Ty Kalklosch and Yann Phung founded and built PayLease into a very successful online payments company for the property management industry. The Company has grown to serve thousands of property management clients in all 50 states representing millions of residential units.
Together you built PayLease into a very successful online-payments company for the property-management industry, even earning a spot on the prestigious Inc. 500 list. Why did you decide to bring on an equity partner?
Yann Phung: We started the company together about ten years ago. Things really started taking off a few years later, and in 2009 we made the Inc. 500 list. So by then, we were at a point where we had taken the business pretty far, but we had to get it to the next level. That included scaling the company’s infrastructure, hiring more people and really going into hyper-growth. And that wasn’t something we had done before. Could we have done it on our own? Probably. But we recognized that by bringing on a partner who had done this before, we could get there a lot faster and avoid making a lot of mistakes.
Ty Kalklosch: Like Yann said, we may have gotten there on our own, but it probably would have taken longer and potentially introduced a lot more risk in the process. Less than three years into our partnership, we feel we’re on track to achieving the goals we had identified when we joined up with Mainsail.
What areas of the business did you feel you needed help with?
Kalklosch: Definitely hiring a new CEO was something we had talked about. We wanted to hire the right person. Mainsail had done this. So they helped us with the search and kind of spearheaded the whole process. They really helped us to evaluate tradeoffs in the process and brought in a top tier recruiting partner, something we would have never done on our own. We had sticker shock at first, but it was definitely worth what we spent. We got the right guy for our culture. He’ a great CEO who has done it before. If the CEO had gone wrong, it would have cost us a lot more money after the fact. And once we put the new CEO (Dave Dutch) in place, he and Mainsail helped us put together an executive team that also had the skills we were looking for. Dave had several connections we were able to tap as well.
Phung: A big part of bringing on an equity firm like Mainsail goes back to been there, done that. For us, that was the biggest selling point. We had no background on hiring a CEO or a CFO; we also had experienced challenges building out our development team, and finding the right developers to help us build and maintain our Web site. We had done really well on the sales and customer service fronts, but we needed help in other areas. More generally, we wanted a firm that would understand our culture and respect what we’d built. Our biggest fear was, you make a little bit of money, you bring in an investment firm, they change the culture, they tell you one thing and do something different after the deal is done. That didn’t happen at all with Mainsail.
What other investments or upgrades have you made which have allowed you to scale?
Kalklosch: Definitely as the business started to grow, we were getting more and more users hitting the Web site, and we realized we needed to scale our technology. We didn’t want the site to be slow for our customers. We really focused on hiring quality developers and also implementing the Agile product-development process. One other big initiative we implemented was Salesforce.com. Mainsail helped put us in touch with a consultant to help us implement it. In addition, they helped us with some compliance issues. It was more helping us get there and putting a plan in place to achieve our goals, and not just us saying, “We’re going to do it.” We’ve also had to make some updates to our organizational structure. It’s obviously a very different proposition managing a 60+ person company versus a 20 person company.
Did either of you want to be the company’s CEO?
Phung: In the beginning we were co-CEOs. But we never had experience with growing a small company into a bigger enterprise. It involves a lot of moving parts. The decision came down to one thing and one thing only: What’s going to be best for the company and help us grow this company as quickly as possible. And both of us remain extremely involved in the company—me with customer management, and Ty running biz-dev and sales.
What is the single biggest change having an equity partner has brought to the company?
Kalklosch: Their expertise. Helping us forecast numbers for two or three years out and helping us get the right CEO, and put together the right management team. Mainsail even helped us recruit a new strategic board member, Charlie Fote, who previously ran First Data Corp. It really comes down to structure and infrastructure.
Phung: From a high level, when the two of us built the business we were always kind of backwards-looking. Sell as much as you possibly can, bring on as many clients as fast as you can, provide the best service you can. That was a good formula that got us to where we were. What we didn’t do as much was plan for the future, plot strategy, all those things that are forward-thinking. With help from our board members, we now have a good plan in place. And we have the strategy to execute. It’s a good position to be in.