Can you explain exactly what your company does and what problem it solves?
Seven Lakes helps Oil & Gas companies optimize operational efficiencies to improve production and increase return on capital through collaborative and data-driven planning, decision making and execution. Falling prices and rising expenses in the industry, have created a heightened demand for our software approach as the industry struggles to squeeze the most out of their margins.
Other industries have the luxury of advanced technology, but Oil & Gas is a few generations behind in integrating across functional information silos. As the sector’s leading provider of innovative enterprise analytics and workflow software, there is an incredible opportunity for Seven Lakes to lead the transformation of Oil & Energy producers into nimble, data-driven companies.
How did Seven Lakes get started?
My background is data. Earlier in my career I worked with Chevron providing insightful information that could help them achieve their goal of improving production and increasing their return on capital deployment. I became very excited about this opportunity and the potential impact data could have. I wanted to see if I could make things happen even faster by building something of my own. I looked around and found that MLPs were starting to blossom, and seized the opportunity.
Tell me about your team and approach.
When it comes to people, technology and process, our philosophy is to always prioritize quality over quantity. When we started out, I hired top people from the industry and my own alumni network. As we grew, I continued to hire great people maintaining the same focus on quality. When you place such importance on quality, some things take a little longer, but having great people and great chemistry in the organization has paid-off. Today our company is recognized among the top 20% of the Inc. 5000 for achieving three-year revenue growth of 459%.
What are some of the specific challenges you’ve faced as the company has grown and how have you successfully addressed them?
We had our biggest setback in April of 2013 when we found out that our largest client had to put our project on hold, almost overnight, due to other business priorities. The natural instinct was to panic, but instead, I hired my first sales guy and we went on a sales rampage pursuing diversification. We grew our client base five-fold and doubled revenue. It set us on the course that made Seven Lakes the company it is today. During these bootstrapped years, we learned what the customers really wanted. This allowed us to only build with the full understanding of what products would actually sell.
Tell me about your decision to bring in an equity partner.
After a few years, the team became very confident about our collective understanding of the industry and what customers needed. We recognized the time had come to make the evolution from service delivery to becoming a true product company and to transition into a recurring revenue model. To build a subscription-based company we initially needed to defer revenue, which meant we needed access to outside capital to keep the shop running.
We had a great banker who introduced us to several private equity and VC firms. But until we met the team at Carrick, we never really clicked with anyone. We met plenty of smart young people straight out of great business schools, but they lacked the breadth of experience — actually building companies, developing technology and operations, taking products to market — that the team at Carrick had. The depth of their experience, the chemistry we felt with such a forthright group, and their access to a network of people who could also help grow and influence our business were the factors that tilted us toward Carrick. We have been incredibly pleased with the amount of feedback and help they have provided. Anytime we send an email we receive a response almost immediately. It’s as good as it gets.
In what areas of the business did you feel you could use help or counsel?
I was not looking for that much money. The company was pretty profitable. More than the money, I was doing this for the first time, and I needed guidance. For five years I bootstrapped, but I knew I would need people with incredible experience to help take the company to the next level. I’m a techy. My strength is engineering, and I needed help in every other area. I didn’t understand the value of marketing for example, because we made $15M in revenue without it. But I’ve been fortunate to learn through these guys, and I can say that every aspect of the business has been positively impacted by their involvement.
What are the benefits of working with a group like Carrick Capital Partners?
In addition to the experiences I’ve already described, the power of their network and the way they help guide a company like ours is more valuable than I ever imagined. We recently recruited a board member, Klaus Besier, and they helped us to see the role he could play and the value of his experience to our company. They were a true partner throughout that whole process.
What has been the biggest change to the company as a result of working with a private equity partner?
The biggest change has been that I was always looking at what we could do over the next three months. Now with Carrick we are building for the long haul. They’ve helped us put a lot more structure in place and to hire incredible C-level talent. They’ve showed us how to shape a long-term approach to achieving our vision. It’s clearer now, we are building a sustainable business.
What are the lessons you have learned from the private equity relationship and how have you applied them?
Understanding how to build a sustainable business in every aspect. That will be my biggest take away from the lessons learned.
What’s your advice for other growing businesses considering private equity?
The most important thing is to keep an open mind. If you assume that you know it all, you may be able to raise capital but you won’t be able to do much with it. The ability to learn from people who have done this in the past and leverage their experience is the real value private equity offers. What Carrick refers to as their ABV, or approach to build value, is incredibly powerful. Money is nice, but their ABV has been far more valuable for us.
What are you most excited about at Seven Lakes and what’s next?
In the short term, we are most excited about taking more of a value-based selling approach than we did in the past. In terms of what’s next, we are very excited about a new stealth product we are developing, which we believe will transform the O&G sector.