Brainstorm Tech 2024: A New Generation Rises In Silicon Slopes
Adam Edmunds, Chief Executive Officer, Entrata David Wright, Co-founder and CEO, Pattern, Interviewer: Andrew Nusca, FORTUNE
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00:00Hi, guys.
00:01How's it going?
00:02It's good.
00:03I'm still acclimating to the altitude, to be perfectly honest with you.
00:05Yeah, yeah, yeah.
00:06It only takes like four weeks.
00:07You'll be fine.
00:08Four weeks?
00:09Oh, great.
00:10Well, good.
00:11All right.
00:12Three and a half weeks to go.
00:13Gentlemen, I said a lot of jargon up at the top about what it is that you folks do, and
00:18I would actually like, for the benefit of the audience, for you to explain your companies.
00:22So Dave, if you don't mind starting, what is an e-commerce accelerator for the normals
00:28in the audience?
00:29Yeah, thanks for having us on, first off.
00:32So e-commerce acceleration, we essentially built the category.
00:37We help brands sell their products wherever in the world they want them sold, marketplace-wise.
00:44So if you're a brand sitting in, you know, New Jersey, which I'm flying there on a red
00:49eye tonight to a big brand in New Jersey, and they've got an e-com team, generally,
00:53you know, 10 people or something, and they have to tackle global e-com, which it would
00:57include China.
00:58We have a couple hundred people in China.
00:59We have people all over the Middle East, people all over Europe.
01:02And if we can do it at a margin that they can't do it at, there's just no reason why
01:08not to use an e-commerce accelerator.
01:11And so if you're a brand looking to sell your products globally on marketplaces, then that's
01:16who you'd partner with as an e-commerce accelerator.
01:19Got it.
01:20And then, similar view, Adam, property management software.
01:24For who?
01:25For what?
01:26So we're actually the biggest enterprise software company no one's ever heard of in here.
01:30We're about 20 years old, based here in Utah.
01:33We build, we're a vertical SaaS company.
01:35We build software for multifamily property management businesses on the enterprise side.
01:40So if you have 1,000 units or more, you're a target customer for us.
01:44About 2,500 people, about 1,000 of those are engineers, just crossed 400 million of ARR.
01:51The company was bootstrapped for several years, raised some money a few years ago, brought
01:54in a few investors.
01:55But yeah, people always, most people have never heard of us.
02:00We're kind of stay under the radar.
02:01That's all right.
02:02Sleeper.
02:03I like it.
02:04Yeah.
02:05Gentlemen, I just want to level set for everybody.
02:07Could you please very quickly just explain what your revenue looks like right now and
02:12how much money you've raised?
02:13Because it is really extraordinary amounts.
02:15Adam, if you don't mind.
02:16Yeah.
02:17So this company raised a million bucks in 2005.
02:19That guy still is on the board, owns like 15% of the business.
02:21So he's going to do okay.
02:22Good life.
02:23He'll be all right.
02:24Yeah.
02:25So we never raised money again.
02:26I came into the business about 2020 as CEO.
02:29We raised around in 2021 a little over $500 million, a lot of that secondary.
02:35We brought in Silver Lake, Dragonair, and then a couple of local CEOs, Ryan Smith and
02:40Todd Peterson also helped out with that round.
02:44And that's all we've raised.
02:45The company's always been break-even slash profitable.
02:47I mean, that's the only way to be bootstrapped for so long.
02:49Sure.
02:50Sure.
02:51And your revenue, did you say?
02:52Revenue, a little over 400 million of ARR.
02:53And like I said, always been profitable.
02:55Thank you very much.
02:56Dave.
02:57Yeah.
02:58We started in 2013 and because my background wasn't in building a business or finance,
03:05we never raised money until 2021.
03:07We raised 52 million at that point.
03:10In total, we raised 277 million.
03:12We did 1.3 billion in revenue last year, and this year we'll do 1.8.
03:16Right.
03:17So thank you for that.
03:18So we're talking about fast growth here.
03:21A lot of heads you both have on your teams.
03:25Tell me a little bit about the environment that we're in.
03:28What has been a challenge for you in this economic moment?
03:32What keeps you up at night?
03:34You've raised a ton of money.
03:37That's not free.
03:39Tell me about it.
03:40Yeah.
03:41So for us, we sell to the apartment industry, so they've been facing major headwinds the
03:44last 12 to 18 months.
