Lisa Calhoun
Welcome to the Atlanta Startup Podcast. I’m Lisa Calhoun Calhoun, the General Partner at Valor Ventures and your host for this program. Today, we have an exciting Atlanta local entrepreneur, Tammy Farley. Tammy, I’m so glad you’re on the show.
Tammy Farley
And happy to be here, Lisa Calhoun.
Lisa Calhoun
So, you built an incredible software business, The Rainmaker Group, and even more incredible had a fine exit very recently. Tell us a little bit about that.
Tammy Farley
Yeah, I mean, I think I would love to tell you that it was all well-planned and executed, but it sort of happened more than being planned. Started the business back in 1995/1998 with my partner who I’ve known since 1995. Quite honestly, we didn’t have a business plan. We didn’t have a product. We didn’t have any customers. We just had worked together at a company that he owned and was sold and had great success working together and knew we could do something but didn’t know what it was. So [we] started a business and did a little bit of just consulting work to start. Then in late 1999, [we] had the opportunity to take over some software from a local Atlanta company started by another great entrepreneur, Bob Cross, if you don’t know him, you should. It was all focused on travel and hospitality and multifamily, and it was revenue management software. So, we took over the hospitality product and really started to build a great business around that. But interestingly enough, we never really wanted to be a big company. We didn’t, you know, this was a lifestyle business for us and then we’ve been approached by a company called Archstone-Smith. They were an apartment operator who had, at the same time, we took over the hospitality product, they’d taken over some software. They wanted to get out so they did a partnership with us and it was that piece of multifamily software that really propelled us from a little lifestyle entrepreneurial business into a real full fledged software company. And then a trajectory from there to sell both sides of the business to different acquires. And I don’t know if you have specific questions there.I can talk about whatever you’d like.
Lisa Calhoun
Well, you know, I think a lot of people struggle with that language–lifestyle business, because when their businesses are young, and they’re not making a lot of income, or maybe they’re not even profitable, they think, “Is it a lifestyle business or not?”, you know, and they don’t know. You know, they’re figuring it out. And so, I would be curious about any lessons you learned about the differences like how you clearly found the difference between running a lifestyle business and running a for profit equitable software firm. Looking back in hindsight, what are those key differences?
Tammy Farley
Yeah, and I only wish that I would have known that those differences existed as we were going through it. But I mean, I think our plan was just, we had a good time working together and life was easy and that was the lifestyle part of it. And we worried about where the next check came from and I can tell you, there were lots of days when we’d sit in our office and see the mailman come and then wait a few minutes and walk out to see if there was a check and, you know, whether or not that check was their major, you know, broke whether or not bills got paid. And, you know, and back in the day, we had not taken any outside money and so, Visa and MasterCard were our private equity. We had, you know, the zero percent credit card checks that we would line up on our desk. “When are they due?” And so interestingly enough, I don’t even know that we realized it. So we’d started the company in 1998 and had a meeting with our accounting firm, probably in about 2009. And in that meeting, he made a comment to us about the potential value of the business. We thought he was kidding but Bruce and I both fell out of our chairs. And it was then that I think we suddenly felt this incredible burden of this isn’t just something for you and me to pay the bills and we really need to now make sure that we’re good caretakers of this business, because there could be a pretty significant pot of gold at the end of the rainbow and so I never knew the difference until I was sort of confronting it for real.
Lisa Calhoun
Did you decide to raise capital at that time? Was that part of that decision?
Tammy Farley
Funny enough, we didn’t so that was probably 2009. We were incredibly comfortable, we were profitable. I will tell you that in the economic downturn, there were some, you know, 2010, probably, it had hit us square in the face with- we had a line of credit that came due and the bank called it on Memorial Day Friday of 2010. And, you know, that’ll sort of send you into a downward spiral in a hurry. But we didn’t, you know. We were able to sort of reorganize and be okay and we never wanted to take outside money. And I don’t even think that we had considered that it was a possibility. And then as businesses were still really struggling in, you know, coming out of the economic crisis, we found ourselves in a position of being extremely profitable growing at a record pace, and we were getting approached by lots of folks and so it was really only then that we started to think about, you know, the best time to take money is when you don’t need it. And we don’t need it right now and there seems to be a lot out there. So maybe we should talk to these guys.
Lisa Calhoun
That sounds like a very compelling reason when you don’t need it but the terms are almost too good to resist. Let’s talk about investing for a minute because a lot of our listeners are also very interested in finding the right investor. They’re aware that there can be the right money but the wrong person behind the money, and yet that can be also very fuzzy when you have never accepted investor
capital. What have you learned about an investor led or investor backed business and kind of some do’s and don’ts are pros and cons for you through your experience?
