CIBC Innovation Banking Podcast

Welcome to Financial Toolbox, a podcast series sponsored by CIBC Bank USA that understands that financial wellness is not innate. It's learned, whether you're a member of the next generation wanting to start your financial journey out strong or you're a lifelong learner looking to improve your financial standing moving forward. Our team of experts are here to equip you with the information you need to help make your ambitions a reality. And now for this week's episode.

>> Andy Kirk: Hello, welcome to Financial Toolbox. My name is Andy Kirk, leading Innovation Banking in the Southeast for CIBC. I'm pleased to be your host today. For this episode. We will discuss TEAMWORKS and the decade-in-the-making overnight success.

Joining me today to discuss further is Zach Marius, founder and CEO of TEAMWORKS. Thank you for joining me, Zach.

>> Zach Maurides: Thanks for having me. Andy. It's a pleasure to be with you this morning.

>> Andy Kirk: Zach, for this episode, we will cover your journey of starting the company to raising capital, including the ups and downs that other founders can learn from your experience. Let me first tell our audience about TEAMWORKS. TEAMWORKS is known as the operating system for sports that powers elite teams worldwide. The company calls as clients, over 7,000 teams globally — 520 collegiate athletic departments, 330 professional sports organizations, and 65 leagues in governing bodies. With that, thanks for joining me, Zach, and tell us more about that catalyst that sparked your idea for TEAMWORKS.

>> Zach Maurides: Yeah, so the idea for TEAMWORKS really came out of my experience as a student athlete at Duke University. So I went to Duke in 2003 on a football scholarship, and when I arrived there, Duke had put about 15 professionals around me to support me in all areas of my life on and off the field. And again, coaches, trainers, strengths, staff dietitians, high performance professionals, sports psychologists, tutors and mentors, career counselors. Again, a really robust ecosystem of support, but as I experienced it, that ecosystem of support had really grown in size and complexity and outgrown the systems of work that supported how all those people worked together cohesively as a unit. So that's a very long-winded way of saying they had a lot of people working with me and it was a disorganized mess. And so the concept was, can we build some software that will allow all those people to connect and collaborate more effectively on the care and development of the athlete, but also provide the athlete with a single portal, a single pane of glass to connect to that full ecosystem of support? So it was my sophomore year that we started working on what was the early version of TEAMWORKS Hub, and it was my junior year that we launched it with our football team.

>> Andy Kirk: That's great background, Zach. Curious, what was the original vision for TEAMWORKS and how has that evolved today?

>> Zach Maurides: Yeah, so I think very quickly we came to understand our job, at least initially, the job to be done was connecting all of the people that work within an athletic organization. And as we got in and started solving the problem of how do we get all these people that are foot mobile all day long across campus and different facilities kind of on the same page and keep them on the same page. We also started to realize that there was a bigger problem that all of those people also had siloed software systems. So strength coach had their own system that they were using, training room had theirs, equipment room had theirs, and so on and so forth. And very quickly was clear that the mission needed to expand to not just connecting all the people, but connecting all the technology within these organizations.

>> Andy Kirk: Great, great. So for founders, one question is funding the company. How did you fund the company originally?

>> Zach Maurides: So we raised a small amount of friends and family money, but really bootstrapped the company for the first five, six years, kind of eat-what-you-kill. Aside from that kind of very small seed money that we put together, it was really, we had to fund the business through sales, which I think has pros and cons. I mean, the pros to it are it requires that you have a level of discipline around how you spend your money that maybe if I had a bunch of investor capital early on, I probably would've made the same mistakes and it would've just cost more. But then I think also constraints can lead to greater creativity. And so it made us really have to make hard choices around what we were building in our product, what features we did or didn't pursue. And I think it led us, ultimately, I think it got us the product market fit faster than we would've if we could have pursued anything and everything that we wanted to with the product.

>> Andy Kirk: That's great. On that same vein, what resources in the local community did you find available that helped advise or guide you along the way?

>> Zach Maurides: Obviously I took huge advantage of the resources at Duke University. I mean, that's one of the great things about being at a college or university as a young person is that you can go and talk to oftentimes professors that are either current or former practitioners in doing what you're trying to do. I mean, I went and sat down with the dean of the business school to go through my business plan, someone who has had a very long career in global consulting. I was able to go and talk to folks in the computer science department about what language we want to build and what technology we want to use to build the TEAMWORKS application. I was able to get access to a lot of executives in the athletic department to kind get a better understanding of not just the athlete's perspective, but the business perspective, the folks who were on the other side of the table. So I would say Duke University and the ecosystem of Duke University was a huge part of us figuring out how to get this thing off the ground.

>> Andy Kirk: That's fantastic. Zach, when did you know it was time to bring in an equity partner?

