Seems like yesterday, but it was six years ago when the idea for Shugo hatched — though the vision then is much different than where we are today. Yep, six years ago we started devising the initial business plan and design of FileGuardian, our core product that was going to change our lives. I thought it would be helpful (and amusing) to share how it came came about. Give you the background on where we started, how we tried to minimize the risk as much as possible and where we are today.
Why create a start-up…my dad thought I was crazy
The question I was asked over and over again: why create a start-up when we were already running a successful consulting company? We had a nice client list paying us well over $100/hour for our software development expertise. In the late 2000’s, we had four employees and the business was generating revenue of over $500,000 annually. We were extremely profitable and had long term commitments of additional consulting work year after year. In fact, many of our consulting contracts were open ended with no end date because of the tight relationship we had with our clients.
Then why rock the boat? Why disrupt what we built over the years? Why take an unnecessary risk?
Yep that’s me, I rock the boat
It was mid-2008 and my life was great but changing. My wife and I had married in 2007. We welcomed our first child (Taryn) in January of 2008 (we didn’t waste any time eh). We were expecting a son (Brayden) in March of 2009. So why risk a business generating revenue of a half a million dollars a year for a start-up? My dad, a banker his entire career, thought I was crazy.
The answer: I wasn’t happy. I enjoyed building software, but not building software for other businesses to profit long-term from. Sure I received near-term profit but my client received the long-term reward. It may sound selfish but I poured my heart into the work we did for our clients. Our entire team did. We treated it as if the software was our own and the clients of our clients (the end users of the software) we ours as well.
What really tugged at me was when I’d hear about the level of support the end clients of the software received from our consulting clients. We’ve built this great software only to see it not supported all that well. It bugged me…the software that we spent hours developing wasn’t receiving the level of support I felt users deserved.
But we were generating revenue of half a million dollars a year, shouldn’t that have made me a little bit happy?
Well it didn’t. I dreaded leaving the house every day (ask my wife, she could see it in my face). I wanted something more. I wanted to control my own destiny, even if that meant I failed. Of all times, newly married, one child with another one the way, I was ready to make the jump.
The three amigos…
In June 2008, I broached the idea of starting a SaaS based business with my partner in the consulting company and a good friend who ran his own marketing firm. Gone would be the days of hourly billing. We’d welcome recurring monthly revenue with unlimited scalability.
I came up with idea of allowing small businesses to securely exchange data. Wouldn’t every accountant in America want a simple and secure way to send tax returns back to their clients? Wouldn’t they also enjoy the idea of being able to securely receive QuickBooks backup and other setup files from clients as well? And yes I explicitly say accountant since it’s who we felt our target market would be — the low hanging fruit my father always mentions.
We had to think of a product name and I wanted something fresh like Google or Yahoo. Something unique that no one would’ve heard before but would stick in their mind. Well our marketing partner decided that probably wasn’t the best approach, especially if we were marketing to accountants (of course he was right). We needed a name that was simple to easily describe the product. His idea: FileGuardian.
What — no business plan?
So we had a concept and a product name. We had our target market defined so let’s start crafting a business plan. It was the next logical step since I went to business school for Entrepreneurial Studies (graduated with my MBA in 2001 and had written a few). At least I thought it was the next logical step but my two partners didn’t agree. They both thought it was a waste of time but I held true and started my market research and crafting the plan. I thought at a minimum, we at least needed an Executive Summary.
Part of what we needed to decide would be the structure of the organization, specifically who was going to responsible for what and what our titles would be. More importantly though, we had to define who would be the leader, the end decision maker of the three, the one who would be the face of the business moving forward, for better or for worse. My marketing partner and I both felt I should be the one. My partner in the consulting company disagreed and felt he should be the leader.
Typically, I would’ve figured out a way to work out a compromise but this was one situation where I knew I couldn’t. See, I already had some reservations with my consulting company partner from the years of being in business together. We thought differently, but overall I felt that was a good. We had varying viewpoints which helped challenge us both. But, there had been a few moments when he completely dismissed my differing view. Those moments really tugged at me.
How Tacos changed my life
Randomly, I decided to take one of our employees in the consulting company out to lunch. I hadn’t had a chance to interact with him much in the recent months since he and my partner worked tightly on a contract and I was busy on another part of the contract. I thought it would be good to catch up and learn what was new in his life and ensure we were offering him the opportunities he needed. It was a lunch that changed my life.
We entered the restaurant and sat down waiting for our food to arrive. I asked this employee how things were going in life and how things were going working with my partner. Immediately (even before we had a glass of water on the table), he pulls a piece of paper out of his pocket. It wasn’t just a 3×5 or 4×6 piece, it was the full 8.5×11 variety with bullet points from top to bottom, left to right covering the entire sheet.
He reels off point after point at the difficulty he’s had with my partner, how my partner takes credit for all his work and how unhappy he truly is. Point after point I could see and understand where his frustration lied. He concluded by sharing how he appreciative he was for my ear so he could share his viewpoint.
The light bulb really turned on for me after this experience. Some of the concerns he had with my partner I shared as well. It was these reasons and this lunch that sealed it for me: I need to be the leader of this new company no matter what.
I hope that doesn’t sound selfish but I knew if we were going to shake up our lives, I need to lead the charge.
Part 2 to come soon…