[REPEAT] Scott Burns [2]

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.

Scott Burns cofounded GovDelivery in 2000 and subsequently sold the software company once and for all in a merger with Granicus in 2016, after selling it to Vista Equity Partners one month prior.  He then returned to cofound Structural — an employee success software firm — in 2017. (Part 1 of our interview can be read here).

You said that joining McKinsey in 1997 was one of the best decisions you have ever made…why?

It’s a super intensive introduction to professional life, full of on the job training and mentorship.

What I really liked about it at the time was the scientific method with trial and error type of rigor applied towards business problem solving. So someone like me right out of school could be assigned to a complicated problem faced by a large business with a mix of detective work, outside research, data analysis, and create a solution to one or more of their most pressing problems.

This allowed me to get into business alongside some very smart people both inside McKinsey and on the client side. It was a really rapid fire and intense introduction to business analytics, problem solving and management.

Why did you leave?

After two years there, in 1999, I had finished their analyst program and I wanted to get some firsthand entrepreneurial experience with a smaller company…so I joined a Colorado startup called SafeRent as employee number eight.

The President was also from McKinsey, she was a great mentor to me, and we set out to reinvent how people were approved for renting apartments. We created a data model that made renter screening more accurate and cut the time from days down to 30 seconds. That company went from zero to over a million in revenue in just about eight months, with 50 people and a bunch of venture capital.

During that process I went from being the CEOs chief of staff to head up marketing. And the reason I left is because, in the long run, I just wasn’t passionate enough about the market even though the value proposition was great and the business went on to a nice exit.

What happened next?

I was accepted into Stanford for business school and intended to go there in the fall, but instead ended up committing to be CEO of GovDocs (which later became GovDelivery) with my co-founder, Zach Stabenow. That was mid-2000. We had been trying to launch the business in our free time on the side as a way for people and companies to download and print out government mandated signage like those minimum wage posters you see in the employee breakroom from the Web instead of ordering print copies. I went full time because we saw a larger opportunity to create a platform governments could use directly to communicate with the public, and that is what became GovDelivery.

How did you two know each other?

We’re both from Minnesota and got to know each other while ski racing in Vermont years before. We became roommates when I moved back to Minnesota after college in 1997 and talked a lot about doing something entrepreneurial until we launched GovDocs on the side. Then, we basically recruited anyone who was free or cheap to help us start the company. We were truly bootstrapped because it just wasn’t fundable in the beginning.

Is this how GovDelivery began?

Yes. When I left SafeRent and was waiting for Business School, I went full time at GovDocs. I began exploring whether there was an opportunity to create a software company that sat between the government and the public, which was how the idea was born in 2000. At this point, I was really foregoing a full ride to business school from McKinsey for this startup idea so it was really a gamble, but I got caught up in the dot come hype and went for it.

Our first customer for what would become known as GovDelivery was the City of St. Paul, followed by South St. Paul, and others around the state.

Was there any pressure from those around you not to start your own company and instead pursue the safe route of going to business school?

There was really a lot of positive support and no naysayers. It was the dotcom era and everyone thought being an entrepreneur was worth all of the risks.

How did it go at the onset?

To be honest, we thought it would take off faster than it did. There was this period of elation and joy after we won our first few customers.

But the flywheel never really got going, at least for some time. You always start with a lot of great intentions and momentum…it’s like Columbus searching for America, I’m sure the first part of that journey was just amazing. And you better start that way!

There ended up being longer sales cycles than we anticipated, the dotcom bust happened and then there was 9/11. It took some serious heaving lifting, a lot of trial and error over years of work, before we found our groove.

What did you learn?

I developed humility. I learned to love every day. I learned to focus on the task at hand. You have to want to be an entrepreneur for the right reasons, not just because of the allure of success and money. Laying the bricks is the hard part and it’s dirty, so the happiness and satisfaction must be there for the day to day and not just the big milestones.

How long did you lay those bricks for?

For the first five years…

And how did you know when that period was over?

In the mid 2000s…once there was some predictability to sales. You are gaining traction when you know good things are going to happen, you know why they are happening, and then you can measure them. The second step was when I realized that 95% of the great things happening in the company didn’t have a lot to do with me. Then I knew we had a team that could start to scale.

The two triggers to our success were getting larger clients like the Federal government and unlocking network effects.

Getting bigger clients was a straightforward calculation… they paid us more than the small clients and weren’t much harder to land. The network effects were the real innovation. As a digital communications platform for government, we started allowing our clients to collaborate with one another to reach more people. This works in government but not in the private sector because government clients don’t compete with each other. That realization and rollout took a long time to realize, and I truly believe now that a software company can gain only gain traction when it unlocks some sort of unique value in data and/or network effects. Just competing on functionality is like running on a treadmill. You can never move fast enough to get ahead.

