The History of a Failed Startup to a Successful $128 Million Exit

Date : June 15, 2021 By Jeff Solomon

This is the history of the founding, building and selling of Velocify (formerly Leads360) as best as I can remember and from my personal perspective; in bullet point format.

In 1999 I co-founded my first startup, Xoop with 5 friends
I had a cool idea with no business model and no startup experience
We raised close to $300K from angels
We foolishly burned $300K in 3 months
In late 1999 the dot-com bubble burst and we went out like bell bottoms
I became mildly depressed and resentful
A few months later I founded my second company, ThinkLogic
Thinklogic grew to a fairly successful tech consulting firm mostly focused on ASP classic web applications
In 2002 I hired Chris Adams to help me run the company
Around mid 2003 my friend, and co-founder from Xoop, Charles Chase began doing contract programming for ThinkLogic
Soon after that, Charles finished his MBA program at USC Marshall
Charles said to me one day “Jeff, this whole ThinkLogic business is cool, but your not really building anything of value. You’re never going to sell this company or build anything substantial. At best, you’ve got a great lifestyle business.”
That got me thinking… a lot
Enter Scotty Hewitt, a sales guy who I’d come to know during the Xoop days
Scotty began freelance sales efforts for ThinkLogic and was getting some deals
I realized a lot of what Scotty was selling and what we were building was basically the same thing – lead management software
In Late 2003 Charles and I discussed the idea of building a SaaS lead management business which he endearingly named Leads360
That’s when the scheming started and when I began assembling the pieces for what would ultimately be Velocify, the company that sold today for $128 million
Both Charles and I knew we didn’t have the engineering talent at ThinkLogic to build this platform
Charles knew this guy Tony Christopoulos from his days working at CyberU (now Cornerstone On-Demand)
Around March of 2004 Charles and I met with Tony for the first time in Vegas (yep, it all came together at the MGM grand)
We sold Tony on the idea of leaving his cush setup at CyberU to start Leads360 with us
But in the back of my mind I knew we had no way of paying him anything close to what he needed to live, even if he did it on the cheap
Tony had (has) a wife named Lynette
Lynette was pregnant and Lynette is pretty conservative and likes creature comforts
I knew she wasn’t going to go for it unless I had some cashflow coming in for Tony, at least for a while
I also figured I’d have to win her over with my charm or she’d be out on that accord too
My scheming continued
At the same time Scotty brought ThinkLogic a new deal — different than the rest
This deal basically needed a full-time .NET, hardcore software architect (again, nobody at ThinkLogic fit that bill, we were all tech scrubs really)
But Tony wasn’t (a scrub) — he was just what the doctor ordered
Of course I told that client I had the perfect guy at ThinkLogic and he was just finishing a project and was ready to rock (lies)
I got them to sign off on a 6 month flat $10K per month contract for remote full-time programming to fix and improve their software
Thinking back, I don’t recall paying Scotty a rip on that one, but I did co-sign on this Chrysler 300 he so badly wanted then
A few days later I took my wife Aya to dinner with Tony and Lynette to try and close the deal
Remember, Lynette was a skeptic and she was pregnant
Of course Tony picks Sushi (which Lynette loves but can’t eat) and drinks more than a few brews (which Lynette likes to do but also can’t while pregnant)
I hard pressed Lynette and charmed her (I think); Tony helped, or hurt depending on how you look at it — and Aya helped too
Lynette signed off with minimal reluctance – I think Charles was thoroughly impressed knowing Tony and Lynette better than I did
By now Charles and I had Scotty buzzing on the idea mailbox money from SaaS software
And I had gotten Chris and ThinkLogic in a great position to incubate the whole operation
I maintained my income from ThinkLogic and split time between it and Leads360
Tony had the $10K per month from the consulting job I’d closed
Charles continued consulting for ThinkLogic so everyone was making at least enough to survive
We started building the Lead Manager as we soon began calling it
Then Scotty kinda realized something big — although I’m not sure he realized how big it would be just then
The latest iterations ThinkLogic was building for Scotty’s sales deals were not only the same lead management solutions, but they were the same type of customer – mortgage brokers
Mortgage… ooh… a double edged sword
In mid 2004 we had our first version of Lead Manager ready for prime time and Scotty had our first client
