Latest / NC Tweener Talks / Richard Holcomb: Using "Hillbilly Negotiating" to Create an Excel-lent Microsoft Deal

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Richard Holcomb: Using "Hillbilly Negotiating" to Create an Excel-lent Microsoft Deal · NC Tweener Talks

• 00:00:03 - Richard Holcomb So we turned down the million dollars from Microsoft and instead suggested that they pay us a royalty per copy. I actually ended up in a conversation where I got compared to Opie and Andy because you Southerners ain't very bright if you'll turn down a million dollars. By the end they were shipping about 400,000 copies of Excel a month. So every month a check showed up From Microsoft for 400,000 do. 00:00:34 - Announcer Welcome to Triangle tweenertalks, a weekly podcast by Builders for Builders where we explore the startup journey from the idea to the exit and all the lessons in between. With an exclusive focus on founders from the Triangle region of North Carolina. Tweener Talks is produced by Earfluence. Now here is your host, Serial Founder and General Partner of the Triangle Tweener Fund, Scott Wingo. 00:00:57 - Scot Wingo Hello and welcome to this episode of Triangle Tweener Talks. I was really excited to sit down with Richard Holcomb, General Partner at North Carolina Venture Capital Fund and deal Lead at Quorum Group. Before I give you a summary of what we talked about, I'd like to thank our sponsors, Eisenhower Amper, formerly hpg, one of the world's largest business consulting firms with a dedicated technology practice offering outsourcing, accounting, tax and advisory services. Our experienced professionals serve more than 2,000 technology companies from early stage startups to public enterprises. If you want to learn more go to eisneramper.com TechTech smashing boxes, a Durham based design centric digital transformation company, bank of America. Their transformative technology group helps game changing tech businesses and founders realize their boldest ambitions across a wide range of technology sectors. Robinson Bradshaw, a full service business law firm with a passion for supporting the Triangle's entrepreneurial ecosystem. And special thanks to our friends at Earfluence who helped produce this podcast. I first met Richard Holcomb right around 1997. I was a first time entrepreneur, started my company Stingray Software and to be honest I was really struggling as a tech founder to understand a lot of this business stuff. One of my NC State professors, Dr. Tom Miller, who we are going to have on the pod, soon connected me to Richard. Richard was already on his third company, Hot Haht Software and they had raised a ton of capital. They were growing rapidly and yet he still took time to mentor me and help me through what I was working on. So much time that I began to feel guilty and tried to compensate him with either some cash compensation or stock. Richard refused and taught me a valuable lesson, the importance of giving back, of helping people up the ladder behind you versus pulling up the ladder behind you and the fact that entrepreneurship is not a zero sum game. It's a pie. Our little triangle, startup pie. And we can work together to make that pie bigger instead of fighting over slices. And that makes a lot more sense if you really think about it. The pie is growing so fast here in the triangle that everyone's slice just gets bigger and thus it's a win win, not a zero sum game. There's a abundance kind of situation. So Richard taught me, a relatively young founder, that lesson, and that is the kernel of why this podcast exists. The Tweener List, the Tweener Fund, and all things tweener. So this is all part of my paying it forward. Thanks to Richard, setting a great example for me. So it was a really full circle moment when I sat down with Richard for the pod and despite spending a ton of time with him since 1997. And I've heard a lot of his stories, but I've never heard the whole story linearly and I was able to pick out some fun new nuggets and I think you'll enjoy it. Here's a couple of highlights to listen for. Richard started with humble beginnings. So he grew up on a farm in rural Whiteville, North Carolina. Now he's going to get back to the farm in this story, which is pretty interesting. He taught me a skill I use a lot, especially when dealing with some of our friends out in Silicon Valley, and I call it hillbilly negotiating and you'll learn about that in this episode. He did this deal with Microsoft that is still legendary to this day at Microsoft for a deal not to do with an outside vendor, and it is still used as a case study for product managers in the legal team on deals you should not ever do. So in this conversation we cover everything from his early days working with Oracle and the rise of database middleware to founding game changing companies like Data Direct and StrikeIron, to lessons learned navigating the dot com bubble. So if you've ever kind of wondered how someone can navigate through that, how do you go from the farm very humble beginnings to pretty wild success, you're going to enjoy this conversation with Richard Holcomb, as I did. 00:05:00 - Richard Holcomb I was born in England. My father was a GI and my mother was an English lass and they actually got together before my mother was 21, which was legal age in England. So I was born out of wedlock. 00:05:22 - Scot Wingo Whoa. 00:05:22 - Richard Holcomb My grandmother had my father kicked out of the country, so my mother and I immigrated to England when she turned 21. I was three. 00:05:32 - Scot Wingo Interesting and then where'd you all land? 00:05:34 - Richard Holcomb Whiteville, North Carolina. 00:05:36 - Scot Wingo Why on earth? Whiteville, North Carolina. 00:05:38 - Richard Holcomb That's where daddy was from. 00:05:39 - Speaker D Okay. 00:05:39 - Richard Holcomb We had a farm there and grew up on a farm. And then he did some construction work. And, you know, it was you sort of a rural southern life. And it was drilled into my head that you need to go to college. 00:05:54 - Speaker D Yeah. 00:05:55 - Scot Wingo Did you work on what kind of farm was this? Was like a dairy farm or like tobacco? 00:05:59 - Richard Holcomb Well, farms in that time did a little bit of everything, but they only made money in tobacco. Yeah, tobacco. 00:06:04 - Speaker D Yeah. 00:06:05 - Scot Wingo Did you actually get out there and. 00:06:06 - Richard Holcomb Oh, every morning, tobacco stuff by 5:00? By 5. By the time I was 5, I was driving a tractor. 00:06:12 - Speaker D Yeah. 00:06:14 - Richard Holcomb And my first job was to fuel it up at about 5 o'clock in the morning. So I'm a 5 year old putting fuel in the tractor at 5 in the morning and then driving around. 00:06:22 - Speaker D Yeah. 00:06:23 - Richard Holcomb Doing. Doing. 00:06:24 - Speaker D Yeah, yeah. 00:06:25 - Scot Wingo So you know where your chicken sandwich comes from. I've had the pleasure of watching you deal with a chicken. And you did it very fast and easy. I was like, this is not Richard's first time. 00:06:35 - Richard Holcomb I didn't know you. I don't remember you seeing that. Okay. 00:06:38 - Speaker D Yeah. 00:06:39 - Scot Wingo So. So you grew up on a farm and then, you know, it was drilled in to go to college. So then you're a technologist. So when did you know this? Kind of in high school. Did you kind of catch on to technology or was it later? 00:06:49 - Richard Holcomb Early on I wanted to be Jacques Cousteau. We only had one TV channel and Jacques would come on it, so that looked like fun. Yeah. By the time I got to college, I wanted to be a chemist. So I did a year of chemistry and decided that I really, really don't like chemistry lab. So I switched to computer science. 00:07:09 - Scot Wingo Was there like an explosion? Did you lose some eyebrows on a Bunsen burner or anything? 00:07:13 - Richard Holcomb I actually had two vials in my hand and one was 100% pure acetic acid and one was something else. So to figure out which was which, I sniffed. So I sniffed in a sort of a full breath of pure acetic acid and couldn't breathe for a little bit and decided that now this lab thing is just really not for me. 00:07:34 - Scot Wingo Yeah, it doesn't really happen when we're dealing with computers. A lot safer than. 00:07:37 - Richard Holcomb A lot safer on the computer. Yep. 00:07:39 - Speaker D Yeah. 00:07:39 - Scot Wingo So that was South Carolina. Did you, did you. Why didn't you stay in North Carolina? 00:07:44 - Richard Holcomb My father moved to Myrtle beach, basically. Conway, Myrtle beach, when I was in the eighth grade. To take a job at A Grove Manufacturing, which made cranes that had moved from up north down to South Carolina. 00:07:58 - Speaker D Yeah. 00:07:58 - Richard Holcomb To get away from the unions. 00:07:59 - Scot Wingo Interesting. So that was the. In state school at that point for. 00:08:01 - Speaker D Yeah. 00:08:02 - Richard Holcomb Y. 00:08:02 - Scot Wingo And then. 00:08:03 - Richard Holcomb And what's your story? How did you end up at usc? 00:08:05 - Scot Wingo I'm from aan. 00:08:06 - Richard Holcomb Okay. All right. 00:08:07 - Speaker D Yeah. 00:08:08 - Scot Wingo So. And my parents went to usc. 00:08:10 - Speaker D Yeah. 00:08:10 - Scot Wingo When I grew up, I didn't really. I'm not a huge sports person, so I didn't really know there was schools outside of like the two that were in South Carolina. I didn't know there was anything but like, you know, but two schools. I thought there was just like. And I always thought you just like went to the school near you, so I didn't really understand how that worked. 00:08:24 - Richard Holcomb Sorry. 00:08:25 - Scot Wingo But yeah, so there's like one and done. I just applied to South Carolina and got in. 00:08:28 - Richard Holcomb Okay. 00:08:29 - Speaker D Yeah. 00:08:29 - Scot Wingo Didn't. Didn't come up on a farm. My dad was a programmer, so I. You were hanging out on the farm? I was hanging out on the vax. Ah, gotcha. 00:08:37 - Richard Holcomb Yeah. 00:08:38 - Speaker D Yeah. 00:08:38 - Scot Wingo So you went to South Carolina and you graduated and then what year was that? I know, it's a long time ago. 00:08:46 - Richard Holcomb Long time ago. So I didn't finish high school. I. I didn't do 12th grade, so I went straight to college from 11th grade. So I did that in 79. So I did three years at USC. So it was 82. 00:09:00 - Speaker D 82. 00:09:00 - Scot Wingo Yes. 00:09:01 - Richard Holcomb So 82. I came to NC State for one year of grad school, which makes it 83. And then I started working. 00:09:08 - Speaker D Yeah. 00:09:09 - Scot Wingo And then why'd you go to grad school? 00:09:10 - Richard Holcomb You know, the, the go to college instruction from my childhood was really go to college and get your PhD. So got the master's degree and then went. No, there's no real advantage of back then, particularly PhD in computer science. So yeah, I went to work. 00:09:28 - Speaker D Yeah. 00:09:29 - Scot Wingo And back then conci was in the math department too. Right. So like, the math would always get harder too, which was no fun. Now they put in engineering and the math gets hard, but it kind of. You can. It can tail off. 00:09:40 - Richard Holcomb Right. 00:09:40 - Scot Wingo Like when you and I went through, there was like, if you went comp sci, you were signing up for a ton of math. 00:09:45 - Richard Holcomb Yes. 00:09:45 - Speaker D Yeah. 00:09:46 - Richard Holcomb But then when you went to NC State, when I did, the master's program was actually part of the electrical engineering department. 00:09:52 - Scot Wingo Oh, weird. 