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But other factors are key, too. Talented staffers. Persistence. Committed investors. A fresh start.
Here are two case studies in the art of survival.
Customer wins helped
From his Denver Tech Center office, John Raeder is mulling something few local software CEOs have done lately - selling shares in his company to the public.
The head of Denver-based IQNavigator Inc. is meeting with investment bankers about an initial public offering.
Any IPO would come in 2006.
"We're finally having fun," said the upbeat Raeder, 41.
The company's Web-based software automates the purchase and management of business services, such as contract labor, technology outsourcing, legal services and printing services.
It wasn't always so rosy for IQNavigator, founded in 1999 during the heyday of the Internet boom.
A pivotal day was Sept. 10, 2001.
"We were facing certain death if the meeting did not go well," Raeder said.
The executives were "hammered" with questions. Still, the meeting was an apparent success.
But less than 24 hours later, on Sept. 11, the IQNavigator team sat down to a breakfast meeting in downtown Manhattan. During the meal, they heard the first plane smash into the nearby World Trade Center. An uproar ensued among pedestrians on the street outside. Stunned, the executives retreated to their hotel rooms and watched the inferno through the window.
IQNavigator's future suddenly was uncertain: Baker Capital could change its mind amid the turmoil of Sept. 11 and say no to any financing.
The investment firm already had nixed two companies from its list for funding because of the attacks, leaving IQNavigator's fate up in the air.
"It was a 50-50 chance of whether they were going to fund us or not," said Raeder, who fretted over his own company "imploding" because of events.
IQNavigator already was struggling because of the bursting of the Internet bubble - a period Raeder refers to as the "nuclear winter."
Good fortune, however, was with the company. Raeder and his team ultimately convinced Baker Capital that the software maker had significant traction, pointing to recent big "customer wins" - including Nike, Sony, Northrop Grumman and Shell Oil - as well as the commitment of other investors to the company.
IQNavigator survived, ultimately landing $20 million in venture financing from the New York meeting. Last fall, the company raised another $8.7 million.
Now, IQNavigator is thriving. Although the private company doesn't disclose details, it says revenue tripled last year.
What paid off?
Raeder ticked off several factors: keeping customers happy, ensuring that the company had adequate capital to pay employees, hiring top-notch staffers . . . and putting in long hours.
"We had to close as many new customers as humanly possible," he said. "So we traveled four to five days a week and worked 18-hour days."
A turning point came in the fall of 2001, when the sales team signed long-term deals with Northrop and Shell - deals that helped land that $20 million in venture funding. Other customers include CH2M Hill, Level 3 Communications and Xcel Energy.
What was the most important lesson for Raeder?
"The most important lesson comes down to people," he said. "Great people create great ideas, deliver major (customer) wins, execute for our customers every day, and develop breakthrough technologies."
Vericept revamped strategy for new market
When Tery Larrew took over as CEO of Vericept Corp. in 2002, the company was hawking software mainly to school districts across the nation.
But there was a problem: The software's price, at $1,000 to $4,000 a customer, just didn't cut it.
"There simply wasn't a lot of money coming out of that to support the company," the outdoor-loving Larrew, 51, said. "They were struggling."
Larrew's game plan: Revamp the software for businesses, then troll for corporate customers willing to pony up big bucks to use it to monitor sensitive information and traffic on their computer networks.
What kind of information? Trade secrets that might leak out to a rival; a patient's hospital records that could be transmitted in violation of privacy laws; or voluminous downloading of Internet porn that could embarrass a company and damage its brand.
The plan would require radical change.
Vericept would have to retool its business model, its sales model and its software. The company would still sell to school districts, which bought the software after the 1999 Columbine massacre to keep tabs on potentially threatening words and pornographic material that might circulate over a school's computer network.
In addition, Vericept's sales staff would fan out and knock on the doors of midsized to large companies. The company started the change in late 2002.
To help adapt the software for business use, staff linguists identified tell-tale business words or phrases - such as insider trading - that the software could flag for computer security staffers.
The transition wasn't fully implemented until the third quarter of 2003, with the sales staff having to revamp its approach.
"Once we got the technology in place," said Larrew, "then we had to work through the cultural breakthrough that you can do larger and larger and larger deals."
Was it easy for sales staffers to absorb that? Not really.
"People were looking at me like: 'What is this guy thinking?' " Larrew said.
Changes did come, however.
"The first $100,000 transaction was huge," he said.
That was in late 2002. Before that, the biggest deal had been $10,000.
Soon after the $100,000 deal, Larrew convened a pep rally in the office cafeteria. The message: Let's get out and do $500,000.
Today, Vericept is winning deals ranging from $250,000 to $1.5 million - undoubtedly helped by such stories as a former AOL employee getting arrested last June for allegedly swiping 92 million screen names and e-mail addresses and selling them to spammers.
Vericept still caters to school district customers, using resellers instead of its direct sales staff.
While not providing details, the privately held company watched its revenue jump 80 percent last year and 70 percent in 2003.
Vericept has more than 600 clients, having added nearly 170 last year. The company plans to add 250 to 300 clients this year.
Customers include SunTrust Banks, the Denver Broncos, United Technologies and McData.
Larrew, who gets by on four hours of sleep a night, said a key lesson for him is the people.
"It's absolutely critical to have the right people - people that fit with the culture you're developing," he said.
IQNavigator Inc. at a glance
- Headquarters: Denver
- Founded: 1999
- Product: Software that automates the purchase and management of business services
- Employees: 115; about 165 targeted by year's end
- Biggest challenge: Potential loss of key funding after Sept. 11, 2001, attacks
- Survival guide: Happy customers, adequate capital, top-notch employees, long work hours to win customers
Vericept Corp. at a glance
- Founded: 1999 as eSniff Inc.
- Headquarters: Arapahoe County
- Product: Software monitors e-mail and Web browsing on internal corporate computer networks to flag suspicious activity.
- Employees: 90; about 110 expected by year's end
- Biggest challenge: Starting from scratch to overhaul the company's software and changing the approach the sales staff would take to selling a new product
- Survival guide: Strong investors, good board, top-notch employees, good product
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