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95: Easier Software Integrations with Michael Zuercher of Prismatic

Published November 9, 2021
Run time: 00:51:24
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Getting data to talk is harder than it should be. That’s why Michael Zuercher co-founded Prismatic, a complete embedded iPaaS (Integration Platform as a Service) solution for B2B software teams.

Michael joins the show to chat about why software companies should use an iPaaS provider over building an integration internally, what he’s taken away from growing a startup during a pandemic, why rewriting code is often better than starting from scratch, and what makes acquisitions work.

In this episode, you will learn:

  • How iPaaS originated
  • When it’s the right time for a company to consider an iPaaS provider
  • How to lean into trying times as an entrepreneur
  • When a founder role becomes a CEO role
  • What makes deals work and not work

This episode is brought to you by The Jed Mahonis Group, where we make sense of mobile app development with our non-technical approach to building custom mobile software solutions. Learn more at https://jmg.mn.

Recorded October 6, 2021 | Edited by Jordan Daoust | Produced by Jenny Karkowski

Show Links

Things You Should Never Do by Joel Spolsky | https://www.joelonsoftware.com/2000/04/06/things-you-should-never-do-part-i/

Prismatic Website | https://prismatic.io/

JMG Pricing Page | https://jmg.mn/pricing

Connect with Tim Bornholdt on LinkedIn | https://www.linkedin.com/in/timbornholdt/

Chat with The Jed Mahonis Group about your app dev questions | https://jmg.mn

Rate and review the show on Apple Podcasts | https://constantvariables.co/review

Episode Transcript:

Tim Bornholdt 0:00
Welcome to Constant Variables, a podcast where we take a non technical look at building and growing digital products. I'm Tim Bornholdt. Let's get nerdy.

This episode is brought to you by The Jed Mahonis Group. We build best in class iOS, Android and web apps. We do this by integrating with teams that lack mobile expertise and work together to deliver creative mobile solutions that actually solve real business problems. To learn more about us and see our pricing, something we're quite transparent about, visit us at JMG.mn.

One small request before we get into this week's episode. We're trying something new with ratings and reviews for our show. We know these asks are a little annoying, but they're very valuable to us. And as a thank you for taking the time to rate and review us on Apple Podcasts, we will give you and/or your company a shout out on the show. Leave a rating and review on Apple Podcasts, get free advertising. It's that simple. Even simpler, we've put a link in the show notes to take you right there, or just head to constant variables.co/review.

Today we are chatting with Michael Zuercher, CEO and co-founder at Prismatic. We have a wide ranging conversation about how organizations can use embedded iPaaS systems to get their data to talk to each other, how he started a company while in college and grew it to be one of the biggest purveyors of technology for small town public safety organizations, and what it's like to buy and sell entire companies. So without further ado, here is my interview with Michael Zuercher.

Michael, welcome to the show.

Michael Zuercher 1:52
Thanks for having me.

Tim Bornholdt 1:53
I'm really excited to have you aboard here today. Why don't you tell my audience here a little bit about yourself and about your company, Prismatic?

Michael Zuercher 1:59
Sure. So I'm a co founder and CEO at Prismatic. Prismatic is an embedded integration platform as a service, which we'll probably talk a bit more about coming up here. But you know, I'm a second time founder of a software business, ran my last startup for about 15 years. And after exiting that, started my current company Prismatic. And I'm excited to talk more about it.

Tim Bornholdt 2:22
Right on. I hear a lot about the term iPaaS, and, you know, integrated platform as a service. And it seems like everything is an, as a service these days, if you're in this technical space, but I'd love for you to maybe help define that term for somebody who maybe has never heard of it before.

Michael Zuercher 2:40
Yeah, so, you know, integration platform as a service, as you said, is kind of the, you know, the new buzzword of sorts in the integration world. But in a lot of ways, it's not terribly dissimilar from what's been happening for, you know, literally decades around integrations. You know, for a long time, businesses have been using multiple systems to do what they need to do. Maybe they have a CRM and an ERP, and a finance system, for example. And those things all need to exchange data. So integration platforms originated a long, long time ago, to help businesses make the connections between systems that are needed for efficiency and things.

Now that started with big businesses; it started at kind of the top end of the market where there was more efficiency to be found. And those platforms were very expensive originally. Then, you know, what's happened, probably kind of throughout all of technology is, the expectations that larger businesses have had, come down market to where midsize companies are expecting to need a lot of internal integrations. And at this point, small businesses expect a lot of integration with tools like Zapier, for example.

And so you know, that's kind of the traditional path of integrations and integration platforms. And what happened is, you know, as the cloud became more prevalent, and as the right answer to enable integrations became to put the platform in the cloud, we suddenly started calling it integration platform as a service. And so, you know, in a lot of ways, it's just a really natural evolution of the platforms that exchange data between systems inside a business. Now where Prismatic goes a step farther is, you know, rather than just be an iPaaS that's used by a business to exchange things in their internal systems, we are in embedded iPaaS, which means that we are meant for b2b software companies that need to enable interaction between their own product and their customers' systems in their customers' environment, which is really kind of the new piece of the integration market, from my perspective, is that you have vendors like us, kind of enabling b2b software companies to provide these integrations to their customers in a really simple way.

Tim Bornholdt 4:44
What's the advantage for a company that is into software to use a service like that, as opposed to building out, you know, the integrations themselves?

