Bootstrap First, Raise Money Later from Houston: Onit CEO Eric Elfman (Part 7)

Sramana Mitra: Was it an all cash acquisition, cash in stock, or pure stock?

Eric Elfman: I’d like to think that we did what K1 did for us. It was a mix of cash and stock. I needed their founders on board. 

Sramana Mitra: What is COVID doing to you?

Eric Elfman: It’s changing everything. We have seen over $10 million of our pipeline shift as a result. Some deals just shut down. It’s going to have an impact, because we are selling to big companies. It’s easier for us to adapt to selling virtually.

It’s harder for our big customers’ legal departments to shift completely to buying big software virtually. It’s been a bit challenging. We’ve reached our Q1 targets, but we had to reforecast the business for the first time in my career at Onit. We never missed a target at Onit. We always outperformed.

We saw the writing on the wall. The sales are going to be harder. It’s going to be harder to maintain the same batting average that we had before. We reforecast and in March, we were doing our worst case planning to make sure that there was not going to be a cash crunch, but we changed that and said that we were going to do 75% of bookings in Q2, and 50% in Q3 and Q4.

It turns out that we were right in Q2. We only did 75% of our original plan and we think we are going to be right in Q3. We just don’t know the full effect. It is having an impact on the top line.

What we did was different than a lot of our peers. We did not do a reduction in workforce. We had 312 employees when COVID started and we are at 330 now. We found $10 million of cost to tear out of the business by getting more efficient without terminating a single employee.

Our original plan was to grow to 100 people this year. We are not going to do that, but we are still going to hire 40 to 50 people this year. I believe that as a workflow collaboration company like Onit, this current situation is driving people to push automation projects and workflow projects much faster. We are intent on coming out of this strong. in fact, stronger than our competition in terms of capability. I think in 2021 and 2022, it is going to be a better world for selling technology like Onit.

I lived through the dot-com crash. We were just three years old at Datacert when the whole world changed. I saw my private jet disappear. That helped educate me. I think strong companies get stronger in times like this and unfortunately, weak companies get weaker. We had turned our attention to M&A in this area. We have signed a letter of intent to acquire a company. 

Sramana Mitra: It’s a very good time to acquire a company. 

Eric Elfman: We are trying to sign the second letter of intent with another company and both of these companies are on different continents than Onit, so it’s creating its own set of challenges. There’s quite an unknown factor involved here – how do you do due diligence in a company that you have never seen and can’t fly to.

With K1 backing and support, we are leaning into the current environment and not just retrenching and hanging on to survive. 

Sramana Mitra: You are going to be about $30 million this year?

Eric Elfman: Closer to $50 million. We are at $40 million already and that is only the recurring revenue. That does not include $15 million to $20 million of service revenue on top of that. 

Sramana Mitra: Great story! Congratulations on all your success. Thank you for your time.

This segment is part 7 in the series : Bootstrap First, Raise Money Later from Houston: Onit CEO Eric Elfman
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