Ross Buhrdorf is the co-founder and CEO of ZenBusiness which offers business products and services that help business owners in starting, running, and growing a business. The company has raised over $70 million from top-tier investors which include Founders Fund, Greycroft, and Slow Ventures to name a few. Prior to this is was the founding CTO of HomeAway which was acquired for $3.9 billion.
In this episode, you will learn:
- Transitioning from CTO to CEO
- Why keep doing startups after a big exit
- Creating value for customers and investors
- The fundraising process
- Acquisitions as a growth strategy
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Ross Buhrdorf:
Ross Buhrdorf is a serial entrepreneur, CEO at ZenBusiness, which democratizes entrepreneurship by making it easy to create, maintain and manage an LLC or other corporate entity. He is responsible for building both the team and the technology platform that ultimately created and defined the concept of the “short-term rental” and “vacation rental by owner” market.
In his more than 30 years as a technology leader, entrepreneur and corporate executive, Ross helps transform the way consumers interact with technology. Also, CTO of the year in 2011 and founding chief technical officer for HomeAway (NASDAQ: AWAY) which he helped grow the company from a startup to its current position as a $3B global leader in the travel industry.
Also, a member of the Board of Directors for American National Bank (where he is helping them through a digital transformation and security upgrade).
He is passionate about the consumer Internet, security, mobile technology and how to apply innovation to build better products and a better world.
Connect with Ross Buhrdorf:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today’s guest is super, super exciting. He’s been in the world of startups for many, many years. In today’s session, we’re going to be covering a lot. We’re going to be covering building, scaling, creating new categories, what it looks like when you start to see traction, massive exits, and you name it. So without further ado, let’s welcome our guest today. Ross Buhrdorf, welcome to the show.
Ross Buhrdorf: Hey, great! Thanks for having me, Alejandro. I’m super excited about today and super excited about your show. I listen to it.
Alejandro: Oh, so glad to hear. Originally, you were born in Lincoln, Nebraska, so how was life there?
Ross Buhrdorf: I’ll tell you what, with this year, I’m down in Austin, Texas right now, and it feels like I’m back in Lincoln, Nebraska with all the snow and ice we got, so I froze my butt off in Lincoln. That’s what happened. I got down to Austin, Texas, and went to the university as quickly as I could.
Alejandro: Right. Your parents were a great source of drive for you. They were pushing you to even get your paydays removing snow and cutting wood. I’m sure that made a difference for you.
Ross Buhrdorf: Yeah, absolutely. It’s funny. We talk about my business, ZenBusiness. Both of my parents had side gigs. They had regular jobs, but they had side gigs, and that seems to be even more popular right now with the pandemic are side gigs. When I was going to school, I’d shovel snow as a kid when I was in Middle School. Later on, when I was in the university, I’d chop wood. So, I was always an entrepreneur. My father was always an entrepreneur doing side gigs, whether it be – he had a dump truck and had a salvage business in addition to his regular business. My mother hung wallpaper. They also did home renovations. From an early age, it was always to have a side hustle and be an entrepreneur, and I jumped in early in my career.
Alejandro: That’s amazing, and also, you jumped into computers very early on, so what got you into computers?
Ross Buhrdorf: They were just coming out, and it was something I was enticed by and excited by. I went to the University of Texas and got my CS degree. I think maybe it was the novelty of it. I think I picked the right field. It wasn’t obvious when I started out. Certainly, computers were coming on, and it was important, but who would have thought that it impacted the world the way it has?
Alejandro: Yeah, 100%. Right away, after you got your degree, you went at it, but not as an entrepreneur yet. You went at it in the world of corporate, so how was that for you doing a little bit of corporate America?