Michael Zuercher 4:52
Yeah, so I mean, as a b2b software company, you know, integrations are a big challenge in a lot of ways. And you know, it kind of originates in my opinion from the fact that by their very nature, integrations touch a lot of parts of your company. You have to deal with integrations on the sales side, because every customer you're dealing with has different needs. You have to deal with them on the implementation side, because often, your customer can't go live with your product until the integrations that they need are in place. And then of course, you have to actually somehow produce them on the r&d side, or the product and engineering side. And so you kind of have a lot of different pieces of this, not to mention that, you're probably going to have these integrations live for the entire life of your customer, which is, you know, 10 years or 20 years in a lot of business applications. And so you just kind of have this building complexity, I guess, as your customer base grows.

And so you run into challenges, like, of course, you could build this yourself. You're a software company, after all, you know, of course, of course, you could just write it in code, like everything else. But the problem is, you end up building a lot of things that have nothing to do with the core domain you're in. So if you're a company that's in the ag space, the agriculture space, selling software to AG vendors, you maybe are going to spend 80% of the time that you're spending on an integration, doing things that have nothing to do whatsoever with that domain. Instead, they have to do with reliability and logging and infrastructure and authentication refresh. And you know, I mean, a whole bunch of just kind of you know, boilerplate type things that are really best handled by a platform like Prismatic.

And so that's where Prismatic comes in, is we said, you know, how can we provide a platform that provides as much of that kind of low level stuff as possible, that is domain in specific, such that a person in the ag space or the, you know, the ERP space, or whatever, can instead focus all of their energy on the things that are actually unique to their core offering, and build differentiators instead of rebuilding infrastructure over and over and over.

Tim Bornholdt 6:57
I like the history you gave earlier about how this whole concept of integration started from, you know, huge companies working down now that even small companies now have to worry about things like this and deal with things like this. What is would you say is like a perfect time for, like, you know, let's say you're a small company or a startup, and you're starting to kind of run into these sorts of concerns, what would you say is like an appropriate time for someone to be considering something like Prismatic?

Michael Zuercher 7:27
So you know, what's happened is that, as that has come down market, as the expectation for integrations has come into the small, medium business space, those companies, those customers of a software company, so to speak, don't tend to have the internal resources to build those integrations. Maybe they can build some of them with Zapier or something like that. But unlike a big organization, they don't have a giant in house group whose job is to integrate internal systems. And so what's happened by its very nature is, those customers in the SMB space, have put that responsibility, I think, rightfully so on to the vendors that they're purchasing solutions from. And so you know, what's happened is, and we've all experienced this, if you go buy a, you know, a piece of financial software to manage your small business, you're not going to imagine that you need to buy that and then you need to go connect that to your email system, and your, you know, payment processor and everything else. You're going to expect that that automatically connects to those things.

And so what's happened is, if you're the software vendor selling the financial package, well, basically, from day one, if you don't have the integrations to all of those things, you're not a viable option for your customer. And so what we've seen is, you know, our customer base kind of ends up getting split into two segments. The first is earlier stage companies that have to provide all these integrations, basically, from day one, or their product just doesn't work. And then secondly, an organization that's gotten large enough that they have some additional scale problems, or they've run into the challenges that come with, you know, many years of maintaining these things.

So my recommendation would be as soon as you are in a software space selling software, where integrations are important, look at platforms, like an embedded iPaaS, to avoid building the tech debt that you will later have to service. And then of course, if you're a later stage company that, you know, is kind of trying to try to figure out how to move faster with integrations or be more efficient, that's obviously a good time as well.

Tim Bornholdt 9:32
What got you into like, seeing this problem as like a business problem that made you want to like jump out and start tackling this?

Michael Zuercher 9:40
Yeah, so I mean, there is no motivator like personal pain and I spent about 15 years, like I said, in a previous startup, you know. We sold software to law enforcement organizations and dispatch centers. And that's an interesting space in that, you know, we ended up by the time I exited that business, we had about 2000 customers, I believe, and something like 600 integrations spread across those customers. And so the average customer used eight integrations, even though we had many hundreds of them. And this made for just an extremely painful environment, as a software company, you know. We were spending close to half of our r&d effort on building and maintaining integrations, which is not what anybody trying to build innovative product wants to hear, you know. We were spending significant amounts of support resources. And it's, you know, in some instances, we weren't able to move as fast as we wanted with customers who needed some new integration, because we flat didn't have the capacity. And so we looked years and years ago, at my old company, we looked for a solution like Prismatic, and there wasn't anything on the market. Now, of course, you kind of had all the original integration platforms and iPaaSes. But as I kind of explained, at the beginning, they only solve call it half of the problem that we as a b2b or in that case B2G software company had.

And so this was just stuck in my brain. It was, you know, I have the scars. We spent years and years trying to improve it. We built all kinds of internal tools. And we did improve it in some ways. But I would have killed for a solution like Prismatic, you know, eight years ago, or five years ago, and that's what stuck with me and my co founders. And when we exited the other business, we were ready to do this. I

Tim Bornholdt 11:26
You're right in that being a developer there is, you see like you spend so much of your time doing these integrations. And when you start to get, you know, a customer, when you start to build up your customer base, and each one of them needs different integrations, and you're building 600 unique integrations, the maintenance and everything on that, and just the mental complexity required to like keep all that in your head as as a developer is just unbearable. So I can totally see why having that concern kind of get punted out to somebody else would free your time up to do you know, actual innovation instead of spending time, you know, repaving roads all the time.

