How to Build, Scale and Exit a Cloud Company in Today’s Market
People First is the Hyde Park Angels podcast dedicated to deconstructing entrepreneurial success into actionable takeaways you can use today. Hyde Park Angels is the most active early-stage investor in Chicago with a commitment to taking a “people-first approach” to investing. By matching our members’ expertise with entrepreneurs’ needs, we help develop top-performing companies that are delivering extraordinary results. Our latest episode features Dan Murray, cloud services expert and founder of Engineering Animation, Inc. and Workiva.
With roots in Ames, Iowa, Dan started his first company at the age of 19. He has a history of building, growing and selling companies. He sold J.P. Morgan its first cloud solution as a founder and leader of Workiva, one of three companies he founded and one of two that went public. He is now a member and leader of Hyde Park Angels. In this podcast, Dan discusses major professional and industry-specific takeaways with host Pete Wilkins, including:
- How to trust your gut and know when it’s time to start something new
- How to identify your strengths and add continuous value to a company
- How to let user insights drive product creation
- The importance of DevOps when you’re building digital products
[PODCAST TRANSCRIPT] “How to Build, Scale and Exit a Cloud Company in Today’s Market” – Dan Murray
Pete: Good morning everyone it’s Pete Wilkins, with Hyde Park Angels. I’m the Managing Director and I have the great pleasure to be sitting down with Dan Murray. Dan, I don’t want to steal any of your thunder, so I’m going to ask you to go ahead and introduce yourself and give a little bit about your background, please.
Dan: Sure, thanks Pete. Well, like you said my name is Dan Murray and I’m from Ames, Iowa – kind of a unique place in the center of Iowa. I had quite a great experience there in building early stage companies. I started my first company when I was 19 years old. Actually I was really on the ground floor of a company called Engineering Animation Incorporated. We grew that company from its very beginnings to about 125 million in revenue.
P: That’s nice work, right?
D: Yeah. It was pretty fun. We went public in 1996 and I was the Chief Software Architect there. We really didn’t find our rhythm until about ’95-’96 with products and manufacturing visualization. So, we had large customers like Ford and GM and Chrysler, really all over the world – Rolls Royce, Airbus…
P: Pretty impressive list.
D: Yeah, yeah it was a lot of fun and I got to do a lot of traveling when I was a kid. Basically meeting with heads of engineering for different departments in these large companies, you know selling and supporting our product. So, after about a ten year run we ended up selling that company to Unigraphics Solutions which was then taken private by EDS – the combination was taken private by EDS. And after that I took a little bit of a step back and kicked around…
P: Sure, you deserved it right?
D: Well, you gotta decompress after those hard pushes. So, anyway I took a step back and got involved – started another business that focused on online customer support and sales training. That was an interesting ride. Ended up with a small exit there…
P: But, at least you have a nice trend coming together – building companies, growing them, selling them, that’s nice, right?
D: Yeah, yeah it was pretty good. As a result of that one I happened into an opportunity to do some consulting work. So, I built a consulting business after that. We focused on a platform for pharmaceutical sales. And we had companies like Pfizer, Merck, Johnson & Johnson. That went really very well. Had a group that really started in the basement of my house just doing consulting. Had a lot of guys moonlighting.
P: Sounds like a lot of things have been going on in garages and basements that eventually you’re selling to Fortune 500 type of clients, so that’s also a good trend.
D: So, anyway I was in the middle of that and I got a call from my former partners leadership at Engineering Animation Inc. and these guys, can’t say enough about them. Matt, Marty, Jeff — those guys have been coaches and mentors to me my entire adult life and I got a call from them saying, “Hey, Dan we’ve got this idea, so I flew out to California and met with them and it was financial reporting. And that became the basis of the next company that I built with that team. The company we called Web Filings at the time, it is now known as Workiva, another IPO. I was in the midst again of doing something different and I could just see the opportunity and you know, just jumped in with both feet. Again, we got that ramped up in the basement of my house, which right now we are in the process of remodeling.
P: You should honestly, maybe we extract it, and maybe to some degree make a little museum in Ames, Iowa of the basement of your house. Have you thought about maybe? Or maybe not a museum, but take the couch or the rug and put it somewhere, so you could do that someday.
D: Yeah, you know we are in the process of remodeling, so I think there’s an opportunity to do that right now. My wife would like to get rid of some of the furniture.
