10 Secrets of Scaling to a Billion-Dollar Company with Laurie Schultz, Galvanize

And Too often when CEOs join to restart up an organization, they do the easiest thing, which is a financial re engineer. In my opinion, that's not a pervasive thing. If you could get culture and customer experience right first, you're going to have the financial outcome.

I need some traction. You need some traction. Lets get some traction.

Hey what's up innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host Lloyd Lobo. We're a community of over 100,000 people just like yourself, on a mission to help you get the methods, the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana, and many more, this episode is brought to you by Boast AI. Each year the US and Canadian governments give out billions of dollars in R and D tax credits and innovation incentives to fund businesses like yours. But the application process is cumbersome, prone to frustrating audits, and receiving the money can take up to 16 months. Boast AI gets you access to research and development, tax credits and innovation funding opportunities without the headache and red tape. Join thousands of North American companies leveraging Boast AI software to maximize cashback. Check out Boast AI. This episode is also brought to you by Launch Academy, an international tech hub that provides mentorship, resources, network and the environment for entrepreneurs to launch, fund and grow their startups. Since 2012, Launch Academy has incubated over 6,000 entrepreneurs, of which 300 have grown their startups past Seed and Series A and have collectively raised over $1.2 billion in funding. To learn more about Launch Academy's programs, check out launchacademy.ca super excited for today's.

Session because it's one of my favorite topics. I am a pirate and we've raised a lot of money and now it's time for me to graduate into a Navy Admiral and I'm having an interview internal fight with myself and I couldn't find a better speaker than Laurie Schultz here who's taken we galvanized which was ACL. What, 49, 50 year old company.

Nine years.

Yeah, 49 year old company that was primarily in the services space, upgraded them from a services company to a software company and then sold it recently for a billion dollars. And prior to Galvanize you were SVP at Sage and VP at Intuit. And a very illustrious career over 25 years transforming companies, brands, business models and marketplaces. How are you today? Lori?

I'm so glad to be here. I've never quite Thought of myself as the Navy, so this is new skin for me. I like to think of myself as half pirate, half Navy, but really glad to be here. Thanks, Lori.

I think the attire also makes sense, right? I'm like dressed like a pirate. And you're dressed very well, like we're at a ball. So that's great. You're looking fantastic. To kick things off, Laurie would love to get more about your background, how you got to Galvanize, how you transformed the company.

We officially closed our transaction with Diligent on April 6th, and so you're getting me in a very incredible moment here. And as Lloyd mentioned there, we have been known up until recently as acl and we were actually born in the University of British Columbia school system back in 1972, before most of you were born. And what you see here is Professor Hartwell. He's this champion who built an algorithm with a handful of students back in 1972 and basically gave that capability away to professors and auditors around the world for the better part of a decade and change. And what it allowed people to do was interrogate data for anomalies, which could be indicative of fraud, corruption and waste. And thus audit command language was born. This is his son Harold, Commercial the business in 1987. And perhaps it's just worth emphasizing right here, I was not the the founder. Like many of you, I did not start up this business. You can see our milestone wall here with many accolades over over the decades. I restarted the business, however, when I joined in 2011. And despite building a category and growing it to a global footprint, we kind of flatlined by 2011 and falling victim maybe to our own historical success. And I joined Galvanize on the invitation to break all of the rules that Hart and Harold had created in the first place. And if any of you have been through a CEO founder transition, that is something that you have to do delicately. The founder may want you to break all the rules, but when you start doing that, you have to have really good chemistry and alignment and strong communications. We'll talk about this more. One thing I had to do early was create belief. It's ironic. Our mission at the time I joined almost 10 years ago was to be the most trusted billion dollar software company and nobody in our organization believed it. We'd run out of gas. Employees didn't feel like they'd authored that goal line and didn't feel like we were making the appropriate investments to get there. And a fundamental part of my role was to recreate belief. And indeed we would Say leaders create a future that otherwise would not have happened by embracing what they don't know, making promises they don't know how to keep, and then living up to their word. And I know that many of you do that all day long. But we had to relearn how to do that after several decades of leadership. And when I was hired, it was really with an emphasis to start with culture and then to leverage culture to transform many other elements of our business. We're very symbolic and culture is a really big deal at Galvanize. And I'll just maybe animate this screen out. This is basically my journey. I've been here nine and a half years and what are annualized billings, revenue and profit? And as Lloyd mentioned there, we were fairly heavy consulting when I joined, 47% of our revenues. We were perpetual, we were on premise. And if you can look at the first five years there, you could say I didn't do a very good job. And we're still pretty flat. But what we were doing was giving this business a seven organ transplant. We were fundamentally reshaping the quality of the revenues, transitioning our technology, our business model and our value proposition. So again, we'll talk about this a little bit more, but our formula, and I almost hate to call it a playbook, but looking back our playbook over time, we started with culture. We bought a true multi tenant cloud solution early on and reversed our entire business around that. We were a subscription model which was a very big part of our transformation. We took on investment from Norwest the first time in our bootstrapped history in 2017. And with them as an excellent partner, we rebranded our business from ACL to Galvanize. We got even better at acquisitions and through all of those changes, we created a lot of resiliency through Covid while actually becoming the recognized leader in our space. And I'll show you a slide on that in a second. As many of you I know are focused on global go to market capability is a big part of the formula here. And being in 130 countries takes a lot of tenacity. And so that that remains a preoccupation for us as we had looked to further double our business in the next three years just before we got acquired by Diligent. So just a few other things here. Some of us joke internally that if you had to have a one page resume from the galvanized kind of journey, this would be it. In 2011 we weren't known at all in the governance, risk and compliance space. And you can See the Forrester wave recognizing us of the top corner and that, that felt damn good. Not gonna lie. But it was based on a lot of hard work in kind of that transformation playbook that I shared with you earlier. And we, we've always been very overt about wanting to go public and not getting sold. And ironically here I am on the tail of a billion dollar US acquisition. Covid was unexpected for all of us, but in particular the amount of inbound with a lot of investment dollars available and a scarcity of assets and hopefully we'll talk about this Lloyd but because of the investment in relationships that we placed with bankers and PE and strategics alike over that entire journey, we were able to queue up a lot of choice and had a lot of inbound interest in 2020. And if I could maybe summarize on one slide things that were really effective for us to achieving that outcome. We had a one page strategic plan, single most important piece of paper, a galvanize captures our vision, values, mission. It's the orientation for board through frontline alike. We had a billion dollar heat map. If you're a data junkie, certainly it seems a navy thing to do. I love the billion dollar heat map. We're very visible about that and we got better and better at storytelling and we told the story our way. In fact, we use that as a bit of a screen. If people didn't want to hear it our way, if they didn't buy into our culture, then they weren't the best partners for us. And maybe lastly just we picked up the momentum around who we were talking to. We had open dialogues with investment bankers, private equity and strategics alike really with the mantra of creating choice. 6 months ago I would have thought that we would have done an additional raise really to fuel additional acquisitions. I would not have imagined that we sold to a strategic, but in the end we did. Diligent is an amazing organization. It owns the board governance space and if you know anything about risk professionals like auditors, they don't necessarily have the audience that they should to the boardroom. And thus our customers now have access to 700,000 iPads of the world's most influential board directors and leaders. And maybe just by way of a quick wrap, if you haven't figured it out, I'm Canadian. We're a Canadian headquartered business though sold in 130 countries and we're really proud of this outcome. We had to work our ass off to create belief again and it's a goal line that I'm so, I have so Much gratitude we share to share with employees. This transaction makes us one of only 20 unicorns in Canada first led by a female. And as a byproduct, I hope that we've bred the next generation of startup entrepreneurs into our economy. So hopefully that was good for a warm up there.

