Frank Poore is the founder and CEO of CommerceHub which is a cloud-based e-commerce merchandising, demand generation and order fulfillment platform for retailers and brands. Frank successfully built an industry-leading company that created 3 liquidity events for shareholders and employees – first through a sale to Liberty Media/QVC in 2006, second via public offering in 2016 (Nasdaq:CHUBK), and through a take-private sale of the company to GTCR and Sycamore Partners for $1.1 billion in 2018.
In this episode you will learn:
- Building a company with a family member
- Raising capital when you need it the most
- Building meaningful relationships
- Learning the art of selling
- Recruiting and fundraising when you are outside of big hubs
ACCESS THE PITCH DECK TEMPLATE
About Frank Poore:
Frank Poore is the CEO and founder of CommerceHub, which he founded in 1997 and built into a $1 billion company that plays a key role in helping retailers compete more effectively in a digital world by optimizing assortment, demand and delivery.
As a pioneer in ecommerce and drop-ship fulfillment, CommerceHub helps retailers like The Home Depot, Best Buy and Macy’s meet the demands of an increasingly savvy customer by creating an exceptional customer experience.
In 2017, CommerceHub helped more than 11,500 retailers, brands and distributors achieve an estimated $16 billion in Gross Merchandise Value.
Connect with Frank Poore:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello, everyone, and welcome to the DealMakers show. Today we’re going to learn quite a bit from this founder, someone that has built something from nothing into something meaningful that actually recently had a quite interesting successful transaction happening. But I think we won’t go more into it because we’ll let him tell us about it. So, without further ado, Frank Poore, welcome to the DealMakers show.
Frank Poore: Thanks for having me, Alejandro. How are you today?
Alejandro: I am doing very well. Also, in New York City and it’s a beautiful day, so I cannot complain. Frank, doing here a little bit of a walk through memory lane. Did you actually grow up in New York?
Frank Poore: Yeah, I grew up way up on the Canadian border. We called it the North Country. It was literally on the Canadian border. So, I grew up in a small 900 sq. ft. house and actually joined the Army after I graduated from high school. I grew up in a pretty rural small town.
Alejandro: Nice. So, why the Army? What was the trigger there?
Frank Poore: Well, I really didn’t have the money to go to college, and didn’t really know too much about the process of college and that sort of thing. I knew all of my friends were going, and I wanted to go. I ended up joining the Army because they had a GI Bill at the time that would allow me to if I saved some money and took certain jobs in the Army that I would be able to come out with $15,000 for college. At the time, that seemed like a lot of money and a real opportunity to me.
Alejandro: And you were doing tactical communications there. What was tactical communications?
Frank Poore: Tactical communications was a fancy way of saying that I was a radioman in a combat infantry unit. So, I carried the radio. That was the tactics. We fixed the radios at a very superficial level, but for the most part, I was in an infantry unit. We would get forward deployed with communications gear. That sort of thing.
Alejandro: What deployment or operations were you involved in that were exciting?
Frank Poore: Well, exciting? A lot of it is preparation, and the preparation is usually pretty boring. But some of the exciting stuff, we were in Panama. We went into jungle training in Panama. I thought that was a lot of fun, but there were certain aspects of it that probably weren’t really who I am. I’m much more of a free-thinker and much more of an entrepreneur than I am somebody who likes to be told what to do and follow orders.
Alejandro: I totally get it. Just before we go into you studying philosophy and psychology, what were your biggest takeaways from this couple of years that you did in the army?
Frank Poore: Honestly, the thing looking back on it was that it’s just the idea of perseverance. Whether you’re in a difficult situation or whether you’re in some long, interminable march or whatever you’re doing, the idea that mentally, you can get through it. You know you can just stay strong, keep a positive attitude, and try to persevere. Perseverance is probably the biggest thing I took away.
Alejandro: After you did this a couple of years in the Army, what got you into thinking, “You know what? I’m going to go and study philosophy and psychology.”
Frank Poore: Like I said, I always wanted to go to college. I probably figured I would go for computer science. There was something about that at the time that was appealing. I don’t know if I have the mathematical brain that I would have needed to really be successful in that, but I ended up going and took a couple of classes, and the ones that really stuck with me were sort of the more esoteric high-level intellectual kind of classes, philosophy in particular, and then some of the more, I’ll call it philosophical psychology types of topics that were really interesting to me. It’s just what captured my attention and became really interesting to me. I think people always say if you could do it over what would you go study? I said, “Look. If I was going to do it all over and I just wanted to make a lot of money, I’d probably go into finance because those guys make a lot of money for not doing a lot, at least from my perspective, just moving other people’s money. But if I was to do it all over again, my sense is I’d probably go into those very same topics just because they were what was of interest to me.
Alejandro: So, as soon as you graduated from this because I know it took you a little bit of time before you launched your big business, CommerceHub, which we’re going to go into detail in just a little bit, and you did that after your MBA, but what did you do right after college?
