Special Episode: He Patted My Hand and Told Me I Didn’t Know Anything About Business

Loren and Karen talk with four of EY’s Entrepreneurial Winning Women about opening the books, bootstrapping a tech company, selling a business for more than $100 million, competing with Amazon, hiring hard-to-get talent, and pitching investors: “I've always said, ‘I'd rather be 75 percent of a watermelon than 100 percent of a grape.’” Plus: how much of your life do you have to sacrifice to be successful?

He Patted My Hand and Told Me I Didn’t Know Anything About Business

Guests:

Karen Clark Cole is co-founder and CEO of Blink.

Sherry Deutschmann is founder and CEO of BrainTrust.

Lori Torres is founder and CEO of Parcel Pending.

Diana Lee is co-founder and CEO of Constellation Agency.

Michelle Vondrasek is founder and CEO of Von Technologies.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Sherry Deutschmann: “He patted my hand and told me I didn’t know anything about business. He said, ‘Just go sell another account.’ So I did, except this time, it wasn’t for his company. It was for mine.”

Sherry Deutschmann: “I realized that all of our problems were simple human error. The human error was because nobody cared and nobody cared because nobody cared about them. It hit me like a ton of bricks.”

Lori Torres: “I will tell you that competing with Amazon, some entrepreneurs I’ve heard say, ‘We went out of business because we couldn’t compete with them.’ For me, I’m like, ‘Bring it on.’… It’s made us a better company.”

Lori Torres: “I am an employee again. Here’s the funny thing. I was in corporate America my whole career, for 30 years. I really thought I’d probably be the best person to be acquired by a large corporation because I can deal with corporate America. Is it as much fun? Maybe I would admit that it’s not as much fun as I used to have.”

Diana Lee: “Everybody talks about being the visionary and being such an incredible CEO and being kind to your people and you’re so compassionate. All the things that I think every CEO wants to do. When you don’t have any money and everybody has a problem, suddenly your compassion goes away.”

Diana Lee: “I’m like, ‘I buy them food Tuesdays and Thursdays, we have all the medical benefits there are. We have Citi Bikes, we have Metro passes, we buy $800 worth of Amazon food each week. I put in a Bevi machine with sparkling water. What more do I have to do?’”

Diana Lee: “The most interesting thing I found in this entire experience is I’ve lost some friends on this journey in the last three and a half years. It’s not even the last three and a half years, because I’ve always been really fiercely ambitious. I’ve always had this fire in me, and now it burns bigger… much bigger. I think my friends have always questioned my ambition. Like, is it really worth sacrificing everything else?”

Michelle Vondrasek: “I hate taking in my car and they tell me I need $500 worth of stuff. I don’t know better. I kind of wanted to be the mechanic for Wi-Fi, and be right with the customer, be honest with them, and be fair.”

Michelle Vondrasek: “We’ve built this awesome machine. We’d love to bring somebody in to put some gas in it so we can really scale it and grow double or triple.”

Full Episode Transcript:

Introduction:

Loren Feldman:
Hello, everyone. Welcome to the 21 Hats Podcast. This week, we have something a little bit different for you. Instead of our usual therapy session with our regulars, we’re coming to you from Palm Springs, California, and EY’s annual Strategic Growth Forum. I’m here with one of our regulars, Karen Clark Cole, CEO of Blink UX. Karen, I think you and I met here at this event. You’ve been coming for years. Why do you come to this event?

Karen Clark Cole:
Loren, we did not meet at this event. I think that we met through your former gig at Forbes, where I was writing. However, I do come to this event because I was actually in the Entrepreneur of the Year program for the Pacific Northwest. Probably five years ago, I was a finalist in the Seattle region. When you do that, you get to come to the national event, which is in Palm Springs.

Loren Feldman:
Which you’ve been doing every year since, I believe.

Karen Clark Cole:
Once you go, you’ll never stop going, because it’s so incredibly fabulous and lavish and wonderful in every way.

Loren Feldman:
Give us some examples. What do you like?

Karen Clark Cole:
You can ask a waiter for a bottle of champagne at any time and they’ll bring it.

Loren Feldman:
No one ever told me that.

Karen Clark Cole:
It’s true.

Loren Feldman:
Now I understand why you come back every year.

Karen Clark Cole:
Honestly, the quality of the people that are here is so incredible. It’s mostly founders, CEOs, leaders in big companies, and so the quality of the conversation while walking to the pool is outstanding. Then you add on how at EY, generally every participant here has a host who will help set up meetings for you with anybody who you want who’s attending. Everyone gets the guest list.

Then there are always a handful of talks that I go to—and they’re usually the ones that I just sort of bumped into and didn’t expect to go to, which are the best—that can be life-changing, and certainly make me think differently about how I’m running my company and what other people are thinking about or struggling with.

Loren Feldman:
Do you want to ask me why I come to this event?

Karen Clark Cole:
Well, I know that you love the Winning Women program, and I can’t imagine anything not to love about it.

Loren Feldman:
The program is about 12 or 13 years old now, and I think it grew out of the Entrepreneur of the Year program that you were referring to. I think at a certain point EY realized there weren’t as many women competing in that as they would have liked. They created this leadership program called Winning Women, and as a journalist, I just found it was an incredible way to meet really interesting entrepreneurs who were established, but not that far into their journey.

Karen Clark Cole:
It’s like EY is doing all the work for you when you’re trying to find entrepreneurs.

Loren Feldman:
It’s great to find people who’ve been vetted by somebody, and I know they’re legit. I’ve gotten so many great stories, contacts, sources out of it. It’s been really helpful to me and would come to this event every year just for that. I didn’t even know about the champagne.

This year with the podcast, it’s such a great opportunity—you and I knowing that we were both going to be here, we decided to line up interviews. What we’re going to do now is sit down one by one with four of these Winning Women. Most of them are alums who’ve won in the past, one who’s just won this year. We’re going to hear a little bit about their journeys.

Karen Clark Cole:
Fabulous. We should say that we’re in a very lavish room.

Loren Feldman:
Where we can’t close the doors because if we do, we might lock ourselves in. Thank you for taking time away from the pool and the champagne to join me with this.

Karen Clark Cole:
My pleasure.

Loren Feldman:
Let’s start.


Part 1: Interview with Sherry Deutschmann

Loren Feldman:
Sherry Deutschmann, thanks for joining us.

Sherry Deutschmann:
Delighted to be with you.

Loren Feldman:
We want to talk about all aspects of how you built LetterLogic and your really impressive entrepreneurial journey. To start, I’d like to read something from your book. You’ve written a terrific book that I recommend called Lunch With Lucy. In it, you write: “I was a 42-year-old single mom with a high school education and meager savings when I cashed in my 401k and took a risk. I sold my personal belongings in a yard sale that yielded just enough cash to start a company, LetterLogic, in my basement, which defied every single rule of what makes a sure bet in business. That business grew debt free to a $40 million enterprise.” Give us a quick version of how you wound up starting your own business.

Sherry Deutschmann:
I was working for a company in the same industry that was printing and mailing hospital bills. I was responsible for the sales. I was VP of sales. We screwed up everything we touched. I would sell a new account and lose an account, and it was a constant. Just observing one day, I realized that all of our problems were simple human error. The human error was because nobody cared and nobody cared because nobody cared about them. It hit me like a ton of bricks. I went to talk to my boss about what we could do to affect the morale and change the culture of the company and how that might affect the results. He patted my hand and told me I didn’t know anything about business. He said, “Just go sell another account.” So I did, except this time, it wasn’t for his company. It was for mine.

Loren Feldman:
Unlike a lot of books about culture, you don’t just talk about treating people well, which we all agree you should treat people well. You connect the dots between treating people well and having a profitable business.

Sherry Deutschmann:
Well, it seemed to me it was absolutely a direct line between behavior and profitability. I thought if all of the employees understood exactly how we made money and their part in helping us make money, they would behave differently, and they did. I set out to make sure that all of their basic needs were taken care of, so that when they were at work, they would not be worried about whether or not their lights were going to be on when they got home, or whether or not their health insurance would cover an illness. From day one, I paid for 100% of everybody’s medical, dental, disability, and life insurance.

Karen Clark Cole:
How did you afford to do that on day one?

Sherry Deutschmann:
I never considered not being able to afford it.

Loren Feldman:
It was a little bit less expensive back then.

Karen Clark Cole:
How many employees did you have right out of the gate?

Sherry Deutschmann:
Two. Then we grew to 60 at one time, and they back down to 50. In the beginning, we covered even their families’ insurance. We did that for the first five years. It was the whole family plan. Then we were challenged by a single employee who said, “It’s not fair that I cost the company this much. She has five kids, and she cost the company this much, so I want the difference.” We had to equalize it by paying just for the employee.

We also let them bring their kids and their pets to work, which doesn’t seem like a big deal, but if you’re a single mom and the kid has a wellness visit, you have to take them to school, first, leave work, go to pick them up to take them to their doctor’s visit, take them back to school, and come back to work. You get nothing done. Or if the kid has a runny nose, they can’t go to daycare. Just bring them to work. We all pitched in to help take care of the kids so that the parents could be at work with us.

The most important thing we did, the most game-changing thing, was taking 10% of the profit every month, splitting it evenly, so that the CFO and the janitor got exactly the same dollar amount, letting them know that they were just as important as everybody else in the company on the final results.