00:09:53 - Richard Holcomb So. 00:09:53 - Scot Wingo So undergrad was in a different department than the grad. 00:09:56 - Richard Holcomb Yeah, it's something to do with the unc North Carolina State split of. Of computer science. And engineering. So I had to take these electric circuits classes that I never did actually pass. 00:10:10 - Scot Wingo Like, so we're not really sure if you got your masters. 00:10:13 - Richard Holcomb We don't know. 00:10:15 - Scot Wingo We'll have to contact the chancellor and get our research staff looking at this. 00:10:19 - Speaker D Yeah. 00:10:20 - Scot Wingo Back then in computer science, for folks that, you know, now what? So probably Fortran. 00:10:28 - Richard Holcomb PLC. 00:10:29 - Scot Wingo PLC. Okay. Wow. 00:10:30 - Speaker D Yeah. 00:10:30 - Richard Holcomb Fortran. Yeah, 360 assembler. 00:10:34 - Scot Wingo This was not cards, but it was magnetic tape. 00:10:36 - Richard Holcomb Cards. 00:10:37 - Scot Wingo Cards. 00:10:38 - Richard Holcomb Cards. 00:10:38 - Scot Wingo Oh, wow. 00:10:39 - Speaker D Yeah. 00:10:39 - Scot Wingo So explain for people, like, how cards worked. 00:10:42 - Richard Holcomb Well, you got the. Looks like a typewriter. Right. And you type on it, and it makes little holes in the cards. 00:10:47 - Speaker D Yeah. 00:10:47 - Scot Wingo So you're gonna do a program, and it's got, like, 80 steps, and you break. But you could probably have to break that down into, like, one instruction per card, right? 00:10:55 - Speaker D Yeah, yeah. 00:10:56 - Scot Wingo This predates me, but my dad did cards, and, you know, so then you had to, like, there was these boxes, and you would put them in and, you know, instruction number ones at the front all the way through the back. And then you put them in this thing, and then the program pulls them in. Just like, almost like scanning a. In a printer today. And then you do all that, and it, like, flashes an error signal. 00:11:14 - Richard Holcomb Yes. 00:11:14 - Scot Wingo And it's like, bug. That's all it tells you. 00:11:16 - Richard Holcomb That was it. Then you had to create other cards. It would say things like, well, print. 00:11:22 - Speaker D Yeah. 00:11:23 - Richard Holcomb And it sorted at different points in the. 00:11:25 - Speaker D Yeah. 00:11:25 - Richard Holcomb In the card deck to figure out what went wrong. 00:11:27 - Speaker D Yeah. 00:11:28 - Scot Wingo So. So my dad would have. He would have boxes, and they'd have rubber bands around them. Like, this was a debug for this. This was. 00:11:33 - Speaker D This. 00:11:33 - Scot Wingo This was set up a machine for this. So this is. These were, like his macros, but they were, like, very physical. It's like something kind of almost romantic to that to me. 00:11:41 - Richard Holcomb Until you drop them, and then you got to sort the cards. Yeah. 00:11:46 - Scot Wingo There's like a hole. You would have to put a little pencil on there, like 180, in case you would learn all these little tricks. Interesting. Okay, so then you did that, graduated, and then where did you find a job? 00:11:58 - Richard Holcomb So at the time, in the triangle there area. Then, you know, we had. We had IBM and we had Data General and a few other big companies, and I don't know. Did you read the Soul of a new machine, Tracy Kidders? 00:12:12 - Speaker D Yeah. 00:12:13 - Richard Holcomb Okay, so, you know, that was about Data General and basically trying to build a vax killer. You mentioned Vaxis. Yep. And they. They had two different programs for it. One up north and the one down Here in Reese's Triangle park, where they were trying to build the. The radically new machine. In the end, the one up north won and they sort of shut down everything that was happening on this radically new machine. They laid off a lot of people, and people that, you know, get recruited to the Triangle tend to not want to leave. So rather than, you know, go back to Boston, where most of those people are from, they started a whole bunch of startups. And one of those was called Foundation Computer Systems. And I went to work for, you know, as a programmer for Foundation Computer Systems. And we were building what would now be called a low code, no code system, but back then we called it a 4Gl. And it, you know, you write the code once and it would work on, you know, different monitors. Not monitors as in green screen. 00:13:13 - Scot Wingo Yes. 00:13:14 - Richard Holcomb CRTs and different databases and, you know, different. All kind of things. So exact same idea of what we got now in low code, no code, but, you know, on a. On a crt. 00:13:26 - Scot Wingo Yeah, the keyboards were better back then. 00:13:28 - Richard Holcomb They. 00:13:29 - Scot Wingo They had, like, more tactical feel. 00:13:31 - Richard Holcomb Yeah. 00:13:32 - Scot Wingo They were super loud that you tunnel. 00:13:34 - Richard Holcomb For moving a mouse around too much. 00:13:36 - Speaker D Yeah. 00:13:36 - Scot Wingo And all those computers had to be pulled so you'd be in these rooms that had an elevated floor, and so there's air conditioning running in underneath you and above you. So there were always. You would always have to go in, like with winter and wear, because it was freezing in these places. 00:13:47 - Richard Holcomb Yep. 00:13:49 - Scot Wingo The good old days. And then I remember my favorite thing as a kid was helping my. There would be a problem, or we'd need to run a wire and you'd have to have these suction cups and you could pull up panels in the floor. That was always. 00:13:58 - Richard Holcomb Yeah. 00:13:58 - Scot Wingo And as a kid, I could, like, get underneath there. That was fun. 00:14:00 - Richard Holcomb Oh, yeah. 00:14:01 - Scot Wingo Yep. Felt like being in aliens or something. Was sass, kind of. They had SASS around. 00:14:08 - Richard Holcomb SAS was maybe one or two buildings. 00:14:10 - Speaker D Yeah. 00:14:11 - Scot Wingo Did you ever interview there or didn't really? 00:14:13 - Richard Holcomb I interviewed there on my way coming to grad school and didn't get an offer. 00:14:17 - Speaker D So. 00:14:17 - Scot Wingo Yeah, I think I interviewed there like six times. Never got an offer. 00:14:19 - Richard Holcomb Yeah, we got. Okay. Yeah. What do they know? 00:14:23 - Scot Wingo I don't know what. What I did wrong. 00:14:24 - Richard Holcomb Yeah, me either. 00:14:27 - Scot Wingo Okay, so then you're. You're working for the man for a while at. And then what was. What was that like? Was it interesting? Was there. 00:14:33 - Richard Holcomb Oh, it's great. 00:14:33 - Speaker D Yeah. 00:14:34 - Scot Wingo Was there an entrepreneur? Was this an entrepreneurial kind of a thing? 00:14:37 - Richard Holcomb So they were. The. The founders of foundation were all, you know, people that had worked for Data General and, you know, they were building this, you know, new new system to, you know, code it once and run it everywhere kind of thing and were reasonably successful. They had licensed it to Oracle. They had licensed it to, I think, to, to Digital and Burrows, maybe some, some other big companies. 00:15:02 - Scot Wingo Yeah, Hitachi was big around then, kind of like in that zone, trying to build those kind of things. 00:15:06 - Richard Holcomb So they had several, several licenses of it. It was commercially successful product. But I said one of the, one of the licensees was Oracle. And the company got bought by Oracle. No, it got bought by another company that was called Encore. And Encore was one of the very first, you know, sort of concept iPodOS. It was the founder of. One of the founders of. It was Ken Fisher, who was at prime, one of the founders of Data General and one of the founders of Digital. And they all got together to create this new company that was going to be brilliant at sales and marketing because they were brilliant at sales and marketing personally. And they were going to go, the business plan was to go and buy a lot of other smaller companies that had good technology but weren't good at sales and marketing and grow it up and make it big. In the end, it didn't work out. But anyway, Encore bought us as one of their software companies kind of after. 00:16:06 - Scot Wingo That IPO or like on their way to the ipo. 00:16:08 - Richard Holcomb After their ipo. 00:16:09 - Speaker D Okay. 00:16:09 - Richard Holcomb I can't remember the exact number. I think they raised like $50 million, which would have been a lot of money in 84ish, I guess. 00:16:15 - Scot Wingo Yeah, they didn't call them IPOs back then. I remember they, you know, one of the things that inspired me is my dad gave me a magazine that had Bill Gates and it was the Microsoft thing and they called it like, you know, Bill Gates deal that made him, you know, a millionaire. And, you know, they didn't really call it an ipo. Like, wasn't even really in the vernacular at that point. It's interesting. 00:16:34 - Speaker D Yeah. 00:16:36 - Richard Holcomb So anyway, the contract that Oracle had with foundation, the company I was working for, somehow gave them a right to break the contract on a change of control. So they exercised that. I think they had to. They had to write a check and essentially get a source code license. Then they own source code. They could go in their own direction. And I actually got called up by Larry Ellison and recruited to come work for Oracle. Huh. So I flew out, you know, started the company with George Waltman, who was the, you know, the key developer at Foundation. And I had become sort of the number 2, 1 so we flew out to California, we interviewed and we decided that, well, you know, real estate is just too expensive. We're never, we're never going to convince our wives. 00:17:24 - Scot Wingo What was a North Carolina farm boy like meeting Larry Ellison? 00:17:28 - Richard Holcomb He's, he's impressive. Yeah, I think he's still pretty impressive. One of the really funny things is when I did go out to go to work for him, I was 24. And when I got to the rental car agency and they discovered I was 24, they wouldn't rent me a car. So I had to call Larry. 00:17:47 - Scot Wingo And. 00:17:48 - Richard Holcomb He had to send one of his secretaries to like co sign for, for renting the car. 00:17:53 - Scot Wingo Wow. Yeah, There's a whole thing in Silicon Valley that what's the difference between Larry Ellison and God? God doesn't think he's Larry Ellison. Yeah, it's kind of a classic Silicon Valley. Yeah, he's got a good bit of an ego, apparently. 00:18:05 - Richard Holcomb But it was a, you know, spectacular time. 00:18:08 - Scot Wingo So we get some Oracle stock. 00:18:10 - Richard Holcomb Well, so that's what I was. 00:18:11 - Scot Wingo And have you held on to it? 00:18:12 - Richard Holcomb Well, no, no, no. So there's a story there. So we were offered Oracle stock and both of us looked at it and went, we can't afford, on salary. We can't afford to buy a house here, anything comparable to what we have in the Triangle. So I had just finished building like a 3,000 square foot house on an acre of land. I think it was $180,000 that I had into it. 00:18:33 - Speaker D Yep. 00:18:34 - Richard Holcomb So when we got the job offer from Oracle, we both went, we can't, you know, we're not going to be able to, to afford anything to live in. So he actually said, well, then we'll buy you a house. 00:18:45 - Scot Wingo Whoa. Okay. 00:18:46 - Richard Holcomb Then we went house shopping and I picked out a nice little, you know, sort of 3,000 square foot in Palo Alto Hills on maybe a half acre. And it was 1.2 million. And Georgia picked out something else. I think it was a little bit less. So when we went back into delirium, said, okay, we've found our houses. And he's like, oh, okay, fine. Well, to be fair, I should get your house in North Carolina. Yeah, yeah, that, that's fair. Well, what's it worth? Well, it's probably worth 200. I paid 180 for it. Yeah, you expect me to up you by a million. I'm like, you made the offer, not us. Because he had no idea that property was that much cheaper in, in North Carolina. So it didn't happen, but we became consultants instead Contractors. We started our own company, and that's how that first company got started. 