One of the most salient qualities we look for in our founders is the endless quest for learning. Brad Feld once dubbed these standout folks “learning machines,” and the most effective CEOs often fall into this category. The realization that there is no final answer, that there are always more questions to be asked, more angles to be considered, more potential paths forward. This is one of the things we admire most about Ryan Denehy, CEO of Electric, an AI-powered IT support platform that just announced a successful Series A, led by Bessemer Venture Partners, alongside us and Bowery Capital.
Ryan is a multi-time founder, having led his first two companies – BNQT Media Group and SWARM Mobile – to successful acquisitions by USA Today (2008) and Groupon (2014), respectively. For each of his companies, Ryan says that the most valuable learnings have come from identifying his “spirit animal”, a company analogous to his own that’s two or three steps ahead of his business. It’s an ingenious approach that’s helped Ryan more clearly plot out his company’s trajectory, while simultaneously building long-lasting and meaningful relationships with fellow founders in the tech community.
We sat down with Ryan to learn more about his spirit animals, and about how keeping an open mind and asking the right questions have helped him get to this point.
What makes a great spirit animal?
It’s a company that’s similar to mine, in certain ways, but that has already overcome the challenges I’m going through right now. It’s a company that’s extremely well-run, with strong leaders who are open to sharing their experiences and helping a fellow founder along the journey. Being able to have these really open and honest conversations is so invaluable and serves as some very welcome inspiration on a path that might otherwise be incredibly challenging and lonely.
What turned you on to this “spirit animal” approach?
When we started SWARM in 2012, I was inundated with feedback and advice, but I found it hard to interpret the quality of all that feedback. So I started looking for CEOs who had already successfully waded through a lot of my issues. My biggest question at the time was how to build a strong inside sales team. My good friend Kenny Herman was working at SinglePlatform then. I knew they had a phenomenal inside sales team, and realized that our customers were functionally in the same market: brick-and-mortar small businesses. So I started asking a lot of questions about how things worked, periodically stopping by their offices to chat with the team, and absorbing their learnings from building a huge, effective sales team. There was a ton to learn from this team that eventually went on to be acquired by Constant Contact for $100 million later that year.
I’ve since used this approach for all of my companies. It has effectively enabled me to borrow from the playbook of successful companies, saving me the time, pain and frustration of reinventing the wheel.
Do you find that your spirit animal changes as your company grows and evolves?
Absolutely. As SWARM matured, we realized there was an opportunity to sell through resellers and distributors, rather than direct sellers. At that point, I turned to Meraki, which produced some of the best WiFi, routing and security products on the market, and it had the best channel sales team on the West Coast. One of Meraki’s founders took me under his wing and literally taught me everything they had done to build that team. Under his guidance, we were able to pivot our sales structure from direct to channel, and we grew our revenue five times in one year. Meraki was acquired by Cisco for $1.2 billion in cash in 2012, and SWARM was acquired two years later.
Who are Electric’s spirit animals?
With Electric, I’ve spent a lot of time looking at Managed by Q and Namely. Q is a great analog for us because they’ve found a way to use software to modernize office management services, while Namely has essentially reinvented HR in a way that’s similar to what we’re doing in the IT space. Both companies are extremely well-run operations with fantastic leadership, and they’ve figured out how to grow their businesses quickly while still delivering a great product.
What made Managed by Q such an easily identifiable spirit animal for you? What were some of the issues you were looking to solve?
I met Q’s founder and CEO, Dan Teran, through mutual friends, and we immediately hit it off. We discovered that our businesses are solving similar problems in similar ways, and we’re selling to the exact same customer (SMB offices). At the time, his company was 15 times the size of mine, so he’d already lived through and solved for many of the growing pains I was experiencing.
One of my most pressing questions for Dan, especially in the early days as we built more automations into our workflow, was how to introduce more offerings while still optimizing for customer satisfaction. Customer satisfaction has always been one of Dan’s top priorities in growing Q, and he offered valuable insights around the importance of constantly engaging with your customers and internalizing their feedback.
Recently, you’ve gotten to know some of the founding team at Namely. What’s your biggest takeaway from that company?
