Bootstrapping a Billion Dollar Unicorn with Services from Utah: Dave Elkington, CEO of InsideSales.com (Part 2)

Dave Elkington: I decided to quit and come back to school to get a master’s in Computer Science. The rationale was two-fold. One, I believed that coding was not that hard. It’s not as challenging as the programmers try to make it. We were paying, at that time, exuberant amounts for people who weren’t that qualified. At the same time, they weren’t delivering. Additionally, if we take a trip back to my undergraduate, what really enamored me about Philosophy was a subset around Set Theory, Logic, and Epistemology. I was really interested in the way people learn and categorize data. Specifically, I was interested in the Aristotelian view of the world—categorization of things. I had a philosophy around the way I believed people consume and aggregate data. I believe that, ultimately, it was a system versus something that can be organically built within the human brain.

As I decided to go back to college to get a master’s in Computer Science, I wanted to see if I could demystify code and technology. Even more importantly, I wanted to see if I could systematically and more importantly, algorithmically represent my philosophical theories that I’ve established. I came back to BYU to get a master’s in Computer Science. As you can imagine, I’m sitting in the office of the Department Chair and explaining to him that I wanted to do this. He said, “Dave, I love your ambition and I love your approach in trying to see if you could use more of a philosophical approach to machine learning and artificial intelligence, but you haven’t taken a math class since you were a Junior in high school. You can’t do this. It will take you too much time.” I said, “I can do this. Give me a semester to prove it.” He approved my acceptance and I just had to grind it out. I went through Algebra 1 and 2, the two Calculus classes, and Linear Algebra.

At roughly the same time, I decided to start a new company that was the foundation of what ultimately became InsideSales.com. The rationale was not to raise any venture money. I became disillusioned with the venture approach. I decided to build a company that was essentially a professional services organization that would fund the development of a product. I wanted to start in professional services, use the cash flow, build a bunch of IP up, and then transition to a product using the cash flow and the IP. I started that company at the same time I’m in school.

At the same time, if that doesn’t sound fool hardy, I’m also working the graveyard shift at a hospital here in Utah. My wife was so frustrated with me but totally supportive at the same time. She was just frustrated in that I was sleeping very little. I’m starting a company. I’m not sleeping and I’m working on a master’s degree. Ultimately, I built a bunch of hypotheses specifically using machine learning algorithms around how to represent this philosophical Aristotelian set theory approach to the world. At the same time, I built my professional services company to some size. We were probably doing a million a year in revenue.

Sramana Mitra: By the way, this approach of doing professional services to bootstrap a company is very well known. We have case studies after case studies of people building companies in that mode. We even have a book in the entrepreneur journeys series called Bootstrapping Using Services. This is something we are very familiar with. We encourage entrepreneurs to do that because seed capital is still not something that flows abundantly and it’s a very good approach to build companies actually.

Dave Elkington: By no prudence or intelligence, it was just by almost frustration and dumb luck that that was the approach. Don’t assume that I necessarily had great prudence at that time.

Sramana Mitra: You didn’t know at that time but what I’m saying is we have made a concerted effort to make this a well known technique of bootstrapping.

Dave Elkington: It’s absolutely what I did. There were a couple of things that I was trying to accomplish. We were not just professional services. We were an outsourced web application development firm. People would pay us to build HR, inventory, and accounting systems. We were building virtually anything we could get them to pay us to do. What we did was, we did something unique with the code and the IP. We built a framework and a platform that was ubiquitously usable to create web database applications. We owned all of the IP. We gave irrevocable site license to our clients so that every project that we built, we define the technology that then allowed us to develop more efficiently and more quickly. Not only were we able to build a revenue base to pay for the development of a product, we also built a lot of IP and we built expertise. We built a development team that had continuity and were able to work together. I did that for roughly two years – 2002 to 2004.

By 2004, we were probably upwards of a million plus a year in revenue and had probably 20 employees. There was one partner who helped start the firm with me. Ultimately, I bought him out as we made that transition. I actually started the services company without knowing what I wanted to develop outside of the fact that I wanted to develop some sort of solution that would allow me to deliver artificial intelligence in this philosophical approach. By 2004, I knew how to do it. I hadn’t finished my Masters but I got far enough down the path that I knew how to code adequately. I had all the mathematical and the algorithmic background that I needed. I started InsideSales.com. We shut down the services and moved all of our IP.

In doing so, I had to figure out where specifically the solution that I wanted to develop but I knew that it was going to be around the need I had around the product that we have today, which is an artificial intelligence learning platform. I needed a massive amount of data. The core philosophical concept behind is one of propinquity, which means similar people behave similarly. The fact that you and I are on this phone call together suggest that you and I have a lot of behavioral similarities and buying patterns. An example would be I drive a 5 Series BMW. Because I drive that and you and I are currently on the phone right now, the likelihood that you, a family member, or a close friend drives a BMW 5 Series is astronomically higher.

This segment is part 2 in the series : Bootstrapping a Billion Dollar Unicorn with Services from Utah: Dave Elkington, CEO of InsideSales.com
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