The Risk Manager
June 27, 2009
Louis Têtu is one of Canada’s most successful tech sector entrepreneurs. In his early 20s he and his older brother built supply chain software pioneer Berclain into a $20mm per year company before selling it to Baan Software. Shortly afterwards Louis founded Recruitsoft (later re-branded Taleo Software) which he built into a $200mm per year, publicly traded talent management SaaS powerhouse. Louis is now at the helm of Quebec City-based Coveo Software, a fast-growing enterprise search software company which he believes will be his greatest success to date.
StoneWood Group’s Bob Hebert sat down with Louis to discuss his career and driving philosophy.
How did it all get started for you?
I graduated with a mechanical engineering degree from Laval University at the age of 19. I was clearly pretty young and had no idea what I wanted to do. I joined Bell Canada and spent 18 months working as an engineer. I enjoyed myself there but soon realized that this was not where I belonged.
I then joined a small robotics company where I worked in sales and marketing. This gave me a sense that I liked smaller, more entrepreneurial businesses. It also convinced me that I love being with customers where the action is.
About that time, my older brother had written a scheduling software engine that he was starting to commercialize. I thought the software, and the problems it addressed were interesting and so I joined him. I had no family at the time and no obligations and I figured why not take a chance?
If you removed the constraints, the obligations and fears around people’s lives there would be a lot more entrepreneurs out there. For me, and for many others, youth provided the right conditions to start going down that path.
How well did Berclain develop?
It went very well, though if I knew then what I know now it would have gone a lot better. We had hands-down the best technology in the sector at the time and we were able to get considerable traction in the marketplace. We built the company into a $20mm per year concern with 175 employees.
But we were young and inexperienced. Though we had the best technology another company called i2 had the sizzle, the buzz, the money and the relationships. Their growth dwarfed ours.
When Baan went public we saw an opportunity to really propel our business. We spoke to them and shortly afterwards, in 1996 we became Baan’s first acquisition. I became head of their supply chain solutions division which was a great experience for me.
Over the next two years I had a front row seat in a company that grew from 1,700 to 6,000 employees. For a 31 year old guy that was pretty exciting and I learned a lot.
What lessons did you take from Berclain?
There were many. For one, you have to be pragmatic. Berclain became successful but we were never going to be a global leader. We had great technology but we had not differentiated ourselves commercially as the best in anything. To rise to the top you have to be differentiated and I now spend a lot of my time understanding how firms differentiate themselves. Success lies in being the best in something, whatever that may be and you really have to get that proposition right.
Also, selling the business to Baan was absolutely the right thing to do. They had the resources, the global footprint and the brand to make really something of us. It was also the right business deal for us as a good portion of our buyout was paid for in stock and over two years the value of that stock rose from $24 to $108.
I learned never to fall in love with a business. You have to be pragmatic. I do not ever want a ‘Me Inc’ thing happening. Running a successful business is not about me, it is about the business. The company is not my baby. My babies are at home not at the office.
I look at businesses as adventures in building, in creating value, in solving problems. But I separate myself emotionally from the business so that the right decisions can be made on what’s the best thing to do at any given time. I want my businesses to be successful, and I do not build them to sell them. Taleo remains a growing, thriving standalone business. But, I will always do what I think is the right thing for the business.
Finally, that business taught me to trust my instincts. At some point entrepreneurs question themselves as to whether they are the right people to continue to run their businesses. While you always need to develop and push yourself to get better, you have to be careful as you will always be told that someone else can run your business better than you. That is often not the case.
I fell into that trap. I was very young and people always questioned how far I could take the business. At one point we hired a US-based president who was supposed to be seasoned and successful and who would take us to the promised land. It was a total flop and it cost us a lot of money, time and momentum. I knew at the time it was the wrong thing to do but I did not trust myself. You have to continually learn, you have to continually push yourself to get better but you also have to trust your instincts.
What happened after Berclain?
After 2 years at Baan I got bored with corporate life and quit.
I had invested in a job board in Quebec and started to think about jobs and companies and the whole talent issue. I started to see that the flow of talent was another supply chain and that technology could be applied to it in exactly the same way as we had done at Berclain.
In 1999 we started a company called Recruitsoft aimed at automating some of these processes. As the business expanded to include talent management we found the Recruitsoft name a little restrictive and changed it to Taleo.
How did you approach building Taleo?
It was 1999 and all I knew for sure was that I was going to learn from my Berclain experience. This time I wanted to move more quickly and invest aggressively. We had a superb value proposition and I was certain that the trending was on our side. We needed to get out there fast.
The success of Berclain was helpful as investors were willing to listen to us. We had a good story behind us, an exciting new category that we were pioneering, a compelling value proposition and an absolute certainty that we were going to be successful.
And when they heard us they agreed to invest in us. We immediately started to build the leadership bench that could make this happen. And we just didn’t build a bench, we built one ahead of the growth curve, pulling together a group of high performers who had successfully scaled businesses such as ours and who brought knowledge and wisdom to the table.
We did the same with the board which was world class.
What changed in 2001?
Well, as everyone knows the market crashed and we were forced to build the company in the midst of a recession. As I think about it, all three of my businesses have been built in a recession. I have never actually built a business that has truly taken advantage of a bubble.
The downturn did not really matter. Companies were as open then as they are today to good ideas that will make them more productive or save them money. We hammered away at telling our story in the marketplace.
