REPEAT is a special interview series underwritten by CliftonLarsonAllen where we take a deep dive inside the minds of Minnesota’s rare repeat technology entrepreneurs. Repeat means to start a tech company, exit said company, and return start another one.
We kick it off today with Scott Litman and Dan Mallin, presently pursuing Equals 3 after decades of documented business success. Together and in parallel they also founded the Minnesota Cup in 2005; Litman & Mallin are among our guests of honor at the upcoming Founders Respect and Recognition event on April 5th.
What was the first exposure you had to technology and work, business or money?
Litman: As a kid, growing up in St. Louis Park, I really got swept up by Apple and Microsoft, as they were both in their prime. I remember reading everything about Woz, Jobs, and Gates since they were like the tech idols of the time…creating products, cultures and companies.
I got my Apple ][ when I was 13 from my grandmother and that timing was kind of my awakening, though I think entrepreneurship has always been in my DNA. I witnessed my uncle firsthand, as he scraped together a few dollars and ultimately became very successful.
I started with a paper route in high school, which really felt at the time like was running my own small business. It was a hustle to be sure.
Mallin: I also had an Apple ][ – ours was a family computer – and I learned desktop publishing using markup language. Building off that, in high school, I created a video production company (and sold it) while still in school. I too had a paper route and did lots of shoveling while growing up which taught me about hard work and earning money.
What did your parents do for a living growing up?
Litman: My father was a professor at the University of Minnesota in the School of Public Health, and my mother stayed at home and is an artist.
Mallin: My dad was a physician, and every physician was really an entrepreneur at that time, moving from a junior to the senior partner in the practice.
Do you have siblings and are they entrepreneurial also?
Litman: I have an older brother, who worked at WCCO TV for 20+ years.
Mallin: Two sisters — the oldest is a ‘big firm’ lawyer and the younger is a teacher and an artist.
What came next?
Litman: Around age 17-19, I was consulting by teaching people how to use computers, and helped them buy hardware — at a margin, of course.
Mallin: I ended up going to work for the national largest independent Apple Dealer starting in shipping and receiving and moved into Sales and service side by 1984, de-soldering and reassembling the mother boards inside the original Macintosh.
Were your families supportive of your early business interests?
Litman: I grew up in a environment of ‘you can be whoever you want if you’re willing to work for it’
Mallin: Yes they were and work ethic was instilled in us from the beginning.
Where did you decide to pursue business at such a young age?
Mallin: I love working. I also loving playing… in general I have always enjoyed the process of accomplishment, learning and earning. Having some spending money was certainly a factor in the beginning, I really learned how much I loved solving problems and using technology to do new things.
Litman: From an entrepreneurship standpoint, my motors have always been running. One of the things that we both share is growing up in a Jewish household and when you’re 13 you have your bar mitzvah which takes years of advance training…discipline, planning, and hard work are the paths that we were set on.
Mallin: I would add presentation skills to that, with hundreds of people in the audience for you and your content. We also both happened to play basketball growing up which taught us about practice and winning.
Litman: I don’t know if it’s time based or a learned thing, but I do think there’s something to it that’s fundamentally genetic. When I start a venture, I fundamentally believe that it will work and I know Dan is the same. Some people just aren’t wired for this, the uncertainty vs. certainty mentality.
What is a business lesson you learned back then that you still embody today?
Mallin: understanding the value of cash flow…I remember from the route that if I didn’t collect the cash and do the job right then there was nothing to count.
Where did you attend college?
Mallin: I went to Drake and played hockey while studying business and information systems. Later I received my MBA from the Carlson School of Management at the University Of Minnesota.
Litman: I went to the University of Minnesota and my days of wearing the uniform had ended by then. I was a history major and a speech communications minor.
Did you continue your entrepreneurial ways in college?
Litman: Absolutely. By the time I was a sophomore, I was working for Microsoft. When I was a junior, I joined a startup and continued to put in the hours, making a professional salary while still in college and learning a ton about what to do and what not to do.
Mallin: I worked for Apple and Microsoft in college and always had my own consulting company on the side. Ironically, I passed up on the same position that Scott had with the startup he just mentioned, we didn’t even know each other at the time.
Litman: But we did both work for Microsoft at the same time, still unbeknownst to each other.
How did you finance your education?
Mallin: I was fortunate enough to have my tuition covered.
Litman: There was family savings for college, but by my Junior year I was able to pay my way through the work I was doing.
How did you meet?
