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March 2006 Presenters

It Can Happen In Cincinnati USA: A Deeper Look at the Intelliseek Story!

Intelliseek's founder, Mahendra Vora, is recognized as a visionary leader and successful entrepreneur in the IT world. He started his first company in 1988 and sold it in 1992; started another working with main frame drivers and sold it to Unisys; then started yet another and sold it for a hefty profit. He has now made a deal to sell Intelliseek to Nielsen, continuing his run of one success after another.

Sound like a fairy tale? Not quite. When he started Intelliseek, Mahendra found he was like "a crippled man partnered with a blind man, caught in a fire." This is their behind-the-scenes story.

When Intelliseek first started in May 1997, it was an Internet/enterprise software company dedicated to a desktop research tool targeted to librarians and corporate researchers. It took the idea of Google and created a true research tool, a concept novel at the time.

Now, nine years later, Intelliseek appears to be a completely different company: they provide tech-enabled marketing services to measure online word of mouth for brand and marketing managers. They are a market leader and are no longer owned by the "two geeks" who founded them, Vora and Kadayam, but by leading corporate and venture partners. They have four locations - including Israel - versus just Cincinnati.

So what happened to elicit such drastic changes? Many things, starting with the hype of 1998-2000 and the unfortunately events of 9/11. Then came the bubble bursting, as companies stopped IT spending, especially what Mahendra calls "nice to haves" like Intelliseek's products. All of a sudden, Intelliseek was not meeting its numbers and feeling significant pressure.

All the traditional pieces started to come into play. First, layoffs: but Mahendra does not believe in layoffs. "They are the last thing I'll do," he says. "I'll sell my house, my car, I won't take a salary, before I'll lay people off." He describes firing as fine, because "the employee screwed up." But in a layoff situation, "You screwed up - you couldn't provide work for your people."

But, Intelliseek was running out of money. This was not acceptable, but Mahendra also does not believe in "getting bought for nothing" or fire sales.

So, what did he do? Changed product strategy, kept his people together and challenged them to focus on the customer, stuck to it and voila! they made it through.

When Intelliseek started, they sold 2.5 million copies of their desktop search engine - for $20,000 in revenue. It was just not enough. They realized they needed new technology but didn't have the time or funds to build their own product. Instead, they bought a company with existing products and ended up with P&G and others as customers.

However, they did not have the right VP of Sales - in fact, the person they had in place was a horrible sales leader. They were continuing to lose money. In early 2001, he and his partner realized the truth: in Mahendra's words, "It was as if [my partner] were crippled, I was blind, and we're caught in a fire." They needed help!

Their second strategy change came with the introduction of the CIS product - Corporate Intelligence Services. "People don't want to do searches," Mahendra explains, "they want answers." This new product allowed them to close with Ford, who became corporate investors. Mahendra became VP of Sales.

In that next year, revenue increased sevenfold. They did another deal, purchasing Planet Feedback. Now they felt they had everything except marketing. They added marketing … but the market was terrible. Sales continued to slip.

At this point, Mahendra noticed a trend: others were all selling because the market was so bad; he decided to buy. "I acquired 4-5 companies for practically nothing," he says. They started building technology, but were still missing the "secret sauce."

He found that "secret sauce" in the IP from Wizbang. He put in a bid for $650,000 but lost to a large company. However, three days before the bid, he hired Wizbang's entire team. "I lost the technology but I had the people," he laughs. Sure enough, the company who won the bid called, saying "we don't know what to do, we have this technology but we don't have the people." He signed a deal with them providing services and giving him a license to the technology for 3 years. Within this time, he was able to buy the technology after all.

Now, they had everything they could possibly need - it was time to focus on execution and profitability. They moved from a strategy of "technology for the sake of technology" to "technology for customers." Finally, they had the formula.

It was the right formula, because sales turned around and the company became profitable. At the same time, their segment because viable, attracting Nielsen's attention. "Big companies like to be in a segment when it becomes a reality," Mahendra explains. "This is an exact replica of the Nielsen Net Ratings approach."

Nielsen provided a great deal to Intelliseek, providing cash to those who wanted it but the option to remain invested for those who still believed in the company. Four of the original investors, including River Cities and Mahendra, kept their equity, with the belief that this investment will continue to grow under Nielsen's management.

What lessons did Mahendra learn from all this? Many, which he shared with the group:

90% of companies give up just before they would have made it. Mahendra faced many ups and downs, strategy changes, market disappointments - but he persevered, believing he could find the way.
Being too far ahead of the market can be a problem. It's good to be ahead, that is the way to have your company in place when the market catches up, but you have to be able to make it through the times when the market is not ready for you.
The last 1/3 of your product should be completely only with customer input. Get it "good enough," then give it to real people for testing & feedback.
Recognize the various strengths of your investors. Mahendra's VCs really believed in the team and didn't micromanage. Some were focused on cash, some on customers - all bring different strengths.
The next most important job to the CEO is the VP of Sales.
The heart of success is conviction - not short-lived, but ongoing tenacity that will last through the entire period, through the ups and downs. It's difficult to sell something you won't buy.
This region does not have enough money, conviction and culture to fund really big ideas. There is no focused fund to support innovation. Why not create a small fund that fosters innovation? $100-500 million technology ventures do exist, if they can get going. Our incubators don't offer much. Mahendra has started an incubator in Hamilton that he hopes will address these problems. In the meantime, he encourages VCs to help people with early stage ideas.

Question: "What made you a sales success"
Answer: Three things went wrong:

In the early days, they were so enamored of technology, they thought the VP of Sales had to be, too. This is wrong - the salesperson needs to be objective, to question value & pricing.
The salespeople they had had were prima donnas - Mahendra hadn't realized that if the big-name companies were taken away, the person was useless. They weren't rainmakers, they wanted 6-9 months to understand the market - they didn't just get out and sell.
You don't go to Harvard (or a theoretical business school) for sales leaders. These schools teach marketing, the idea that "if you change everyone's thinking, people will buy." Small companies can't do this, P&G can. In business to business, you have to sell yourself.

Question: Why did you not use open sourcing?
Answer: There are two aspects of open sourcing. Intelliseek used it to build their products, in-sourcing of open sourcing. But, to make the product itself open sourced wouldn't have worked because they were not big enough to make an impact - their only asset was their IP.