Mergers and Company Growth ft. Michael Zuercher

VO: Get ready for your semi-regular dose of random ideas from the guys at Codelation. We like to talk about big ideas companies that are winning, and those that aren't along with current events in our crazy world of software startups. So come along with Erick and Josh, who challenge you to think big, start small and turn your ideas into something on this episode of, from idea to done.

Josh: Hey everyone, I'm Josh.

Erick: and I'm Erick.

Josh: And on this episode from idea to done, we're talking with Michael, the CEO and co-founder at prismatic, Michael. Thanks for taking the time today.

Michael Zuercher: Yeah, thanks for having me.

Josh: Awesome. Can you share with the audience a little bit about, uh, prismatic, who you are kind of your journey?

Michael Zuercher: Sure. So, um, I guess PR PR, so prismatic is a, uh, is a company that is focused on solving the integration problem for B2B software companies specifically via B2B software companies and niche, vertical markets. So that's a, that's a pretty narrow focus obviously, but, um, but it's a big problem and something that, um, that I have a lot of experience with in my previous company, which was called Zercher technologies, uh, and for 15 or 16 years, I grew that from, from nothing to a decent sized company, which I think is to some extent what we're going to be talking about today.

Josh: Yeah, I think saying a decent size, a little bit of an understatement, you know, when we talked earlier, you went from you sitting in an office to a 250 team members, I'd say that's a pretty healthy sized company.

Michael Zuercher: Yeah. I'd say we, uh, we were just kind of breaking into the, the mid-sized company area.

Josh: Yes. So, you know, when you were going through that, you know, um, when you're scaling to that, where are you, where are you looking at an exit? Was that on your mind? I can't imagine, you know, 2002 when you're starting out and you're saying, you know what, I want to build a business so I can go sell it someday.

Michael Zuercher: Okay. Yeah. I mean, absolutely not. So, I mean, I think, I think as is, as is the case in a lot of these stories, um, Zuercher was started just, just plainly as a, you know, met a customer that had a need or a potential customer, I guess, that had a need. Uh, in that case it was public safety software. So software for law enforcement organizations and things like that. Um, and it was really honestly intended to be a summer job. Uh, I was still in college at the time. It seemed like it was better than any other summer job, but we needed to write software and we need to do it for yourself. I mean, it was almost like, uh, I didn't think real hard about it is the truth and it certainly wasn't ever supposed to become a real company. And so, you know, what happened then is over that few years when I was finishing school finishing college, it, it got a little bit more serious.

Michael Zuercher: And I ended up with a customer that was willing to pay a little bit for an actual records management and dispatching type solution. Uh, well, you know, before I knew it, I was done with school and it seemed a lot more fun to work on, work on a company, then, then go work for whatever, with the electrical engineering degree I had just earned. So, um, so at that point it became, you know, uh, a little bit more real. And that was, that was in 2000, uh, five and six, I guess. And at that point we, uh, you know, over that couple of years got pretty passionate about seeing public safety, uh, professionals, you know, law enforcement, dispatchers, EMS, that kind of thing as, as underserved, you know, the software that they use. And to be honest, this is still true today to some extent nationwide, but the software and technology used is, is just kind of chronically behind the software that's available in many other vertical markets.

Michael Zuercher: And so, um, we were just, hyper-focused on disrupting that industry and we didn't even use the word disrupt early on. I mean, we didn't, we knew so little about anything that, uh, you know, we just wanted to, we just, we wanted to make it better than we thought in making it better. We can build a company. And so all of that to answer your question, you know, we set out, I would say to disrupt that industry without any thought whatsoever of an exit along the way. And what, what happened with the exit is nine years later, uh, you know, a very large company in our space that had always really succeeded with giant cities like Denver and Austin, Texas, and whatever. Um, they were, they had never been able to really crack our part of the market, which was cities of a couple of hundred thousand population and smaller.

