How Fast?? What began as an eight-member dream team exactly two years ago, has now evolved into an outright leader in the online education industry. Blackboard Inc. now claims 90 employees and more than 250 institutional customers, including Cornell University, Georgetown University and The College of William and Mary. A private company backed by four venture capital firms, Blackboard has raised more than $16 million in capital and watched its sales bounce from several hundred thousand dollars a year to several million. And all of this before it’s even out of diapers?
What propelled you to launch Blackboard?
This may sound hokey, but it’s true passion. I was a teacher in Washington, D.C., and I went onto the Harvard Ed School. My mom’s a teacher, my dad’s a school board president, university administrator. So I’ve just had education in my blood. And with the Internet impacting education as an industry, I got really excited about an opportunity to build a business around the intersection of the Internet and education.
What were the guiding principles of Blackboard when you started and what benefits do you think you’ve reaped from keeping those principles close at hand?
I do think that our biggest strength has been the discipline with which we’ve executed our business plan. The big idea of Blackboard was that as the Internet impacts higher education or education broadly, schools and universities and corporate trainers will want to use the Internet to do distance learning and also to help support traditional courses with a Web component. Everybody needs a platform that they can use to help create and deliver and manage their on-line courses and to help faculty create course Web sites that they then can deliver to the students. It allows students to check their grades, take courses, access learning materials, those types of things.
We were focused on being the platform. And so we picked a specific industry within education: the higher education industry. And then we focused on one core competency, which was to provide the software platform that universities would buy from us to create their on-line courses. And now we’re starting to — since we’ve gotten a pretty good momentum — think about other revenues streams that we can build on top of that platform franchise that we’ve built.
But up until now I think the value we’ve gotten off of staying focused on that has been huge. Some of our competitors started off as platform companies, and have now thrown 15 other things on top of it before they really got market share on just the platform. And they’re finding themselves encumbered by a very big stack of products and services they’re offering to a small segment of the market, while we are still focused on one very clear thing, and we’ll continue to be very broad-based across the entire market. And so a year from now you’ll find that Blackboard is at all of these institutions and is ready to start building other kinds of businesses on top of that when these other folks have lots of businesses built, but they’re only at a very small segment because they didn’t stay agile in the beginning by staying focused on what they’re good at.
Four of the common growing pains that fast growth companies experience are generating revenue, amassing cash, maintaining growth margins, and then predicting the profitability. What stage of the game do you think you are at now, and what methods are you using to overcome these challenges?
Cash is the first. That’s just a unique thing about being in the Internet industry — that the cash and the capital that you need to grow the company, whether it’s equity financing, debt, IPO, however you get it — is readily available. I mean cash is as cheap as it’s ever going to be in the markets — private and public markets. When it comes to revenue, I think we are generating revenues pretty significantly. We made more in April than we made in half our first quarter. So we’re growing very quickly on the revenue side. I would say we’re really in that gross margins component, really trying to do a land grab, where the most profitable pieces of that business are going to be once we settle into an established market share. And then the next stage will be once we figure those out, implementing them to achieve profitability.
But there are other components. I think the first thing that you hit when you’re a fast growing company as we’ve been is to know how to scale the organization in terms of people’s experience and management capabilities. In other words, how to know when to fire yourself. I was a founder of the company, and I was CEO and Chairman of the company, and we brought on board a CEO. And other colleagues of mine who were the co-founders at different points headed up sales, headed up product development, headed up marketing. And in all of those areas, we’ve recruited people who have much more industry experience in those specific areas. And I think most fast companies will fall apart typically because the founders keep too much control in areas beyond their expertise for too long.
That seems to be another huge stumbling blocks — the inability of the leadership to grow and move on or find people who can do things better.
It’s a tough thing to give it up and trust other people to your vision, and to really scale the organization by breaking it out, keeping it fairly flat, keeping it fairly agile, rather than bottlenecking everything through the one or two original founders of the company. And there are examples of that being successful. Microsoft grew at huge rates, exponentially with Gates tying a lot of things together, having an extraordinary involvement in a lot of areas, even on a fairly large scale. But I think the vast majority of those stories end up being failure stories.
