The Supply Chain Shaman interviews founder of Model N
Article by Lora Cecere from Supply Chain Shaman; published on April 9th 2013.
Model N, a revenue management enterprise software provider, went public on March 20, 2013. The company raised over $100 million in its initial public offering (IPO). I first met the founder Zack Rinat thirteen years ago. When he rang the bell on the New York Stock Exchange, I raised a glass for a toast. He did it. There have been too few public offerings in the world of enterprise applications. I applaud Zack for taking his third company through a successful public offering.
I only know of two public offerings in the enterprise applications market in the last year: Model N and E2Open. They are very different models serving different industries with different management styles; but one thing that I do know, there have been too few IPOs in the enterprise applications software space. I caught up with Zack by phone to discuss his journey. I wanted to share his insights with readers.
The Shaman: What advice do you have for other founders of enterprise applications in the market?
Zack: I have a fundamental belief in ‘build to last’ rather than ‘build to sell’. Great companies are built with a strong culture that is based on core values. The core values serve as an “internal compass” to driving long-term vision and strategy. In the process, you may be unpopular in the market for a long period of time. However, you need to stay true to your vision and strategy. That is what we did at Model N.
We have four core values with DARE as the acronym:
- Demonstrate respect for individuals and their personal choices.
- Adhere to a hierarchy of responsibilities: customers first, followed by partners, company, department, and individual.
- Reach for the dream with the assurance that risk taking is protected by an internal safety net.
- Exemplify uncompromising integrity, and a passion for excellence in all things: attitude, journey, and outcome.
We have eight pillars to our strategy.
Zack Rinat’s Eight Pillars for managing Model N:
- Foster a company character and culture built around the Core Values.
- Create Revenue Management as a broad, independent, enterprise software category.
- Claim and visibly demonstrate thought leadership in Revenue Management.
- Specify and deliver the best, easy to use, most comprehensive, and seamlessly integrated Revenue Management Application Suite.
- Provide exceptional customer value through verticalization of the product and a go-to-market approach.
- Focus on customer success by creating a unique customer experience in the way we sell, install, implement, and support the product that makes customers so successful that they are vocally positive references.
- Drive Model N as a software company and create an industry around the Model N solution.
- Drive to a scalable, sustainable, predictable, and profitable business model.
It was our goal to create a category for revenue management. To do this we needed to solve a business problem that mattered to customers and was backed by great customer stories. We were fortunate to work with great companies like Amgen, Johnson & Johnson, and Novartis.
The Shaman: Any advice for software companies working with Venture Capital Funds?
Zack: The key is alignment. I was fortunate that I could select any VC that I wanted. I self-funded the companies for the first eighteen months and only then raised money from two exceptional investors Accel and Accel-KKR. We raised one more round in 2003 from another exceptional investor Meritech. I am proud that in ten years since 2003 we grew the topline 10X and the number of employees 10X, doubled the size of the company in the last 2 years, and still had more cash on our Balance Sheet than what we raised almost 10 years ago. Our investors shared our vision of building a great software company and were great supporters of the company through the years. They shared the same philosophy that I had about ‘build to last’ and how to build it. They agreed to have only a one VC on our board and supported me in hiring great independent directors.
I believe that relationships with investors, like any other relationship, need to start with cultural alignment, values, and philosophies of how to build a company. It needs to continue with understanding of the definition of success and in building trust. Our investors were paramount in providing me with advice, support, and direction and were always there for the company and myself.
The Shaman: One of the goals for Model N was to create a new category. I know that this is not the first time that you have created a category. What have you learned about category creation?
Zack: It does not happen overnight. It is very challenging. Category creation happens when you can identify a clear value proposition, and you orchestrate the understanding of the category to analysts and thought leaders through client testimonials. You need to have compelling case studies from missionary customers. You also have to guide the organization through lots of skepticism. It does not happen overnight. It took me four years to have revenue management recognized as a category.