Michael Zuercher 12:06
Yeah, that's exactly right. And you know, our perspective at Prismatic is there's real integration, there's real innovation to be done with your integrations. It's just not, you're not going to innovate on how to store logs, you're not going to innovate on how to store credentials and refresh them, you know. What you're going to innovate on is, hey, how could I pull the agriculture ERP space closer into my product? You know, how can I understand my customer so well, that I can show them a workflow that they would have never envisioned by producing an integration? And so you know, what we want is we want Prismatic's customers who are software companies, we want them focused on, how can I use integrations to make lasting differentiators, and truly, you know, serve my customers well? Let's get rid of all the cruft and just put that onto a platform.

Tim Bornholdt 12:54
There's really, you know, there's really never an easy time to launch a company. But I would argue, you know, in the years that I've been running my own business, a global pandemic is certainly up there among the most challenging times. What impact did this pandemic have on growing Prismatic?

Michael Zuercher 13:12
You know, I think we, to be honest, I think we got off really easy. We started Prismatic a bit before the pandemic. And so we had a team kind of spun up. And we had kind of spent some of the early time building product and envisioning product. And so by the time we all went work from home there for a while, we were already a pretty gelled group with a pretty firm strategy. Of course, in any startup, that's going to be a little bit fluid as you learn more from the market, but we were at that point, pretty well geared to just go execute. I think we also got off a little bit easy in that, you know, we've been able to build a team that has at least some folks that have worked together before and have found some really, really great people to add to that team. And so that team gelled very quickly, which is one of the things that I think would be really hard to do, or could be really hard to do during a pandemic. And in that way, I honestly think we got to kind of dodge some of the worst of the downsides of the pandemic, from a startup perspective.

You know, from the other side of it, that you think about, you know, not just the internal side, but the external, how is this gonna affect the market? How's it gonna affect my customers? Those types of things, you know, as we all know, it's not like tech just paused during the pandemic. And so, you know, it certainly has made demos, remote demos more acceptable, you know. I don't travel to, you know, to larger customers to do demos anymore. And that's probably a really good efficiency win. It's also made it just completely expected that you can reach six prospects or six customers in one day, which you know, kind of a few years ago would have been much, much harder to do. I'm sure you know, I could pick it apart and find some downsides specifically to, you know, to the startup of Prismatic from, you know, from the pandemic perspective, but I think we got off easy compared to a lot of organizations.

Tim Bornholdt 15:08
I think the more that I reflect on the pandemic, and kind of listening to what you were saying, it seems like a lot of times you can have, you have to have the perspective as an entrepreneur to be optimistic and find ways to be adaptable in challenging times. And certainly there you know, that it's an easy, privileged position for me to say, because I didn't get sick, and I was able to work from home. And you know, there's a lot of factors that go into it, where I know that this is like a weighty statement, but from like a purely business and entrepreneurial standpoint, I would say, like this, usually the trying times, and the recessions and the challenging times are the times where as an entrepreneur, you can really dig your heels in and find opportunity, lean into those opportunities, and make the most of, you know, what is otherwise a pretty negative situation.

Michael Zuercher 15:58
Yeah, I think that's right. I think trying times call for innovation, and I think startups are generally the innovative ones. And so I think, you know, it certainly isn't a time to, you know, be extra fearful as a startup. I think it's a time to say, you know, look, there are new problems to be solved. And we may be really, really well positioned to solve those problems. And I think that's, you know, that's the way we look at a lot of things. But I think, as you kind of said, in hindsight, you know, of course, I'm speaking from a very narrow perspective here, but strictly from the perspective of starting a new software business. I don't think the pandemic really set us back.

Tim Bornholdt 16:33
Yeah, I think that's how a lot of tech companies have approached it. And you're right, I mean, it's been terrible for others, you know, if you're trying to start a restaurant in March of 2020, you know, God help you, unless you were a delivery service or something. It did not go well for many people. But from a tech standpoint, I think the pandemic has been just like nothing but a net positive, because you've been able to show your technology and show how, you know, you're able to help people stay connected, when we otherwise couldn't.

Michael Zuercher 17:03
Yeah, I completely agree.

Tim Bornholdt 17:05
So you've, obviously we talked about the other tech startup that you founded before Prismatic a bit. I'd love to lean into that a little more, and maybe start with what led you to starting a company during college?

Michael Zuercher 17:17
Yeah. So I mean, I think the one word answer to that is naivete, you know. It's just one of those stories that like, isn't a complicated story. But in hindsight, it's kind of amazing it worked out at all, you know. I met a sheriff's deputy, kind of through happenstance, while I was back in my hometown between my freshman and sophomore year of college. And, you know, I was studying electrical engineering, and was always kind of an open source software guy a little bit and, you know, got to talking with him about the software they used. And it turns out, they basically didn't have software at this tiny little sheriff's office in the middle of South Dakota. And so, you know, just through, you know, some combination of not having any idea what the world was really made of, and also having a lot of time on my hands, you know, I kind of turned that into a, well, what if I worked and built you a product, as in the way I thought of it as kind of as a summer job. So like, next summer, I will, instead of go get a, you know, traditional summer internship or whatever, I will start this little company, and I'll build a, what was called a records management system, for this law enforcement organization. It'll be a summer thing, you'll have something, everybody goes home happy. Little did I know, I'd spend the next 15 or 16 years doing that. And so, you know, I think in hindsight, I never would have started that if I had any idea what that industry was actually like from a marketplace perspective, if I understood how far reaching it was gonna be from a software perspective, or if I understood how hard that climb was going to be. But I'm certainly glad I did.

