Omer (00:11.360)
Welcome to another episode of the SaaS Podcast.
I'm your host Omer Khan and this is the show where I interview proven founders and industry experts who share their stories, strategies and insights to help you build, launch and grow your SaaS business.
In this episode I talked to Mike Hilton, the Chief Product officer of Accolade, a health technology platform that partners with large innovative employers to simplify and improve healthcare for employees and their families.
Previously, Mike was the co founder of Concur, a travel expense and invoice management product.
Mike and his two co founders launched the business in 1993 from an apartment and self funded it for the first year in 2014.
21 years later, they sold that business to SAP for a mind blowing $8.3 billion.
They started out with a Windows product which they sold for $69 and eventually became a SaaS business in 2001.
And in order to build the SaaS business, they had to bet the entire company and risk all the revenue they were generating from their existing on premise product.
It's clearly not an overnight success story.
The founders put 21 years into the business and it wasn't all smooth sailing either.
They became a public company in 1998 and grew it to a market cap of $1 billion and a share price of $60.
But within a couple of years, their market cap dropped from $1 billion to $8 million and their share price went from $60 to $27 cents.
They were losing money and hemorrhaging employees and they were written off for dead.
But they figured out a way to keep going and eventually turned things around.
It's a fascinating story and Mike is a great guest who shares it all.
I hope you enjoy it.
Mike, welcome to the show.
Mike Hilton (02:04.960)
Thank you so much for having me.
It's great to be here.
Omer (02:08.080)
Do you have a favorite quote that you can share with us?
Just kind of what inspires or motivates you?
Mike Hilton (02:12.480)
Yeah, I appreciate you asking.
I actually do.
It's on my desk at work every day.
It's actually a quote from Gandhi, one of his most famous you must be the change you wish to see in the world.
And I find that really inspiring.
I think it's a call to action kind of quote that we all observe things that we wish were different in our daily lives, whether it's at a global scale, a personal scale, a local scale.
And I feel like that quote to me says, do something about it.
Live your life in a way that does something about the problems you see.
And so for me, it's super inspiring.
Omer (02:48.230)
Love It.
Okay, so we're going to spend most of this conversation talking about the story of Concur and how you guys built that business and then went on to sell it.
Before we get into that, tell me a little bit about your background because there are a number of products that you've worked on in the past that people will have heard of.
Mike Hilton (03:09.190)
Sure, yeah.
Try to give you my brief history.
So I was a computer science math major and worked in Silicon Valley right out of school.
Worked at a startup in Palo Alto right out of school and a couple years into my career, I ended up at Apple.
In the early days of the Macintosh.
I was the lead developer for a product called MacWrite.
In the early days of the Mac, back in the day, it was the leading word processor for the Mac.
Happened to meet a gentleman named Steve Singh there and we ended up being amazing business partners for many decades.
But we worked together at Apple.
We left Apple in 1990 and started a company together and ended up creating act for Windows.
A product called act we got involved with and ended up building that Windows product that we eventually got acquired by the company that was founded around ACT.
And ACT eventually got sold to Symantec in 1993.
For those of you that don't know, ACT is basically a precursor to Salesforce Automation.
So think of Siebel and Of course today salesforce.com this was a predecessor to all those tools and it was a personal productivity tool.
It was focused entirely on the salesperson, all about automating their lives.
And we were literally replacing Rolodexes, those old paper circular Rolodexes on people's desks.
And hugely successful product.
It's actually still around, still millions of users today, but that product, very successful.
And it was really around that experience with ACT automating salespeople's lives that the genesis for Concur came around.
This idea of you talk to salespeople, you ask them what their pain points are.
Filling out expense reports is usually one of the first two or three answers that they'll give you.
And so we had this inspiring idea that said, look, we know how to build great software for consumers.
This is an extraordinarily manual paper process, very painful for everyone.
The traveler, the manager, the company.
There's gotta be a way to make it better.
Didn't totally know how to solve the problem in 1993, but we had an inspiration to start a company around that idea.
And that's how Concur was really founded.
The genesis of the idea.
Omer (05:20.970)
Now I've had Mike Muni the co founder of act, on the show a couple of times.
Tell me about the connection there.
