[REPEAT] David Bagley & George Reese [2]

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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.

David Bagley (left) and George Reese (right) originally formed enStratus Networks in 2008 as a spin-off of marketing software maker Valtira.  Changed to Enstratius in 2013, the company specialized in cloud computing infrastructure management.  Enstratius raised a series A round of $4.5 million in 2011 and was acquired by Dell for $60-$80m two years later. After some time there, the duo came back with a new venture known as SeekaTV. Part one can be read here.

David, were you at Retek during the IPO in 1999?

Bagley: Yes, I joined the company in 1997 and was the head of head of strategy and marketing when we went public, and I was there until 2002.

Why did you leave and where did you go?

Bagley: It was time for a change and I went to another startup founded by a former Retek colleague as COO. We grew that company from scratch to a $35m annual run rate until it was acquired by Lucent after I left due to cultural differences. From there I started working with George!

George, how did you two meet?

Reese: I was working at Imaginet with Scott Litman and Dan Mallin and following that acquisition with JWT, went and started Valtira as a product and service company in about 2003. Dennis Anderson at Andcor had introduced us initially in around 2005 when David was looking for something new…

How long did you know each other before you decided to go into business?

Reese: (laughing) I don’t honestly remember?

Bagley: Not very long – but we were playing around with scaling Valtira as more of a software as a service product when we stumbled across what would become a new entity called Enstratuis for which we captured a little venture funding up focusing our efforts on for the next chapter.

Was that the first company that you founded David?

Bagley: Yes and no…I previously dabbled in some of my own previous startups that didn’t exactly pan out (laughing).

 

Would you say that Enstratius panned out?

Bagley: Yeah! We grew up from scratch in 2009 and grew to about 30 people before selling in 2013.

Reese: I think the best part about Enstratius was that we all got out what we put into it.

That seems like a pretty quick turnaround?

Reese: It doesn’t feel like it!

Bagley: I think that’s the relevant point…we realized that we were on to something before going all in based on our customer research and the type of savings we could demonstrate. It was apparent to us that it was something that we could execute on quickly and line up the potential acquirers in the cloud-governance arena. We expected to be acquired from the get-go and had acquirers turning to us as early as our first year in the market. It was just a question of how we could maximize the value and return.

What was your inventive breakthrough with Enstratius?

Reese: The key thing about it was enabling a promise that AWS was making at the time, but we were actually putting it all together so that our customers didn’t have to worry about that manufacturing or maintenance.

Was that the first time the two of you had raised capital and how did it go?

Reese: Yes and it sucked.

Bagley: In 2011 we raised about $4.5m investment from Jeff Hinck and partners when it was Eldorado Ventures and also a little bit from Citrix. It was an ok experience, glad I did it. Once.

You started, scaled, and exited – it sounds like you ran the course?

Bagley: and we even did our corporate time!

Reese: Two and a half years time

What was that like?

Reese: it got frustrating…

Bagley: remember that shortly after our acquisition Dell went private, so a lot of the parameters changed.

Would you do it again in hindsight?

Reese: We all got out what we put in, the risk was rewarded, what more can you ask for?

Bagley: Absolutely.

How did it change your life?

Reese: It brought some overdue financial security for me, a big change and a nice windfall. It gave my wife time to take off to spend with our kids, and go into a new creative career.

Bagley: I went from a high pressure environment to low pressure one. I also made sure nothing changed for my children just because we had come across some money.

How old were your children at the time of exit?

Reese: at the time of exit, 10 and 7, both girls

Bagley: My daughter was 13, and my sons were 11 and 8 when we sold.

During that five year Enstratius run, you both were in the prime of fatherhood as well…how was that?

Bagley: Joyful!

Reese: as stressful as it can be, you do get to be in charge of your time, as opposed to being on someone else’s watch.

Do you think your children perceive you any differently because your entrepreneurs?

Reese: My youngest daughter is really bent on being an inventor…so much that she doesn’t think my software patents qualify as a real inventions. But they’re teens now and our conversations about business aren’t very engaging. I did pay my older daughter some money to do some odds and ends, deliverable-based compensation of course.

Bagley: I don’t think so…we talk about it a little bit, but I want to make sure they enjoy being kids before they start worrying too much.

Do you see yourself as different because you’ve chosen to be an entrepreneur?

Reese: I think to my neighbors it’s very obvious that I keep weird hours

Bagley: There’s a certain pleasure in working for yourself that I’m reminded of from time to time.

After you sold and experienced some financial relief, you could have done a number of things…why did you go back to start another company?

Bagley: I enjoy it.

What do you enjoy about it?

Bagley: the discovery, the shaping of things, crystallizing vagary into business that can change things and make money.

Reese: for me, it wasn’t a foregone conclusion to start another company. I decided first to get back into my creative side, where I started my career in television and film, and was having fun with that when I saw the opportunity in the market at the same time that David was observing a similar void with online entertainment.

Turns out that the two things were interested in are complementary, and for me, it’s a chance to do something that I’m very passionate about, as opposed to Valtira and Enstratius, which were more corporate problems of the era.

So you decided not just to do it again – but to do it again together?

Bagley: Who else would work with me?

Reese: There’s a lot of things that can go wrong in business and it’s important to go at it with someone you trust who you know has your back.

Did you consider not doing another startup after leaving Dell, as in what life might be like in a different path, perhaps a less risky one?

Reese: I examined the film making thing – but that tends to cost a lot of money instead of making a lot of money. Second, I talked to some potential employers to see what the market was like, but I’m not fond of the corporate life.

Bagley: Not really, I know what I like doing with my time.

What will you do differently this time around?

Bagley: I don’t think we’re putting ourselves under the same sort of pressure.

Reese: I think that the market dynamics and the spaces are wildly different…cloud computing is now a given and it’s hard to create value in that space.

How old were you when you started Enstratius?

Reese: I was 37 when we met and 39 when we launched

Bagley: I was 42

What advice do you have to others later in life, maybe established with families, considering starting a company?

Bagley: Advice is a fools game.

Reese: Same thing I would say to anyone considering entrepreneurship: sit down and execute.

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