Tim Bornholdt 18:52
Well, let's unpack that a little bit. What are some of the challenges that you weren't anticipating when you were that naive college student that jumped in headfirst?

Michael Zuercher 19:03
I mean, I think, kind of on multiple levels, the first is probably the really classic, everything in software, and probably everything in almost anything, takes three times as long as you think it's going to, So, you know, what I was going to build in a summer ended up taking two years or something like that. And, you know, it's just one of those you don't know what you don't know until you get in there. But I think from a slightly broader perspective, if you look at the, you know, the public safety market at that time, or the landscape of public safety software, there were a couple of really not great things from a startup perspective. Number one, there were about 200 competitors nationwide. And there are still many competitors in that space. They are less than there were but it's still a very fragmented market. So you're competing with kind of everybody, big people, little people all over the board.

Second, that market is very geographically specific, so you may have a solution that works well in South Dakota, but as soon as you go to Nebraska or Virginia or California Yeah, only pieces of it still makes sense because there are legitimate differences in the way law enforcement works in different parts of our country because of state law and all kinds of things. And so, a, you've got a really fragmented market, b, once you build a solution, you're only going to be able to serve some small part of that market from a geographic perspective. And then the third thing is, it's a very broad solution. And so in order to serve a police department, or sheriff's office or a 911 center well, you can't just build one piece as it turns out. As I said, I kind of set out to build the records management side, because that's the part that I heard about from this deputy. But as it turns out, nobody can really use your records management system, or at least not very many customers can, unless you also have a jail management system, and a dispatch system and mobile solution for in police cars. And the list just goes on and on. And before long, you've built out this just really broad far reaching business system. And you kind of have to build all of it before you can use any of it somewhere.

And so you know, for customer number one, we had one of those pieces. For customer number two, we had to build the second. For customer number three, we had to build the third and fourth. And by the time we had five customers, we had been building product for, I believe, six years. Which is not the way you want to start, you know, an early stage startup.

Tim Bornholdt 21:25
Yeah, no, not at all. Usually, you want to get something that you can build once and sell the six people as opposed to building, you know, five or six different things and having to incorporate them. But I would imagine along the way, there were a lot of the things that affected customers three, four and five kind of piggybacked on to customer one, and you were able to just kind of further take all of that knowledge and expand it from there.

Michael Zuercher 21:49
Yeah, and, you know, like, so many things, some of what I described ended up being a blessing in hindsight, in that we, because it was a very geographic, you know, disparate market, we started in South Dakota, that's where I grew up. That's where I live. So we started in South Dakota. Well, South Dakota doesn't have very many people, as a lot of us know, and South Dakota, therefore, it doesn't have a lot of law enforcement officers. And so we were going to flat run out of market in South Dakota. And so we very quickly expanded into other states. We moved into Minnesota as a second state and Louisiana as a third state. And the thing that made that a blessing was that, unlike so many of our competitors that got very mature in one or two states, and then decided to become a nationwide company, we were forced to do it almost immediately. And we ended up, one of the things that really made us successful in the long term, is that we ended up with a solution that was very configurable, and was built with the understanding that we were going to serve a lot of different states. And that then later allowed us to grow very quickly, once we put some real resources into, you know, sales and marketing and starting to grow nationwide.

Tim Bornholdt 22:58
So one thing that you had mentioned was that, you know, you had to learn from customer after customer after customer. And by the time you got to six years down the road, you've been building product for six years. And that was when you, maybe I'm putting words in your mouth, but felt like you had a more complete system you could take to the market.

Michael Zuercher 23:15
Yeah, that's right.

Tim Bornholdt 23:16
One question I have for- excellent, good. Do you think that if you would have like, started again, with that six years in hindsight that it would have still taken you six years to get to that point? Like I guess what I'm trying to get at is like, the whole you don't know what you don't know, kind of thing makes sense when you start out right away. But then after you've gotten down the road aways, like, did you ever have the urge or did you ever see a need to just scrap it and be like, we're gonna rebuild foundationally and we know kind of what it needs to look like? Or was it really just kind of, you're just building on top of everything and trying to sort it out and straighten it out as you go along?

Michael Zuercher 23:53
Yeah, I mean, I think anybody who's ever been involved in a software company always wants to scrap it and start over. You know, I think you always see, you know, hindsight is always 2020. You always know, after the fact, how you wish you had built it. And that, you know, that was certainly true of us. You know, I think we, one of our big differentiators in that market is that we were built on a modern platform. And you know, all of those, as an example, all those different pieces that I talked about were part of one system, whereas kind of historically in that industry, they were each different, completely different systems that, you know, ironically enough, were integrated together. And so, you know, I think, of course, there were things that made us want to scrap it and say, Hey, I bet if we just made a really concerted effort, we could rewrite this thing in three years, knowing what we know now or something like that. But I think certainly in our case, and I think in the case of most companies, that's the best way in the world to kill yourself, you know. That's the best way to stop being a company is to just pause for a bunch of time and imagine that you're going to, you know, come out with this utopian solution in the end. You know, I often reference, at least back then I often referenced the, you know, the grand decision by Netscape to step back and rewrite their browser from scratch. And when they came back, IE had, you know, the majority of the market and that was that. So, you know, I don't think that's probably ever the right answer. We were able, you know, fortunately to rewrite some of the architectural things as we scaled, but, you know, the reality some of the code that's still there is, is original stuff, I think. And, you know, and that's just the nature of software.