Cause I think there's an interesting story in terms of how you guys kind of ended up working together there.
Mike Hilton (05:31.760)
Absolutely.
So Steve and I basically decided to start a development company together.
And ACT was founded out of Texas, Carrollton, Texas, and originally was a DOS product.
And for a lot of you, this is going back to ancient Times.
But in 1990, Windows 3.1 came out.
And at that time, you know, Windows was fledgling, had no market share, it had gone through several iterations.
But Windows 3.1 was the first really interesting release and it became an interesting product.
And so the founders of ACT decided to sort of hedge their bets and found Steve and I contracted with our company to build a Windows version of act and we decided to also build a Mac version for them because we came out of Apple and knew how to build Mac software as well.
And so they basically signed a contract, gave us a very lucrative royalty, and said, you guys build us Windows and Mac versions of act.
Really thinking that they were going to be hedging their bets on if Windows, for some crazy reason decided to become popular, they would have a solution.
And what happened?
Within about a year of us working on that, Windows exploded.
And it became quite obvious that Windows was going to become the future platform of the PC.
And so Contact Software, the original ACT company, had a problem on their hands in that there was a third party that really had the product and that was building the product, and we had a lucrative royalty.
So they decided to acquire our company and we became the development shop for Contact Software.
And so that happened.
We retained a royalty for a good period of time, even through that acquisition.
And what happened was another year or two after that, we got acquired by Symantec in 1993.
And so basically, Steve and I built this product and we got acquired, and then we got acquired again, and we had a very lucrative royalty that really funded Concur in the early days.
The success of the ACT product and the royalty stream that Steve and I had is really what helped fund the early days of Concur.
Omer (07:36.170)
So concur launched in 1993.
And from what, what I understand about the story, you guys started out in an apartment.
Mike Hilton (07:48.590)
That's correct.
So this is where Steve's brother Raj, Raj Singh enters the picture.
Raj was just graduating from college.
It was very early in his career when we started concur.
Raj was 25 and I was 29.
And the story goes that Raj had graduated, had got accepted to law school and was going to become a lawyer.
And Steve convinced him to come out to the Bay Area for the summer and help him and I help work on a business plan for what became Concur.
And so Raj came out for the summer before law school.
We would meet over Steve's coffee or kitchen table every week and work on a business plan, a prototype.
And Raj kind of got the bug.
He got the startup, the founder, the entrepreneur bug during that time and by the end of the summer we had convinced Raj to start the company with us.
And true story.
One night in a bar, Steve and I were talking and we basically came to an agreement that said we needed to protect our royalty stream at Symantec.
Steve had been given an opportunity to become a GM at Symantec and run the ACT division.
We had a couple more years of royalties coming to us and we basically agreed on a plan that said Steve was going to stay at Symantec, run the act business.
I would go up to Seattle with his brother and start concur and run the company.
And after the royalties ran out, if it worked out, Steve could join concur later on and that Steve and I would co fund the company in the beginning and we said let's do it and we basically hatched that plan.
So Raj came up to Seattle first, found an apartment, I moved up a little while later and we basically.
It's one of those stories that's true.
We really founded the company in an apartment and worked out of the apartment for the first four or five months and really got it off the ground.
Omer (09:41.910)
And you guys self funded the business I think for like you said, the first 12 months.
Right.
Mike Hilton (09:47.350)
Basically Steve and I co funded it.
Steve was the chairman, I was the CEO and we put equal amounts of money in and got basically a product built, got up to about 10 or 15 employees and built a version 1.0 product which was hard to believe, a Windows shrink wrapped software product that we sold in egghead software for people who remember that for $69 and we sold it directly to business travelers.
We basically self funded all the way up to the launch and then raised a series a round in 1994.
Omer (10:21.490)
Your target market at the time was like who was it?
Because it wasn't corporate customers at that point.
Right.
Mike Hilton (10:28.460)
It wasn't.
It's one of the real themes of concur over its 21 year life prior to getting acquired is that we always had sort of the same core mission.
Expense reporting sucks.
Let's make it better.
We never really changed even, all even Today, even today as concur is an enormous part of SAP and its mission is still kind of that expense reporting is an enormously challenging thing for everyone.