Ross Buhrdorf: Yeah, it was good. It really was a pivotal point for me. I went to work. I actually interned at Data General while I was going to the University of Texas, and Data General was a microcomputer company like Digital Equipment Corporations. I remember they had this huge year. They hit a billion dollars in revenue. Six months later, there was economic downturn, and a lot of people got laid off in the facility that we were working on except for me. I was one of the people that didn’t get laid off, and it was because I was a low-paid intern that was adding a lot of value to the company. It really impressed upon me at that time that there’s really not any difference in risk with respect to working for a big company or working for somebody else and being an entrepreneur or taking your risk into your own hands. At a very pivotal age, I learned that there are no guarantees. I guess I’d rather go out on my own and take more risks with my career, and that’s literally what I did from that point on. I went to Tandem Computers. That was my first job out of school. I needed the job and had a family then. I worked at Tandem and got a great bunch of experience. It was an internal startup at Tandem. We build the first fault-tolerant UNIX machine, and I played a part in that. Then, after that, I went to Hal Computer Systems, which was my first real startup. That was the last computer company from the ground-up, Hal Computer Systems. We built the first fault-tolerant SPARC chip. The SPARC chip was what was in all the Sun Microsystems boxes. That computer and that company got bought by Fujitsu. I was off to the races as an entrepreneur. After Hal, I went to Excite.com. That was a startup. That was the whole internet boom. I was one of the first few people at Excite.com. After Excite.com, I went to Salion during the bust.
Alejandro: Your experience here is amazing, Ross, because I’m sure that going through the dotcom bust – there are so many people that are listening to us now, and they don’t even know what that is. We are coming out of the market where we’ve been for 14 years, celebrating returns after returns. What were some of the lessons that you got from seeing that catastrophic environment of companies going down the toilet like one after the other?
Ross Buhrdorf: Yeah. I’ll tell you what. It made a huge impression upon me, the bust, because I had made a fortune at Excite.com – $4 options that were over $300 at the peak of the market. I thought it was a great idea because we were riding so high. “I’ll invest that in Sun Microsystems and Cisco.” At the time, Cisco was the largest cap company in the world. And, boom, it all came tumbling down. I lost a lot of money. As a result, that makes a tremendous impression on you. It made me more conservative in my approach moving forward. What it taught me is that there has to be real value. You have to be building real value for your customer. You have to have real retention. You have to build a product that your customer wants. Certainly, at Excite.com, we did do that, but a lot of the other companies were surrounding it. The market viewed it as a land grab. It didn’t matter if you made money. It just mattered that you were capturing eyeballs. Ultimately, eyeballs don’t necessarily pay the bills. You have to have a real business model underneath it. What I walked out with from that part of my career is – and it’s made me I’m certainly not risk-averse. As a startup and an entrepreneur, risk is one of the things that you have to spend. It’s how you out-compete the incumbents. But I’m also very focused on unit economics, a sustainable business, and building real value for customers. Or, like I always say, you can’t lie to your customers.
Alejandro: Yeah, I know 100%. After this experience for you, Ross, you did a couple of failed enterprise startups that I’m sure gave you a lot of lessons and experiences on your view on how you wanted to execute and do things well and avoid not making mistakes that you had seen in the past. But that was the segue that really got you into being the founding CTO of this small company called HomeAway. Is that right?
Ross Buhrdorf: Yeah. I was the founding CTO at HomeAway. We created the category leader, the unicorn, for the vacation rental segment. We did 28+ acquisitions, raised $450+ million, did an IPO, and then ultimately sold it to Expedia for $3.9 billion. It’s really something to go through and create a unicorn like that and go through that experience. I think my career, up to that point, had built upon that. At Excite.com, we did lots of acquisitions, so I knew how to do those. But nothing prepares you for the fantastic growth we had at HomeAway. Here, again, it comes back to one of my tenants: great business model, always return for all of our investors, always was a profitable business, maintained the growth even past the IPO, was a standout business from the business model point of view. It also delivered so much value, not only for the owners of the vacation rentals that rented them out and for the travelers. It was a fantastic and great experience. I always focus on the customer experience and build that value. Everything else works out as long as you’ve got a sound business model underneath it.