Mallin: I was working at 3M after college and we met during that period…over time we started working together on more projects and eventually started doing it collaboratively. Scott’s business was known as Imaginet and mine was called Oatmeal Media. We ultimately ended up merging those two businesses as we sold them to Imation.
What was the thing that really brought you together as partners?
Mallin: I think we’re still trying to figure that out?
Litman: In the early days, it was more of a typical business arrangement than a bond or a partnership…we had each created our own thing and brought that together for the Imation sale, but through that process had realized how important it is to have a yin and yang balance.
Mallin: We learned just how like-minded we were and how much mutual respect we shared. It doesn’t mean that we don’t frustrate each other at times, or have our moments, we do trust each other implicitly. We are better together than we would be individually.
What was the situation with the Imation sale?
Litman: We sold to Imation in 1997 with 25 employees.
Mallin: Our companies were all about what businesses could do using technology, so we built data-driven websites. One of our biggest was for 3M with 2,600 product SKUs. It sounds trivial today but it was rocket science at the time.
Then you ended up repurchasing the company back from Imation?
Litman: Yeah…we learned a lot from that transaction. When you sell your first business of consequence and are still in your 20’s, sitting on what you think is a fortune…but our employees were unsatisfied. We were very excited by the accomplishment but the mojo was bad. Imation was buying a lot of different things from us, but culturally we weren’t a fit as we quickly found out. We lost a lot of morale and kind of became a train wreck. We made a recommendation to them that went up to the board and said that that we should either put a bullet in it or take it back.
Mallin: It was about 15 months in, we bought it back in 1998, less than 24 months after selling.
Litman: I will say that we never designed or planned it to be that way, though ultimately both transactions were accretive.
What did you learn?
Litman: I learned a ton about emotions and toxicity at the same time. My own emotions and the importance of maintaining a healthy environment for employees.
Mallin: Cultural fit matters. It’s something that has affected us in later transactions that’s for sure.
How long did you continue to own and operate Imaginet for?
Mallin: For almost three years before selling the same business to WPP on the last day of 2000.
Litman: All three events were good and WPP was the biggest, we had 125 employees, solid revenue and good profitability. We actually liquidated it just months before the dotcom bust and September 11th attacks of 2001 – and we all know what happened to the market and economy at that point.
Did you then join WPP?
Litman: Yes. It was a great experience selling to WPP because we were running one of the ten largest digital agencies on the planet with eight offices and 10% of the Fortune 500 clients under the JWT division. All of a sudden all that risk you assumed for years turns into a jet-setting lifestyle.
Mallin: It was definitely the biggest business achievement for us both at the time, and we stuck it out for four years. We were really dying to start the next thing.
Did you each have families and kids throughout that period?
Litman: Yeah although Dan is a decade ahead of me in starting a family, we were both married and had children.
Mallin: My third son was born less than a week after we sold to WPP.
Was there any pressure to not go out and be entrepreneurial again?
Litman: total support on my end.
Mallin: same for me.
What did you do after leaving WPP?
Mallin: We became passive partners in a Chicago venture called Spot by Spot that created ERP for the sell-side of advertising – radio, billboard, TV, etc. That eventually sold to Comcast in 2007, still exists there today, and is the only company we got involved in that wasn’t Minnesota based.
Litman: We started the Minnesota Cup then in 2005, about a month after leaving JWT actually, because we couldn’t really go out and work in the field immediately.
Was Spot by Spot formed under the holding company SDWA, aka Scott and Dan’s Wild Adventure?
Mallin: Yes, that became our financial holding company for our ongoing investment interests. SDWA was also the company that bought Imaginet from Imation.
And what compelled you to start the Minnesota Cup?
Litman: I remember waking up in the middle of the night, and pitching Dan that morning. Within 30 days we had the commitments needed to get things off the ground. I became the program director and we were very immersed for the first few years.
It all stemmed from my time back at the University when I wrote a paper as part of a challenge issued by Apple to ‘Design the Computer of the Year 2,000’. I had earned top five in that national competition and met some very influential people as a result. So I thought a lot about what that program did for me at the time and wanted to pay it forward at this point.
Dan, what did you think right away about Scott’s idea?
Mallin: Well, we riffed on it and just got busy with it. We thought it was going to be good and all but didn’t expect it to become as big as it has over the years.
What came after you got the Minnesota Cup up and running?
Litman: Once we brought on a new director and we had sold Spot by Spot, we started to put the plan together for Magnet 360, which we ended up launching in 2008 after about year of planning, partnering, and fundraising in early-mid 2008, which once again was well timed before a major market crash.