In the News | Capital Efficient Entrepreneurship

This article originally published by One Million by One Million blog

 

"Stay close to what you know and who you know" ~ Don Mal, Vena CEO 

 

In this candid Interview with Sramana Mitra, Vena CEO Don Mal shares his path from small-town boy to big city entrepreneur. This article originally appeared in the One Million by One Million blog.

 

Don grew up on a small island off the East Coast of Canada and has built a capital-efficient business leveraging some key strategic assets. Very instructive interview.

 

Sramana Mitra: Let’s start at the very beginning of your journey. Where are you from? Where were you born, raised, and in what kind of background?

 

Don Mal: I was born in India and immigrated to Canada when I was seven years old. We moved from Northern India to a small province in Canada called Prince Edward Island. I moved to a small, single-room schoolhouse in rural Prince Edward Island very close to where Anne of Green Gables went to school.

 

Sramana Mitra: How did that happen? Why did your parents move there? I know there are huge Indian communities in Vancouver and Toronto, but I’ve never heard of this small town.

 

Don Mal: Canada in the 1960s had an aggressive immigration policy to bring in teachers and nurses because there was a big shortage of those two skill sets. My uncle had immigrated to Canada as a teacher. He then sponsored us. My mom was a nurse and that’s how we were able to come to Canada.

 

Sramana Mitra: How did you navigate from there? What did you do for education?

 

Don Mal: Just going back to that Anne of Green Gables comment, the reason why I mentioned it is because if you know that story, Anne of Green Gables was bullied. I have actually spoken at various diversity events. I use the story to talk about my experience when I moved from India to this one-room schoolhouse. There was a huge opportunity for me to not be accepted.

 

In fact, the opposite happened. I had no racism experience there. I was accepted right away. I was integrated very quickly into the Canadian culture. My experience as a young immigrant in Canada was very positive. I talk about how that paved a way for me to live a very confident life in Canada as a business person and as a very successful entrepreneur as well. Going back to your question, I went through public schools.

 

Then I went to St. Mary’s University in Halifax and studied Commerce. I started taking business courses early on. It was one thing that I gravitated to in terms of what I enjoyed and what I thought I wanted to do.

 

Sramana Mitra: What kind of work did you do that triggered your entrepreneurial journey? What was in your childhood or education that triggered your entrepreneurial process?

 

Don Mal: My mom was a nurse, but my father was a serial entrepreneur.

 

Sramana Mitra: What field?

 

Don Mal: My father had a retail store. He had restaurants and had wholesale businesses.

 

Sramana Mitra: You grew up watching that way of life or owning your own business. That’s very common actually. I’m also an entrepreneur’s daughter. It makes that very big difference.

 

Don Mal: I used to help my father in different roles. When I turned 16, I actually got a job selling insurance to fishermen. There is a company that sells accident insurance to fishermen. They hire kids in school. I got this job where I drove to the fishing docks.

 

As fishermen used to come in with their catch, I would sell them a $10 insurance policy that would protect them if they lost an arm, ear, or eye. I ended up selling a lot of insurance. I realized that sales is something I’m good at. That was my first thing. I also got involved in music. I was lead singer in a band performing on stage. I actually dropped out of university to pursue a rock and roll career. We got signed by a record label. We recorded two albums and had songs on the radio, but not big hit singles.

 

Sramana Mitra: What years are we talking?

 

Don Mal: This is the early 80's. I did university for two years and then I dropped out to pursue rock and roll. To support myself financially, I got a job selling stereos at different stores around Toronto. I pursued that rock and roll career. What I realized was I was really good at selling stereos.

 

I asked my boss one day, “How good am I?” He said I’m in the top three. But I wasn’t making much money selling stereos and my rock and roll career was not going anywhere. At that point, I wanted to switch to an industry in sales that paid more. I asked my friends what the hot industry was.

 

My cousin who was in the computer hardware industry said, “If you want to get into where all the money and action is, software is becoming the hot thing.” It was ’86 when I got my first software job. I picked up a few PC magazines and learned about the hot software of that time. I applied for a job I saw at a job board. The company ended up being SoftKey Software.

 

Sramana Mitra: In Toronto?

 

Don Mal: Yes. Do you watch the show Shark Tank?

 

Sramana Mitra: I watch it from time to time.

 

Don Mal: Kevin O’Leary is one of the sharks. He was my first boss in software. He was the CEO of SoftKey that eventually sold for $4 billion. Right away, I had a boss like Kevin. He was all about making money.

 

Sramana Mitra: What year were you selling software?

 

Don Mal: ’86.

 

Sramana Mitra: Before the Internet, were you selling packaged software?

 

Don Mal: Yes. In fact, SoftKey’s mail list management software was the hottest product in PC Magazine. You’d put in a database and get your labels to put on envelopes.