Karen Clark Cole:
I read that before you do that, you show them how the company is doing, you show them the financials once a month, and then distribute the profit?

Sherry Deutschmann:
Every month, we brought everybody together in one room and went over the financials so they could see top line and all of our expenses in between and bottom line, and then we talked about the results.

Karen Clark Cole:
What would happen for your employees? Did they understand it right away? Were they interested—all of them? In my experience, it sometimes terrifies employees if they see really what’s going on or it’s too much information. It’s overwhelming. Then how did they feel when when there wasn’t a profit?

Sherry Deutschmann:
For most employees, just the high level was enough. There were some employees, specifically the sales guys, who really wanted to see more. In those cases, I would allow them to come to my office, pull up a chair right next to me, we’d get right into our NetSuite and say, “Have at it, you can go anywhere except to see peoples’ salaries,” and let them see exactly to the penny and to the fraction of a cent our costs. That changed their behavior in regards to going after the right kind of account and selling at the right price because they understood exactly what our costs were.

It took us a couple of years to become profitable, I think 18 months when we were first profitable, and nonstop profitable until about three years before I sold the company. I was investing heavily into technology.

Karen Clark Cole:
In order to run the business?

Sherry Deutschmann:
Yes. Actually building out the e-commerce so that I would no longer be printing and mailing patient statements, but sending the statements to patients electronically and facilitating payments for them electronically. I was spending millions of dollars doing that and not really minding our core. You know, what we were good at? In so doing, we had several months of declining profits, so I would have to stand in front of the entire company every month and say—

Karen Clark Cole:
60 people at that point?

Sherry Deutschmann:
Yes, at that point, it was 60. 63 people I think. I’d tell them, “Our profits were down this month.” It had gone from $7 to $17 to $700 and then it started going back down to $19 and then to $6, which is not even going to buy you a six pack of beer, right? And just tell them, “I’m sorry, we weren’t profitable,” and then two months back to back of losses. And for me to stand up and say, “There’s no profit share, because we didn’t make a profit.”

Loren Feldman:
You said you were sorry. Did you feel it was your fault?

Sherry Deutschmann:
Oh, it was my fault. Absolutely was my fault.

Loren Feldman:
How so?

Sherry Deutschmann:
I was chasing the shiny object. I hired an outside consultant—who ended up being one of the best things that ever happened to me and a lifelong friend—who challenged me to go back to our core strengths and to quit trying to be something I wasn’t and make the company something it wasn’t. At that time, we were on the Inc 5000 list for 10 straight years. The reason you’ve gone so fast is because you’re so good at this. You’re the best at this. You’re the undisputed best at this. Even your competitors say you are and now you’re saying that’s not good enough. I wanted to chase them down a rabbit hole.

Karen Clark Cole:
Did you do that because you were worried about the times changing, everything becoming more digital, and you needed to go there?

Sherry Deutschmann:
Yes, and somewhat a fear of missing out, and my sales team saying, “We lost this account because we weren’t able to do that and you’ve got to do this.” Just fear, totally acting out of fear. Up until that time, we had been partnering with other companies that could provide that part. We just had a tiny revenue share. That was really the right solution. We went back to that, and we quadrupled EBITDA over the next 18 months.

Karen Clark Cole:
So you just cut off all that money you had invested and said, “That’s a loss”?

Sherry Deutschmann:
Yeah, and we had just hired all these people to help us build out the technology. We had to tell them, “If you want to stay with us, we’ll find something for you to do. But we’re not doing that sexy work you thought we were doing.”

Karen Clark Cole:
Did they stay?

Sherry Deutschmann:
Some stayed, a few left, some were contract workers who we brought in and they left. We right-sized back to 51, 52 people and really got back to being—

Karen Clark Cole:
How was that transition for everyone in the company when you had to do the right-sizing and make the announcements?

Sherry Deutschmann:
Such a sigh of relief for everybody because those people who we had hired to do that work, we were hiring them so quickly that we couldn’t train them, we couldn’t integrate them into our culture. There was no place for them to sit so we had to do a build-out to add more office space for them and to try to be cool enough for these techies who were coming in instead of being a manufacturing concern. I was sending mixed signals being a pretty bad leader at that time, just running all over the place. I think that there was a huge sigh of relief for everybody, including those people who were brought in.

Karen Clark Cole:
What was the moment where you hired that consultant? What came into your head that said you should do that and something’s not working? Because you’re losing money?

Sherry Deutschmann:
Losing money and having to tell them there was no profit because of my poor decisions. He came in and for the first week, he said, “This is the best run company I’ve ever seen. I don’t know that you have a problem that we can’t fix pretty quickly.” Then the second week he said, “Oh, you have a huge problem, and it’s this, and you know what to do and you know how to fix it.” It was all on me. I made the hard decisions and made the hard choices and got us back to profitability.

Loren Feldman:
Sherry, you described talking to your bosses at the job you had before you started your own company and you told them what they were doing wrong and what you thought they could do better. Your boss patted you on your hand and said, “You don’t know anything about running a business.” To some extent, they weren’t wrong about that.

Sherry Deutschmann:
Oh, they were absolutely right.

Loren Feldman:
Then you figured it all out on your own. All these steps you took from opening your books to the way you rewarded your employees—was there anything guiding you on that up until the point where you hired a consultant? Or were you figuring out what made sense to you on your own?

Sherry Deutschmann:
I think it was a combination of common sense and innate empathy.

Loren Feldman:
It’s not that common. though.

Karen Clark Cole:
It’s listening to your intuition. I think that’s a strength of a woman leader.

Sherry Deutschmann:
Simple human kindness too. I was just listening to the CEO of Cisco, where they’ve just been named the best company in the world to work for, and he talked about the importance of that, of just realizing that people are just human beings who want to be heard and want to be treated like humans. I employed that trait that I have to serve the company.

Loren Feldman:
We’re having this conversation at EY’s annual Strategic Growth Forum. You’ve come to this event for many years. I met you here because of your involvement in the Winning Women program. Tell us how you got involved and what the program meant for you.

Sherry Deutschmann:
My company culture was so unique that we started getting a lot of press fairly early on and somehow EY heard about me and invited me to apply for the program. I did. When they told me I’d won, that was 2009. I figured it was just like any other award thing. You go to a fancy dinner, which you pay for, and then they give you a little trophy and that was it. It’s not like that at all. It is really a commitment to helping the women with any resources they need to grow their businesses.

Loren Feldman:
Not investing in those businesses. Not that kind of resource.

Sherry Deutschmann:
No, not that kind, but invaluable connections. It gave me credibility in a way that I could never have achieved on my own and introduced me to the network of the other Winning Women. But all the brilliance of EY globally—they helped me several times with sales tax nexus issues and other things. They didn’t charge me a dime, but helped me conquer pretty insurmountable problems at the time. Then the press that I received as a result of the EY Winning Women program has been incredible. That’s how I met you, and as a result, I was featured in The New York Times. I’ve had Forbes talk about me and Success and Business Leaders and Inc and Entrepreneur. None of that would have happened without the Winning Women program.

Loren Feldman:
We’ve heard this really impressive story about how you built this special company and the success you had. Why did you decide to sell the business?

Sherry Deutschmann:
Two things. We had gone through that phase of quadrupling EBITDA in 18 months. The graph of our growth, for the first time, showed the bottom line was outgrowing the top line. On paper, that was exactly the right time to sell a company, when you would get the highest multiple. That coincided with my teenage granddaughter coming to live with me. Trying to raise a 13-year-old and working 60 hours a week didn’t look like a good decision. It’s like it was in the stars.

Karen Clark Cole:
You had a buyer?

Sherry Deutschmann:
Yes, I had a buyer, had a lot of interest, had multiple offers, and chose one.

Loren Feldman:
People had been approaching you about buying it you even before you went looking.

Sherry Deutschmann:
Yes, for many years.

Loren Feldman:
Did the sale work out the way you hoped it would?

Sherry Deutschmann:
Yes and no. Financially, it was a tremendous success. What pains me most is how the culture changed after that. The first thing the buyers did was do away with the profit share. Although, in the dog and pony shows and all the negotiations, they had indicated that they loved the culture and they loved the profit share and they saw how it affected the bottom line, not realizing it was just lip service.

Karen Clark Cole:
Did you have a role in the new company?

Sherry Deutschmann:
I didn’t, I exited. It was an all-cash deal. I invested in the new entity they created and then got a board seat with that investment. Then it was too painful for me after six months. I just said, “Please, I want out of this.” So I was totally out and got my investment back.

Karen Clark Cole:
Did some of the employees leave?

Sherry Deutschmann:
Yes. Today we’re three years after the sale, and of those 51 employees we had at the time, I think only 12 are still there.

Karen Clark Cole:
Wow.

Sherry Deutschmann:
They weren’t 38 mediocre employees. They were the cream of the crop employees.

Karen Clark Cole:
Have they been able to maintain the profitability of the company without those people?

Sherry Deutschmann:
I’m not sure. I think there have been two or three roll-ups since then. I sold a $40 million company. Now probably a quarter billion dollar company has emerged from a lot of roll-ups. I have no idea about their profitability.

Loren Feldman:
Did you feel you were as prepared as you should have been to sell the business? Did you know what you needed to know?

Sherry Deutschmann:
Probably not. I learned a lot in the process and getting the company ready to sell was the most fun I ever had running the business. I loved it.