Lloyd, that was fantastic and so inspiring. There's so many unicorns in Canada. Maybe five years ago they weren't as many, but the first female led unicorn in Canada. Now there's Cloudflare which is co founded by a Canadian, but that's a U.S. company. But I want to dive in to a few things that you talked about here. That's going to be great. But the starting point for this was early stage startups often act like pirates, right? Like we're doing whatever we can to scale in pursuit of the treasure and we're rough around the edges, we break things along the way. But it comes a time where you got to turn into this navy, right? And as a founder you're battling with yourself. Oh, I don't want to do that. I don't want to raise money. I'm going to have to add all these grownups to the company. But being disciplined and polished in your approach with a long term strategic view towards market domination is the only way to build a massive company. You can't be a pirate forever. Look at what happened with Uber there. Eventually they swapped the leader because ultimately if you're a pirate forever, all you're going to get is loot. But navies conquer worlds. And so I want to start by saying as a founder transition, let's start there. What does it take for a founder to transition to scale? Do founders have to think about like, you know what? I don't think I can graduate into that and I don't want to add executives to my team. I'm just going to sell the company. But it doesn't have to be that way. Talk about founder transition and how it worked at Galvanize either leveling up or bringing someone from the outside.

I just, it's interesting to open this question this way, right? So many tech CEOs and founders sell out before they have to. And I think we're probably a bit more unique. In fact, when I joined, there was bets all over town, there was bets in the building, how long before I get fired or I got quit? Because mostly when a founder CEO invites someone like me to the table to break all the rules, they don't really want you to break the rules. And Harold Will was unique. He had a lot of self awareness. And he wanted to continue to be part of this amazing business and move to the board. And he and I worked really hard to build chemistry. We made sure that we had alignment and values and in destination. And in his own words, I've asked him, if you were to recommend to other founders, you know, how to ready yourself for this and how to do a founder CEO transition effectively. He says this, know yourself, be up for it. Choose very carefully. I was one of 127 people interviewed, and I think I had 14 interviews myself. That's. That was a big effort, 100% commit, be prepared to put everything at risk and then get the hell out of the way. And because he did that and because we built chemistry around a common set of values, we've had this outcome.

And what were some challenges you saw during that time in transitioning? Was there any friction? Were there some interesting stories? Were there like, I guess, employee activism, shareholder activism?