Frank Poore: After college, I met a guy. Back then, Apple didn’t have Apple stores. They had what were called Apple Dealerships, and they covered certain territories around the country. I worked for the Apple dealership in upstate New York. I had from the Canadian border down to Albany, New York, but not Albany; over to Syracuse, but not Syracuse. Then back up to the Canadian border. So, I had this really sort of rural pasture of a territory, but I started to get very excited about the Macintosh and the kinds of things it could do. I started to see how well it actually could work within schools and the types of software they had. I wasn’t able to sell in the businesses at all. There was no business software for it whatsoever. There was no Excel. They didn’t even make Microsoft Word at the time. So, it was a really difficult business sell, but I found that printers, in particular, I could really tackle and schools. So, I ended up doing really, really well as an Apple salesperson and ended up getting to meet Steve Jobs at MacWorld in Boston one year for hitting my numbers. That was a huge event for me. This was before he was the super-cool famous guy that he is. He was more of a tough guy, but it was really cool to go and get to see him and just hear him speak and knowing the story that he had started this in his garage always appealed to me. So, I did that for quite a while.
Alejandro: What did you learn about the art of selling?
Frank Poore: You know, people say you’re a good salesman. The truth is I’m a good salesman if I really believe in what it is I’m selling, and I’m a horrible salesperson if I don’t. What I learned is you really have to believe in your product. If you don’t believe in it, then you’re not going to convince anyone else to. But in addition to that, you really have to find out how to tailor everything to that particular person or company’s needs. It’s not a one-size-fits-all. There are some patterns out there, but for the most part, I think every sale is unique, and I learned that you have to be thoughtful, and you have to listen more than you talk so that you can end up tailoring the presentation, tailoring the pricing, tailoring the packaging and everything to what it is the customer needs.
Alejandro: Yeah. I agree. That’s why we have two ears and one mouth. Right?
Frank Poore: That’s right. Use them in proportion, they always say.
Alejandro: That’s it. So then, you did this for a little bit, and you were already in the world of being employed. Why did you decide to go back to studying and doing the MBA?
Frank Poore: Well, interestingly enough in the interim there I came down, and my wife was working for a company that was selling video games at wholesale distribution. This ties back out to even where I am today. But basically, they were selling video games to BlockBuster and to other stores and that sort of thing. This was the typical video games you would see. At the time, there was no such thing as electronic boutique, or Funko which has come and gone, or these other types of companies that were just selling video games. So, I decided to start a video game-only store. In addition to just selling video games new, I decided to start selling used video games. This sounds not-so-interesting today because a lot of companies do it, but back then, that was sort of unheard of. Right? People did used books, but nobody was really doing used video games at the time, and I did really well. That really got me to catch the entrepreneurial bug. I was doing some work with another gentleman. We were going to open up multiple of these stores. He was going through some personal issues that he had to resolve before we could go do a number of these things. So, I decided to go back and get my MBA at that time. So, that’s what led me up to the MBA. But the video game company and that guy ended up being pretty important to the story long-term.
Alejandro: Then the MBA, would you say that it’s like the last push that you needed, and if so, what did that look like? Because you went to do management information systems. That was really the focus. Right?
Frank Poore: Yeah. To be honest with you, I went back to my MBA program more as a way to just—I don’t want to say just to have something to do, but I wasn’t sure what I wanted to do. I was doing this video game store. We were starting to do really well with it. The person who was going to be putting up the money needed some time to do certain things, and I didn’t want to wait that year or two that it was going to take. I wanted to do something productive, so I went back to get my MBA. I’d like to say that it was thoughtful and that I had some master plan, but the truth was I decided that I didn’t have a job, and I didn’t know what I was going to do with my life. So, I went back to get my MBA, and that’s the truth.
Alejandro: Just a random question: if you could go back in time, and in terms of like getting up to speed in the world of business, would you do an MBA, or would you just launch your own company?
Frank Poore: So, I came from psychology and philosophy, so you have to understand I didn’t know that much about finance or operations and that sort of thing, and I had been a sales guy. I think getting the MBA was helpful. It gave me a sense of how all the pieces fit together. I think that most of what I learned in my MBA class I really didn’t apply here. I think a lot of the MBA class was sort of either bigger company-centric or really kind of building a base of consultants that were coming out to go and work at the extensors. That sort of thing. So, much more broad management kind of thinking. Looking back, would I do it again? I think in my particular case I needed some business understanding, understanding how to put together a plan and to understand what EBITDA and what multiples of revenue were. Just basic stuff that I would never have gotten exposure to in my undergraduate.
Alejandro: Makes sense. I think for some people it works, and for some others, they’re like, “You know what? It’s better the pragmatic route, and just do it myself.” I totally get it. So then, your next business, CommerceHub. That happened right after you got your degree, your graduation out of the University of Albany. Walk us through what was the process because ideas take time to incubate. Were you thinking about how this would look like during your MBA program? Walk us through how that idea got incubated.