Tim Bornholdt 25:26
I think there's like a famous blog post to about that Netscape example that I always think about whenever I get tempted to go back and you see an app that, you know, you wrote seven or eight years ago, and you're like, oh, man, this is still being used. We could have done it with this, we could re architect it to be more efficient, or whatever the cause is, but I'll drove that post and put in the show notes, cuz I think it's the guy Joel.

Michael Zuercher 25:52
Joel Spolsky probably wrote about. Yeah, that seems like something he would write about. I agree.

Tim Bornholdt 25:58
Yeah, that article, I always think about that. And I think if you're listening to this, and you are running a tech company, and you're in that kind of like, you know, you've been going for a few years, and you get the urge to scrap it, read that blog post, because it shines a lot of light on instead of burning something to the ground and starting from scratch, you lose so much institutional knowledge that you think you might have built up in your head. But likely you don't. And you just have to keep relearning a lot of those mistakes, and things are changing so fast any way that sometimes it's more efficient to learn how to change the tires on the car while it's driving down the freeway.

Michael Zuercher 26:37
Yeah, and we, you know, we all hear stories all the time of you know, we're rewriting our x in y new framework, right? And sometimes that's the right answer, if you have some time horizon that you're optimizing for, and the fastest way to get where you need to get on that time horizon is to do this rewrite as part of it. But some, you know, replatforming or rewriting or whatever, for its own sake, in my experience is almost never the right answer.

Tim Bornholdt 27:02
Yeah. But you, we've talked a lot now about the early stages, and that was Zuercher technologies. Right?

Michael Zuercher 27:09
That's correct. Yeah.

Tim Bornholdt 27:11
So you were at Zuercher Technologies for 15 years, how did the early stage, being like a solo founder, compared to the later stage, when you've got infrastructure and employees and customers and the whole nine yards?

Michael Zuercher 27:26
Yeah, so I mean, there's almost nothing similar about them. You know, and I actually wasn't a solo founder. I had a co founder, who was a buddy from college.

Tim Bornholdt 27:35
Oh nice.

Michael Zuercher 27:36
Who was nice, you know, a very, very technical guy. I'm maybe half technical, and he was very technical. So he managed a lot of the kind of back end decisions and architectural things and grew with that company for a long time as well. So I can't really speak to being a solo founder. I think that would be extremely difficult. But you know, but even as a two person company, and then three, and then five, you know, at some point you're wearing, there are a lot of things that are different. One, you're wearing a lot of hats, you know. You're kind of doing everything that somebody else doesn't happen to have on their plate. And that's not just true of the founder, that's true of kind of every employee in an early stage company. And in some ways, that's great. You know, for some types of people that's really energizing. And it's really interesting. In some ways, it's awful because your interest is or your energy is split across so many things, that it's hard to do anything really well. So I think that's one of the big differences, you know, between early and later stage.

You know, I think another piece of it is that you're, the things that are hard, are just completely different sets of problems. So in an early stage company, it is not hard to communicate in your organization. There are three of you or two of you, or whatever, and you sit around the table for lunch. And suddenly you've communicated the company's news, right? But that gets really hard when you have hundreds or I can't imagine but 1000s or 10s of 1000s of employees.

I think on the flip side, some things like having visibility into the market are really hard in an early stage company, because you just don't have penetration into the market. You don't have sales people all over the country, whatever. You don't tend to have as much visibility. In a later stage company through lots of means you tend to have much better visibility. And so those are just two examples, but I think you're flat solving completely different problems at different stages. And in that way I would argue the job of CEO or Founder CEO is just two completely different jobs. They're probably actually multiple completely different jobs as a company grows.

Tim Bornholdt 29:31
How does being like a founder CEO evolve like as you get further down the road, do you see yourself spending more time putting out like the more operational problems as opposed or is it really like the whole trying to delegate and figure out how you can get the right people to help you take on those responsibilities that you used to be doing by yourself as a smaller company?

Michael Zuercher 29:54
Yeah, I think different founder CEOs succeed in different ways, but you know, from my experience in the very early days, you're the chief spokesman of the product. You're probably the product manager, essentially, that's setting strategy and direction from a product perspective. You're probably the main communication with your early customers. And so you're just, you're right at the tip of the spear, from a customer perspective, from a market perspective, from a product perspective. And that's how you're spending a ton of your time.

Then as you go a little bit, you got to focus on other things. And so, you know, as you said, you have to bring folks in that you can trust, and you have to start to delegate some of those responsibilities. And that's really hard, you know. I mean, figuring out, you know, where your highest and best use is, what you should keep doing, as opposed to what should somebody else be doing, or what is somebody better at than I am, is I think a journey that you go on, you know, over the years of growing a company. I think then the you know, the other side of it is as you get kind of to, you know, what I would call mid sized or something, a few 100 employees, or maybe 100, I think you get to a point where you've now delegated that most of the day to day to other people and what you're focused on is almost a second order thing of, you know, setting strategy, making sure the right people are in the right places. And then just making sure that everybody's aligned, making sure that everybody's communicating well. You're starting to deal with really internal company focus type things to some extent, as opposed to as many you know, exactly what detail of the product should be which way.