Yeah, there is a lot of skepticism. And I remember describing the organization like a ping pong game. I don't know why I described it that way, but there's like a third of employees that were like, ready to go. Well, we can do more. And there was a third of employees that were burnt and maybe negative influencers. And then there's a third of employees that were in the middle watching the ping pong batch going on, figuring out what side am I going to be on? And it was really critical that I got in fast and I talked to employees. And it's so obvious, it's not even complicated. But town halls is a mainstream part of our culture. And my first two weeks I did 14 town halls. No pink slip. Let's just talk about what's working, what's not working. And I learned in my first three minutes, my very first town hall from employees, what needed to change. We had to change leadership. We had to have a real roadmap and make some investments there. But more importantly, I actually was able to spot in a crowd who the change agents were. These were people that had integrity of intent, who could create belief, who had the respect of their peers. And those are the folks that I put in charge of our transformation. I didn't care how long they'd been there. I didn't care what function they were in. I was interested in kind of the caliber of their character and their ability to move a room. And it was an essential change for us. It broke all of the ice because I listened to people and I put them in charge of their own ideas, basic stuff.

And what Were your top two or three things to identify who those change agents were? I have this fundamental belief that there is high leverage people or high trajectory people where if you attach to them, they go from like 0 to 10 and they're high experienced people. And sometimes people with lots of experience, they don't want to change. So how do you identify that? Right. Especially going from a services business now transforming to a software, because likely if you stayed services, you couldn't have got this multiple. But how did you spot who is the right person there? There's hundreds of people in your company.

Boy, you're making me think, if did I have like more newer people or more tenured people? I guess I was looking for people that were brave, regardless of tenure or regardless of function and people that, I mean, to jar us from where we are. We needed bravery. And for people to stand up in a room in front of me in that first few weeks and actually just put themselves out there, those are the folks I watched. And perhaps there's a bit of a bias towards extroverts. There's many other ways you can get a voice of opinion, and I think we're pretty good at engaging our introverts as well. But when you get folks in a small setting and you make it comfortable for them to have a voice, you got to pick the ones that got a voice early. And then you've got to clear all of the, all of the antibodies out of the way. One of the first things that we had to do was fix our roadmap. And I remember through all my town halls, we spotted about six people and we created a little SWAT team. And I put them in a room, locked them up for three months, threw some meat in there every now and then, said, you guys are in charge. You come out with the new roadmap. And I remember the founder and I talking about it. He's what? Like, how can we do that? How can we just have like these six people come out of the room with our roadmap? It's going to be wrong. And I said, yeah, but that's okay. It's not going to be perfect. The point is who's authoring it. And again, it's all about creating belief. So often in larger organizations, decisions start moving to the top. And man, if you can invigorate opinion and put people in charge as close as possible, the front line, you build momentum. That is fundamentally the recipe for how we change things.

So Maxine asks here, during that time in the early process, what were your biggest stresses and can you screw up something that's destined to grow and scale?

Oh, man, there were so many times we could have screwed things up when we made big changes. Like we changed our business model to subscription in one year in 2014. Crazy. I mean, if I'd done it before, I might not have done it again because now I know how hard it was to do something like that. When you have a heart change, it's good to have an emergency escape clause and play that game and chicken as long as you as possible. My challenges in my first six months would have been actually more just senior leadership team obstacles. I broke down silos. We were very fractured and there was politics and agendas. I just got all that stuff out of the way. And maybe with the founder and I, it was about just massively communicating. And because it was, I really respect what he did and pretty much let me come in and blow everything up. And there's a couple of moments in our relationship early where he's, we need more information, we need more information. I was like, there's no more information. We have to take the best of what we've got, put the best people on it and go from, you know, our experience and our instincts, but there's no more information. And I don't need to say that to this crowd, but just trying to get the organization to rebuild the muscle that it had somewhere back close to 1972, which is just to go for it, we had to actually relearn how to become pirates before we could become the Navy again.

That's amazing. That's what I was thinking. As you went through this and as you transformed this business model from services to software, is that why the founder brought you in, to transform the company from services to software, or what was your thinking and why did you join the company?

The ask of me was actually to focus on culture initially. And I'd worked at Intuit and Sage before for five and seven years respectively, and I'd learned revenue and customer with Intuit and I'd learn EBITDA and consolidation and kind of global partner model with Sage, but never in a privately held business with this kind of global footprint and with the Ask to fix culture. And I'm a very value centric leader and to be given the opportunity to lead a financial and a customer transformation with an emphasis on culture, that. That was just something that, that really resonated, really resonated with me, definitely.

And in, in this transformation of business model, because I want to dive in there. What were the first few things you did like Moving from services to software, like you shifted the thinking, you identify five or six people and yes, you needed to become a pirate to become the Navy again because it's like you came into an established services company, blew it up and build a startup. What were the first two or three steps you did to make that transformation?