03:46Rents have really kind of stabilized, decreased in a lot of markets.
03:49A lot of these owners are underwater in a lot of the loans that they have, mortgages
03:53that they have on buildings.
03:54So luckily, we sell to the biggest customers in our space, so they're super acquisitive.
03:59So that's helpful.
04:01When they go buy other companies, it's just automatic growth that comes to us.
04:04But we're starting to see that turn around, I think, as the Fed starts to drop rates.
04:08That's going to make life a little easier for our customers.
04:12I've found over the last year or so, I think if you're profitable, if you're a big company,
04:15I don't know if the funding environment ever went away.
04:17People definitely got a little more valuation-conscious, I'd say, over the last year or two.
04:21But if we wanted to go raise a round, I think we'd still have quite a bit of demand.
04:27Are you worried about getting over your skis, given the environment for your customers?
04:33We sell to a space that's always going to grow.
04:36It never grows super crazy.
04:37So getting out over our skis would be pretty difficult to do.
04:41This company just will grow at 25% to 30% a year for a long, long time.
04:46So for us, it's just about maintaining efficiencies, expanding globally, but being really smart
04:52about it is what we think about every day.
04:54Yeah, yeah.
04:55Dave?
04:56Yeah, same.
04:57We're lucky because we're in digital, digital commerce.
05:00So as people move from brick and mortar, which is probably 78%, at least in the US, 78%,
05:0522% is digital.
05:08But it's growing every year.
05:10So we have had slowdowns, I think, the consumer, and there's concern there.
05:13We don't feel it that much because there's generally as much that moves from brick and
05:18mortar into digital.
05:20So I think through the years, almost every tech company in the Valley did layoffs.
05:25We managed to avoid that.
05:26And I don't expect we ever will have one, unless we can't forecast.
05:32But even if we get a little over our skis, the tailwinds help us grow out of it, just
05:38being in the space we're in.
05:40Now, you both have interesting personal journeys as far as how you got to the place that you
05:44are now.
05:45You have strong feelings about the founder versus operator debate.
05:51First off, I'd like to know where you land on that one, since you've done both, and why.
05:57Dave?
05:58I think founders and operators can be the same.
06:02I think Adam and I are probably both more on the, you know, I founded the company, but
06:07I think my natural skill is just running a machine.
06:11Where I think I've probably had the most tension is the investor-founder, you know, tension.
06:19I think there's a bit there.
06:20Oh, do go on.
06:25We've had one great one, one not so great one.
06:28But generally, it's just hard, I think, and you can see where they're coming from.
06:32But an investor comes in, and they're like, we're long-term, we're thinking five years
06:36from now.
06:38But in order to monetize something in five years, they're thinking we need profitability
06:41now, so a lot of the changes we're doing are to set up a sell in three to five years.
06:46And that's a long-term view, maybe seven.
06:49But mostly founders or deep operators are thinking, you know, 10, 20 years down the
06:53road.
06:54And that is hard to bridge, and I don't know, you know, and generally, you know, a group
06:59of investors are holding a CEO accountable, and if he doesn't hit certain numbers, he's
07:03going to get fired.
07:04So it causes him to do things in the short, him or her, to do things in the short run
07:09that wouldn't be best for the company.
07:11So luckily, you know, Mel and I, who's our co-founder, we own, you know, 60, 70 percent
07:18of the company, and we have investors, but we largely just stay.
07:21We're just holding the, you know, and there has been a lot of rigorous debate, because
07:24we run a very slim margin, because I feel like it's better for brands and better for
07:29pattern.
07:31But oftentimes, you know, so we grew a brand from 8 million to 324 million, for example,
07:35across global marketplaces.
07:36So our investors say things like, if you grow a brand from 8 million to 324, you can charge
07:41them anything.
07:42And we charge them, you know, 3 percent.
07:45And so that's generally the debate that we get is, but I just think it's better long-term
07:50thinking.
07:51If you look at all of the companies in retail or in those spaces, they win by having the
07:56best service at the lowest cost.
07:59We do both.
08:01I wish I was a founder, because then I'd own 60 to 70 percent of something doing 1.8 billion
08:05in revenue.
08:07So I started to, they were okay.
08:08The first one we sold for 10 million bucks.
08:10The second one we sold for 70 million bucks.
08:12Founders are psychos, though.
08:13Like, they care about everything.
08:15And there's like...
08:16Please tweet that.
