Starting and Leaving Email Reaction (smartFOCUS DIGITAL)

EmailReaction was founded about 10 years ago, by Mike Austin and Pete Austin (developers and the people behind MarketingXD) and Vicky Carne (marketing and MD). It was always intended as a SaaS Email Provider, an ESP before that term was invented.

EmailReaction built upon an earlier dotCOM venture, CastingVote.com, which hosted forms using a Freemium model and therefore needed launch finance. With the dotCOM crash, it was clear that businesses needed to be cash positive, so we refocused on bulk email, where there were potential paying customers.

EmailReaction started in Mike’s garage; moved to Pete’s front bedroom; then to serviced offices near a bus garage. The final move was to a succession of ever larger offices on the University of Southampton Science Park where it is still based.

It was self-funded throughout, starting very slowly, and taking about two years to get any significant customers. I can still remember our first “large” client, with a list of about 70K that required constant “baby sitting” to go out smoothly.

EmailReaction was bought out by smartFOCUS in early 2006 [thanks for the correction, Charlie!] and provided with a much greater marketing budget. The division is now called smartFOCUS DIGITAL, which has grown to approximately 40% of the whole smartFOCUS business. The product, now called eChannel, has grown and sends billions of marketing emails every year.

People

smartFOCUS DIGITAL ended up with the best team of people that I’ve ever worked with. Apologies to those I don’t mention. I’ll just name three who were vital:

• Charlie Came who graduated from support to run the email infrastructure for smartFOCUS DIGITAL. Great guy. Combines leadership with technical excellence. Always researching, planning, and monitoring. 
• Eddy Swindell, who grew with the company to run marketing. Brilliant at closing a deal.
• Tim Watson was head-hunted to build and run the support and services operation with calm efficiency. Interesting blog. Brilliant at delegating.

Lessons

• Founders probably work best in a bedroom or garage. It concentrates their minds. But most people are not like that. Move early to a science park, because it shows you are serious and you need a good working environment to recruit and keep the best people.
• Cashflow. Small tech companies must focus on cashflow, which is a good discipline but also limits the growth of self-funded companies. For example you have to avoid market sectors with a reputation for slow payers. smartFOCUS invested in the sales team and available working capital, which was very beneficial.
• Opportunity costs. Slightly larger tech companies must focus on opportunity costs. Your people have two responsibilities
  1. keep everything running smoothly, including fixing bugs and doing custom work, and
  2. work for the future of the product by adding features and managing technical debt.
  Whenever staff+resources are taken off (2), to do (1), there is a significant opportunity cost, because your product drops behind the competition, making it less valuable. You need to explicitly budget for this cost, or else you will make mistakes such recruiting too few developers, or as charging too little for custom work.
• Delegate! Be aware and budget for the costs of centralized decisions, in terms of delays, additional admin, and “third best” decisions made because it’s simply not worth the time to convince senior managers of your case.
• Market! “Eat your own marketing dogfood”. If you are a digital marketing company, do a lot of marketing of your products, and use that marketing to demonstrate your own tools. You are not a sales company, so do not do a lot of sales.
• Design collaboratively, so everyone can contribute. Use simple storyboards, drawn on whiteboards or chart paper. Never use a graphical tool with a huge learning curve, like Enterprise Architect.
• Security. Forget “movie plot” attacks. Limit most access to specific IP addresses and use secure datacenters. Then worry about the attacks that can be mounted from overseas by someone using an editor and a browser, because there are thousands of potential hackers like that, compared to those who can develop a zero-day vulnerability.
• Outsource! No ordinary company should be running something like MS Exchange.
• [update] Do not rely on Microsoft. I don’t like singling out one supplier, but we started with a system based on VB6, ASP and a browser-based editor from IE. MS end-of-lifed all of these with no viable migration path, costing us several £million in technical debt. In the last case, there was literally no warning, but fortunately the main affect was that we could never support  Vista ;)
• Choose. You cannot do everything, so pick some things to do well and resource them properly. Do not try to keep everyone happy by doing a little of everything. This is the most important lesson.

Leaving

Mike and Pete resigned from smartFOCUS last Christmas, after long standing disagreements, including our belief that we were in danger of missing huge opportunities in social marketing and automated marketing. Senior management had other targets in mind.

We had to keep this confidential, under the terms of our contracts, so could not talk openly with colleagues until April. That was very hard. We left smartFOCUS DIGITAL to go on “gardening leave” from Friday 8 April 2011, just before the whole of smartFOCUS was bought by EmailVision. We did not have any visibility of the sale process, and I only learned the identity of the buyer when they leaked it.

Read this blog for what happens next!