Frank Poore: Sure. I was really fascinated. You have to realize this is like the onset of what we know as the internet, the World Wide Web. As soon as the first day that I was on a Mosaic browser and the internet was no longer textual, it was pictures, I knew it was going to be a commerce platform. People were going to sell things. It was just so obvious to me that that was going to happen that I became obsessed with it, and I wanted to figure out. I figured I was going to be some online retailer. That’s sort of how I got started. My first thought was obviously selling video games online because I knew somebody who had video games. But basically, when I was in my MBA program, most of the other students were doing certain types of projects. I worked with my professor. We got, at the time, an Oracle database, and we got some other tools. I suggested we build an e-commerce platform. Nobody was really talking about it. I got a couple of other people to be on my team. We started to put this thing together, and we built the bookstore for the University of Albany. So, we had all the memorabilia you could buy: the tee-shirts and sweatshirts and all that kind of stuff. At the time whenever it was, 1995 or ’96, that was pretty remarkable. I don’t even know exactly when Amazon started, but right around then. So, we had put this bookstore online, and it got a lot of attention. I got a lot of job offers when I was graduating. I just decided that I wanted to do my own thing. I hadn’t been working. I had been in an MBA program, and I figured if I’m ever going to do something, now’s the time. If I go buy a house and have kids, then I’ll probably never be able to start my own company. So, my wife was gracious enough to keep working for a while so that I could start the company. I started off, and my first piece of revenue was coming back from the video game distributor. We started to connect him onto a bunch of different retailers. I had the notion that he’s got 3,000 video games in his warehouse, and what if we could get those pictures and product descriptions displayed on all of the top retailers: the Walmart’s, the QVCs, the Targets, and be able to have those companies leverage their marketing and sales muscle, and open up an entirely new channel for this video game distribution company. So, I would reach out to these retailers, and I would say, “I was on your website. I noticed you have 10 video games. We’ve got 3,000 video games. I’ve got all the pictures and product descriptions. You could put them on your website. We can do an integration to our backend systems, and we’ll ship these products directly to your customers on your behalf. They would all say, “When can you be here?” Because it was all incremental revenue and all incremental margin for these guys. They didn’t have to stock any inventory. They didn’t have to warehouse it. It was literally zero risk. Right?
Frank Poore: And it was just new sales and more products they could sell.
Alejandro: Really cool.
Frank Poore: So, we went down, and QVC was the first company I went to. They were very excited about trying to make this happen. Then we ran into all the realities of what it’s really like to be a drop shipper or shipping on behalf of major companies. Customers would call and ask where the order was. They wouldn’t have any knowledge of that, so we really started to build systems that would tie out all of this information. So that we, in essence, literally made this video game distributor in Upstate New York almost like it was one of their own warehouses. They would know exactly what inventories and stocks systematically. They placed an order. It would get shipped. They would know it’s shipped. They would get the tracking information. Stuff we take for granted today when we do this stuff, but back then was really complex. We were on the forefront of this. We built a platform that would allow us to do this at greater scale. It just went from there. But leveraging that video game, I look back, and I think if I was trying to start this, and I had to go sell a retailer purely on the platform, I probably would have never made it. But I look back, and it’s because I had those video games. I had something the retailer wanted, and that got me in the door. Once I was in the door, I could be like, “Do you have problems with other suppliers?” Because I knew how problematic it was for us. They would say, “Of course we do.” I’d say, “Why don’t you pass them my way and I can see how quickly I might be able to get them connected. We just continued to leverage that. I had a really good co-founder that really understood the computer science problems we were trying to solve beyond the business objectives. We meshed well and were able to just continue to build from there.
Alejandro: Let’s talk about your co-founder. How did you guys meet?
Frank Poore: Meeting Richard really helped catalyze the go-forward plan. I had a former professor who asked me to come back and speak at one of her classes. I really had no interest in doing it. I was tied up with a number of things that I wanted to do, but I agreed to go back and speak. Because it was an MBA class, I didn’t figure I was going to find the technical person I wanted. So, I went there, and I just did my spiel. I told folks, “If you know anyone technical, have them reach out. I need somebody to help me build a company.” When I got back to my desk, I got an email, and it was literally on one line. You know, back then, there was the difference between systems. He was sending it from a UNIX system. So, it was literally one line. I scrolled across that whole line, and I saw the word Java. I found his phone number in that long stretch of text and decided to give him a call. We ended up meeting for lunch, and in many ways, the rest is history. It took him a while to join the team, but we became friends, and he would stop by. Slowly, but surely, I was able to get him to join the team for very little money, and hope that the company would succeed with equity.
Alejandro: Meeting co-founders is a tough one. It’s probably the biggest decision that you make when you’re building a business. When you met Richard, was there like one moment in time that you really told yourself, “This guy is the guy for this.”
Frank Poore: Yeah. Just when we would talk about the problem. I had met with other people along the way, and they’d all try to solve it almost like a programmer would try to solve the problem. They would just start coding. It’s the difference between the way an architect thinks about a building, and the way a carpenter thinks about a building. So, Richard had that architectural mindset. When we first sat down, he was saying, “Here are some of the problems you’re going to run into if you try to go and do this. There all kinds of other things that you’re going to need to abstract out.” It’s really remarkable looking back. He didn’t have the experience to have come to these conclusions but did. He had that kind of mind.