Enter Curt Melone and Pac West Funding, the self proclaimed “Father of the Lead Manager”
Curt and his sizable sales team helped shape early features of the product and introduced us to the world of lead generation
Sometime in early 2005 we met Matt Coffin and LowerMyBills
LMB was literally printing money by generating sales leads for mortgage brokers
Side note, I had met Matt years earlier through a college friend and he invited me to join him building LMB, back when they were actually going to try and lower peoples bills
In hindsight (something I’ve learned a ton about through this process, I probably would have made a lot of money being the 1st employee at LMB — Matt sold LMB to Experian in later that year
Matt had a pretty key insight that he played close to his vest at first — that lead management software solved LMB’s #1 problem — selling more leads and retaining customers
We realized that not too long after and convinced Matt it was better to partner with us than build his own solution
Huge win for us — for the next 2 years LMB and other lead generators like LendingTree became the primary user acquisition channel for us via referrals
At one point I remember overhearing an LMB sales rep tell a prospect that he wouldn’t even sell them any leads until they setup Leads360 — it was just a waste of time
From day 1 I had started an aggressive content marketing strategy — planting seeds that continue to serve us even now
From 2005 – 2008 I focused our marketing to position us as the expert in lead management best practices — and we began to back that up with performance data from our clients
My blog posts, white papers, sell sheets, pitch decks, sales presentation, everything were about Leads360 being the company that teaches you how to close more leads — and we did just that
Sometime in 2006 we realized we needed money to scale our exploding business
Tony loaned the company $300K (I think that was the amount)
We hired two key engineers that are still at the company: Drew Markovitch and Jeff Zhen, along with Tony, these guys single handedly built, managed and maintained our entire tech stack – total fucking rockstars and really good people
I began looking into venture funding — none of us had any experience in that arena and LA was a desert in terms of startup resources, angel investors, seed capital and even VC’s
I eventually got connected with Tech Coast Angels — who were fairly legit at that time — and got invited participate to their Fast Pitch Competition at UCLA Anderson
I listened intently to the instructions along with 20 other startups at the preparatory meeting and heard loud and clear when they said “it’s 60 seconds, after 60 seconds we turn off the mic”
My pitch was epic and I practiced it time and time again until I had it memorized, perfect and at exactly 58 seconds (you can even listen to the original fast pitch audio here)
I got lucky, in addition to completely crushing the competition and wining every category that day — John Babcock, partner at Rustic Canyon, was a panel judge
Rustic Canyon was one of the few real VC’s with a sizable fund at that time in LA and John loved me (what’s not to love)
Side note, if the instructions are “finish in 60 seconds” then fucking finish in 60 seconds, at least 10 of the 20 participants didn’t do this
Soon after that we had a term sheet for $3.25 million, along with 2 other competing term sheets
After some deliberation and some negotiation (they tried to smack us with a bs 2.5X participation in the first iteration) we chose Rustic
Chris got bought out, Scotty got a slug and we we’re ready to start the next phase of Leads360
I was the CEO of a real company Jack (ala Boogie Nights), with a real board, a real stock option plan — everything I always wanted, so I thought
So we did what any good startup that’s growing like made and just got an influx of capital — we spent it
We hired people, we upped marketing, we did trade shows — we were crushing it, and we still were, but that was about to end
Part of the funding agreement had us hopefully bringing on a flashy industry board member in addition to the founders and the Rustic crew
John and I had our sights on Matt Coffin, and although I had developed a pretty strong bond with him by then, he wasn’t feeling it — I’m still not entirely sure why, maybe conflict or too flushed with cash to care enough — but he was very helpful still
At one point I got to meet the Experian executive that lead the LMB acquisition deal, Ed Ojdana and while he was quite a bit older, way more seasoned and probably freaked out by my hacky style — he took a liking to me and our company
I convinced John that Ed would be a great addition and that I thought I could sell him on the idea of joining our board — and that’s what happened; I think that bought me some much needed points with John down the line
