Gero Decker On Building A $400 Million Business By Helping Companies Make The Most Out Of Their Operational Data

Gero Decker is the co-founder and CEO of Signavio which provides tools for business process management. The company has raised over $200 million from investors like Apax Digital and Summit Partners. The company has become an emerging global leader for Business Process Management.

In this episode you will learn:

• Who Gero chose as their ideal investor and why
• What the due diligence process was like
• The future of business process management
• The importance of hiring slow and firing fast
• Gero’s top piece of business advice for new founders
• How Berlin’s tech scene has been booming and the impact on commercial real estate

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Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

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About Gero Decker:

Gero Decker is married and has 2 children.

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• Twitter

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have an exciting founder that is actually based out of Berlin. I think that we’re going to be able to get a lesson or two about executing in Europe, where it’s obviously a bit different than executing in the U.S. But without further ado, Gero Decker, welcome to the show today.

Gero Decker: Thank you. Thanks for having me, Alejandro.

Alejandro: Originally born and raised where Gero?

Gero Decker: In a town called Braunschweig, known for two things: [0:01:52], not to be consumed together.

Alejandro: That is absolutely true. Your parents were also entrepreneurs. We’re going to get into how you got into your current venture with Signavio, but I’m wondering if there was anything around your upbringing or perhaps your family that triggered this direction for you?

Gero Decker: I do come from a family of entrepreneurs. My father started as a university professor researching laser technology for industrial manufacturing. Then, over time, he started his company. For most of his career, he built industrial lasers. My uncle was one of the pioneers of solar panels, starting in the ’80s of the last century, to industrial the usage of solar panels for renewable energy production.

Alejandro: Very cool. Would you say that maybe that was one of the things that perhaps pushed you, as well, into the engineering side of things, solving problems, and things like that? Or how did you get into engineering?

Gero Decker: Actually, it was the reason for not wanting to become an engineer and not wanting to start my own business. I think when you’re young, you sometimes try to do something vastly different. I wanted to become a lawyer, but then being in high school, I went to the local university set in a law lecture, and I fell asleep after five minutes. Then I went next door, and it was theoretical computer science, and I loved it. So this was the decision to go into computer science and become an engineer.

Alejandro: Very cool.

Gero Decker: Having entrepreneurs in your family not only shows you the bright sides, the passion, the love that goes into this, but you also see the dark sides: there’s a downturn, your company crashes into a wall. How does bankruptcy feel? How does it feel when employees that you had to throw out won’t accept that and camp out in your garden? So, these are the things that you can feel firsthand if you have that entrepreneurship in the family.

Alejandro: Absolutely. Then you went into consulting. Why did you choose consulting?

Gero Decker: I went to University. I love computer science. I love building stuff. I love programming. After finishing, I actually continued to do a Ph.D. and stay with the university and dig a bit deeper. But over time, I was bored with the work as a researcher, and I felt like everything was slow, and nobody really cares about what you are producing in terms of research. Also, I wanted to do something vastly different. I took a break from my time at the university, and I went to work for McKenzie for a couple of months, just to see something vastly different, and it was super exciting. I was working on a great project for a large telco operator. So a bit of technical background helped, but it was vastly different to anything I had experienced before. I loved it, and I wanted to keep going, but then life happened, and I founded my own company instead.

Alejandro: Got it. Let’s talk about Signavio. How did you come up with the idea, and how did you bring it to life?