00:19:31 - Scot Wingo Okay. 00:19:32 - Richard Holcomb Us being contractors. 00:19:33 - Speaker D Yeah. 00:19:34 - Scot Wingo You ever done the math of what that Oracle stock would be worth? 00:19:36 - Richard Holcomb I did at the time that we sold that company, and it was almost exactly the same. 00:19:41 - Scot Wingo That's good. 00:19:41 - Richard Holcomb All right. 00:19:42 - Speaker D Well, yeah. 00:19:44 - Scot Wingo So then you started Data Direct, Right? 00:19:46 - Richard Holcomb Well, right. So that company was called. We. The initial name was Pioneer Software Systems. And there are at least 100 different companies in the triangle named Pioneer. 00:19:54 - Speaker D Yeah. 00:19:55 - Richard Holcomb Including people that did Windows and kind of stuff. So we changed it to the name of the product that we first built, which was Q +E. And that came about because we were doing this work for Oracle, working on this 4GL system, and sort of the word got out that we knew a lot about Oracle. And if you go back to that time, you know, Motorola was producing the 68,000 chip, and everybody and their brother was building a new UNIX box based on the Motorola 68K chip. And most of those companies needed to sell to the government. And to sell to the government back then and probably now, you had to have Oracle. Well, you could buy a license from Oracle to get Oracle onto your box, but you had to pay Oracle to then port it onto your box. And they were so much demand that they were way backed up on porting. So I got a call one day out of the blue from. I can't remember. I think it was Acer, but I may be wrong. I don't want to. But one of the Japanese companies, hey, we've just, you know, paid all this money to Oracle for this license, but they say they can't port it for. For a year. Can you guys do it? I'm like, well, how much is the porting fee? Well, Oracle wants a million, but we think you guys could probably be a little bit less. Oh, yeah, we could do it for 750. Okay, great. Done. So then I walk into the, you know, the room with my partners and go, guys, I just agreed to port Oracle source code to a. 00:21:26 - Scot Wingo Did you have access to Oracle source code through the relationship or something or. 00:21:30 - Richard Holcomb No. Well, the. 00:21:32 - Scot Wingo Okay, so they're just gonna. They could let you miss. 00:21:34 - Speaker D Okay. 00:21:37 - Richard Holcomb We were working on Oracle source code through our contracting with Oracle. 00:21:40 - Scot Wingo So it wasn't totally unfamiliar. 00:21:42 - Richard Holcomb Well, it pretty much was. We were building tools. 00:21:46 - Speaker D Yeah. 00:21:46 - Richard Holcomb We didn't know anything about the core system. Yeah. But. So I walked in and said, hey, I just agreed to port oracle to the 68k box for $750,000. And everybody sort of looked around and went, richard, we don't know anything about. Well, I figured for $750,000, we'll figure it out. 00:22:05 - Speaker D Yeah. 00:22:06 - Richard Holcomb And we did. 00:22:06 - Scot Wingo And to put that in perspective, well, the company was making what, like 100k at this point. So this was like a big number. 00:22:12 - Richard Holcomb It was a big number. 00:22:13 - Scot Wingo Yeah, yeah, yep, it's a big number today, like for a deal. But like back then it was like beauty of it was 10 million today. 00:22:18 - Richard Holcomb I think it probably took us three months, four months to do it. But once we had done it, it only took two or three days to do it the second time. 00:22:27 - Scot Wingo Yeah, you know, there's like this part of code that's the hard part. 00:22:30 - Richard Holcomb Yeah, well, and again, all these boxes were the same because they were, they were using the same version of Unix and they were using the same 68k Motorola chip. So yeah, once you figured out how to do it, sort of like putting together a piece of furniture from Ikea, infinitely second time is way quicker than the first time. So I think we ended up with a total of five companies paying us to port Oracle over. So by that point we were making pretty good money. And one of the things we were doing at Oracle was helping with building the tools out for a new operating system at the time known as Windows and it's Big Buddy OS 2. So some graphical user environments on top of Oracle. And there were no tools in Windows comparable to all the tools we had in the UNIX world for doing queries and report writing or building forms or any kind of stuff. So we had a brilliant idea of, well, let's do it. So we built basically this little report writer thing that worked on top of Oracle. And since we had a background in writing code that worked on top of all the databases, we made it so that it would work on Oracle, on Sybase and all the other SQL databases, including the flat file databases like DBASE or RBASE or whatever all the bases were at the time we packaged that up. We were the very first Microsoft Windows application that could talk to a SQL database. 00:24:03 - Scot Wingo Very cool. 00:24:04 - Richard Holcomb So where it got cool was we charged $99 for that. We went to COMDEX our first time in Vegas and we sold about 100 copies. 00:24:13 - Scot Wingo Wow. 00:24:15 - Richard Holcomb Some number of those copies got bought by people at Microsoft. So when we get back from Vegas, I get a phone call from a gentleman who claims to be Steve Ballmen. 00:24:29 - Scot Wingo Was he like very Steve Volmer? Like, wow, crazy over the top person? He's probably a Persona. 00:24:34 - Richard Holcomb Yeah, he got there and what he wanted to do was he had a problem. So you know, the only real viable Windows application at the time was Excel. And to put it in context, they were selling about 10,000 copies of Excel a month, and Lotus was selling hundreds of thousands of copies of 1, 2, 3. So Microsoft had recently bought a license to Sybase. So they had their own SQL database now, Microsoft SQL Server. Well, Lotus123 could access SQL Server data. Excel could not. 00:25:11 - Scot Wingo Embarrassing. Can't access your own database. 00:25:14 - Richard Holcomb So they called us again. We're the only Windows app that can talk to a SQL database. Offered us a million dollars to buy it. At this point, we got all this money coming in from porting Oracle. We're like, a million dollars is nice, but it doesn't really change the math very much. And we had been doing work with Oracle long enough to know that the work that we were getting paid for, for every dollar that they paid us to do the work, they were probably making $1,000 of selling, you know, the software. 00:25:43 - Speaker D Yeah. 00:25:43 - Richard Holcomb So, you know, we're mid-20s, right. And decide that, well, no, we don't. We don't want to sell this. We're going to build a software business. We're going to grow this. So we turned down the million dollars from Microsoft and instead suggested that they pay us a royalty per copy and give us access to mail, not email, because didn't exist mail the registered Excel user list three times a year. I actually ended up in a conversation where I got compared to Opie and Andy because you, you Southerners ain't very bright if you'll turn down a million dollars to get a dollar a copy on something that you're only going to be getting for six months. Because after six months, we're going to replace you with something else. Well, okay. Right. Maybe. 00:26:33 - Speaker D Yeah. 00:26:34 - Richard Holcomb But we were, we had that also that right to mail the. So we figured we build other products and we would mail it and we'd build a software company that way. 00:26:41 - Speaker D Yeah. 00:26:41 - Richard Holcomb And it, it's exactly how it turned out. The only part of it that didn't turn out the way it was predicted was, you know, Instead of going six months, it went about four years. And by the end, they were shipping about 400,000 copies of Excel a month. So every month a check showed up in Microsoft for $400,000. And I've never been able to repeat that. 00:27:04 - Scot Wingo Yeah, but that's a. That was a good bet. 00:27:06 - Richard Holcomb Yeah, it was the bet. 00:27:07 - Speaker D Yeah. Yep. 00:27:08 - Scot Wingo You know, if, you know, you've mentored me a lot and you do this. Really. I kind of coined it. You do this Hillbilly negotiation. So. So you'll roll into all these meetings and you'll just like, lean into the hillbilly thing and they just think they're totally taking advantage of you, but you're. Who's that rare rabbit that kind of like. So you bear rabbit them. And you're like, well, shucks, I guess you could throw me in that briar patch. 00:27:28 - Richard Holcomb Yeah. 00:27:29 - Scot Wingo I'm the dumb one here, you know, Pay me the small royalty of, you know, a dollar per Excel. It's probably a dumb thing to do, but that's, you know. 00:27:36 - Richard Holcomb Well, that was their last. 00:27:37 - Scot Wingo Yeah. 00:27:38 - Richard Holcomb 10,000Amonth for six months. $60,000 and you're turning down a million. You're just stupid right now. We were pretty sure they wouldn't get it done in six months because at most, you know, if you got a. If you got a list of 100 problems and you solve one of them. 00:27:49 - Speaker D Yeah. 00:27:50 - Richard Holcomb You still got the other 99. And you're not going to resolve the one you already solved. 00:27:53 - Scot Wingo It ain't broke. Don't fix it. 00:27:54 - Richard Holcomb Right. Well, by the time they were paying us a few hundred thousand dollars a month, it was broke. 00:27:58 - Scot Wingo Yeah. They're like, so. 00:28:00 - Speaker D Yeah. 00:28:00 - Richard Holcomb So then they fixed it. But along the way, it was a. It was a good ride. Yeah. And we actually sold the company just a couple months before Microsoft ended the contract. 00:28:12 - Speaker D Good. 00:28:13 - Scot Wingo Good timing on that one. 00:28:14 - Richard Holcomb Yeah. Well, I've had others with bad timing, so it comes and goes. 00:28:17 - Speaker D Yeah. 00:28:18 - Richard Holcomb But that one was good timing. Yeah. 00:28:19 - Scot Wingo So did you take venture capital back then? 00:28:21 - Richard Holcomb We tried. 00:28:22 - Scot Wingo We strapped. 00:28:23 - Speaker D Yeah. 00:28:24 - Richard Holcomb Nobody would give us money. Yeah. 00:28:26 - Scot Wingo This is back in the day. We had Aurora in our south and Southeast Interactive. Back then, you. This may predate early days. 00:28:33 - Richard Holcomb In the early days, all we had was inner South. And we did ask, but we didn't get any money. 00:28:40 - Speaker D Yeah. 00:28:41 - Richard Holcomb Now, by the end of it, because we sold it in 94, everybody wanted to give us money because we were. 00:28:47 - Speaker D Yeah. 00:28:48 - Richard Holcomb So profitable. 00:28:48 - Scot Wingo You're making like 5 or 6 million bucks. Almost pure margin. 00:28:51 - Speaker D Yeah. 00:28:53 - Richard Holcomb That rolled into the second one. So by then we had all these VCs who wanted to give us money. So we started another company. And, you know, they. They lined up and I think we raised a couple million dollars in the first 24 hours. 00:29:06 - Scot Wingo Yeah. 00:29:09 - Richard Holcomb And all from, you know, who's who of Silicon Valley, folks. Yeah. 00:29:16 - Scot Wingo Before we go there. So back in those days. So you knew Dr. Miller. Did you meet him when you were at NC State or you met him kind of later? 