Michael Zuercher: And so they, they came to us with our private equity backers and said, you know, Hey together, we could actually address the entire market of all public safety in the United States. What sounded like a pretty good way to accomplish our mission, right? Like what we wanted to do is disrupt an industry, this, you know, you call it an exit, but, you know, and it was to some extent, but at the same time, what it really was is just like a bunch of capital to go scale like crazy. And so, you know, it was all, it all happened super organically and looking back on it, it, it looks like it made a lot more sense than it may be felt. It, you know, at the time things just kind of happened. And, you know, we, we wanted to, we wanted to disrupt the industry. We needed new to do that. We needed to be a certain size and, and being, being part of that exit or that acquisition was, was, um, was the best way to do that. So one thing led to another and over the next three years, we, um, we grew five X in that three years as we scaled out nationally. And so, you know, it, it, it worked really well from, uh, you know, at accomplishing what it was meant to accomplish, but yeah, absolutely no focus on an exit until kind of when It happened.

Josh: Yeah, no, I think that's, you know, impressive to stick to that, that mission and being able to find a partner that had the resources to help take that next step with you, um, I think is really a kudos to the, the market fit that you had. So, um, along the way, you know what I've seen, you know, we're still a fairly small company and when we seem, you know, companies grow, there's kind of layers or areas to where it makes sense to add in additional, you know, management levels or different processes and procedures, as you kind of went from that, you know, one to 250, what were kind of the, the major groupings that you saw in your company that made you kind of step back and say, oh, we're not the same as we were a month ago, six months ago.

Michael Zuercher: Yeah. And you know, that's a super interesting question because of course what happens is you notice them after it's too late, right. You notice them once there are problems as a result. And so it's a super insightful question. And I, I think there are kind of a, a couple of ways to think about it, but, um, you know, the ones that I think are maybe the most meaningful as you think about how to, how to scale a company or how to organize a company are the ones that affect team members. Right? So in a, in a small enough company, a lot of things are really easy and I'm experiencing this again, being in a, you know, being in a startup again, you know, it's, it's not hard to communicate the vision of a company when you're communicating to in prismatic case, just a handful of people.

Michael Zuercher: You know, you don't, you don't have to say it nearly as often. Everybody kind of understands that communication around those things is easy. Uh, communication around values is easy, but I think the way that it really hits home with him with, with, you know, the team is at a small enough stage. Everybody knows what everybody else is doing. And everybody knows the value that everybody else brings. And, and, and that makes so many things easy right there, right? Like you can all be at a standup every morning. Things are just many things just kind of happen as a result. And so I think the first big place that some things change is when it's no longer reasonable to expect that everybody just kind of has a feel for what everyone else is doing and whatever everybody else's value is inside the organization. And, you know, it seems like that probably happens at 10 or 15 people or something like that.

Michael Zuercher: I'm sure it's different in different organizations, but, you know, there's a, there, there comes a moment where you realize like, you know, person a has no idea what person C even has been spending their last month on. And so I think, you know, at that point then you have to think about, okay, well, how do we keep everybody cohesive? How do we start messaging, you know, things around what we're doing as a company. And, uh, how do we make sure that we all stay aligned to the same organizational mission, the same values when it's not just 1000, it's not completely organic and just the, like, we all know everything. And so I think that's one of the, the big first transitions. And then, you know, kind of around that same time and again, different different organ, uh, different organizations. Um, I think there's a big transition that you have to make, you have to make a very specific decision about, and it's the decision.

Michael Zuercher: And it is the, the, the turning point where the company can no longer continue to grow at the rate. It's grown by just leaning on the extraordinary efforts of a few. You know, you can, you can get a long way, you can get to 20 or 30 or 50 employees sometimes by just having a core team of a handful of people, founders, or otherwise that are willing to just work three times as hard as anybody ever should. And, you know, be willing to, to just do the crazy things that founders do and entrepreneurs do. But that, that only works until you're a certain size, because once you get to a certain size, then, you know, you might, when you're one, when there are three people, one person is 33% of the, of the team, right? Well, when you're 50 people, that one person becomes 2% and you just flat, can't working three times as hard.