We also kept raising money through the downturn. I remember going out to Bain Capital who initially looked at me like I was from another planet. Peoplesoft had 72% of the human resources software market at the time and here we were in a down market talking about a new category and an ASP model no less. But I am not a gambler. I take calculated risks. I showed them our research, I showed them why this business would work and how they would make money. After looking at our assumptions and our numbers it began to make sense to them as well and they became one of our biggest supporters helping us immensely along the way.
As an aside, there is always a lot of investment money available, even today, despite what people may think. The shortage is not access to money, it is people who know what to do with it.
How did you make Taleo a success?
There are no certainties but we could see that though the internet had yet to mature to mission critical quality, it was going to get there. Our solutions made sense, they solved problems, they helped companies and they were very easy for companies to buy. Though CIOs were skeptical of having their data outside the firewall I could see that this was going to happen as the internet matured. We were early in selling an ASP model but we knew it was just a matter of time.
We invested heavily in sales and marketing and put a lot of people out there educating customers. Our value proposition was unassailable. In 1999 we had revenues of $200k and that was with Bombardier who gave us our first chance. In 2000 revenues grew to $2.8mm. In 2001 revenues went up to $13mm. In 2002 it was $28mm and then $44mm, $64mm, $79mm, $120mm and now Taleo is over $200mm and mostly recurring revenues. And the category is expanding as Taleo has moved into performance management and related talent management applications. The future is very bright for Taleo.
Taleo went public in 2005, when I passed the CEO reins and then phased out altogether in 2008. I remain a shareholder however.
One of the interesting aspects of your story is that all of your companies have been built in Quebec City. Can you talk about this?
Quebec City is my home. It is a wonderful place with a great quality of life. There is also tremendous talent there. It is a university town with a great mix of people and companies.
Though one can focus on the challenges of driving a global company from a predominantly French, relatively small city, I look at it as an advantage. We have created a distinct personality to all of our companies by mixing and matching talent from Quebec and elsewhere.
It is simply not true that you have to move to the US to build a company. That said, we have tax harmonization issues between Canada and the US which are a real challenge for cross border financing. They also act as a disincentive for setting up companies on this side of the border.
But, there is no reason why you cannot build a great company headquartered in Quebec City, Halifax or Edmonton for that matter. Look at RIM in Waterloo or Cognos in Ottawa. You just need to manage these companies differently. You need to mature your management style to deal with distributed management. You need to mix and match. But it can be done and done very well.
The amount of data enterprises are dealing with is doubling every 18 months. And a lot of this explosive data growth is unstructured information like email. All of this needs to be unified and indexed so that it can be found, organized and used, both for productivity reasons as well as compliance or litigation support. The mobile world is adding even more opportunity to the situation, as Smartphones are bound to become a secure access into all enterprise systems. The whole search paradigm which Google has brought to the world needs to be brought to the enterprise. That is where Coveo is positioned. It is a massive market opportunity.
I was not the founder of Coveo. It was founded by individuals who had a prior company called Copernic. These individuals have long and deep experience in metasearch and desktop search which they have continued to develop. They are brilliant at unifying data and information access in enterprises. It is complex wonderful technology.
I originally joined the Board of Directors and had the technology tested at Taleo and elsewhere. Later, as I phased out of Taleo I spent more time with the founders helping with strategy. At the end of 2007 I invested significantly in the business and eventually joined full time, primarily as I saw a phenomenal team that I could work with.
I am back to doing what I love, building exciting companies with exceedingly smart and high integrity people. Coveo is and will be a fantastic company. I love its value proposition.
What is your role in building a company?
My job is to pick the direction, see where the business needs to go and then help set it up in such a way that it can eventually get there. I have always been pretty good at what Wayne Gretzky describes as seeing where the puck is going to be, not where it is. I am less interested in the minutiae of today than I am with shaping tomorrow.
I am by no means always right but I do not look behind except to learn. And I move fast. In fact I believe in high speed of failure; failing much faster than most. As an entrepreneur you just have to keep moving forward trying things, adjusting and trying again. Also, I am a firm believer that you will never get ahead of the curve unless you are out there with customers. I am the proverbial road warrior. I need to meet customers, see where they are, hear what needs to change. I need to meet enough of them to see patterns and anticipate trends.
More importantly though, building a successful company is not about the one ‘big idea’ it is about the details, the hundreds of little things that have to be executed properly. And to execute you need to surround yourself with good people.
I obsess with building teams of really smart people. I always want to be the dumbest guy in the room. I always want to surround myself with people who can challenge me and who can push the company to new heights. Make no mistake, you then need to create an environment where these people can work together, can have fun, be energized and thrive. That is leadership and management.
If you take a look at the management teams and the boards of directors of our companies you will see that we have been blessed to have outstanding people.
What drives you at this stage in your career?
I see life as a series of adventures. I am a commercial helicopter pilot and I love to fly. I have traveled the world with my family. Several years ago we moved from Quebec City to Toronto to enrich our lives and learn different things. We are now moving back to Quebec City to devote more time to Coveo.
Work does not define me. I do not work weekends. I enjoy myself. I build businesses because they are fun. I love starting things from scratch and building them though beyond a certain point they begin to bore me. I get frustrated by the politics of larger companies and my attention turns elsewhere.
Building companies intrigues me because I continually learn, I continually meet new people and I get to work over and over again with the really outstanding ones.
As a serial entrepreneur do you consider yourself a classic risk-taker?
As I mentioned earlier, I do like risk but only calculated risk. I do not gamble. And as I get older I spend a lot more time understanding, categorizing and trying to manage risk. It is actually quite intriguing.
All the trending, all the data and yes, even my gut tells me that Coveo is in the right technological place at the right time to help solve some major enterprise problems. That is not risk that is fun.