We had, so we were, we're a software company that had 47% of our revenues were services. So it was a perpetual on premise technology and business model. First thing I had to do was address culture and move out leadership obstacles and create an environment where it was stepping on an ant hill where all of the ants were like out of there little tunnels and which create this like reinvigoration where ideas were almost like expected. So we had to focus on culture. We acquired a cloud based, true multi tenant cloud based technology three months into my job and I had to protect that like crazy. The antibodies were ready to pounce down on it. And I had to make sure that its CEO at the time was a direct leader to me and I gave it disproportional attention and I just created space for it. And so with culture and with technology we were able to work our value proposition. I had to motivate people to sell cloud. And we back in the olden days of 2011, auditors and risk professionals, they didn't do cloud. And so I get all kinds of pushback. Well, we don't. Auditors don't buy cloud. I can't sell that. Can you sell it if I pay you 35% commission? And they're like, yeah, no problem, we can do that. And so compensation might sound plain Jane, but when you're trying to make major changes that are against every bone in someone's body, you have to reward that behavior. You have to disproportionately pay for the behavior that you want. And so we had culture, technology, customer value, prop and compensation all in play. And that positioned us to ask our customers to change our business model, which we did. Bootstrapped in one year. And the byproduct of that by the way was we turned our P and L upside down for three years. The first year we converted everybody in 130 countries to subscription. We're like hooray, we did it. And then the second year, holy shit, like we did this and we don't know actually how to count our money now because everything was deferred and we had to hang out in our balance sheet and we had to focus really on customers consumption of our gear as evidence that things were working. And then we came out the tail end of that two and a half years later and the compound forward benefit of a subscription model, oh my gosh, like growth started rolling in. It was so gratifying. It was so gratifying.

I can imagine. And that's what got you your multiple. I don't know if you're open to sharing this, but when you raise the money with Norwest, what were you guys at, revenue wise? And now you sold, obviously, or you don't have to share that if it's not public.

I won't share that if you don't mind. But we were, let's call it at least half the size we were today. And multiples then, not multiples in general in the market, were also lower than they were today. But we didn't have. We were just on the tail end of our business model conversion, at least half the size then. And so our attractiveness continued to grow after Norwest came on. As you saw from my slide there, there was other things that we did that added extra fuel. We rebranded our company. I'm not sure if anyone on this call even knows acl, but if you're in the auditor space or the risk space, that's like a household name. And it was another big risk we took. And actually it was at the invitation of our customers because we were so pigeonholed in audit, which is just a fraction of our total addressable market, that we had to unleash ourself by changing our brand so that the market would give us permission to sell to cybersecurity people and the general counsel and all of those folks that own the risk agenda as well.

I want to go into this change agents concept here you talked about. Tell me about town halls that you've done to engage your people and give them the authorship of the destination.

So we do town halls all the time and we did them a lot at the beginning. And it's just a way when you join to create a lot of credibility and frankly to learn what is broken and learn what's not broken and learn who wants to lead the change. I'll add, I did something in my second year there. I asked a bunch of CEOs, have you ever had a public top talent program? Everybody's. Nobody does that. And at the time I estimated maybe 25% of companies have a top talent program and hardly any of them are public with them. So when I joined, we had actually a top talent program, but it was viewed very suspiciously by employees because everybody knew there was one and nobody Knew who was on it. Exactly. Unless you weren't on it. And it just fueled a lot of mistrust of management. And so change agents, as we actually call our top talent program, are about spotting those folks that, looking back, have had strong performance, but looking forward, have strong potential. Because, again, it's something about their Persona, their ability to lead, their peers, their appetite for taking constructive risks. So they've got this potential. And so each year, we actually publish about somewhere between 5 to 10% of our employees who are change agents. We actually write a paragraph around. Here's why. They're change agents and they're given equity. They're given access to me. I do personal development plans with them. We do, like, strategic workshops and stuff like that. And why wouldn't you want to tell the organization who the change agents are better named change agent than top talent? Because there's a bit of a, maybe an elitist label to top talent. But this has become a big deal in our organization because it allows me to describe and show publicly what we're after, and it also allows me to get to know these people. And in fact, if I may say it, around the question of scale, we're 500 employees. It's hard to know every single thing about 500 employees. But I sure as hell better know a lot about the change agents, what motivates them professionally, what's meaningful for them, and what do they want to be when they grow up. And that's been an incredible part of the change agent program is it keeps it personal and it keeps me accountable to knowing who our key talent is. And it puts me in a position, with their help, of saying, hey, if you want to be in this job two years from now, how do we create a path for you there? How can we create some experiential opportunity for you so that you can get that role? That actually was a huge part of our transformation.

How often do you do your town halls?

Once a month.

There are some people who come with a lot of experience, but likely they're not super high trajectory. You need both in a company. When I say that, meaning they won't. Likely they're great at doing the things at hand, and there are folks who can transform those things for a bigger, better future. And how do you promote people who don't come with high experience, but you spot them as change agents without screwing up the culture and creating bad will? There are change agents, sometimes they're very vocal, right? They want their voices heard. They say a lot. How do you differentiate if that's a toxic person versus a change agent because these people are vocal, they want to be heard. They're high trajectory people I've found are restless, so they just want to be heard. High experienced people who are, they're great at what they do, but they're just, they don't want to rock the boat. So how do you differentiate that and how do you make sure you're promoting people without messing up the culture? You're saying you're giving these people a little more equity, you're giving them involvement and likely many of them are new or newer than people who've been there and done that the old way.

