Yuchun Lee is the founder and CEO of Allego which provides a mobile video-based sales learning and development platform. Prior to this, he was the founder and CEO at Unica which offered enterprise marketing management and cloud-based marketing solutions to companies and different industries. Unica was acquired by IBM for $500 million after taking it public. Interestingly, while at MIT he was also a member of the famed MIT Blackjack Team that inspired the bestseller Bringing Down the House and subsequent movie 21.
In this episode you will learn:
- What triggered IBM to buy Unica
- Why his latest startup sought out a more remote location to be headquartered
- How much money Allego has raised so far
- What he would tell his younger self before starting a new business
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About Yuchun Lee:
Yuchun Lee is CEO and Co-founder of Allego, a software company focusing on transforming sales learning and boosting the performance of customer-facing teams using short videos and mobile devices.
Mr. Lee is also the Executive Chairman of Clarabridge, a software company helping companies leverage customer feedback into intelligence that improves customer experiences.
Prior to Allego and Clarabridge, Lee served as vice president and general manager of IBMs Enterprise Marketing Management Group, with a global responsibility focusing on the needs of chief marketing officers.
He joined IBM in 2010 as part of its acquisition of Unica, which Lee co-founded to meet the needs of marketers seeking to leverage technology to reach new customers.
As Unicas CEO from its inception in 1992, Lee guided the company through a successful IPO in 2005 and its sale to IBM for over $500M. Prior to founding Unica, he was senior consultant with Digital Equipment Corporation and a member of the research team in MITs Lincoln and Media Lab.
A respected thought leader in technology and marketing, Lee is currently an Executive in Residence (XIR) at General Catalyst Partners, a venture firm; serves on the board of Vertex Pharmaceuticals (NASDAQ: VRTX), an S&P-500 biotech-pharmaceutical company, and is an Executive Advisor with Summit Partners, a global venture and private equity firm.
He is a co-inventor of six technology patents and the co-author of Solving Data Mining Problems through Pattern Recognition. He holds a Bachelor and Master of Science in Electrical Engineering and Computer Science from MIT and a Master of Business Administration from Babson College.
Lee is also a Trustee and Overseer at the Isabella Stewart Gardner Museum.
Connect with Yuchun Lee:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone and welcome to the DealMakers show. I think that today our guest is going to be quite exciting to hear. He’s built a couple of companies already. I think that he’s very talented and also a foreigner, so he also experienced the culture shock of coming here to the U.S. and seeing the vibrancy of innovation everywhere. Without further ado, I’d like to welcome our guest today, Yuchun Lee. Welcome to the show.
Yuchun Lee: Thank you. Glad to be here.
Alejandro: So originally born in Taiwan. How was life being born and growing up there?
Yuchun Lee: It was very crowded, very competitive, and I had to get out of there because if I hadn’t, I would need to serve four years in the military as part of the mandatory requirement for young boys. So my parents got me out of there.
Alejandro: Wow. At what age is the military?
Yuchun Lee: You start around 17, 18, and it takes four years.
Alejandro: Oh, my gosh. Yeah, I remember we have something similar to that in Spain, but I was very lucky that they took that requirement out like two years before I was due for it.
Yuchun Lee: Right.
Alejandro: So you came to the U.S. What happened here? What triggered the move to the U.S.?
Yuchun Lee: Well, mainly because my father was an oil tanker captain, and he was never home. So he got tired of always being away, and he found an opportunity to open a company here with an ambassador. So we immigrated over here, the whole family.
Alejandro: Was that the time you started to see what it looked like to be an entrepreneur?
Yuchun Lee: Well, I’ve always been fascinated about commerce and the prospect of buying something and then selling something at a margin. So I think it’s in my DNA to do that, and hence, I’ve always had an interest with startups.
Alejandro: And your first company in high school. So you took no time. How did this happen?
Yuchun Lee: Yeah, I was a nerd in high school, so I ended up spending a lot of time playing with computers. That’s when my high school first got some personal Apple computers. We fooled around with some friends, got really proficient at it. In my junior year, I started a company to help professionals to do their professional drafting on an Apple PC. It was the first program in the market that allowed a professional to do that.