Loren Feldman:
How so?

Sherry Deutschmann:
We had a brilliant broker who first did a free valuation for us and then coached us on having mini valuations. Every Monday and Thursday, my leadership team had a mini valuation and we made decisions based on valuation for the first time. You would think that your company value wouldn’t change from a Thursday to a Monday, but if you add a big account or you lose an account in that time space, it can change a lot if you’re looking at a seven or eight or 10 multiple. It changed our behavior and we were working as a really tight team.

Karen Clark Cole:
You did that for how long?

Sherry Deutschmann:
About a year and a half.

Karen Clark Cole:
Can I just ask you, when you’re doing your monthly reporting to the employees and doing the profit sharing, how did you choose monthly versus quarterly, which seems more common to me?

Sherry Deutschmann:
It’s really hard to tie your behavior and your actions to something if it’s quarterly or annually. But monthly, if we brought everybody together and said, “Look, we made a ton of money this month, and this is why.” It was like a Swiss watch. Everything happened exactly as it should have. Then there was a direct correlation between their behavior and the profit.

Karen Clark Cole:
You talk about being able to measure profit by treating your employees well. Is that how you did that?

Sherry Deutschmann:
I think mostly it was seeing their dedication to the company and retention of employees. Nashville is one of the fastest growing cities in the U.S. For the last three or four years, we’ve had over 1,000 open IT jobs every day. Our IT workers were highly sought after. They stayed with us and stayed loyal because of the culture that we created.

Loren Feldman:
Looking back, are there things that you would do differently if you had to do it over again, in terms of the sale?

Sherry Deutschmann:
Yeah.

Loren Feldman:
What would you do differently?

Sherry Deutschmann:
I would have coached the leadership team about how to handle the integration with a newer, bigger leadership team. What I thought naively was that we were going to infect the larger company that was swallowing us up, that we were going to inculcate our culture into them. I think we could have done that if I had realized that I needed to train the team on courage and sticking to their convictions. I think I failed in choosing a bad leader. Not a bad leader, but somebody who wasn’t really equipped to withstand—

Karen Clark Cole:
Somebody who had to do your role, right?

Sherry Deutschmann:
Yes.

Loren Feldman:
Although that was going to be hard anyway. Once they got rid of profit sharing…

Sherry Deutschmann:
But the right person would have stood up for that and would have gone to the board and said, “No, this is why we’re profitable. These other companies that you’re acquiring, they’re not profitable. They’ve got tons of debt. They’ve got three times the employees we have with the same revenue.” I wish that I had taught them to take that tack and to infect the other company.

Loren Feldman:
What are you doing now?

Sherry Deutschmann:
Too much. The first thing I did was start a little angel investment firm to invest in women-owned businesses, because women only get less than 2% of the private equity and venture capital. I wrote a book, Lunch With Lucy. It’s available right now on Amazon, but it’ll be out at a bookstore near you on March 10th.

Karen Clark Cole:
There’s a lovely quote at the beginning that you put in by Mother Teresa. Can you tell me about that? Is that an old favorite of yours?

Sherry Deutschmann:
Yes. It might make me cry. She said, “There is more hunger in this world for love and appreciation than for bread.” When you think about how many people in the world are starving literally, don’t have enough food, and more people are suffering from lack of love and appreciation.

Karen Clark Cole:
Yeah.

Loren Feldman:
You started the investment firm, but don’t you have a business now as well?

Sherry Deutschmann:
Yes, I’ve started a company, BrainTrust, which is a peer-to-peer membership for women-owned businesses to help them get to the crucial million dollar mark. Less than 2% of women-owned businesses—I think there’s almost 12 million of us now in the U.S.—get to the million dollar mark.

Karen Clark Cole:
And beyond that.

Sherry Deutschmann:
Right. I think the average is $88,000 in annual receipts. You’re not going to ever build personal wealth or financial independence when your total cash receipts are $88,000. You’re not going to change the lives of your family at that rate and you’re not going to be able to be an influencer in the community to change the world.

Helping women get to a quarter of a million dollars, at that point, they can start paying themselves a little better. By the time they get to a million, they’re making a decent salary. They have several people working for them who are working in the business so they can work on the business. At that point, they are more bankable so they can get a line of credit to grow the business. They can attract investors. Importantly, they can join come organizations like the Women’s Presidents Organization and EO, the Entrepreneurs Organization. But until you get there, you can’t be a member.

I had been lucky enough to be in WPO and EO and found how critically important they were to me. I started this organization for all those women who don’t qualify. I’m going to help you get there. We’re going to help you get there so you can move on and go from a million to 10 million.

Loren Feldman:
Sherry Deutschmann, thank you for joining us. Really appreciate you sharing your story.

Sherry Deutschmann:
Thank you. It’s been a pleasure.


Part 2: Interview with Lori Torres:

Loren Feldman:
Lori Torres, welcome to the 21 Hats Podcast. Really appreciate your stopping by to talk about Parcel Pending. Tell us what the company does first.

Lori Torres:
Thank you so much for having me here. I’m thrilled to be part of it. At Parcel Pending, we have electronic smart lockers. We manage packages. We’re a package management solution company. Envision a bank of lockers that have a keypad where a courier (UPS or FedEx) can go to the touch screens. Once they find your name in the system, they then put a package into the locker, close the locker door, and now it sends you a text or an email that says you have a parcel pending.

Karen Clark Cole:
Is this a physical locker?

Lori Torres:
It’s a physical locker. Imagine you’re at work and you have personal items delivered, and instead of having it stolen off your front porch at home, you can have it shipped to your office, but it goes straight into the locker at your office building. Now you can go on your way home, grab your package, off you go, and you have not lost your package.

Karen Clark Cole:
There are varying sizes that you can rent, I assume?

Lori Torres:
That’s correct. Small, medium, large, extra large. Different sized lockers for packages. We are now in multifamily, commercial, grocery, retail, universities, and commercial office buildings. We even have our lockers in corporate headquarters such as UPS. All their employee packages go through our lockers at their headquarters.

Karen Clark Cole:
When you say multifamily, do you mean apartment buildings?

Lori Torres:
Yes, apartment buildings.

Loren Feldman:
Can you tell us how big the business is now?

Lori Torres:
We’ve grown the company over the last five years. We’re now in 48 states and Canada. We take 1.6 million packages a month. We’re expecting to take 3 million from Black Friday to Christmas this year, so it will be a crazy, wild ride. It’s a lot. We have over 200 employees.

Loren Feldman:
Wow. Where did the idea for the company come from? How did you end up starting it?

Lori Torres:
I was in real estate my whole career. I was working for a large company, a developer in Orange County, California. We had 44,000 apartment units and I was the senior vice president overseeing the operations of those 44,000 units. I kept going to the properties and they would say to me, “Lori, we have such a package problem. We need more headcount, we need bigger package rooms.” And I thought, “No way, we’re not going to add headcount. That’s going to kill on the margin. And we’re not going to get bigger package rooms because just doesn’t make sense.” So I knew there had to be a way to take technology and marry it to something, some type of a box system so it could be self-service.

The other benefit to Parcel Pending lockers is that you can get your package in the evening on your time. We have people pick up packages at 2am, 4am.

Karen Clark Cole:
Can people share lockers?

Lori Torres:
It’s not a one-for-one. It just depends on when your package comes today, your locker might be in the left upper hand side of a small locker. Tomorrow, you might get a package over on the right hand bottom that’s a large locker. It’s not your own designated locker. It’s based on when you have a package. If you don’t get a package but once every five days, you only have a locker used once every five days.

Karen Clark Cole:
You pay per package?

Lori Torres:
No, there are different pricing models. We actually sell the lockers to the landlords and owners and they pay a monthly software and service fee. Some models, we give them the lockers and then the end user pays a monthly fee. In the different verticals that we’re in, there are different models, whether it’s a subscription model, a lease model, or a purchase model.

Karen Clark Cole:
How many years did it take you to figure out these different models?

Lori Torres:
I just thought, “This is going to be genius.” At one point, I actually thought we will never sell another locker and we will only give lockers away and charge this fee and the residents will pay. Well, the industry said, “No, we don’t want to nickel and dime our residents. We want this as an amenity.” And so they said, “We’ll pay for it.” I really thought that 80% would be the subscription model and 20% would be the purchase, and it’s the opposite.

Karen Clark Cole:
How many years did it take to figure that out? Was the subscription model gradual?

Lori Torres:
No, we’ve only been in business six years now. We’ve had to figure out a lot very fast.

Karen Clark Cole:
Wow, you’re growing really fast.

Loren Feldman:
Was anybody else doing this when you started?

Lori Torres:
When I started, no. Then since I started, there have been a few competitors. I’m sure you’ve heard of those guys called Amazon, and they’re a big competitor now.

Karen Clark Cole:
With the same sort of product?

Lori Torres:
The same product, yes. They came into multifamily because they want to distribute more packages.

Loren Feldman:
They’re not just in Whole Foods?

Lori Torres:
They’re not just in Whole Foods anymore.

Loren Feldman:
I didn’t realize that.

Lori Torres:
They’re in universities, commercial office buildings, retail even, and the reason for that is they just want to distribute more stuff faster. But their model is completely different. They’re not doing it for a P&L purpose. It’s tough because competing against them when they’re not out to make money—their prices can be significantly less than ours. We have a value proposition of what makes us different. I will tell you that competing with Amazon, some entrepreneurs I’ve heard say, “We went out of business because we couldn’t compete with them.” For me, I’m like, “Bring it on.” This has been the greatest challenge. It’s made us a better company. It’s made us smarter and think better and be more on our feet. I’ll take it.