Earlier that year we had run out of space in our shitty little Inglewood office and the founders had bought a killer warehouse building in WEHO (again, with Tony’s help on the down payment)
Side note, Tony came from money and as much as he always seemed broke personally, he could always come up with big chunks of cash when he needed it
We were still bootstrappers at heart and we’d built out this new space with our bare hands (and some help from Tony’s brother)
I nearly died stringing CAT5 cable along the top of a 50 foot high wall — the ladder dropped out and I magically grabbed the ledge and was hanging to my death — Charles was there and saved me
Sadly, like many startups and first time founders do, we burned through a ton of that cash in the next 12 months
This would have been ok because we were growing big time, but then in 2008 the shit hit the fan — the financial crisis happened and subprime mortgage was at the heart of that
Of the 1000+ clients and $400K/month in recurring revenue we had going into 2008, a good 85% of them were in subprime mortgage
From 2008 to 2009 we cycled through nearly 100% of our clients — backfilling some, but not most and we were in deep shit
As much as your VC is a partner and wants you to succeed, they’re also pretty keen on sharking bloody waters — good for them, in this case it paid off
We hunkered, let go a bunch of people, including some that we really liked and had just had meetings with a month earlier selling them on their long term role in the company — that was rough
In November 2008 I took my wife on a babymoon to Hawaii, partly because well, we were pregnant, but also because I was stressed as fuck by that time
I recall talking with John Babcock from our hotel room, trying to figure out what to do, we were at odds; he didn’t want us to fail, but he wasn’t about to back a sinking ship
I got pissed. In a pretty bitchy voice I told him “fuck it, I’ll shut down the whole thing, I don’t give a shit” or something to that nature
Obviously I didn’t shut it down, but I was ready too
I honestly don’t know how Charles and Tony were feeling at the time — I know for sure that I took on the weight of this company way more personally than they did — which caused me more pain and them less of it.
Of the many lessons I learned through this whole experience, one certainly was speaking up, on all levels, when I need help, when I know what to do, or when I don’t agree (more on that soon)
John agreed to give us more money — a Series A “extension” ala, the same valuation, which incidentally was about $10MM pre money — which is absurdly low in today’s market for a company doing north of $350K/month in recurring SaaS revenue
I think they gave us another $1 million and we got some breathing room
Sometime just before or soon after another Rustic partner, Dave Travers, who would later replace John on our board, introduced me to a HBS friend of his that was looking for a key role at a budding startup
Nick Hedges was about as polished as they come — a total HBSer — and we seemed to complimented each other and I think we had a mutual respect — I certainly did and do to this day (for obvious reasons as you’ll soon learn)
In an attempt to close Nick, who had previously been at Bain (of course) and I’m sure had mad offers from tons more well oiled startups than ours, we took him to some fancy hipster restaurant in WEHO
And, in a twist of fate that I can’t say inked the deal, but certainly didn’t hurt it, one of my friends from college was our waitress — not just any friend — I wonder if she even remembers this story
Andrea Andes was literally one of the hottest girls at Arizona State in 1996 when I graduated — and that’s saying a TON (yeh, I went to ASU)
Even then I was good at inserting myself into the right situations — she was dating a guy who’d really come to like and trust me — and so did she; I hadn’t seen her since graduating 10+ years earlier, but we instantly recognized each other
And Nick recognized her too — I mean as a totally hot blond girl that the CEO of the company he was being courted by knew on a very personal level — yeh, it helped
Suffice to say, Nick came on board. I had also closed another key hire earlier that year, Josh Evans, who had come from Cars Direct and the 5 of us rounded out the executive team
Side note, Josh and Nick stuck it out to the very end and are still at the company; Josh as SVP of Client Services and Nick as CEO — they have my gratitude
With a fresh million in the bank and the market beginning to stabilize, just a little, we started growing again, slowly, but steadily and this time we we gave some thought to client diversification
One of the caveats to Johns “extension” funding was that we get some gray hair CEO that knew what the fuck he was doing type guy in there and I would give up the role