Alejandro: Yeah. So then, finally you guys go into it. What was that initial team? What were some of the initial key hires that you had to make?
Frank Poore: Definitely, programmers were the bulk of it. We had a few operational people to support the customers that we had. Then we had mostly engineers. In the early days, there were three or four of us. Then it grew to six or seven. Then we raised a little money, and you go from 10 to 20 pretty quickly. But generally speaking, it was mostly engineers. At one point, I had a part-time finance person because we were running out of money, and I needed to figure how to go and raise capital. That was nothing I had ever done. We were living off the money we were making off the consulting work doing for the video game distributor.
Alejandro: What were some of the early days like of CommerceHub?
Frank Poore: Some of the early days were a lot of system problems. These are the things I remember. Systems going down. Just problems that would happen on the retail side. Their systems would hiccup. They’d send out orders, and we’d send those orders down to a supplier. The supplier would send out the big-screen TVs. Their system would hiccup and send that same batch of orders again, and those suppliers would send out another batch of big-screen TVs to the same customers. I remember that happening maybe three times in one day. So, when big-screen TVs go out, everybody gets panicky. There were a lot of things that needed to be worked out down in the bowels of the system. When you’re dealing with disparate parties, we had control over what happened inside CommerceHub, but we didn’t have control over what happened inside the suppliers’ systems, and we didn’t have control over what happened in the retailers’ systems. We had to evolve a platform that would detect all kinds of problems from all these different sources, and all the things that could go wrong. Quite honestly, if Richard were here, he would say that we built antibodies to the viruses we’ve encountered in the jungle over 20 years. So, we developed capabilities that allow us to protect all of the parties that communicate through our platform from each other. So, if the wrong invoice goes up, the retailer agreed to pay $50 for the item, and the item gets shipped. The supplier tries to charge $70. We can control that from getting into the retailer’s system and updating their accounts payable system in correctly. So, we’re sitting in the middle of all of this communication.
Alejandro: Got it. So then, one thing that really hits me here is you definitely grow from the video gaming experience what you had learned there, and you grow this to a wider audience, like how you enabled the retailers and the different brand. For the listeners so that they really understand what really became the business model of CommerceHub, if you don’t mind just summarizing it, that would be fantastic.
Frank Poore: Yeah, so I’ll just give you the high level. CommerceHub is in the business of integrating retailers and their suppliers. We do this primarily for e-commerce. If you think about it, Amazon has about 300 million SKUs available for sale online. If you take the average retail store, they may have 70,000 SKUs. Maybe 100,000 SKUs if it’s a superstore of some sort. But for the most part, when you go online, 100,000 SKUs is like Charlie Brown’s Christmas tree. It’s paltry. So, in order to be successful in today’s environment, retailers have to have really vast assortments of products. They have to have really good offers. They have to have really good customer experience. They have to offer free delivery; quick delivery. So, one of the hardest challenges for retailers is a balance sheet. They don’t have the ability to go out and do what Amazon does and keep getting rewarded by Wall Street. They have to maintain profitability. So, they have to be very selective about which inventory they’re able to buy, and they’ll buy those things they think they’re going to sell a lot of that have a lot of inventory turns. But what we enable is the ability for them to radically expand the assortment that they offer to their customers beyond what they can physically cut checks for, for inventory. So, you take some of our retailers, as much as maybe 90% of their online products are actually virtual and going through CommerceHub. As much as 50% of their online business is going through CommerceHub, and we’re talking billions of dollars for some of these retailers. We work with the likes of QVC, Walmart, Costco, Home Depot, Dick’s Sporting Goods, Lowes, Macy’s, and a number of other large retailers. We’ve got about 12,000 brands in distributors that are on the backend that are shipping products directly to customers. Last year, we did about 20 billion dollars of gross merchandise value of goods sold that got processed through our platform and network.
Alejandro: That’s amazing. I get dizzy from just thinking about all the zeros. Frank, let me ask you, one of the things I was present to was as we were discussing, and you touched on the challenges that you guys were facing, was it really the fact that you guys are not in a place like Silicon Valley, or let’s say New York City because you were talking about some of your key hires being programmers and engineers. Did you find it tough to be able to secure talent given where you guys were located?
Frank Poore: No. Interestingly enough, this area has a lot of good colleges and universities. There’s a lot of technical talent around here. The bigger challenge in Albany, New York, in particular, is there’s just not a lot of e-commerce or retail experience. But the technical and operational, we’ve got GE here. We’ve got IBM here. There are a number of larger companies. So, there is a technical pace, but not a retail and e-commerce banks for sure. That was the bigger challenge. We opened up an office. We actually bought a company on Seattle. We got a team of people out of that acquisition that are in Seattle that are really focused on marketplaces, social, and search-types of capabilities, and e-commerce because it’s much more prevalent there. But, interestingly enough, I would say within the last year, or so, we’ve moved the entire engineering team that we had in Seattle to Albany, New York. We’re probably 30% less cost here, and honestly, we get a higher caliber engineer here. If you think about Seattle, there are all kinds of things going on out there from artificial intelligence to drones to Boeing, Microsoft, Google, and Facebook. Whereas, in Albany, we are working on some of the more cutting-edge types of things.