Gero Decker: I was very lucky. I had a visionary colleague in the research group. Already in the first week of doing the Ph.D., he came to me and said, “Gero, I’ve seen the future. I’ve now understood how software will be built and looks like in five or ten years. This was back in 2006. He was thinking through what it would mean if all software would move to the Cloud. So Cloud was still a new thing. The web browser was not there to host complex software. Because we were in a research group dealing with operational improvements, business process management, we were dealing a lot with the flowcharts, where you would map out how you would work today or how you want to work tomorrow. We thought, “It might be a great technical challenge just to build a web-based system, something that runs in the browser and allows people to move the stuff that we were dealing with in the research group. So, basically, flowcharting and a drawing tool in the web browser. We were lucky that we had students on student projects and people who were looking for an assignment and would work for the next six months. This was very exciting and technologically challenging. Our programming environment was Firefox 1, Firefox 2. There was no Chrome web browser, Internet Explorer didn’t support any open standards at the time, and we were building a heavily, technically challenging Web UI. Six months in, this was the first magic moment when we did our final presentation — the students did it. Because there was this nice incident the day after the presentation — our service went down. So we had a little web server, and we didn’t understand what was happening. We figured that in the last 20 minutes, more than 20,000 users had clicked our application and wanted to see what we had built. It so happened that there was a journalist sitting in the room who blogged about this and put it through like the German-TechCrunch if you will. A lot of people got to know the project that we were working on for the first time. That was exciting to see that suddenly thousands of people are using the stuff that you have been building [0:07:59].

Alejandro: Very nice. So what happened next?

Gero Decker: We continued building the stuff we were building. It wasn’t an open-source project, so we had no commercial afterthought. It was really about the technical challenge and building something that nobody had built before. It was another year in, so this was 2008 when a guy called me up. He was very nervous on the phone because he had a super-important meeting later that day. He had all of his plans for how they would work in the future in our system, and again, the system was down. Again, the server had crashed. But this time, it was not because 20,000 people had accessed the system, but it was because the power cord had fallen off of the computer, which was standing under my desk. While I was plugging it back in and the server was booting, I asked him, “Why are you using our prototype. It says the system will crash anytime, no production in use, your data might be lost, and we can’t do anything about it. It turned out that this guy was running operations for a senior manager of operations at the German Railway Services for cargo transport, so those people shipping cars and other things through the country on trains. They were revamping their whole operations. The interesting thing was that they had a system in place to do exactly that operations planning that process management, and they had spent millions and millions on it. I knew that. So I asked him, “Why are you not using this robust great product that you bought, and you used the academic prototype instead?” What he said was really defining for us, because he said, “Well, this other system is built for a few specialists only. It has all of the features and capabilities that we want. But what your system allows us — it’s crappy, by the way. It’s not fun to use — but what your system allows us to do is to very quickly and easily involved dozens or hundreds of people into the discussions and build on ideas of each other. The one thing that you have solved with your system that these other commercial tools don’t offer is collaboration, bringing people together, making it a team sport.” This is when the idea for the company was born because we realized that not only had we solved the technical challenge of bringing a piece of software to the web browser to the Cloud, but we had actually solved the business problem, which was that you want to involve many more than just two or three experts when you redesign a process. It’s not just two or three people, but it’s potentially hundreds, and you need a new type of software, a new type of product to support it.

Alejandro: What ended up becoming the business model, and how were you guys making money?

Gero Decker: We were scrambling to find the right monetization model. Being an open-source company, we first thought, “Let’s just look at those people who downloaded it and integrated it into their own products.” For example, at the time, web had already one of the leading open-source companies. They had used our software and built it into their own product. We reached out to them and asked them, “Do you want to sponsor our open-source project.” They said, “No, but you can become an employee if you want.” But we didn’t want that. So the only way out was to go direct and find customers ourselves who would pay for it. We were very lucky. We had worked with a couple of companies through the university project. The first customer then was the leading health insurance company in the region, called AOK, a public health insurance, market share like 30%, a really big organization. For them, it was a perfect fit. They had a merger ahead of them. They have a lot of regulatory change. They were planning to implement SAP. They had a lot of things that were influencing their operational model, and they had to get a lot more people involved into their business process management initiatives than they previously had. So they were looking for a tool or platform to support that. They become our lucky first customer.

Alejandro: Very nice. Then how did you guys go about raising money because you’ve raised quite a bit? How much money have you guys raised?

