A hand full of aces… the Rule4 story (part 1)
While enjoying dinner with a friend in Rome last week, she asked the inevitable question — so you have a new company now? I’ve heard this question a lot in the last year, and it’s one where the concise answer (“Yeah, Rule4!”) doesn’t provide the full picture. The journey to this point has truly been the experience of a lifetime, a lifetime filled with lessons. As a passionate entrepreneur who believes everyone who’s inclined should be an entrepreneur too, in this series of posts I’ll try to share some of the possibly useful parts of the Rule4 story.
For context, Rule4 provides cybersecurity and emerging technology professional services. We have global reach, and are committed to applying technology in a way that has a positive benefit. Learn about our name, and our journey to become a certified B Corporation. I’ll dig into more about what Rule4 really does (and how we do it) in future posts.
A few folks know me as the co-author of Unix and Linux System Administration Handbook, a project that I am honored to have worked on for over 30 years and is currently in its 5th edition (in bookstores near you under the Addison-Wesley imprint as of late 2017). But, beyond that, I’m a serial entrepreneur, dad, skier, beekeeper, and overall outdoor enthusiast.
As for the serial entrepreneur claim, constraining the timeline to post-college years, I was one of two co-founders of XOR, Inc (with Herb Morreale) in 1991; an Internet-focused professional services company that started with only the 2 of us and was 550 amazing XORians at its peak. XOR was recognized for many accomplishments, including 5 consecutive years on the Inc 500 list. XOR was wholly acquired in 1999 by a Chicago-based VC, and today is part of FICO. XOR was the ultimate coming-of-age bootstrapped company story — two dudes just out of college, running a business in their garage (ok, it was really a cabin in the mountains). No clue how to do anything from finance to contracting, hiring to long-term strategy. We knew we were winging it, but were determined to figure it out one step at a time. We did everything from firing our largest client (80%+ of our revenue) in year #2, to launching the first online Internet rental car booking system (unbelievably, there was a time when you couldn’t book rental cars online) that used a custom-built OS/2 gateway to a IBM mainframe running CICS/MQ. XOR was first and foremost a huge trip, and when times were rough that company was held solidly together by its culture (more on that later).
After XOR, I co-founded AppliedTrust with Ned McClain in 2001. Also a bootstrapped company, AppliedTrust provided a wide-array of IT infrastructure, DevOps, and security professional services. AppliedTrust solved hard infrastructure problems for the likes of Bloomberg, Nordstrom, Children’s Hospital of Colorado, USGS, Rally Software, and ResMed (to name a few), and was honored with many awards including the much coveted CTA APEX award and many years on the Inc 500 list. AppliedTrust was wholly acquired by Colorado legend ViaWest in 2015 — a fantastic match, the amazing ViaWest family was a strong culture fit. ViaWest was acquired by private equity-controlled Peak10 in 2017 and now goes to market under the Flexential name. I’ll save my observations about private equity, complex corporate structure, and the importance of a strong brand for another time.
One thing that XOR and AppliedTrust hold in common is that the teams there (and now, in most cases, alumni) are the top 1%tile of amazing, talented individuals. I would proudly go into battle with any of them.
Rule4 is neither XOR nor AppliedTrust, but the experience of 27 years of building — and selling — successful professional services organizations provides a great basis for take-away lessons, or at the very least, good discussion fodder.
Entrepreneurs always have a story, and especially as of late there’s a lot of focus on how to succeed in the VC-funded world. While I’m sure there are somehow useful lessons in popular discussions such as “How many slides should my pitch deck have?” or “How much equity should I give up in my seed round?” (and I wish all those folks brilliant success), I hope that first and foremost folks will give a great deal of thought to this question: “Who am I founding this company with, and how is that going to play out years down the road?”
Yes, the #1 lesson that I’ve learned over the years — and have both shared and tried to share in other forums (note to self: VC-funded conferences aren’t interested in bootstrapped success stories) — is the need for having a strong, talented, dynamic, resilient, brilliant co-founder(s) by your side. I believe that getting this element right is more important than any other aspect of your business plan. Founding and building a company isn’t easy, and does not follow some beautiful, predicable path as described in a business school text book. As the Navy Seals say, the only easy day was yesterday.