Alejandro: Probably more loyalty from employees now because being in a place like New York City, I can tell you from experience that it’s just like a revolving door having people. You train them, and then there’s something that comes along, and it’s just like you probably have people on average like a couple of years.
Frank Poore: Yeah. We tend to do better than that. One of the things if you came by our office is, you’d see jerseys that are hanging. We do hockey jerseys. I started that a long time ago. You get your last name on the back, and then you get your employee number. So, the first people that were here would go up to 99. Then after that, we put the year that you started. If you walk around, you’ll see that the tenure here is pretty good. We’ve hired a lot of newer people over the last couple of years, but you’ll see that there are a lot of people here that have been here for some time.
Alejandro: That’s really cool. I wonder if there’s anyone showing up in the cafeteria with the jersey that says 97?
Frank Poore: 97. I’m not sure about that one. Back then in 1997, the numbers were low. So, I was #1. 97, there’s probably only two or three jerseys given out that whole year.
Alejandro: Got it. So, you were talking about the fundraising before. Tell us a little bit about the fundraising side and at what point did you tell yourself, “We need money for this thing.”
Frank Poore: Well, at the point when I did basic math, and it said this is how much I’ve got to pay people and this is what it costs for rent. I knew in the beginning that I’d have to raise money if I wanted to do anything other than trade my time for money. That was always a big thing with me. It was always like I never liked the idea of trading your time for money. I thought if you’re going to be a brain surgeon, maybe you can make the most amount of money for your time, but you still have a limited amount of time. We knew we needed to raise funding. So, I put together a business plan. I wasn’t really good at the financial aspect of it in knowing how everything all tied out. I certainly didn’t pay as much attention in accounting class as I should have because I didn’t know how to do all of that balance sheet stuff at the time. So, I got somebody to help me put together some numbers and do modeling. Once I had a model, I could play with the variable inputs and do snapshots of business plans. I had a business plan with financials, and then I went out and started getting meeting after meeting to try to get some people to give me money. That was a really, really hard and fruitless log for the most part. I didn’t really understand how investing worked. I think that’s fundamental. I came to the conclusion at one point that it’s just like a meat grinder. People want to put a dollar in the top, crank the wheel, and have like $7 come out the bottom. They don’t really care what happens in the middle with all the sausage making. As long as you can convince them if they give you a dollar, you can give them $7 back. I got to the point where I started to say, “Okay. I get what this is about. It’s about investment.” I started to learn how to present it. But I had probably been to 10 meetings. I was in Albany, New York. I was going to Silicon Valley, a meeting with the likes of Benchmark Capital. I was getting great meetings because E-commerce was hot, and we were in the B2B space which was hot. I was going to Battery Ventures. I was going to New York City. We were trying to raise money.
Alejandro: How did you get those meetings, Frank? Let’s face it. You’re in Albany. Especially during these years. I remember one of my first meetings was with Sequoia. This was years ago, and they said, “We don’t invest in a company that is more than a bike ride away from our office.” So, how were you able to secure those meetings?
Frank Poore: I don’t know. I’m a hustler. I pick up the phone. I dial. I send emails. I write compelling letters. I overnight something. I’ll do whatever it takes. I’ll wait outside your office.
Alejandro: I love it.
Frank Poore: Basically, I had a good story. I did. If I look back at it, I remember somebody, I won’t say who, at Benchmark Capital said to me, “What goes on in A-l-l-bany? I said, “It’s Albany.” He said, “Well, what goes on there?” I said, “What do you mean, what goes on there?” He was like, “Can you find talent?” I was like, “What is this guy saying?” Now, I realize. I was a young naïve punk, but now I realize it’s like if somebody came to me from my hometown and said, “Frank, I’ve got this incredible idea,” and it was a really good idea, and they were going to stay in my hometown, I wouldn’t give them money because they don’t have the infrastructure. They don’t know the people. Nobody’s going to move there. And I got that. To somebody from Silicon Valley, they probably thought of Albany as backwoods as backwoods can be. It’s really not. It’s a pretty vibrant area. It’s the capital of the state, so we’ve got access to City, and Boston, and everything. So, we’re close. But yeah, I think no one wanted to invest. The one guy said, “I really like your company, but I’m not going to invest because I don’t want to have to fly across the country four times a year just for board meetings. The Boston guys were a little less problematic with that, and certainly New York City guys could take a train up here. So, they didn’t have a problem with Albany per se, but you look at the management team. You’ve got Frank Poore. He sold computers for a while, and a how-to-use video games store. Is that really where you want to put your money? Richard and I were joking. He was like the president of his eighth-grade student council. That was his leadership experience. So, we didn’t have the track record. We were in an undesirable area. We ended up winning the RPI Business Plan Competition. That got the attention of some alumni investors from RPI that probably saw the winners that were investors somewhere. Then we got a small investment, $250,000 from a local bank that started a little venture fund. Then the guy, Glen Rockwood, I owe him a lot. He was the video game guy factoring again into the story. I needed some money, and I was running out of cash. I was waiting. I thought I was going to get money, but it was taking longer than I expected. So, I reached out to him because I had to make payroll that month. I said, “Is there any way you could loan me some money until I get this VC deal done?” He said, “How much do you need?” I couldn’t even bear to say $10,000. It seemed like so much money to me to ask this guy for $10,000. He’s like, “What do you need?” I said, “What can you part with?” He’s like, “Frank, what do you need?” I said, “Glen, it’s hard for me to ask. What can you do?” He said, “What do you want, $100,000?” And I said, “Yes, I do. I’d like $100,000.” So, he wrote me a check. Had he not written me that check, I wouldn’t be sitting here.
