Serial Entrepreneur Zack Rinat on Model N (Part 8)

SM: Besides culture issues, can you talk about the business strategy decisions that helped you survive the perfect storm?

ZR: A big key for us was maintaining focus. When we started the company, our two first deals out of the gate were $2M each. Then the perfect storm happened, and we could complain about it. However, we knew what we stood for, so we pulled back, evaluated our strengths and looked at where the market was going. Nobody knew where the market was going after Sept 11th. At the time we had a lot of cash, and we realized that we needed to be very conservative with that cash. We realized we needed to have a company-wide focus on conserving cash. We also knew we had to look at developing applications on top of the technology we already had in place, and it had to be very specific for customers because customers were only willing to buy applications with very precise value propositions.

We decided to go with a classic “bowling alley” strategy and go after the medical device market. We went after that market because it was a market which was not sensitive to economic woes. The last thing people stop doing is taking care of their medical needs. We decided to focus on this market, and it was a relatively small market. We also knew another characteristic of the medical device market is that it was all about being “first to market”. The winner takes it all. J&J and Boston Scientific get to the market first and keep it. We knew that companies who compete there, take risks with their own technologies would also take a risk with our technology. Finally, we knew it was not a competitive market. There was only one competitor which had very old technology.

We made a very obvious strategic choice, and we had the strategic discipline to stick to that. We saw opportunities close around us, but we maintained our discipline. One of the issues about people in the Valley is that they have a strategy, or they think they have one, but strategy is not only about what you do but it is also about what you do not do. You really have to focus to achieve excellence.

We started getting customers in this market, and felt comfortable in this market, and then we decided to expand into the pharmaceutical space. It is a fundamentally different market. It is more conservative, very well regulated, and very different than medical device, but it is also a larger market. We were very successful there and ultimately decided to expand into high tech.

SM: What did you do to enter the high tech market?

ZR: We did the traditional MBA stuff. Took a look at the world, evaluated market size and competition, and we narrowed down to 8 industries. We went and spoke to partners and customers, and narrowed down to 2. We decided to go the route of high tech manufacturing. Within that, we decided to go after semiconductors and the next question was “make” versus “buy”. Kamal, our VP of Marketing, found a company in the East Bay and we acquired them.

You know how it is, there is a general belief in the Valley that you cannot do acquisitions successfully, but we did an off the charts successful acquisition.

This segment is part 8 in the series : Serial Entrepreneur Zack Rinat on Model N
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