CEO Series Ep.2: Adam Ilowite and Michael Upex

Ravix Group — Ravix Group is the leading outsourced accounting, fractional CFO, advisory & orderly wind down, and HR consulting firm in Silicon Valley. Whether you are a startup, a mid-sized business, are ready to go public, or are a nonprofit, when it comes to finance, accounting and HR, Ravix will prepare you for the journey ahead. To learn more, please visit their website at https://ravixgroup.com/

Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected]. 

Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.

If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at oberle-risk.com. Or reach out to August directly at [email protected].

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(4:47) – What was your experience Searching and how were the first few months after the acquisition?

(7:14) – Were there any skills from your careers in Consulting or Investment Banking that played a role in your Search?

(8:55) – What advice did you get from investors or peers on how to handle your first year within the business?

(11:04) – Was there any challenge or learning curve that stands out from that first year?

(16:52) – How did you go about learning ideal process implementation?

(22:52) – What lessons on change management have you learned?

(23:51) – How has your mindset changed as you navigate your second year of ownership?

(26:51) – What are your top 3 priorities?

(28:07) – What’s your philosophy for putting together budgets and hiring plans?

(29:44) – How do you decide on edge-case expenses when you’re structuring a budget?

(31:49) – How did you think about what positions were needed when creating your hiring plan?

(34:38) – What are some common errors or omissions you’ve seen in budgets that you try to avoid?

(36:05) – What are your thoughts on filtering advice and who you should be listening to?

(38:18) – How does industry factor into the types of people you reach out to for advice?

(40:10) – Have you found value in going to industry conferences or trade publications?

(42:28) – What excites you the most about running this business in 2023?

(45:05) – What strongly held belief have you changed your mind on?

(48:33) – Are there any entrepreneurs or CEOs that you study and admire?

(49:49) – What’s the best business you’ve ever seen?

Alex Bridgeman: I think starting off, it’d be helpful to hear a background on the business that you both acquired and what your search was like and maybe the first couple of months in the business. I’d love to hear all about that.

Michael Upex: Cool. I can start and talk a little bit about I guess maybe the search and how we found Axero. I mean, so Adam and I, we launched our search in April 2020. And we did a search for about 14 months and acquired Axero at the end of June 2021. And during that search time, we, I guess, reached out to maybe two and a half thousand companies, talked to about 300 or so, made about 40 or 50 offers, and then ultimately signed two LOIs, of which one of them was Axero. We found Axero through propriety means, where we were reaching out to folks within the enterprise collaboration space, project management and so forth, just good secular trends coming out of COVID, thinking more work was going to be done online and ultimately identified Axero through our outreach. The two founders were already on another venture that they had that they started in a different space, so I think they were open to an exit. And ultimately, we did the transaction and stepped into the roles. As we stepped in, we sort of divided up the kingdom, Adam and I, and Adam focused more externally on sales and marketing and me more inwardly focused on client success, product development, finance, and so forth. And yeah, first couple months were very, very intense, very busy. I think it was just a lot of drinking from the firehose, learning about the business, learning about the customers, about the product, learning about the teams, and start trying to identify some early opportunities where we can have an impact and see how we execute on the plan that we had set out.

Adam Ilowite: I mean, we did a traditional funded search. I think the only thing that was maybe a little bit different, although it is more common now, is we didn’t start fresh out of business school. Both Michael and I worked for about three years after business school, Michael in investment banking and me in consulting. I think those years, those skills that we learned there ended up being, A, very helpful during our search and then, B, really translated well to what we each focus on at Axero. So I think a lot of those skills ended up being more translatable to running a small business than maybe I would have realized when we were making those decisions.

Alex Bridgeman: Yeah, any particular skill from consulting or investment banking that sticks out to you as most helpful?

Adam Ilowite: I think, I mean, client or stakeholder management, I mean, dealing with happy clients, frustrated clients, dealing with so many. We have hundreds of customers, and each customer has maybe dozens of stakeholders or more. It’s not all that different than kind of the Rolodex of people that you interact with either in consulting or banking, where everything’s- you have to be comfortable in tricky situations, comfortable talking to people who know a lot more about their business than you do and still having them feel like the conversation was valuable and that you are a trusted adviser and trusted vendor.