Alejandro: What does remarkable customer experience look like? What does it look like from a 30,000-foot view?
Ross Buhrdorf: It’s not so much of how does it look? It’s more, to me, what are your customers telling you? It’s having a feedback loop with your customers where they’re giving you the feedback: I like this. I don’t like this. This is no good. This is great. I want more of this. Of course, you want to start out with all of the best practices and the best UI, and a great user experience, but it’s about value. In the case of HomeAway, early on, with a lot of the companies we acquired, they didn’t have great user interfaces. When we put them together, we were struggling to put all these companies together. But it was such a fantastic traveler experience. Once they stayed in a vacation rental, it was like they didn’t have access to these properties, so the value was so tremendous, and the experience was such a great experience for them and their family that we had an over-the-top NPS, net promoter score after travelers would stay in the house. That was the value. If you think about a tremendous customer experience for the people that owned the vacation rentals, now all of the sudden, they were making more money than they ever had because of the distribution that we provided and making income off of these vacation rental houses. Again, it was that overwhelming value and, ultimately, coupled with a great user interface and great customer support. All of those things combine to make a tremendous user experience, customer experience.
Alejandro: What was that point like when the deal is inked, and HomeAway sold for 3.9 billion. Then, you’re able to look back and reflect and to say, “I was part of this thing. I actually engineered the first product and the way that we were engaging with customers.” That must be very fulfilling.
Ross Buhrdorf: Yes. It was. We had done the IPO before then, so we had lots of peak experiences. But I really do think that was the ultimate to go full cycle and sell it to Expedia. Expedia came out and said this was the best acquisition. I think it is, still to this day, generating a tremendous amount of money in revenue form. It’s kind of like a frog in a pot of hot water. You don’t know it until it happens. It’s a lot easier to look back on it and see there’s a peak experience. It’s just fabulous to be able to build something like that and to see all of the tradeoffs and the decisions you made come out in a great outcome for all of the employees, all of the teammates, and all of the investors. I think that’s very rewarding. What I’m always trying to achieve is that outcome.
Alejandro: In this case, with HomeAway, you were exposed to acquisitions. You guys did 28 acquisitions. Now, you’ve even done a bunch of acquisitions already with ZenBusiness, and we’re going to be talking now about ZenBusiness. It seems that now you’re even doing it at ZenBusiness. How do you see acquisitions as a tool or a strategy to grow faster?
Ross Buhrdorf: At HomeAway and also at ZenBusiness, acquisitions are a way to accelerate growth. You can do it either organically, or you can buy companies that also have some good organic position, or customer base, or technology. It really is this way to accelerate. It’s not for the faint-hearted. The fact that I brought together a lot of the HomeAway mafia, a lot of my old colleagues, many of which I’ve worked for decades. We can do these acquisitions easier than other companies because of our size. Big companies can’t do acquisitions as effectively as we can. As you said, it’s really just about acceleration, where the sum is bigger than the parts. So, you get this accretive effect of doing acquisitions. It accelerates you. Even just the IP, and the knowledge, and the skillset, and the team members, it all accelerates you. Let alone any revenue benefits or marketing benefits that you get. We’ve done three acquisitions so far. Two of them have really been about organic position or SEO. The third one was a platform. We bought Joust, which was a fintech challenger bank platform that embeds all of the fintech solutions for our platform. It would have taken us years and years to develop that, and we acquired it, and we’ve already launched it in Q1. We’ve already launched our rebranded – it’s called ZenBusiness Money as part of our platform. That’s what it does. It accelerated us by a couple of years.
Alejandro: Nice. Let’s talk about ZenBusiness because, after the acquisition of HomeAway, rather than taking time off or retiring or whatever people would do after experiencing a big transaction like that, you went at it again. You went at it with ZenBusiness, so tell us about how you came up with this idea and what was that process of giving birth to it?