08:17Founders are psychos.
08:18They're psychos.
08:19In the best way.
08:20I've worked with some of the best.
08:21And I'm just, my love language is like ARR metrics and customer acquisition costs and
08:25raising money and board meetings.
08:27So after that, I went to a company called Podium.
08:30I was super early.
08:31We went from like one...
08:32Did you say your love language is board meetings?
08:33I'm just asking.
08:37This is my coming out party, all right?
08:40So the last company I was in, we went like 1 to 100 million of ARR.
08:44Raised money from like Excel and Google.
08:45Just lots of emotions and craziness.
08:48But now I'm in this big, boring, Silver Lake private equity world, and I kind of like it.
08:52There's no emotions.
08:54They get called...
08:55They say they're financial engineers.
08:57And that's great.
08:58Because they just...
08:59If you can see it in a spreadsheet, it's great.
09:00So I actually wish I was a cool founder that owned 60%.
09:03I am an operator.
09:04A big, boring operator.
09:06And I've just come to accept that that's what I am.
09:07And I'm okay with it.
09:09I'm gonna get you a mug that says big, boring operator.
09:13I'm gonna come to the audience for questions in just a minute, but I've got one for you.
09:16So you're both actually in Lehigh.
09:19Is that right?
09:20Yeah.
09:21You know, we've talked on this very stage before, last year, about the Silicon Slopes
09:26environment.
09:27The pros, the cons.
09:28I would love to know, from your perspectives as operators in this environment, how has
09:35being in this region helped your business?
09:38And how has it held it back?
09:41I'm happy to go first.
09:43So I started in 03, my first business.
09:46And it was hard back then in Utah.
09:47Like you mentioned Qualtrics and Omniture.
09:49This company was bootstrapped, plural site.
09:52They were bootstrapped because you couldn't raise money here.
09:55The other thing that was really difficult is you couldn't find execs.
09:58Like if you, 10 years ago, if you needed a CFO that had taken a company public, that
10:02did not exist in Utah.
10:03You had to import them from the Bay Area.
10:06That's changed quite a bit.
10:07What we've always had is really good go-to-market talent.
10:10We've always had really good engineering talent at, you know, it used to be like 50 to 60%
10:15of the cost of the Bay Area.
10:16It's crept up.
10:17We've still maintained that.
10:18So what's been nice is we've had enough of these companies that you've mentioned get
10:22at bats in the public markets and big acquisitions and multi-billion dollar acquisitions.
10:26So the talent pool is really rising.
10:28So now I really think it's a huge competitive advantage to be here.
10:31We can get the talent we need, the execs we need.
10:33You can raise money from anybody here.
10:35Times have changed.
10:36Yeah.
10:37Yeah.
10:38I mean, it's tough sometimes in Utah.
10:40And there is a stigma to Utah, and some of them are true.
10:43You know, I think being, you know, I'm not LDS, which is the predominant religion in
10:50the region.
10:51I think there's been a lot of history around that, and a lot of it's, you know, a fair,
10:55you know, assessment of Utah, maybe some things to look at.
10:58But from running a company, the talent is there.
11:04And if you love being outside...
11:07So the people we bring in, it's like a little bit of a love-hate relationship.
11:12When they come in and they land in Utah, they're like, I love this place, and I will
11:16never move.
11:17That's how I feel about it.
11:18But I love to go outside.
11:19I love to hike.
11:20I love to fish.
11:21I love to run.
11:22I love to bike.
11:23And I can get on a biking trail, and I can go 20 miles up the canyon and never get off
11:25the bike, the trail, right?
11:27You know?
11:28So that, I think, is nearly impossible to find.
11:30I don't know any other place where you can go and park and be in the mountains in seven
11:36minutes with your car.
11:37You know, that's from both of our offices, largely.
11:39So a lot of advantages.
11:42Occasionally, the person that comes in is like, you have to have a car here?
11:47Like I can't walk?
11:48No, you cannot.
11:49It's two miles, so probably the closest store from most places.
11:53But if you want to park without paying for parking, and you just drive up to the store,
11:58you get out of your car, you walk in, it's fantastic.
12:00So I think...
12:01And the talent is here.
12:02I think it has a...
12:04People think you maybe need to go outside, but I think not anymore.
12:09Now, we still go outside quite a bit, because you have to be global, I think, to win now.
12:13So we have more people outside of the U.S. than we do inside.