Michael Upex: I would agree with that. I think, obviously, coming from investment banking, just being comfortable around financial statements, projections, analysis has been just incredibly helpful for some of the financial side of the business. But beyond that, I do think that project management work, which is what you end up doing quite a lot, and its consulting and investment banking, managing teams internally and external stakeholders through various steps and various milestones in order to achieve the resolution, whether it’s the transaction or the launch of an internet, I think that I do rely on that experience quite a lot . And some of the migrations or some of the implementations can be quite complex. And so having that experience to leverage knowing that got team in place, got the milestones defined, we know what we need to do, and just a matter of executing has been helpful for Axero.

Alex Bridgeman: What kind of advice did you get from investors or peers for how to handle your first year in the business once you acquired it?

Adam Ilowite: I think the most common piece of advice that you hear a lot of the first year is do no harm. You’re there to learn, you’re there to understand how things work today before you start making changes. And I think it’s not bad advice. But you very quickly, I mean, a year is a long time to wait to have ideas about how you are or going to start executing on things that you want to be doing to move the business in the direction that you want to be moving with. I think the better analogy that one of our investors shared with us was like docking the space station. You want to make sure you’re moving at a certain speed, the space station is moving at certain speed. You’ve got to get those relative speeds right and then dock and have a good lock, and then you’re both moving in the same direction before you start changing the direction of either the space station or your little ship. And I think that actually was very good advice. Not so much that it takes a year or it takes six months, it’s probably different for everyone or for every business, but making sure that you have- that you’ve docked with the mothership before you try and change the direction of either is important.

Michael Upex: Talking to customers and talking to prospects was also one of the advices that came out, and you can never spend too much time talking to either customers or prospects. We just learned an enormous amount about how people use our product, what pain points they have, what they’re getting out of the platform, what they like, what they don’t like. And we certainly spent a lot of time jumping in on customer calls, whether it’s their implementation, whether they’re having a renewal conversation, or anyone who’s in the sales pipeline as well at different stages. And doing so, there’s a limit to what you can accomplish, how much you can talk to customers prior to stepping into the role just for confidentiality reasons and so forth. And so, really doubling down once you do have all access is a great way to learn the business.

Alex Bridgeman: Within the first year running Axero, is there any particular challenge or time period that was most difficult or where you feel like had the highest and steepest learning curve?

Adam Ilowite: I immediately know what I think is our shared answer. But yeah, I mean, the first few weeks, really Michael should talk about it, of getting the financial engine of the company back up and running was probably the biggest challenge we faced in the first year.

Michael Upex: Yeah, just by various circumstances, we walked into Axero with no finance function whatsoever. And so 30 odd employees, couple hundred customers, invoices to send out, bills to pay. And really, our knowledge of our systems and processes were all outside in through documents that we had that we viewed prior to transaction. So yeah, setting up a finance function from scratch was incredibly challenging and very, very steep learning curve. And it took about three or four weeks for us to start sending out the first invoices. So certain customers were already renewing or were approaching renewing and wouldn’t necessarily have received their next year license subscription invoice. It ended up being me sending them through a joint Gmail. I mean, it was a full time job that I was doing while trying to do other things in the business.

Alex Bridgeman: So, you said it took three to four weeks to figure out. What did you end up doing?

Michael Upex: Well, so we got a new part time CFO that got parachuted in and who helped really do the triage and to understand the different systems and so forth. And I think one of the issues that we had set up, and I think this was poor advice that we had received or poor guidance that we had received from someone prior, we set up a new QuickBooks instance from scratch. And so there was a whole data migration that had to happen and mapping the different products and services that were being sold into this new QuickBooks entity. And we use as our revenue recognition system SaaSOptics, which is now called Maxio. But that migration broke connectivity with Maxio. And so there was no link between those two systems anymore. And it really took, it took a desperate message from me to the folks at Maxio, their leadership there, to ask for their help for us to get up and running again. And once that had been resolved, then we were able to issue invoices based on the subscription that was determined by Maxio. So it took a little while for us to get that going.

Alex Bridgeman: And what about the second six months? So the back half of the first year, anything within that period stand out to you?