Tammy Farley
I think you hit the nail on the head. There’s a lot of money out there and has been since the time that we explored taking it for the first time. You know, I think there continues to be a pretty frothy capital market. But for us, then and I would say now too, the people that we chose to take money from [were] so much more important to us than the terms of the deal. And so we were hyper focused on “Do we like these people?” “Do they fit our culture?” And I can remember Bruce saying to me, “This is one relationship that you get into that you can’t get out of easily. So don’t take it lightly.” So we, at the time, sent a book out to 18 firms and had 17 bids, but we left it to our team to narrow that down to four. And then we visited the four and, you know, I can tell you that again, we didn’t take the best deal that was offered to us but we took the deal that came from the people that we felt most closely aligned with us.
Lisa Calhoun
So, let me dig in on that a little bit. I think I just heard you say you didn’t take the absolute best financial terms.
Tammy Farley
That’s right.
Lisa Calhoun
You took the best overall package?
Tammy Farley
Yes.
Lisa Calhoun
And what were some of the components that were not financial that were important to you, Bruce and the team?
Tammy Farley
So there are those things that you, you know, there’s so much more qualitative than quantitative. And so it’s just do you feel like these people are going to be there to support you. We knew that it wasn’t always going to be the, you know, sunshine and rainbows that we were living in right then, and would would these folks stand by our side and support us or, you know, wood, they start sort of beating us over the head with a hammer and, that’s a feeling that you get, so we spent time with them. And we spent time not just in, you know, in our conference room talking about the deal, but we spent social time with each of the four groups to make sure that we felt that chemistry from them, and then we let them know how important culture was to our business to make sure that they would allow us to continue to grow that culture, foster that culture. It helped that we weren’t taking a majority deal. We were taking [from] a minority partner. So, you know, we knew that they would never have the ultimate leverage. But I think it’s just that feeling that you get more than anything and I know that’s not helpful, except that I think when you’re sitting in a room with folks, you can tell “Are these good people that I would want to have a beer with?”, you know, were it not for this deal.
Lisa Calhoun
I feel the same way. I mean, a lot of times we give the best terms we can in Valor. They’re not always the best terms on the table for the entrepreneur but we also know what we’re going to do to back it and does the founder accept that full message? “Are we able to help them beyond the capital?” is a huge, almost unspoken, but incredibly valuable part of the deal. It’s almost like the money is the tip of the iceberg is what you can see. But the real deal is all of that underneath the water mountain, that’s going to make it work.
Tammy Farley
So, that’s exactly right. And we, you know, we didn’t just talk to them, but we talked to references that they gave us. We did digging to find references that they didn’t give us. And, you know, people tell the truth. People aren’t going to, you know, blow smoke when it’s about something as serious as that and so we continue to be a reference for them because they held up their end of the bargain.
Lisa Calhoun
So, what were some of the things, just kind of broad strokes, that you learn to rely on your investors for or that you thought they were good at, whether or not it’s what they said they were good at, what were they good at? And what should founders think, from your, you know, what you’ve experienced?
Tammy Farley
Yeah, and so I think we learned a few lessons there too. And so, I think one of the things you know, they were one of the firms that didn’t have- they had all- I don’t know what you would call them, the partners are all financial guys. They’re all the guys that do the deal. They didn’t have operating partners who had actually worked in business that would sit beside you and provide sort of that former founder advice. But we did rely heavily on them for who do you have in your portfolio companies like us that we can talk to when we were experiencing a variety of different challenges. And they always made the right folks available to us. And there are some things that you know, that they would say to us, we let you go, you know, we’d say, “Why didn’t you tell us?” “Well, because you didn’t seem like you needed our help.” And so, I think we learn lessons together about what we would have done differently, but one of the places where we stubbed our toe was not investing heavily enough in sales and marketing soon enough. And when we dove in, they supported fully what we wanted to do and had resources at the ready. And so, we were able to, you know, to kind of bridge the gap. We wish they may have come to us sooner to say, “Hey, listen, we think you might want to do this.” And I think they learned from that as well.
Lisa Calhoun
Awesome. So I’m hearing you say “Ask, ask, ask” because you know, open mouth gets fed.
Tammy Farley
Yes.
Lisa Calhoun
Interesting. That’s a really cool takeaway. I’m sure the audience can get a lot out of that. If you look back on sort of your younger self of building the company, is there any advice you wish you’d had or that you would share with yourself if you could have done so?
