This entrepreneur launched a successful startup without all the risk
Bob Eisiminger is one of my favorite entrepreneurs, not only because he’s a smart, humble, and outgoing guy, but also because his trajectory is a great illustration of the moonshot moneymaker business plan. (Actually I have wrote about Bob here before—twice!) Bob’s path to success doesn’t follow the familiar tale of the Silicon Valley maverick who burned millions in venture capital funds to realize the disruptive idea they cooked up in their garage. Sure, those stories exist — see Amazon, Uber, and Facebook, among other mainstream household brands — but what you hear less about are the hundreds or thousands of failed startups that tried to follow the same path. . Also, not all of us have access to these sources of funding or, let’s face it, to these innovative ideas.
I’m here to tell you that you don’t need it. And Bob is proof of that.
Do not mistake yourself. Bob, the latest entrepreneur featured in our video series– started in 2005 with many valuable assets: an education at West Point, stints in the military and corporate America to develop his leadership skills and flair for talent, as well as the intelligence and drive to make things happen. But he didn’t have insane seed capital, and his product—a doohickey that turned electrical wiring into a computer network—wasn’t even his. Instead, Knight Point Systems established itself as a value-added retailer (VAR), essentially a sales operation that integrated service into its products. VARs are common in the B2B technology market because they help their customers adopt unfamiliar technologies quickly and easily. They require little more than a wholesale relationship with a manufacturer, some technical expertise, and a network of prospects. The barrier to entry and the risk are therefore relatively low.
“I’m not that creative and innovative, but I knew there was a segment within the federal government that I could take advantage of,” says Bob with typical humility.
Bob’s career in the military gave him insight and contacts within the US military, so he chose to market his products to the Department of Defense (DoD). “I’m not that creative and innovative, but I knew there was a segment within the federal government that I could take advantage of,” he says with typical humility. The problem? Although VARs are low risk, they also have low profit margins, and those margins don’t improve much with scale. Nonetheless, Knight Point Systems could build a stable of satisfied customers while building a positive reputation in the relatively small defense contractor community. Soon, customers demanded much more complex engagements, especially given the growing need to move or replicate data centers, those giant server farms that form the backbone of enterprise technology.
Applications running in these centers are mission critical and any downtime could result in millions of dollars or, in the case of the DoD, national security. This required creating multiple redundancies in any system, so that if one center suffered damage, the system could instantly “switch” to another. The problem? Many of these fail-safe centers were built too close together so that a natural disaster such as a hurricane or earthquake could bring them both down at the same time.
Bob saw an opportunity and invested in software that would streamline the process from months to days. The company began to focus more or less exclusively on this service, differentiating itself from its competitors by its proprietary technology. In other words, the service side of Knight Point’s value proposition became much more important than the product side, and the company was able to take on larger, more profitable projects.
A later software update made it easier not only to move a data center, but also to manage a data center’s capacity on an essential basis. With this development, Knight Point has completely transformed its business model. It was now a managed service provider, and its engagements with its customers lasted for years rather than weeks or months. In 2018, Bob landed the biggest contract in company history — an eight-year, $902 million commitment with the DoD — and other big deals followed.
As a VAR, Knight Point systems wouldn’t be worth more than a low earnings multiple, but as a managed services provider with a $1.2 billion backlog on its books, it was a target. very attractive acquisition. On his second week of Birthing of Giants scholarships in 2018, Bob seized the moment again and decided that his one-year goal would be to find the right buyer for the company, one who would provide his team with the same vision. and the same dynamism that kept them going. since 2005. A year later, almost to the day, he achieved that goal, selling the company for $250 million and walking away with a check for $132 million.
Are you hesitant to take your business to the next level because you don’t have the cash you think you need? Take a page from Bob’s book and scale down your ambitions, but the size of the steps you take to achieve them. Smaller steps reduce risk and present opportunities you might not even have seen at the start of the journey. What problems do your customers face? What solutions can you offer them? And how can you position these solutions to provide your business with steady, profitable growth and greater value? Let me know in the comments. I would love to hear from you.
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