Tim Bornholdt 31:28
One thing you had talked about there was trust, and establishing trust as the company grows. What are some techniques or tips that you've seen work effectively to build trust in people that you bring on to take on some of those roles?

Michael Zuercher 31:44
Yeah, so I think, I mean, the number one thing is hire people better than you at what they're doing. I mean, there's no better way to trust somebody than to just accept that they're just legitimately better at this than I am. And, you know, certainly, they're probably some things that I'm better at than they are, and I can probably help them with some of that, but who am I to get in their way, when they're the one that's really, really good at this. And I've been fortunate to work with a ton of those people at both Prismatic and at Zuercher. I think there's just nothing more comforting than watching somebody do what they do so well, that you're just, you just want to get out of their way. Because all you're going to do is, all you're going to do is do it worse.

Tim Bornholdt 32:24
Yeah, that's a good point. And if you hire someone better than you, then that almost implicitly requires you to trust them. Because otherwise you are going to be holding them back and stepping over their toes. And nobody wants a micromanager anyway, when you're at that kind of a level, or ever for that matter. So that's a really good, really good point on how to build trust.

Michael Zuercher 32:44
Yeah, and I think it's one of those things, that's easier said than done. You know, first of all, in an early stage company, one of the big jobs of the founder CEO is recruiting, and recruiting is hard, you know, especially right now in tech, where you have lots of very large tech firms that have remote workers and are paying very well and are very stable, you know. So one of the things you have to do is you have to find those people that are better than you and then somehow convince them that they should come be on the team. And, you know, I think that is not an easy thing, that's not like a, you post to a job board. And the next morning, you have somebody. So I think that's part of it.

And then I think the other part is, you know, just making sure that as they come on board, they know the way you feel about you know them in their role. They know both what you expect of them from, you know, I expect you to do this really well because that's what you're here for. But also from a perspective of, like, we need to hear, we need to hear your perspective on this. We need to see you do your thing, because we we flat respect your knowledge on it, and want to see the right way.

Tim Bornholdt 33:45
Yeah, that's one thing I've really tried to do with my own company, is giving workers the autonomy to do their job and do it, you know, without us putting too - there are certain things you have to you know, put constraints on of maybe how things get checked into a repository or you know, whatever. Like, there's some foundational things that you want to make sure you're consistent on, but for a lot of things, it's like, yeah, the reason that I hired you is because you're smarter than me. And, you know, I feel like I know what I'm doing. But I don't, again, with the, I don't know what I don't know. It's nice to bring in people that do know what you don't know, and can just jump in and feel the freedom to actually make meaningful change within the organization as opposed to just kind of being a cog in the wheel.

Michael Zuercher 34:30
Yeah. And I think then that starts to speak to, you know, overall company culture and, you know, things that if you don't have, if you don't have cultures and undercurrent, what you described is, in my opinion, almost impossible to pull off, you know. you kind of have to have the base built over a long period of time to encourage all of those things, you know, from the team.

Tim Bornholdt 34:49
Yeah, I agree. So, eventually you did end up selling Zuercher Technologies to a portfolio company. I think a lot of times people assume that when that sort of thing happens, when you sell the company, that the founders just basically dust their hands off and walk away with a briefcase full of money or something like that. I assume that wasn't specifically the case for you. I think you stayed on board for a little while. I'm curious to hear, you know, why you chose to stay on board and what eventually lead led you to leaving that company?

Michael Zuercher 35:24
Yeah, you know, with the way all of that happened, I feel like the most fortunate founder in the world, you know. I like to say, I essentially got to sell my company twice. And so you know, what I did is in, you know, in 2014 2015, we were to the point that we were, we had a product that was starting to really grow like crazy nationwide. And we were in a lot of ways, the first company in that market in more than a decade, that had been able to grow that way geographically. And so suddenly, we were to a point we'd always been bootstrapped. We'd never taken any significant outside money, never had any institutional money. You know, we were flat limited by cash flow. And so you know, it was a, we needed to do either one of two things. We either needed to decide that we were just going to grow at the rate we could grow, continuing to bootstrap and continuing to, you know, operate with our cash flow. And at this point, we were almost 100 employees. Or we needed to somehow get external capital, to essentially put into sales and marketing, and all the things that come along behind, you know, to grow nationally, quickly. I believe there was an opportunity in the market. I believe we had the right product. Remember, by this point, we're 10 or 12 years in to this journey.

And so kind of through, it's another one of those things where, you know, you take a call that you didn't think was going to mean anything. And then in hindsight, it mattered. I got a call from a person that a private equity firm, who was looking at at our industry at the Public Safety software industry, and had come to a conclusion that I completely agreed with, which was, there are a handful of companies that serve the biggest cities in the United States. And that was already basically a consolidated market. But then there were a couple 100 companies that served mid to small agencies in the United States, think like a few 100,000 population and smaller, all the way down to you know, your town of 1000 people and that was a very unconsolidated market. And so what this private equity group was looking to do was go buy one of the the companies that serves big cities, and then go buy somebody that serves small cities, put them together, and you know, do all the operational efficiencies stuff and the market consolidation stuff with a company serving the big cities, and then just put resources into growing a company that can can run through this fragmented market and gain a lot of market share by just having a better product for small cities.