Tammy Farley
Yeah, I mean, it’s not easy, right? Building a company is not easy. If it weren’t customers and employees, it would be a cakewalk, but customers and employees make it a little bit tricky. And the thing that I think I learned along the way, but I wish I would have maybe known and invested in and focused on sooner is how important culture is taking care of people. And I spoke to somebody yesterday who was saying that they learned it in a way and it’s never been more true than now. But success doesn’t come from being the smartest or the most cunning or the most innovative. It comes from having the biggest heart. And, you know, I think I knew that was important. I don’t think I knew how important that was if you do the right thing for the people who work for you and who you work for, everything else takes care of itself.
Lisa Calhoun
That’s an incredible insight. And it reminds me of how we met. I was watching you on stage at the Make A Wish Foundation. Absolutely leading the organization that year with so much heart, and that’s just a little piece of your volunteer life. Like, “Who is Tammy Farley, I must know this woman.” So, thankfully someone introduced us but that- from you from the context through to I know you that really resonates as something that you live by. So, thank you for sharing that.
Tammy Farley
And I think especially in these times, and you know, especially to the folks that are in your portfolio, but also people that are like them, it’s really hard right now, I think to be as compassionate and as big hearted as you may find yourself needing to be but I think right now is when companies have the opportunity to show people how much they care and people will remember the companies that did that, and that pays itself into,you know, pays dividends forever.
Lisa Calhoun
Well, you know, since you bring up the whole pandemic situation and the fallout from it, I am curious about your perspective about how this is changing marketing, sales, the hospitality business. I know you have a very in depth experience in that area. So, what are you thinking is going to happen? How do you see the future?
Tammy Farley
Yeah, I mean, I think it’s hugely interesting in hospitality in particular. I think those companies, who could have ever imagined the hit that they would take. To see hotels closed for months, casinos closed for months is, you know, devastating to their business. And yet marketing and sales are the lifeblood of that business. If they can’t create demand, they can’t survive. And so, I think they’ve spent this time looking inward. And I’ve heard from lots of different people about, you know, they’ve been sort of focusing inwardly on how they’re going to do things differently and better when the doors open again, or when the business comes back. But they’re the places where I think those companies will continue to invest. It’s hard to invest when you’ve just taken such a financial hit. I also think, though, that they’re going to look externally for partners to help them. They’ve had to let go so much staff I think it’s going to be really hard to build back the deep marketing teams that many of those companies had so I think they’re going to look for partners that can bring those resources to them and outsource in a sort of way.
Lisa Calhoun
Have you outsourced pieces of your marketing business from time to time?
Tammy Farley
So, we’ve never completely outsourced it. We always had partners. We had, you know, somebody that did for us press releases and came up with campaign ideas and helped organize events. We didn’t start doing that though, really in a big way until probably 10 years into our life and it’s a place where I would have invested more heavily sooner had I known the need to do so.
Lisa Calhoun
How do you look at making the decision between outsourced partner, like one of the many types of agencies or building the team in-house. How did you come to look at that decision?
Tammy Farley
I think you’ve got to find somebody that you know, sort of really understands your DNA. And so we went through a couple iterations of both internal staff and external partners. Because there were people that may have been really good in the business, they just weren’t really good for our business. And so, we needed people that understood exactly who we were and how we wanted to be represented. We weren’t hornblowers. We weren’t credit takers. We wanted to be value add providers, thought leaders. And so, you need somebody that understands that, you know, every time you speak to the market, you want it to be because there’s some value I always said, you know, ask yourself the question, so what? And if the answer to so what is frivolous then let’s not go out with this message.
Lisa Calhoun
So, in looking at the exit that you did go through, I think really just about a year ago, right? It wasn’t that long ago.
Tammy Farley
So, we exited the second part of the business just a year ago. We exited the first part of the business. We closed finally in December of ‘17. That was a bigger exit.
Lisa Calhoun
In going through your acquisition, how did you choose that partner, and anything you could share with other founders about picking the right offer and the right time. Because it may be an investor back to business but when you’re building a growing and strong software firm, it always seems like it’s a great idea to keep holding. So, I wondered how you confronted that decision at the board level and what some of the points of view might have been that you can share at a high level.
Tammy Farley
We were not all in unison on this when, you know, when we started having the conversations. I think it’s Warren Buffett, he said the biggest mistake that he ever made was selling too soon. And so, for us if it was too soon, that’s okay. I think the catalyst for us is that we had had a number of inbound inquiries on both sides of the business and really, while we operated as one company the verticals were so unique and distinct multifamily and hospitality that the suitors were pretty distinct as well. But we were getting inbound inquiries on both sides, we had a couple of conversations, and finally Bruce and I talked and decided that you only get one chance to make a great first impression. And what if we took one of those calls and said exactly the wrong thing and that company was the exact right buyer, but never came back. So, we put together sort of a pitch deck and went to our investors, and just said, “Here’s what we’re thinking, here’s where we are in the business. We have nothing that is forcing us to run a process right now, other than the fact that we’re afraid we’re going to say the wrong thing. What do you think we should do?” And you know, they agree there was no reason to run a process. So, we agreed that we were going to call the “non-process” process. We would take the group of folks making the inbound inquiries. Expand that net a little wider and then just sort of see what came. And if nothing came, we put the genie back in the bottle.
