Imagine packing a sixteen-week, graduate-level startup masterclass into one hour. That’s kind of what it was like listening to a very broad and candid entrepreneurship discussion with Angie’s List co-founder and CMO Angie Hicks, and Baker Hill co-founder and prolific angel investor Mark Hill. Tom Walsh, intellectual property attorney and partner with Ice Miller, moderated the talk at Entrepreneur Bootcamp that had the pair of startup rockstars telling their own stories about hiring, big mistakes, tipping points, raising capital, finding advisors, leadership and more.
Jumping in the wayback machine, both Angie’s List and Baker Hill (now Experian) were started in other states, but relocated to Indianapolis. If you think Indy is foolishly maligned by other tech hubs or major markets today, can you imagine what it was like building a software company here in the late 1980s and early 1990s?
Mark Hill was a sales rep for IBM and his wife Karen worked at a local bank in Denver when a half-price PC Mark bought changed their lives because Karen’s ideas for better banking software started gaining traction — and more importantly, customers. Originally from Ft. Wayne, Ind., the Hills came back home, bringing their fledgling tech business, Baker Hill, with them and settling in Indianapolis. As Mark tells it, they were young and didn’t know any better, but they didn’t have any money and Indiana was just a lot more affordable than other places (and still is today). The Hills eventually sold Baker Hill to Experian in 1995, and Mark has since become one of the area’s most active angel investors through his private investment firm, Collina Ventures, with about 50 startups.
Angie Hicks was a college intern when she met venture capitalist Bill Oesterle. The pair started a service-provider ratings and reviews business after Angie discovered that no such thing existed while trying to help Bill hire a reliable contractor for his house in Columbus, Ohio. Angie moved to Ohio and went door-to-door signing up homeowners for “Columbus Neighbors,” a company name patterned after a neighborhood newsletter called “Unified Neighbors” back in Indianapolis. In 1996, Angie’s List purchased Unified Neighbors and moved the company to Indianapolis, where it has grown to employ thousands and evolved into a sophisticated tech company that is challenging service industry norms. The latest Angie’s List product is an app that, for example, brings the best plumber for the job to your door with a few taps on your smartphone.
On Raising Venture Capital
One of Angie’s favorite (and least favorite) stories to tell about raising venture capital has to do with a certain coastal firm that was on the verge of closing an investment deal with Angie’s List.
“They said they love us and signed the term sheet, and then they said we need to move the headquarters to Boston and we told them no thank you,” Angie said.
They didn’t think the company could find enough smart people in Indianapolis to build the business. Angie and her team definitely knew more about Indy than the venture capitalists and to date they have hired 2,000 people with a recently announced additional 1,000 on the way, including enough software developers and engineers to make Angie’s List one of largest tech employers in the area.
“My advice (on venture capital) is to go raise it when you don’t need it and be very picky who you take money from because they are going to end up helping to drive your business,” Angie explained.
Angie’s List eventually did take venture capital in 2008 from Battery Ventures, the VC firm that had become well-known in Indy for its large investments in ExactTarget (now Salesforce Marketing Cloud). Angie says they weren’t even looking for capital at that time. They were keeping their heads down and focused on growing their business, but the opportunity to partner with some great people and build effective relationships with VC folks who had their fingers on the pulse was just too special to ignore.
Mark’s VC story is a lot shorter.
“We had opportunities to take VC money, but we just chose not to,” Mark said. “After 15 years in business we were comfortable. We were a ‘ma and pa’ business and it was good. Of course, we wanted to drive forward and grow so we definitely thought about venture capital, but we just grew and grew and by the time we were serious about it we didn’t need it anymore.
“My advice for most people is don’t raise money,” Mark said. “The majority of people simply dont need it. Go out and get customers and really get the business going first. Then you can worry about whether or not you need capital to continue growing.”
On Hiring and Building Your Team
After seven years in business, Baker Hill was still a relatively small company with just seven employees. Mark says is was a bad hire that was one of the biggest mistakes they ever made and it definitely had an impact on the way they looked at their business and processes in the future, and contributed to them staying fairly small for so long.
At the time, Mark and Karen thought that improving the product was the key to growing the business, so they hired a friend from grad school who had similar technical skills. That’s when the problems started.
“In retrospect, we had the product far enough along,” Mark said. “The miss on the hire was that we didn’t need to add another technical person. The key to growing the business was actually all about marketing and sales and it was a painful mess not having the right kind of people.”
