Tuesday, August 19, 2008

Building A Billion Dollar Business

Christine and I went to what I thought was one of the best Churchill Club events that I've attended, "Upsizing: Breaking the Billion Dollar Benchmark."

Emmanuel T. Hernandez, CFO, SunPower
Mark B. Templeton, CEO, Citrix
Maynard Webb, CEO, LiveOps; former COO, eBay


David G. Thomson, author

Most company CEOs dream of building an organization that generates more than a billion dollars in revenue. Most fail. What do those who do succeed have in common? What sets them apart? Is there a quantifiable success pattern independent of economic cycle or industry?

This discussion brings together corporate CXOs that have led or played a key role in taking their companies past the billion dollar benchmark—one of them as CEO, one as CFO, and one as COO who is now CEO of a startup and planning to do it again. Led by moderator David Thomson, author of "Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth," the panel will identify the management traits and techniques that lead to success.

Mark Templeton is President and CEO for Citrix Systems, a $1.4 billion leader in application delivery infrastructure. He joined Citrix as VP of marketing in 1995 when Citrix had $95 million in revenue and went public. He became president in 1998 and was named CEO in 2001.

Emmanuel Hernandez is CFO and helped take public SunPower, a leading solar power company scheduled to attain $1 billion in revenue this year. Prior to joining SunPower, he served more than 11 years as the executive vice president of finance and administration and chief financial officer at Cypress Semiconductor Corporation.

Maynard Webb became CEO of LiveOps, the leader in distributed contact centers, after serving as eBay’s COO.

Thomson’s book is based upon three years of detailed research of American companies that have IPO’d since 1980 and grown to at least $1 billion in revenue. Join us for this down-to-earth discussion including practical steps you can apply today to improve your prospects for growth.

It was interesting to note that Thomson's research found of the 7,500 IPOs over the past 25 years in the U.S., only 5% hit a billion dollars in revenue. Over the past year, the largest number of new billion dollar revenue companies still comes from the U.S. Most people in the audience raised their hands on China or Russia. We raised our hands correctly :)

The highest number of these new companies came from California (vs. other states) and, of course, most of them were based in Silicon Valley.

The number one sector for new billion dollar revenue companies was the specialty retail industry and number two was technology. During the past five years, the number one economic sector was energy.

After Thomson's initial download, he began to ask the panelist questions.

Mark Templeton, CEO of Citrix, described how in 1995 their revenue was $14.5 million. In 1996, it was $45 million. In 1997, it was $225 million, and so on. They hit a bump in the road when they were around $800 million in revenues and went back down to approximately $500 million. They adjusted, continued on the right path, and hit $1.4 billion in 2007.

Maynard Webb, CEO of LiveOps, described how in 1996 eBay had only 225 people and $100 million in revenues. He helped grow it from $140 million to $4.5 billion by 2005.

Templeton stated that things just don't happened. How you have to navigate through the trends. He admitted that Citrix was lucky enough to ride the wave of the Internet and then Java.

eBay discovered they had a hidden gem in their "autos" section that was initially placed in an "other" category. They made an "autos" section that became a multi-billion dollar business. eBay also looked for growth in foreign markets.

Maynard described how it was different at LiveOps. He says he has to be focused to discover and hit the sweet spot and ride a growth curve. At eBay, they had a huge wind behind their sail that took them for a long ride.

Hernandez's story about SunPower was insightful. They went from a solar cell product and expanded to creating solar panels and then went downstream to installation. They created a network of dealers for installation but for new home production they did this themselves.

Templeton said, "A core market might not take you to a billion, so you have to look right and left." Adjacent markets, new verticals, etc.

For Citrix, much of its success he credited to their study of what went wrong (i.e. Novell, Netscape, Lotus) and really admiring companies that were doing things right. He listed Microsoft, Adobe, and Shiva, which was acquired by Intel.

Hernandez emphasized the importance of finding a marquee account to jumpstart your growth towards a billion. For SunPower, it was a customer in Germany since they had the most developed solar energy market. (Largest solar markets are Germany, Japan, Spain and then the U.S. Italy might take over the U.S. this year.)

Being a gamer, I naturally thought of Blizzard. They found a tremendous path towards growth in South Korea with their Starcraft game. So if your industry allows for it, look beyond your borders for a marquee account.

Thomson discussed how his research found that one common factor was the executive team, which included the CEO and a CXO, had one good inside person and one good outside person. Someone to interface with the public and investors and someone to work on operations.

Templeton said that he didn't have the luxury of a good inside/outside combination, so it was a team approach for inside operations. The other Citrix executives work as a team on the critical operation issues while he is the outside guy.

Templeton also stated that they require board members to be stellar generalists. He doesn't want operational advice, which he said would be disastrous, but sound strategic advice. This was one reason he had a venture capitalist on his board. Also going back to his advice on finding companies to admire, he went on to get an executive from Adobe to sit on his board.

Webb made a good point on how startups shouldn't be afraid of their board. How it was a powerful tool that is typically underutilized.

The last important discussion centered on how acquisition is an important part of the equation towards a billion and more in revenue. For SunPower, it was necessary for them to follow their downstream strategy. It was a bold and risky move that most of their shareholders opposed, but they believe it was the right decision. Hindsight proved them correct and the move doubled their revenues and create a new business line. Acquisition was also an approach taken by Citrix and eBay.

Summary points to driving towards a billion in revenues:

- Look beyond your core market.

- Find a marquee account to start your wave.

- Look to foreign markets.

- Build a strong board of directors.

- Have one good inside leader and one good outside leader.

- Acquisition is an excellent move towards a billion dollars in revenue.

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