Loren Feldman:
But it must have squeezed your margins too, didn’t it?

Lori Torres:
It has squeezed in some areas, for sure. Then the tariffs have certainly squeezed margins because we manufacture in China. We’ve got our challenges. It’s not been a walk in the park by any means.

Loren Feldman:
Oh, that’s interesting. How did you deal with the tariffs?

Lori Torres:
You deal with them. Do you have a choice? We’re actually moving our manufacturing out of country. This year, we’ll start manufacturing still offshore, but in a different country.

Loren Feldman:
Vietnam?

Lori Torres:
Yeah.

Loren Feldman:
Interesting. With that kind of fast growth and competing with Amazon, did you have to raise capital to build the business?

Lori Torres:
I bootstrapped my way for the first year or so. Then I did an angel round of about a million and a half. Then I had a strategic investor. We did a $15 million round. The strategic investor was interesting because we’d set it up in different tranches and we ended up after the first year of that deal going back and renegotiating it. It became a revolving line of credit and I only used $6 million of the $15 million before selling the company. I recently sold the company in January to a French company, Neopost. Now they have changed it to Quadient.

Lori Torres:
They’ve been in business since 1934 in mail, so probably every mailroom you go into either has equipment from Neopost or from Pitney Bowes. The two are competitors. Big, big business but somewhat declining because obviously people aren’t sending mail anymore. The locker strategy made a lot of sense for them and it was in alignment with their business and the other business verticals that they have and products that they have. They already had lockers in Japan and in France, but they couldn’t bust into the United States. So you know what I say: “If you can’t beat ‘em, buy ‘em.”

Karen Clark Cole:
Their locker system in Europe was similar to yours?

Lori Torres:
Yeah, similar technology.

Loren Feldman:
Had you been thinking about selling the business?

Lori Torres:
It’s a great question, because of course, I had been thinking about selling the business from the day I started the business. I will tell you, I think it’s really important that I never did it to make money. While I’ve had a wonderful outcome, it was never my goal. Like, “Ooh, I can’t wait, I’m going to be rich.” Not at all. I was solving a problem. I’m a solution finder. The real estate business I was in—you’re in property management and property operations. All you do all day long is solve problems.

When I saw this problem, I knew I could solve it. But yes, once I started planning for the business and writing my three-year plan (before I even put a name to the company or spent $1, I wrote a three-year plan), I always thought I’d exit in probably seven years.

Karen Clark Cole:
You really are a planner.

Lori Torres:
Yeah, I really am. We were starting to just interview investment bankers who were we going to use. We were going to have our first audit, because we didn’t even have a formal audit yet. We were just in that process and they came along and it was a crazy fast deal. I met them December 3rd in my office, we got a letter of intent December 21st, and we closed on January 23rd.

Karen Clark Cole:
Holy moly!

Lori Torres:
It’s a 32-day deal. They said, “We’ll do light due diligence.” No, EY was involved. Let me tell you…

Loren Feldman:
On your side or their side?

Lori Torres:
On their side, and it was not light due diligence.

Karen Clark Cole:
They went that fast?

Lori Torres:
You know what’s interesting about that? I think you set a precedent. It set a precedent for the new owners if they think that we can always work at this pace, which we do. We work at an insane pace. They said, “We’ve never seen a company fill a data room as fast as you guys filled the data room.” Because we worked day and night and it was over the holidays. December 21st was the letter of intent. The office was pretty empty. People were off because of the holidays and we just worked day and night, weekend after weekend. It was crazy.

Karen Clark Cole:
Wow, congratulations.

Lori Torres:
Thank you.

Loren Feldman:
I hope you don’t mind me saying I read on the internet that you had a very successful outcome. You sold the business for $100 million.

Lori Torres:
It was over 100 million dollars. I don’t like to say it out loud, but it was very public because a public company bought us.

Loren Feldman:
Was that a difficult negotiation or did they come knowing what they wanted to do?

Lori Torres:
They were very clear on what they wanted and they had a clear agenda. I had a clear agenda, and I wasn’t planning to sell the company. I thought we were two years out and our revenues weren’t far enough along. Our new business verticals that I was trying to achieve hadn’t gotten to where they were. I said, “Look, in order to sell, this is the price.” I just stayed firm on it.

Loren Feldman:
You stuck to it.

Lori Torres:
I stuck to it and they stuck to it as well. They’re great people. They were such wonderful people to work with. I really enjoyed everyone at the company,

Loren Feldman:
And you’re staying with the company, at least so far?

Lori Torres:
Yeah.

Karen Clark Cole:
How long?

Lori Torres:
I’m under contract for a couple years.

Loren Feldman:
Did you sell 100%?

Lori Torres:
I did.

Loren Feldman:
You’re an employee.

Lori Torres:
I am an employee again. Here’s the funny thing. I was in corporate America my whole career, for 30 years. I really thought I’d probably be the best person to be acquired by a large corporation because I can deal with corporate America. Is it as much fun? Maybe I would admit that it’s not as much fun as I used to have.

Karen Clark Cole:
Do you get to go to France more often though?

Lori Torres:
I have no invitation to France yet, so no. I’m sure the day will come. I have too much to do. We have huge, huge growth goals. I don’t have time to go to France because we are running with our hair on fire.

Karen Clark Cole:
What’s your role in the new organization?

Lori Torres:
The CEO of Parcel Pending.

Karen Clark Cole:
They kept it separate.

Lori Torres:
Yes.

Karen Clark Cole:
So you’re running the U.S. part of it then.

Lori Torres:
U.S. and Canada.

Loren Feldman:
Do you have a lot more capital to spend now?

Lori Torres:
It is really nice to have the big backing of a billion dollar company. We’re scaling it much faster than what we we were able to do and making the investment back into the company now. It’s a wild time.

Karen Clark Cole:
Giving Amazon a run for their money?

Lori Torres:
For sure. They know us. But Amazon is Amazon. They can make a decision to give away free lockers. If they do that, that’ll be a problem for us, but also they’re not delivering on their promise and their service. Not everyone’s elated with them. I just had a client meeting in Dallas on Monday and the client said, “I can’t wait to get these lockers out of here,” which were Amazon Lockers. But you’re going to have good and bad. I’m sure there are people who say that about us, right?

Loren Feldman:
We’re having this conversation at EY’s annual Strategic Growth Forum. You’ve been here many times because you’ve been a part of the Winning Women program. Tell us, how did you get involved with that and what did it mean for you?

Lori Torres:
It has been a game changer for me. I was in the class of 2017. I have met amazing people. I have friends for life. I have a group of gals where we travel together, we talk. Three of us all sold our companies this past year, and all three of us are struggling somewhat in the new world, just because there are the goals. When a new company comes in and buys you, they want to take it to a whole new level, and we were already growing at this crazy level. It’s challenging, but it’s nice to have some partners in crime and to talk to other CEOs. You can’t have that conversation with your employees. It’s nice to have other CEOs, and that’s what it’s done for me—it’s created this network of people to be able to call and reach out.

Loren Feldman:
You’ve forgiven EY for the due diligence they did on you?

Lori Torres:
It’s funny that you asked me that. But yes, I had a softer spot in my heart because of it, so I didn’t want to wring their necks as much. There were three times during the deal that the deal almost died, but I had leverage. I was not in a hurry to sell. There were three different times where I was like, “If we need to put this on hold, and pause and go clean up what you think is an issue, let’s wait six months.” They were motivated to make the sale happen, so it did.

Karen Clark Cole:
Suddenly the problem went away?

Lori Torres:
It did cause a few pain points for us, I will tell you.

Loren Feldman:
Did you learn anything through that process that you think others could benefit from?

Lori Torres:
Oh my gosh, I learned from every process. In the Winning Women program, the women who take advantage and really embrace the program get so much out of it. The women who don’t, don’t. They don’t show up and don’t participate and they are so missing out.

Then selling the company—especially doing it in 32 days—you just don’t get an experience like that. There were so much I didn’t know. I had to make a ton of phone calls and get advisors in. “What do you think about this? Oh my gosh, I’m not sure what direction this is.” Then what happens is when you’re going that fast, and you’re so tired because you’re working so many hours, you simply start to forget things. You’re like, “Wait, did we negotiate that? Did you get that covered?”

Loren Feldman:
You also can’t run the business the same way when you’re going through something like that.

Lori Torres:
You can’t. The acquisition has hurt—not hurt I wouldn’t say—but it has been a challenge for Parcel Pending for this year. I finally feel now after 10 months, the dust has settled and we’ve got our arms back around this beast. We can go and take on this next trajectory. But it really set us back because there’s this get to know you and so many new processes and new reporting. It’s been a challenging year for sure. I say it’s been the hardest year ever, but I think that maybe it’s like having a baby and you forget the pain, because every year growing my company was really hard.

Karen Clark Cole:
Did your employees know that you were going through that?

Lori Torres:
Yes and no. There was a small group that was under the tent, about six of us. For the beginning, no. My family didn’t even know. I couldn’t even tell my family in the beginning and that was pretty brutal.

Loren Feldman:
Is this because your family is particularly untrustworthy?

Lori Torres:
No.