While my 2 previous co-founders, Herb and Ned, are very (very!) different people, they both proved time and time again the value of not being in business alone, and both had all the desirable attributes of a great co-founder (see below). On days or issues where one of us was not at the top of our game, the other would step in. Over the years, I came to this list of desirable attributes in a co-founder:
+ Commitment to do the “right” thing, every time. This may mean not always doing the “profitable” thing.
+ Perpetual desire to learn and grow.
+ Says what they mean.
+ Understanding of the importance of company culture.
+ Committed to sticking with it for the first year, no matter what. Again, no matter what.
+ Extreme loyalty.
+ Transparency and integrity.
+ Outstanding work ethic.
+ Doesn’t panic when things don’t go as expected.
+ Is not in it for “the exit.”
It’s worth noting that the following are NOT included in the list above:
+ Has a degree in x.
+ Worked for company q, p, r, or s.
+ Knows VC or person y, z, or k.
Maybe this second list would be good (or bad), but for sure are not required attributes of a good co-founder.
Take a careful look at that desirable list — can you concretely say that someone you’re considering as a co-founder has ALL of those attributes? If not, then either 1) they should not be your co-founder, or 2) you need to spend more time with them to get more data. Go on a camping trip. Go to Antarctica with them. Run a marathon with them. Whatever you do, take the time NOW to get the answers. Departure of a co-founder (which I’ll also talk about in a later post) is generally not an “on plan” experience.
But wait, wouldn’t it just be easier to found a company alone? Then you don’t have to worry about all these annoying attributes, or giving up equity to a co-founder! Each to their own, but co-founders take a lot of the risk out of the early days/years, and help ensure that the organization has a balanced mission for which the management team is accountable. I throw no shade on all my friends who have built single-founder companies. But with all due respect, I also wonder how much farther, faster those same organizations could have gotten with a strong co-founder team.
And no, your VC cannot pick your co-founder for you. I’ve seen this tried — a lot! Remember those “could be good but aren’t necessary” attributes, like what degree someone has (or from what school), or who they worked for? I’m convinced that in the VC-centric universe, there is a checklist (or blog post like this) that lays out the formula for how to build co-founder teams based on these on-paper attributes. Educate me about all the terrific, enduring companies that were built this way in your feedback / comments, because I personally haven’t seen it succeed in the wild.
At Rule4, we launched the company with 5 co-founders: myself, Dan Mackin, Paul Nelson, Haley Berry, and Chris Rossi (*1). I can’t say enough positive things about this incredible team — has everything gone perfectly? NFW. But every day they’ve jumped in with a great attitude and a passion to change the world. Not only are we growing ahead of plan, but we are having a blast doing it. [(*1) In interest of full disclosure, Chris made the decision to leave Rule4 in May. He had an indelible, positive impact on the organization, and will always be part of Rule4’s soul].
My primary co-founder (Dan Mackin) and I share the title of co-CEO. This is another somewhat unique startup management structure that I am a huge proponent of. Having a founder co-CEO, if implemented correctly, not only doubles the fun, but it doubles that impact and velocity of the company.
So, how does that work? Dan and I are “partners-in-crime” as co-CEO (and, in a whole bunch of other ways), but like members of other good crime teams , we mostly operate independently. On a day-to-day basis, we both make the best decisions we can as situations arise. We stay in close contact throughout the week, and we have a formal, standing weekly sync meeting where we often discuss strategy or address unexpected issues. There is always some inherent risk of “mom said no, so I’ll ask dad” but both Dan and I are acutely aware of this as a risk and try to stay in especially close communication where particularly controversial issues are involved. We also encourage our team to reach out to both of us together (in a Slack chat room) where they identify such cases on their own.
Like many other close / important relationships, maintaining strong co-founder/co-CEO relationships requires ongoing, proactive investment beyond just sitting in a conference room looking at spreadsheets. Maybe it’s making the effort to go to your co-founder’s kid’s recital, a trip to Vegas, or the annual co-founder fishing trip. Whatever works for your team, it’s critical to invest the time, effort, and $$$ — in a lot of cases, you end up spending more (waking) hours each day with your co-founder(s) than your spouse (also a reason you should carefully select your co-founder(s)).
In the next post, I’ll take about the synthesis of the Rule4 brand, and the underlying importance of a strong brand.
Until next time … Trent R. Hein, Co-CEO, Rule4