P: Alright, ha, I understand. Well that’s impressive stuff though, I mean Workiva has been and continues to serve two-thirds of the Fortune 500 companies. I know that you guys have built it in a matter of a pretty short time to really build on this whole idea of the cloud and being able to help integration and collaboration. So, we are going to spend some time discussing what you see back then and maybe what you see in the future.
D: Yeah, you know and the guys at Workiva are still killing it. So, you know I took a step back a few years ago. I think one of the things that I learned as an entrepreneur is kind of know your skills and know what you’re good at. And I’m good at the first four and five years, you know, when the organization get big you know, it’s kind of time to step back and you know people who are good at running organizations, good at scaling to that 1000 to 2000 employee size. You know, you gotta kind of see that as an entrepreneur and know when it’s time to get out and kind of do your next thing.
P: Can I just kind of underscore this, or double click, as all the kids say nowadays, I think from seeing hundreds of entrepreneurs on a regular basis and over 50 portfolio companies that we have, and for those listeners out there, we are fortunate, Dan is also a Hyde Park Angel member. I think those that listen to the podcast regularly, the idea is that we take folks who have started, scaled, sold their businesses, “IPO’ed” their businesses and try to match them with entrepreneurs trying to do the same. What I want to underscore is the fact that you don’t necessarily have to do “thee” man from beginning to end. There’s an evolution that each of us may have skills, some of us have skills that continue to evolve along the way. But, many of us are really good at certain sprints along the way and so recognizing that that is important is really a strength and not a weakness.
D: Yeah, I couldn’t agree more. I think that as you’re building the business it is easy – you know, you want to take as much ownership of these businesses as possible, you know in the early days. But you know, you think of a business kind of like a child, right? At a certain point it grows up and you gotta let it go. Let it go so that it can become the best it can be. You’re not always going to be the best person, you know when you’re in the middle of these sprints and you get to the point where it becomes challenging for you to feel as effective as you once were. And it’s challenging for you become part of a culture that is sort of having to implement more process because the company is larger. You know if that’s not fun anymore then recognize that, get out when you can. Get back into something that is fun for you. That has motivated me throughout my career to kind of get out and do the next thing.
P: And I’ll underscore this as well – that also probably will create the most value for all the stakeholders. It creates value for you because you’re focusing on what you like to do. It creates value for the organization to continue to evolve and bring in different types of people with different types of skill sets. And since you maintain your equity in the organization then that growth benefits you, the shareholders and all the other stakeholders within the organization.
D: And the key thing I’ll say is that, you know, you really have to trust the people that you get into the business with and that are there to be able to do that. That was a benefit that I had that I think is really uncommon to have as much trust as we had. We’d built a business before, together. So, I always look at that as being a key foundation for me when I look at starting businesses. Get into it with people that you trust.
P: I think that’s critical not only who you’re partnering with but also who your capital partners are, etc. But I think the one thing that our listeners certainly can trust is you probably have some really keen perspectives on – when you were looking at any of these companies, the whole idea is how do you build a collaboration software, in the cloud to transform how people are doing things. Maybe even dive into Workiva a little bit into how you were solving problems and how that’s give you your perspective going forward.
D: If there’s one thing I do – I had a moment after Workiva – where I said, “What is it that I do?” The thing that I do, I guess, I build B2B software, collaborative software, where typically I look for a real business challenge: something – a process in business that has a high degree of pain where people are spending hours, days, weeks doing something manually that they can automate with software and facilitate collaboration and communication with each other that reduces the process time by days or typically weeks worth of time. So, at my first company Engineering Animation Inc., we did that with manufacturing and visualization and we saved design cycle times for large manufacturers – weeks worth of design cycle time for products.
P: Which in dollar amount, when you’re saving that type of time…
D: Oh, easy in the millions or tens of millions. If you do it across product lines then you’re talking hundreds of millions to billions.
P: So, it’s huge being able to have this kind of collaboration this whole visual manufacturing in the cloud, was able to allow these people to collaborate and effectively fashion and ultimately had a significant impact on their bottom line.
D: Exactly. And so, you fast forward to Workiva and take a look at what we did there. The way we got started was I had a couple partners that recognized the challenge that corporations have with filing their 10Q’s and 10K’s with the SEC. It’s a manual process. They’re using Word and Excel to do this. They’re relying on outsourced consultants to form the final HTML to deliver to the SEC. At the time there was a new standard of format that the SEC was starting to require that was called XPRL.