 

Sramana Mitra: How long did you stay with the company?

 

Don Mal: I was there for four to five years. I was 24 years old when I started there. I grew from inside sales to outside sales, and I eventually led sales at SoftKey when I was 27 years old. I had about 18 salespeople reporting to me in major leagues cities in the US as well as in Toronto. I became Director of Sales at 27 for a company that sold for $4 billion a few years later. It was quite an amazing opportunity.

 

Sramana Mitra: Did you have equity in the company?

 

Don Mal: I had very little equity. Unfortunately, I left before the company sold. The reason SoftKey was going through a transformation was because the software that we were selling wasn’t exactly working very well. Kevin decided to take the company in a totally different direction.

 

He started buying discontinued products, putting them on CDs, and selling them on retail shelves, and eventually parlayed that into a pretty big software company that bought the learning company and sold that as software built for kids. When I was there, it was 30 people. It was early days. I stayed there for over four years in sales as well as in management but I never made a lot of money there.

 

Sramana Mitra: By the time you are about 30 years old, we are talking early 90’s. What’s the next move?

 

Don Mal: The next move is another software company called MSR. It was a logistics type of technology for freight forwarders, customs brokers, importers, and exporters that generated customs clearance type of documentation. I was there for seven years in sales and sales management. I continued playing music on the side, but now software became more of a career and music became a hobby.

 

Sramana Mitra: How long did this gig last?

 

Don Mal: Seven years.

 

Sramana Mitra: So now we are in the late 90’s.

 

Don Mal: Yes. That’s when I met my wife. Now I was in my mid-30s and thinking about settling down. I met my wife and got married in 1995. In 1996, I decided to leave MSR and pursue the next level of opportunity in my career which was to be a General Manager. I looked around and found a posting for a job to run a Canadian subsidiary of a US IT consulting firm.

 

This was leading up to the year 2000 and the Y2K problem. IT consulting was hot because everyone was busy changing all their computers to be Y2K-compliant. I took over a very small branch of a large US company and I was able to grow that company five times in about four years. That took me through to 2000.

 

Sramana Mitra: What happens next?

 

Don Mal: Then I went to another software company but only for a very brief time. When I went to the services company, even though it was successful, I decided that I missed selling products. I did a couple of things. While I was in the consulting business, I did go to school and picked up a certificate in project management, because I wanted to get a better handle on the whole services business.

 

I went to York University and did a one-year PMP program. I ran to somebody who was looking for a VP of Sales and Marketing for a European software company that had an office in Toronto and Boston. This was between 2000 and 2001. I took that job. Then the dot-com bubble burst right around then.

 

Now, I had been in software for 15 to 16 years. I thought I needed a break. It was a crazy idea. I said, “I’m going to go and build a golf course.” I started playing golf when I met my wife. I fell in love with the game right around 1996. When I met my wife, their family had cottages on a beautiful lake two hours north of Toronto and there was nowhere to play golf. I thought, “Maybe I should take a break from IT and pursue this crazy idea.”

 

I ended up building up a $10 million golf course. I raised money and convinced enough people to invest. I hired a top designer who had designed some of the best golf courses in the world. We built a $10 million private golf club on the lake where my wife’s family was. I moved my wife and my kids to a small town. I had a three-year sabbatical from software. I built this golf business that I eventually sold. Building a golf course is amazing. It’s a very creative process.

 

Sramana Mitra: So how long did this golf course journey go and what happened after that?

 

Don Mal: It lasted three years. After it was up and running, I was pretty bored. Running a golf course is pretty boring. It’s not very intellectually stimulating. We decided to move back to Toronto. I sold my share in the business and moved back to Toronto. My wife was also very bored living in a small town.

 

She wanted to come back to the big city and she got a job back in Toronto. We moved back and I then decided to go and do my MBA, because I didn’t finish my degree earlier on. I decided that I wanted to get an MBA because I wanted to know why people have MBAs. I went to the University of Toronto. I did a two-year executive MBA. While I was doing that, I got some odd jobs here and there.

 

After I finished my MBA, my wife met a woman at a playground at school. She said that her husband is the COO of a software company. They got to talking. I met the husband. He’s the COO of a company called Clarity. That was 10 years ago. I came back to software. I started to work in sales and very quickly moved into VP of Sales and then I ended running all of sales for Clarity Systems. That’s a company that is in the same business we’re in now.

 

Clarity was a great company, but they were acquired by IBM in 2010. I stayed for a while at IBM. One of the guys that co-founded Vena gave me a call. He said, “I have an idea for a product, but we need someone to help us take it to market.”

 

Sramana Mitra: Why was he calling you? How did you know this guy?