Adam Ilowite: Yeah, I think one shift that was kind of underway and still is underway at Axero is that the number of enterprise customers, true Fortune 500, Fortune 1000 organizations that we work with, has skyrocketed from, if you were to go back five years in Axero’s existence to practically none, maybe one or two, to now it’s our regular course of business is selling to and serving those types of organizations. And implementations of our product for organizations of that size are a completely different flavor in terms of the skills we need to provide the resources that those organizations bring to a project like this compared to what Axero grew up on as our bread and butter. And so, I would say definitely, in that sort of second 6 to 12 month timeframe, we realized how many of those implementations we have live and the number of resources we had devoted to them and how they could stall, or how they could be successful in terms of what we needed to do to bring them closer to launch and closer to getting value out of the platform. I think we took a heavy role, both Michael and I, in helping really move those forward. And again, that’s where some of that consulting and investment banking experience comes back into play in terms of just we could interact with C suite executives at Fortune 1000 companies. We understood how to project manage highly complex projects with multiple work streams of multiple different stakeholders and how to keep things moving forward. And that became a big effort that we were working on and a big challenge that we didn’t necessarily think that much about when we were doing the transaction. You just think you make the sale, have an implementation team, they implement the customer, what else is there to understand? But obviously, when you have 30, 40 customers and implementation at any given time, there’s a lot to wrap your minds around, there’s a lot that could go wrong, a lot could go right, and helping keep those on track was- and we ended up revamping our implementation process, we ended up hiring a couple of new folks on the implementation team to help support, and we continue to be heavily focused on how do we run really tight, really successful implementations today because it’s time to value on the platform and the success of your implementation, the speed of your implementation are very, very, very good predictors of your long term success with Axero. If you can implement quickly and get value out of the platform quickly, you’re very likely to continue growing and getting more value out of the platform over time. And the vice versa is also true. If you have trouble getting off the ground, it’s not a great start to our relationship, and it tends to be very difficult to get back on track.

Alex Bridgeman: Implementation for enterprise customers is definitely a big task that you don’t want to develop a bad process for. How did you go about figuring out what is the best process? Were there investors you could reach out to or peers? Like what was your process for kind of learning what an ideal implementation looks like?

Michael Upex: We started joining a few obviously right at the get go. And I think, both Adam and I, kind of alarm bells went off. And we quickly understood that this wasn’t going to be sufficient for what we did. And so we really did sort of a teardown of everything, of the process from beginning to end. And we started off with a big workshop where we just wanted to brainstorm as many ideas and perspectives as possible from the sales folks, from the product team, from client success, from current implementation managers, and trying to understand what is their perspective on what works, what doesn’t work. And over time, we developed essentially a breakdown of step by step each task that needs to be accomplished in order for our platform to be successfully installed for any size customer. The larger the customer, the more complexity comes around site architecture, content, integrations. But at its core, the implementation really follows a similar blueprint for our customers. And so once we had identified that full journey and all the tasks and all the requirements that need to be accomplished, we created a collaborative project management document that we share with customers, so the customers can see their progress through these tasks and helps us have better visibility on how the customers are moving forward. And that helped pretty dramatically reduce the launch time of customers. That was a metric that wasn’t necessarily tracked by the company prior. So we did some analysis to understand how long it usually takes, set up this new process, and now we’ve been measuring the time to launch since then. And we’ve had a reduction of about, I think, 35 or 40% in number of weeks. And so that’s been incredibly helpful. Because as Adam was saying, the relationship with the customer, that very delicate moment when they’re no longer a prospect, they become a customer, that is really where we have to spend most of our time providing value and making sure that they feel well taken care of, that the customer feels well taken care of with us, that they understand and start seeing the value of our product. And so really educating ourselves around client success in general, reading a couple books, connecting with a few advisors from our network was very helpful for us to just very quickly understand the customer journey, the pressure points, the friction areas, and how to ultimately iron those out to retain the customer in the long run as much as possible. And really thinking about client success is really the first touch point from the sales side as well. And understanding what they’re looking for, why did they identify the need for a solution like ours, and making sure that that first touch point where they start explaining this to us is already built into our implementation plan so that when they are finally a customer, we are leveraging the entire knowledge of our relationship up to date, and then obviously, building from there and delivering the product and implementing it successfully. That’s kind of the long winded answer about how we view the customer journey as being a key component and where we spent a lot of time last year.

Adam Ilowite: There were two other small things I remember that either we got lucky with the timing or we did well, probably more luck than anything else. But one was we were implementing a customer success platform for Axero, one that we use internally now, and going through implementation with that vendor. And we learned a lot that we borrowed from them as we rebuilt our implementation process. So that was very helpful. And the other thing that was very helpful was we got lucky in a customer of ours had hired an implementation manager on their end for implementing our product at their organization. And he was looking for new roles, new opportunities. And so, we actually hired him as a new implementation manager at Axero right about as we were revamping the implementation process. We had just been a customer, implemented our product, was joining Axero with that knowledge, and we were in the middle of revamping the process to something we thought would be better. And he immediately started providing feedback and guidance on this is an improvement or this is not an improvement. And I think those two things really did help get the process improved quite a bit in the early days.

