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.
Partners Scott Litman and Dan Mallin are presently pursuing Equals 3 after decades of documented business success. Together, and in parallel, they also founded the Minnesota Cup in 2005; part 1 can be seen here.
What was the Magnet 360 opportunity?
Litman: We learned a lot from previous transactions in the advertising space. We founded Magnet 360 after selling Spot Buy Spot to Comcast BUT the inspiration for Magnet 360 came from our work at WPP, the worlds largest agency holding company which wrapped up in 2005. We build the concept of Magnet 360 originally as a thin operating company with investments in a number of smaller agencies that would sell big contracts and deliver from a network of ~30 partners. Our revenue growth trajectory was 1.5m, 4.5m, 8m over the first three years – it was not as profitable we learned.
Mallin: We decided in 2012 to change the model by buying some of the companies in the Magnet 360 network, and shedding others while transitioning from a network to a direct services model, which significantly changed our profitability. Ultimately would sell Magnet 360 to Mindtree for ~$50m in January of 2016 and we planned an immediate sunset for us.
What did you learn from that experience?
Mallin: If you are not learning then you are probably the fool…we continued to treat our customers as partners and to be a great project-based company.
Litman: From an investor standpoint, the one thing we did not account for in the early days is that not everyone is a growth oriented entrepreneur. You can not be an investor in lifestyle businesses, rather the entrepreneurs involved have to be wired for growth.
So along the way, have you ever thought about cashing out and calling it quits?
Litman: Not really…we have always had these moments of clarity around opportunity.
At any point did you think about just running a fund, stepping away from the edge?
Mallin: Not yet, it is alluring, should we lose the urge to be the creators ourselves.
And did you already know what you were going to do next after Magnet 360?
Litman: We were full time on Equals 3 the day after we left Magnet 360
Why Equals 3?
Mallin: Because better than the individual and better than the machine is the individual aided by the machine. You plus Lucy Equals 3!
Litman: It plays well into our marketing and adtech business background.
How is Equals 3 going?
Litman: We have invested over 40,000 hours into the development of Lucy, a unique IP of Equals 3. Lucy is an early market leader in the space of AI solutions for marketers. We have formed a very good partnership with IBM, they are a customer, a reseller of our solution and we have embedded several Watson Services into our tech. We have been in market for about a year and a half now, raised $5.5m and received great recognition from IBM, AdAge, DMA, and industry peers. Our typical customers are spending north of $ 180k year one and $100k/year ongoing – between the license and customization. We have about 24 people on the team between our Minneapolis headquarters, New York office, and India offshoring.
Mallin: There is an arms race happening in this space, it is high risk and high reward, we are all in once again.
What’s the vision now?
Mallin: Total world domination
Litman: …in this space, that will do.
Taking a step back, how have you continued to work well together for so long?
Mallin: A big part of it is we are like yin and yang. Our skills and capabilities compliment each other. After all these years, we know how we think…so that helps us make business decisions quicker over time.
Do you ever disagree or how do you resolve that?
Litman: We have been remarkably efficient at working things out. We have such strong mutual respect that even if we are not in agreement, it works out. There has been times where we have not both been 100% on board with something but we have a lot of faith in each other and are willing at times to drop our reservations once spoken based on confidence and belief in each other.
Do you think entrepreneurs are born or made?
Mallin: I think that the biggest thing anyone can do is jump. From there, being entrepreneurial involves assuming risk and driving things forward.
Litman: I tend to think they are born. Good entrepreneurs will hold themselves accountable and learn from their mistakes.
How do you think your entrepreneurial path has affected your families?
Mallin: My siblings kind of think I am crazy, still to this day there is a bit of that. I think my family is proud of me and I know they would be just as proud if I was not an entrepreneur. My kids are ages 17, 20, and 23 — they all have some level of me in them and I think that two of them are likely to be entrepreneurs though I do not care just as long as they are happy.
Litman: I have an 12 year old and a 14 year old. The older is very entrepreneurial even though I do not think he quite realizes it yet. One of the things I have learned with kids is that you have to be concise, so I am not yet grandstanding around them too much.
Do you have any guiding belief system or orientation that you defer to on a philosophical level?
Litman: Good entrepreneurs have an unyielding belief in themselves. They face all kinds of rejection, they face overwhelming market forces and they make mistakes along the way, but in the end, they believe in themselves and their vision at a level where they just figure it out and make it work.
Mallin: Certainly all kinds of things, the bottom line is that there is no such thing as a momentary lapse of integrity.
Do you see yourselves continuing as entrepreneurs into the next decade?
Litman: I do not see why not?
Mallin: He has not thrown me out yet!