How JAGGAER Got Started - Part 1: The 65-fold Return on Investment
There were four co-founders of the company when it got off the ground in 1995. Two of us, Bobby Feigler and I, had been working for one of the major laboratory supplies distributors, servicing pharmaceutical companies such as Glaxo Wellcome and the universities in North Carolina including UNC and Duke. Our product catalogs had about 2,000 pages and our job as sales reps was to leaf through them to source the laboratory supplies demanded by scientists from our network of thousands of manufacturers around the world.
We were good at our jobs, but we felt that we were not really adding any great value to the process. Consequently, one day one of my biggest clients told me, “We like you, but we don’t need to see you in future. We’ll just fax our orders to you.”
Then in 1992-3 the University of North Carolina got access to this new thing called email and told me they were going to use it to send me their orders. The University managed to get me an account with the only ISP in the state, which cost me $150 a month out of my own pocket. Suddenly, I started getting orders from other research departments who usually purchased through competitors. Thanks to the ease of communication, my sales went through the roof. But then it occurred to Bobby and me that this could be the end for commodity sales reps: within a few years the catalogs would be on the other big new thing – the Internet – and our clients would simply search online catalogs and email their orders directly to our warehouse and suppliers.
We thought, “If this is going to happen, why don’t we do it first?” and I put together a business plan, which we presented to our employers. They said sure, go and study the idea for a year!
“You’ll never have to deal with another sales rep”
Bobby and I were amazed that they were so slow to grab the opportunity, so we got together in a Subway restaurant and sketched out the entire business model – literally on napkins. We quit our jobs and recruited two of my friends and roommates, Peyton Anderson as CEO and Keith Gunter as VP of Sales and Business Development. We first incorporated the company as OutPurchasing Inc.
But we soon realized that was a terrible name and changed it to SciQuest a few months later.
We created a “website” – actually it was no more than a bunch of static screenshots that linked to one another – loaded it onto a massive computer and the four of us and my wife drove overnight for 20 hours through two blizzards to Chicago for PittCon, the annual conference and trade show for analytical chemistry. We made it just in time, set up our booth, and without a doubt it was the most popular booth at the show because our basic pitch to visitors was “You’ll never have to deal with another catalog or sales rep again”.
“We have a tiger by the tail”
Even though we did not yet have any revenues or venture capital, we knew were on to something big, so we hired a few folks to help us. Though they got nervous when we paid them with credit card checks, they saw the vision and we started building an environment around our own values of passion, hard work, ethics, selflessness and customer focus. (In fact, in subsequent years we rallied the company around a corporate mantra that we called STOCE! (Spirit, Teamwork, Customer focus, Ownership and Excellence!)
Values that I know have evolved and live on in today’s company.
But it was a struggle to get backers. Peyton was the polished businessman though and after our overwhelming success at PittCon he started calling up angel investors and telling them, “Hey, get in quick, because we’ve got a tiger by the tail”. A popular early employee who everyone called “Ask Joe” because he had all the answers to everything put us in touch with his father-in-law, an unsophisticated investor who had made a bunch of money with AT&T and had an eye for a good opportunity.
So, we arranged to meet in a Cracker Barrel restaurant. I had carefully put together a 40-page presentation to give him, but he pushed it aside and said, “I wouldn’t be here if Joe didn’t trust you! My only question is, is it going to be big?” We replied, “Yes sir, it’s going to be big, really big.”
The gentleman said, “Well, I’ve only got $40,000 in cash with me, but I’ll give you $100,000.” And sure enough, he showed us a briefcase full of cash behind the seat in his truck, adding, “Take it, I want to invest in you before someone else does.”
It was a clearly risky investment decision, taken in less than five minutes, but we turned his $100,000 into $6.5 million in about 4 years.
Within a few months we had raised a total of $700,000 mostly based on the confidence and trust of friends and family – in the Farmville, Virginia area and the company that was to become JAGGAER was on the road to greatness … but we would have a few more challenges to contend with in the years ahead. I will continue the story in Part 2.
So then, in the words of Paul Harvey, you will know the Rest of the Story.