First of all, I think it's really cool when you find somebody new that you can put in this crowd because that means you don't have to be. When the geriatrics were before you get into the change agent club, there's no bias towards brand new or tenured. And you know what? We didn't always get it right. Yeah, we did put every now and then the change agent program folks that maybe spoke more than they acted and then they're just not in the change agent program next year. That's probably a fairly predictable outcome. What's More important is 90% of the change agents aren't toxic and they, as I said, There's 5 to 10% of our organization or change agents, when they leave a strategy meeting, they're carrying the conversation forward into their group, including how to manage a conversation when there's somebody that's maybe disruptive in the crowd. That's a good skill set to gain as well.

Coming back here to this one page strategic plan that you talked about in your slides. Tell us more about that and how did you enforce it? Do you still use it? Does each product team, each division have it? Walk us through what the ingredients of that one page strategic plan and how that sort of formulates your destiny.

Single most important piece of paper at Galvanize. If I'm ever CEO somewhere else or any board role I have, I will always try to influence that organization. Having a one page Strat plan perhaps Boast AI. It's this tool to corral the emotion and the intellect of a large group of people. Frontline C suite, everywhere in the middle and the board. I use it at every presentation I do. It has our vision, our mission, our values, and it also captures our top three strategic priorities for any given year. And those when you double click, they change each year of course, but thematically in order very purposely mobilized talents, customer experience and then business model would be the three anchors. So we're very vocal around the order of transformation starting with employee. If you've got amazing employees, you're going to have an awesome customer experience and you get both of those. The financial outcome will come around. And Too often when CEOs join to restart up an organization, they do the easiest thing, which is a financial re engineer. But in my opinion that's not a pervasive thing. If you could get culture and customer experience right first, you can have the financial outcome.

Talk about building a moat because we've had a few conversations so far prior to this and you bring up moat a lot. What goes into building the moat? What's a strong moat and how did you guys build that?

We were top corner there on that forester wave and we talk about moat a lot. What is that distinguished distinct competitive advantage you have and you have to keep? Everything has an expiry date, right? So you can't rest on your laurels. But for us, by way of example, we're the only true multi tenant platform not point solution in our governance, risk and compliance category that has native data automation and a global footprint. That may sound like blah blah blah under the hood. That's real stuff. That is stuff that our competitors cannot easily match. And we're very careful about trying to protect and expand our lead. In some cases it's through additional R and D investment, maybe it's through expanding our partner model, maybe it's through acquisition. But every organization in my opinion should have a really clear moat. It's an obvious thing, but I've met a lot of organizations that aren't really that clear.

What, what in your opinion are like. I guess if you had to prioritize like the top three things to make up a great moat, what would they be?

Man, it's hard to pick one thing. But what makes us hard to catch is there's many competitors in our space that are strong, but they're North American local. It's not easy to do business in 130 countries. And if you think about it, a lot of customers. Johnson and Johnson might be an example of an organization. They have a global operation, so their ability to access our resources on a global scale is an example of how global scale contributes to our mode. It's not just the business we do in a specific country, but it's how we can service global customers. True multi tenant cloud. I'm not sure of the backdrop of all the folks on this call here, but I meant so many companies as we're looking to Acquire where they're single tenant or they're a hybrid. We're single tenant hosted. And on Prem, like we just walked away from all of that stuff. It doesn't scale. It's tempting when you're trying to incubate the billion dollar outcome to say what if we just modify our technology and we'll scoop in that little on prem because it's a big government client and we didn't compromise when we introduced cloud, true multi tenant cloud to our category 10 years ago. We walked away from a lot of business and pioneered a cloud only outcome. And that gave us a tailwind that's hard for a lot of our customers to our competitors to recreate right now because they've chosen the wrong technology, they're on the wrong business model and they're all hitting the wall somewhere between 10 and $15 million because they can't scale.

Axine is doing a recap here. She says don't be afraid to walk away from the business and what makes us hard to catch. Love that.

I want to make a comment there if you don't mind. I saw Maxine's comment and it's something I wanted to say because I look back nine and a half years I've been here, billion dollar valuation, what could I have done faster? And I hate to call it a playbook. We have a playbook. Culture, technology, business model, rebrand M and A and global go to market. Those are things you need to do to be able to end succession. But here's one thing that added a couple years at least to my journey and is I had to unwind stuff. I had to exit countries, I had to exit technologies, I had to exit opportunistic revenue lines. Like training for example, would have been an example of ours where I dial them down. And I just thought that might be meaningful to throw to this group because you're in maybe an earlier phase of your business. It's tempting, maybe sometimes even essential to take that non strategic revenue line or even non strategic customer. But I can tell you it added two, three years for us to unwind that after the fact.

So you said the second most important piece of paper is your tam.

Yeah.

Tell us more about that. How should companies calculate their tam? How should they think about it?