Major learning for me right here – don’t be a pussy – that’s harsh, but really I had issues with standing my ground on what I thought was best, and I promise you, no matter anyone tells you (and I can’t imagine anyone would) when I did make decisions and take action, I delivered amazing results — but I didn’t have the confidence I do now, or wish I did back then and that hurt me and the company
Enter Dan Morefield, a seasoned CEO previously at Yahoo / Overture
Dan was a good guy, and don’t get me wrong, I had to sell him too — I had to sell him on taking over my job — mind fuck for me, but it wasn’t really, b/c in some ways I was already done with CEO of a 50+ person company
Side note, I wouldn’t be CEO of a 50+ person company if you paid me the proper salary for a CEO of a 50+ person company — I’m not that guy, but the truth was, neither was Dan
Dan took over, Charles left — was kinda squeezed out really, but he, like me who didn’t realize it till later, was NEVER getting any more stock, so other than salary and ego boosting, there wasn’t much left to gain at the company
I on the other hand had a lot more to give and I did just that — starting with head of product (which I was already doing as CEO), then head of marketing (which I was already doing as CEO), then head of sales (which I was already doing as CEO), then as head of enterprise sales (which we didn’t have until I did it)
I’m a really good generalist, that’s incidentally why I’m great at starting and growing companies but not great at scaling them and I don’t really like it either; fortunately Nick is (more on that soon)
Dan did help us get some process in place, some accountability, some structure — but the truth was he just moved to slow for all of us and for the company; on top of that his wife got very sick soon after he took the job and he was already driving up from OC — a perfect storm that made it hard for him to do what he came there to do
Side note, one of the side effects of me giving up the CEO role was that Rustic lost their appreciation for my importance in the company. I’m not sure what Dave or John would say now, but I know, and I think Nick knows, a ton of the success over the next 8 years were due to the work I did in those 2 years after stepping down as CEO
Tony, Drew, JZ and I worked very closely together over the next year improving the Lead Manager and we did, big time
From 2009 – 2010 we really started breaking away from the competition in terms of product depth, best practice knowledge and performance
Most of the big mortgage companies that were still around were now back on our system and we were starting to get some good clients in Insurance, Education and other B2C categories
Another key person in the company on the product team was Chris Kinnear – a total work horse who became a right hand man for me and all the product development were were working on
Chris hired a junior product manager named Sandhya Pujari who was also a work horse and a great asset
Until then Leads360 was primarily a CRM-esque solution with no dialer; we had built a pretty shabby click-to-call solution from our product, but nothing more
Sandhya and I were working on enhancements to our click-to-call and some pretty innovative ideas around automated dialing from within our software but at that time the ideas fell on deaf ears among the board and Dan, although I think Nick saw the potential
Interesting side note, while Sandhya and I were figuring out what to build, I was figuring out how we were going to build it — telephony was complicated and not our core expertise
We talked about building our own stack to do it, we talked to various consultants in the telephone space to help us, but it just didn’t make sense
There were a few 3rd party SaaS companies that provided API’s and aspects of what we wanted, but we still weren’t sure
That’s about the time I met Jeff Lawson, founder of Twilio
Jeff had barely any traction with Twilio at that point — he had some legit venture investors and is obviously a smart guy, but he was pretty early in a nascent market
I remember flying up to San Francisco and meeting with Jeff Lawson during Dreamforce (maybe 2008 or 2009)
Sitting at some little coffee shop in the Mission, Jeff told me the story of how he decided to build Twilio — it’s foggy, but he said he had taken 6 months (maybe longer) and isolated himself at his buddy’s house (I wanna say in the Hamptons, but I don’t remember) and just spitballed ideas with this guy (either his co-founder or some VC guy)
They talked about literally anything and everything and eventually came to the idea of a distributed SaaS platform for communication — telephone, messaging and more — ala Twilio; it was kinda inspiring
Needless to say, Twilio was way smaller than we were at that time I’m pretty sure and I think he wanted our business more than I wanted him as a partner