Loren Feldman:
I was kidding.

Lori Torres:
No, you weren’t. Part of it was when I was growing the company, I ended up hiring a lot of people. There’s this web of a lot of connections. My son knows this guy who works at my company and this guy knows this guy who knows my son, or my other son, they’re best friends, and she works here. My ex-husband’s best friend was an investor in the company. There were all of these interconnections so I felt I couldn’t tell the family until we were ready and couldn’t announce because it was a public company. But I had to go to the shareholders because it was such a short window. I couldn’t get a vote in time. There were a lot of challenges that happened with that quick of a sale. I had to tell my family the day before I told the shareholders because I knew that the shareholders that knew my husband were going to reach out.

Karen Clark Cole:
You didn’t tell your husband?

Lori Torres:
Ex-husband. We weren’t married at the time, but I still had to tell him.

Karen Clark Cole:
What was the reaction from your employees?

Lori Torres:
I think it was mixed. We had a vision and we were clear on what our purpose was, and we were clear on what we were trying to accomplish. Then the game changes and it creates fear, because the first thing that happens when you sell a company, is that people say, “What’s in it for me? And what’s going to happen to me? And oh my gosh, are they going to keep me around?” It’s not like a company that comes in and buys you has all these people in their back pockets, but you hear of all the horror stories where people lose out on opportunities and things change. It was funny because I have an all-hands meeting with all employees once a month, and we talk about what’s going on in the organization. When I announced that we were selling, that we had sold the day that it was closing, I asked the team to raise their hands if they thought we were going through a sale. Half of the room said yes.

Karen Clark Cole:
Really?

Lori Torres:
Yeah, we’re just we’re too transparent of a company and then all of a sudden, we’re doors closed and we’re off-site meetings. It was just not our behavior, and they knew something was up.

Loren Feldman:
Last question: you referred before to how fast you were already growing and then the challenge of being bought by a much larger public company and having to grow even faster. What are you doing to grow even faster and what are the challenges that you’re facing?

Lori Torres:
You want me to give you my secret sauce? I can’t because Amazon could be listening or another competitor. We have had significant growth in prior years. For the first five years, we had 70% year-over-year growth every year. It was just insane.

Loren Feldman:
Now you have to do it even faster.

Lori Torres:
Even faster.

Karen Clark Cole:
So without telling us what it is, do you have a secret sauce? Is it like that?

Lori Torres:
I think that every company has a secret sauce.

Loren Feldman:
Do you have a secret sauce, Karen?

Karen Clark Cole:
I don’t know about that.

Lori Torres:
I think you have to ask yourself what makes the company successful and why are other companies that have a good product and a good service not as successful? I think it’s about the vision of where you’re going. It’s absolutely about the people.

Karen Clark Cole:
I read you talked about employee appreciation.

Lori Torres:
Yeah, because I couldn’t have done any of this without the team. I won the regional EY, and it felt wrong for me to take that that win. It was not me. It’s the team that did it. I could never have done it without the team. Every single person in my company benefited from the sale. I wanted to show my gratitude. They all have stock options, but no one had vested. We hadn’t been in business long enough to vest.

Karen Clark Cole:
That’s awesome.

Loren Feldman:
Lori Torres, thanks so much for taking the time. Really appreciate your sharing your story.

Lori Torres:
Thank you for having me. I appreciate it.


Part 3: Interview with Diana Lee:

Loren Feldman:
Diana Lee, thanks so much for joining us on the 21 Hats Podcast. We’d love to hear a little bit about Constellation Agency, the business that you’ve built. Give us a sense of what you do and how far along you are now.

Diana Lee:
Sure, thank you so much for having me today. I am the CEO and co-founder of Constellation Agency. Constellation started about three and a half years ago. We’re an ad tech company. Originally, we started as a digital media company running social search display advertising. Very quickly, we realized we couldn’t scale because of the amount of customers that were coming in, and so we invented and patented (patent pending) our ad technology that basically produces ads within minutes’ time for those platforms.

Loren Feldman:
How far along have you gotten and how big is the company now?

Diana Lee:
Three and a half years. We’re projected to hit right now $20 million in sales by December. Next year, we’re hoping that we could make close to $40 million because we’ve tripled year-over-year growth. Our first year, we’re at $4 million, 2nd year $10 million, and then $20 million.

Loren Feldman:
The most amazing of all—you’re profitable doing that.

Diana Lee:
Yes, we’ve been self-funded as well. It has been a very painful journey because it is not easy to remain self-funded, but it was a desire that I had right from the beginning.

Karen Clark Cole:
And the technology idea, where did that come from?

Diana Lee:
It’s interesting because I’m 50 years old. I am not the person who said, I want to start developing now, it wasn’t in any of the structures of what we were looking at. When it came around, it was that I didn’t have enough manpower to produce the assets that we were getting. At the end, I looked for outside sources to make the ads to help us.

Karen Clark Cole:
Can you just stop for a minute and talk about what you mean by assets? Are people sending you images? How does that work?

Diana Lee:
When you go on Facebook and you go on Instagram—I’m just going to use them as examples—it takes a good 30 to 45 minutes to actually make an ad on those platforms. By the time that you actually have the ad ready, like the design of the ad, and then you have to actually import it—

Karen Clark Cole:
Are you talking about a banner ad on the top of the page?

Diana Lee:
No. We’re on Facebook, so it’s social. Those platforms were invented by a genius, Mark Zuckerberg. But the platform was made by a developer. It wasn’t made by an advertiser. So the platform thinks like a user. It’s great if you want to like something and you want to share the content, you want to view it with your friends and family. But if you’re an advertiser, and you need to go on Ads Manager that is a part of Facebook and Instagram, it’s really hard to manage that situation.

We have so many brands that we represent. We have Audi, Volkswagen, Jaguar, Land Rover. Everybody has brand compliance, and everybody’s got different fonts and different colors and different tones. The problem is this platform that was made by Facebook and Instagram doesn’t support all the different functions that you actually need to do in order to launch a brand-compliant ad. It takes manpower to do all that work. The problem is, if you’re going to screenshot every single ad that you have are doing in that platform, send it to legal, send it to compliance for them to send it back, then you’ve got to edit it.

Our platform basically does all of those compliance situations within seconds’ time, and PDFs it so you can you can send it to legal and compliance. It’s got a full ad library that’s brand-compliant already.

Loren Feldman:
You realized this opportunity existed because it was a problem that you were confronting. How did you come to the conclusion that you could solve the problem with technology?

Diana Lee:
We went to India, we’re like, “Okay, maybe we can get people in India to do it,” and realized there was a language barrier. We can’t do it that way. Then I hired high school students. It was so funny. I was desperate. I’m like, “Okay, I’m gonna hire high school students, because at least they know the computer. They’re really efficient.” They said, “Diana, I hate my job.” I’m like, “What do you mean? I’m paying you $400 a week. What do you mean you hate your job?” “Listen, I’m just cutting and pasting all day. At the end of the day, I want more from my life than just cutting, pasting, and screenshotting things.” I thought, “This is not something that’s going to compel anybody to stay at our company. I’ve got to find a different solution.”

One day, I asked my co-founder, “Get up.” He was like, “Where are we going?” I said, “We’re going to GitHub.” And he’s like, “What?” We were in a WeWork building and GitHub was our neighbor.

Loren Feldman:
This is in New York, right?

Diana Lee:
This is in New York City. Basically, it’s a development company. They’re probably one of the biggest and largest out there. I walked in, and I looked at all their developers, and I said, “Guess what, I need some developers. I need you to help me find some.” They thought I was crazy, but they were so nice. They said, “Okay, we have some recommendations of people who would actually help you out.”

Karen Clark Cole:
You explained the problem?

Diana Lee:
I explained the whole problem. They gave me some names. One of the names was this person by the name of Vinny. Vinny was previously a senior vice president of Big Spaceship, which is a huge ad tech brand in New York City. He started his own development consulting company, and I thought, “This is great. I’ll ask Vinny what to do.” I hired Vinny to consult and he said to me, after he heard about everything that we were doing, “The guy you want is Noman from RGA.” RGA is another huge ad tech company. “But he’s been there for over 10 years, Diana, and you’re never going to get him.”

Of course, when anybody says that… I was like, “I will get him.” I call Noman, he comes to the office, meets with me and our co-founder, and I’m pitching. I’m pitching so hard. He looks at me and he goes, “You know, you have a good idea, but I’m not leaving.” So I said, “Okay, why don’t you think about it? There are a lot of things that are going to happen. I want you to think about what we’re proposing. Just go home and think about it.”

About a week later, I reached back out, and he’s like, “Diana, you’re a really nice person. I think you’ve got a great idea. But I’m not leaving RGA. I’ve been here over 10 plus years, and I’m just not going.” I said, “All right, just meet me for dinner and hear me out.”

Karen Clark Cole:
What were you thinking at that moment? Were you sort of on the fly, or did you think, “If he says no, I’m going to take him for dinner and I have this big plan”?

