Business Incubator Series: Troy Henikoff, Excelerate Labs – Chicago, Illinois (Part 2)

By guest authors Irina Patterson and Candice Arnold

Troy: So, in my early days of entrepreneurship I was sitting in the basement writing custom database applications. It quickly became clear that there were more businesses that needed my help than I could personally help.

So, I brought on a partner within the first year. A year later, we brought on two more people. A year after that, we brought on four more people. We were doubling each year. We were doing it on revenues alone and cash flow.

I had never heard the term venture capital. I didn’t know about outside investment. I had just gotten out of college. I literally started the business with $1,000 as the entire capital investment that I had. We grew it.

We continued to grow. We were doing systems for companies like McDonald’s and Abbott Labs. We did Hyatt’s worldwide purchasing system. We had software in every Hyatt hotel in the world that we had written. It was a lot of fun. We were having a blast.

One of our clients, in 1992, Medline Industries, which is a manufacturer/distributor of medical supplies in the Chicago area, ended up buying us, and we became the software division for Medline.

They wanted to leverage their position in nursing homes and hospitals through software. Hospitals that needed new material management systems, we actually built those systems and put them in. Then instead of the hospitals paying for our services in cash, it was a rebate type of arrangement. The hospitals would pay for our service by buying more of Medline’s core product line, bed pans, linens, syringes.

For every dollar they spent, 2% of that went to pay our bill. So, they ended up promising to buy more bed pans, linens and syringes from Medline and signing a three-year contract.

I had a five-year earn-out at Medline. I ran the software division for five years. At the end of the five years, our little 55-person software company was responsible for about $125 million a year in incremental sales to Medline through this rebate program. It ended up being a great deal for Medline. I learned a ton along the way.

Somewhere along the way in there, I realized I needed a bunch more business skills than I had. My undergraduate degree was mechanical engineering. I went back to school, went to Kellogg, started working toward an MBA. I didn’t finish that MBA then. I was too busy getting a real-life MBA.

I did take a bunch of courses that taught me tangible skills that I needed as an entrepreneur, finance, management, accounting, those sorts of things that I had not gotten as part of my undergraduate engineering education.

After Medline’s five years were up, I left. I wanted to be an entrepreneur. I didn’t want to be running a division of a $1 billion-plus company. I joined Jellyvision for a year and a half to help them build the technology for “You Don’t Know Jack,” which was a big hit as a CD-ROM game in the mid-1990s.

It has since been re-released for Playstation, Xbox and the Wii. In April, it was re-released on the iPad and iPhone. It’s so much fun, all new content, to see “You Don’t Know Jack” being played on phones and iPads all over the place. It’s doing great. Anyway, I helped them build out that technology.

I left Jellyvision to start Sure Payroll in late 1999. Sure Payroll’s idea was that we were going to be one of the first companies to provide payroll services through the Internet.

You think back to 1999, people were just starting to get comfortable with paying their bills online. There’s no reason businesses shouldn’t pay their employees online. We simplified the processes a ton, taking a lot of manual processes and expense out.

In a traditional payroll system, there were operators taking orders; there were printers printing checks; there were delivery guys delivering reports and checks. It was very cumbersome.

When you go to online, the small business owner can process his payroll at any time from anywhere, whether on vacation or at midnight. He does it all through the Web. Employees get paid electronically. Employees are notified that they’ve been paid and sign back into the secure website to see their check stubs.

This segment is part 2 in the series : Business Incubator Series: Troy Henikoff, Excelerate Labs - Chicago, Illinois
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