[Editor’s Note: Founder Forum, a weekly interview with a startup founder in Maine, is sponsored by the Maine Technology Institute. Read more about MSI’s sponsored-content strategy here.]
Abierto Networks isn’t the most well known technology company in southern Maine, but if you’ve been inside a gas station convenience store or fast food restaurant, chances are you’ve seen the Eliot-based company’s technology at work.
Rick Sales founded the company in 2005, though it only really took off in its current iteration, offering digital signage and marketing solutions to the convenience store and fast food industry, once he moved it to Maine in 2011 after receiving a $400,000 development loan from the Maine Technology Institute.
The company surpassed $4 million in revenue in 2016 and currently employs 15 people.
In our conversation, Sales talks about the challenges of hiring the right people, his “ready, fire, aim” philosophy on product development, why he provides stock options to employees, and why every entrepreneur should be comfortable with selling. The interview has been edited for clarity and length.
Maine Startups Insider: When you started Abierto, did you feel prepared to launch your own business from scratch?
Sales: Prepared is an interesting choice of words. You’re never prepared. I certainly was emotionally prepared. I was ready for what I knew was going to be a serious effort. The first three years of the company I worked all 7 days.
In finding my original investors, one of the things I tried to do differently was not just look for money. I was looking for key people for my board. So if you look at Roger [Brooks, chairman of Abierto’s board and former business associate of Sales’]. I approached Roger for a number of reasons. One, because everyone knew Roger would keep me on the straight and narrow and tell me when I was doing stupid things, because we have that kind of relationship. So I had respect for him and I knew he was very knowledgeable, but primarily I asked him to join the board because I knew that the day would come when we would raise money or we would sell the company and I didn’t want people to lift the rug and say, “Oh my God, what a mess!” I wanted people to lift the rug and say “Wow, this is a great company!” Roger has really helped us make sure our processes are good, our financials are clean, our strategy is solid and really when people come look at us they are pretty impressed at what we built. That was his job. It was his job to help us do it right.
So, to bring it back to your question on preparedness, the best thing I could do at the time was gather a good group of people that I trusted and had invested in me and were going to give me good advice going forward.
Has any of that advice stuck with you?
Yes, (laughing) I’m actually writing a book, believe it or not. Just as an aside. Yes, there a lot of pieces of advice that we operate with at Abierto.
For example: Perfection is the enemy of progress. That’s one I’ve carried with me for a long time. For a startup trying to find opportunity, getting your people to embrace the idea that being perfect and doing a great job are not equivalent. Trying to be perfect actually slows you down and is bad for you. That’s one Roger gave me a long time ago that’s really carried through and is part of our culture.
Another piece of advice came from my partner and friend John Gable. For the first several years at Abierto, it was just the Rick show. Rick programs it. Rick packages it. Rick sells it. Rick invoices it. For the first couple of years, it’s just you. And then you start hiring a team and get into the world of expectations. When you are an owner you have to get into expectations. Finally I sat down with John, he said, ‘Rick there is no other Rick Sales. You can’t expect other people to be Rick Sales. He started opening the door on how to look at team members who perhaps don’t share your level of commitment, but can share your level of passion and certainly can buy into your goal if you help them. But you certainly can alienate them too if you feel that they are letting you down every step of the way. That’s hard for an owner because an owner works seven days a week, has committed everything, and has put everything on the line to make this work. So he was really very helpful at making me think about this from a different angle. Like I said earlier, I’ve received a great education over these years and my partners’ help has been instrumental to that education.
What have been the biggest challenges you have faced, either personally or professionally, in starting and growing your business?
Recently I think that, as our team has grown, understanding our dynamic and understanding who can be successful in an environment like ours and who can’t. It was a very big challenge for myself and for the team. We have a group of believers here, we have a very engaged team. So it can be an intimidating environment for some people. It is a fast-paced environment, we are very results oriented, so people who are not used to having a meaningful level of personal responsibility can falter in a place like ours because there is no babysitting here, there is no safety net. So really understanding that people can hurt you and understanding that while it may be common knowledge to say, ‘hire quickly, fire slowly,’ work with people, the reality is, particularly for a growth company, it’s the inverse. It’s ‘hire slowly, fire quickly’ and avoid protracted situations. So that was very challenging.
We have made some mistakes in hiring that have set us back and it’s not a simple matter of just getting rid of those people and hiring other people. We actually needed to think and to look at our hiring process and understand why it got us there. We introduced some outside players to our hiring process to make sure we didn’t have our microphone wired into our receiver and weren’t hearing ourselves talk. One of the things we discovered through all this work is that at the end of the day the process that we had before was putting too much weight on what a candidate can do for us in the future and not enough weight on what a candidate can do for us right now. Hire the best people. Hire people that can grow with you, but also hire people that want to work and do today’s job. If you can’t do today’s job you never get to tomorrow’s job. So that was a very big challenge and a great learning experience. At the end of the day it’s not just platitudes: Great people help your company be amazing, and lousy people will ruin your dynamic overnight.