Alejandro: What were you doing here with this company then?
Yuchun Lee: Yeah. After two years, it made good money. I had to go to college. I went up to MIT for my undergraduate and graduate school at MIT. I basically had to drop that business because of the workload that was involved in the new school.
Alejandro: Got it. So let’s talk about MIT. Because I know that MIT is really unbelievable when it comes to engineering and having a network with other engineers. What opened your mind to the experience of being at MIT? What was that experience for you like?
Yuchun Lee: It’s a great question, and I would say the most people I know that graduated from MIT all would tell you that it was a very humbling experience. There are a lot of people smarter than you, you realize. You find also other people that have similar interests. Namely, we are all pretty nerdy. In fact, my companies today, Allego, is founded by people that I met there as well as friends that I met along the way, fellow entrepreneurs. So it’s a place to meet great people.
Alejandro: We’ll talk about Allego in a little bit, but let’s continue here. So you did your undergrad, and you also did your graduate degree from MIT, and I understand that you also joined the MIT Blackjack. What was this?
Yuchun Lee: It’s a pretty infamous group that’s known in the casino industry as a team that figured out a way to beat the casino. So we were able to go to Las Vegas and able to beat the house at their own game using just our brain, using a technique that frankly is not too hard to train people. It takes about six months to train to be good at it, and it’s completely legal, so the casinos are afraid of us, so they tried to pick us out and kick us out of casinos. So it’s a little bit like a spy, James Bond type of experience if you will. It was a fun experience for me personally.
Alejandro: So, what did you learn from the Blackjack game?
Yuchun Lee: Well, there’s a lot of camaraderie because you’re walking around trying to beat this massive organization a little bit of the David versus Goliath type of feel to the interaction. You have to learn how to act. That’s actually the hardest part. The counting part becomes second nature after a while, but learning to act and not get caught is pretty thrilling and also pretty nerve-wracking as well.
Alejandro: What was the craziest thing that you saw?
Yuchun Lee: Craziest thing. Well, I was betting on a table with Larry Flynt, who’s well known as the founder of Hustler Magazine and he was in Las Vegas, Caesar’s Palace sitting next to me and was putting out a lot of money. I was putting out a lot of money, and two of us basically had almost 50 to 80 people around us watching us betting. He lost a million dollars that weekend. That was great.
Alejandro: Wow. What was the biggest hand that you ever won that you can remember?
Yuchun Lee: In the span of one round, I think I won like $80,000 in two minutes.
Alejandro: Wow. And I assume that also because entrepreneurship, there’s a lot of uncertainty involved, and I’m sure that in Blackjack when you’re waiting to get the next hand, there’s also a lot of uncertainty because that’s going to determine the potential outcome. Every single hand that you’re given, it’s really determining the result. So how did you learn how to be with uncertainty?
Yuchun Lee: Yeah, you’re asking the heart of the question of how to survive as an entrepreneur. I think there is inherently a lot of unknown, a lot of risk, and when good things or bad things happen to an entrepreneur, you have to discern whether that’s because you made a mistake or because you are unlucky. So, in Blackjack, the same thing. You can count perfectly, but you can still lose money. So the idea is that you’ve got to have enough emotional fortitude, have the stomach to weather the downturn in knowing that you’re doing the right thing, and over the long haul, statistics and large numbers will take over, and you end up winning. So it is a hard scale to learn and something that I think good entrepreneurs are able to stomach that downturn while being resilient on the upturn so that they can continue to persevere through the difficulties.
Alejandro: My understanding as well is that while at MIT, when you were doing your graduate degree, you also got the second company in motion. It was a hardware business. Tell us about this.
Yuchun Lee: A friend of mine and I saw the wave of personal computing, and IBM has put out a standard basically at the time around the 80, 8086 chipsets. So we end up creating a bunch of PC compatibles. We input parts from Asia and assembled them in our dorm and sell them. At one point in time, we were probably the lowest cost-producer in the East Coast.