Frank Poore: That $100,000 coming from him, somebody that knew me from multiple years, that had worked with me, that was a customer, gave confidence to the local VC guy to put in $250,000. It got in the paper, and another guy gave me $100,000. The next thing you know, I had friends, fools, and families contributing, and we were up to almost a million dollars. I wanted to get the profitability on that. Every venture capitalist I talk to after that told me I was an idiot, basically, because I wanted to get to profitability, and it was about mindshare, and market share, and eyeballs, and all kinds of other useless business metrics. Eventually, we went on, and I raised a little bit more money. Then 9/11 hit, and I was profitable when no one else was. So, we were profitable in 2001. That summer, we hit profitability and cash flow generation. So, we were able to outlast folks that went out and blew. Some of our competitors had raised as much as 130 million dollars. Some 96, 76, it was all off the charts the amount people had raised.
Alejandro: Were they producing the same amount of results?
Frank Poore: No, they weren’t. They were signing up customers. We would go and meet with these customers, and we would be trying to charge more money, and so they’d go with the lower priced people, and they would all go out of business. Every single company that we competed against, and I could name probably seven of them, went out of business probably by 2006.
Alejandro: I’m glad that you touched on this because there are a lot of people talking about a potential correction that may happen because at the end of the day, the economy goes in cycles, and it seems that we’re coming out of one of the biggest, if not the biggest bull run in history. Knowing what you know now, if you had to go through another, let’s say, downturn like the one that you went through, what kind of tips or takeaways would you really keep in mind when building a business?
Frank Poore: There are people out there that are far more risk-taking than I am. Some of those folks have much bigger returns ultimately because they took the bigger risk and it panned out. But you can take a big risk and completely come up short and lose everything. So, I’ve always been somebody that wanted to build profitability, have a sustainable business that could persist and weather storms. In the good times, you can expand and do those things, but if you know that winter is coming, you want to make sure you’ve squirreled away some nuts, and make sure that you’re fed through the tough times. I concur. I can’t predict when something is going to happen, but this market does feel a little frothy, and in my mind, I’m not a finance guy, so don’t take my word for it, but I think the whole thing is built on phony money. It’s just all government-producing, running printing presses, and the money has to go somewhere. It made its way into the markets, and it’s making its way on the balance sheets of companies. It’s making its way into mortgages. It’s out there and exposed. If there’s a downturn, all that data is out there. You know what I mean?
Alejandro: Yeah. Absolutely. So, definitely, a good way to control your own destiny the study that you chose. I know that you guys have done three liquidity events. So, first, it was the transaction, the acquisition that you guys did with Comcast/QVC. Then you actually took the company public, and then the most recent transaction which the company was acquired by private equity firms. We’re going to talk about each one of them, but I guess on the first one, how did this acquisition come about with Comcast/QVC?
Frank Poore: QVC was my largest customer. As I told you after 9/11 money was starting to dry up everywhere. As you can imagine, there was anthrax in the air, and the world was a little bit unnerved. So, money was drying up. I wanted to take another round of funding, and it was hard to do. QVC was my largest client. We cut a deal where they would take a control stake in the company. That’s tough on an entrepreneur because I don’t know what that ultimately means, but we were good partners, and I really liked the people that I was involved with. We cut a deal that would give them control of the company. I didn’t want to be a captive subsidiary, and I didn’t want the shareholders who had invested along the way to be captive. So, we created a liquidity event in the form of I had negotiated a Put Right where I could, in essence, put the company for sale, put my shares for sale. We’d get valued by a third-party investment bank. They would have the first bite at the apple, and if they bought it at that price, it was theirs. If they didn’t buy it, I had the next bite at the apple, and if I bought it, it was mine. If I didn’t, it went to auction. When the price came back, I was delighted by the price, and QVC/Comcast exercised their right to buy the company outright, and they did. So, that’s how that happened in 2006.
Alejandro: Got it. So, ultimately, there was a controlling interest as you were saying, but one thing that I thought was really interesting is that you’ve been involved with CommerceHub for 22 years.