Gero Decker: To date, we have raised a little bit more than 200 million euros in three rounds, but that happened very late. In the early days, we had the idea of creating a company in 2008. We actually incorporated in May of 2009. So this was the absolute meltdown from an economic perspective. There was no money around, and Berlin was a desert back in the days for business angels or venture capital financing. So you had the Samwer brothers, who had built their ringtone and then started with profit internet, so doing B2C stuff only. But there was no other B2B software company. There was not a tech scene to speak of in Berlin, actually in 2009. The business angels you would need would be— people would come to you and say, “Show me your app.” And you would say, “Well, we don’t have an app because it doesn’t make sense for our product.” They would say, “Well, if I don’t have an app that I can show to my friends,..” This was the type of sophistication that you would find. For the first couple of years, we didn’t bother about raising money. We felt that it’s much better time spent to go chase customers than to go chase investments. We grew the company for quite some time for more than six years in bootstrap manner. So, really, only growth through revenues. Only in 2015, we were already 70-80 people on the team. This is when we started thinking about fundraising for the first time.

Alejandro: Wow. Obviously, you were bootstrapping the business. At this point, you had a lot of leverage on the discussions with investors because it’s not so much selling them on the future. The present and the past showcase the historical data and how you’re executing. So how did you go about choosing the right partner because I’m sure that you had a lot of people knocking on the door?

Gero Decker: Exactly. We had a lot of inbound interest. I don’t know where we appeared, but we felt like suddenly there was a floodgate open, and every investor in the world was. We were overwhelmed. We took an M&A advisor to help us structure and coordinate our whole process. We had a couple of favorite investors. One of them was Summit Partners, but we still ran a full-blown competitive process. We had management meetings with, I think, 30 funds that we had selected. So, we had a certain profile. We wanted to have American funds because strength in the U.S. business was one of the big challenges at the time. We wanted to have one who had done that level of growth, so going from 100 people to let’s say 500 or 1,000 people who had done that a couple of times. Thirty funds, we went to management presentations. We had 13 term sheets on the table. 

Alejandro: Wow!

Gero Decker: We went to due diligence with three funds. We were very happy that our favorite fund to begin with, Summit, stayed on. But having a competitive process helped manage the timeline and forced them to close because, at the end of 2015, you could already see a lot of volatility in the Nasdaq, for instance. Then in January, February 2016, the stock markets went down quite a bit. Our advisors were very eager to close and finish the process fast.

Alejandro: When you were saying there, Gero, favorite, what made them favorite? What was that profile that looked as a favorite one to you guys? What were some of the ingredients?

Gero Decker: One ingredient was a track record of very successful software investment. With Summit, it stood out that they had done a lot of IPOs in the past. They had done a lot of enterprise software deals in the past. So they knew that. The other one was the large U.S. footprint. They also have a performance group, which is an operational team to help portfolio companies with all kinds of different things that you can use for free. You call them, and they come for a couple of weeks and help you. We just liked the team. In the end, it’s about the people that you work with, and we had a very good relationship with the investment managers dealing with us — head of the transaction, but also.

Alejandro: Having dealt with U.S. investors and foreign investors to the U.S., like investors that are there in Europe, what makes that process different when you’re pitching a U.S. investor than pitching a European investor?

Gero Decker: There’s not much of a difference, but it feels you have much more choice in the U.S., that there are more funds and more funds who are willing to write larger checks. In Germany, there are — at the time. Now, I don’t know, but at the time, there was hardly anybody who fit the profile and who would be able to write the check size that we were looking for. In that round of funding, we raised 31 million euros. There wasn’t much choice in Europe. The U.S. was more of a natural choice. But, in the end, they looked for the same things. They look for the markets that you’re operating in. They look at the team. They look at how robust the product is or whether legacy, and you need to rewrite everything. Everybody’s looking for great customer references, and they call up your customers without you knowing it. That’s just how it goes. They did a very thorough job of screening the company very closely ahead of making a decision. But I guess that’s just the nature of the check size. It was a slightly later stage than usual.

Alejandro: Absolutely. For the folks that are now listening, how big is the operation of Signavio? Anything that you can share about employees or anything to give a sense of the size?