Alejandro: Very cool.
Yuchun Lee: But as fate would have it, we realized how fast the hardware’s were depreciating over time, and so we got out of the business knowing that if we don’t move the inventory fast enough, you could lose money. That’s the same year that Michael Dowe figured out that successfully. He obviously had found a formula.
Alejandro: Yeah. He was making a killing. I think it was something crazy like 400,000 during the first year of business while in school. He had good reasons to drop out. In your case, after this second company, then you decide to join the Digital Equipment, but why did you go and work for someone else when you already had experience of what it looked like being an entrepreneur?
Yuchun Lee: One thing that I’ve learned from a larger organization is to see what a successful, established company looked like from the inside. In my mind, one always needs that perspective. If you don’t have a personal, you probably need a team with others who have that experience because as the company grows at different stages, it’s like a totally different job. What the CEO needs to focus on is totally different. So that was a very great experience. They also told me that I don’t want to work in a large company forever.
Alejandro: So then, after this, the idea of your first big, big success came along, Unica. How did the idea of Unica come first and foremost in front of you, and how did you decide to bring that to life?
Yuchun Lee: First, when I was working at Digital Equipment, I did my graduate work in the area of Beta Mining. So, I and other friends of mine joined a group Beta Mining, by the way, what we learn is machine learning and all the statistical approaches around that. We applied that in Digital as a Service. When we started Unica, along with two other co-founders, we basically applied our knowledge in machine learning and created a tool to help organizations to process their data without having to be an expert. It’s a very early toolset for people to build statistical models and neuro networks. So it’s along the line of studies that I had been working on frankly for a while.
Alejandro: So then once you took the leap of faith, and you started to really go at it fulltime, what were some of the initial steps? Did you put together the team, or how did you execute this?
Yuchun Lee: Yeah. We started the business in 1992 in a recession. We started out with a model of finding a few customers and experiment with the types of product that we sell. We basically bootstrapped the business through 1992 all the way to 1998. So it was a pretty long haul of seven years. We got to profitability finally in 1997. We started to hit a particular growth area, specifically in the area of marketing automation. That was the business that was able to propel Unica to grow by leaps and bounds. At one point, we were one of the fastest-growing companies in America. We ended up bringing it public in 2005.
Alejandro: So up until ’98, you guys were basically grabbing whatever money you would generate and just putting it back into the business? No financing whatsoever?
Yuchun Lee: Correct. And basically, build a product as you sell solutions, as you sell parts of the product, and then over time, we started to focus in on industry areas, and that accelerated our growth.
Alejandro: So, the IPO was in 2005. Did you guys take any financing? I believe you guys got some financing. Right?
Yuchun Lee: Yes. So interestingly enough, we got some money before the dot-com crash to the tune of about 11 million. The interesting thing is, by the time we went public in 2005, we had close to 70-million-dollar cash on our balance sheet. Our banker told us, “You can’t go public with this much cash.” So basically, we didn’t touch the money that we raised. So we ended up dividending that out and went public.
Alejandro: Got it. Typically, when you’re bootstrapping a business, it’s very complicated because if you take the wrong step, it could be catastrophic. So how were those years where you were building up the business, and growing up the revenues, getting the team together? Walk us through it.
Yuchun Lee: Yeah. You know, it’s interesting. Most people think that by taking venture money, you can grow rapidly. The converse is true, which means if you don’t take money, then you can’t grow rapidly, but ironically, we were growing over 100% for many years at Unica without using venture money. Part of that has to do with the fact that we built the company from the ground-up with high-level customer-centricity focusing on the customer’s problem, spending money in a very disciplined way, never let the lack of money be an obstacle to growth, but at the same time, making sure that the culture of the business and the type of the decision we made are well thought through. I’ve seen too many entrepreneurs blow through their money because they don’t have that discipline. So I’m a huge believer. That’s why even today at Allego, we were bootstrapped all the way through without using external fund. And that’s something I’m very proud of.
Alejandro: Got it. What ended up being, in Unica, the business model so that the listeners understand?
