Bootstrapping Using Services: George Anderson, CEO of Ninth Wave (Part 4)

George Anderson: Here is a lesson I learned. It’s very relevant to bootstrapping using services. I said, “How do we take this business to the next level?” The answer was to go out and raise some capital. I hired Jeffries and we put together an information memorandum and a package, and we went out and started to pitch to companies.

I heard two things from people that were frustrating. The majority of the people that I pitched to said, “We love the software, but we hate the services. Services are unscalable.”

Sramana Mitra: This is a common reaction from a venture capitalist. I don’t agree with that reaction at all. I think it’s a stupid reaction, but it is out there and common. 

George Anderson: It was so frustrating for me. I believe strongly in it. I loved the business and I believed in it. It was working and I had all these customers on the software. It was phenomenal.

The other reaction that I would hear was, “You really don’t have anything. You don’t have a software product. What you have is some technology that you are using to sell more services.” I found that frustrating. To this day, people still tell me that it’s impossible for a services company to transition and build a software product. 

Sramana Mitra: That’s utter nonsense. If you want, I can give you 50 examples of case studies.

George Anderson: I’ll tell you two things. Once I walked into a room and started to do my pitch. There was a gentleman at the back of the room who said, “You don’t have software. You have something that you are using to sell more services.” I tried to talk to him and it wasn’t working, so I just started to pack up my stuff.

There was another gentleman that was a managing member in the front of the room and he said, “What are you doing?” I said, “The guy in the back said that I don’t have software. He didn’t ask me what my software does, who uses it, and he didn’t ask me what they pay for it. He just says, ‘I don’t have software.’ If I don’t have software, then I might as well leave. “

Sramana Mitra: The arrogance of these rough spreadsheet jockeys who’ve never built business is just mind-boggling. 

George Anderson: It gets even funnier. I went back to my office and said, “You know what, I’m going to stop banging my head against the wall here. I’m going to take all the software-specific slides out of our pitch stack, and I’m just going to put them in a new deck and put a new company name on it.”

That is exactly what I did. It was a few months later that I called the same investor and I asked him if he would be willing to meet again. They said yes, so I went in with the same software. I just took the software specific slides out. I left the room with the term sheet. These were the same people.

Sramana Mitra: You put Ninth Wave in a separate company though?

George Anderson: Yes. Fast forward a bit to more recent times. In mid-2018, I looked at the business and said, “There is a real shift coming in terms of financial data sharing, FinTech, and the whole ecosystem. I believe that we are very well-positioned to take advantage of that shift. How do we best do it?” I never closed an investment. 

Sramana Mitra: So when you got that term sheet, you didn’t take the money?

George Anderson: I didn’t take the money. I’m glad that I didn’t. 

This segment is part 4 in the series : Bootstrapping Using Services: George Anderson, CEO of Ninth Wave
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