And so, I mean, that is exactly the way I saw the industry. I had no interest in Zuercher serving big cities. It was just part of the market we just weren't well set up for in a lot of ways. But I really thought there was a ton of progress that could be made with the right capital in the small cities. And so you know, this took nine months or something to get put together, but that private equity group eventually went and bought a company called Tritec, which was the best largest vendor serving, you know, big cities. And then they went, they came to us and they said, like, look, here, you clearly have a product that's getting a lot of market share. You clearly, I assume they understood that we were under capitalized, and they essentially said, you know, come be part of what we're doing. You can continue to run Zuercher. We'll leave it in Sioux Falls. They even left the brand the same, which wasn't super important to me, but I think is indicative of just how separate we left that organization. And what we're going to do is we're going to finance and we're going to help with the growing of Zuercher into a, you know, truly the largest of the vendors in the you know, in kind of the small city space.

And that was just a super attractive way to me to say, you know, look, we've built for 12 years a product that is now ready to really take off, you know, and it's not like it was nothing at that point. But there was a lot more we could do. It was a really great way to get the capital to do it. And honestly, to get into a situation where I got to learn things that I never, I never, a, probably knew I didn't know and, b, never thought I would be exposed to and be able to learn. We did a lot of m&a work. I got to work closely with the board at this private equity firm. And they eventually brought in a CEO for the overall group who's one of the best guys I've ever worked around and I got to just learn an insane amount from him very quickly. So I stayed on for about two and a half years. We grew that and then you know, kind of as per plan, we sold the overall business including Zuercher and Tritech to to another private equity firm and that's when I exited.

Tim Bornholdt 39:55
Yeah that really does sound like a fairy tale for a founder. Like, you hear so many horror stories of being acquired and having just culture issues and finding ways to have organizations kind of blend together and do it in a right way. And this sounds like just such a success story of being able to do it the right way and feel like you've got kind of partners that are helping you, as opposed to, you know, like, you always think of like greedy capitalists, or someone who's just in it for the money and trying to get in and get out. It's like, it seems like it was actually well executed to pull this vision off.

Michael Zuercher 40:33
Yeah. And I think, you know, I'll say it again, I just flat was very fortunate. Our company was very fortunate in the way all of that worked. And some of it was, it just worked out that way. But at the same time, I think the thing that we, that I thought I understood going in and as it turns out, it was correct, was that our interests were aligned, you know. What I wanted for Zuercher, at that point was, I wanted us to grow into the most impactful thing we could be in the public safety software market in North America. I was not interested in it being a bespoke company. That has pros and cons. But that's just not what I wanted Zuercher to be at that point. And I think it's not what most of our team wanted it to be. I also didn't want it to be, you know, a small business forever, you know, and that ship had kind of sailed probably, as we got close to 100 employees. But I didn't want it to be, you know, a just kind of slowly growing, really stable thing. I wanted to make the biggest impact in public safety we could, and that interest aligned very well with private equity. I mean, obviously, they had a financial interest, as did I, in growing that business. And so interests aligned. I wanted us to grow rapidly, and we needed capital to do it. They wanted somebody who was going to grow rapidly and make their return, you know, the way it needs to be. And I think just at the most basic level, that alignment of interests made it in some ways, pretty easy for things to go well. At the same time had I gone into it saying, hey, I want to take some cash off the table. So I want to bring in a private equity partner, but I want Zuercher to continue to be this, you know, this slow growing really nice place, you know, to work for the next 40 years or whatever, you know, those interests probably wouldn't have been aligned. And so I think alignment is the big thing that made that work.

Tim Bornholdt 42:18
Are there any lessons or any, we had talked about before with the things that you had learned in that first six years. And how like, you know, it took you that long to like build out the product and you learned a whole bunch along the way. Are there any things like having gone through the m&a process that if you were to, you know, with Prismatic go down this path again, of getting acquired, hopefully, and moving on, like, are there any, are there any lessons or things that you took away that you would, you might want to share with anyone who's kind of going through a similar situation?

Michael Zuercher 42:50
Sure. So I mean, I again, I was pretty fortunate to be able to be involved in m&a on kind of both sides. So you know, obviously, I sold Zuercher to the portfolio company and the private equity folks, and then was very involved in the process that then sold that overall company to more private equity about two or three years later. So I was involved in to sell side, you know, processes. But then we also did a lot of m&a ourselves. And I think we probably looked at 15 or 20 businesses to acquire, and I think we ended up acquiring, I think five of them over the course of about three years. And so you know, there you're on the you're on the buy side.

And, you know, I think having been on both sides gives you an interesting perspective on what makes those deals work or not work. And I hate to sound like a broken record. But it really, in my opinion, all boils down to interest being aligned. You have to assume I believe that the other party in an acquisition, whether it's a founder selling or institutional capital buying or whatever, I think you have to assume that everybody is going to act rationally based on the things they're optimizing for, but you better understand what they're optimizing for, or it's going to feel like they're acting irrationally.

And so often you hear founders, you know, tell horror stories of, and sometimes they just are legitimate horror stories, but you often hear people tell stories of, you know, we lead in this investor, or we sold a big chunk of our company, or we became part of a portfolio company, and then they changed everything. You know, we used to have these really close relationships with customers and, and they cut support, or they grew sales, and outgrew our ability to deliver. I mean, we've all heard those stories. And I think all that comes back to, you know, usually people are going to rationally act in the thing that toward what they're trying to do. And often if you really went back to the beginning of a lot of those stories, you have somebody that came in with a different set of interests than the founder had, or the selling party had. And so I think you just have to know what everybody wants and assume that they're going to act really aggressively to get whatever they want. And if you're a founder who's looking to exit, you know, maybe those interests do align. Maybe the right thing is like look, I just need to take cash off the table and get out of here to either retire or just to move on. And they want to fold it into some larger organization. And maybe that's what's best for the company. But at the same time, don't sell to that kind of an organization if what you want to do is stick around and have a 20 year career doing exactly what you're doing. You know, I think, I think you just have to understand what everybody wants.