 

Don Mal: We were together at Clarity. This is Rishi Grover, one of the Co-Founders. He’s 20 years younger than me. This is where it connects to the golf business. He said, “I need someone to help raise the money. We need someone to start our sales and marketing.” All that experience came together for me to be able to confidently leave a million-dollar job to come work and start a new software company.

 

Sramana Mitra: What stage did you raise money for Vena at? What did you have? Did you have some customers? Did you have an early product? What was the metrics with which you went to raise money?

 

Don Mal: You’re going to love this. We value the company at $10 million on day one with zero customers.

 

Sramana Mitra: This is not something that is a repeatable story. You can tell me how you did it, but it is not very doable.

 

Don Mal: We did have a product. Rishi was busy for about six months in a basement working with the other co-founder who coincidentally was at IBM as a developer. They went to high school together. They basically wrote the first version of the product. It was in a demo state. It wasn’t fully-baked.

 

Sramana Mitra: What was this software supposed to do?

Don Mal: It’s corporate performance management. We take Excel, integrate with our product, we have a database, we give it workflow and auto trail. That’s what we do.

 

Sramana Mitra: Rishi and your other co-founder had built some portion of the software when you went out to raise money. What about customer validation?

Don Mal: We believed that we had a business worth $10 million because we had the team that had done it before. Rishi and I worked at a company that just sold for $300 million to IBM. We went to investors and said, “We’ve done this. We know that this product solves a very similar problem that that other product solves.”

 

The beautiful thing with IBM is that they don’t have a non-compete. We were allowed to go to market with a product that essentially competed with one of their products. We showed the market that we had a product and the ability to go to market.

 

Sramana Mitra: I got exactly why you were able to do this. Let me summarize, based on my experience, exactly what happened here. You guys were a team out of Clarity that just sold to IBM and had spent a little bit of time at IBM. You had domain knowledge in the exact same domain that you were selling. You went to the investors and said, “We’re going to do this again with a competing product. We have all the customer relationships and it’s the same team.”

 

There is one question that follows from that. What did you do differently or how did you improve the product? You were setting yourself up for a situation that you were going to go back to the same customers that you’ve sold Clarity to before. What is the justification? What was the sales pitch?

 

Don Mal: We had to respect a one-year non-solicitation agreement. We weren’t able to go to the customers for one year. We knew that we could go to other prospects that were like those customers. Having said that, that is the beauty of Vena. Our approach was that we leveraged Microsoft’s native Excel technology in our software. All of the competitors, including Clarity and IBM, replaced Excel with proprietary grid technology. That was the big differentiator.

 

Sramana Mitra: By the time you raised Series A, you already had $20 million in revenue?

 

Don Mal: Yes.

 

Sramana Mitra: Can you discuss what kind of equity cap table did you raise that money on? We have a very big philosophy in our program where if you operate tightly with small amounts of capital, you have a lot of leverage in follow-on situations.

 

We have a lot of hanky-panky going on in the industry right now vis a vis these cap tables with investors stuffing term sheets with liquidation preferences. I imagine you have none of that. Talk to me a little bit about how by the time you went out to raise your Series A, you had a lot of leverage.

 

How much equity had you parted with? How much equity did the founding team control at the point at which you went in to raise your Series A and how much did you have to give up?

 

Don Mal: We never went to build this business to keep as much equity as possible as founders. We did it slightly differently. This might not be great for your readers. We gave 15% of the company to the employees.

 

Sramana Mitra: That’s a good thing.

 

Don Mal: Right off the table, 15% of the company is owned by employees through options as well as stock purchase programs. The founders started with almost 90% because we did sell 13% on day one. I want to say that we had still about half of the equity in the company when we went out to do our Series A.

 

Sramana Mitra: Did the management team, founders, and employees take any liquidity in this Series A? The kind of situation you’re describing is often a situation where these days, we see a lot of founding employees taking liquidity and the professional VCs coming in with money. Is this something you did or did you put all the money into growth financing?

 

Don Mal: It was a combination of taking that equity and we paid off the debt that we had. There was some secondary. There was an opportunity for all shareholders to take some money off the table. It was given to every shareholder including friends and family and angels. There was some secondary. Some of the funds went to working capital. The majority went to the balance sheet for working capital.

 

Sramana Mitra: That happened last year in 2016.

 

Don Mal: Yes.

 

Sramana Mitra: What else do you want to share with our audience?

 

Don Mal: If you think about the journey around why we’re successful, we had a highly-differentiated story with a product that is very easy to articulate.

 

Sramana Mitra: And relationships with big customers.

 

Don Mal: It doesn’t hurt.

 

Sramana Mitra: That is the business maker here. You really understood the problem and the solution that customers would be willing to accept.

 

Don Mal: Stay close to what you know and who you know.

 

Sramana Mitra: Exactly. Thank you for your time.

 

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