00:29:23 - Richard Holcomb Later, yeah. 00:29:25 - Scot Wingo And then. So kind of in entrepreneurial circle back then, there wasn't much going on in Durham. Durham was like, almost the only other. 00:29:32 - Richard Holcomb Company that sort of preceded us in getting any kind of exposure was Da Vinci. 00:29:39 - Scot Wingo Chris Evans. 00:29:39 - Speaker D Yeah, yeah. 00:29:40 - Scot Wingo And Bill Nussey. 00:29:41 - Richard Holcomb Yep, yep. Yeah, they. I think they were. At least to my recollection, they were the first that got. 00:29:46 - Speaker D Yeah. 00:29:46 - Richard Holcomb You know, kind of known. 00:29:47 - Scot Wingo And I think, how did y'all hang out together and have entrepreneurial meetups in the Triangle? Whereas, like you, Chris Hindle, we would. 00:29:53 - Richard Holcomb Hang out together on airplanes flying back and forth to California. 00:29:56 - Speaker D Yeah. 00:29:56 - Scot Wingo Interesting. 00:29:57 - Speaker D Yeah. 00:29:57 - Richard Holcomb There was a lot of. 00:29:58 - Scot Wingo Hey, yeah. 00:29:59 - Richard Holcomb Hey, Chris. Hey, Bill. 00:30:00 - Scot Wingo Did they ever, like, was there any collaboration, like using, like, you could have promoted DaVinci to Excel users? 00:30:07 - Richard Holcomb No, no, never commercially. There was. We were just each other. Yeah, still are. Yeah. 00:30:13 - Scot Wingo Mailing the Excel list. Did you guys ever come up with anything to make that monetized? 00:30:17 - Richard Holcomb Right. So we. Well, the work that we did became the ODBC standards. Our next product was selling these ODBC drivers so that we actually ended up with almost every major software company being our customers. Yeah. 00:30:33 - Scot Wingo Because everyone would include databases. 00:30:36 - Richard Holcomb Lotus licensed the ODBC drivers. That's funny. 00:30:40 - Scot Wingo So everyone get these databases, but mere mortals that didn't know SQL, they couldn't really interact with it. So they would use a front end, which was usually a spreadsheet of some kind, and they would need the middleware. And you guys were kind of like that middleware to connect to that. 00:30:52 - Richard Holcomb We were the database middleware. Yeah. But then sort of the next thing we built that had, you know, some of the highest volume was we, you know, they rolled out Visual Basic. Microsoft rolled out Visual Basic. And it would. It would only talk to flat files. It wouldn't talk to SQL databases either. Well, here we are. So, you know, about the same time they rolled out Visual Basic, a couple of weeks later, we rolled out, you know, SQL for Visual Basic. 00:31:18 - Speaker D Yeah. 00:31:18 - Richard Holcomb I can't remember what we called the product. And, you know, sold tens of thousands of copies because VB was a big seller. Anything at that point coming from Microsoft was a big seller. So we ran ads and said, you know, you got vb, you want SQL. And interestingly enough, we got another call from Microsoft, same story. 00:31:39 - Scot Wingo They wanted to license it. 00:31:40 - Richard Holcomb They wanted to license it. And we're like, well, guys, why would we do that? For the little bit of money that you're offering us. And. Yeah, so that deal didn't happen. 00:31:48 - Scot Wingo Didn't happen. 00:31:48 - Speaker D Yeah. 00:31:49 - Scot Wingo That's okay. Because customers still need it. I'm sure they built their own, but it's probably not very good. 00:31:52 - Richard Holcomb Well, became what was. I'm too old to remember names. 00:31:56 - Speaker D Yeah. 00:31:57 - Richard Holcomb But access. 00:31:58 - Scot Wingo Access. Okay. Interesting. Did you ever meet Bill Gates? 00:32:04 - Richard Holcomb I met Bill several times. Not in the course of, of doing any of those deals. I never dealt with, with Bill for the, for the work that we were doing for Microsoft. I would. Meeting at, meeting at industry shows. 00:32:18 - Speaker D Yeah. 00:32:18 - Scot Wingo Like conducts and stuff. 00:32:20 - Richard Holcomb Yeah. And they were like Esther Dyson conferences. 00:32:22 - Scot Wingo There were these confabs. 00:32:24 - Richard Holcomb Yeah. Where you get to go spend some time in, in Phoenix at a, at a fancy resort and there would be. I remember having the thought once that if, if somebody showed up with a machine gun at this event where there's you know, 200 of. I mean there's, there's Gates, there's Michael Dell, everybody's there. I'm like yeah, one guy with a machine gun. They're gonna take out the entire tech industry. 00:32:47 - Speaker D Yeah. 00:32:47 - Richard Holcomb Fortunately never happened. 00:32:49 - Scot Wingo Did you ever have, did you interact with the Apple side or. They weren't really interested in like kind. 00:32:53 - Richard Holcomb Of no B2B type stuff. 00:32:55 - Scot Wingo They were more consumer and back then. 00:32:57 - Richard Holcomb Might still be the case. Back then developing from the Mac was hard. 00:33:01 - Speaker D Yeah. 00:33:02 - Richard Holcomb So we had Mac versions of our products but they were you know, 1% of sales. But it was at you know, you know somebody like Ford Motor Company and they want, they want 10,000 copies and they want 100 of them to be for the Mac. And if you don't give them the 100 Mac, they're not going to buy the. 00:33:17 - Scot Wingo Yeah. 00:33:18 - Richard Holcomb Thousands of Windows you have this kind. 00:33:20 - Scot Wingo Of like half ass Mac version that kind of. 00:33:22 - Richard Holcomb Yes. 00:33:22 - Scot Wingo Someone has to complain about it not working for you to kind of like try to get, to get it. Software. 00:33:26 - Richard Holcomb And we had the OS 2 versions. 00:33:28 - Speaker D Yeah. Yeah. 00:33:29 - Scot Wingo Back then software had a physicality too. 00:33:31 - Richard Holcomb Oh yeah. 00:33:32 - Scot Wingo Like whenever someone would order your software you would say on a phone they got books floppy. You probably initially sent it out on eight inch floppies or small floppies. Small floppies, smaller floppies. 00:33:44 - Richard Holcomb Three and a half by the end it was those little three and a half inch three and a half hard ones. There were 29, 30 floppies in the we. 00:33:54 - Scot Wingo My first product had 30 floppies to install. It was like punch back to punch parts because you're like feeding the thing. 00:34:00 - Speaker D Yeah. 00:34:01 - Richard Holcomb And if one of them went, if one of the 30 was bad then. 00:34:03 - Scot Wingo You had to all things restart over. You have to ship them a whole nother thing. So then there's an urban legend that that deal that, that Excel Deal is like still taught at Microsoft. Have you. Is there. Is this true or false or have you. 00:34:18 - Richard Holcomb It is what I have been told. 00:34:19 - Scot Wingo Okay. 00:34:20 - Richard Holcomb As an example to their lawyers of what not to do. 00:34:23 - Speaker D Yeah. 00:34:23 - Scot Wingo And product managers. So, you know, there's like a way we don't do business at. You know. And it's got a picture of you like this. This guy looks like a hillbilly, but he's dangerous. Stay away from this guy. 00:34:34 - Richard Holcomb It's just funny about how long ago it was. That's almost 40 years. 00:34:37 - Speaker D Yeah, yeah. 00:34:38 - Scot Wingo Don't. Don't ever have a recurring payment in anything at Microsoft. So then you guys. So then you started Hot Software. 00:34:46 - Richard Holcomb Yes. 00:34:47 - Scot Wingo Is that the company that. 00:34:47 - Richard Holcomb Yeah, that was the company you started after. 00:34:49 - Scot Wingo And so I know this, but it's not well known, but HHT is the initials of the founders. 00:34:54 - Richard Holcomb Yep. 00:34:55 - Scot Wingo And you're obviously one of the H's. And who are the other three? 00:34:57 - Richard Holcomb Holcomb. 00:35:00 - Scot Wingo Are you the first H or the second? 00:35:01 - Richard Holcomb We used to argue about that. The second H was Jim Adler, spelled H E B E R T. And then Tyler Bennett, he was the T. And Roland Archer, he was the A. 00:35:17 - Scot Wingo And then the urban legend here. Is it, is it Roland or Jim? They were a huge fan of the Allman Brothers. 00:35:23 - Richard Holcomb Oh, Roland. 00:35:25 - Scot Wingo And they had the biggest, one of the biggest sites on the Internet at the time, which was an Allman Brothers fan site homage. Fan site. And updating that site was such a pain in the butt that he wanted to have like some way of automating it. And that was like one of the. 00:35:41 - Richard Holcomb That was one of the ideas behind. Yeah, the behind hot site. 00:35:44 - Scot Wingo Right, that's interesting. 00:35:45 - Speaker D Yeah. 00:35:46 - Scot Wingo So let's see, let's put this in. This was 96. 00:35:50 - Richard Holcomb Yes. 00:35:51 - Speaker D Yeah. 00:35:51 - Scot Wingo And the way I, you know, in hindsight you guys were like, way. There's like what we'd call notion today. You guys were trying to build this like super WYSIWYG Internet flexible thing. 00:36:02 - Richard Holcomb Well, we were trying to build. So early days of the Internet or the web anyway. The only real useful application on the web that did anything with Data was the FedEx app. You could type in your tracking code and it would tell you where your package was. Everything else was sort of brochureware, just. 00:36:21 - Scot Wingo Marketing ware, very static. 00:36:22 - Richard Holcomb And you know, the web's inherently stateless. So we had to invent a way of keeping up with transactional data as you move through something. So we built one of the very first application development platforms, development environments for building database oriented apps on the web. And we got Lucky again. We demoed that to some folks out in California at the SAP California lab. And the person we demoed it to went, huh, wow. You know, one of the founders is in the building right now. He's going to love this. So we went from meeting with a product manager to meeting with Hasso Platner, one of the founders of SAP. 00:37:10 - Scot Wingo And SAP, Is that an acronym too? I don't even know that they stand. 00:37:15 - Richard Holcomb For something in German. 00:37:16 - Scot Wingo Okay. Plotner could be the P. And within. 00:37:20 - Richard Holcomb A month, we had a deal with SAP and we were demoing hot site, working on SAP data. And we actually contracted with SAP and we built all of their original web versions for SAP America. And we thought that we had struck gold again on that one because we thought, well, SAP is obviously going to buy us. And what we didn't understand was the politics of big software companies. 00:37:50 - Scot Wingo Maybe big companies in general, especially international, complicated, especially Germany. 00:37:56 - Richard Holcomb We had the blessing of one of the founders, but the deal was through SAP America. And folks in Germany weren't that thrilled with the idea of SAP America taking the lead on something. So we had that contract for three, four years because that's how long it took the folks in Germany to do what we had done in a month. And then that deal went away. 00:38:21 - Scot Wingo What's cool though is you were doing all this stuff, very interactive websites, kind of almost before even Amazon was born. Just. Oh, yeah, there was no aws, there was no Amazon. Yep. And then I think you guys were really early on on online payments, if there was like some piece of that that you had done some really interesting days around. 00:38:38 - Richard Holcomb Yeah. Pioneered a lot of that. So the. I can't remember again, all the names. There was a show each year where they rolled out the best hardware platform and the best software platform of the year. It's one of the PC Week or PC Magazine guys that ran it. We were in. I can't. The exact year would have been maybe 98, 99. We were the software product of the year. Guess what a hardware product was? 00:39:09 - Scot Wingo 98. 