>> Zach Maurides: I think it's a couple of things. So one, we had gotten to the point where the primary problem that we had as a company was distribution. As quickly as we could get our product in front of organizations, we were winning at a pretty high rate. I think back then we had about an 80% plus conversion rate of sales leads, which is crazy high. And so number one, it was clear that we had product market fit, but what we needed to do was invest in go-to-market. And our ability to do that was limited by the fact that we were bootstrapping. But then also number two, I think it was in 2014 and 2015, we went from no competitors to six copycats. And so it's like, Hey, we can't keep moving slowly here. We've clearly created a market and if we don't go and take that market, somebody else will. And so that I think created the impetus for us to say, Hey, we need to go faster. And we went to market in 2016 and raised that Series A and that's what we did.

>> Andy Kirk: Nice. Good background. What are some of the common values you share and look for with an equity partner?

>> Zach Maurides: So I mean, I would say that I think a lot, one of the mistakes that you can make is just trying to solve for the deal and the price. I think it's actually for you to ask the question, what sort of values do you share is the right question. I think the first thing that we look for is alignment around strategy. And a lot of investors, they will say, well, tell us your strategy and what you're going to do with this business. And one of the things I like to do is before we give them the answer to the question, ask them the same question. Like, Hey, you've done your outside in research, you've done your market research, you've seen our deck, what would you do with this business and why? Where would you take it? And what I'm looking to see is obviously not that their views are identical to ours, not just looking for an investor that's going to be a sycophant and just support any idea that we have, but that there's not a huge diversion.

If I meet with an investor in 2016 and they go, I think you should take TEAMWORKS to the shipping industry, I'd probably be like, yeah, that's really not in our vision. It's not a good fit. We think we want to stay in elite athletics and expand product suite and grow it there. So number one, do they demonstrate the same instincts around the business that you have in terms of where it should go and how it should grow? And then second, is there chemistry? And just like any relationship, a friendship, even a romantic relationship, you're looking for natural chemistry. Can I talk to this person? Do we understand each other easily? Do we have some shared interests? Because you're going to have a relationship with this person, a long relationship and likely a relationship that goes through very stressful times. So I would say it's actually more akin to getting married than it is to having a friend.

And if you don't have some level of chemistry, just like getting married, some level of chemistry and an alignment around where you're trying to take the organization, you're going to have a really difficult time. I think that's most important. And then once you've found the partner that you think that is most true of, then it's absolutely about trying to drive the best deal that you can. But I think too many founders solve for what is the best deal, and then there's not that alignment or there's not that chemistry. And yeah, they got a great price and their equity, but they're spending a ton of time and energy fighting with their investors or dragging them along, and that slows the whole enterprise down.

>> Andy Kirk: Nice. So Zach, on those same lines, did you have goals or milestones as a company you wish to achieve before you were even ready to have those conversations?

>> Zach Maurides: Yeah, I mean, I think I'd be lying if I said part of why we bootstrap so long, I mean, part of why we bootstrapped so long is because we were intimidated of the fundraising process. And I think that's also true of a lot of entrepreneurs where they're afraid to go out and do it. And to me, it's like if you haven't been afraid to go out and pitch and sell customers, you shouldn't be afraid to go out and raise money. And I think looking back, I wouldn't change anything because I'm happy with where I am, but perhaps raising a little bit earlier, taking market share a little bit faster would've been a better move. So one, I think be bold, but then also I think the other thing that we were trying to make sure was in place before we raised was also just clarity that we had product market fit and clarity that we had at least the beginnings of unit economics that supported an influx of investor capital. Because if you don't, and you're just funding broad fact finding, that's really expensive money, versus like, Hey, we're going to put a dollar into the business and we think we can generate a dollar of ARR for every dollar we put in when every dollar of ARR is going to create $10 of shareholder value, like put a dollar in, create $10 of shareholder value. That makes sense. But if that formula is not solidified, it might be I put a dollar in and I don't create any shareholder value. And that's scary.

>> Andy Kirk: That's good insight. So Zach, were there any challenges to raising capital early on versus later in the company stage? How many pitches did you have to make before finding that first investor?

>> Zach Maurides: I think we did over 20 pitches in that first round. The biggest challenge back then we're talking 2016, is I would say there was a very small percentage of investors that had made an investment in sports tech. And of those investors at that time, the market was so small that most of them hadn't seen a great return. So the small percentage that had done something in sports tech were like, yeah, didn't really have good results here, not interested in doing another one. And then the majority that hadn't, didn’t understand the industry, and I think back then again, had maybe a similar market view, is this is really a constrained tam and can you build a big business here? And so it was a lot of, I think, articulating the market opportunity, also articulating how we saw that market opportunity growing over time, and then obviously making the pitch that A, it's there. And B, we can take it.