12:21But I think every company has to do that to win now.
12:23Certainly at the scale that you're facing.
12:24All right.
12:25Let's go to the audience for questions.
12:27Any questions for the gentleman here?
12:29Any questions?
12:30Yes.
12:31Back here.
12:32Please.
12:33Just wait for the mic, your name, and your affiliation.
12:36Sure.
12:37My name is Del Rey from Fortune.
12:39I have a question for David.
12:42So I've covered Amazon for a long time.
12:47They have these policies about how they want brands to work with them.
12:52Sometimes they enforce them, sometimes they don't.
12:54They decide when they want to.
12:56That can really upend a business like yours or others in the ecosystem.
13:03How do you deal with that, and how do you sort of educate your employees to deal with
13:09that?
13:10I mean, we've been at it for 11 years, so we've dealt with probably every policy change
13:14or wind of change that Amazon has done.
13:17And of course, we've had our moments where we've woken up and we've thought, we're dead.
13:24But over time, we've just come to realize if you provide value, we're deeply great at
13:34helping a brand on the technology side and have such a great track record.
13:40I just got back a stat from Amazon last week.
13:42This is from Amazon.
13:43Pattern is beating brands that are non-pattern managed on the platform by 2x, and 6x in the
13:53health and personal care space on page views.
13:56So that's all just a tech.
14:00And so regardless of how Amazon decides to set up the model 1P, 3P, however they want
14:05you to move the goods, and they change that, it doesn't really matter at the end of the
14:09day to winning, because Amazon is always going to focus on the customer.
14:15So as long as a customer gets a great product at a good price and we can help that happen,
14:20it's all keyword phrase based from a machine learning perspective, then you will always
14:24have a job and pattern will always exist.
14:27The revenue models might change.
14:29Those have changed over the years, but we've come to care about them less as the years
14:35have gone on, because we're on Tmall in China, for example.
14:39Those change all the time, Rakuten in Japan.
14:41So we support 70 marketplaces in 60 countries, and they always have some new way of doing
14:49something.
14:50So brands have to just adapt.
14:55We've got one more.
14:56Yes.
14:57Your name and affiliation, please.
14:58Yeah.
14:59Venk Vardhan, co-founder and CEO of Nanoware.
15:00We're a healthcare at home remote diagnostics company.
15:03I love the topic on the founder versus operator.
15:06I'm a first time founder, but I think my skill set was always an operator beforehand.
15:11How do you guys see that skill set from the founder and maybe separately the operator
15:17or the blend changing now, 2024 onward, where a lot of those skill sets from the past are
15:23now being automated, they're being augmented or evolving from technology, and you may not
15:28need those old skill sets like you did in the past.
15:31Just curious on your thoughts there.
15:32If you could answer briefly.
15:34Yeah.
15:35I think it's hard to find someone who could scale founder to operator, like a dollar to
15:39a billion dollars of revenue.
15:40Like Zuckerberg's maybe one of the few who've done it really, really well.
15:43It's hard, because when you're small and you want to be a psycho and make every decision,
15:47those same personality traits as you get bigger will push every good executive you
15:52have out the door.
15:54And I don't think that has changed.
15:56So I think it's a really hard transition to make for a lot of founders.
16:00I personally don't know a lot who have done it super well.
16:05I'd say that it's almost a misnomer, because there is operators, but at the end of the
16:09day, the people who operate things really well, companies, they're good at letting go
16:16and letting people do it.
16:18Because once you're a founder of the 1,700 people at Pattern, no matter how good I am,
16:23I'm not running that machine.
16:24I might think I'm running the machine, but in reality, I'm not running the machine.
16:29And so if you can hire well and treat people well, have a good work-life balance, build
16:34a machine, build a good culture, you're going to be a great operator.
16:38That's almost, I think, how you define it, even if you're not in the details.
16:41Someone is who's great.
16:42Right.
16:43Right.
16:44Right.
16:45I have one last question for you before I let you go.
16:48Are we expecting, I mean, I know the environment, economic environment is what it is, but are
16:52we expecting any liquidity events in the near future, Adam?
16:58We are preparing to be a public company.
17:01I think this will be a great public company for a long, long time.
17:04Timing is TBD.
17:05Yeah.
17:06Dave?
17:07Same.
17:08Same.
17:09All right.
17:10You heard it here first.
17:11A round of applause.
17:12Thank you, gentlemen, for joining us today.