We chose Twilio as our partner and started building on their platform; at first we were helping them way more than they were helping us — the didn’t have shit that we needed and it was buggy as hell
I doubt any other client of theirs at that time was more helpful at flushing out the platform and features than we were — and at one point we were the largest client on Twilio in terms of minutes used and even at the time of the IPO were were top 10 — and we still use Twilio today
Around that time we started running out of space in our hipster warehouse building in WEHO and we moved to a corporatey cubicley spot in the Ivory Towers in El Segundo (Ala the Oracle buildings)
Side note, apparently Larry Ellison had some crazy dragon’s lair on the top 3 floors of the building that barely anyone had ever seen — all kinds of crazy rumor stories about that place (I never saw it)
Nick was pretty frustrated by then; he wasn’t a huge fan of Dan or the board at that point, but really he just wanted to be CEO and wasn’t; I don’t blame him and I had to do a fair amount of damage control to keep him on board
Sometime in late 2009 we hired our first enterprise sales guy away from Eloqua; Tim Dunlea and I began building out enterprise sales for the company
In mid 2010 Dan left the company and we promoted Nick to CEO, he was stoked I’m sure; and while it was weird reporting to the guy I’d hired back at that fancy restaurant years earlier, it didn’t bother me as much as you might think
That’s about the time I started to get the feeling — the feeling that I was cut out to be one thing and not another — and the feeling that that was totally ok
I split my time between running product and marketing to general culture building — and began working enterprise clients in earnest with Tim Dunlea
I spent the better half of 2010 traveling the country with Tim trying to close deals with 100+ seats (SaaS users)
From Plantation Florida to Kent Ohio and Racine Wisconsin we met with some of the biggest mortgage companies, insurance agencies, educational institutions and even the largest cremation services organization in the country… yes, human cremation, it’s a big business (we closed that one 1000+ seats)
From a salary standpoint I was actually making the most money I’ve ever made with base + commissions, it was pretty cool
At that time I was also working closely with Sandhya and Drew to build out our dialer features in the Lead Manager — we had some really big ideas here and we knew this was going to be essential to the future of the company
Still, even with Nick at the helm, our board wasn’t really hearing it — they had become extremely conservative and I’d pretty much lost my magic with them by then — we could barely get agreement on anything we wanted to do that wasn’t status quo — it was frustrating
As much as I was coming to appreciate what I was good at and what I really wanted to do and be in my career I also realized I had created some of the challenges we were dealing with at that time
In the beginning, I was a visionary, I saw that and people believed and appreciated that quality in me, including John Babcock and our board
Later, as the company matured, maybe I didn’t and I lost confidence in myself; and what had gotten us this far was kinda failing and Nick, our investors and even my partners to some extent felt it
2010 was exciting on the one hand because I was having success with enterprise sales but stressful on the other hand because I was coming of age
That all being said, I knew in my bones we had to jump on this dialer stuff; I knew it intuitively and I had been the only one doing actual customer development from being in the field with our biggest prospects and future clients that year
Nick agreed, but he too was in a precarious spot; he had to cement himself as CEO and gain trust with the board — so he couldn’t come out guns blazing on Solly’s crazy product vision — he had to walk a fine line
Side note, one of the things I’ve learned throughout my career is that it’s a fine line between every man for himself and placating the interests of those around you — the best entrepreneurs know how to do this and Nick certainly did
In late 2010 I remember Nick telling me that if I wanted to get the board to agree with me and allocate resources to this whole dialer business, I would need to put together a proper, fully data supported, presentation — straight Bain style he thought
Truth be told, Nick was already there, but if it was gonna fail on the board, he wanted me to deliver it, not him — and if it got any level of positive reception, he’d back it — Nicks no dummy and I respect him
I spent a good 3 weeks developing one of the most detailed and thorough presentations of my life — In hindsight it was truly the best PRD I’d ever written because it had a ton of customer development data to support the features — and the feature set was rich; pushing the company product roadmap out several years.