Diana Lee:
No, I really thought, “I’m going to convince him to come over.” I really thought that he was the right person and I was going to do everything to recruit him. So I took him out to dinner and I remember I was sitting there pitching again, pitching hard, pitching hard. He looks at me and he goes, “Diana, really, I’m just not interested at this time. You’re too small of a startup and I’m not going to do it.” I probably shouldn’t have said it, but I did. I looked at him and I said, “You’re making the stupidest mistake of your life.” That’s what I said. “You’re making the stupidest, dumbest mistake of your life.” He looked at me like I was crazy. I said, “Nobody’s going to ever walk into your life and offer you the deal that I just gave you. No one. 10 years from now, you’ll still be at RGA, making maybe a 2% raise or a 4% raise year-over-year. At the end, you’re going to see us blow up and you’re going to regret this opportunity. So I’m going to ask you again to rethink the offer.”

Karen Clark Cole:
I love your confidence.

Diana Lee:
He said, “Okay, this is what I’ll do.” I said, “What do you want to do?” He goes, “How about I watch you guys for a little bit?” I said, “Actually, I kind of like that idea. Why don’t you come to some of our meetings? In a few months, if you really don’t want to do it, what loss do you really have? Just watch my team, watch what’s coming in, watch what we’re selling, watch our revenue numbers. I’m going to give you access to all of it, fully transparent.”

Karen Clark Cole:
But at that point, you had no platform. You were doing it cut and paste.

Diana Lee:
We had actually made one platform, me and my co-founder by ourselves, with an outside development company, and it was messed up. This is when we had realized, we need somebody who can speak that language, because neither one of us understood developers. They were a strange breed to us. We didn’t understand the language, how they worked.

I said, “Watch us for a little bit.” So, he did. What I then did was, every client meeting I had—which we had a ton back then, and they were with major companies—I contacted Noman and I said, “Join the meeting, join the calls we have right now with Volkswagen, with Audi.” I throw these names out there. He heard these millions that we were making, just in the very short amount of time that he was watching us. In a few months, he’s seeing the revenues go up. I’m sharing my revenues. I’m sharing the whole bottom line. I’m sending him exactly how profitable we are. Then basically, after a few months, he’s like, “I’d be stupid not to make this deal.” I said, “I knew it, thank you very much.”

Loren Feldman:
Was he worth it?

Diana Lee:
He was. We blossomed, we learned a lot as a team. It wasn’t like it was perfect right from the get-go. I think he needed to learn how each of the operations worked with each of the other teams. We—the operations team, our accounts team, our sales team, our campaigns team, our search team—also had to learn how the development would actually play, in terms of being able to scale the rest of our operations.

Karen Clark Cole:
Did he come in and build an engineering team?

Diana Lee:
Exactly, initially it was a small engineering team. Our thought was, this engineering team was just going to be internal to us at the end. There were two things that had happened. We wanted him to be internal to us to build the platforms that we needed in order to scale the advertising. So how do we make 100 ads in five minutes versus 50 hours? How do we produce all those assets?

Karen Clark Cole:
Was that your goal from the start? Or did that evolve as you saw what the platform could do?

Diana Lee:
Yeah, it started evolving. Each of the team members was really frustrated with parts of their jobs. It was like, “Diana, it’s taking way too long to QC all of these ads. We need something that actually allows us to QC in a streamlined process.” “Diana, we don’t want to screenshot anymore. We want PDF filing where all of it is screenshot within seconds’ time.”

As we’re fixing all the different situations that each team member is having, in terms of the operational part of what makes their job not engaging for them, or how difficult it was for them, that’s when we would go to Noman’s team and say, “There are five people on that team. They’re all complaining about the same thing. I need you guys to enter this into that platform that you’re building right now.”

Karen Clark Cole:
So you were doing internal research.

Diana Lee:
Yeah. It was our internal research of our agency that basically told our tech team what to develop so that they could produce those things for what was challenging for the internal team.

Loren Feldman:
You said there was some pain involved in being self-funded. What were you referring to?

Diana Lee:
This is where I feel like it’s great when I come to events like this. Everybody talks about being the visionary and being such an incredible CEO and being kind to your people and you’re so compassionate. All the things that I think every CEO wants to do. When you don’t have any money and everybody has a problem, suddenly your compassion goes away. As much as I would like to say that, there is a difference between a startup CEO and a mature company CEO. If somebody funded me, of course, I’d be like, “Oh, I have all the money in the world. Yes, you can take an extra vacation. Yes, I’ll pay for you to go out for another two weeks.” These are all the things I want to do. Of course, I want to do it. But I’m limited with the resources that I have. That has been a very difficult journey.

Loren Feldman:
I like to ask people what comes first: does a great culture result in a successful company or do you need a successful company to create the great culture you always wanted to have?

Karen Clark Cole:
That question drives me nuts.

Diana Lee:
I’m a certified coach. Obviously, I’ve done 360s. Of course I know how to do this. I know what employment engagement is all about. But at the end, when you’re the one that’s on the line, and you’ve got to support a team of 60 and make sure payroll happens for everybody, you’ve got to do what it takes. Sometimes, it’s not compassionate. I’m sorry, as compassionate as you want to be, sometimes you can’t be 100% during that time. I said this to my co-founder, because he pulls me back sometimes, and he’s always the one who gets me grounded—and I hate to say this, but it’s true—”Everybody said Steve Jobs was a jerk.” He had the most innovative company that was so successful, that had all the money in the world, but he was a jerk. To me, I don’t know if that was because he started Apple. That mentality of that founder is very different than one who actually is assigned by a board.

Karen Clark Cole:
Yeah. How do you deal with retention in the company?

Diana Lee:
What we do is we give out equity rights. What that means is 80% of our company employees have equity rights to Constellation Agency. If there’s any type of buyout in the future, they would cash out as well with those equity rights.

Karen Clark Cole:
Is the 80% based on their tenure or something like that?

Diana Lee:
No, we don’t do it that way. I make it pretty much performance-based.

Karen Clark Cole:
It’s a reward.

Diana Lee:
It is, and how much they’re contributing to the company that we all feel like we want to retain that A player. It has a lot to do with that. But I’ve learned a lot from that experience just recently, to be honest. Because to me, I’m so passionate about our company. I live, breathe, and sleep Constellation, and it’s probably a sickness, but it is who I am. When people had left me in the past, I was really insulted.

Karen Clark Cole:
Sure, you take it personally.

Diana Lee:
I took it personally.

Loren Feldman:
Is Vinny still with you?

Diana Lee:
Vinny is not. He was always just a consultant. But Noman is still with me.

Diana Lee:
What I find interesting is somebody said to me recently, “Diana, this is just their job to them. Don’t you understand that? This is just a job. They’re not even thinking about equity rights, they don’t know when you’re going to sell. At the end, this is a job, and you need to actually make it engaging for them enough to stay.” I’m like, “I buy them food Tuesdays and Thursdays, we have all the medical benefits there are. We have Citi Bikes, we have Metro passes, we buy $800 worth of Amazon food each week. I put in a Bevi machine with sparkling water. What more do I have to do?” And they’re saying, “You just have to keep coming up with ways to engage each employee. It’s going to be different from each person’s perspective.” So it’s something that I’m still trying to figure out.

Loren Feldman:
Can you relate to that, Karen?

Karen Clark Cole:
Sure, I would say they want to leave at the end of the day feeling valued. Finding a way to do that is going to be what you’re describing, which is: give them interesting work, give them clarity of what that job is, and then it starts snowballing from there.

Loren Feldman:
We don’t have a lot of time, but I wanted to cover a couple of things before we let you go. One is, it’s such a technical product, and a lot of people don’t get involved in this aspect of marketing. Could you give us an example of a typical client and kind of walk us through how they use your program? Do you have to be a large company to do this, or are those large companies doing a local version of this that would be affordable to smaller companies as well?

Diana Lee:
Yes, it can be localized, and it can be much smaller. As I said before, we made a self-made, self-serve platform. You can do it yourself, and we realized there are people out there who don’t want to do it themselves. We have what’s called “managed services.” We can do it all for you or you can do it yourself. If you have a marketing team that’s already in-house and you already have 120 people, then they would go on to the platform and they would say, “I want search banners, I want social banners, I want display banners, I want Facebook ads, I want website banners,” and they’d be able to produce all those assets within minutes’ time. They would be pre-templated.

How it works with the bigger manufacturers is they want the branding. Their biggest concern is, if you have so many advertisers out there advertising for all separate locations of our brand, then brand compliance is a mess, because every agency is going to use their own interpretation of the brand guidelines if they even use the brand guidelines. Sometimes they don’t. Every font is different. The designer does it different. The colors are different. Now it’s not consistent at all.

It’s like looking at a McDonald’s ad: you know that it’s McDonald’s, whether you’re in Houston, China, or Japan. But if you don’t have that brand consistency, now you lose brand identity. What we’re saying is we can keep it brand-compliant, but allow you to localize that ad based on the location of where you are. If you want to make it in Chinese and Hindi, if you want to put an offer, “I want to offer $100 for this product just from my location,” now you can do all of that and still have that brand consistency.

Loren Feldman:
Do you have competition now?

Diana Lee:
There’s nobody that’s doing it. Literally nobody, and I have had big giants call me up and say, “We have all the data in the world. We can now target a woman in a blue dress at two o’clock in the afternoon in Central Park. We have all the data in the world, but where’s the creative to go along with that?” That’s why they needed us to produce the creative assets for the data that’s actually out there.

Loren Feldman:
We’re having this conversation at EY’s annual Strategic Growth Forum. You’re here because you’re part of the latest class of Winning Women. Can you give us some sense of what it’s meant to you?

