Opinion: Of bootstrapping, business divorce and outsourcing

Pythian retains positive outlook though industry changes

In 1996, Paul Vallée left Minneapolis and a lucrative contract consulting position billable at up to $175 an hour to come to Ottawa and live the impoverished life of an entrepreneur.

Mr. Vallée, a past OBJ Forty Under 40 winner, bootstrapped the resulting enterprise, Pythian (pronounced “pith-ee-ann”) and his T4 for the next year proved it – his income was just $1,000.

In fact, he did not get back on the payroll until 2000. But, as he reminded his audience during a recent speech at the University of Ottawa, bootstrapping is a race against time – if you only have three months worth of capital, you can do a lot in those three months.

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Mr. Vallée also believes it is easier to start a business today with all the free and near-free tools and support around than it was even 15 years ago.

He notes that you have to be adaptable, persistent and a little crazy to want to become an entrepreneur. It’s not about having a genius-level IQ. It’s about grit, doggedness and discipline. He quotes former U.S. president Calvin Coolidge: “Nothing is more common than unsuccessful men with talent.”

While still a (self-admitted mediocre) student at the University of Ottawa, Mr. Vallée started two businesses. Both were unsuccessful, which led him to look for: a) a solution for a huge problem that was not yet solved in an industry where all boats were rising, and b) a startup where he was not wholly dependent on any other product or service or person for his success so he could stand on his own two feet.

He found it by his fourth year with Pythian, which now has six offices in five countries. The firm provides database management services to Fortune 500 companies and others who are heavily dependent on data security and integrity for their success, such as CBS, Electronic Arts, Boston.com, Telesat, Forbes, Toyota, TheStreet.com, Bridgewater, Harvard, Western Union and Nordion, which cannot have their databases fail.

Pythian works with chief information officers, vice-presidents and chief technology officers, and big computer systems. Mr. Vallée believes that who you hire is crucial to the success of your enterprise and he notes that Pythian, with an annual volume of about $12 million, has more Oracle “Aces” (six) than the $85-billion IBM (which has just one).

Interestingly, one of the most important sources of sales leads for Pythian is perusing job sites like Monster.com. It turns out that future customers unknowingly tell Pythian that they need the company by advertising engineering positions for folks with Pythian-type characteristics. Mr. Vallée and his team simply follow the chain back to its source and convince CIOs or CTOs not to put those engineers on their payrolls, but to outsource the work and hassle and risk to Pythian.

The other marketing channel the company has developed that is equally cheap and effective is waiting for a technology to become obsolete – a legacy computer system is a dream come true – and then pounce. Since no engineer wants to work in a tech dead end, it’s fertile ground for Pythian to find new outsourcing customers. Pythian provides a career path for techs even if they work with legacy systems.

It wasn’t all smooth sailing, though. The fact that the two founders of Pythian did not have a partnership agreement going in meant that they paid more than $300,000 in legal fees when the time came for a business divorce and a separation of their respective interests.

But that wasn’t Mr. Vallée’s worst day in business; Sept. 11, 2001 was. Pythian’s partner at the time was Sun Microsystems, which was located on the second floor of one of the World Trade Center Towers. Sun Microsystems suffered terribly that day, after which there were many unknowns for Pythian in the year following the tragedy.

Still, there have been no layoffs so far at Pythian in its first 14 years. The company has become the employer of choice in its industry and this, combined with rigorous checklists (for everything), journalling and quality assurance, has given Pythian a hard-to-beat, sustainable global competitive advantage.

Pythian could probably be sold today for four times its revenue – perhaps as much as $50 million. But Mr. Vallée, who is in his mid-30s, says he’d miss the action and his team, and he figures he would probably re-enter the business within a few years even if he sold Pythian. Putting together another great company and another top-notch team are tough, so why bother selling it?

He looks at starting a business as a no-brainer. He tells the student entrepreneurs in his audience hanging on his every word:

“If you bet $10,000 on your next startup and you fail, I realize you’re down $10,000. But if it works, it might be that you’re up $10 million. The startup game is a lot better than casino blackjack and, by the way, the person who makes the most bets, wins.”

Professor Bruce M. Firestone is entrepreneur-in-residence at the University of Ottawa’s Telfer School of Management; founder of the Ottawa Senators; executive director of Exploriem.org; and a broker at Century 21 Explorer Realty Inc.

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