P: Which, all of this stuff is required by law if you’re a public company though – it wasn’t like they could just not do it. They had to do it, right?
D: Exactly. So, they had to do it and this XPRL mandate was really scaring the life out of the financial reporting teams at these financial companies. It’s a very technical format and they had a case where the financial printers and some other outsource companies were charging them a lot of money and it was all variable cost, so they couldn’t predict how much money they were going to spend at the end of their reporting cycle. And again, they’re doing it all manually with Word and Excel and they’re using file systems, file hard drives, and emails to transfer everything. And so, I think anybody who has worked with Word and Excel tried to collaborate with it, you end up with these documents and if you make changes you have to send the changes to people. It becomes a mess trying to manage that process with files. So, similar to what we did with AI we took that whole process and we put it in the cloud and put all the data in the cloud. Early on we were a first mover with Google App Engine. This was really in 2008 – the early days of cloud computing.
P: I think you hit on something that a lot of our listeners can really relate to because I bet many of them use Google Docs. So basically, and correct me if I’m wrong, but to help our listeners think through this… you created a Google doc for these forms and regulations that public companies needed to provide and you did it in a way that was automated and streamlined. Is that accurate?
D: That’s exactly right. So you would work with our product in a browser. Our product would enable you to link data so that you’d have one place to change it and it would update everywhere it’s used. And then you would be able to work on it with a team of people simultaneously. An example of some success with that is – my path through companies tends to touch through different areas, but one of the areas where I get involved in is Sales. One of my house accounts was JPMorgan. The first time JPMorgan used our product they filed their 10Q three weeks earlier then they ever had in their history. It was exciting enabling that collaboration, but also it was meaningful because the people who worked with the product were also able to get home in time for dinner when they would ordinarily be there overnight.
P: There’s probably folks listening who think well this collaboration will probably never work – just to remind everyone where we started: Seventy-five percent of all the Fortune 500 companies now use this product and you guys were able to go public. So, there isn’t any doubt that this was successful. But I think that in a moment I’m going to ask you to step back a little bit – there’s always doubt when you’re building it as an entrepreneur for sure. I know you had a sales role, but you were also instrumental from a product development standpoint and when you’re looking at building software from an MVP perspective, what did you have to do at Workiva to say, “Ok, we have the right thing that we can go to market to these Fortune 500’s, but it’s not perfect.” Does that make sense? Could you expand on your experience there?
D: Yeah, my experience is and I think this is the way I’ve done it and the way I’ve seen a lot of successful companies do it. You know, you build a product and it’s almost like you’re building and airplane in flight, right? So, you identify what the key pain points are for your target market and you start to build the product. We were lucky at Workiva because we had two former CFO’s who were partners of mine and two women who were – I just can’t say enough – incredible former controllers who understood the process very well. They understood how tools like Excel and Word are used in the process. We were able to, as my development team, just mine a lot of knowledge from them. A lot of times we’d sit on the couch in my basement and we’d project stuff on the wall and talk over how things are used today and the development team was able to get some of the key features out. We reached a point where product, or the development team would say, “This isn’t ready yet.” But we all said, “We’ve got to get it to market.” We’ve got to get it out there and start getting customers to use the product. That’s were you learn. You learn how they use your product and they can help you be successful. So, we went through the process of really establishing those early, early adopter customers. We picked ‘em right.
P: Well that’s good – clearly they kept it up. So, how many years ago, in the ball park was this?
D: This was in 2008-2009 we were doing this.
P: Alright, so for rounding purposes about ten years ago. The cloud world is different now then it was when you were looking to do this. I imagine at that time there were security issues especially with this valuable, confidential information. So, I’m going to ask you two questions. You can answer both or you can choose the one you want to answer. It’s your lucky day! 1. What were the challenges you faced, at that time, in selecting the right solution in the cloud? And then 2. Now, if you were to start this company, which you have AWS, Azure, etc. there’s plenty of opportunities to look at – what do you think the benefits are today for those that are starting off? I mean I think that a lot of people probably could understand how you had problems, but they’re probably most interested in how do you look at this marketplace now?
D: Sure, sure. Well back then we really had Amazon and Google. Google had announced, Google App Engine a month before we really got moving on a product. So, we chose Google at the time. It was early for them and it was early for us. And so, that was challenging. Cloud services from Amazon and Azure, they’ve all become more mature. I think the challenges that people face today are that there’s so much choice. When we were developing the product back then, when we launched, we became the first cloud solution for a lot of many of the companies that we sold to. We were the first cloud solution at JPMorgan.