Yuchun Lee: We helped chief marketing officers in companies to run their operation base, end-to-end to help a CMO. Most of our customers were large business-to-consumer companies such as those in financial services, retail, hospitality, and so forth. It’s a growing business. We basically created the market for marketing automation at the time.
Alejandro: Got it. During these years, especially between ’92 and ’98, did you think, “My gosh. We’re not going to make it.”
Yuchun Lee: There were several times like that, although every time, I remember coming back up and saying, “You know what? Even if this kills me, I’m going to make it work.” I often joked with my colleague that pretty soon, and I’m exhausted sometimes, all the wrong answers before I find the right answer, and we’re able to persevere after that.
Alejandro: What was, for example, the darkest moment for you guys?
Yuchun Lee: Well, there are times where you have to pay the rent. Right? And I even contracted myself out to do programming in the daytime. So there are times where you just have to do whatever it takes. I took on almost $200,000 on my credit card as credit card debt.
Yuchun Lee: So those are pretty tough times. Luckily, I was single. Luckily, I was able to work as hard as I could without much constraint.
Alejandro: Got it. Wow. That’s talking about uncertainly, Yuchun. So let me ask you this then. You guys with Unica went through several recessions.
Yuchun Lee: Yes.
Alejandro: So what did you learn as a result from that. Like if you had to, for the people that are listening, prepare for a recession, what would that preparation look like?
Yuchun Lee: Yeah. So we went through three recessions at Unica, two wars, one global currency crisis, and through the ups and downs, we were able to grow the business. I think of all 18 years of history we had one down quarter in the entire history of the business. I think part of this, again, has to do with the core discipline of: are you building a business that can scale? Are you not just finding business? Are you spending money prudently? Is that the right culture? Do we have the right culture for the whole organization so that everybody knows that they spend money like it’s their own money? On the other hand, a maniacal focus on customers. Customers are the lifeblood of any business. I know a lot of companies say that. A lot of executives say that, but very few businesses truly are customer-centric. I believe that I stand close to your best customers and build a culture of prudency. That’s what it takes to weather the ups and downs. I’m very confident. For example, Allego is very well-built data. We can weather through the next recession, which is sure to come. It’s a matter of time.
Alejandro: So, what does it look like when a company is customer-centric?
Yuchun Lee: When it’s customer-centric, you gravitate and service your customers, and you try to solve and anticipate the problem. The organization has to be a great listening organization. At the same time, you don’t want to be a push-over, but you want to make sure that there’s a balance that if you add value to a customer, you can pay for it. In a downturn, you have to ship your strategy from revenue-generating value proposition to cost-cutting value proposition. You want to make sure that you have enough imagination or flexibility or talent in your organization to weather the changes in buying behavior, the changes in hiring markets, and how the organization grows. There are many, many lessons I’ve learned through that. Let’s put it that way.
Alejandro: Let’s talk about the IPO process. How was that for you guys?
Yuchun Lee: It was a great process. I think it elevated Unica’s visibility in the market, and we’re able to attract even greater numbers of customers. But after a few years, the tax, if you will, that was put on the business kind of there’s a part of me that feels like I love the experience on the one hand. The other experience is just there’s quite a bit of tax on executives and on my time. I spent probably about 15% of my time dealing with Wall Street investors. But overall, if you’re a business that needs a high-level profile and financing that needs any liquidity for any shareholders, that is obviously still a viable path.
Alejandro: What was the most nerve-wracking moment of either going IPO or being the CEO of a publicly-traded company?
Yuchun Lee: There are times when the Wall Street expectations run well ahead of your company’s guidance. I mean, the pattern is, once you start to hit your number, you start to raise your targets. Over time, Wall Street reacts to it and says, “Yeah, these guys want to beat it, so they end up moving their own target up beyond what the management recommendation is.” When that happens, you’re now stretching, and sooner or later, you’re going to miss a quarter. Probably the darkest time I ever went through as a public company was when I first missed a quarter. That was just very hard. You feel like you let people down, but it’s also one of those things that I believe every company will miss their quarter because it’s a game theory outcome where the expectation will eventually outpace the actual through this process that we have here.
