Among the biggest challenges entrepreneurs face is when to make an about-face in their business model and strategy. You're cruising along with your existing business model and then something happens that makes you question your direction. Do you lie down until the feeling goes away? After all, change is hard...really hard.
Andrew Sieja made that about-face. His company, kCura, which he launched in 2001, was a contract software consulting practice that wrote custom programs for fewer clients than it could count on the fingers of one hand. The company had about a half dozen employees when it was approached in 2004 by law firm Foley & Lardner to develop a document management software package. This job led to more work with large law firms.
In early 2007, one of the world's largest law firms, DLA Piper, bought a firm-wide license of the kCura software program used in the emerging legal market for electronic discovery to speed research for litigation. Then, says Sieja, "We stopped doing consulting and started doing the product work only." After the DLA commitment, "We went all in" with the software, called Relativity. At the time, kCura had 3 other customers using the package, and its revenue was a mix of mostly consulting and Relativity license revenue. kCura retained the copyright for the custom software it developed, and has been selling its flagship product to law firms ever since.
The decision to "go all-in" with a product rather than a service model was risky but turned out to be right. From a small handful of clients and users in 2007, kCura grew to have about 5,000 users by the end of 2008, 31,000 at the end of 2010, and nearly 37,500 as of April 2011. From six employees, it has grown to 130.
The big risk came during the decision to switch business models from contract software to seller of packaged software. "Cash was always an issue," Sieja said. Loans were not available from banks or other lenders, and neither was equity capital from venture firms. Sieja approached several friends who loaned him tens of thousands of dollars, and he also persuaded several customers to prepay for licenses to the software. In a remarkable show of trust, one customer prepaid for six years.
Sieja offered three tips for entrepreneurs based on his experience.
- Don't get spread too thin: Some people call this the "shiny penny" problem. Entrepreneurs often have short attention spans and are always looking for the next new thing. "A lot of entrepreneurs get into too many things and are not all-in on one product to the point where they do it really well. We were victims of that for a while in the consulting business," he notes.
- Don't try to be something or someone you're not: Sieja is a computer programmer by trade, who became a sort of accidental CEO. When he was younger in the early days of the company, he thought he needed to act the part of the Brooks Brothers-suit-wearing MBA. "I looked foolish," he now realizes, talking about value propostions and strategy. "What I was very excited about was our product, our software. When I started to be genuine about that, people started embracing it. You have to sell who you are. People are buying into you and your company."
- Customer service is really important: How trite-sounding, we know. But consider this: Sieja says virtually all the company's business from 2007 to 2010 came from word of mouth and repeat business. And if you excel at service, you have the platform to ask clients to help you, which Sieja does. He isn't shy about approaching clients and specifically asking them to recommend Relativity to other potential buyers.
Sieja plans to continue to grow kCura organically and believes it can be a billion-dollar software company along the lines of SAP, which has a core engine that all their software is built on. "We will do the same thing with Relativity in the legal space."