99. This is like the cloud computer thingy. 00:39:15 - Richard Holcomb The Palm Pilot. 00:39:16 - Scot Wingo The Palm Pilot, yeah. Didn't make it. 00:39:20 - Richard Holcomb Yeah. Well, we both ended up. 00:39:24 - Speaker D Yes. 00:39:25 - Scot Wingo So tell us. So obviously the dot com bubble is going to burst in this story somewhere. 00:39:29 - Richard Holcomb Yes. 00:39:29 - Scot Wingo Like, so tell us. Kind of. So you raised. How much did you guys raise? You had like, at the time it was like this crazy round you guys started with, like for a seed round in the triangle. 00:39:39 - Richard Holcomb That seed round was a couple million. 00:39:41 - Speaker D Yeah. 00:39:41 - Scot Wingo At the time it was like, Holy. 00:39:43 - Richard Holcomb And then three months later, we raised another 10, 15 million. Yeah, I still have the sticky pad, sticky note where I scribbled that deal out at dinner for the VC who led the round. 00:39:57 - Scot Wingo And that was one of the west coast. You guys pulled in some west coast money too. 00:40:01 - Richard Holcomb Mental adventures they were. Yeah, pretty much all the money into. Into hot was. Was. Was West Coast. Yeah, we. We raised over $100 million before it was. Was said and done. And we're in registration to go public in March of 2000. So much for good luck. 00:40:23 - Scot Wingo Well, what's a shame is you guys actually had revenue like you were solving real. Oh, and all this noise. That was not no revenue. 00:40:31 - Richard Holcomb Shame is Right. Because by that point, by the time we run registration in public, we hadn't raised quite that much money. 00:40:36 - Speaker D Yeah. 00:40:37 - Richard Holcomb A few months before that, we had a. We had a buyout offer and we turned it down because we wanted to go public. So rather than. 00:40:47 - Scot Wingo Who was it from? 00:40:48 - Richard Holcomb Can you say? I think it was Business Objects. If it wasn't Business Objects, it was one of the other big and analytics type companies and, you know, we were, we were full of ourselves and arrogant and said, that's not enough money. 00:41:06 - Scot Wingo We didn't know what was coming. Yeah, no one did. 00:41:09 - Richard Holcomb So we, we turned that down and we were going to do the big IPO and we ended up selling that company for a lot less than we would have gotten had we taken the original offer. 00:41:20 - Scot Wingo Did you actually get to the point where you did the S1 and everything or. 00:41:23 - Richard Holcomb Yeah, we were in registration. 00:41:24 - Scot Wingo So you're in registration. Then the bottom fell out. 00:41:26 - Richard Holcomb Just. 00:41:26 - Scot Wingo And they're like, the bankers are like, you got to pull this and we're going to stop and. 00:41:30 - Speaker D Yeah. 00:41:31 - Scot Wingo Did. Did you have to like raise emergency money at that point? Because you probably had planned that you have this windfall of money from the ipo. 00:41:38 - Richard Holcomb Yes. And when you have to raise money is the worst time, not the. 00:41:43 - Speaker D Yeah. 00:41:43 - Richard Holcomb Not the best terms. Yeah. 00:41:46 - Scot Wingo You ended again. I don't know if it was you, but either you or the. The founders had bought the building you guys were in and it was like kind of where North Hills is now. Is that right? 00:41:56 - Richard Holcomb We didn't buy that building, but it was right where. North Hills. 00:41:59 - Scot Wingo Okay. 00:41:59 - Richard Holcomb Where all that new developments, they tore that building. 00:42:01 - Scot Wingo You said something like, you know, we're going to make more money from this building than the company. 00:42:05 - Richard Holcomb Yeah. 00:42:06 - Speaker D Yeah. 00:42:07 - Scot Wingo Happens. 00:42:08 - Richard Holcomb It does. 00:42:09 - Scot Wingo Yeah, it does. Okay, so then, so then what did you do after. You know, kind of. So that will, that will kind of put your ego in check pretty quickly. What'd you do then? 00:42:18 - Richard Holcomb Then we did strike iron. So that was with Bob Brower and David Motsinger. And it was, you know, again, everything we did was always sort of focused on data. And the idea here was, well, now we got cloud computing coming. So we tried to build a system again of development tools that would help people build applications in the cloud and work with these new fangled things called web services. And we would demo it to people and show it to people and they would go, that's kind of cute. But that, that demo you just did showed an example doing address verification. Where'd you get that from? Oh, we just built it so we could demo it. Oh. And then, and after being told enough, we finally dawned on us that nobody gave a damn about our tools, but they really, really liked the web services that we had built that did, you know, address verification and would tell you the weather and, you know, and it was funny that one of the very first test cases was because now E Commerce is coming along, right? And the, we had an address verification, you know, service. And one of the first companies to license it was Fredericks of Hollywood. 00:43:38 - Scot Wingo Oh, nice. 00:43:39 - Richard Holcomb And they had a problem that, you know, you're, you're ordering something sexy and spicy for your girlfriend and you make the mistake of typing in your home address and it ends up going to your wife. Now you have to explain why these panties showed up not in her size. And you would. So people would call up and go, no, no, no, I never ordered that. And force a refund. And FedEx charged a lot of money if they had to redeliver the package or turn it back. So we were charging like 10 cents a lookup kind of thing. So they would take the, take the name and look up the address that we gave and say, hmm, I don't think Shirley Jones is at this address. Are you sure? And that was sort of the start of sort of mass adoption for us anyway of those different services. And I think in the end we had about 100 services. 00:44:28 - Scot Wingo There was another company in the triangle that did this. 00:44:30 - Richard Holcomb Oh yeah. 00:44:31 - Scot Wingo But they would like de. Dupe your data in your database, which seems very simple, but like, you know, we have this explosion of data and suddenly there was. And then part of that is they would look at the addresses and kind of say, those are the same. 00:44:40 - Richard Holcomb Yep. 00:44:41 - Speaker D Yeah, yeah. 00:44:43 - Richard Holcomb Well, and Bob's company, Bob Brower, the co. Founder of Shocker, he, he had done Data flux. 00:44:48 - Scot Wingo Yeah, that's it. 00:44:49 - Richard Holcomb Right. So that's sort of all that was coming yeah. 00:44:52 - Scot Wingo This is funny. I met them when they started Data Flux and they're like, you want to come by the office? I was like, sure. I'm looking at the dress, I'm like, what? 00:44:58 - Richard Holcomb Y. 00:44:58 - Scot Wingo And it's a house. 00:44:59 - Speaker D Yes. 00:45:00 - Scot Wingo You go to this house in Preston somewhere not. Not Preston proper, but like. Like one of the sub. Sub. Sub Prestons. And, you know, it's just like no furniture and monitors and cords everywhere. It's crazy. 00:45:10 - Richard Holcomb Yeah. 00:45:11 - Scot Wingo I was like, wow, this is. 00:45:12 - Richard Holcomb This is intense. Start up in a garage kind of thing. 00:45:15 - Scot Wingo They got done. I forgot he was involved in Strike Iron. So he started strike iron in 03. 00:45:19 - Richard Holcomb Yeah, I think so. 00:45:20 - Speaker D Yeah. 00:45:21 - Richard Holcomb Yep. Sounds right. 00:45:21 - Speaker D Yeah. 00:45:22 - Scot Wingo And were you like founder or you. 00:45:23 - Richard Holcomb Yep. 00:45:24 - Scot Wingo You were kind of. 00:45:24 - Richard Holcomb Me and Bob and. Well, there's an original founder and then David. Yeah, another original. And then David Monsinger. 00:45:30 - Speaker D Cool. 00:45:31 - Scot Wingo Did you guys raise a bunch of capital or you'd gotten kind of a year? 00:45:33 - Richard Holcomb We raised, I think, like a. Like a half million dollars from the Aurora funds sort of on the idea, on the concept. And then when we finally figured out what we were actually selling, not tools, but actual web services, we were able to raise a couple million more. And then we raised more money from VCs in Boston and all in total, I think we raised about $18 million. But the last round was a down round, so. Because we hadn't quite hit the numbers that we were supposed to. And then we brought in a new CEO who had more of a sales background than a technology background, and he just did an amazing job. Sean and Leary came in and took the company and took all this code we had written, all this stuff we had done, and went, huh? Let's figure out who the actual customer is and let's. Let's do real sales and marketing and let's sell. I learned. I learned an important lesson then. Sales matters, marketing matters, positioning matters. And grew the company up to about 10 million in revenue. And then we sold it in 2014. 00:46:48 - Speaker D Yeah. 00:46:48 - Scot Wingo To Informatica. Informatica, yeah. 00:46:51 - Richard Holcomb Yep. Cool. 00:46:52 - Scot Wingo And then in the middle there, I remember you calling one day and saying, hey, I'm buying a farm. Oh, tell me about that. So you grew up on a farm? 00:46:59 - Richard Holcomb I grew up on a farm. 00:46:59 - Scot Wingo And you decided, you know what I really need is a farm to get back to a farm. 00:47:03 - Richard Holcomb Yeah, well, I had the. I had the four kids, was divorced, living in great big house in country club hills in Raleigh, and just looked at the life my kids were living and they. It wasn't as good a life as I Had on the farm. 00:47:23 - Scot Wingo Right. 00:47:24 - Richard Holcomb You couldn't really go play and couldn't play in the street. There were too many cars. You know, there were neighbor kids, but they each went to a different school or they couldn't play because they had soccer practice or this or that or something else. There were. There were days when, you know, I needed my. Myself and my girlfriend, who didn't have my wife at the time, and at least two or three other people just to get my four kids to the different soccer games that they were supposed to be to. 00:47:46 - Speaker D Yeah. 00:47:47 - Richard Holcomb So I bought this little farm in Hillsborough with the idea that, well, this will give us something to do on the weekend. All right. I'm tired of being in the city. So to put it in context, the farmhouse, which was built in 1870, was smaller than the master bedroom suite in the house that we were living in. Had a wood stove for heat, no air conditioning, plenty of holes for air to come through. And we'd go on the weekends. And after somewhere between a month or two, on Monday morning, having to get up early and drive back to Raleigh for the kids to go to school, the kids just went, so, daddy, why don't. Why don't we just stay here? Because by that point, they had horses and they had dirt bikes and four wheelers and 45 acres on a river to play on. 00:48:36 - Scot Wingo And you trojan horsed them. 00:48:38 - Richard Holcomb Yeah. Yeah. 00:48:39 - Scot Wingo So they made it their decision. 00:48:41 - Richard Holcomb They grew up on the farm. But, you know, then the problem is. And you have it. You have the same disease. This entrepreneurial. I gotta. I gotta do it. I can make this better. I can do something with it. So instead of it being the weekend place to hang out, it became, well, why don't we really farm? Why don't we get some sheep? 