Alejandro: So how was that night after the earnings go, you went back home, and you were falling asleep, and you were looking at the ceiling. What was going through your head?
Yuchun Lee: I actually walked on the street of Nantucket, and I bought a sculpture called Entrepreneur to remind me of that night. I still have the sculpture.
Alejandro: Wow. What would you say was the breakthrough for you because obviously, that’s a breakdown, and then what would you say was that moment that opened up for you? And how did you really tackle that as a leader to really turn things around?
Yuchun Lee: You know, I’m a firm believer that once you love your own mistakes and learn from every single set back for me, it’s one of those things that I’ve been preparing for. I prepared the company for actually, even before it went public, I would show these graphs that go up and down to the whole organizations and say, “Hey, when we go public, you are going to have a downturn.” So part of this is preparation. But at the end of the day, it is still an emotional journey, and I do think individuals grow and thrive if they are able to overcome adversity, and that’s what I tell my kids all the time, to be able to bounce back from.
Alejandro: That’s very interesting when you were talking about emotions because I think it’s definitely a rollercoaster of emotions as an entrepreneur. And it’s very tough to be proactive and less reactive to whatever is in front of you. So how did you deal with that?
Yuchun Lee: Yeah. I’ve learned that it’s much easier to run a business when you admit you’re not perfect, and when you are receptive to feedback and embrace mistakes. Those are actually some of the core values we have at Allego here. So I try to share that with as many professionals as I can. I’m a huge believer that if you learn to embrace your own mistakes, if you learn to be a true listener to feedback, you will be able to overcome a lot of adversity, and you treat every one of them as an opportunity to grow. Again, there’s the emotional component. You’ve got to build that fortitude. But that’s what it takes. You’ve got to keep yourself in check as well as making sure that you can continue to thrive and rebound from adversity.
Alejandro: Got it. IBM became a customer of Unica, which led to a positive outcome. So can you walk us through how a customer all of the sudden ends up being a 480 million acquisition?
Yuchun Lee: Yeah. So IBM is an organization that’s great at selling to IT organizations and companies. I think that over time, they’re beginning to realize that chief marketing officers spend a lot of money on technology as well when the whole world of customer communication marketing shifted to digital communication. Then they began to realize that they don’t have a strong enough offering for marketers, so they bought Unica and actually IBM bought additional organizations to assemble a set of technologies and solutions for CMOs. We artificially lowered the number, but it’s actually over half a billion dollars that they spent on acquiring us. We were able to help anchor their solution to the market for the CMOs.
Alejandro: At what point did the conversation turn into an acquisition?
Yuchun Lee: It’s when a convergence of our success as a solution for IBM’s usage in their marketing, specifically digital and web marketing. General managers there realized that “We’ve got to be in the market for these kinds of solutions.” So it’s both a familiarity of our solutions, and it’s strategically in IBM. So I believe that companies shouldn’t be sold. They should be bought. I that case, IBM is the one that realized the need, and they approached us to further that conversation. It’s not like us to proactively go after IBM to be acquired.
Alejandro: Was it like an unexpected email or a phone call that you got from the corporate development team, or the team that you were working with on the product side, they all of the sudden send you a note saying, “I’d like to introduce you to these guys that want to talk.”
Yuchun Lee: Yeah. The initial conversation is always the introduction from the people you know in the organization. Then you gradually move towards all the decision-makers that do acquisitions. Then we have advisors that are obviously familiar with the process. And at some point, you realize, “This is not just talk. This is real.”
Alejandro: So how long did the deal take from introduction to completion?
Yuchun Lee: Let me see. It took about six months.
Alejandro: Really cool. So how was that day when you signed?
Yuchun Lee: I was in Singapore, and I signed it through a fax, and I shot it back. It was fine. It was the right decision, and I was actually really excited because IBM had a lot of resources that they can help grow the business faster.
Alejandro: Got it. I mean, this is a company that you were from ’92 all the way to the day that you actually completed the deal. Which year did you complete the deal in?