Lisa Calhoun
And you ran that internally.
Tammy Farley
We did.
Lisa Calhoun
Brilliant.
Tammy Farley
Well, we actually did hire a banker. So, we hired a banker, and let them help us lead the process.
Lisa Calhoun
Now, did you hire an investment banker from a huge firm from New York? Or did you hire someone from the suburbs of Atlanta that works out of their home? or How did you find your banker?
Tammy Farley
So, if you haven’t gathered it by now, we’re “people” people and so it was, again, sort of who did we fit with and so it wasn’t a huge New York bank. We’ve actually stayed in touch with the guys. They’re no longer with the bank but they were Southeastern based, not Atlanta based, but super good guys. And we just felt synergy and felt like they understood our business and would represent us well to the market.
Lisa Calhoun
Oh, I’ll match the hustle of some of the investment banking professionals in the southeast against anyone from anywhere. It definitely is about the person in that business. And so you want the right person [with] passion for that process and I’m really excited it turned out really well for you in the team. It’s interesting as we talk through your story, I keep hearing that you and Bruce really invented your approach. You took advice, and you certainly had your ears to the ground, but ultimately, you sort of designed your own path forward. Do you think that founders are aware of how much actual road busting they have to do to have a strong growing business?
Tammy Farley
Don’t think they are and so it’s, you know, it’s a curious time where we had a lot of young folks, you know, I sort of begrudge the millennial conversation but millennials who came to work for us and you know, after sort of six or eight months, they get a little bit fidgety and a little bit restless and they wanted to be promoted. They didn’t just want to be promoted to the next job. Ultimately, they had their sights on my job. And Bruce’s-
Lisa Calhoun
They wanted your job! Like, [I was about to] say that!
Tammy Farley
And then they say, you know, “I think I’m gonna go start my own business.” And, you know, and I would say, “You’re going to do what? What business? Do you think you’re going to start? And have you thought about all the things that it takes?” We got incredibly lucky over and over again, but I think that’s the exception, not the rule. And so, you know, it’s probably better. I didn’t know how hard it was going to be because I don’t think I would have ever done it. It’s like, not even stupid and that helped.
Lisa Calhoun
Every founder I’ve ever spoken to, including myself. It’s like, “I’m glad I’ve come this far. I’m so excited by where I am. I’m very, very into the challenges ahead. But if you told me before I started my last firm. What’s some of the challenges would be just sort of laid it out on a timeline. I think. It just-”
Tammy Farley
You would never do it.
Lisa Calhoun
Does it make rational sense? That’s for sure. It’s not a rational process what founders do. I am really compelled by what’s going to happen now because of the whole pandemic worldwide crisis. I believe that crises are like rain to founders, you know, and they spring solutions from the native ground, honestly, to solve the problems in our civilization and that means now is an amazing time for entrepreneurs. I wonder when you went through hard times with your business, including the crisis, you know, aid and those private crises that almost no one ever knows about, but they’re make or break company moments. Where did you go to, in your heart or in your head for that voice that would tell you how you could survive? How do you encourage yourself?
Tammy Farley
Yes, Funny enough, I mean, I think the first big crisis that we went through was 9/11. And at the time we the work that we were doing was mostly consulting, but a little bit of software all around the airline industry. And we had only just done the deal to get into hospitality when 9/11 happened and the airline industry virtually went away overnight. And then got into hospitality, which was for us largely gaming at the beginning. And everyone said, “You’re so lucky, it’s recession proof. It’ll never fail.” until the financial crisis of ‘08 and it abysmally failed. In each of those instances, we never took our eye off the game. We just kept doing what we were doing. We never let that become our focus. You just keep running a good business, you keep focusing on the fundamentals. You put metrics in place, you know, we learned early on that you can’t manage what you don’t measure. So, we measured everything and the things that we hyper measured tended to do better. So, when something was suffering, we’d say “What might we need to focus on?” We just never stopped running a good business. And I think if you take your eye off the ball to think, “What do I need to do [differently]?”or “What can I innovate?” It’s sometimes those distractions that lead you down a rat hole that wouldn’t otherwise happen if you just kept doing what you’re doing.