Alex Bridgeman: How long did that end to end process take where you realized and customer calls, oh, this isn’t an ideal way to implement, versus now the new implementation person has been hired, and there’s a better system in place now? How long do you think that took?

Michael Upex: About four months. We started first of July. I think by August, we were already- I mean, I think even before that, Adam and I, we had identified it. And in August, we started the effort with the team and getting their ideas. And we unveiled the process on first of January last year, and the next sale was going to go through the new process. And there was a bit of change management as well. So really making sure that we would have a few follow-ons, discussions, identifying if sort of the sales team understood it well, internally, we understood it, on the client success side, we understood it well, and encouraging the sales team as well to follow through on the implementations of their new customers, so that they can have a firsthand experience on what it’s all about. So, we took about four months, four and a half months or so to develop it. And then it was change management. And we still tweak it every now and then and find areas of improvement all the time. So, we see it more as a journey as opposed to a final product.

Alex Bridgeman: Yeah, from that process, you mentioned change management. What lessons on change management did you learn from that experience?

Michael Upex: Probably looking back, I would probably want to do it even faster, I would say. I think we were trying to finesse it too much. And I think maybe starting smaller and executing faster and doing- probably, I don’t think the product would have been- would have just evolved faster and been more tested quicker. And I think there are definitely a couple of implementations that’s towards the end of our first year that I felt were already not necessarily on the best track and would benefit from a revamp plan. But we didn’t really have that revamp plan ready yet. So really, yes, starting smaller and then more tactically deploying our new idea. I think that’s what I would do differently.

Alex Bridgeman: Now that you’re in the second year of your business, in what ways do you feel like your mindset has changed from that first six month period or even the year to today?

Adam Ilowite: I think in that first six months or even in the first year, your biggest concern is you miss something or you missed something and you don’t know that is waiting for you around the corner to surprise you. And I think now, that isn’t our biggest concern. And so because of that, it allows us to move faster, to be more confident in the decisions that we’re making. Yeah, so I think that’s the biggest shift from year one to year two is it does take a year to sort of fully understand what it is, what the business is. And then once you have that, it’s a lot easier to strategize about where you want to take the business next.

Michael Upex: Yeah, really shifting from what’s going on day to day, oh, my God, did you see this, to a customer opened this case, just got this email, to more confidently delegating and trusting the team, trusting the processes, trusting the work that we had put in initially, really keeping an eye on things, and recalibrating, certain things are now bearing fruit, and that we can shift from not what is the biggest fire today to what are the milestones that we want to achieve for this month, quarter and start thinking on a more longer term basis. And I think, yeah, just buying the company and investing and incredibly cautious and, oh, can we spend this much money and so forth. But now we’re just at a scale where we have to move faster, higher faster. So, shifting our time to building not just ARR but building the team that has to go with it and trying to support everyone across the business too. And the needs to coordinate amongst larger teams is I feel where our added value is most right now.

Adam Ilowite: I think one of the mantras that stuck with us, one of the sort of platitudes from the search space that you’ve heard probably before is you spend that first year, the business is running you. At some point, you’re running the business. And then at some point, you’re truly leading the business. And I think that first piece, for sure, that the business runs, you’re responding to fires, you’re in a highly reactive state. At some point, you get your handle of it, and you can actually run the business. But still, you’re too in the weeds. You’re a problem solver, you’re trying to solve all the problems out there. And then at some point, you evolve to, I don’t think we’re fully there yet, but we’re somewhere along in this journey of I don’t need to do everything, I don’t need to solve everything. I need to build a process and a team and equip them with the right resources to solve everything. That’s one of those pieces of advice that definitely felt like it was true and wasn’t misleading.

Alex Bridgeman: So if you’re now transitioning from managing the business or running the business to something more akin to leading, what are the top three priorities for you within that shift now? Like, what has changed on kind of your top of mind ideas going forward?

Michael Upex: One of the folks within our investment group had actually coined it, I think, quite well, but like what it means to lead, it’s really about being in the marketplace. And so it’s about being in the marketplace of people and talents with clients, of course, but also partnerships, vendors, and really being a little bit- looking at the business as a whole and thinking about what else is out there that can help support growth? And how can Axero partner with the right people, vendors, clients in order to move that forward? And so yeah, I think right now, things definitely on the people side of things, making sure that we’re growing, growing the teams, we’ve got a somewhat aggressive hiring plan that we want to execute on quite early. And at this point, I think we also need an internal HR function and recruitment that can help support that as well. So right now, I’d say my biggest focus is really on the people side, just to support the growth.