Yuchun Lee: 2005, we went public. 2010, we completed the deal.
Alejandro: That’s a long time with your baby, so did you feel like some sense of loss or something like that once you knew that now it was under a different umbrella?
Yuchun Lee: Well, I didn’t because I stayed with the business for almost three more years in IBM. In fact, I helped IBM craft a larger strategy that accelerated the growth of the entire group. Not just Unica, but also other businesses that we’ve acquired. So I feel like Im just executing on the same path, except with more assets, more resources, and a large distribution network across 190+ countries. So it was a great experience.
Alejandro: And also, what an outcome. Not only a great experience but an amazing outcome because of a half-a-billion deal. So any indulgence that you did in anything that you bought?
Yuchun Lee: We bought a house a bit closer to town. That was probably the biggest indulgence, but beyond that I thought I was going to retire, but retirement’s way overrated. After two weeks on the beach, I felt like, “I’ve got to get back to work.”
Alejandro: So what did you learn then because going back to work meant working with General Catalyst. What was that experience like for you?
Yuchun Lee: Yeah, so I didn’t know whether I wanted to be an investor or start another company, while at the same time, I started incubating Allego, my current company. I think through General Catalyst, I learned that you can do multiple things. There are a lot of talented people in General Catalyst that have shown me that you can do multiple things. You can multi-task, whereas, at Unica, it was very single-threaded. So after General Catalyst, I realized that I actually enjoyed running companies. I want to get involved with businesses. I enjoy the prospect of grooming professionals and help them grow as professionals. So that’s how I got back on the saddle if you will and started running businesses again.
Alejandro: I want to talk about, just really quickly, your experience with General Catalyst and especially being on the other side of the table. Any takeaways or anything that you saw more from the investor’s side when you were overlooking and seeing the operator’s side from a 30,000-foot view. Any key takeaways from that?
Yuchun Lee: Well, you know, the biggest surprise I had was, I thought venture investors and investors in general are, for lack of a better word, system thinkers. They are thinking about economics. They’re thinking of market trends and whatnot. When in reality, especially in the early ventures, meaning the venture from that deal with startups or Series A and B companies. Most of the professionals there, I would say are actually not system-thinking economists or anything, but they actually are people-people. They are professionals that are very talented at sizing up individuals, understanding what makes them tick, and bet on teams of people. So they’re almost like HR professionals if you will. That was very surprising.
Alejandro: That’s very cool. HR professionals. I mean, if you think about it, it’s kind of like recruiting too.
Yuchun Lee: Yeah.
Alejandro: Like when you’re trying to get the right people.
Yuchun Lee: You try to spot talents and understand that this group, even if they’re business idea s**ks, they’ll figure it out.
Alejandro: So, what were the traits of these guys that you were the most impressed by?
Yuchun Lee: People who are huge extroverts, are big connectors. They are very fun to be with, and I think they make things happen by connecting the dots between people. By connecting the dots between people, ideas get generated, and things happen. That’s the biggest lesson I’ve learned. I’ve also learned that I’m not one of those. My skill set is actually building a company versus connecting and socializing.
Alejandro: What does connecting the dots between people look like?
Yuchun Lee: Well, sometimes, it takes one or two key board members to be added to a business, or connecting one entrepreneur with another entrepreneur, or at the critical moment, introduce a business to somebody that’s from a company that may be a suitable acquirer of that business. And just starting to make intros and make connections. I think that’s really the critical value, I think, that a board adds and a venture can add to any business.
Alejandro: Very cool. So then let’s talk about Allego because you incubated Allego during your stint with General Catalyst. How did you come across the problem, and how did you start to see the solution that eventually became Allego?
