Navigating Through Multiple Pivots: Convercent CEO Patrick Quinlan (Part 6)

Sramana Mitra: What happens in 2012?

Patrick Quinlan: Going all the way back to Delta and to Rivet, there was this trend of finding something that existed. It didn’t need momentum. We were very good at extending at. We wanted to find a company where there’s no majority shareholder, but had a huge addressable market.

We had a list of six things that it had to be or could not be – had to be SaaS, no majority owner. We found this small company in Denver called Business Controls. This was the one we settled on. We had a solid reputation coming out of Rivet. We went into that, took over ownership, and then very quickly raised $10 million.

Sramana Mitra: What was the premise of the company?

Patrick Quinlan: All publicly-traded companies and most large private companies had a mandate called the Helpline which was an offshoot to the Sarbanes-Oxley where employees could go into an anonymous intake channel and report accounting fraud, sexual harassment, etc. This company had one of the helplines in the world where an employee could do an anonymous report via a phone or web form channel. Then it had this software that you would use to do the basic investigation of that case.

Sramana Mitra: This is Convercent.

Patrick Quinlan: That was Business Controls. When we took that business over in the summer of 2012, we quickly raised a million and a half. Then we raised another amount of money from Azure. While we were doing that, we wrote down a very clear business model that said we were going to build four modules, with 100% internal build. We were going to build a true single-tenant, multi-instant, global-ready product. We released the first version in January of 2013. That’s seven months after we started. We quickly grew the company to 40 employees. We launched the new brand in Q1 of 2013.

Sramana Mitra: When you raised $10 million, you already had clients?

Patrick Quinlan: No client had ever bought the new product or the new brand. For the first six months, we were in stealth mode. Everything stayed Business Control while we were writing all the new code. When we raised the money, there was not a reference.

Sramana Mitra: What you brought in through that other company is not what you used to raise the money?

Patrick Quinlan: The reason that we went into that other company was there were 120 existing customers on that platform on small ASPs. Some of them were large companies. Part of the model we had was, “We got this existing base of customers who we know will get on the phone with us.” If you think about building a SaaS company, there’s the milestone of getting to the first million, getting to $3 million, and then getting to $10 million.

Our view point was that we could rapidly accelerate that first million in ARR. Our first year, we grew very well to the point that we raised additional capital in late 2013 from Sapphire Ventures. We were early-stage for them but they were so fascinated with the business model that we had because of SAP. Sapphire was a spin-off from SAP. The Chief Compliance Officer at SAP took a look at the product and said to Sapphire, “If those guys pull that off, that is game-changing because nobody has ever built purpose-built software for me and all my peers.”

When they fail, Wells Fargo happens. It’s a multi-billion problem when it fails. You had three options with the industry. You can build your own company. They can buy from this company called Navex, or you can work with a company that is doing what Benioff did. We are building beautiful engaging, configurable technology with analytics and reporting on top.

Sramana Mitra: How long did it take you to convert the 120 companies that were paying small fees?

Patrick Quinlan: When you have a really good idea, you figure it out fast. It was a really good idea that we figured out fast. Then we got 30 or 40 of them quickly. Then a lot of the small ones never moved over. We got 70% of the revenue in three months.

Sramana Mitra: Then you went out to get new customers.

Patrick Quinlan: Yes.

This segment is part 6 in the series : Navigating Through Multiple Pivots: Convercent CEO Patrick Quinlan
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