Alex Bridgeman: You mentioned a hiring plan, which is part of a budget and kind of a broader planning process. What’s your philosophy for putting together budgets and hiring plans and planning broadly for the following year or several years?

Michael Upex: Yeah, so it really starts for us, and we do have to thank our board who has been incredibly helpful in helping us put together our plans, but it really starts at the top of the funnel – okay, so how many sales folks do you have? What are their quotas? What do we think is their attainment of it? What is ARR that we can confidently target for the business? Okay, let’s haircut that just from a budgeting standpoint. Then from there, it’s really about modeling out and thinking about where- what’s the capex utilization across the business, how many implementation managers do you need, how many technical support do you need, who generates the most tickets at various life cycles within their journey. And that can build out the client success requirements, and then start thinking about the number of cases or tickets or features that are generally required at any point in the business. And then that flows into the development budget. And so, yeah, each department has to manage its growth in line with the growth that we are expecting from a top line, and we go through every single line of expense that we had in 2022 and determine whether or not it should be in the budget for 2023. So really thinking about it from a budgeting perspective to ensure that we’re managing the business the most effectively possible from a capital perspective.

Alex Bridgeman: For those costs that you’re evaluating whether they should remain in the budget for next year, how do you decide edge cases? Like I could see things that are critical for the business that you need to keep in there, some that are very unnecessary or one time that are pretty easy to exclude. But what do you do with expenses that are kind of in that middle ground where they’re somewhat useful but not necessarily across the team, but for those kind of middle ground expenses, what do you do? How do you think through their inclusion?

Michael Upex: It really depends on the amount ultimately. If it’s something that’s not generating that much value, but it’s $1,000 a year, it’s probably not, and if someone finds it useful, that’s probably good enough. But on average, I would say we’re more keen on just cutting. If it’s not useful, then we should just not keep it. I think otherwise, you just end up with bloated expenses of a lot of things that are semi useful as opposed to having things that are very useful.

Alex Bridgeman: That makes sense. When Feyday [RD1] was mentioning you guys on a phone call I had with him, he said you made a really great budget. What made it great? Like what part of the budget do you feel like garnered that kind of praise from Feyday? He’s got a high bar. So I’d be curious what you guys did.

Michael Upex: What I’ve tried to do in creating the plan is that it’s very clear. And there’s a lot of schedules, a lot of analysis, and that all of these analyses tie together to ultimately what is the output, which is three statements projected for the year, but that everything is coherently built from the bottom up. I mean, we built this completely from scratch, just a blank Excel, cell A1 and start building it out and start thinking about what the biggest expenses are, what the biggest drivers of the business are. And over time, it’s evolved, obviously. But I would imagine that Feyday was impressed by the comprehensiveness, I guess, of the model that there is really no stone left unturned.

Alex Bridgeman: Yeah, it certainly seems like you tried to make sure you covered every minor detail for what would affect the business. So, what about the hiring plan? How did you think through which positions you would need? Does it kind of go back to the budget where you talked about the different factors and what can create your sales team and how that kind of filters down, and then just headcount, who do you need for- how many folks do you need at each team and whatnot?

Michael Upex: Yeah, that’s exactly it. Yeah, I mean, I think, talking about from the sales budgets, like how much do we think we can achieve? What is a reasonable amount of growth that we think that we can achieve? Given where we are in the business, what is the quota that each sales person has, and are we going to achieve it with the current team? No. Okay, so we need another sales manager with X amount of quota in order to reach that target. That then flows to how we think about implementation managers and sort of the waterfall. Each implementation manager we think can have maybe 10 to 12 maximum amount of implementations at any point in time or implementations of a certain length. So we can start seeing when we will need more capacity in order to cater for the new business that’s coming in. That determines then, okay, we need a new implementation manager most likely somewhere middle of the year or not. And then just the volume of business. So new customers coming in generate more cases and tickets than older customers. So as a result, there is going to be an influx of cases. Each technical support engineer can manage X amount of cases per day or per month, which results then in an assessment that, okay, there’s too many cases, or we expect too many cases for the current resources. So adding the resources that we need at the right time in order to make sure that there’s no burnout for everyone, that the volume is adequate. And then same thing then for the account managers. So each CSM can manage either x number, x million of ARR or number of customers, depending on the segment. So as the segments are growing or net expected churn, how many client success managers do you need, how many account managers do you need, and then that triggers the hiring plan for those positions. And then, on the development side, it’s maybe a little bit less scientific around the number of user story points that are produced, but there’s some math around how much money we want to spend on the infrastructure side of things, on the development side of things, or mobile versus QA. And it’s a little bit maybe more of an art and a science from that perspective. But it ultimately does follow a little bit of a linear trajectory with the business and what we should expect to deliver in terms of development for current customers. So that’s in a nutshell how we kind of developed our hiring plan for the year.