Yuchun Lee: At Unica now, IBM and I ran a pretty large sales organization as part of my business, and I’ve always felt that sales reps are not very well trained. The way reps are trained is that you typically have some sort of boot camp or kickoff meeting. You bring them to these places, and you mentioned you throw a party, so everybody feels good about the team. And then you lock them in a room, and you put a pipe down their throat, and you pump like a thousand PowerPoints and somehow magically assume that they’re going to remember all this. And it never happens. Right? They forget what they’ve learned from those meetings, and so I believe that even back then that there’s got to be a better way. So at Allego, we help businesses onboard their reps faster and help them be better at launching new products, and help them to be more efficient at selling everything by turning the whole learning process, the training process upside down. You know, most of us love to learn when we need the information, not when we want to learn it just in case I need information. So we pioneered this concept called Just-in-Time Learning. We help companies basically set up an advanced system to make sure the reps learn all they need to learn. Not just formally, but informally where 90% of the learning happens. So that’s the business of Allego.
Alejandro: How do you make money?
Yuchun Lee: We help organizations do that, and they pay us on a per seat basis, per rep basis. I know many of your listeners are in the financial services industry, so you think of companies like John Hancock, or Nevene, or TIAA, or TD Ameritrade, and even Blackrock won an award from our customer conference last year. These are companies with a huge company-facing organization, and having Allego helped them get the latest, greatest intel from the market, makes sure all the people are trained, and make sure that they’re consistent in their messaging. That’s what we do.
Alejandro: You were talking before about how you leveraged your network that you created at MIT to really surround yourself with talent at Allego. So can you walk us through that?
Yuchun Lee: Yeah, you know, even today at Allego, a lot of our hires are from referrals. As a company grows and you build a reputation to be a great place to work, employees automatically would submit more and more referrals. As the circle gets bigger, you can grow organically. That’s only one thing. The other thing is you know, I still am an XIR, Executive in Residence connected to General Catalyst, and through that network also recently, I also connected with Summit Partners who put some money into Allego. Both of these firms helped Allego gain more connectivity exposure in the market as well as just in general, give us valuable feedback that we wouldn’t have otherwise. So it’s all about building these networks of employees, networks of customers through introduction by the way, our customers also refer us to other customers. When our customers, individuals, move a job from one company to another, they bring us over. So to some extent, I believe that successful business today sit on top of these network of people. At Allego, we’re really, really good at making sure that customers are satisfied and that they’re able to bring us new business.
Alejandro: So let’s talk about the money side because I know that you guys have you were pointing to Summit. So how much money have you guys raised for the business?
Yuchun Lee: A little under 60 million altogether. But again, most of the money we raised is sitting on the balance sheet. We’re actually doing better than Unica in a sense that we’re also growing organically. We try to grow a cash flow neutral basis here organically. As a business, we are probably growing at twice the rate that we were at Unica. Since inception, our compound annual growth rate is over 140%. We were #5 at Inc. 500 last year.
Alejandro: That’s very interesting that you say that because in many instances, when you go to investors, and you say, “Oh, you know, we need this amount of money for marketing, and we’re going to spend it on marketing.” Anyone can raise money to spend it on marketing, but the toughest part is to really identify unique channels that can help you to grow the business organically. So you were alluding to that. What have you learned about building a business organically?
Yuchun Lee: I believe that by having too much money, people become lazy in their decision-making process. And the converse if very true, which is when you are under constraint, every decision’s made properly. So when a company is bootstrapped at the beginning, they grew up with the mentality that these are critical decisions, and we don’t make them lightly. By having that kind of discipline, when you do have money, when you do grow, you’re able to just make better decisions over time. That’s the first thing we know. The second thing we do is, we correct course very quickly. We do make mistakes in our execution, but when we do, we correct our course very quickly. We have a very intellectually honest, open culture at Allego, and very, very high retention as a business.
Alejandro: What does an open culture look like?
Yuchun Lee: We are very collaborative in our salesforce, for example. Anybody can ask any questions, and people will jump in. We obviously at Allego use our own tool to help train salespeople. In fact, many of our customers are using Allego not just for salesforce, but for the rest of the organization as well. We help people collaborate. We help them access critical content in the organization as well as help them do onboarding and ongoing training and learning. So the system part helps. The culture part is open, collaborative, and very intellectually honest. One of our operating principles that I talk to every single one of the employees is that “Try to learn to love your mistakes and not be too defensive about it if somebody points it out to you.”
