Every year, Inc. Magazine publishes one of the most watched lists in business: The Inc. 5000.
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The Inc. 5000 is a list of the fastest growing privately-held companies in America. The Inc. 5000 is ranked according to percentage revenue growth from the previous four years.
To qualify for the most recent list, companies must have been founded and generating revenue by the first week of 2003, and therefore able to show four full calendar years of sales. Additionally, they had to be U.S.-based, privately held, and independent–not subsidiaries or divisions of other companies–as of December 31, 2006. Revenue in 2003 must have been at least $200,000, and revenue in 2006 must have been at least $2 million.
And, of course, their growth rate has to be among the top 5,000 in the country. Needless to say, it is pretty tough to make this list.
But one company serving the purchasing and supply management space placed quite high – #610. That company is Iasta – a provider of software platforms that help automate companies’ strategic sourcing processes and provide buyers with the ability to collect and analyze a wide range of supplier information.
This growth rate intrigues me. Especially because of the competitors that have graced the market: those that are somewhat large, publicly-held companies that have grown by acquisition; those that seemed destined to stay small forever; and those that became victims of the dot-com bust.
So I was able to catch up with David Bush, the CEO of Iasta, to learn more about how a niche provider in our space has been able to achieve such impressive growth despite tremendous odds against it. This is not a paid advertisement – as a fellow entrepreneur who knows a little bit about rapid company growth, I’m simply curious about the story. But I think you’ll enjoy David’s insights, too.
CD: So, David, tell my readers about Iasta: what you do, how you started, and where you are today.
DB: Iasta was started in March of 2000. Currently, the company is run by myself, Todd Epple and Jason Treida and we divide duties equally. I manage our sales, marketing, business development and alliances, so I am the most visible of the executive team. We actually started the company after seeing FreeMarkets Bidware in a Dana auction. FreeMarkets was trailblazing and on a rocket trajectory, but we were not scared by the software. We also knew what they were charging, so, in classic capitalistic fashion, we started Iasta. We never did see the admin side of any tool, and still have not. This has probably helped in the long run, since almost every eSourcing tool looks the same and ours does not.
You will see some changes from us in 2008. We recognize that the market has changed since then and eSourcing tools are no longer auction hammers. For eight years, we have developed functionality from our single code base and are very close to having end to end sourcing functionality under one umbrella. This is a major differentiator for us.
CD: You’ve expressed pride that your company is private and has not accepted venture capital. What difference should that make to a Director of Purchasing who is evaluating Iasta’s solutions?
DB: It means that Iasta is in this for the long haul. Stability and consistency are important for any procurement team that wants to build change and drive efficiency through technology. Furthermore, Iasta was required to make money on the merits of its solution and service to survive. We were never given any special treatment, so everything that we have developed comes from sweat equity and listening to our user community, which provides direction to better functionality.
Ultimately, we have relationships with our clients only. No one is telling us how to run the business, except these organizations, since they vote with their feet. If we do not perform, they will look elsewhere. Fortunately, we have made more good decisions than bad and more companies move to us than away.
CD: In the early eCommerce days, venture capital money abounded and companies were going public like crazy. What made you approach things the way you did?
DB: It was probably a mixture of factors. Todd and I had already bootstrapped one business for almost 10 years and felt 100% confident that it was repeatable. Also, we live in Indiana, which is not exactly Silicon Valley. Finally, we are fiscally conservative by nature. Taking huge financial risks is not in our DNA, and in the early stages of business development, your time is free. Of course, you pay for that in stunted growth, since it takes years (and some luck) to generate the momentum needed to achieve recognition.
At the end of the day, we felt this would be a good way to make a living and build a business. We never saw it as an investment vehicle that we could turn X ROI in X years. There was never even a business plan, just the desire to make a profitable business as fast as possible.
CD: While your competition has struggled with growing, even as publicly-held companies, Iasta has grown rapidly. Why do you think that is?
DB: As a smaller company, we have a lot of head room. Even now, we still are coming into a significant percentage of Global 3000 companies that know very little about us. This provides us a big opportunity to show that they are not pigeon-holed into the same “me-too” solutions. Some cannot over come the mental or political barriers, but many do see the value in working with a company smaller than Oracle, SAP, Emptoris or Ariba.
Next, there is the Law of Big Numbers. That is not really a Business Law, but how we refer to it internally. Companies cannot just keep doubling revenue; eventually you cannot do it any more without a totally different, non-organic strategy. As of today, we are still growing rapidly through 100% internal investment; however, it’s just harder to double $25 million than it is to double $5 million and we have not hit that wall as hard as others.
CD: After implementing Iasta’s solutions, what results can a purchasing and supply management department expect? What problems are solved?
DB: From a general standpoint, a client should obtain cost savings, increased sourcing efficiency and knowledge retention. Depending on how capable their internal resources, will determine how well they will be able to maximize these benefits. Of course, Iasta also provides a wide range of implementation services that we customize to fit the need of the client. These can range from simple training to deploying a team to transform the sourcing process. At the end of the day, a sourcing organization should be able to do a much higher volume of strategic sourcing with its available staff levels, which will help with cost reduction goals by default.
To learn more about Iasta, visit www.iasta.com.