Ross Buhrdorf: Alejandro, I wish I could say it was some genius idea that I came up with, and everything worked out perfectly. My plan was to take the year off and cool down. I made it ten months. These two blood-thirsty startup guys, entrepreneurs, kept pestering me to take a look at their business. At the time, it was the previous business to ZenBusiness. I took a look at it, and I said, “Well, guys, this is something that seems interesting. I’ll come on as CEO and put in an investment. We recreated the founding team. I brought on a couple of my friends from HomeAway, and we started up ZenBusiness. At that time, these guys were already in the formation space, but they were focused on law offices and white labeling. We pivoted at that point and started going after a formation business. We looked at the main competitor out there, LegalZoom, which is a great business, but much in the same way that Airbnb disrupted HomeAway, and I was on the other end of that. I could see that there was this huge incumbent in the formation space. We could do a much better job, and we disrupted or are making a dent in the way formations are done and the way small businesses are created and how they’re managed. As I say, ZenBusiness does all the back office, headache-inducing paperwork. We make your business worry-free. We make it Zen for you as a small business, or microbusiness, or solopreneur. We handle everything you need to get your business up and running and going and manage all that for you. Here, again, it’s that same theme, Alejandro, which is delivering more value than you’re asked to deliver. We have a super-high of Ps, which is to continue to build value for our customers. And they love us for it, and we love them for being our customers.
Alejandro: How has this transition been for you because, obviously, in HomeAway, it super-high reviews, and a great product for a great price. It’s the same theme throughout my whole career, which has been to deliver value. We always laugh at work. I can remember laying in bed praying for my first customer to come up. “Please, hire our service. Please.” We had five or six different websites, trying different value propositions, and we got traction with one, and that’s what we’ve been going after ever since, was more like the CTO, engineering, and the technical side. I’m sure that you were involved with business, but here, we’re talking about transitioning from CTO to CEO. It’s different responsibilities and perhaps different ways of analyzing things, so how has that transition been for you?
Ross Buhrdorf: Alejandro, I get asked that question, and for me, the punchline is, I should have done it years ago. Everyone says I’m doing a pretty good job. We just raised a big round. We’re doing fantastically on growth. We’re having explosive growth, and we’re building out a great product and the team. For me, it’s when I left as the CTO of HomeAway when it got acquired. It was like, what do you do next? I couldn’t retire; I was too young. I enjoy work. I enjoy giving back to the world. One of the things that I do as an entrepreneur is create jobs, create value, and keep the cart going. I need to add value; what do I do next? I think, for me, it was the CEO. This is really full circle. Just like at HomeAway, I bought vacation rentals, I drank my own champagne, as we used to say. Not eat our own dog food. I have vacation rentals. We surveyed our customers, and we asked them, “Why did you start a business right now?” The majority of them came out and said, “I want to change my life. I want to change my trajectory. I want to change my life. That’s why I came to ZenBusiness to start a business. I want to be my own boss.” We asked, “What held you back?” They said they were insecure and felt fear, and they didn’t know how to do it. They were worried that they would do something wrong. I think that’s the same thing for me. What held me back from being a CTO to CEO is fear, but it’s not rational fear. It is, can I do this? Can I raise money? Am I going to be able to lead all these people? So far, so good. It’s the same path that all of our entrepreneurs have to take. We’re here to help them. We’re here to make them successful. For me, it was an easy transition in hindsight. I was a Product CTO and very technical but also very business and product-focused. I think that there are a lot of CTOs becoming CEOs in big companies. I look at one of our competitors, GoDaddy, which has a CTO that’s gone CEO. It’s natural for us. We’re very data-oriented. We’re a very technical company. We’re a very product-oriented company. We’ve got good technology, good product, and very buttoned-up data.
Alejandro: Amazing. In terms of capital, you were alluding to it. How much capital have you guys raised to date?
Ross Buhrdorf: The first bunch of it is coming in. I begged, borrowed, stole, put in my own money at the seed round. But right now, we’re at $70+ million we’ve raised. The first round was $15 million. The second round was $55 million. We pulled in another million, $56. So, in that $70-million range, we’ve raised so far.