Michael Zuercher: Doesn't, isn't the lever that it used to be. And so I think, you know, there's a book called no man's land written by a guy named Doug Tatum. And, um, it talks a lot about this, where, you know, you have to make this decision that you're going to, you're going to suddenly get through that and, and start, start thinking of yourself as a thing that, that like we're scaling is an inherent part of the way you're thinking about everything. You're no longer going to rely on this one person to just like, do, uh, do more than anybody should. So I think, I think that's a second big turning point. Um, and then from there it just gets into, you know, having to think harder, harder, and be more and more intentional as you get larger about alignment of values, alignment of mission, how you communicate inside your organization, you know, as you all know the number of connections between people grow exponentially with the number of people.

Michael Zuercher: It's a, it's a, it's a very scary, you know, graph. If you're thinking about organizational design and before long, you have to have managers and you have to, um, you know, do the things that you have to do to keep people connected to the organization, uh, and keep people connected to what's going on. And, and I think at the extreme, uh, which happens, you know, pretty, you know, I would say it a few hundred people, um, you know, you as the CEO or you as the founder or whatever, really know very little, you're the, you're the dumbest person in any room about any specific topic just about. And at that point, all you're really doing is making sure everybody understands the vision. Everybody has to understands the values and just recruit the right people to make the right decisions with those inputs. And, you know, so it's a, it's an, it's an exercise in abstraction, I think, and by, and by the end, but it's very, very different than it was at the beginning.

Josh: You make it sound so easy.

Michael Zuercher: You know, I don't know about that. Believe me, I made every mistake you can make.

Erick: So that's absolutely crazy. And I can relate to being the dumbest person in a conversation, right, as I talk with to software engineering founders. But I had a little question as we were kind of talking about that growth. How, how do you kind of control culture and keep culture at a high level when you do kind of have that rapid growth or what are some things you can do when you change from a team of 10 to 20 to 50 to keep everyone engaged and to keep everybody happy? And how does that change?

Michael Zuercher: Yeah, so, I mean, I think I'll start by saying, I believe much of culture is, um, is, is not something you can prescribe. You know, the, the culture of an organization comes from so many indirect inputs that you can certainly do things to shape the culture, especially when you're small, but the culture is the culture like right, writing something on a wall, doesn't change the culture. You can document the culture by writing it on the wall, and that has value. But I, you know, I think step one is like, make sure you build a culture, that's the culture your company needs. Um, and that goes to, you know, to, to values and the way we interact and, and all those things. But then to your question to know, once you have something that you think is the right culture for your company, it just purely becomes a, the larger you are, the harder it is to keep everybody aligned with that.

Michael Zuercher: And, and it's, you know, it's, it's almost a numbers game, you know, and it's probably more complex than that, but, you know, you end up saying things around, you end up talking about the Organ- organizational alignment more than makes any sense at all. And because you, you know, you, or, or your, you know, your team or whatever, it's not just like, it's only the CEO, but, um, you know, the people who spend a lot of their time talking about that, hear themselves say the same thing five times a day, and you feel like a broken record and you feel like, oh my gosh, people have to be sick of hearing me say this. And then you end up in a room where you realize that, like, the people in that room, haven't, haven't thought about it in awhile because they haven't been in any of the rooms you were in when you've been saying it five times earlier in the day or whatever.

Michael Zuercher: And so, you know, I think it's just, it all comes down to being extremely intentional bizarrely intentional about, about focus on alignment and how you communicate that and how you reinforce it. And I think it goes right back to hire the right people, fire the people that you need to, to enforce culture, um, you know, and just, just make sure that that's the number one thing, because at a certain scale, that's almost all you can control. And then after that, you just have to have the people, you know, you know, you, you can control keeping people aligned beyond that. They're going to make all the decisions that are going to, you know, make the business work or not.

Josh: Yeah. So set that north star and defend culture at all costs.

Michael Zuercher: Yeah. I think, I think that's right. And of course, much easier said than done, right? Like when you're in a conversation like this, it certainly sounds like, wow, man, that sounds like w w you know, we just do that. Well, of course the real world is, is a messy place.