Diana Lee:
Oh my gosh, it means everything to me that EY has picked us to be a part of this event and to be a part of 2019’s Winning Women. I didn’t realize what it was exactly. The most interesting thing I found in this entire experience is I’ve lost some friends on this journey in the last three and a half years. It’s not even the last three and a half years, because I’ve always been really fiercely ambitious. I’ve always had this fire in me, and now it burns bigger… much bigger. Most women couldn’t understand me. I think my friends have always questioned my ambition. Like, is it really worth sacrificing everything else? You’re not even showing up to our friends’ events right now because you’re always putting the job ahead of a lot of things.

Then here I was in the 2019 Winning Women conference with all the women who were chosen this year, and I’m hearing the same craziness coming out of their mouths that’s been coming out of mine. I’m looking at them and I go, “Oh my gosh, we’re so similar! We’re twinning today.” All of a sudden, I’m in a room full of women who sound just like me. As you get bigger and bigger, I could see how lonely that life could be, because you no longer can express all your thoughts and feelings and your stress.

One, you can’t do it with your employees. You can’t do it with people within your own company. Then my friends, I couldn’t do it with them. My husband’s fantastic. I do rely on him, and he’s been super, super supportive. But at the end, there are not a lot of people out there who can understand. To have a room full of women now, alumni, and people not only who understand me, but they are who I am inside—that’s an incredible journey to go on together. EY has created a tribe for me.

Karen Clark Cole:
That’s awesome.

Loren Feldman:
Diana Lee, thank you so much for taking the time to join us and share your story.

Diana Lee:
It was an amazing experience.


Part 4: Interview with Michelle Vondrasek

Loren Feldman:
Michelle Vondrasek, thank you so much for joining us. Tell us about Von Technologies. What does the company do?

Michelle Vondrasek:
We’re in such an exciting space right now. Von Technologies started out as a deployment company and now specializes in network infrastructure and wireless. That’s a space right now that’s pretty exciting. A lot of unique technology that’s touching Wi-Fi like never before.

Loren Feldman:
Tell us what you’re doing specifically.

Michelle Vondrasek:
One of the reasons that we started Von Technologies was because there was a gap for a services company that was focused more on the solutions for a customer. You have your carriers, you have your bars, and they have their purpose. That business drives circuits, if you’re a carrier, equipment if you’re a bar, but there wasn’t anybody really focusing on being agnostic and giving them a solution that was right for them. That’s where we came in. I thought we could do it a lot better than the way it was being done there, focusing on the customers’ needs, becoming experts and advising them. They want to run their business. Networks, Wi-Fi are very critical to a business. Now it’s so exciting. Look at what’s happening with technology on Wi-Fi.

Loren Feldman:
I don’t know what you’re referring to. What is happening?

Michelle Vondrasek:
Well, think about if you go into even a restaurant today, it’s expected to have Wi-Fi, right? Everybody wants to log on. They want to be in touch.

Loren Feldman:
These restaurants are turning to Wi-Fi to…

Michelle Vondrasek:
To satisfy their customers. It’s gone a step further, because now you can start collecting information and understanding the foot traffic through Wi-Fi of where your customers are coming in, where they’re dwelling, where they’re spending their time. Do I need more staff, based on how many people are showing up at what times? Understanding how often they come, being able to ask them to log in and learn a little bit more about them and be able to send them messaging, couponing that’s really relevant to who they are.

Karen Clark Cole:
The restaurant chain is where it gets really compelling, so if one one restaurant knows you’ve been there, and then you’re going to go to another one and another one, they can use that intelligence from the Wi-Fi to better serve you in the next location. Is that right?

Michelle Vondrasek:
Absolutely. Especially if you have multiple brands, you can really understand what locations they’re going to, what foods they like, how far they’re coming from.

Karen Clark Cole:
Might you serve them a discount code to get them to come in if they’re walking by? Can you do that, or do they have to log on?

Michelle Vondrasek:
Do you need to give somebody a discount if they show up every week? You’re really trying to transition that infrequent user who shows up once a month and try to get them to come one more time a month. That’s going to increase your revenue.

Karen Clark Cole:
But can you reach them when they’re not in the restaurant, if they’re not on your Wi-Fi at that moment?

Michelle Vondrasek:
Once they’ve logged in and you’ve captured that information, you know who they are. You can even get it down, if they’re logging in through certain social media accounts, sharing who they are, allowing you to see who they are. Your responsibility is to give them relevant content, nothing annoying.

Karen Clark Cole:
It’s important that you said that, it’s that there’s a responsibility on either side.

Michelle Vondrasek:
Absolutely.

Loren Feldman:
In terms of the data that you’re talking about collecting, obviously everyone’s aware that that data is being collected when you go to a website.

Michelle Vondrasek:
It’s a social exchange these days. They understand.

Loren Feldman:
Maybe this is my lack of expertise, but I don’t think of that happening just signing in on Wi-Fi. But you’re telling me the same thing happens if I go into Starbucks.

Karen Clark Cole:
When you accept the terms.

Michelle Vondrasek:
I’m saying not everybody has embraced the technology. A lot of the larger corporations surely have figured out that they want to understand who their guests are. They want to make good decisions about the future menus that they have, who the next generation is going to be coming into their stores.

Loren Feldman:
They can do that without having people go to their website. They can do it through customers showing up.

Michelle Vondrasek:
That’s right, and getting them on the Wi-Fi.

Loren Feldman:
So what you need to do is give customers an incentive to get on the Wi-Fi.

Michelle Vondrasek:
And a great experience. If you want somebody to get on your Wi-Fi, you’d better make sure it’s stable. There are a lot of things that people are doing on Wi-Fi without the right network. It’s not going to be a good experience and they’re not going to go back.

Loren Feldman:
Who else is doing this? I’m sure it’s not just restaurants that you’re working with.

Michelle Vondrasek:
I think anybody who’s got customer service, customer hospitality, it really applies—

Karen Clark Cole:
A mall would be a great example.

Michelle Vondrasek:
A mall is a great example where you have people coming. Any kind of brick and mortar. It applies to auto industries. “Where are people going out on my lots and hovering? They’re here in the trucks. They didn’t buy though, so maybe I’ll hang out at the auto store or the auto shops a lot.”

Loren Feldman:
It never would have occurred to me to sign into Wi-Fi at an auto dealer. What’s the incentive? Why do I do it?

Michelle Vondrasek:
Perhaps you want to go ahead and learn more about the car. You can log onto their website or log onto their Wi-Fi and get more information, maybe a video.

Karen Clark Cole:
Maybe a bar code that would have prompted you to do it, right?

Michelle Vondrasek:
Absolutely. Not to mention the kids are sitting there waiting for mom and dad all day long as they scroll around. “Here kid, here’s my phone, get on the Wi-Fi.”

Loren Feldman:
How did you get into this business?

Michelle Vondrasek:
I actually call it an “entrepreneurial seizure.” I was really lucky when I got into IT services. I had a great mentor back in the 90’s. He taught me that if you were good to your customers, if you were honest, if you were really trying to solve problems for them, you would be successful. They were a great company, and in line how my parents raised me. But then they got acquired, and there were some differences in the new company that just weren’t in line with—

Karen Clark Cole:
What were you doing in that company?

Michelle Vondrasek:
I was running a sales team for them. I waited about a year for things to get better, and they doubled down on what I thought was bad. I left the company within a month.

Loren Feldman:
When was this?

Michelle Vondrasek:
2006 in December, and then started Von Technologies January 1st. Not a lot of time to think about a name, so it’s not really creative.

Loren Feldman:
What was the opportunity that you saw? Obviously, a lot has changed since 2006.

Michelle Vondrasek:
The company that I worked for really let us build our own P&L. We saw a niche out there for services to help companies build networks. It was getting more complex. They didn’t have the in-house resources. They needed somebody who they trusted, not just somebody who was wanting to sell them equipment that was going to get them a rebate at the end of the year, but a real service that was more purpose-based, kind of like being a mechanic. I hate taking in my car and they tell me I need $500 worth of stuff. I don’t know better. I kind of wanted to be the mechanic for Wi-Fi, and be right with the customer, be honest with them, and be fair.

Loren Feldman:
Did you know what an important element data would be at that point?

Michelle Vondrasek:
I did not. We started the company right before the iPhone. It’s been an amazing evolution for our company, for the industry. I look at Wi-Fi before and what it meant. “Hey, I just want to connect. I want to send an email.” Now it’s, “I want to watch a movie. I want to send updates to labels on a shelf for a two-hour flash only on the rows that are athletic shoes.” That’s over Wi-Fi. “I want to allow frictionless payments so nobody has to go to a register.” Oh, by the way, my point of sale systems? They’re on Wi-Fi.

Karen Clark Cole:
How did you innovate over these years to get to where you are now? Did you have a vision? Or did you change it every day or every week?

Michelle Vondrasek:
When you’re augmenting those carriers and bars and the OEMs, we built partnerships and really were at the forefront of what cutting-edge technology needed to be installed. We’re a smaller company. We have awesome engineers, and we could learn that quicker than some of these companies could cascade out to their organization.

Karen Clark Cole:
How big are you?

Michelle Vondrasek:
We’re big.

Karen Clark Cole:
Can you tell us how many employees?