Alex Bridgeman: I bet your investment banking and consulting experiences both gave you a lot of experience working with budgets and seeing that, perhaps some you built yourself and others you got to see. What are some common errors or omissions you’ve seen in budgets that you’ve tried to avoid?

Michael Upex: I think maybe it’s a bit of a nuance about specifically Axero and the company and being a software company. It’s really about thinking about cash revenue versus GAAP revenue and sort of how ARR flows into the equation. Because I think just by the nature of how our subscription model works, customers pay upfront. And so, you then recognize the revenue over the length of the contract. And that does create a very, very unique cash flow model. Because you’re getting a lot of cash up front that needs to be serviced over X number of months or even years in certain cases. And so drilling down and thinking about the deferred revenue and how to adjust that in order to get to cash revenue was probably the mistake that we may have made had I just taken investment banking background, just sort of started modeling out what it would have looked like but bringing it down to our business and looking at cash revenue, cash EBITDA, and what that means was the best route for us. I don’t know if that quite answers your question. It’s a common mistake, but it was certainly a mistake that we would have made at Axero.

Alex Bridgeman: Yeah, that makes sense. You’ve mentioned taking advice from your investors or board in the past. I’d be curious to hear your thoughts on getting advice. How do you figure out who you should listen to or what type of advice is valuable for you and kind of filter through all the advice I’m sure you get from lots of different folks in your network?

Adam Ilowite: One of the great things about search models or community is there’s no shortage of people who are willing to help you and people who are willing to give you advice. How you find the advice givers that you trust who are saying things that you feel are relevant for your business is a little bit of trial and error and making sure that you’re having a lot of conversations, asking people their opinions, their ideas. I think certain people would say things, and Michael and I would both feel like yes, they’re on our wavelength. We’re on the same frequency. We need them to be advisors of ours through this journey. And others would say things, there’s nothing inherently wrong with the advice, but it didn’t resonate with either Michael or I or it didn’t resonate with our business. I think one of the big challenges of the search community is there’s a little bit of a rumor mill or a flywheel where searchers and CEOs give information to their investors and advisors, and the ones that have good outcomes, all of a sudden that information becomes advice to then give back to other searchers and CEOs. And it’s kind of like a self-fulfilling prophecy where sometimes certain pieces of advice that have become so easy to repeat and repeated don’t actually end up being the best advice for your particular situation for your particular business. And I think you need folks on your side who understand the business really well. I mean, that became obvious to us who those people were and were not. The more conversations we would have, the more advice we got. And so I think the way to do it is just have as many conversations with smart people that you think you can trust as possible. And over time, the ones that are really aligned and understand your business and just advice you feel is really valuable will emerge.

Alex Bridgeman: As part of kind of figuring out who to ask advice from, how does industry come into it? I imagine there are some questions that you might have that aren’t necessarily very industry specific and then some that are very much so. How does industry factor into the types of folks who reach out to you for advice?

Adam Ilowite: I mean, one of the pieces of advice we got when we were putting together our board was it would be helpful to have someone who knows your industry really well, someone who knows your business model really well, someone who can play more of the CEO coach or who has been in your shoes operating before. I think those were the three kind of personas that came up. Maybe I’m forgetting one.

Michael Upex: And capital allocator.

Adam Ilowite: Yeah, someone who understands capital allocation really well. And I think, for us, I mean, we’re a horizontal software solution. So, industry was maybe less relevant then. But I think someone who understands horizontal software, someone who understands the SaaS business model, someone who could be a coach and a guru for Michael and I, and then someone who understands capital allocation. I think that was pretty good advice in terms of thinking through the different types of experts or advisors you want near you. I don’t think anyone is more important than the other. Maybe it is for others. But we are a horizontal software solution where industry maybe isn’t the most important. Maybe if you’re a, I don’t know, like a healthcare RCM software solution, maybe understanding industry and Medicare, that becomes more and more important. But for us, there’s really not a ton of industry trends that you need to be an expert on to run our business well.