The moral of the story is this. The hires you make and people you surround yourself with are going to have an impact on your company culture, your company growth and ultimately your company success. It’s important to really understand the marketplace in terms of what the customer needs because you could end up wasting time and money improving a product that doesn’t need improving while your competition is out selling their product to all of your prospects.
For Angie’s List, the first big hire came four years after its founding, and the new hire was co-founder Bill Oesterle as CEO. Angie ran the business with a small staff for the first three years expanding city by city until 1999.
That’s when we really started to see it as a real business,” Angie said. “We were opening four markets at the same time so we started a search and ultimately asked Bill to join as CEO in January of 1999.”
In both cases, whether at the top or elsewhere in the company, finding the right people and building the team by adding strengths that were missing was key to managing growth.
On Taking Off
Selling to banks was tough, according to Mark. Banks are conservative and skeptical and it was hard for Baker Hill to get any type of momentum, at first. Their belief in the product and persistence paid off paid off when technology caught up to their forward-thinking approach.
“There was a progression — PCs, then LANs, then WANs, then the Internet, then bigger pipe — all those innovations drove new software development,” Mark said. “The inflection point for us was when PCs became networked and we were able to build more and sell existing customers more products.”
The hard lesson Baker Hill learned was that they should have focused sooner on selling more products to their own existing customer base rather than the harder and more expensive new customer acquisition sales processes. It’s a questions every growing company should ask. If you already have a customer base, is there something else you could be selling to them?
“Many people think the tipping point for Angie’s List was the Internet, but it was just another access point for members,” Angie said. “The real tipping point came through a marketing investment.”
In 2005, Angie was negotiating marketing deals with NPR stations in 30 different markets. The buy was going to top $1 million and it occurred to Angie that she might get a better deal going national, even though Angie’s List didn’t have a true national presence quite yet. As it turns out, the national buy got Angie’s List exposure in a total of 700 markets and the company rapidly expanded into 100 of them over 18 months. It was definitely a risk to manage that kind of growth appropriately, but Angie knew they had a proven model and she chose to trust what they had built.
On Mentors and Advisors
“One of the things I think is important when starting a business is having really great advisors,” Angie said. “Reach for the best you can get, over-invest in the best lawyers. A bad contract that holds you back for a decade is not worth the cost savings. Great people with a mediocre idea will do better than mediocre people with a great idea.”
Mark didn’t have the same experience, but he too sees a lot of value in seeking out great mentors and advisors.
“For us to attract and get to a group of mentors was outside of our consciousness. We were literally banging our heads against the wall to make mistakes and move forward. It wasn’t until we came home to Indiana did we have a board and some good counsel.
“Agreements are important and so are relationships and the way you think about them,” he explained. “I can’t tell you how many times I’ve seen where an agreement is bad or not well structured or it is not clear and you waste so much time and energy. For us, Tom at Ice Miler and BKD (CPAs) both were such good counsel. It is expensive. You could just go to legal zoom, but you miss out on so much experience and expertise”
On Being a Good Manager
“When it comes to being a good manager, you have to be very conscious of the business processes and understand what you are good at and what you are not good at,” Angie said. “Being too quick to hire and too slow to fire is a problem for a lot of people. With key positions just get to know people really well and if you are slow to hire you will be happier.”
“Transitioning from being a doer to being a manager and leader takes time,” Mark said. “It wasn’t as big of a deal when we were smaller, but when we grew to 25-30 people you really needed managers helping, keeping things together. The hardest part was that some of the doers couldn’t make the transition to being managers and leaders — probably because they were perfectionists. Some of the people who had been with us for a long time and helped us get to where we were-were not the right people to take us to the next level. If you can’t tell them no you will never be successful.”
A little Extra …
Mark and Angie had this to say to people considering starting their own businesses. There aren’t that many Zuckerbergs out there, but if you start young and get some good experience and get to know a market really well your probability of success jumps up. You need to develop your personal brand and keep growing your connections and networks and pay close attention to those first contracts and customer agreements, hire smart people like the attorneys at Ice Miller to work for you and then dig in and work hard.
“It’s similar to the age-old question ‘when is the perfect time to have a child,'” said Angie. “It’s okay to try and plan for when you’re going to jump, just don’t forget to jump.”
Check out these other stories from TechPoint’s Entrepreneur Bootcamp:
- Young Entrepreneurs, Lessons Learned Featuring: Chris Palmer of Boxfox and Peter SerVaas and Ilya Rekhter of DoubleMap
- Startup Lessons Learned: How past failures shaped the way Dustin Sapp runs fast-growing Tinderbox