I probably shouldn't say this, but in a previous job I had a CEO say what's your tam? What's your TAM on? It's like bold. It's like an academic exercise. Okay, I'll go and I'll figure out how big it's like the billions of dollars. Our TAM was our second most important piece of paper. And especially as we not only pitched to bankers and PE and even strategic alike because we had a very original form of TAM presentation, but it also helped us organize our R and D investment versus our M and A strategy. And so what we have sized for our governance, risk and compliance category is a $41 billion TAM. And just for laughs, when I joined were pigeonholed into kind of the audit management auditor segment which is a billion out of 41 billion. I mean if that's not an obvious catalyst for expanding buyers and moving beyond audit and I don't know what is. But we had a very methodical mathematical understanding of how big different geographies were, how big different buyers were and how big different we call them use cases. Different types of risks were in overlap and that we also scored our capability on those intercepts using a ski run metaphor. Actually green run, we kick blues. We're not bad at black runs. We're not great at. And we actually managed our pipeline against that metaphor. Meaning we didn't want our sales guys with a bunch of black diamonds sucking resources out of the whole organization just to sell a deal. We were very purposeful around what segments of the market that we pointed our resources. So our TAM view informed our build versus buy. Our R and D organization is pointed at continuing to evolve our platform to expand our tam. And in some cases we actually bought our way into the TAM we made in our acquisition of a company called RSAM in 2019, for example. That bought us kind of vendor risk management and cyber risk management, things that would have was faster to build than to buy. And that tam, by the way, it's with the one page strap plan. It's in almost every single deck.

I love it. There's a bunch of questions here asking for that one page strat plan template. So I might ping you for that and we'll add it to the recap. When it comes to tam, when companies are early, they're often focused on their immediate target market, right? You got the total addressable market and then you got the immediate target market. At what point do you say now I'm going to expand more and more into the TAM? Is that at 1 million revenue, 10 million revenue? At what point do you say I'm going to all my messaging to investors internally. Everything else is going to be saying let's chase this tam. Because in the early days if you're talking about a massive target market, people might just shun you, right? Thinking that, hey, this person is a dreamer.

And when you ask that question, are you thinking about it geographically? I sense you're thinking geographically.

It could be overall market or it could be like, say, let's say boast. For example, we automate R and D tax credits for U.S. and Canadian companies globally. Trillions of dollars are given in all business tax credits and we can chase after the global market to automate all tax credits. But if we said that like a few years ago, people would think like, these guys are dreamers, right? Both internally and externally likely. So at what point do people start like taking you seriously or you should take that big time, very seriously.

Clearly prioritization is an art. And you kind of gotta, I'll use the monopoly metaphor. You gotta nail home base to give yourself permission to experiment. And picking the experiments wisely. We would have debates around do we accelerate? Our platform development would be a clear example. Do we build our way or buy our way? But we'd have a lot of discussions around geography and things that we would consider is it's not just the cost of getting there, but it's the revenue side. It's supply and demand in a way. So we would often referee TAM expansion based on how, let's say, for example, we want to move into a new GRC risk case or to a different buyer or even geography. What's the history of churn in those markets? What's the average revenue per customer? Is it going to be a meaningful size? And sometimes I think maybe that gets a little bit lost. It's a little bit of a separation of the kernel from the chaff. But if you chase too many small things, then you're not gonna have enough room in the jar for the big things. And so I think that the trick is to maybe I'll just make this up. Put 80% of your next investment in something that's big. Don't put it in 80 small things. You know what I mean? Because those things add up to exhaustion. And as we looked at, for example, taking certain geographies direct, those were big investments. You can't just like penny your way in to go direct in, let's say market like the UK for us, we had to have a full contingent, a brigade, we used to call them, actually. We had to have this certain minimum number of. We had SDRs and sales, pre sales. We need consultants, like, what's the bare minimum, product management to actually land in a market in an authentic, legitimate way. Because if you don't pass going collect $200. And then if you're able to carve off investment for your next TAM expansion, make it a big one, not a bunch of small ones.

So from the time you took on, it took you nine and a half years to drive Galvanize to a 1 billion USD valuation. And you made this decision to take the exit over going ipo. Why did you make that call? Because it's a massive TAM like you outlined and you guys are a market leader.

I didn't expect this outcome. And as you saw from that one slide, we especially last year were actively talking to investment bankers, AKA keep us honest around the time frame and the probability of ipo. So we had a lot of excellent conversations there. That's the path I thought we were on. And of course we had a ton of PE and we would have considered a fairly large raise, our next raise to drive acquisition. And we had very few strategics. So ironic here that we sold to a strategic and I'll say the ultimate responsibility, I believe of a CEO is to make the right decision for a customer. And as I said, this is category redefining to bring our $41 billion GRC TAM into kind of the board portal space and to marry the impact a risk professional have can have with the responsibility a board director has. It was just not something we could say no to. It was above all other choices, the best thing to do for our, for our customers. And maybe as a side note here, and true of all of us, our category is consolidating. And for many of the years I've been here, a company like mine could look down and maybe scoop up a point solution and be acquisitive. Call it midsize on small or call it big on medium. That game's changing in our category at least it's mid size on midsize or large on large consolidation. And I think from a competitive positioning, it was really essential that we did this.

Makes sense. There's a question here that asks, could you tell us more about how you leverage partnerships to drive growth?

