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Vivonet Celebrates 10 Years Today
Posted by Brad Brooks at April 15, 2009 9:00 AM
Vivonet, the company behind Halo Secure Web-Based POS celebrates it's 10-year anniversary today.
Remarkable, considering all of the factors that stacked up against the
success of the company. What's always fascinating about success stories like this is the tenacity shown
by the entrepreneurial founders as they fought their way to beat those
odds.
I sat down with the co-founders of the company, Ryan Volberg (CEO and
President) and Kevin Falk (CFO) asked them about some of the lessons
they learned along the way.
Q: Ryan, why don't you start off by giving me a history of the company.
Ryan Volberg, President and CEO: Vivonet was founded on April 15, 1999. Seeing an opportunity to utilize the internet to bring an end to the huge gap between the 125 year old cash register and expensive client server point of sale packages, Kevin and I dedicated ourselves to delivering a web-based point of sale and payment processing system for restaurants and retail. Ultimately we would go nine months without income, cashing in RRSP’s to make mortgage payments until an Angel investor in Seattle provided the first seed capital.
I decided to share our idea of “providing the business power of the world’s best retailers for the price of a cash register” with the top hospitality industry executive at NCR – a US $4 Billion leader in retail systems. Within a few months his belief in our vision overwhelmed him and John left his 13 year career at NCR (he was the Senior VP of Hospitality Marketing Worldwide when he left) to take over the presidency of Vivonet – with me continuing in the position of CEO. John moved his wife and three kids from Atlanta to Bellingham and one of the first things we did was to get out into the industry and share our vision with prospective partners. One day in early 2000, in a chance event John and I ran into most of the senior executive team of Micros Systems Inc. at the corporate offices of McDonalds in Oakbrook, Illinois. Micros is the world-wide leader in restaurant POS. Within 2 months we had a deal with Micros for $2.5 Million in equity investment and a world-wide distribution deal.
At this point Kevin and I were looking like geniuses… and then the dot-com crash hit. Micros, possessing the exclusive rights to our application decided not to release it as promised but rather to sit us out of the game while they suffered through the tech decline. The problem was that, with Micros possessing the exclusive rights to sell our product, we had no path to revenue, and to make matters worse, if we were to go out of business (and how could we avoid this having no revenue?) Micros would gain the rights to all our source code. Kevin and I began to formulate a plan.
We went to our investors with a proposal: Invest an additional half million for a legal war chest to battle Micros and a second half million to seed the creation of a subsidiary in the Automotive industry. Our investors said yes and we began the simultaneous process of starting up in a new business in an industry we knew little about while taking on a $600 Million company.
The legal process with Micros was a US old-school hardball education that money can’t buy. Despite enormous financial hardships during 2002 and most of 2003, Kevin and I never missed a payroll – often forgoing our own paycheques for months at a time and often borrowing money from the bank personally to loan the company – over $300,000 at one point. Many of our staff took pay cuts and unfortunately many were laid off, but our Automotive business began to take off and within a year was breaking even. Meanwhile after a nine month legal process involving every delay and intimidation tactic in the book the inevitable could be delayed no longer: By late 2003 it was time to have our hearing with Micros. http://sec.edgar-online.com/micros-systems-inc/10-k-annual-report/2003/09/29/Section2.aspx
Within minutes of Kevin and I showing up in Maryland with our two attorneys Micros was offering to settle. With our legal war chest all but depleted we agreed to a settlement that saw us regain all rights to our software as well as getting back all shares Micros owned in Vivonet for $10. We had beaten the giant, preserved the value of our shareholders’ investments and simultaneously built a profitable software company in the automotive industry. http://www.darbylaw.com/professionals/xprProfessionalDetails4.aspx?xpST=ProfessionalDetail&professional=406
In December of 2005 we closed a US $3 Million round of venture financing from three prominent VC’s – two based in BC and one in Toronto. With these funds we have been able to grow our point of sale and payment processing business by over 600% this year and are projecting the same for next year. We currently employ 51 terrific employees, many of whom have been with us since 1999. In 2006 we completed the sale of our automotive subsidiary to our US partner. The deal has netted Vivonet shareholders a 5X return on invested capital.