P: You could put that in your museum as well, right next to that couch.
D: Yeah, [chuckles], no kidding! It was a long cycle with them, but they’re great people to work with. Today the challenge I see with cloud is there’s so much choice. Recently, I’ve begun the process of taking a look what’s out there and as an entrepreneur or developer it’s hard to know which platform to pick and what tools to pick off the shelf – because there’s so much. When I look at it, I think it depends a lot on your market. For me, B2B, information security is top of the list, so I need to go with a mature provider that can provide me with the ability to do Soc 2 Type 2 compliance. One of the most mature ones in that space is Amazon, although there are several good choices right now. I think that’s one of the biggest challenges right now is picking the platform for your market that your customers are going to be most comfortable adopting. Then you have all these choices in tools and you’ve really got to pick the tools that are the best tools, specific to the product. If you have latency, you need to insure you have low latency, and there are certain elements of those platforms, you have to really look and make sure that if you have a specific part of your application that has to have low latency – check that out. Make sure you have conversations with these cloud providers. That’s one of those things they have today that they didn’t have back then. They have people, on staff, for you to talk to and help match you with tools. If you can create a good relationship with one of them – do that and take as much advantage of it as you can.
P: The benefit you have, is you’ve built three companies. If you were to provide to the entrepreneur who is just starting to think about this, what would be the three things that you would tell them to evaluate as they pick a cloud service provider for their solution?
D: Well, first I would definitely pick one that can provide you the best support. That’s something I benefited from with the past few companies that I’ve done. Pick one that listens and listens well to you –whether it’s their sales or support team. That’s the first thing. Second thing is make sure you evaluate very carefully the ability to scale with their platform and understand those vectors, because the thing that you want, I mean, you want to build a business that scales and you—
P: So what do you look for? Because I can’t imagine any of these guys are saying, “Yeah we don’t scale well.”
D: They all say they don’t scale well, but definitely today the big topic in scale is container deployment and making sure you have a tool that sits on top of that container deployment and monitors and manages the different nodes in your architecture and that as you become, resource deprived, that it will automatically deploy. That’s one of the things – I’ve always looked at investing heavily in, make sure you have a really solid DevOps approach. One of the approaches I’m taking with my new business right now, really led by a great team member who just came on the team a month go, is to build DevOps into your entire organization.
P: For DevOps, development operations, can you give us a sense of, I know many entrepreneurs probably don’t have full appreciation for what that all entails.
D: The DevOps people typically sit in the middle of the Dev team and what they’ll do is, they’ll take the results of a build and they’ll insure that they get it deployed in the cloud. But, they’re also responsible for the scaling structure. A lot of times they take responsibility for your revision control system and your continuous integration system.
P: Because once you’re out on the cloud, how this is being deployed this impacts clients that are using the product and then your version control and all of those elements internally as you release those things have to be really tight and those are all factors in the whole ability to scale. Probably different products have different needs too.
D: Absolutely they do, one thing that we found very effective at Workiva and I’m building into the new business here, is the idea of continued release. You know, you build a product and you want to deploy it to the cloud. You want to make sure that deployment system is effective, repeatable and scalable. You think of that release process as a moving train, instead of thinking of a big bang software release—everything is ready so we are going to release it — think of it as a moving train and the things that are ready get on the train and the things that aren’t wait for the next car. That is incredibly effective and that enables you to focus on quality, which your customers expect.
P: And you’ve got to have strong leadership internally to manage that process effectively, correct?
D: That’s right, and that’s where DevOps comes into play. You’ve gotta have someone who, I really think, as I’ve seen it and I’ve seen software business evolve and the approach to developing software evolve, DevOps people have to wear so many different hats. Because of that they see so many different aspects of development. So, I’ve seen a theme now, where there are DevOps people that are being put into leadership roles and they are building DevOps as something that everybody in the engineering organization does, so that you don’t have a single group that’s just saddled with catching all the new features and making sure they get deployed.
P: That is probably, if you were to go back a decade ago, that’s probably one of the biggest evolution that you see in software development, that cloud services have really driven forward. Wouldn’t you say?