00:48:57 - Scot Wingo Yeah. 00:48:59 - Richard Holcomb And some chickens and that's all fun. Well, these five sheep were pretty good. Why don't we make that 50? 00:49:04 - Speaker D Yeah. 00:49:05 - Richard Holcomb And then why don't we do this? And so next thing I know, once. 00:49:07 - Scot Wingo You have 50 sheep, you're gonna put a lot of sheep. 00:49:09 - Richard Holcomb You're gonna end up with a lot. 00:49:09 - Scot Wingo Of sheep because they always have twins. 00:49:10 - Richard Holcomb Yeah. 00:49:11 - Scot Wingo So it happens fast. It's a logarithmic progression. You learn about compounding. 00:49:15 - Richard Holcomb Yeah. So that became. It went from let's. Let's hang out here on the weekend to let's try to build a real organic farm business. And that was a. That was a lot of physical labor and work. It was good. Good for the kids, I think. But now the kids are grown, so. 00:49:33 - Scot Wingo Yeah, it's not so Much fun when it's you out there at 6am with a sheep that has some kind of a problem. 00:49:39 - Richard Holcomb Right? Yep. So 20 years ago. We did that for 20 years. 00:49:43 - Speaker D Yeah. 00:49:43 - Richard Holcomb So cool. 00:49:44 - Scot Wingo Did you. Did you officially sell the farm or. You're still looking. 00:49:46 - Richard Holcomb I have officially sold all the farm businesses. Okay. I'm not farming anymore. The farm property is for sale. 00:49:52 - Scot Wingo Okay. If anyone's interested, hit Richard. 00:49:55 - Richard Holcomb That's right. Hit me up. Yeah. If you need a little farm, it's on the. 00:49:58 - Scot Wingo It's not so little farm. How. It's. How big is it? Like 20 acres? 00:50:01 - Richard Holcomb It's 40. 45 acres. 00:50:02 - Scot Wingo 45 acres. Wow. And then you did this really interesting thing where you vertically integrated. Right. So then you. You thought, all right, I need workers. So then you found a town where people wanted to Lear Organic farm. You brought them here, and then you're like, well, what do I do with this stuff? And then you bought a restaurant. 00:50:18 - Richard Holcomb Yep. 00:50:18 - Scot Wingo So you, you know, so literal farm to table. 00:50:21 - Richard Holcomb Yeah, it was. It was a vertical integration. And I, you know, my wife was. Is a Morehead scholar from unc and at that time. All right, so what are we talking now? Early 2000s, right? 2004. 00:50:35 - Scot Wingo Yeah. 00:50:37 - Richard Holcomb The coolest thing on earth was organic farming. You know, there were little kids walking around with T shirts that said, when I grow up, I want to be an astronaut, a doctor, or an organic farmer. With a check mark on the organic farmer thing, because. So, you know, one year we got, I think it was four Morehead scholars as interns at the. At the farm. And, you know, our average farm worker at the time, not so much a worker, but somebody wanted to learn farming. 00:51:05 - Scot Wingo They. 00:51:05 - Richard Holcomb They had a PhD in this or a master's degree in something else, or they had turned down law school. They didn't take that job with. With Goldman because they just wanted to learn to farm. All right, so it was. It was a lot of fun because now here we are, these people are living on the farm, and we're feeding them and we're all working together. The, you know, the conversation that over. Over dinner was just fascinating. Right. By this time point, I'm getting close to, I guess, 40. And, you know, they're all in their 20s, but just, you know, I love being around people that are that smart and have that many ideas and are just so passionate about it. But those days are over. 00:51:44 - Speaker D Yeah. 00:51:45 - Richard Holcomb All those people are now back on Wall street, back in law school or. Or maybe working for Elon building rockets. I don't know. They do not want to be Organic farmers. That, that's hard work. 00:51:55 - Scot Wingo Seems romantic, but it, the, the juice, the juice may not be worth the squeeze on something. 00:51:59 - Richard Holcomb Yeah, so that's a good way to put it. Yeah. 00:52:01 - Scot Wingo Did you found any companies after that? So after Strike Iron, then you've been more or less like on boards and, and kind of supporting kind of role. So. 00:52:09 - Richard Holcomb Well, so those were the three companies I founded. I did the math and I had been either an investor in or on the board of or an Advisor to about 40 companies total in the 40 year, almost 40 years I've, I've been doing it. And you know, some of those are, you know, I show up for a board meeting every three months and, and get a meal and then some of those are. 00:52:36 - Scot Wingo You also contribute. You always have good ideas. 00:52:38 - Richard Holcomb I'm like every day I'm on the phone with somebody trying to, you know, help work through a sales problem or this problem or that problem. So different, different levels of, of attention. But yeah, done. Done a lot of little things, including things with you that were fantastic and wonderful. Do you remember the snowstorm one winter when you called me about the, the offer you had gotten for auction? River. 00:53:04 - Speaker D Yeah, yeah, yeah. 00:53:06 - Scot Wingo So the company wanted to potentially buy us. They, they want us to come out, but there was this crazy snowstorm. 00:53:15 - Richard Holcomb Yes. 00:53:15 - Scot Wingo There's like feet of, feet of snow. 00:53:17 - Speaker D Yeah. 00:53:19 - Scot Wingo And you said, take the offer, get there. You said go out there, figure out how to get there. I was like, crap, he's right. So my Michael Jones at the time had a Jeep, so we took his Jeep and we went as far west as we could and we got to an airport and then we were able to get there. So. 00:53:38 - Speaker D Yes. 00:53:39 - Scot Wingo And we sold the company. So that was good advice. 00:53:40 - Speaker D Yes. 00:53:41 - Richard Holcomb And then you got it back. 00:53:42 - Speaker D Yeah, yeah. 00:53:42 - Scot Wingo So then we bought, bought it back as channel. 00:53:44 - Richard Holcomb So. 00:53:45 - Scot Wingo Yeah, yeah, buy low, sell high. Yes. 00:53:48 - Richard Holcomb Right. And don't go public in the middle of market crash. 00:53:52 - Scot Wingo No, that's, that's not good. 00:53:53 - Richard Holcomb You were able to miss that. 00:53:55 - Speaker D Yeah. 00:53:55 - Scot Wingo Got lucky on the channel buzzer side. 00:53:57 - Richard Holcomb Yep. 00:53:58 - Scot Wingo The, the. So you've seen the startup ecosystem here from, you know, the very early days to, to now. What are, you know, what are some of the things that you, you, how do you think about it? Do you think of like phases or. And also you, you were inspired me on this payback piece. And you know, you've been on all these boards, you've certainly, you started three, but you've impacted way bigger. Where does that come from? Is that just like a Richard thing or. 00:54:27 - Richard Holcomb You know, the the payback in general thing probably came from my mother, I mean, along with, you know, she grew up in post war London. Right. 00:54:38 - Scot Wingo So yeah. 00:54:39 - Richard Holcomb And she had stories of, you know, once a year you were, you could get shoes and you could trade stuff and maybe get some sugar. And so there, I guess an environment at the time for her that was very. If you didn't help your neighbor and your neighbor didn't help you, you weren't likely to get through it. Yeah. So she instilled, I think probably that lesson in me. And then it's, it's the same with, with farming. Right. You, there's some tasks that require 15, 20 people to do and you don't have 15, 20 employees. So everybody gets together in the neighborhood. 00:55:12 - Scot Wingo And helps you kind of. 00:55:16 - Richard Holcomb So yeah, the give back thing was probably just instilled in me. Yeah. And it's fun. I like it. I love seeing people be successful and I learn so much for it. So, you know, you talk about the changes in the area. One of the problems and you know this, that you and I are two of the exceptions that were able to successfully raise very large sums of venture capital. Okay. Most companies in this area couldn't when we were doing companies and still can't. 00:55:49 - Speaker D Yeah. 00:55:49 - Richard Holcomb There still is very little early stage or, you know, mid stage or even late stage venture capital in the, in, in the triangle. And I think that has an impact on the companies. They tend to be, you know, lean and mean and wiry and. And then the other part of that is once you've gotten the company to a certain level of success, we don't have the, the, the infrastructure here or maybe the critical mass that makes it really easy to sell your company. 00:56:19 - Speaker D Right. 00:56:20 - Richard Holcomb So I did two things recently. I started a little small venture fund just a little bit before you started. 00:56:27 - Scot Wingo That's crazy. Don't do that. 00:56:28 - Richard Holcomb Yeah, yeah, well, it is probably a little crazy. And you know, I, I took on the role of the local, you know, deal maker rep for an investment bank that sells software companies. And, and I did it because they, they reached out to me. All right, had you worked with them before or. 00:56:48 - Scot Wingo No, no. 00:56:49 - Richard Holcomb And they did. Never even heard of them before. Right. But they reached out to me and I love their story. It was great. And they were, they weren't representing that many companies in the, in the south. And they, you know, one of the reasons was that they didn't really have any southerners working for the company. So, you know, I met their profile, they met my profile and you know, I started doing some Stuff with them. And that's gone extremely well. 00:57:15 - Speaker D Yeah. 00:57:15 - Scot Wingo Say a bit more about that. What's the name of the firm and. 00:57:17 - Richard Holcomb Like the company, the company, they're based right outside of Seattle. It's called Quorum Group. They're the largest software technology sales side investment bank in the world. Sold over 500 deals. He'll do tons of training and educational events and it's, it's a. And, and the real difference is that everybody at the company that it was, whose job is to, you know, find companies and sell them to the, to the M and A buyers, they're you and me. They're guys that started their own companies, funded their own companies, grew their companies and sold their companies. They're not your, you know, typical investment bank has someone with an MBA from, from Wharton or Harvard or Stanford or, you know, really, really smart, great guys, but, you know, they've never had to make payroll. Yeah, they don't. They've never had that. 00:58:09 - Scot Wingo Not really. Operators, Wow. 00:58:11 - Richard Holcomb I just, I just maxed out my credit cards in order to be able to buy that, you know, thing I needed to be able to launch the product. Yeah. And when you're talking to, particularly in the south, you know, small entrepreneurs that have taken 10, 15 years and bootstrapped their company up to 3, 4 million in revenue. You speak their language and then they, it appeals more to them. They trust you. 00:58:34 - Speaker D Yeah. 00:58:35 - Scot Wingo Now what's the profile? So is this, you know, you've got a million in revenue up to 10, or do you guys go like higher, lower? Like, what's the sweet spot for, for firms, you guys, the companies you work with? 00:58:46 - Richard Holcomb Wheat spot is probably 3 to 20 million right now. But yeah, we do from, from 1 up to, to 100. Yeah. And, and the real sweet spot is companies that don't have a lot of venture money. 