Tell me about Abierto’s growth projectory over the last decade. Have you been 15 people for a while, or were a lot of those jobs added early?
Let’s make that a Maine story. In April of 2011 we moved to Maine from New Hampshire because we had successfully been awarded a development loan from MTI to build our first digital marketing platform. And, go figure, they wanted us to move to Maine to get that money. When we came her to Eliot there were three of us. We had one suite in this building. With that money we got from MTI, the first thing we did was hire a software developer. That was our fourth employee. We’ve been growing steadily since then. I want to say that when we came to Maine in April of 2011, we were under a million dollars in revenue. We just closed 2016 with over $4 million. 2016 was a profitable year; we made money. On top of that, in 2017 we are planning a couple million dollars of growth and more profit.
Maine has been good to us. We came here, we hired people, we got support. There’s a great ecosystem here for entrepreneurs. We found investors, our insurance rates are lower here than in New Hampshire, our health plan costs less than in New Hampshire. If I had known that all these benefits were going to come to my company by getting out of my house—because the first 6 years were in my house—and have better work conditions and more flexibility and this ecosystem with people that are interested in what we are doing, I would have done it earlier.
Besides MTI, what other resources have you found valuable?
Well, MTI has obviously been great. We have the Maine Venture Fund and Coastal Enterprises also as investors in Abierto. They are observers on our board and they are very involved and very supportive. You know, MVF has a great perspective based on their portfolio and they have been quite helpful introducing us to people or vetting out issues for us, whether issues of corporate governance, of us inquiring about what other companies might be doing as it relates to a particular topic. For example, we are an LLC, so we really can’t have a traditional stock option plan for employees, so we were able to craft a stock-option plan that would work under the LLC environment. Many of our investors were very helpful in the discussion, helping us understand what other people do and what taxation issues might be involved. MVF had a lot of input that was very helpful.
With CEI we have this huge deal that we are working on right now. Abierto is a cash flow monster. We are putting in over 100 installations a month. We have two installation companies that we own and two crews each fully committed between now and May. So it’s really a cash flow monster and CEI was super helpful in establishing a line of credit. We have cash, we have investment, but we were also able to obtain a line of credit to deal with that upfront bubble. The typical station that we install is over $10,000 of hardware and equipment and installation services. You are using large, high-definition TVs, commercial mounting systems that hang from the ceiling, also network connections for the different devices that are displaying the content. It is a complex installation. There is a lot of hardware that we need to acquire, configure, kit and send to the location and make sure the equipment is there when the installer shows up to put it in. Not only is it a major logistics job, it has a major impact on our cash position. We are super diligent on our cash management. We know exactly where we stand on things and therefore were able to calculate what the impact of this business was going to be on our cash demand and able to bring that issue to CEI, and they were super in helping us address it because they understood that we had grabbed onto a tiger and we couldn’t let go and we needed help to fill the requirements. So I think pretty much every one of our investors or board members have had an opportunity to step in and provide meaningful input on something new or different that we tried to do.
You raised a quarter of a million dollars to launch Abierto. Have you had to raise more money since then?
Yeah, happy to share that with you. What we did in the beginning is very interesting and might be interesting to other entrepreneurs. My partners invested in me and my ability to create a business, not necessarily in the specific idea that was the nexus of Abierto. That quarter of a million dollars was an arbitrary number. We said this company is going to be worth half a million on day one because we really had no other basis. So, I said I’ll sell half of it and I’ll get the controlling interest. So that’s how we started. We needed some money to operate, we needed a shingle. I have a very good friend, my old business partner at LAN Technologies, he was Vietnamese. And he had this saying, which will be in my book: “If you want people to bring you gifts you must have a temple.” So $250,000 was to establish the temple and get going. We had customers right away. The next chunk of money was the development loan from MTI, about $400,000. And a couple years later we did a convertible debt raise where we sold a million dollars of convertible debt. That convertible debt was bought primarily by Maine Angels, MVF, and MTI and CEI, so it was all in Maine. So that debt matured and converted 100% as convertible debt. And now we have a line of credit. We haven’t had to do anything else. We have a healthy amount of cash in the bank right now, and we are actually predicting to have more cash by the end of the year. We are building cash, we are making a profit. We don’t expect to do an additional raise for some time.
Right now you’re at roughly $4 million in revenue, 15 employees. What do you expect Abierto will look like in five years?