Tim Bornholdt 45:21
Being a founder and running your own company, you go through a lot of times, like when you're acquiring customers, it feels like it's the same thing, like you kind of develop this gut feeling of whether this is going to be the right customer for you, or whether they it feels like the, again, incentives are aligned. And it takes a few times of, I'd say in a low stakes environment where you take on a client, and you realize, you know, it might be months or years down the road, but eventually you realize, like, oh, man, I had that feeling at the beginning of this relationship. And I thought things were gonna get better, and they just didn't. I think it feels like, I haven't been through an m&a event myself, but I feel like there's, you kind of learn as a founder and an entrepreneur to kind of harness that biome on your gut to tell you whether or not it's gonna be a good situation or not. And with m&a, specifically, I would imagine when you're talking with people, if you are shopping your company around, and you're talking with different people that you kind of have to use that same instinct of, you know, our are incentives aligned? Does it feel like it's going to be the right relationship? And if not, then that's fine. There's other opportunities, you can find other options, but I think a lot of times, you just feel like, I got to take the first thing that's on the table, or this is gonna be the only time I ever get here. So I'm gonna, you know, just do it. And even if it feels wrong, you know. Is that kind of accurate to what your experiences were?

Michael Zuercher 46:47
Yeah, I think certainly there's a personal side of all of this. And, you know, in my specific situation, when we first sold to Tritech and into the private equity folks, you know, I pretty quickly realized these were people that knew what they wanted to do, that were really smart about what they were trying to do. And that were being really transparent with me about what they wanted to do, knowing that it might not be what I wanted to do. And it turns out it was, which is what made it work out. But I was super comforted by you know, some of the really early calls I had with this, you know, guy from New York in a private equity firm, where he was just really blunt about what he was looking to do. He wanted to find somebody that was ready to really grow, where the product could keep up, put capital behind it, and grow it like crazy. And that was super exciting to me. But to many of the companies like Zuercher, that he probably had talked to or that I know he had talked to, that was the last thing they wanted to do. Because you know, they just had a different mindset about what success looked like for their business. And that's fine. And I think I was super comforted by how blunt he was about those things, before he felt around to really know what I wanted. Because to me, it gave me the impression that like, I mean, this guy isn't trying to get into a relationship with somebody that doesn't want what he wants. He knows he's stuck with it for years as well. And he was just very blunt. And you know, I think part of the way that I learned to kind of understand some of that was, you know, those guys never told me, and I never really saw them tell anybody what that person wanted to hear, you know, exclusively, partially because they didn't have the time. You know, like they were busy. Yhey knew what they wanted to do. They had a lot going on. And they just didn't, they didn't have the time to make up stories. They didn't have the time to dance around things. They were going to get to the point. And if it wasn't something that worked out, it didn't work out and you move on. And I actually, I think I came to a little bit different understanding about, you know, how founders can think about institutional capital, especially later stages institutional capital by just understanding their motivation and their world and how busy they are. And knowing that like they don't want to be in a bad relationship either. Like this needs to work for them as well. And if you can just be blunt, both directions, it's amazing how fast you can flesh out whether something makes sense.

Tim Bornholdt 48:24
It's amazing us Midwesterners just don't have that bone in our bodies, usually, to be blunt. So it's nice working with someone from the East Coast, who can just throw it down first, which kind of gives you the freedom to feel like you can be blunt right back.

Michael Zuercher 49:26
Yeah, I think that's right. And I think that's, you know, certainly a regional thing. And I think, certainly something that you learn I think as you deal with, you know, in large organizations or you work with more and more folks.

Tim Bornholdt 49:40
Michael, this was an amazing conversation. Thank you so much for taking the time to be here. Is there any parting words you want to leave to the audience or maybe tell people how they can get on boarded with you with Prismatic?

Yeah, so I mean, thank you for having me. It's been a great conversation. You know, certainly any software company out there that is looking at, you know, how to handle integrations, I'd love to talk with you. It's possible Prismatic's a fit. It's possible it's not. But I think, I mean, I have the scars of almost two decades now of working in the b2b software world specifically around, you know, integrations being a big part of it, and would be happy to have conversations with anybody or point you in the right direction. So, I'd love to, love the talk and I appreciate being here.

Excellent. Thank you so much.

Michael Zuercher 50:25
Thank you.

Tim Bornholdt 50:26
Thanks to Michael Zuercher for joining me on today's podcast. You can learn more about Prismatic at Prismatic.io.

Show notes for this episode can be found at constantvariables.co. You can get in touch with us by emailing Hello@constantvariables.co. I'm @TimBornholdt on Twitter and the show is @CV_podcast. Today's episode was produced by Jenny Karkowski and edited by the positive Jordan Daoust.

As I mentioned at the top of the show if you could take two minutes to leave us a rating and review on Apple podcasts, we will give you a mention in a future episode as a thank you. Just visit constantvariables.co/review and we'll link you right there.

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