Alejandro: Got it. Does it get easier over time?
Ross Buhrdorf: Does it get easier? Oh, my gosh. Raising money is really tough. I don’t know if it gets easier or harder or it’s the same. I thought, “My goodness. We should be able to raise money in a few months. It always seems like it takes six months to raise money and to do the close. My lovely wife, Paula, I’d get phone calls. Sometimes, I’d be frustrated and say, “Oh, my gosh, they’re asking this question and that question. It’s like, when is this going to end?” She asked, “How much money are they giving you?” I’d say some enormous money, and she’d turn to me and say, “They get to ask any question they want if they’re giving you that much money.”
Alejandro: That’s amazing.
Ross Buhrdorf: I am maybe not the norm for entrepreneurs. I absolutely love venture capitalists. It is the advantage that the U.S. has in the world market. My whole career has been based on venture capital. My experience with venture capitalists is that they’re great. I’ve always had great investors. I would tell people: get out there, pitch, get your story out. It’s much the same thread that I’ve been saying this whole time, which is, you can’t lie to your customers. You can’t lie to investors. Get your story out there and tell it to investors. They’ll tell you exactly what’s wrong with it. I’ve changed the course of the company based on feedback from investors prior to it even getting out to customers. What could be better than that? Get out there with your customers. Be focused on making revenue. Get out there with investors early, and be telling your story, and you’ll get feedback. The more feedback and the more value you bring, the easier it is to raise money. It’s hard to raise money – just the process of it is hard. We’re doing so well. I think we’re over the hump. Knock on wood. Hopefully, this next round will be easier. I say that about every round.
Alejandro: I hear you. Obviously, different rounds, different expectations, but it’s not like selling a dream like you’re doing more at the seed stage. It’s more like numbers and historicals and things like that. One thing that I wanted to ask you so that the people that are listening get a good idea is, in terms of scope and size, is there anything that you can share on how big ZenBusiness is – maybe the number of employees or anything that you feel comfortable with?
Ross Buhrdorf: Yeah. We’re over 200 employees. We’ve got well over 110,000 customers and formations. We have thousands and thousands of new customers on a monthly basis. We don’t publish our revenue numbers, but we do pretty good-sized revenue numbers. Even right now, we have a super-high NPS. We have a 4.8 out of 5 on a trust pilot.
Alejandro: Very nice. One of the questions that I typically ask the guests that come on the show is if I put you in a time machine, Ross, and I take you back in time to that moment where you were thinking about launching a business, that younger Ross, and you had the opportunity of giving one piece of business advice to your younger self, what would that be and why before launching a company based on what you know now?
Ross Buhrdorf: I think it is: fear is a liar. You just have to jump in and go for it. Alejandro, you’re an entrepreneur. I’ll push it back on you. The difference, I think, between successful ones and not successful ones is that successful ones are willing to take the leap, and they’re also willing to listen to the truth. They don’t shy away from the truth. They go for it like a hot flame. What are the problems with the business? What are the issues? What are we hearing? How do we fix this? Where is the opportunity? I think, early on, for me, it is: fear is a liar. Go for it.
Alejandro: I love it. I’m right there with you. I find that the big difference between the people that succeed and the people that fail is taking action. When there is fear, that’s the opportunity for growth. That’s the problem of being in corporate America – nothing wrong against it. You get paid a nice salary to get intellectually stuck because when you have fear, you learn so fast. It’s unbelievable.
Ross Buhrdorf: That’s right. That’s right.
Alejandro: So, Ross, for the people that are listening, what is the best way for them to reach out and say hi?
Ross Buhrdorf: Send me a note at email@example.com.
Alejandro: Amazing. Well, Ross, thank you so much for being on the DealMakers show today.
Ross Buhrdorf: Thank you for having me. It’s a privilege.
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