We are pretty focused on a direct model in core strategic geographies and an indirect model in ones that we don't ever intend to. Could never be good at being direct. A market like Africa, for example. And I mean that for us at least that has built some clarity around kind of our hybrid strategy. It's being the geographical line in the sand. And back to my earlier point, like when we go direct in a region, it's like with a big commitment, it's not a small team in order to make that, make that play I'd say we could probably do a better job in terms of diversifying the kind of partners that we have building marketplace and looking for a lot, looking to diversify the kind of partner base that we have today. And so that's a forward opportunity definitely.

Now I want to go through this $1 billion heat map. And as you were planning to build this $1 billion software company, that is your mission was to be the most trusted one billion dollar software company that nobody believed in. Who are the key hires and what points you brought them along the way? Answering that in context of the heat map you took over, like at what point do you hire maybe a CMO or CRO or COO or CFO like all these people? Because you inherited a 40 year old company that had a different DNA, you changed the DNA and to transform it into a $1 billion software company probably needed some very key execs. You talked about sort of change agents from within. Yeah, External people you brought.

We all go through these phases and probably have our own different opinions on what, what are the different kind of revenue lines. Somebody might be good at leading a function or a business up to let's say 10 million. And maybe somebody's great from 10 to 25. And maybe somebody's great from 25 to 100. And it's normal for individuals to have a unique wall. And I think the responsibility of a leader is to, to be able to anticipate that. And when I joined, I actually replaced the entire leadership team except for one. Because at that point stage we needed just the new DNA. We had to do that, frankly. And it wasn't just about experience, it was about culture. And then through time the bar goes up on different functions. And sometimes you get lucky in that you have somebody that's born internally that incubates into like your next cto. That's the best outcome. But I do think it's important to bring in external along the way. I'll say this, just a couple of key hires come to mind just as a point of reference. One, we brought on Chief Revenue Officer from Avalara. I worked with him actually at Sage and he joined Avalara when they were 10 million and brought them through their IPO at their north of 500 million today. So that's pretty good experience to have, obviously as we head into an ipo or so we thought. So having a scaling Chief Revenue Officer at some point is critical and that's hard. That's culture. That just creates a lot of culture tension because it's easy for Everybody to be an expert in sales and in marketing and to bring mathematical rigor, that's tough because it's a tough job. And that's something as you go through $100 million line, for sure, I would recommend. Now here's another one. And in fact, the person that helped me with the billion dollar heat map was actually an independent on my board. Somebody that's from our category who was the CEO and an executive chair and founder and now a very successful investor. And for those folks here that don't have a board, you should seriously consider getting one because, man, they'll hold you accountable, they'll bring discipline, but they're going to bring a lot of experience, obviously, depending on how well you pick them. And those are two functions. Our chief revenue officer and this independent that in my last few years had a, a really big impact on our outcome.

This is great advice here. Sometimes you feel like you're drinking from a fire hose, but you want to just keep drinking anyway. And then I'm learning a ton, right? A lot of people don't want boards, but they add a lot of value. And you are the collective of everyone around you, right? You're the sum of the five, six people around you. I want to go back to that CRO. What is the job of a CRO? What is the function of that person? Like, what does this person do? Because you mentioned my board and my CRO were critical to that 1 billion.

To grow the business without breaking culture. Maybe that's pretty oversimplified. Our CRO has our direct business, including both new sales and renewal, has marketing and has partners. And in other organizations they would often have professional services as well. And then he has operations. So pretty large scope. Not sure if others on this call have this shared experience, but the one thing that's been a real eye opener for me with, with this gentleman coming on is like I said, everybody having an opinion on sales is like a sport almost. And others get a lot more relief. And so he's taken a real good poke at marketing and I make sure that our marketing organization is held with the same level of accountability and has the same level of visibility. That's actually being pretty pronounced emphasis for us as of late. So at least for us, I thought I'd share. That's where he's bringing a ton of value. Certainly the expansion of how we think about partners, those are, those are things that we're learning from him. And if I may, having come from Avalara, I mean, they do an excellent job at partners. The Term moat actually comes from my CRO here because in Avalara's case because they've, they've got such kind of spaghetti code into so many partners. How does anybody bump them? So partners done can be obviously a very effective moat and he's an example of somebody that led that.

I'm going to summarize the 10 tips really quickly. We talked about founder transition. We talked about change agents moat, the one page strategic plan. We talked about having your tam, your playbook which you talked about six great things which was culture, which was technology, business model, global GTM brand and the M and A strategy. We talked about being focused and separating the kernel from the shaft. So going after the biggest opportunities versus chasing things that drag your averages down. You talked about your heat map with the two key functions there, your board, your CRO. The last thing here is quoting investors, bankers and strategics. Tell us about that. You guys raised 50 million. Was it from Norwest and was it only from Norwest?

We ultimately raised 70 from them in a couple of runs and then they were our one and only investor.

And hindsight 20 20, would you have taken more investors or the one and done was probably the best decision due to headaches.