Lisa Calhoun
That is fascinating. Now that you’re post both of your exits, where do you find yourself naturally drawn to spending your time? What makes you curious these days?
Tammy Farley
I wish more things were available to make me- No, I’m kidding. And that, you know, and I think being home, being sort of forced to be home, has been an incredibly introspective time but it clearly was obvious to you that I have a passion for doing good, not just doing but doing good, and so I’ve done a lot of work in Africa. I spent some time there. Built a school in Zambia. I wish it was a place that was easier to get to than Zambia but that’s where it is. And so, I spend a lot of time thinking about how I can help them become better business people, better educators, better people, they just, you know, they’re so starved for resources. So, I’ve used this as time to try to figure that out. I’m trying to figure out how to start a 501C3, so that the money that I send there is tax deductible.
Lisa Calhoun
As it should be.
Tammy Farley
I know, right? And it hasn’t been to date. So I just think about how I can do more to do good. I’m fortunate enough to have exited, you know, like you said twice, and I don’t think I want another job but I want to be helpful where I can be helpful. So I’ve stayed plugged into, you know, some of the hospitality stuff with some friends. And you know, hope that maybe I can add some advisory stuff there but other than that, it’s just to do good.
Lisa Calhoun
And that is that is all anyone could ever give, Tammy.. That sounds amazing. I know that several times I’ve shared your story with Valor portfolio firms in a nutshell, just as an example of a type of quality of resource in sales, marketing and leadership that you know, when they need to call on you, you’re there with an honest voice. And just showing up with that actually makes such a difference. Your ripple effect in this world is very real. I wonder if you might want to shine a light on some of the other people, especially in the Atlanta community. This podcast is listened to primarily in the Atlanta area and the number two audience is listened to is in Mountain View, actually. We talked about startups and there’s so many West Coast investors that are actually interested in deal flow here that I think we have a lot of junior associates listening in and they’re a welcome part of the audience. So if that’s you and you’re smiling, we’re glad to have you too. But mostly it’s in an Atlanta local piece and so if you know any Atlanta local people in the business community that have made a difference for you, it will be great to hear about.
Tammy Farley
I mean, so I think one of the first people that we met that, and especially I think it was at a time when we realized that we weren’t just running a lifestyle business anymore we needed to get serious, was John Yates at Morris Manning. I can’t imagine that there’s an entrepreneur in Atlanta that doesn’t already know John, but if you don’t, you should. He seems to be the man with the most relationships in this city and in fact, put us in touch with our investors, Norwest, who are in Palo Alto, but have a pretty big West Coast presence. And so, I would say they’re good guys to know on the west coast. I mentioned early on Bob Cross. Bob is slightly sunsetted but he’s got some sons that have become his entrepreneurial legend. They’ve started a business and they’re just great. Bob is a great resource. He focused on revenue management but also had a successful exit and is probably a good person for people to know. And then, while not this is much more generic than that, I would say just also know good legal people because when you need them it’s too late to find them so just always have that in your back pocket. One thing I didn’t mention and it’s I don’t want to go down to whatever trail but we went through a big unexpected process with the DOJ for our first exit and so, I would just tell people always anticipate the unexpected and that was unexpected for us and so just knowing how to pivot and have good legal counsel never hurts. So you know, John at his at his firm or anybody else here in town,
Lisa Calhoun
You know, my first several years in business, because I’m sure it’s too small, but I didn’t understand why there were so many lawyers.
Tammy Farley
Now, you know.
Lisa Calhoun
And now I’m like, you know, good ones are scarce.
Tammy Farley
And funny enough, so Bruce and I started the firm in 1995 and we used some folks to help us make sure that we exited our employment agreements from the previous firm appropriately, and they are still with us today. They stuck by us through, obviously, they weren’t our antitrust counsel, but Krevolin-Horst here in town. So, folks [who] don’t know Doug Krevolin or Jeff Horst. They’re great guys. And if you don’t have attorneys, they’re super.
Lisa Calhoun
That is a great recommendation. You’ve been so generous with your time today. Thank you for sharing your truth as an incredible founder here in Atlanta. Really appreciate it. If people want to reach out to you, I know you’re incredibly busy and doing good is quite a full time job, especially across continents. [Can] people reach out to you on LinkedIn or what is a way that they could get in touch if they really had something they thought was perfect for you?
Tammy Farley
LinkedIn is fine and I’m happy to give my email too if that’s okay with you. Happy to share I’m tammy@madeitrain.com.
Lisa Calhoun
Thank you so much. I really, really enjoyed this. Have a great rest of your afternoon.
Tammy Farley
Likewise, you do the same.
Lisa
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