Gero Decker: In terms of employees, we’re now a little bit more than 400 people — 430 or so. I can’t remember. We are serving roughly 1,500 organizations. It’s typically mid-sized and large organizations. Many of the big banks are our customers or insurance companies like Aflac or large companies. Large Telco’s. This is basically our client base. In terms of financial profile, we typically run the company, not too crazy cash burn. It’s probably our legacy from being a bootstrapped company for the last couple of years where you, obviously, need the capital. We’re not profitable at the moment, but we’re not the types of guys who feel comfortable with bleeding cash. We try to grow very efficiently. Currently, we have a momentum of roughly 70% year-over-year growth rate.

Alejandro: Very nice. How have you seen, as well, the ecosystem mature and change there in Germany, of startups?

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Gero Decker: It’s very different now. For instance, we’re currently looking for a new office location here in the city. A couple of years ago, you had real estate like crazy because Berlin is an economically strong location, just historically. For the first time, with all of the tech companies booming in the city and also the large brand names coming into the city and investing heavily, like Tesla being one of the latest ones to set up shop bigtime in the region. You just feel the pressure. When we now move real estate, just to give you a data point, in our current office, we have been here for four years. For the same real estate, prices have risen roughly 200% to 250% in four years on commercial real estate. That’s what I call a Boomtown.

Alejandro: Yeah. Absolutely. For your space, as a whole, like this collaboration, this process management, how do you see that evolving over time, let’s say in the next three to five years? 

Gero Decker: It’s so funny that you asked that. Ten years ago, when we started this company in the process-management space, nobody would get what this actually is, and people would think, “This is the most boring thing we’ve ever known.” Now, you fast-forward ten years, and you look at today, some of the fastest-growing and most notable enterprise software companies are in the process state. So you have robotic process automation with companies like Life Path and Automation Anywhere, for instance, in the space that we’re directly in with Process Mining, our closest competitor is Celonis, who just did a funding round at more than a 2 billion valuation. This company has only existed for eight years. So the space is much hotter than ever. It’s interesting to see why that is the case. The explanation is twofold. 1) Companies are much more interested in delivering a greater customer experience, and they’re forced to do so if you look at the Ubers and Amazons of the world. They show you how a great customer experience is done. It’s very easy to have great ideas about customer experience, but it’s incredibly hard to turn that into an operational reality if you have a 1,000 or 50,000. Our software helps with these types of exercises and digital retention. 2) The other point is, people are very fascinated with automation and technology, in general. Machines are simply much younger than people. You need to tell them precisely what they’re supposed to do, and you can manage and. Again, process technology is the enabler for an increased degree of automation. These are the two megatrends that help us thrive. In five or ten years’ time, you will see even more of that because of the operational model, and what you do and how things work together is going to be even more important than ever.

Alejandro: Got it. One of the questions that I typically ask that come on the show is if you had, Gero, the opportunity to go back in time and before you were launching the business, maybe at that moment where you were thinking about the concept and that route of doing something. Knowing what you know now, all these years, all this money raised, this hypergrowth, all these incredible employees and this team that you’ve been able to build you if you had that opportunity to speak to your younger self and give your younger self one piece of business advice before launching a company, what would that be and why?

Gero Decker: The most important thing I would do differently is to have spent more time and to be clear about how to build the organization. We didn’t have clear roles in the beginning. There were only two roles, for instance. You were either an engineer or a sales guy. In an organization of 80 people, there were just two roles. But this is not scalable at all. That’s not how you can build a great company. Making faster choices about how you built the organization, but also about people. When things don’t work out, to rather make a cut sooner than later because if you have a bad feeling, it’s never going to be better, and you’re just delaying the evolution of the thing. In the end, it’s about people and creating the right environment where people can thrive and making hires slow, and make changes fast is probably the big lesson learned.

Alejandro: I hear you. So, Gero, for the folks that are listening, what is the best way for them to reach out and say hi?

Gero Decker: Just ping me on LinkedIn. I’m watching that. Feel free to reach out, and I’ll be happy to discuss or help you with questions that you might have.

Alejandro: Amazing. Well, Gero, thank you so much for being on the DealMakers show today.

Gero Decker: Great. Thanks for having me, Alejandro.

 

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