Frank Poore: Yes, I have.
Alejandro: That’s a long time. It’s amazing. So then after the transaction, what happens?
Frank Poore: After the transaction, they wanted me to stay on as CEO, but I decided that I would move on. They asked me to stay on the Board of Directors. So, I was Vice Chairman. I helped them bring in a new CEO, and a CEO ran the company from 2006 to 2011. In the interim, Liberty Media bought QVC. So, they inherited this investment. When they realized what they had, it was e-commerce, they pulled it up under their e-commerce portfolio under something called Liberty Interactive. So, we were part of the portfolio. Obviously, I was on the board. I got to meet the Liberty folks and got to know them. They invited me to a lot of events. We hit it off, and they started to try to figure out if there was a way they could get me to come back on a full-time capacity. So, I came back as CEO in 2013 and took over the company then.
Alejandro: Let’s talk about what was like a Steve Jobs type of move. Right? Because we were talking about Steve Jobs before, so very similar coming back to the company that you founded and taking the reins. So, just out of curiosity, what did you see when you got back because we’re talking about a fair amount of years outside of the operational day-to-day?
Frank Poore: I was on the board. I was clearly updated. When they had big deals, I would get brought in and on sales deals, that sort of thing. I wasn’t completely out of the dark. I think that the company didn’t innovate as much during that period, and so the growth rates had changed a bit. I had been the primary sales leader for the company when I was in the first phase. So, I think that started to slow down a little bit. When I first came back, I really wanted to make the company much more frontend-focused. You know, when we first got started, we were and are an IT company. We’re a software company. We’re technically connecting people. So, we’re out selling this technical platform. But something much more profound had happened and was part of the original vision which was, “Mr. Retail, you can radically grow your business by expanding your assortment.” I wanted to really make the company much more about product expansion, faster delivery, and being able to generate revenue than it was about being a technical integration solution. So, I refocused the company much more heavily on not selling to the operational teams or the technical teams, but really going in and selling to the PnL owner, the president, the CEO, and saying, “This e-commerce part of your business could be a dramatically greater portion, and it’s where the future is, and you’ve got to get with it.” So, we repositioned the company, built out account management teams that were much more focused on helping our retailers grow their business than focus purely on making sure that system-to-system connections worked. You know what I’m saying?
Alejandro: Yeah. So then after you put all these different corrections in place, and it seems that you already have a strategy, and how to move things forward. What was the reasoning behind going public?
Frank Poore: So, to go public. We had the company going. We wanted to unlock value ultimately. We were part of this Liberty Interactive portfolio. In this portfolio was QVC, which was if this were a dinner plate, they would be the massive piece of steak in the portfolio. Then you’d have CommerceHub, and we’d be some peas, and Bodybuilding.com and they had Backcountry.com. There was a handful of companies in there. But QVC was so dominant in the portfolio that investors just sort of—we were rounding errors. CommerceHub wasn’t getting valued as a standalone company. We were in the sauce of this larger company. So, we wanted to unlock the value of the company. We decided to spin the company out from Liberty and take it to the public market.
Alejandro: The people that I’ve had on the show that discussed the experience of being a public company, some of them thought it was interesting. Some of them actually didn’t enjoy the experience at all. For you, how was this experience?
Frank Poore: Every entrepreneur, when they first get started, you go to talk to investors, and they’re like, “What’s your exit strategy?” I remember in the beginning, people would say, “What’s your exit strategy?” I was like, “Exit? I’m trying to enter.” I wasn’t even thinking about leaving. But, it’s like when you’re talking about this as an entrepreneur, it’s like, “Oh, yeah. You want to go public.” That’s the naïve thing you want to do. It just seems like the endgame somehow, and if you do that, you were successful. Back in the day, everybody’s going public, so it seemed like that was the endgame, or at least it felt like that. For us, going public, it’s obviously a lot of work. We didn’t have the public infrastructure. We had to hire. We had finance, but we didn’t have the entire infrastructure you need for a public offering, investor relations, accounting, the whole bit. So, we had to go and put that in place. We had to go out and meet with banks, and take on lines of credit, and things we never had to do. So, it was a great learning experience. Then going out. If you think about it, we had Liberty shareholders. We did a spin-out. We didn’t do an IPO. When we went on our roadshow, it’s what they call a non-deal roadshow. At the end of it, nobody’s buying any shares. So, you don’t even know how you’re doing on the roadshow. Normally when you go on a roadshow and you meet with some bank, and “Hey, can we put you down for X?” And they buy them. Then you have a sort of book, a business. When we’re doing it, people already owned CommerceHub. All the Liberty shareholders already owned CommerceHub through Liberty Interactive. The easiest way I can explain it is pretend there are ten stocks in Liberty Interactive. It’s almost like a Mutual Fund, and they’re all worth a dollar, and you put $10 in. On Day 2 after the spin, you own 9 shares of Liberty Interactive and 1 share of CommerceHub. Before, you owned 1 share of CommerceHub, but it was in this larger $10 investment. You know what I mean?