Michelle Vondrasek:
We have about 80 engineers and a couple hundred, what we call “techs”—smart hands—across the company. We’ll be a lot bigger. There are so many things that we’re doing now, which is exciting, because not only are we developing these awesome Wi-Fi networks. We’ve made some great partnerships with software analytics companies to build analytics solutions with OEMs that have great IoT devices that we can leverage, and a lot of different data points to build pretty interesting information and solutions for our customers.

Loren Feldman:
How have you financed your growth?

Michelle Vondrasek:
We have bootstrapped this 100% ourselves.

Loren Feldman:
Wow.

Michelle Vondrasek:
Yeah, it’s been exciting.

Loren Feldman:
Impressive. Have you wavered on that at all? Have there been moments when you thought, “We need to bring in additional money”?

Michelle Vondrasek:
We’re absolutely there right now. Interesting that you should ask. We’ve built this awesome machine. We’d love to bring somebody in to put some gas in it so we can really scale it and grow double or triple.

Karen Clark Cole:
Because you think the opportunities are greater right now than they ever have been?

Michelle Vondrasek:
Opportunities are greater. We moved, not just from a service company, but built our own managed service platform to be able to monitor and manage the networks that we’re building and all this technology that’s connecting. That’s really important that it’s constantly running. You were in the session earlier with Chuck Robbins from Cisco talking about how we don’t even know what’s going to be connecting to our networks in the future. It’s been evolving. It’s fun to see that, to meet people like the entrepreneurs here who are making cool products that we can incorporate into our ecosystem and sell to our customers to solve for some of these business needs they have.

Loren Feldman:
You’re here at the EY Strategic Growth Forum in part because you’ve been a member of the Winning Women program. I think you were in the class of…

Michelle Vondrasek:
2015.

Loren Feldman:
Are you here this year specifically because you are thinking about the potential of taking on an investor?

Michelle Vondrasek:
I come every year for so many reasons. Certainly, the conversations around investing have been a high percentage this year. But the conversations to understand these new companies that are existing, how they were created, what are their challenges, or where are they heading—especially from the technology perspective—some of the solutions we’ve developed and partnered on have been because of conversations with new companies that are going in a unique direction and want somebody to help develop solutions for them.

Loren Feldman:
Karen, you’ve been through the process of talking to investors. Do you have any thoughts, lessons learned, warnings, cautions for Michelle?

Karen Clark Cole:
It’s a lot more work than I could ever have imagined.

Michelle Vondrasek:
Yeah, I would have to agree with her.

Karen Clark Cole:
It’s sort of a theme lately in some of the talks I’ve heard as well. All of the preparation time that goes into just being ready to even have a conversation with an investor, I think that’s time that I’ve never heard anyone be warned about. But it really has a big impact on the company.

Michelle Vondrasek:
I’ve been very fortunate. I’ve met some wonderful women through the EY program back in Chicago, who have done this a lot, who have given me guidance, really assisting me through the process, and making it less intimidating, and less overwhelming, because it can be. It seems to be getting easier and easier to have these conversations and really understand my value and go, “Wow, I am getting people excited.” It’s turned the tables, and I’m so grateful for that.

Loren Feldman:
For you, is it mostly about getting the capital that would allow you to grow? Or are you looking for a strategic partner that might be able to open doors or take you places you haven’t been yet?

Michelle Vondrasek:
I really want that money to come with a strategic partner that has done it before and can give some guidance. I think our team has all the capability in the world, but we’re looking to double, triple over the next few years, and would never turn away anybody who’s done it before and says, “I think I know a few things that can help you.”

Loren Feldman:
Do you have competitors?

Michelle Vondrasek:
What I found is, there are folks who are good at designing and engineering things, and they’re usually with the big corporations. They charge a lot of money. A lot of them outsource that work to us. That’s who our customers are. They leverage our capabilities and expertise. They know they can’t be great at everything. They’re trying to get product offerings out the door for themselves, and they go to third parties who can help them develop those offerings. Then there are companies that just manage networks. We do both. We really have formed a company that’s in a space where there’s not a lot of us in there. We have a nationwide footprint.

Karen Clark Cole:
How do you find your employees?

Michelle Vondrasek:
We have our own in-house recruiting. It’s a tight market. I think we’ve done a great job in grooming and building our workforce.

Karen Clark Cole:
That stays for a while?

Michelle Vondrasek:
That stays for a long time.

Karen Clark Cole:
Good.

Michelle Vondrasek:
Yeah, and that gives them a career path. They get to see a lot of cool technology. They do a lot of travel, but they’re not sitting at the same environment every day, just maintaining it, tweaking here and there. They’re seeing new technology, a lot of proof of concepts that we work with, and it’s exciting to them. It’s been fun.

Karen Clark Cole:
That’s great. What are you doing or what do you think works well, to keep your culture?

Michelle Vondrasek:
I think what works well is we have a fantastic onboarding process and a great diligence when we hire people. We hire and we literally go through our values and talk to them and ask them to give us examples of how that applied to them. Because in our industry, it’s very competitive for these resources.

Loren Feldman:
When you say “our industry”—

Michelle Vondrasek:
In IT, in technology and engineering, it’s very tight out there right now. Having that small family feel and that flexibility for them… I’ve always had an open-door policy. Our leadership has. When you can call and say, “Look, I need some time off for some family issues,” and there are no repercussions, or a call gets made in the middle of the night because somebody was in an accident and they need help with the insurance and they can’t get through—that’s why people want to come work for us. To maintain that small family feel, even as we grow, where we do care about them. We try to hire people who are of like minds with us.

Loren Feldman:
Do you worry at all about the impact on your culture of bringing in an outside investor who might point you in a different direction?

Michelle Vondrasek:
Absolutely, but I’m more excited about the ideas they can bring to us. There is always going to be that risk, and to Karen’s point, it’s a long process, because you do want to get to know these people. You want to understand who they are, they’re your next husband. At least for three years, five years, whatever the plan might look like. I think that’s a little concerning, but if you go through the right process, I think the reward is bigger. I’ve always said, “I’d rather be 75% of a watermelon than 100% of a grape.”

Karen Clark Cole:
Amen!

Loren Feldman:
Do you feel you’re in an industry where you have to grow?

Michelle Vondrasek:
I feel like I just spent 13 years getting us to a position for that growth—building out a company that has a great reputation that became experts.

Loren Feldman:
Would you even have the option though of saying, “You know what, we’ve been pretty darn successful. I’m comfortable with my life as it is and I don’t need to take on an outside investor. I want to keep going the way things are going.”

Karen Clark Cole:
You’re talking to a former Olympic swimmer.

Michelle Vondrasek:
Trials. I see the potential of where I could grow because of the effort that our company—the people who work at Von—have put in the last 13 years to build a reputation, to build a product. This is what we’ve worked for.

Loren Feldman:
To get to this point?

Michelle Vondrasek:
To get to this point to really scale.

Loren Feldman:
But there’s risk involved.

Michelle Vondrasek:
Do I want to stop at the 90 yard line? I’d rather see it get kicked across the goal line.

Loren Feldman:
Karen, what was your point with the Olympic swimmer?

Karen Clark Cole:
I think there’s a lot of ambition that is driving Michelle and people like her.

Loren Feldman:
And people like you.

Karen Clark Cole:
Right, it’s not as straightforward as saying, “I’m not going to grow, I’m happy.” It doesn’t even go there. It’s not a question of—

Loren Feldman:
I didn’t mean to imply that either. I didn’t mean to suggest that I don’t want to grow. But there are trade-offs. In some cases, you can say, “I’m happy to grow organically. I like being my own boss. I don’t want to bring in”—

Karen Clark Cole:
But sometimes it’s hard to not grow, for starters. And so if you can do it better with a little bit of infusion, because as we talked about earlier today, you can’t always do all the things you want or know you should do if you’re cash strapped. I think when you’re growing, you’re always investing in the company. Therefore, you don’t have a pile of money to be able to pay your employees bonuses, for example, when you know you should.

Michelle Vondrasek:
Especially when you’re funding it yourself. There’s not a pot of gold just sitting there where I’m like, “Oh, okay, I’ll take a little bit more out of there.”

Karen Clark Cole:
Yeah, or you want a raise?

Michelle Vondrasek:
Yeah, it cost a lot to get where we are.

Loren Feldman:
Also, I think it really depends on the industry. There may be some industries where you can say, “I want to continue to grow organically.” But in certain industries—and yours might be one of them—if you rein it in, someone else is going to come along and do it. You may not even be able to maintain what you have, if you haven’t continued to invest and expand.

Michelle Vondrasek:
Absolutely.

Karen Clark Cole:
I’m sure you experience with having such sought-after employees that raises are a real thing, and they’re constant. How do you keep up with that as you grow?

Michelle Vondrasek:
You have to acknowledge it, you really do. You have to unfortunately bill that in to the customer. We’ve never claimed to be the cheapest out there. We never will be. But when people do an analysis on quotes versus cost of ownership and what it’s delivered at, we win all the time. We try not to go into price wars. We try to discuss what you’re going to get for what you’re paying, and the customer recognizes the value of that.

Loren Feldman:
Have you met someone here who you think might be the person who answers your need?

Michelle Vondrasek:
Oh gosh, there are so many conversations I’ve had here. It’s really exciting. Conversations that I didn’t expect, interest that I didn’t anticipate from people I didn’t even consider.

Loren Feldman:
Michelle Vondrasek, congratulations and thank you for joining us and sharing your story.

Michelle Vondrasek:
I appreciate it. I really do. Thanks so much.