I wish I still had that presentation
At the next board meeting, I made the pitch and I pressed hard — deep down I knew this was going to be the last thing I sold to the board because I was pretty close to letting go of the baby I’d founded and ready to move on to something else
They bought in, although I wouldn’t say with flying colors — but Nick took the reigns and supported it and we began building
I got to see some of the fruits of my labor, but not everything I had envisioned happened before I left
In early 2011 I sat down with Nick, at IHOP lol, and told him it was time for me to go
I kinda felt like he had mixed emotions on my departure; on the one hand, this is what he wanted, now it was his company and I wasn’t going to meddle anymore
But also, deep down I think he knew that I was the heart of the company and certainly the product and was scared about those pieces landing on his shoulders
A month or so later I announced to the company I was leaving in a heartfelt all-hands meeting
I had begun conversations with Paul Bricault around then about starting an accelerator her in LA which we launched later that year named Amplify.la
I told people at Leads360 that it was time for me to go start something new, that I was really cut from a cloth that was woven to build companies, to a point, but not scale them beyond that
Amplify was a great next step because I was building a company but also would be investing in hundreds of other companies so I’d be in the thick of things — maybe I’ll tell that story later
I remained on the board until January 2012 when we closed our Series B with Volition partners (that was all Nick) and I took a million and some change off the table
Side note, I wish someone had advised me (although I admit I didn’t really seek any advice) to only sell what I needed, and I did have good use for some, but not all of that money
The $1.3 million I took then would have been worth nearly $4 million today (lesson learned doh)
Off the board and out of the company, for the next 5 years I didn’t have much input at Leads360
They changed the name to Velocity in June 2013, which hurt a little, but it wasn’t my baby anymore
I probably did myself and the company a disservice by not insisting I at least stay involved in product — the truth is, the core platform hasn’t really changed much since I left; in fact it looks nearly identical to the UX I originally implemented back in 2007
But Nick did grow the company to a near $50 million annualized run rate, and positioned it well to finally be acquired on by Ellie Mae on August 31, 2017 for $128 million
Incidentally, I originally forged our relationship with Ellie Mae back in 2008 or 2009 when more and more of our clients were migrating to their platform from Calyx Point
On more than one occasion while I was still at the company I discussed selling to them with then COO Jonathan Core, now CEO and who Nick brokered the deal with
So today, I sent in my stock certificate and received my wire for the sale, along with Charles and Tony we retained more than 20% of the company
It’s a success story for me far beyond the millions of dollars I made — it’s a proof point, validator and feather in my cap as it is for many others who were part of this journey
Thanks for the memories ya’ll

What I Learned in a Nutshell

Like just about every human being on this planet, I have an ego. And like everyone else my ego can be a weapon as much as a curse. Most people would agree it’s important to keep your ego in check, but not everyone might appreciate the need to let it puff up when the time is right.

Building Leads360/Velocify I probably kept my ego a little too in check sometimes and held back sometimes when I knew I should have spoken up. Seeing that now is important for me, not just in how I proceed along my not nearly over career path, but in my personal life. To find a balance between listening to the heart songs of those around me and shouting out my song when I know it’s appropriate is an opportunity for me to be a better person, a more effective leader, an even better friend, a loving and encouraging father and a purposeful contributor to society.

Not everyone who starts companies will have the same experience as I have. Some will sell companies for billions. Others will go belly up. Some will learn what they are really meant to do while others will keep doing what they think they should do but aren’t really designed for. Some will let their ego get the best of them. Some will ignore their ego to the point of failure. But for me, the experience was exactly what I needed exactly at the time I needed it.

I’ll have more success in my life, financially and impactfully (this isn’t a word but it should be). But more importantly I’ve learned lessons, made friends, created wealth for countless people, directly and indirectly improved the performance of thousands of businesses, had a ton of fun and may not have changed the world, but I had an effect on the trajectory of it. And even though not everyone will appreciate or might disagree with my story altogether, I know what I did and I’m eternally grateful for the ride so far.

Category: Stories

Tags: startups