Alex Bridgeman: Have you found value in going to like industry conferences or getting to know folks through other industry like trade publications or whatnot and just trying to meet folks that way? I enjoy getting to know people in media and data. And I’ve tried to find kind of advisors or just people who are doing interesting things in both areas, but it’s still hard as an outsider to know where truly to look, or it may on the surface look like a good place to look or this type of role may look like they’re very helpful but turns out, there’s a totally different area to actually start looking in. How do you kind of get familiar with the industry and know where advice can be found?

Adam Ilowite: I think for the most part, I haven’t found that there’s groups or communities or places where you can find that easily at scale. I think it really comes down to individuals. You have to find the right people. Where you find those people is sort of irrelevant. But you need to find people. And I think where we have found people that have worked well for us, through expert networks that some of our investors subscribe to, those ended up being really helpful resources. Through LinkedIn, I mean, just by following a bunch of talking heads on LinkedIn who are giving relevant advice in your industry. And that leads to three more and leads you to three more, then LinkedIn just becomes like this steady flow of interesting content that’s helpful for informing whatever you’re trying to learn more about. And then the search community, obviously, going to conferences and events hosted by our investors and their networks and meeting others who are at various stages along the way. I think the most helpful advice we’ve gotten are from the first and third categories I just said. And so, the first was expert networks that our investors subscribe to as a paid service that we have been able to find really smart people through. And then former operators who are further along in the journey, whether they’re still operating or sold or not, who are in the search community and now have given us a lot of great advice in terms of lessons they learned along the way and passing those on to us.

Alex Bridgeman: What do you feel like you’re most excited by today? Of the things you’re looking forward to the most in 2023 and beyond, what excites you the most about running Axero?

Adam Ilowite: Compared to where I was, I think Michael feel similarly, but as a consultant, you wake up, you do what you’re told to do. You have a client meeting coming up next week, you have to put together a deck for whatever it might be. You wake up in the morning, and you just think, okay, what do I have to get done, and you just work through your list, and that’s that. Versus waking up as a business owner or leader with ownership in a business, you do what you think will create the most value for the business that day or that week or that month or that year. That is a very exciting feeling to wake up to. I mean, I used to go to bed Sunday nights very anxious about starting the week on Monday as a consultant. And I go to bed Sunday night here, and I can’t wait to wake up Monday and get in front of clients and get in front of prospective customers, get in front of our team, and talk about how we’re going to keep improving Axero, keep building, keep growing. For me, that feeling of ownership, of real ability to set your own priorities and set priorities for the business I think is the most exciting aspect.

Michael Upex: 100%. I mean, can’t do whatever we want, but we certainly do have quite a bit of freedom on a day to day basis to influence the company and in the way we think will yield the best value and having the freedom to really just be able, Adam and I, to make decisions on the direction to go is incredibly fulfilling to do on a day to day basis. But to be honest, we come out of a good year for Axero. We did a lot of work, put in a lot of good processes, really great team members that have joined this year, and our overall financial performance was very robust in 2022. And so really, part of it is about I’m just really excited about doubling down on all the great things that we have established last year. I think, as we’re talking about the first six months, the early part of 2022 was really still figuring a lot of things out, still solving a lot of problems, and doing a lot of thinking and trying to calibrate the business in a certain way. But in a lot of ways, we do feel that we’re somewhat calibrated enough at this point that it’s really about executing on what we’ve already done and reaping the benefits. So I think that’s very exciting, just given the year that we just had.

Alex Bridgeman: Yeah, no kidding, that is exciting. Moving into closing questions. What strongly held belief have you changed your mind on the most?

Michael Upex: I think for me, it was really about I’m quite academic. I do like to over study things prior to making a decision. And when Adam reached out and suggested that we do a search fund, he sent me this Stanford guide. I mean, I obviously read all 80 pages of it to really make sure that I really understood what I was getting myself into. And I think over time, I’ve become more fail fast, and something that I’ve learned as well just working with Adam is making faster and quicker decisions and not necessarily over analyzing. Because ultimately, it’s all a venture, and you can never know the outcome with certainty. So you don’t have to overanalyze and overthink about the outcomes and just go for it. And so that’s probably something that I’ve changed quite significantly. And I actually try now to coach other team members that I see falling into the same trap that I feel myself extracted from.

Alex Bridgeman: Is that just a matter of reducing the threshold of information you need before making a decision? Like, okay, I know like this is probably the 60% the right answer, and so just do it and see how it goes?