Well, we always talk about ‘Dare to Dream.’ What is the company going to be down the road. I encourage all the people that work for us to dream about how they can make our company different. Financially we are trying to create a company that is a $15 million company, plus or minus. That’s our ultimate goal before any kind of exit. We are very excited about the opportunity to provide a great return to our investors that have helped us travel down the road, so we do look at it as an investment. That is why we did the stock options because we want our employees to ride the train and experience benefit from the sale or whatever liquidity event there is. We don’t know what it will be, but we are working to build a larger business, a business that will probably have twice as many people, more than twice the revenue that we have right now. One of the things that makes us different than many of the people we compete against today is we don’t just do one-off digital signage. We aren’t interested in the menu board at the local pizza shop. We do one-to-many. We are looking for large networks where people have real communication problems. You have 500 stores and 15,000 employees and who knows how many hundreds of thousands of consumers? You have a problem distributing a consistent message across all your stores. That is something our solution can remedy.
If you look at the future, we will be providing services for convenience stores, convenience food service. Food is very strong right now. When you look at other retail, clothing stores, the Limited closed all its stores, Macy closed 80 stores, Sears closed 70 stores, but food service people and convenience food service people are growing 30% to 40% and those are the people we deal with. So we are very excited about that. We think we will continue to bring new solutions and new products to these folks who are growing and are generating a lot of profit and are interested in using technology to drive their revenue.
Tell me more about your decision to provide your employees with stock options. Silicon Valley, where successful startups have turned employees into overnight millionaires, has popularized the concept of employees owning equity in the company they work for. But it’s still not a mainstream idea in Maine. Why did you do it and have you noticed a result?
It’s a great question. I think there are two things I would talk about. One is that we are a very small company. It’s really crazy for us to run behind closed doors every time we want to talk about an exit strategy or an investment or valuation. We aren’t hiding the fact that we are an investment, that our goal is to grow the business and increase the value and have some meaningful return for all of our stakeholders. So, if you are hiding that, you lose credibility within your team. Not only can I not hide it, I need people to understand and embrace it so they don’t fight it. So that was the first element of it. The second element of it is that the people we recruited are not coming to work for us necessarily for the wages, even though we pay decent wages. People that come to us are looking for the experience. They are looking to be able to put their name next to an achievement, a meaningful achievement like creating a business or growing a business. Several of our employees when we hired them raised the issue that they wanted participation in the business, they wanted to be able to ride the value curve. And we had discovered that that thinking was very compatible with people that viewed life in a way that would allow them to be very successful in our environment, because our environment is all result driven. It’s very demanding. The joke about working for a startup is you can work more hours for less money and more risk. So why would you enter that situation? We are certainly not hiring you because you have no other choices. You enter that situation because you want to do something different than being a wage earner. Our management team thinks that way. Our management team believes in the exit, whether it’s a sale or recapitalization or whatever flavor it takes, they understand that there is life after that. They understand they’ll bring lots of value before and after. They understand that they will be rewarded for helping us achieve and they will participate in whatever event takes place. That allows me to have very open conversations about what we are doing, where we are going, why are we doing what we do.
Do you think this idea is applicable to most businesses or only technology-focused, high-growth businesses?
I’m not sure I know the answer to that. I would say that any time you are asking your people to really be engaged, to drink the Kool-Aid, to go above and beyond, and you are generating results, you really need to allow the people who are helping you get there to participate in the outcome. If you don’t do that, my opinion is, you are going to lose a lot of good people. Because how many times can they make you rich before they decide that you aren’t being fair?
You’re already offered a lot of good advice for entrepreneurs. Any parting advice?
You are going to hear “No” a lot. And you need to get use to the idea that a lot of the “Nos” you are going to hear are not valid input. You have to pick the fly shit out of the pepper as far as what “Nos” matter versus what “Nos” are part of the process. I had people tell me that no one would want this. I had people tell me I was three years behind the technology curve. I had all sorts of versions of “No.” You really have to believe that you are doing something that has a future. So get used to “No.”
Number two is you have to get comfortable with selling. You need to be selling all the time. For a technical entrepreneur, I know that is going to be very hard, but at the end of the day most of the best input we have gotten on product development has come from clients. We have this development philosophy called “Ready, Fire, Aim.” The sooner you can test it, the better. The best feedback you can get is if someone has money in hand and tells you, I will give you my money or I will not give you my money. That’s great feedback. The sooner you get to that point in time when you are asking people to give you money for products, even products that are in development, the sooner you are going to find out how to package it and find the right path. There are a lot of people who want to build it in the garage and close the door and have it be perfect when they take it out. And they have a field-of-dreams strategy and everyone will come to it. That doesn’t happen. So you need to get comfortable with selling.
And the third one is you need a mentor. And it’s not someone you can hire. Getting a mentor is a two-way process. The mentor has to accept you and want to invest time in you. And you have to want to learn what the mentor knows. Without a mentor it is going to be like pushing the rock up the hill, it’s going to be really hard. I tell my people: What is the difference between experience and wisdom? Experience is learning from your mistakes, wisdom is learning from mistakes of the other guy. Your mentor is going to have made a lot of mistakes and teach you a lot of things that you need to know. So having a mentor you trust and can rely on is very important.
So those are three pieces of advice: Get use to “No,” get use to the idea that you have to sell a lot, and get a mentor that you trust that can help you grow as a businessperson.