00:59:01 - Speaker D Yeah. 00:59:01 - Richard Holcomb Behind them. Because the VCs all know somebody. Right. They all got a buddy. And the things tend to get traded off that way. So they tend to be bootstrapped. 00:59:10 - Speaker D Yeah. Cool. 00:59:10 - Scot Wingo There's a lot of those around, which is, you know, so I've got the tweener list, and of the 300 tweeners, easily 100 are bootstrapped. They've never had any venture. 00:59:19 - Speaker D Yeah. 00:59:20 - Scot Wingo And there's nothing that it's interesting. Like now that I have a small fund, it drives VCs crazy that they exist and won't take their money. There's a super. Counted, like the calls I get incoming are people that are like, you know, they can see on LinkedIn this company's probably at like 10 million. And they, they're obsessed with trying to invest in that company because it won't take money. It's like this counterintuitive part of raising capital. 00:59:44 - Richard Holcomb Well, there's so much competition now in the capital front. Maybe not so much on the venture side, but we see it in the, in the PE world. 00:59:50 - Speaker D Yeah. 00:59:50 - Scot Wingo The PE world's on fire right now. 00:59:52 - Richard Holcomb There's a new pe, as far as I can tell, every day. 00:59:55 - Scot Wingo Yeah. 00:59:56 - Richard Holcomb But they're all kind of doing the same thing. They want to invest in, you know, vertical oriented SaaS companies. 01:00:06 - Scot Wingo That's super vertical. 5 to 10 million never raise money and low valuation. 01:00:11 - Richard Holcomb Yes. 01:00:12 - Scot Wingo But super profitable and growing fast. 01:00:14 - Richard Holcomb Yep. That's what I want. 01:00:15 - Scot Wingo Yeah. Yeah. 01:00:16 - Richard Holcomb Oh, you too, huh? 01:00:17 - Scot Wingo Okay, I'll let you know when I find one of those unicorns or unicorns probably bad, but one of those mythical creatures. 01:00:23 - Richard Holcomb Well, they're out there. 01:00:24 - Speaker D Yeah. 01:00:25 - Scot Wingo Element 451 just had a big transaction that was. That was amazing. 01:00:28 - Speaker D Yeah. 01:00:28 - Richard Holcomb Yeah. 01:00:29 - Scot Wingo That was exciting. And then there's, you know, I'm aware of three or four kind of under process right now. There's like it was relatively quiet since the go go days of one and a little bit of 22 and then it was been quiet and three and then here at the tail end of four it's really picking up the. 01:00:44 - Richard Holcomb Yeah. 01:00:45 - Scot Wingo Are you guys seeing that in your. Your deal space? 01:00:48 - Richard Holcomb So you. So we don't disclose a deal and it's. 01:00:51 - Speaker D Yeah. 01:00:51 - Richard Holcomb In. In directionally but I've got four or five companies in market. 01:00:55 - Speaker D Yeah. 01:00:56 - Richard Holcomb Locally. Ish. Local being sort of Atlanta to Richmond, South Carolina, whatever in between. So now there's a. There's a lot of activity. 01:01:05 - Speaker D Yeah. 01:01:06 - Richard Holcomb Going on and a lot of sales that really good improving valuations. Keys are you need growth, you need low churn deals fall apart if no matter how fast you're growing, if you're losing half your customers each time. So some of the B2C deals are hard. 01:01:21 - Speaker D Yeah. 01:01:22 - Richard Holcomb Because you turns high and the PEs don't want to fund that. But it's interesting. The PEs are doing probably 60, 70% of the deals now. The strategics aren't as big a. I sold all my companies to strategics. Yeah. But now it's almost all financial buyers. 01:01:38 - Speaker D Yeah. 01:01:39 - Scot Wingo Interesting. And then there's been a lot of time thinking about the rule of 40. Explain to people. You probably get tired of talking about this because I didn't really know about it until I started to like brush up against this PE world. And it's an interesting thing, but it. 01:01:52 - Richard Holcomb Kind of makes sense. So the rule of 40 is if you add your, your EBITDA percentage to your growth rate, it needs to be at least 40. And so if you're growing 40 and break even, that's rule of 40. If you're 20%, don't really love that. 01:02:08 - Scot Wingo Though because they're always going to go, they're, they want to have some EBITDA. 01:02:11 - Speaker D Yeah. 01:02:12 - Scot Wingo So it's almost like a 1030 is kind of like good. 20, 20 is awesome. 01:02:17 - Richard Holcomb Unless you're, if your growth is high enough. If you're, if you're run at 100% and no EBITDA, then they'll look at that and go, oh, okay. 01:02:27 - Scot Wingo Or 100 and minus 60. 01:02:28 - Richard Holcomb They're like, yeah, they don't want to. Well, because the, the way their model works, they put their money in, they don't want to put more money in. 01:02:35 - Speaker D Yeah. 01:02:36 - Richard Holcomb So a lot of times they can't. 01:02:37 - Scot Wingo Fund off the ebitda. So they're, they're looking at that EBITDA as a way to pay off some, some debt of some kind as well. 01:02:42 - Speaker D Yeah. 01:02:43 - Scot Wingo So when a first time founder, like let's say one of your kids or a, a 25 year old comes up to you and says, you know, Mr. Holcomb, I'm thinking of starting a business. What, what is your, you've got 40 years of knowledge on this. What's your advice? 01:02:57 - Richard Holcomb Well, you know, thing go, things go in waves. Right. So it was, there was a really good time to probably get into manufacturing cars back in the 20s. And then there was probably a really good time to get into aviation. All right, well, 20, 30, 40 years later, those are mature industries and it's not probably a good time to get into them. And yeah, you might disagree, but I kind of think that's where we are now with, with software. 01:03:24 - Scot Wingo That's why I did spiffy. Like it's a, it's almost impossible to have a moat in software because if you get to 3 or 5 million, you're going to have a hundred competitors. They're going to be half the price of you. So then, so then basically it's a sales and marketing company. So you basically have to just like build something, get it to a little bit of scale and then just like pour. And that's what Todd at Pindo has done, which is, you know, he recognizes the game. 01:03:47 - Richard Holcomb Sure. 01:03:47 - Scot Wingo Which is, that is the game right now. 01:03:48 - Richard Holcomb Yep. 01:03:49 - Scot Wingo Yeah. 01:03:50 - Richard Holcomb But yeah, I wouldn't, I wouldn't recommend becoming a Programmer. Yeah. 01:03:56 - Scot Wingo What do you. Let's look forward a little bit. What do you think about AI? Are you. 01:04:00 - Richard Holcomb It's amazing. 01:04:01 - Speaker D Yeah. 01:04:01 - Richard Holcomb You turned me on to perplexity. 01:04:03 - Speaker D Yeah. 01:04:04 - Richard Holcomb I just. 01:04:05 - Scot Wingo It, you know, it's like having an assistant work for you. 01:04:08 - Richard Holcomb He really is. And it comes up with answers that I just can't find on Google. Even. Even after it's told me the answer, I go what's the source of that? And I'll go Google for something I can't find it. It's really incredible. 01:04:20 - Speaker D Yeah. 01:04:20 - Scot Wingo The Google index has gotten basically totally corrupt or like a. I don't know. 01:04:25 - Speaker D Yes. 01:04:26 - Richard Holcomb Yeah. I have. As you suggested. 01:04:28 - Scot Wingo Everyone's SEO'd so much that Google's useless. 01:04:32 - Richard Holcomb Yeah. 01:04:32 - Scot Wingo They've lost arms race. 01:04:33 - Richard Holcomb You got three. Three pages of Sponsored before you actually get to something that was part of the organic search. 01:04:38 - Scot Wingo Yeah. Even then the organic stuff it pulls up is like super. 01:04:41 - Richard Holcomb Not relevant but pretty impressive complexity. Yeah. But I think when go back say maybe strike iron for example, we had millions of dollars like actual dollars of hardware for load balancing and the servers and all and now you don't need any of that. You just, you know. 01:05:05 - Scot Wingo Yeah. We raised 90 million at Channel Advisor. Half of that was spent on servers. 01:05:08 - Speaker D Yeah. 01:05:09 - Richard Holcomb And now it's crazy. You know. Send Amazon 29amonth to get started. 01:05:13 - Scot Wingo We probably could have done it for like 4 million on AWS or something. I did that math time. 01:05:17 - Richard Holcomb Yeah. Okay. And even quicker now you would have. 01:05:20 - Speaker D Yeah. 01:05:21 - Scot Wingo We don't need all the sales reps because now there's. There's AI augmentation for those developers. The engineers would be more efficient. 01:05:27 - Speaker D Yeah. 01:05:27 - Richard Holcomb It's crazy. Yeah. We're seeing that trend that you know as. 01:05:32 - Scot Wingo So then people should buy farms is your recommendation and call you if they want one. Wait a minute. 01:05:37 - Richard Holcomb I'm thinking life, science, material science. You know they're still doing some amazing things at NC State and. 01:05:43 - Speaker D Yeah. 01:05:43 - Richard Holcomb And especially material science. 01:05:45 - Speaker D Yeah. 01:05:45 - Scot Wingo So the thing that's probably most immune from AI is these physical types of. 01:05:52 - Richard Holcomb But yeah. Not farming, not restaurants. 01:05:56 - Speaker D Yeah. 01:05:56 - Scot Wingo Restaurants have claimed many, many an entre took a run at them and got. Got whacked. 01:06:02 - Richard Holcomb Yep. 01:06:03 - Scot Wingo What is. Why is. Why are restaurants hard? Like what's the. Now you've been in how you've. You've had like up to two or three at some point. 01:06:10 - Richard Holcomb I think they're. They're hard. The reason a whole lot of businesses are hard and is people. 01:06:14 - Speaker D Yeah. 01:06:14 - Richard Holcomb I mean the more people you need, the more opportunity you have for. For conflict. And now people are Your most expensive thing. Everything else is cheap. You can get cheap furniture, you can get cheap computers, you can get cheap. Only, only thing that's not cheap anymore is, is the, the people. And people don't want to pay a lot for anything. So, you know, it's. I got really expensive people, I need a lot of them and nobody wants to pay that much. So it's hard to get around in a restaurant. 01:06:46 - Speaker D Yeah. 01:06:46 - Scot Wingo It's an economic squeeze on both sides. 01:06:47 - Richard Holcomb You need the scope, you need the servers. 01:06:50 - Speaker D Yeah. 01:06:51 - Richard Holcomb So you can make money at volume. Same with farm. You can make money at volume, whereas with software you just make money with people typing a credit card number into a website and there you go. 01:07:05 - Speaker D Yeah. 01:07:05 - Richard Holcomb Kaching. 01:07:06 - Speaker D Yeah. 01:07:06 - Scot Wingo There's no incremental variable cost for selling. 01:07:08 - Richard Holcomb Right, right. 01:07:10 - Scot Wingo Anything else you would want to impart on our. Our listeners and viewers? They're largely kind of local founder type people. 01:07:17 - Richard Holcomb There's going to be a harvesting phase, I think, for the next few years. Not just in the triangle, but just, just overall because, well, just like airlines and cars. Right. You can't have hundreds. 01:07:30 - Speaker D Yeah. 01:07:31 - Richard Holcomb It's not efficient. You got to consolidate that down into a. Into a few. So that whole m. And a process of, you know, taking all the. All the 2, 3, 4, 5 million dollar companies and turning them into big companies or going away is. Is going to happen. 01:07:48 - Speaker D Yeah. 01:07:48 - Scot Wingo The p. Seem to be kind of starting that cycle right now. They buy these companies as a platform, which is an indication they want to like, glom on a lot of others. 