Michael Upex: Yeah, and I think the difficulty with that is that I guess I never knew what 100% knowledge looked like. So it’s continuously research and think and analyze. And I think it’s just determining that I am at that 60 or 80% mark that I know, okay, I’m good enough in my mind with the decision that I want to take anyway. And anything beyond that is just going to be, I’m trying to continuously affirm and confirm a belief that I already have, and just letting go of that pattern.

Alex Bridgeman: That’s a good one. Adam, what’s yours?

Adam Ilowite: It may be hard to put into words, but I think, especially when I was in college and later in life, business school, you fall into the trap of just follow this well-trodden path, especially both Michael and I are pretty risk adverse entrepreneurs, which I know is maybe a little bit of a counterintuitive, but the reason we ended up in the search space is because from all entrepreneurial ventures out there, it actually has the right risk profile for folks like us. And I think maybe the belief that you have to be a real risk taker to be an entrepreneur or to be a successful entrepreneur is one that I think should be abandoned. There are plenty of paths out there where you can have a risk profile similar to Michael or I, folks who came from very well trodden paths, consulting, banking, whatever it might be. But this entrepreneurial model actually makes a lot of sense. And you don’t need to accept a 5 to 10% chance of success to be in this model. The data shows that you can do it more successfully or just as successful as other traditional careers. So to me, that would be the one to abandon, that you have to be a risk taker to be an entrepreneur. I think there are models out there for risk averse entrepreneurs.

Alex Bridgeman: Yeah, I totally agree with that. I think a lot of entrepreneurs tend to lean the opposite way and say that they’re trying to avoid risk or at least reduce risk as much as possible by building teams or redundant systems or diverse revenue bases. I feel like there’s a lot of CEOs who are actually fairly risk averse from what it seems. Are there any entrepreneurs or CEOs that you study and admire the most in terms of their risk tolerance or the way that they strengthen their company?

Michael Upex: I mean, I’ve always really admired Charlie Munger and Warren Buffett, and I think they have their formula, and they’ve had it for decades. And for as long as a company fulfills their mantra of simple, good economics and so forth, it’s a good company. And I think that that simplicity of- that they’ve coined their investment decision, I think is something that I’ve always tried to internalize as much as possible.

Adam Ilowite: To plug another podcast, there’s Frank Slootman who was CEO of- I think he is now CEO of Snowflake, but he came from ServiceNow and a couple other organizations aswell. He’s got a podcast with Invest Like the Best. And I try to follow a lot of what he said. He has a couple books as well. But I find his advice is really, really helpful for managing teams, managing change, and just asmart guy. So that’s another one.

Alex Bridgeman: That sounds familiar. I feel like I’ve may have listened to it, but obviously need to re-listen. I’ll go dig that one up. What’s the best business you’ve come across?

Michael Upex: When I was in investment banking, I worked with this company, I want to say- but it’s in the distribution space, and it was incredibly resilient. They sold a consumable product in an incredibly resilient end market and so hardly had a dip in sales during the ’08, 2009 crisis, a family owned, family run. And the consumable nature made it a very, very sticky recurring revenue business. And I had the opportunity to work very closely with the founders and the team there during a transaction. I just always looked up to how they were managing their business, and the company itself was very impressive. I think they’ve tripled in size since I interacted with them, and they’ve done incredibly well.

Adam Ilowite: I like businesses related sort of like globalization of talent. There’s two really that come to mind that we have used a lot or are using. One is Upwork, which a lot of folks know and use. It’s just gives you access to a massive Rolodex of freelancers across the globe who have sometimes really specific skills, sometimes really general skills. We’ve met great people on that platform. And then another is one we use now called Multiplier. It’s similar to some other vendors in space like Deel, with two Es, that let you rather than having to set up an entity in a country to hire folks in that country compliantly. They have entities in all these countries, and you basically pay them a small fee to hire through them. So you can employ employees compliantly in those countries without having to go through the ordeal of setting up an entity and filing taxes and so on, and so on. And so, both of those have given us access at Axero but also at our search fund to a global network of resources that we wouldn’t have been able to leverage otherwise. So, I think just really valuable in the value that they provide. And you’re more than happy to pay a small fee to take advantage of that.

Alex Bridgeman: Yeah, that’s definitely a convenience worth paying for. Thank you both so much for coming on the podcast and sharing a little bit about your business. And it’s fun to hear how the first two years go for a CEO. They tend to be a bit of a roller coaster in some ways. So it’s fun to hear your perspective on how yours went.

Adam Ilowite: Thanks for having us. And if you ever need an internet software employee engagement portal, you know where to find us.

Michael Upex: Thank you very much, Alex.