D: Absolutely, and the thing that is really neat about it too, is that oftentimes when you’re an entrepreneur and you’re looking for people to hire into your business, often you’ll look for people that are good in DevOps. Historically they’ve been in fairly short supply to get really strong ones. But, as companies evolve this approach to DevOps where it involves everybody on the engineering team, you find more people capable of doing it and understanding what it means to scale software in the cloud.
P: That’s great. So, I’m going to come back to how we got into DevOps and that’s the idea of scale. We were talking and making sure that our cloud service providers are able to scale and having insights on what that looks like in an ongoing release cycle is critical. You mentioned the first one is support. One of the things that I extracted was, clearly you’re going to evaluate support by how you’re supported in the initial engagement with the sales folks. But, the second element is how they’re going to support your DevOps folks when they’re starting to scale. So, support and scale and then you said there was —- I think I said you can give me three. You can give me more, but what are some of the other things when you’re looking at cloud service providers that you have to evaluate? And you just have to give me one more to hit the three.
D: My head’s swimming right now. There are a lot of concepts floating around.
P: Fair enough.
D: Yeah, I think when you’re evaluating those platforms you also wanna look at how quickly are they innovating? You know, because software moves so fast one of the things when I talk to others are working and scaling software businesses. At some point when you’re working on software, you deploy and your tech stack becomes more fixed, right? But, if you have the right architecture you’re able to take advantages of new capabilities that the cloud providers come out with. So, I always like to make sure that the cloud providers are innovators and they’re coming out with new things and they’re constantly improving themselves. I think that’s one way….
P: The idea of looking at support, scale and innovation gives our listeners today good touch points of how they’re evaluated. Clearly, price and a host of other things come into play. I think that conversation around your DevOps folks would lead me to a next question that I have. So, you’re talking about building a team early on. Besides DevOps, when you’re trying to build a strong software suite or solution, who else do you feel has to be on that core team?
D: Yeah, I mean you want people throughout the organization, in any function of the organization, that are able to wear multiple hats, they’re humble, they’re willing to take out the trash when it’s time to take out the trash. Another key thing too is to recognize in the early stage of business you want to have people who can work on something and then say, “okay that didn’t work, that doesn’t work” and be able to walk away from it without any sort of negative feeling about it. Yeah, it didn’t work, okay on to the next thing. That resiliency really serves a company well in the early stages.
P: Sure, that makes a lot of sense. So, the team concept, generalists, making sure you got some DevOp folks, clearly would you agree product is important, engineers are important. What would you say in that initial mix if folks that people should consider when they’re building a SaaS solution?
D: Well you definitely want to have a strong product manager. Often times in the beginning that can be the entrepreneur in the early days. Usually they have a great vision for the product, but the thing I would say to the entrepreneur that has the vision or the product is. One, don’t underestimate your need to get out of working in the business and move into working on the business. And to have somebody that you can trust that can take your vision and really own it and work with the team to get to that MVP. And really work with the team to make sure that the developers really understand exactly what they’re building. So, you don’t find yourself in a conference room going through a long of things in an Excel sheet and with someone saying okay would this work or would that work? You have to build with use cases from your target market to begin with. Good product managers know how to do that.
P: Well, I know that you have a pretty good sense of how to build that team, and you’re in the process of building a team of your stealth project as well. I would love to get your insights on what you think the future is and what’s motivating you. Before we do that I want to let you give a shout out to Iowa and Ames. Why is that a great place to build a business?
D: Well, thanks Pete. I appreciate the opportunity. Well I grew up in Iowa; I’m from small town Iowa. I grew up in a community of 4500 people and Iowa is a unique place. We are a small state. We only have three million people, but I’ve traveled the world. And the work ethic is unbelievable and the loyalty that people have to each other, to family and to the business they work for and with it’s second to none. The other element, especially my community in Ames, has a lot of experience helping to grow companies and help them scale. Organizations like Iowa State University, the Ames Chamber of Commerce, the state of Iowa – have been instrumental to me and my partners in building every business that I’ve been a part of. And they know how to help you capitalize your business, they know how to help you get resources that you need and they know when to get out of your way and that’s one thing that I would definitely underscore. They definitely know when to get out of your way and let you do your thing,
P: So, Dan, I wanted to thank you for our time. This has been incredibly insightful. You’re a true leader in your home community, Ames, Iowa. You’re a leader at Hyde Park Angels. And I think that you’re inspirational to those entrepreneurs and you’ve shown that you can start it in your basement and take that idea to a public company not once but twice, anywhere in the world. So, really appreciate it Dan.