Lessons from ExactTarget: Building a Billion-Dollar Public Company from a Tiny Suburb Office

The news wasn’t totally unexpected by any means: ExactTarget, Hoosierland’s marquee tech company, announced June 4 that it was being acquired by CRM giant SalesForce.com for a hot $2.5 billion.  For a company that just a few years was more than happy to secure a second round of $70 million in private equity investments, that’s a heady jump.

But how did ExactTarget achieve this envied position in barely a decade or so, when other technology companies continue to bump along, barely noticed? For four years I wrote a Chicag0-based national business marketing column, and during that time I interviewed both Scott Dorsey (ExactTarget CEO) and a number of high-ranking executives in the company several times as the e-mail behemoth was growing to its present mega-stature. Culled from notes and discussions over time (particularly the early pre-IPO years), here are a few thoughts on how to build a stellar company:

•  Develop a vision and make it live, even when there’s no physical evidence to corroborate it. In an interview seven years ago, Scott Dorsey explained in detail how ExactTarget started up in a tiny office in 2000. A far cry from today’s nearly 200,000 sq. ft. of office space, Dorsey and others shared their working areas in rooms filled with servers south of Indianapolis in the suburb city of Greenwood.  This was during the intoxicating get-obscenely-rich-now-by-“getting-it” times of the Dot-Com Boom. Anybody and everybody could “make an Internet play,” put together a PowerPoint, secure massive VC hysterical investment, and make millions like it was chump change.  Or so many people thought back then. Scott came down from Chicago, convinced (unlike others) that Indianapolis was a great place to partner and build a tech business. E-mail back then was clumsy, slow and nearly-graphic free. But Scott and his partners had a vision of innovating and securing a place for ExactTarget to be a premier e-mail provider, and they lived it, even when the tiny office they worked out of offered no physical evidence of the mighty deeds to come.

•  It’s not the application, it’s the platform According to a group executive interview I conducted at ExactTarget’s then-new offices in the Gibson Building on the high-profile Monument Circle, email as an application was irrelevant to ExactTarget executives. They focused on how people would communicate digitally, not knowing for sure (if at all) back then whether e-mail would make it on mobile platforms (a fact quickly forgotten in the iPhone age). One executive remarked that if “smoke signals were the primary way that people communicated with each other, then we’d be the best at smoke signals.” So as I wrote back in August of 2005, ExactTarget created and largely defined what today is now known as “permission marketing,” skating right in front of marketing colossus Seth Godin and others. Permission marketing – where people perceive sufficient value in your content (or trust you enough) to give you access to their email address – became the platform. Email was simply the digital application tactic.

•  Tough times offer great times to innovate  When the Dot.Com Crash annihilated tech firms (and particularly firms focused on the Internet) and deep recession engulfed everyone across the planet, executives at ExactTarget saw the economic Black Hole event horizon quickly approaching. If they didn’t do something fast, they would soon be a weed-covered gravestone in the Dot-Com cemetery of wannabe tech companies. Compared to the ad agencies they were trying to replace at the time, the Dot-Com companies had an unusual twist on business development. Instead of deploying a comprehensive biz dev strategy with a pipeline for managed services, many Dot-Com companies employed traditional sales staff and sold Web sites and other digital products as commodity products (instead of highly strategic partner-focused applications and brand extensions). When the Dot-Coms started crashing, this left hundreds of sales professionals (with a least a little technology background) available to sell ExactTarget digital products. So ExactTarget scooped them up, all initially working on a 100% commission compensation packages with no “agency freight” or cash flow burdens. And it worked! (And I’m certain ET’s sale force is handsomely compensated differently today, but for a start-up back then – what a great idea)

•  Need a national megaphone? Give your great product away free to top influencers Even with 100% commission (no draining cash impact) sales professionals in the early days, a tiny company like the 2000 version of ExactTarget needed market performance street cred. Ad and PR agencies were natural users of what would become “permission-based marketing,” but almost nobody was doing it. So Scott and his savvy marketing crew decided to give away free e-mail accounts to ad agencies, together with one-on-one workshops on how to use it. With the free account came a bundle of other accounts that the ad agency was then able to re-sell to their clients, and rake in a percentage of the sale. The result? Quick inside sales on a major scale, which quickly introduced the strategic effectiveness of e-mail marketing to a highly receptive market partners.

These, of course, are but a few of the great innovations and fresh looks that ExactTarget used on its way to the top. Perhaps we’ll add some more in the future. Meanwhile, what’s your ExactTarget story?

By Michael Snyder, Managing Principal, The MEK Group