Bootstrapping to $80 Million from Canada: Rob Purdy, CEO of Power2Motivate (Part 2)

Sramana Mitra: In 1989, you launched this company. What happened between 1989 and 2006? Did the business succeed? Were you able to get clients? What scale were you operating at?

Rob Purdy: The business did okay. Unless marketing services companies have a very solid unique point of difference, it’s really challenging to continually grow the business. You are falling prey to the next big idea that the company falls in love with. If it’s not yours, you can lose those clients fairly quickly. The clients aren’t as sticky as they would be in a technology environment.

In those years, we had lots of successes. We landed a lot of different clients and we did a lot of interesting projects, but they generally are labeled as more of project kind of work. That’s quite a different kind of company than where we are today. That was a great learning curve. From 1989 through to 1998, we were a marketing services company operating out of Toronto purely on a domestic basis.

Sramana Mitra: What kind of scale are we talking during that period when you were operating as a marketing services company? How much revenue were you generating and how many people did you have?

Rob Purdy: We were generating an operating revenue of $5 million because there was a lot of consultancy component to that. The margins were pretty high. The blended margin was around 70%. We could certainly operate profitably. We had a sustainable business, but it wasn’t going to be the business that would make you rich or allow you to have a different kind of lifestyle.

Sramana Mitra: In 2006 when you came to the conclusion that you wanted to do SaaS, what was your revenue level?

Rob Purdy: Around $7 million. What we had was a lot of pent-up demand asking us to move into a more global position with the product and also provide a higher level of service in terms of being able to provide ongoing enhancements.

Sramana Mitra: How much profit did you have at that point to be able to do all this stuff, which clearly needed some investment? To build a SaaS platform would require investment. What kind of free cash flow were you dealing with?

Rob Purdy: We had a fairly-sized business. Because tech in those days was so small and there was nobody doing what we were doing, it was a little difficult to say, “We can go out and attract a lot of investor opportunities.” We were also a little bit nervous about bringing investment on too soon.

Sramana Mitra: I’m talking about from your $7 million business, how much free cash flow did you have to invest in the building of a piece of software?

Rob Purdy: We were probably investing about a million dollars a year at that time. We had a technical team of eight people. We were starting to build a pretty expensive code base at that point.

Sramana Mitra: What was the software that you were building?

Rob Purdy: We were building an engagement portal site. It had three core components to it. It was going to provide an engagement solution for employees, a channel incentive solution for sales, and consumer loyalty. Anybody who was looking at a platform would have internal requirements around employee engagement. They would have sales and channel sales requirements, and they often were running consumer loyalty programs.

Our vision was that, at the time we launched that product, you would have retained three companies to do those three services. We wanted to create a single solution that would allow companies to run all three of those applications at the same time through one application.

This segment is part 2 in the series : Bootstrapping to $80 Million from Canada: Rob Purdy, CEO of Power2Motivate
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