over the core of a company without transferring over the people. And for sure, people themselves, you know, if they're, if they like working in that dynamic 400-person company and you're then absorbed into a huge beast, a lot of people just leave. Never mind, you know, when they try and let people go to reduce costs or what have you.

What's the future look like for your organization?

Well, we're still a very small company. I mean, we're bootstrapped. We've got a stable customer base, about 900 customers, and we're growing at a healthy clip. But I've always been a fan of very long-term. So there's different business approaches out there. You can go venture capital and and raise and exit, sell, IPO. But in our case, at least, you know, I've always had the goal of building an enduring business that lasts long after me and that provides high value to the customers, a good work environment for all the team members, and keeps innovating and staying relevant. And I have tremendous respect for businesses that have succeeded at doing that. And there aren't very— I mean, it is very, very hard to do that, to stay relevant over decades. Never mind years, but the pace of technological change is massive. So I have examples in mind of companies like Ford or companies like IKEA companies, then there's many others that have been around for 100 years and they're still going strong. So that's sort of the goal. And how do you do that? How do you do that in an evolving tech environment? I'm not really, you know, we're constantly evolving and figuring out, right? There's no one answer, but that's certainly the goal. The goal is not to sell the business to private equity or to a strategic. It's really to just continue to deliver value for the customers and a good work environment for the team members and just stay relevant as the landscape is always changing. So it's not terribly sophisticated, honestly. It's just like this long-term— I think Jensen Huang from NVIDIA, people have asked him kind of questions like that and his response is like, survive, which sounds weird coming from the guy at NVIDIA, but people forget NVIDIA almost went bankrupt twice. You know, their stock price went down to nearly zero twice. So in the tech world, just surviving for an extended period of time is a huge achievement.

I think it's great. I like that you have this vision and idea that you want to build a company that can provide sustainable value, that you're not looking for an exit. You want to build something that can last, which is incredible. And it sounds like you're well on your way. Jonathan, thank you so much for taking some time with me today. I've enjoyed the conversation. If folks want to get in touch with you, what's one of the best ways to do that?

Uh, best is probably LinkedIn. I'm pretty active on LinkedIn, so you should be able to find me pretty easily. Just Jonathan Brun on LinkedIn. Uh, feel free to shoot me a note. I'm based in Montreal, uh, but travel a fair bit. And then if anybody's in town, you know, uh, feel free to pop by for a coffee.

Great, great. Well, thank you so much, Jonathan.