Bootstrapping to $80 Million from Canada: Rob Purdy, CEO of Power2Motivate (Part 5)

Sramana Mitra: Can you bring these inflection points together for us and help us understand how this impacted revenue?

Rob Purdy: When we signed the contract, the company business was, in aggregate, about $5 million. We doubled our business in the next couple of years. We grew the business to around $10 million. By 2010, we were about $10 million. We had a certain amount of profitability. Most of what we made went back to product development. At the end of any given year, we probably never made any money.

Going back to the original point, we started selling to channel partners in 2008. We also started building the sales incentive platform. That was the next prong in the product development. We continued to develop the next part of that. For us, as long as we could pay ourselves a reasonable income and continue the product development curve, we felt that it allowed us to stay bootstrapped and not get caught up in the investor side of things.

Sramana Mitra: Absolutely. If you don’t need it, there’s no need to get funding.

Rob Purdy: We were very fortunate. The combination of leveraging the product build and the partner model helped us, because it kept us from having to go out and hire expensive sales people at that time in our growth.

Sramana Mitra: It sounds wonderful that you’ve been able to get these very highly-effective partnerships. It sounds like you found these partners through trade shows.

Rob Purdy: Yes, trade shows played a solid role. We got to expose the product in a great environment. It was a global HR show. I think we picked the right show. The timing for the launch couldn’t have been more perfect because tech-enabled services at that time were quite new for those types of shows. Being there with a brand new technology, we attracted a lot of attention without a lot of investment.

Sramana Mitra: In 2010, you hit $10 million?

Rob Purdy: Yes. We continued to grow through the recession. In 2008, we grew only 2%.

Sramana Mitra: What happened in 2011?

Rob Purdy: That was another inflection point. Two of us ran the business up until that point in time. In late 2010, he wanted to leave the business. I wanted to stay. He was looking for a buyout. I was able to facilitate that in early 2011. The timing of that was perfect because we had launched the sales incentive platform and we were starting to bring in larger companies. That buyout then allowed me to have the flexibility to drive the business in a way that I felt was critical.

Sramana Mitra: What does that mean? You brought in a private equity firm who bought out your partner?

Rob Purdy: Yes. I brought in seven minority partners. I took an additional piece of equity in the company to give myself the majority position. We packaged them up in a fairly creative way where they didn’t necessarily have to put up money per se. That offered up a huge flexibility for me because, being bootstrapped, we had to have access to, at least, credit facilities.

If you’re highly leveraged in a buyout, you’re going to lose your operating line. Doing what we did enabled us to keep the operating line unencumbered. The guarantees were held in a different company that sat on top of the two operating companies. They didn’t touch the banking relationship at all. I was able to keep 100% banking relationship. The debt sat off on the side.

Sramana Mitra: That’s an interesting financial engineering right there.

This segment is part 5 in the series : Bootstrapping to $80 Million from Canada: Rob Purdy, CEO of Power2Motivate
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