Late in 2008, we purchased DAS systems based in Kingston, Ontario. DAS had created not just software but a platform for building robust, extensible applications to serve the retail and restaurant industries. The platform that they created forms the basis for the next generation of Halo Secure Web-Based POS.
Q: At what point did you realize that this was a great idea?
Ryan Volberg, President and CEO: When I was VP Sales at Timeac I realized that the emergence of the internet was setting the stage for a new type of POS system. I suppose the real moment that I knew we were on to something though came when John Kirk (Sr. VP of Hospitality Marketing Worldwide) joined Vivonet in 2000.
Kevin Falk, CFO: In the late 90's the POS industry was stuck in a world of disconnected islands of information with very expensive server products that could be purchased to consolidate your operations -- it could take weeks just to get a rolled up report of your operations. If you were a small business there was no cost effective method to determine the status of your multi location business. At this same time businesses were beginning to leverage the web as a cheap transport to connect B2B -- not web-based yet -- just using the internet as a transport system. Ryan and I watched this emerge, and determined that POS and multi location management was a perfect application for this.
Q: What were the biggest challenges you faced when you started?
RV: One of the biggest was convincing investors how big the opportunity was. Most of them couldn’t believe that the majority of 500 location and down restaurant chains couldn’t answer the basic business questions such as "What are my best selling items" and "what were chain-wide sales yesterday?". Also, it has always been a challenge being o the leading edge of technology and in the beginning we were too far ahead of the customer adoption curve. We are just now seeing the kind of customer adoption of SaaS POS that we expected many years ago.
KF: Initially it was financing -- convincing angels and VC's that this was the future -- secondarily it was technology, we were the first web-based POS system -- no infrastructure had been created yet. We had to build it all ourself.
Q: What did it feel like when that first investor said "yes"
RV: Great! Seeing your dreams come to life requires capital and when you are able to bring people on board whether they are investors or employees it is a powerful moment. One yes makes 100 no's worthwhile.
KF: Relief -- then excitement.
Q: Did you ever think...maybe we're crazy?
RV: Of course. And them sometimes I think that the market is crazy because what we have is so much better than traditional (non SaaS) offerings in our market and often we have to work very hard to get customers to believe this. I really believe that you have to be a little crazy to start your own technology business, or any business; it's definitely not for everyone but for me, I can’t imagine doing anything else.
KF: Certainly, I still feel that way. That is the joy of being an entrepreneur. At least now more people are crazy along with us.
Q: At what point did you think, this thing is really going to work?
RV: When we partnered with Micros, but it turned out that older established companies are perhaps the WORST partners for heavy innovators. In reality, once we began selling with predictable regularity to scores of small and medium sized customers I knew we were on our way. Selling in this fashion means you have broad appeal and a formula that works for customers. Any business can get lucky and sell one big deal, but selling 50+ "boring" (they're not boring at all really!) deals per month, every month is a sure sign that you have a real business.
KF: When the cash projections showed that we CAN run this as a service and be profitable.
Q: What advice would you have for other entrepreneurs who are starting out now?
RV: Perseverance is the number one trait that an entrepreneur must have. Resilience too. You must keep advancing, fixing problems, overcoming obstacles, and fighting for every inch of ground until one day you reach your goal... only to set a new one. Technology changes so fast you must also be incredibly quick to make decisions and willing to listen to those round you because most often it is not the idea that is yours but the responsibility of the decision placing the idea into action.
KF: Don't be afraid to make mistakes and admit you are wrong.
Q: Very few companies make it to 10 years...what's the difference with Vivonet?
RV: Perseverance as noted above, as we have overcome far more than our share of hardships including the current world-wide economic slowdown. The other difference is that we have always meant well and even when we screwed up, the PEOPLE we worked with (not the companies, or employees but the PEOPLE) felt that and helped us get to the next level - and we did.
KF: Drive and commitment to our values.
 Category: Technology
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