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Why I Sold The Company

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Today, we sold the company

Every month, since 2003, when co-founder Jay Kaminsky suggested that the (then) twenty-five of us should get together and talk more, I’ve played opening music at our company meetings.  I try to pick songs that capture the company mood.  Tomorrow, I’ll be playing Lenka’s “The Show” mixed into the new De La Soul, “Pushin’ Ahead, Pushin’ Along.”  Lenka makes me tear up.  De La Soul’s new hit track psyches me up.

Selling M5 to ShoreTel is the solution I was looking for all year.  The problem?  Our market has matured.   It is exploding.  All the things we do -- VoiP, Unified Communications, Mobile, and Cloud -- are combining to create a perfect storm of customer demand.  A classic, Geoffrey Moore style Tornado.  Who wins big in a tornado?  The #1 company.  The leader gives Main Street buyers a safe choice, makes it easy for pragmatic buyers to join in, takes more than its share and outpaces the competition.

In a Florida hotel room last July, my team and I decided that we were in a market tornado.  So I set out to explore moves that would let us pull out further ahead of the fragmented competition: partnerships, verticals, acquisitions, faster organic growth, raise more money.  While I was off on these adventures, M5’s expert staff had a great 2011.  We grew revenues around 50%, while our Net Promoter Score moved up six points and profitability improved.   Still, I knew we needed more to achieve our mission, to capture this moment, and to seize the opportunity to redefine an industry that has lost sight of the customer.

I first met the ShoreTel team in San Francisco at Dreamforce last September.  This event was a coming out for the cloud movement, surpassing ‘Oracle World’ as biggest tech conference in the country. Metallica played, streets were closed.  ShoreTel’s reputation preceded them.  They’ve been the competitor I most admire, and fear.  The ShoreTel team was a strikingly open book from our first exchange.  We built trust quickly. It got better when I had lunch the next day with Peter Blackmore, who is now about to become my boss.

The hardest thing about mergers is culture.  Actually, my friends know that I believe it is the most important thing about building a business.  ShoreTel has risen to take the #3 position in the IP phone system industry by building a team focused on the customer.  They build stuff customers love.  They are developers at heart, engineers that sprung from the imagination of SiliconValley true-blood, Ed Basart.   They’ve achieved a phenomenal Net Promoter Score, customers are raving fans, and they are engineered to scale.

Combining what we each do, it is chocolate + peanut butter.  ShoreTel has the best app on the market to insert your desk phone into your smart phone.  Their UC and collaboration suite is polished, as are all their interfaces.  And they make their own handsets, allowing them to control this all-important customer touch-point.  They have a formidable presence in the channel.  M5 needs these things.  ShoreTel doesn’t know how to be a cloud service provider, but they do understand what their competitors have not figured out – cloud isn’t just partitioning software and running it in a datacenter – it needs to be in your DNA.  Salesforce.com could never have shown us the way if they had tried to get a running start by partitioning software from a mature competitor or vendor.

I like being the boss, sure.  But I’ve never run this thing alone, not even close.  I enjoyed being a private company.  But we can’t win this industry without more access to capital.  While we were a leader by most measures, we needed to do this deal to become the leader, and we needed to do it now.

Old wisdom echoes in my head:  “Don’t be afraid to give up the person you are today, to become the person you want to be tomorrow.”  This is the essence of the journey of learning.  That’s what M5 has been about for me.  To my M5 friends and staff, I offer - join me, let’s leap.  I know my place.  It has been my role to hand you the guitar.  I can’t make you take it.  But so many of you have!  And what music we’ve made together!  Join me in this opportunity to set a new standard for this industry.  Let’s rock.

- Dan