>> Andy Kirk: Zach, what was different, if anything, after you brought in capital?

>> Zach Maurides: I mean, certainly there's an element of oversight and financial rigor. Once you raise a series A, we started getting audited financials done every year, and that just levels up the sophistication of your financial operation, which I think is important. And you want to improve that at every step of the business so that you're continuing to A, gain more control over all the different kind of pieces of the financial machine, if you will, and B, to be able to demonstrate that kind of steady progress and improvement in all the important metrics. So, financial rigor. And then the other thing is just the oversight of having institutional investors now sitting on your board and guiding it. And I think where Bill Luby was at Seaport led our series A, and I think really in addition to being a really successful investor in private equity, he also had experience working in sports.

Seaport was one of the main investors in Mandalay Baseball. And so just really had a good understanding of A, how to build a solid business, and B, how to do business in elite sports. And then I think what he brought to the table beyond oversight and financial rigor, he also played a really critical role in every other investor that we brought in. I mean, I think that's really critical. Your first institutional investor should be your closest advisor in terms of who else you allow to get onto the cap table. And I think Bill helped us to make really solid choices in terms of who else we brought into the organization. Also, just the culture. I mean, I think Bill played and continues to play a huge role into the culture that we established on our board, the dynamic between management and the board. And I think through some of the more critical moments in the company, Bill's played a huge role in how do we get the board behind some of maybe some of the bigger swings that we needed to take as a business. And I've certainly learned a lot. I would say Bill has been a huge mentor to me personally and has played a big role in my individual development as a CEO and as kind of a founder of a business of which Bill, bill is also an entrepreneur himself.

>> Andy Kirk: That's great insight. Looking back on your journey, what are a few things you wish you knew sooner that could have made the path easier for folks who are beginning this journey?

>> Zach Maurides: There's more than a few things. There's a ton of things that would've made it easier. I think one is when you're going out and you're raising money, you do need to try and help, especially in those early stages, you're trying to help people. If you're doing it right, you're going after a market that is not yet well understood, which means A, there's a ton of untapped opportunity there for you to go and capture. But B, it's highly likely that most investors aren't aware of it. I think most investors, there's a very small percentage of investors that actually find emerging markets early and invest in them. Most of them are pack animals and they just follow the pack into whatever industry they're moving into. So one, realize that you're going after a very slim percentage of investors that truly have the ability to see things early and be visionary in terms of investing into markets before they've kind of exploded and are very well known. So don't be disappointed when you get in front of 10 investors and nine of them can't understand the opportunity. That's okay, that's normal. Keep going. Keep having more conversations. Find the people that get it.

You'll notice when you asked me earlier, what are you looking for an investor? I talked about three things. I talked about strategic alignment, I talked about interpersonal chemistry, and I talked about deal price and structure. I didn't talk about all the other things that they can do to help you run your business. I've never selected investor because I think they've got a great operations team that's going to help us fix some part of our business, or I think that they're going to make customer intros that's going to help fill our pipeline. An investor is not going to run your business, and if you need an investor to come in and help you run your business, there's something wrong. Right? Inviting an investor who at best is checking in on your business once a month to make operational decisions about your business is a recipe for disaster. They should be there to add rigor, to be a sounding board for really difficult decisions and to make sure the business is properly capitalized. But running the business day-to-day is your job. Don't choose an investor because you think that they're going to help you run the business. That's your job.

>> Andy Kirk: Nice. That's great. So Zach, finally, what advice would you give aspiring founders either the motivation to start a company or help in raising capital along their journey?

>> Zach Maurides: I think best way to get something done is get started. So if you're thinking about starting a company, go do it. I think that I look at our journey and I think bootstrapping early was an important part of us and getting the business going, getting the right discipline early in the business and around decision making, but also we were early in a market, and so probably, if I'm being honest, during a good part of those initial five or six years, it wasn't an investible opportunity because the market hadn't developed. And so if you're really a visionary entrepreneur, you're hopefully in a space early, which means vast majority of the business population isn't aware that there's money there yet. And so I'm a big proponent of bootstrapping, at least for a little while, in terms of creating discipline, creating focus, avoiding dilution maybe when you might be early in a market and then be bold. One thing I would do if I could go back in time is make every decision twice as fast. All the same decisions. If I could go back in time, I would make all the same decisions, twice as fast.

>> Andy Kirk: Thanks, Zach. Thank you all for listening in as we discuss Zach and the success story of TEAMWORKS here in Durham, North Carolina. If you have additional questions, please reach out to us at CIBC to assist. You can also check us out at cibc.com/us or across several social media platforms by searching @CIBC_US. Thanks for listening. We look forward to catching up again soon.

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