One of the two other major stumbling blocks is positioning a company within a larger market when harsh competitors get in and when you really have to make an in-depth strategy. It sounds like that was one of your priorities from the beginning.
Absolutely. To know what we’re good at, to know what we’re going to execute on, to know how to clarify the noise. Because there will always be a lot of noise, a lot of people who theoretically do what you do. But what you’re looking at they don’t or they’re doing other stuff that slows them down or dilutes them. You have to not get scared into matching them but continuing to execute what you’re really good at.
One last major problem is the inability of managers and engineers to assemble systems and structures to handle the fast growth. Are you finding that you’re able to keep up with this amazing growth on the back end?
It’s a huge challenge. We only first hired our first HR person when we broke the 75 mark which means we broke the 75 mark knowing that there were about 15 people that were going to start within a month and so that means over seven different people were recruiting, managing the process, creating offer letters, negotiating salaries. There was no internal promotion scheme and no internal norming of certain kinds of benefits programs. That whole infrastructure. You almost take it for granted when you’re a smaller group that knows exactly what it needs to do and as it keeps looking inward, it’s looking outward. But at a certain point, you need to put in place those processes, that’s what we’re doing now. So that resonates very loudly with us.
How have you started to market yourselves outside of just the smaller educational channels? How have you really built a brand?
Building brand is the other critical thing. When you’re a fast-growing company, you’re about to become a bigger company and you have that sense but you need to create the perception that you’re a really big company, particularly when you’re selling large scale systems, trying to create major partnerships. The cheapest way to become a really big company is not to hire a lot of people to be a big company, the quickest way is to build brand, to build a perception in the marketplace that for all they know Blackboard could be 500 people if it’s just five people because that’s the nature of the Internet if you’re a Web site, if you are a software company that people download and don’t have to interact with people they just never know.
And so we did it by just leveraging. We got a few early customer accounts and we took advantage of our marketing, of list-serves, took advantage of conferences, took advantage of just the network-nature of our client base to take those few success stories and really get them out there.
One of the things that seems most important for fast track companies is an entire staff meeting — a place and a time to knock heads and exchange ideas, problems and updates. Do you have anything like that in place?
We do. Informally, we have an area in our offices called the quad, which is central to our office structure, across all the different divisions. It has beanbags, a fooz-ball table, it has Coke machines and a Spy Hunter video game. And you’d be just amazed at how simple that idea is: people playing fooz-ball, hanging out near the soda machine. A product person will ask questions of sales guys and vice-versa, and it creates a lot of interaction. We also have weekly management team meetings. Once a month we open that management team meeting up to the directors of the company and then we also have monthly first Tuesday meetings for the entire company to get together. Occasionally, we have picnics, we typically tend to go out for a happy hour on Friday nights as a group, all of those things. And we do that not only within the company but also our board of directors, our investors, we meet with on a very aggressive schedule. We meet with them typically every six weeks, which I think is very frequent to meet with a board of directors because things are so fast growing.
What have you found are your most valuable external resources — guidance and advice for fast-growing companies?
Our customers and then the analysts, the gurus, the mind-share folks. Customers because they give you — even if you’ve just had one success story that can be pushed everywhere — ideas to scale that up and if you do a good job in a market, it really does get the word out very quickly. Very early on in Blackboard’s history, even pre-product, to some extent, we just had a really compelling vision, so we had the right messaging for the marketplace and then just had to get our product out there. But we met with all the analysts, the bank analysts, the market research analysts like Gardner Group, the informal association presidents, different kinds of people that really are the salt leaders and they helped anoint Blackboard earlier than our real numbers probably would have warranted. They helped anoint us as the fastest growing, as the one with the right vision, as the one that you really should be pay attention to. And they became our evangelists, they became our face.
Finally, who are your mentors or teachers and why?
I think my mentor is our CEO. One of the reasons I recruited a CEO and then in particular chose an RCO whose name was Lou Pugliese is because I had a clear approach to management, which was mentoring. And so I consider him my mentor. Most of our board members are venture investors in the company, but we only selected venture investors who had operational experience and went through what we’re going through. And so they very much have become our mentors.