01:07:55 - Richard Holcomb And then they add a lot of stuff onto it and they've moved away from sort of smashing them all together and making everybody mad. They tend to keep them independent now until they've reached that point where. Oh, well, no, if we smashed them all together right now, then we would have $100 million company and we could sell that to somebody else or take it public. But at that point it's a friendly smash together because you've got 20 portfolio companies and you're all right, we need one of you to be the CEO of a combined company and you want to quit and y'all want to leave and cash out and you know, rather than buying a bunch of things and then forcing them together, which was more the trend. 01:08:33 - Scot Wingo 10:15 seems smart to let them percolate and kind of figure out who the winner is. And this kind of, you know, portfolio. Small portfolio of things. 01:08:40 - Richard Holcomb Yeah, yeah, yeah. 01:08:41 - Scot Wingo And then on the investing side, tell us a little bit about your fund. 01:08:44 - Richard Holcomb Yeah. So the fund we. Another bad timing thing. The initial close of the fund was like March of 2020. 01:08:55 - Scot Wingo 2020. 01:08:56 - Richard Holcomb Yeah, yeah. 01:08:56 - Scot Wingo Covet. Yeah, yeah. 01:08:58 - Richard Holcomb So we didn't close. 01:09:00 - Scot Wingo Yeah. 01:09:01 - Richard Holcomb Because Covet came and the world was coming to an end. And then a year later a lot of the people that had, you know, had committed to the fund sort of called up and said, well, looks like, looks like the world didn't die. And we've still got this money set aside to invest in your fund. Do you want it? Yeah, so we. 01:09:17 - Scot Wingo Yes, yes. 01:09:17 - Richard Holcomb Yeah. But Instead of a $10 million fund, we raised a million dollar fund. So, you know, we write $100,000 checks into companies that, you know, have product market fit and mainly need the money to, you know, do that first bit of more advanced sales and marketing and ones that probably are going to get home on, on that money. So several of the deals we were the first hundred thousand in and we helped them get up to the a half million to million dollar total round. And then in other deals it's, well, they got 900 and they just need that last hundred thousand to, to close the round out. So we've done, we've done both ends. I'm just real wary of deals that, you know, well, here's some money now and next year you're going to need to raise some more. You know, maybe you can, maybe, maybe you can't. 01:10:06 - Scot Wingo Yeah, we have that at the Tweener fund. Like we can't carry the water if we're like. Yeah. A big part of a first thing or. 01:10:12 - Richard Holcomb Right. 01:10:12 - Scot Wingo Yeah. 01:10:13 - Richard Holcomb So, yeah, well, it's because you, you know, the later rounds, they want you to participate. 01:10:17 - Speaker D Yeah. 01:10:18 - Richard Holcomb Pro rata and the number gets bigger and bigger and, and you don't have it. 01:10:21 - Scot Wingo Yeah, that's called the North Carolina Venture Capital Fund. 01:10:24 - Richard Holcomb The North Carolina. 01:10:25 - Speaker D Right. 01:10:26 - Scot Wingo And then so do you know the website off top of your head or. 01:10:29 - Richard Holcomb I guess in ncvcf.com and cvcf.com. 01:10:35 - Scot Wingo Okay, cool. We'll put that in the show notes. And then we just launched a hub and I need to make sure that that made it in there. So. 01:10:41 - Richard Holcomb Okay, cool. 01:10:41 - Scot Wingo Yeah, so if people want to reach out to you and they want you to write them 100k check, just go on LinkedIn. 01:10:48 - Richard Holcomb Yeah, you're usually that or butchered@ncvcf.com. yeah, right, okay. But where I spend way more time is on the people that have gotten themselves up to a million or two or three or either at the age that they need to retire or at the point where they want to go. 01:11:05 - Scot Wingo Do something else looking for Some liquidity of some kind. Yeah, it's on the quorum side. 01:11:09 - Richard Holcomb And the interesting thing on the M and A front is, you know, if you, if you look at the cycles, it's really a stock market cycle, right. It's about an eight year cycle. So we had a crash in 2000 and then we got back, and then we had a crash in 2008 back and now it's almost 2025 and it hadn't crashed since 2008, so. So we're 14, 15 years into what is normally an eight year cycle. So sort of like I can't predict when the market will turn and you won't be able to sell your company at all, but I can predict that the day will come. 01:11:43 - Scot Wingo There's also an option where I find a lot of. We had this guy Dushan on, who had device magic and he did kind of a, he did a, you know, a small majority. Um, so something like, you know, people will sell somewhere north of 50%, get some money off the table, but then stay on and kind of get a double, double exit. Is that, can your firm help with those types of things? 01:12:04 - Richard Holcomb Yeah, yeah, that's probably at least 50% of deals. We call them recaps. Yeah, recapitalization. So you take some money off the table. It really depends on what the founder. 01:12:13 - Scot Wingo Wants, you know, and you're on the buy side, so. So just like equivalent to a house, you're representing the founder. 01:12:18 - Richard Holcomb Yeah, well, some of them sell side. Yeah, we're selling to the P's. 01:12:21 - Speaker D Yeah, yeah. 01:12:22 - Scot Wingo So. So you're, you're, you're helping the founder. 01:12:24 - Richard Holcomb I'm helping the founder. 01:12:25 - Scot Wingo Right, yeah, yeah, so. So it's kind of interesting because not only do they get, you know, a great investment banker, but you've got like 40 years, you know, you, you've been like, yeah, you get through the snow and go like. You've got very good advice dealing with. 01:12:41 - Richard Holcomb Them on, you know, business operation issues so. So 1, 1 data point for the, for the company, you know, from the time that we first meet, first find you, you come to one of our educational events or something, to the time we sign you up as a client and take you to market is almost three years. There's a lot of work to get done between year one and in year three on that. And it's simple things. Like I talked to a company the other day that they're in 20 million in revenue, right. And on the surface it sound like, wow, y'all, y'all are great. Until we figure Out. Well, none of it's subscription. It's all one off. One off. 01:13:19 - Speaker D Yeah. 01:13:20 - Richard Holcomb And we can sell that, but it's not worth anywhere near as much as what, a $20 million subscription. 01:13:26 - Speaker D Yeah. 01:13:26 - Scot Wingo What are the top four things people could be doing that you find that they aren't? I run into the Gap accounting thing. A lot of people don't understand. 01:13:34 - Richard Holcomb They don't. 01:13:34 - Scot Wingo These bootstrap rights don't understand. 01:13:36 - Richard Holcomb I have that argument and stuff. Yeah. All the time. And it doesn't matter what you think the answer is if you don't do Gap, you're not selling your, your company. I've had some sad situations where, you know, people, particularly engineers, they don't pay attention to the details. Right. So I had one deal almost completely fell apart because a stock transaction that had occurred 15 years ago, they didn't have assigned copy of the document. So we went back to the attorneys to get the signed copy of the document to discover that the attorney was no longer with us and that nobody knew where his records were. So this is a $30 million deal that's now not going to happen because. 01:14:22 - Scot Wingo Of piece of 15 year old paper. 01:14:24 - Richard Holcomb Yep. And fortunately everybody on the 15 year old piece of paper was still alive and all agreed to sign it. 01:14:32 - Scot Wingo Okay. 01:14:32 - Speaker D Wow. 01:14:33 - Scot Wingo But because sometimes you go back to the other party in this thing and they're like, I have leverage. 01:14:37 - Richard Holcomb Yeah. 01:14:38 - Scot Wingo What's it worth to you? 01:14:39 - Richard Holcomb Yep. 01:14:39 - Scot Wingo Yeah. Then, then that can, like the whole. 01:14:41 - Richard Holcomb Thing can spiral out of control and you know, a big company is not going to do a deal if they can't, you know, if there's something. So I run into that more often than you would think. Something. 01:14:50 - Speaker D Yes. 01:14:50 - Scot Wingo I've learned that as a, as a developer, as a tech founder, we're not good at details, but it is. You're going to dot those eyes and cross those T's or it will just blow the whole thing. Intellectual property. So if you ever have a contract or any of that stuff, you got to button that up. Be very careful with open source. Like people that if you're, if there's some way your code can leak into open source, that's a big thing that a lot of people fall into. 01:15:11 - Richard Holcomb Yeah. 01:15:12 - Scot Wingo You got to document all the open source use in some way and make sure that you, you know, and I've. 01:15:16 - Richard Holcomb Had deals fall apart on tech due diligence. Right. You know, there's companies that do nothing but you look at your source code and tell, tell the buyer whether it's good or not. And if it comes back with, you know, 40 pages of what's wrong with it? Which is a lot of times just, you know, well, you're using this version of something and it has a security threat. That was three years ago and you hadn't done anything about it last three years. So not only is your, your source code, you know, open to, you know, being penetrated, but you obviously aren't paying very good attention because you've let this go on for three years and then fixed it, didn't find it yourself and didn't fix it. 01:15:54 - Scot Wingo There could be a three year liability window where something's been going on. We don't have any way of proving it. Yeah, interesting. 01:15:59 - Richard Holcomb It's hard to sell companies that have had data breaches. You can, but it's a definite cut on valuation. But this is the time I think, of consolidation of all these little small software companies. Companies. And the new ones I'm seeing. Right. They're two, three people. 01:16:22 - Speaker D Yeah, yeah. 01:16:23 - Scot Wingo I call it a seed. Seed Strap. 01:16:26 - Richard Holcomb So. 01:16:26 - Scot Wingo So they'll go raise 1 million and then maybe 3 or 4. This will do a pre seed and a seed and they're kind of done. It's crazy. 01:16:33 - Richard Holcomb Yeah, but they don't take the. I mean, I guess my companies, they all got up to well over 100 employees and yours was bigger than that. Now I'm running into companies with 3, 4, 5 million in revenue and three people. 01:16:48 - Scot Wingo Yeah, yeah. It's crazy. 01:16:49 - Richard Holcomb Okay, cool. 01:16:50 - Speaker D Yeah. 01:16:51 - Richard Holcomb Why are you selling? Yeah, just clip the coupons. 01:16:54 - Speaker D Yeah. 01:16:54 - Richard Holcomb Yeah. 01:16:56 - Speaker D Cool. 01:16:56 - Scot Wingo Well, thanks for being generous with time. I know you just kind of came in from Europe. We appreciate it. It's good to see you. Thanks for. I heard a lot of stories, Richard, Stories I hadn't heard. So that's good. 01:17:05 - Richard Holcomb I just have to remember them the next time I tell them. So keep them straight. 01:17:09 - Scot Wingo You got 40 years full of good stories. 01:17:12 - Richard Holcomb That's the good news. I've sort of reached that point in life where I could go, well, you know, I'm getting old and I don't really remember that very much. 01:17:17 - Scot Wingo Yeah, well, if you, you know, in 10 years you can play this back. This will help you as well. Thanks, Richard. 01:17:23 - Richard Holcomb Appreciate it. All right. 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