Frank Poore: So, what happens is, you can imagine the people that were investing in Liberty were large-cap media investors or whoever they were. They were technically not probably allowed within their funds to invest in a small cap tech company. So, we had to go and build up an entirely new shareholder base. So, we were out there meeting with new companies. As these other companies would have to sell off, we wanted additional institutions to pick up the shares. So, we spent time out meeting with bankers and doing the analyst tours, and all of the kinds of things that you do, but it was a non-deal roadshow. So, everyone had the benefit of waiting to see what happens with the stock. It came out, and it did pretty well, and we continued to do well, and it continued to go up. We were public for two years. So, what did we have? Seven or eight earnings calls. The preparation for those is pretty dramatic. It costs 5 or 6 million dollars a year to be public just in public company costs between filings and legal and accounting and finance and staff and everything else that you need. So, we did it. If you ask me, did I enjoy the experience? I did because it was a great learning experience. I didn’t have a lot of the pains and lumps that a lot of CEOs have in getting crushed and beat up in the public markets. That didn’t really happen. We had a pretty successful run. You had some analyst that would come out and would make certain comments. You’d have some people on Twitter who would say what they say, but for the most part, we weren’t facing any kind of real negative pressure from outside. So, it was a good experience for me.
Alejandro: That’s great to hear. Frank, why did you guys decide to actually go ahead with selling the business in 2018?
Frank Poore: We were looking at buying a company, and I went to the board and was presenting a case for buying a company. One of the questions one of my board members smartly asked was, “What are we worth now? What would we be worth if we have this?” And does 1 + 1 = 3? We did some internal analysis. The suggestion was made, “Let’s talk to an investment banker who could give us their view of this.” I learned very quickly how investment bankers make their money. They don’t make it by giving fairness opinions. They make it by selling companies. They saw CommerceHub, and they said, “Wow! We think there are a number of companies that would be really interested in this both financial and strategic.” We should really consider this. Then we got an inbound offer, and as a public company, you have to entertain these things. At a certain point, you have to really ask yourself, “Is this the right time to sell?” Our board concluded that it was in the best interest of shareholders to take the company private, and to reward the earlier shareholders. So, that was the decision that was made.
Alejandro: Was there a process, or you just took the inbound?
Frank Poore: No. We’re a public company. We had a whole process. It went on for months, and there were multiple players involved. Yeah, there was a full process.
Alejandro: So, what’s the main difference between doing an M&A with a private company versus a public company?
Frank Poore: I’ve only done an acquisition as a private company. I would much rather do it as a private company. There are a lot of things that you can do as a private company that are hard to do as a public company because everybody’s got an opinion of what you should be doing on the outside. If you decide that you want to expand your salesforce and take losses for a while, you’ve got to explain that to shareholders and to the public markets who can beat you up with their share votes buying and selling your shares. Whereas, now if I want to go buy a company, we sit down with a couple of people, and have a discussion, and make a determination. It’s a whole different scenario. If we wanted to take something that didn’t have an immediate payback, but it was strategic in the long-term, we could do that versus it’s much harder to do. I mean, you’ve got guys like Jeff Bezos that can go out there and say, “I’m going to lose money. Just let me keep losing money. Let me keep losing money. I’ll make it up to you someday.” He’s able to convince people. That’s harder to do than it sounds.
Alejandro: Absolutely. What were ultimately the terms of the transaction?
Frank Poore: We sold the company for 1.1 billion dollars.
Alejandro: Wow. That’s pretty, pretty cool. This was an incredible ride. What an amazing ride because not once you provided liquidity to investors, but three times with the same business. There are not a lot of people that are able to do this. So, congratulations on that, Frank. There’s one question that I always ask guests that participate on this show, and that is knowing what you know now, Frank, and I know that this is really impossible, but let’s say if we were able to do this. If you had the chance to speak with your younger self before launching a business, what would be one piece of advice that you would give yourself?
Frank Poore: Hire the absolute best people you can find, and pay them the extra. The difference between an A player and a B player is dramatic. It’s dramatic. It’s like when you’re an entrepreneur, you’re success-focused. You know, I wasn’t necessarily a great leader. I was leading through will and determination, and you hire people because they’re the people that you can afford. They’re the people that are willing to take a chance in the early days. I grew up with nothing, and I grew up in an area where I never made a lot of money until I started selling things. So, when you’re going to hire people, and you don’t have a lot of money, you can’t offer a lot of money. I guess the point I’m making is, it’s worth it to pay the extra for the better people. It just is.
Alejandro: Yeah. Makes complete sense. So Frank, what is the best way for the folks that are listening to reach out and say hi?
Frank Poore: I can be reached via email at email@example.com. On LinkedIn, my name is Frank Poore. I’m also on Twitter as @FrankPoore.
Alejandro: Amazing. Well, Frank, thank so much for being on the DealMakers show. It has been a pleasure.
Frank Poore: Yeah. My pleasure as well. I really enjoyed talking to you, Alejandro.