They were great for us. We maybe are a bit unusual in that we were bootstrapped for so many years. So it was something we wanted to be thoughtful about, bringing in an investor that that was a big change for the culture of our business, certainly the culture of our board and we had an advisory board because before Norwest joined. But I'll say one thing that we did all along and the founder did it before I got there but we took the phone calls and far better to have relationships that you're far better not be in a sale trying to be in a pitch position when you need the cash. It's far better to have long standing relationships that are more chasing you than the other way around. And that's something I'll always try to recreate if I ever have the opportunity is taking the calls, being yourself, being clear on your destination and making sure that there's alignment in that destination and culture. And we were able to and they were able to date over the long term and it created a lot of choice for us in the end. And I'll just add one thing we always did is we always told them what we were going to do and then we did what we said, hey, we're going to bring cloud to auditors or hey Harold, I'm going to transition to the CEO role or hey, we're going to convert our business model in one year or hey, we're going to rebrand. And then we would meet these guys on the other side of doing that. They were amazed. And so we green a lot of credibility over time and I think it Contributed to the 2020 kind of courtship that we had because it wasn't starting from scratch.

Awesome. That is phenomenal advice. Life and business is a marathon. It's not a sprint. Right? It's not about the money in your bank account with the people around your tombstone. If you focus on relationships, they transcend companies and if you chase the relationship, you will build a long term partnership. Oftentimes people ask me like oh should we optimize for the valuation? And I think if you optimize for the nth degree degree of valuation, the first time a massive roadblock hits, either you're out of there as a founder or the investors are not coming along for the next round of funding to support you. So this is great, this long term relationship focused advice because they are intertwined with you and they know you personally kind of thing. One last question. Entering advice on entering new markets and when to build versus buy. That was one maybe we can do that in rapid fire. Like any sort of rule of thumb for when to build versus buy and how to think about profitability versus growth. Like were you guys very profitable leading up to the acquisition or just all.

Growth focused Rule of 40 or Rule of 50 or whatever you want to do is managing Adding revenue growth with percent profit margin is probably most people. On this note, I really actually like that metric. Just know where, just know what side of the line you're on and make sure that your C suite and if you have it, your board is aligned. Every year as we went to approval for our annual plan, I would make sure we were all clear on in fact I would plant my whole leadership team by name and my board by name. Where are you on the scale of growth orientation versus ebitda one dimension and strategic versus IPO another dimension. And it's okay to have a difference of opinion. It's just not okay to not share your difference of opinion. And so the key thing for us was to be very clear on the relative to tensions and discussion. And for us, certainly the majority of us, we are very growth centric approach but with respect, profitable. Not massively profitable, but we always wanted to have respectable profit. Profitable growth was our goal.

One follow up there actually. At what point does profitable growth matter? When you're at 10 million, should you be profitable? Should you be profitable at 50 million. Like when should you sink it all in versus start taking some profits?

I would referee it based on what infrastructure you have in place. So this may not be exactly what you're after, but if you've made the right choices with culture and business model and technology and if you've got a path to global scale, then invest for growth. If you're on prem in perpetual and have more of a body shop business than invest for profit because it doesn't.

Scale, that's an awesome. You basically told me, Lloyd, don't reason with analogy. Just because it works with somebody doesn't work for you. Reason from first principles. If you have a path to scale, invest in growth. If you have a path to. If you don't have a path to scale and you're a body shop, then invest in or focus on profitability. And then the last question here, build versus buy. Was there a rule of thumb that you looked at?

Listen, one thing I want to say on acquisitions. I'm a fan of acquisitions and when I first started and I combed the universe, I met, I met so many founders. I actually have a better appreciation now. An M and a strategy acquisition can be fed by multiple agendas. I started looking for product and we made a product acquisition first three months and we made a product acquisition in 2019. You can acquire geography. We acquired channel partner in Asia. That was a really good move. You can acquire talent. Our design team was born of an acquisition and it's a fundamental part of our moat. By the way, we're beautiful, beautiful to use and you can buy buyer type. That's our preacher Preoccupation right now is what kind of organization owns, you know, the privacy agenda in our organization. I'm not really directing, answering your question question, but the build versus buy discussion is not just one of R and D. It's as I've learned, it's also of talent, it's of geography and it's a kind of go to market capability and brand.

Awesome. Now this has been fantastic. We're at the top of the hour here. Three minutes over, actually. As you look back on your journey, what do you wish you did more of and what do you wish you did less of?

I don't like to look back and have regrets. There's things I didn't do that well and mistakes I made. As long as you reflect on those, you come out of it a better person. And so I wouldn't change anything. Even as I mentioned before, how could we have done this sooner? We had to unwind some stuff and maybe for us this transaction happened at the exact right time. So that'll be my answer for now is don't make any changes.

Great things happen to great people and you're one of the most wonderful people I've met. I've taken a lot of notes. I'm not, I'm actually not kidding here. But last thing here before I let you go, what's the one company you're super excited about?

One company? Oh, come on. It's Boast AI.

Thank you so much Lori for the plug for a wonderful day.

My pleasure.

I need some traction.

Thank you for listening and we hope hope you enjoyed this week's episode of the Tracktion podcast. If you enjoyed the show, please leave us a five star review and you can find more information and all the resources mentioned in today's episode at Boast AI. That's b o a s t AI blog.