Alejandro: Got it. Very cool. And you guys are based in Boston. Is that right?
Yuchun Lee: Correct. A town about 20 minutes west of Boston called Needham.
Alejandro: How is the area of Boston now for building and scaling up companies?
Yuchun Lee: Yeah, so downtown Boston is a very hot market. What we’re seeing is that the rent in that area has just skyrocketed through the roof approaching $100 per sq. ft. there. I believe that the Millennials that are working in downtown, within five years will start to realize, “Once we have families and have kids, it’s not clear whether the Boston nightlife is the way to go once we marry and have kids.” So we are actually the counter-downtown culture here in Needham where there’s tons of parking space. My commute to work is six minutes in the morning. I just see lines and lines of people going to downtown. I was joking with my management team, “We should put a billboard up that says, ‘Are you tired of this commute? If so, come to Allego.'”
Alejandro: Wow. Very, very interesting stuff, Yuchun. So one of the questions that I typically ask the guests that I have on the show is that if you had the opportunity to go back in time and have a conversation with your younger self, let’s say with that younger self that was starting the first business. It could be Unica or maybe the other projects that you were doing while at grad school or high school. If you had the chance to give yourself one piece of business advice before launching a business, what would that be and why?
Yuchun Lee: I would probably it wouldn’t be one advice. It would be a lot of advice. I can tell you. I’ve learned so much since my younger self, and it’s basically lots of elements that I’m sharing here with you. Elements around, be comfortable with yourself. Be open to negative feedback. Be open to feedback on mistakes. Learn from your mistakes and having that emotional fortitude. All that took me 30+ years to learn. If I had known that in my early self, I think I would have done a lot better than I am today.
Alejandro: That’s really interesting. So talking about learning from your mistakes, and I’m sure that you’ve been able to do that a lot even though you’ve been incredibly successful. When you really get to learn and get the most out of the mistakes is when you really embrace reflection. So how do you really execute on that reflection to get the most out of that failure and really learn and bounce back?
Yuchun Lee: Yeah, it takes practice. I would say that I openly tell my team that, “I’m going to make 10 to 15% wrong decisions, but you’ve got to help me figure out which ones are wrong so that we don’t all make the wrong decisions.” When you have that open attitude toward your team, they become more open. Then you have now an environment where you can help each other to support each other to go through that. And to some extent, it’s a safety net. I’m human. As much as I want to do the right thing, I will make mistakes continuously by having an open, supportive culture to help you through those tougher times or when you make mistakes. My team will call me out if I make a mistake, or if they feel like my decision is wrong. To me, that is the best way to work because then I don’t have to pretend like I’m somebody I’m not, and I don’t have to pretend like I’m perfect. So that’s my formula really.
Alejandro: I think that’s very powerful because in many instances, I see what people are starting to call the CEO bubble, where you live in this bubble, and you’re in this bubble, and you’re completely detached from what’s going on in the organization. And people are not able to have open communication. Then when you realize it, it’s too late.
Yuchun Lee: That’s right. Knowing that truth. And as the company grows, the harder it is to get the information around. That’s why at Allego, some of the capabilities we have are to help the company excel the critical information in the organization throughout the enterprise, not just within the sales team, but throughout the organization.
Alejandro: Very cool.
Yuchun Lee: I think that the critical part of understanding what truth is, what the world is, you could be the smartest team, but if you’ve got the wrong idea of what the world is, you can still make a lot of mistakes.
Alejandro: Of course. So for the folks that are listening, what is the best way for them to reach out and say hi?
Yuchun Lee: I have an open-door policy to everybody. My email is email@example.com feel free to reach out to me.
Alejandro: Wonderful. And are you on any social media, Twitter or LinkedIn?
Yuchun Lee: I’m on LinkedIn. I try to be more subdued on the rest of the social media out of privacy reasons. But yeah, LinkedIn is probably the best channel.
Alejandro: Wonderful. Well, Yuchun, thank you so much for being on the DealMakers show today.
Yuchun Lee: Thank you. That was fun.
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