Josh: Yeah. Erick, go do that.

Erick: I'm on it.

Josh: Well, Michael you've recently started a new company. You touched on a little bit, um, what headstart do you think you might have, um, because of that, that merger, that acquisition, and having gone through that once before?

Michael Zuercher: Yeah. So, I mean, I think, I think the experience at my previous company kind of gives me three, three kinds of advantages. I guess that the first is that, you know, I'm working with a couple of co-founders that I have, you know, more than a decade, probably almost 15 years of experience working with. And, and that just eliminates a lot of interpersonal risk, I guess, right there, like w we all for better or worse know each other. We, we know, know our faults, we know each other's faults. And, um, you know, and I think if you're thinking about an early stage, early stage project, um, you know, a lot of the risk is around whether the team is gonna, is gonna, you know, gel correctly. And, and I think we were able to eliminate some risk there. Um, so as we've built out the team that's been super good and super helpful.

Michael Zuercher: I think the next one that just strikes me every day is that we are scratching our own itch and that we're solving this B2B software company integration problem. That was the, you know, thorn in our side for 15 years in our last company. And so, you know, understanding that world in a, in that visceral of a way, I think has been a huge advantage. And, and, um, and certainly is something that we were able to kind of, you know, a significant amount of time off the early stage of this company, by just already to some extent understanding the market and the, and, and the problem set, um, specifically around the, you know, how has, uh, scaling a company in the past or exiting benefited me, um, you know, I think so much decision-making and so much, you know, organizational design and the way you think about growing a company.

Michael Zuercher: So much of that is, is pattern matching, right? And, you know, the last time I, I did it, I was young and, you know, not hopelessly just in hindsight, hopelessly naive, uh, and had no, no data on which to make decisions and probably arrogant about some things that, you know, that I knew nothing about. And, um, and I think, you know, just having seen all the mistakes that, that both I made and people around me made and all the good decisions that I made and people around me made, and just having a bunch more data for the pattern matching is super valuable. And I think, uh, you know, that's, that's nothing other than experience, I guess, but having done this once with no experience and understanding how many pitfalls you, you fall for before you even realize that it happened, uh, it sure is nice this time to see a few of them coming.

Josh: Awesome. Yeah. And the, uh, episode we had with Sujan Patel, he talks about hiring and he says, when you hire somebody, you want to hire somebody for that role has done it at least twice. Cause once could be a fluke the second time is they know what they're doing.

Michael Zuercher: Yeah. Yeah. I mean, that's, that seems like very good advice.

Erick: So what, I mean, you said this before, but so you have this failure experience, basically. Yep. So what would you, what advice would you give an entrepreneur who is just starting out?

Michael Zuercher: You know, I think, um, I think the number one thing that most people need to hear, and this is far from an original thought, it's the farthest thing from an original thought, but it bears repeating over and over is that the only thing that matters is product market fit to an early stage company. You know, you can have the best technology, the best team, the flashiest marketing, none of it matters if you didn't make something that people actually want slash need slash are willing to pay for, uh, in whatever, you know, through whatever means pain means, you know, based on your business model. Um, and I think, you know, especially in the tech space, you know, we all get distracted sometimes by, by the flashiness of a technology or by a like, well, this is possible or so-and-so should want this. It would make their life easier.

Michael Zuercher: Why don't they see they should want this? You know, but the reality is if you can't put together a value proposition that includes, you know, a product of some kind and a way to convince people through one form or fashion that they want it you're going to get nowhere. It doesn't nothing else matters at that point. And so I guess, you know, again, not an original thought, but, but I think just being hyper-focused on product market, fit, product, market, fit, product, market fit, um, and once you reach product market fit, well, now there's a whole meal, you know, then there's a trillion things you can, you can decide to work on and, you know, figure out how you want to sell more of it or sell it differently or monetize it better or whatever. But until you've got something people want, which sometimes takes years, uh, none, none of the rest really matters.

Josh: I wish people could see the video. Cause I feel like I'm that dog in the back of the guard is bobbing my head up and down. Yup. That's where I've wasted money. I've wasted money. There yep, yep.

