Value Investing? Answer: Invest in Yourself
The last 8 months I’ve gone few days without an investment-related question from a friend, colleague or distant relative. Should I stay in? Should I get out? Where should I invest? Should I maintain a cash position? What about T-bills? What about gold? And on and on…
The simple best answer I’ve found is: Invest in Yourself. I’ve followed my own investment advice and put my money where I know the team, product and plan are stable and growing. Smartsheet.com. Our modest $1.25M B round should take us to profitability in 2010 and beyond. Plus, there’s no better time to double down on yourself than when the tailwinds are out of everyone's sail and you have strong rowers. Market inertia won't be driving your competitors around you, they'll have to put their backs to the oars if they expect to survive.
I had the dubious pleasure of growing Onyx Software through the height of the tech bubble in late 90's. By almost any measure, we had enviable growth in reaching a $140M run rate in 7 years via 100%+ per year growth. I say 'almost' because some competitors were growing faster and commanding higher public market multiples. Much of the growth in several of those companies was a product of equity-laced deals and subtle product swaps that veered buying decisions away from their original intent of securing the best software solution to automate their business. My exec team repeatedly heard me predict what would happen if a recession hit. The air to that vaporous revenue would be choked off and the advantage returned to those companies with proven products and the highest earned customer satisfaction. Indeed it came to pass.
Salesforce.com is an obvious example of a company that capitalized on the resulting vacuum by being at the right place and time with the right service through the early 2000s. The enterprise CRM players were floundering, and Salesforce's simple adoption and pay as you go approach gobbled up market share. Customers stopped buying shelfware and started buying results. Much like Salesforce, we've built a very forward looking product at Smartsheet that I'm confident has cracked the work management and collaboration formula for the mass market. This economy, like the early 2000s, is the ideal opportunity for us to put our/my money where my mouth is and compete on value.
As with any subscription software company, growing the base of subscription revenue takes longer than selling software up front. But once you reach the critical mass, the benefits are astounding. We've done a very good job at Smartsheet of being exceptionally capital efficient while building a great product and a strong customer base. I'm looking forward to this year, even amidst the challenges due to a struggling economy. It’s a good bet to invest my own money in an extremely affordable, well designed online service that will likely be the tool of choice for those downsized businesses trying to eek more productivity from fewer staff. It’s a great bet to invest in this team.