So you had two companies/products going simultaneously?

Yes…GovDocs was more of middle man business gathering documents and selling access while GovDelivery was the true software play. We raised about five million total during the first nine years before the split in 2009 and both companies went on to find their separate successes after that.

What happened in 2009?

We sold a majority stake in the company and this gave us new energy, capital, and a chance to regroup. At the same time, Zach spun-out GovDocs as part of that deal.

Why the decision to sell?

After nine years we were beginning to wonder if it was time to return some of the investment capital we had raised over the years…we had over 75 investors on our capitalization table by that time. It also gave us a new shot in the arm as a different type of company after so long.

And you stayed on as the CEO?

I did, but I also got some much needed liquidity…

How did that feel?

It was a big relief! I was finally able to pay back my family and friends and former colleagues from McKinsey with a nice return.

What was that like taking their money initially?

It was rough…I think raising money from family and friends is a double edged sword…I mean my plan if GovDelivery failed was to move away.

Seriously?

Yes…you never know the types of thoughts that will go through your head until you’ve asked and accepted money from so many people like that. Honestly, taking professional investment capital is better in that sense because it’s business and it’s their business, and there’s a portfolio they are dealing with where gains offset losses. With individual investors, there is more pressure and more emotion.

Where were you at inside as an entrepreneur when you decided to continue as the CEO of GovDelivery after that point?

I was worn down in 2009 and the edge was dull, but my motivation was restored. I wasn’t financially in distress anymore and was in a better headspace personally.

It brought a lot more joy to the job which helped me become a better manager and leader.

My work became something that I found challenging but not nearly as stressful. It was awesome to take more calculated risks, much more so than when I had my dad’s money in the company, for example.

The psychological benefits of liquidity can be just as, if not more, than the financial value.

How would you describe your evolution over those years to get to that point?

I started becoming more of a manager and less of a straight up entrepreneur. That requires more teamwork, collaboration, and trust that people can take control of the business given the tools to succeed. It really accelerated after 2009.

Is there a difference between an entrepreneur, CEO, and manager to you?

I don’t think there has to be…but a naive entrepreneur believes that ideas matter much more than they do. And we all learn that ideas are a dime a dozen and don’t matter because from where I sit right now I can see dozens of people with great ideas who will never execute in the first place, or if they do, they will fail.

Entrepreneurs also think that they matter more than they do. A good leader will spend 90% of their time trying to figure out how to hire and empower the best people. A poor leader spends 90% of their time trying to execute. To me, that’s the difference in mindset and time management which is maybe the difference between an entrepreneur and a CEO.

A good entrepreneur is willing to take risk, embraces trial and error, and believes in themself. Yet you really can’t scale a business without learning the leadership part and trusting those around you.

Did you see yourself as an entrepreneur at the time, back in ‘99 when you started?

I think I’m an entrepreneur by default, it’s definitely more of my natural state. I had to learn to to lead and be the CEO at a higher level.

Where did the business go after 2009?

2010 was a great year for the business…we had a recent acquisition that paid off, expanded the team, and brought things together. In 2011, we hit a bit of a rough spot when our confidence got ahead of us, but basically from 2010-2016, we hit our goals all around. It was a rigorous high growth rhythm we got in that kept the business growing at a 20-30% annual pace, growing every single quarter for many years to follow.

And then you ended up selling the company again, this time for good, right?

Yes we built it up for up for another seven years and sold GovDelivery to Vista Equity Partners that merged us with Granicus in October of 2016.

Does that feel like a long time to run a company?

Indeed.

Did your interests ever wane or did you get bored, contemplate not being the CEO of GovDelivery?

It is always a struggle for me to balance family and work. There were some years in there that I was traveling 30-45 weeks per year, on the road, missing my family — which really makes you question your pursuits.

There’s people in career paths who say they have 20 years of experience, but really they have five years of experiences repeated 4 times over. It’s like they know their space and can do it, but they tend to put things on autopilot after a while, going through the motions.

And there’s other people, those which I can relate to, who have a lot of freshness in their daily life. I am always trying to change, improve, reinvent, and make myself better and more relevant in everything I can do. I’m driven to want everything to be better including myself. It’s just the way I’m wired and that keeps me pretty fresh.

Personally one of the most energizing things is working with new people and seeing what they can accomplish. The only time I ever got even a little tired of things at GovDelivery was when we didn’t hire anyone new for a few months.

Did you ever feel stagnant?

I don’t think it’s healthy for anyone who is in a growth environment to feel like their butt is cemented in the chair. Because we were always growing and hiring, it made those 17 years at GovDelivery feel like 17 different one year jobs.