Michael Zuercher: We all have, like, and, and, you know, you always fall into those traps. We're, we're our own worst enemy in that way. Cause I think, you know, by nature founders, entrepreneurs tend to be a pretty optimistic bunch and tend to be a pretty, uh, passionate bunch about whatever it is they're working on. Well, the problem is those two things together can often lead you down a path that is not going to be a useful thing in the long run.

Josh: You know, I think the dangerous third trio to that as being a technologies t can actually build the software too. Cause then it's like, well, there's no barriers to me doing, let's just do it. Yeah. Yeah.

Michael Zuercher: And all of that said of course, you know, the way you get there is through experimentation. So I am not saying don't start something unless you can see the two year plan to get to exactly. I mean, that is absolutely not what I'm saying, but, but you know, doing everything you do every hour of every day with prove product market fit as your goal, I think is, is basically the right way to be thinking about early stage things.

Josh: 100 Percent. Well, Michael, thank you for taking the time coming on the podcast today, where can people find you? What do you have to promote? Um, what, what can you share with our audience audience? Well,

Michael Zuercher: Well so, um, you know, my new company we've been at it for, I suppose about nine months is Prismatic. Uh, our website is prismatic.io and we're, we just entered private beta this week actually. So, uh, we've got a couple of early customers that are, that are going to start using the platform and kind of, you know, getting us to the, to the point that we're ready for full production. But, um, you know, if you have any thoughts about integrations, especially in the B2B space, if you've experienced any of those pains and just want somebody to, uh, have a cathartic conversation with, I have had them as well. Uh, you know, we'd, we'd love for you to reach out and, um, we'd love to talk with you. We're, we're, hyper-focused on, on quote, the integration problem end quote, and, uh, and, and a passionate to find other people who are the same.

Josh: Awesome. Well, thanks again for your time today. Really enjoyed the conversation and, uh, yeah. Thank you.

Michael Zuercher: Yeah. Thanks guys.

Erick: All right. Time for a little reflection on that episode. And one of the things that we talk a lot about in our world is solving a problem and you should just build an app that solves a problem, and Michael actually solved a national problem with this startup and sold his business. So a way to validate your idea.

Josh: Yeah. I guess if you have to grow your company and sell it to a competitor to prove you validated, I guess he wins the cake, right. Is, uh, his focus on culture, you know, as you grow was a strong takeaway for me, the fact that at some point like the CEO or the senior leadership really isn't doing anything, but keeping everyone moving towards that north star, that was an interesting take for me. You know, being still in operational mode with, with our company,

Erick: You know, and bizarrely intentional about alignment. And that phrase really kind of stuck out for me from our interview. I think it's like, I like being good, different in a business sense and growing with people that are on like the exact same page and really working to keep everyone on that exact same page will really help with your overall growth in your culture. And I think that really, it links into his growth strategy around working smarter and not harder.

Josh: Yeah, that's something that I'm really starting to see, you know, even at our size of a company, uh, you know, a fraction of what they got to a two 50, if I put an extra 50% in and worked an extra 20 hours per week, I would increase our overall capacity by 4%. So yeah, I'm not going to do that anymore.

Erick: No, it doesn't. It just doesn't make sense. And it's good to know at the other end of that, if I work 20 hours less a week, it doesn't really do anything. One of the other things that we really see in our world, and I wish more people would really think about when developing an app is Michael Stott. That the only thing that matters is product market fit. And if it does it, it doesn't matter what anyone is making, unless they build something people want. It's something that people need. And most importantly is something that they'll pay for.

Josh: I imagine that on a masthead, you know, when they're the 21st 22nd century citizens are sharing on their, their Facebook style, a wall, I want, I want a quote from our generation of a market fit and validations everything. Like I want that Abraham Lincoln, uh, quote up there. So that's, that's my takeaway anyway,

Erick: Someday, someday, someday. Well, thank you for listening. We're hoping when you know a startup that could use our advice and random thoughts, send them over to correlation.com to hear our next podcast.