I met Namely CEO Matt Straz through our mutual friend, Sanjay Jain, last year. I really admire the way the company has been able to take a fresh spin on the HR market. There are many similarities between our companies – market, deal size, team structure – and after our first conversation, Matt acknowledged that they had been in our same exact spot just a few years ago. One of the most valuable takeaways from Namely has come from learning about its growth trajectory over the last few years, which has fundamentally influenced expectations around our own growth and scalability.
How have people responded to you essentially wanting to emulate their path to success?
I’ve had nothing but positive feedback and open doors. By nature, I think, startups are extremely collaborative. Everyone I’ve approached in this way has been incredibly selfless in terms of offering up help, and has expected nothing in return. When we were finding our first few customers and crawling to get off the ground, Dan was happy to reminisce about the early days of Q and talk about everything he did right and wrong. I think it can be very cathartic for founders to look back in this way, to see how far they’ve come and to offer some hard-won and very candid feedback to someone who’s going through a very similar path.
There have been some unintended benefits of these relationships, as well. Since these businesses have overlapped in certain ways with ours, there have been a few exciting partnership opportunities that have come out of them. Back at SWARM, we wound up creating some integrations with Meraki’s products. And now, Electric has started partnering with Managed by Q since we sell into the same market. Many Q customers are now Electric customers.
You’re a very active member of the NYC Tech scene. Talk about how this “spirit animal” approach plays into that.
NYC Tech, and startups in general, really feed off of the network effect. I’m a big believer in not reinventing the wheel, and I’m grateful to work in a community where I’m surrounded by incredibly talented entrepreneurs who are really good at connecting the dots. If I have a particular problem I’m looking to solve, or if I need an intro to a specific individual, I have any number of people I can call to help me get there. In that way, the relationships I’ve built with these like-minded founders are an evergreen source of wisdom and learning as our company continues to grow and evolve. I cannot overstate how highly I value this tight-knit community.
You raised your Series A pretty early in the game. Why rush it? Did your spirit animals put you up to this?
In terms of the maturity of our business – product market fit, revenue, repeatability – I think we were right in line with your classic Series A candidate. We just happened to get there pretty quickly. Ultimately, the round had less to do with timing, and more to do with our having found a really amazing partner. I don’t believe in simply choosing the investor who gives you the best valuation. We were in the fortunate position of talking to a lot of great firms, and the feedback I got from my mentors was to pick the firm that truly understands your business and that can really be helpful to you as a partner, who will help you think through your company’s biggest challenges. The firm you go with on your Series A is someone you’ll be with for a long time, so you really need to think about who will be the best partner to you and your business. That advice changed the way I approached the whole process, and I began looking at the unique qualities each firm would bring to the table.
It took some soul-searching for us to get here, but we are so thankful to have landed some phenomenal investors who will be really strong partners to us.
What is your actual spirit animal?
Not an animal, per se, but I’ve always really admired Pharrell Williams – an amazing artist and entrepreneur. He wrote his first hit single when he was in high school, and by 2004, he had produced 30% of all songs on pop radio that year! He’s had multiple successful careers as a solo artist, but what I admire most is his ability to maintain a very wide range of influences – e.g., Takashi Murakami, Andy Warhol, old school hip-hop, Motown – and package all of those together into fresh, relevant and highly marketable finished products. That’s essentially a startup founder’s nirvana: Being able to solve particular pain points for a specific audience by taking successful elements that already exist in the world, and combining them into a new product that’s dramatically different (and better!) than anything else out there.
What’s your #1 bit of advice for first-time founders?
There are a lot of people who’ve done the things you’re trying to do, and they’ve already made a lot of the mistakes that you’ll likely make. Why go through that pain yourself? Find those people and ask as many questions as possible. The worst thing that happens is they don’t respond. But no one has ever done that to me – and I ask a lot of questions! For a founder who’s already walked in your shoes, it should be no skin off their back to send you their sales playbook or a list of biggest mistakes they’ve made. This will save you a whole world of heartache in terms of trial and error. But more importantly, you’ll have the opportunity to build meaningful and long-lasting relationships that can have an enormous impact on you and the future of your company.