How many acquisitions did you make overall while at GovDelivery?

Govloop, which was the best acquisition we ever made, came right before we sold the first time in 2009

And then there were three different small product companies following that: GovInteract, NuCivic, and Textizen. We also acquired our UK-based reseller.

Those were fairly small and easy to swallow acquisitions. My lesson from doing those is that we did some things well by keeping people on board and motivated. We brought good value to our clients and grew our revenue. I probably would have gone faster on integration…at times we tried to maintain separate brands and maybe moved too slowly on the integration.

Another lesson would have been to get more of our people on board for better cultural integration. And, there was one case where we didn’t do adequate diligence, which is definitely a mistake I’ll only make once.

How was the sale to Vista Equity Partners/Granicus, different than the first sale from 2009?

Well, it was a lot larger. It was a rigorous process that started with a lot of inbound inquiry around the company. It was a four month and very intentional process that went smoother than the first because we were doing much better and had a lot of confidence in our future.

Following the GovDelivery + Granicus merger, why did you decide to start another company?

I found myself in the middle of a very good setup for a mid life crisis. That is, I was paid out and had achieved a great sense of accomplishment looking back over the years, but didn’t know what to do next.

I contemplated a variety of things, but thought ‘what would I do if I couldn’t fail’, that old adage. And taking personal risk has always been a part of me, which really strengthened my view that I wanted to continue living that way.

So I went on a bit of a quest to find the types of people that I wanted to surround myself with. High on that list was Scott Dorsey, my long-time mentor and the co-founder and CEO of ExactTarget which sold to Salesforce for $2.5B out of Indianapolis. His new Venture Studio, High Alpha was the founding investor in my new company, Structural. Chip House, my co-founder at Structural was also high on my list of potential collaborators because I tried and failed to hire him while at GovDelivery and knew we would work well together. Once I came together with those two individuals on getting a new company going, it was irresistible.

Risk is something that terrifies most people, what makes you different?

It’s about framing risk based on life experiences and perspective. The first thing for me, is that I have a thought process that considers what I want to accomplish in this world and the type of impact I want to create. At the same time, I realize that much of what we do is very significant to us as individuals, but it’s not that big of a deal in the grand scheme of things – which helps frame the risk as more rational and less dramatic.

I know that ‘if i fail’ not everyone is going to be worrying about it or looking down on me, because, for the most part, they won’t even care. And I learned a lot about that growing up ski racing because it felt so important at the time, but when I went from winning to struggling, people move on and don’t really focus on it.

I don’t worry so much about the ‘old Scott’ view where I thought I would need to leave Minnesota if I were to fail.

Also, I don’t have a lot of financial needs in terms of my happiness, combined with having grown a nest egg that means my family has their needs fulfilled now regardless really.

Overall, for me, the rewards of entrepreneurship are so great that they overwhelm the risk.

What do you intend to do differently with Structural as an entrepreneur and leader than you have before?

First of all, I was much more deliberate about the people involved in the core of the company. We had great people at GovDelivery, but I didn’t think about how to compose the team, because I didn’t even know that was important. I am also much more passionate about this space and the problem. I intend to be more bold, asserting what we are capable of, and pushing the business forward faster.

The experience that people had with me during the first decade at GovDelivery was that I was a very low trust CEO, now I have become the opposite.

When and why did you decide to become an angel investor?

In 2010/2011 I had some money and made my first angel investment. It’s because I want my behavior to align with my beliefs and history, and I think that reinvesting is a form of paying forward what has been given to me along the way.

Really my angel investing first and foremost is a tribute to the people who took a chance on GovDelivery. The second thing is that I like having a stake in fun and interesting businesses, it’s a great way for me to continue with lifelong learning.

My angel portfolio of about 10 investments is really more about businesses I am interested in than those I think they will payoff. My venture fund investments, like Matchstick Ventures, on the other hand I do have a high expectation of return.

How do you think being an entrepreneur has shaped you as an investor?

I’m such a passive investor that I see my best role as an effective cheerleader and a very targeted advisor on sales and strategic issues from time to time. I’m investing with and into founders/CEOs I see potential in and trust so generally I sit back and admire what they accomplish.

What are those characteristics that you like to invest in?

Something that strikes me as unique insights into the market…something that as an entrepreneur you see ahead of the curve in a new way. I also like to see who else is investing as there are a lot of great investors in town who are more professional at it than me and take a lot more time to do it well.

Is there anything else you would like to add?

Thanks for the opportunity. I like to share the story in the hopes that it inspires someone reading this to start something on their own, or to consider what their next company could look like. We can never have too many entrepreneurs in Minnesota.

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