SaaS Interviews with CEOs, Startups, Founders
1043 HR Tech CEO: I accidently raised $3m!
02 Jun 2018
Chapter 1: What inspired the creation of Job Science?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million.
I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode.
Chapter 2: How did Ted Elliott secure initial funding despite early challenges?
Hello, everyone. My guest today is Ted Elliott. He is the creator of a tool called Job Science. It's the number one provider of staffing and recruiting software on the Salesforce platform with more customers, awards, deployments, users, and development investment. They invented recruiting on the force.com platform so that recruiters could be more successful.
Ted, are you ready to take us to the top?
I'm ready.
All right. Just to be clear, you are the founder, right? I am the founder.
Chapter 3: What pivotal decisions did Ted make in 2007 regarding Salesforce?
Okay. When did you launch?
We actually started job science in 1999 before Salesforce really even took off in an original company that has nothing to do with what we do today.
And what was that company doing?
That company was actually doing job boards for the healthcare industry. And the Washington Post, the Tribune, and IBM offered to buy it from me. when it was six kids in my parents' attic with a cocktail napkin. For how much? For $12 million. On what revenue at that time?
Chapter 4: How did Job Science evolve its business model over time?
Zero. And they asked for 60 days for due diligence. I realized when they want 60 days for due diligence, I was hosed. So I told them I needed a check for $3 million immediately. So they became my initial shareholders when the internet crashed in April 2000. And I had $3 million and no clue what the hell we were going to do with it.
So they walked away because it crashed while they were doing due diligence?
No, they walked away because their business strategy massively changed once the internet ended. And they ended up becoming equity holders in the business. And I made a foolish decision to not end the business because I didn't want them to lose their money.
Chapter 5: What strategies did Ted implement to acquire customers?
So I've carried them today as investors.
Oh, so you were a nice guy because you didn't have to give them equity for that $3 million, but you did.
So we had structured the deal that if the deal failed, they would become preferred shareholders in the business on terms that no preferred holder would take. It's actually a great story. So there was a venture capitalist named Dixon Dahl, Dahl Capital, and he's a great guy. I was in his office and he offered to sign a term sheet with me, but he had one provision.
He wanted me to fire my sister and my dad. And I said to him, well, you know, I think I have some alternatives, but if I can't find a deal, you know, or I can't, if I don't execute the alternatives, I'll come sign the term sheet on Friday. And so I got on the phone with this guy, Ross Hamachek, who had been CFO at The Washington Post.
We negotiated the term sheet in about three hours, and I never showed up for the meeting with Dixon.
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Chapter 6: How does Ted measure success in his company today?
Needless to say, I will never raise a dollar from Dahl Capital because you should not show up or not even call them. But yeah, so that's how it all got started. And unfortunately, our original business plan was a total disaster. And so we've pivoted, I think, twice since then.
Well, Ted, just to close it out, I mean, 3 million on 12, am I getting this right? You sold them 25%. They're still on your cap table today at about 25% unless you've raised additional capital and everyone's been diluted.
Yeah. So they're, they're, uh, with preferred preferences, they're about 30%, but yeah, they, I've carried them the whole time.
Okay.
Chapter 7: What challenges does Job Science face in the current market?
Now how much total have you raised today? So 3 million initially and what today? Really? So totally bootstrapped except that beginning.
Yeah.
That's interesting.
Um, my dad and I have provided debt capital to the business occasionally, uh, Um, but it's always been, um, uh, so that we have a preferred position over all the equity in the event of a total shit show.
Yep. Now, how do you structure that?
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Chapter 8: What future plans does Ted have for Job Science?
I mean, is that like, is this just a conservative market interest rate or what?
So instead of going to SAS capital or going to a third party, a venture debt, you basically offer the business those same terms and you make sure it's commercially reasonable and you have a third party board member, um, Oh, before job science as general counsel of a company, uh, let's see structure it. In such a way that it's an arm's length transaction.
But generally, we were willing to give the company debt when no one else would, but on commercially viable terms.
Yeah. So what I hear you saying is to prevent any bias you have, especially ethically and with the government, you would go use the same term structure that a lighter capital or SaaS capital would use, but then you just do the deal with your own money.
Yeah. And most entrepreneurs don't have what I call the bankitary, who is my father, who I've worked with my whole life.
Where did he get his money from?
he called himself a midwife for startups. And so over the time I was a young child, he was always starting a new company. And he probably had three or four wins out of 10. And over time, I really think the secret behind his wealth is that my mom bought a house every time he started a company and redid the house.
And then for whatever reason, the real estate always worked out, even if the startup didn't. But he started a couple of different companies and was an M&A advisor. So having him As a mentor and as a partner in the business I've started, it's been really helpful. And also, he's been a very easy source of capital to work with.
He's been an extremely difficult source of capital to work with, but it's been extremely easy to get him to give me the money.
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