There's a way to make it better.
The thing that really constantly changed at concur over its whole history was the way in which we solved the problem.
We were very aggressive in listening to what was evolving, whether it was business models, technology, both and constantly recreating the solution to the problem.
We started out as Windows Shrink Wrap software.
We evolved to client server.
Remember this is 93, 94, this is pre Internet.
We had a client server product for a while, then the Internet came along.
We had a browser based product where users would be in a browser but it was running on servers hosted by the company.
What was called intranet software.
Then we were really true cloud pioneers.
We ended up being a cloud company, made a huge bet on that and then embraced mobile and all the modern technologies over time, radical, radical technology and business model transformations over and over again over concurs history but always solving the same problem.
Omer (11:57.030)
So I know it's a long time ago, but once you built this product, the initial kind of Windows Shrink Wrap product that you were selling for 69 bucks, how did you go about getting your first 10, 20 customers?
Mike Hilton (12:09.560)
It's a great story.
So we had a head of marketing who was out getting us interviews and we ended up securing an interview with Walt Mossberg.
And all of you know who Walt Mossberg is today?
Certainly.
But even back then he was world renowned as a technology journalist.
You know, a front page column every week and in the business section, the Wall Street Journal.
And I got to sit down with him and give him a demo of our product prior to us being finished with it.
He was intrigued enough at the idea of what we were doing that he agreed to an interview.
And I was so nervous.
I was a 30 year old kid.
And one of the things that we did that was really innovative because we were solving, we were inserting a Windows product into a paper process.
And one of the interesting things we did is we would ask you to send us, we literally you would send us a faxed copy of your company's expense report form.
And we had this technology where you could fill out your expense report sort of in a quick and like interface, sort of a checkbook style interface.
And it would be really easy to fill out your expense report.
But then when you went to print it, it would print out on a form that looked exactly like your company's form.
So we found a way to insert ourselves into the company's process, but automating the process for the consumer.
And one of the great things about demoing to a journalist would be we would get their company's expense report form ahead of time and sort of do all the translation.
And you'd be giving this demo, and at the end, you would hit print preview, and you would see this form that they dealt with every day, and they would go, oh, my God, this is amazing.
And it was always the winner in a journalist interview.
So I'm with Walt Mossberg.
I'm going through my demo, and he's just stoic.
He's dead silent.
And I get to this print preview part, and it's always the winner in the interviews.
And I bring it up, and I'm looking at his face, and he's completely stoic, and he's not even flinching.
And I'm like, oh, my God, I've totally failed.
I've bombed with my best opportunity.
And he just sits there staring at me, and I'm just completely filled with dread.
And literally the first words out of his mouth after about 10 seconds of silence are, you guys are so effing smart.
He didn't say effing, but he.
And he repeated that, like, four times.
You guys are so effing smart.
It was just like, oh, my God.
And he basically agreed to help us launch the product.
He said, I'm going to write an article.
I'm going to help you launch the product.
I want to be a beta tester.
If you guys screw it up, I won't do it.
But if the product works, I want to help you launch your company.
So it was amazing.
And we had issues with the product, and there were rocky moments with him for the next month or two.
And then we had this really dramatic moment where we didn't know what he was going to write, and we waited until the article came out.
Turned out to be a fantastic article.
There we were on the COVID of the Wall Street Journal business section the day we launched.
We sold 2,000 copies within two days.
And we had a pretty amazing launch to our company by having Walt Mossberg write an article about us.
Omer (15:15.640)
What a great story.
I had no idea about that.
Awesome.
So 2,000 copies in two days.
Mike Hilton (15:23.320)
Yes.
Omer (15:23.720)
Right.
That's what you saw.
So, okay, so that.
Great start.
And then what were you doing?
Because it's not like today with SaaS products.
You get it online, and it's a lot about online marketing.
Like, you guys had to hit the street, right?
Mike Hilton (15:35.680)
That's right.
Omer (15:36.160)
To kind of get it into retail stores and stuff like that.
Mike Hilton (15:39.460)
That's right.
So we were doing a lot of traditional consumer software distribution at the time where you basically have, you're putting product into channels so you're going through all the stores where you sell computer software.
We were basically, we were manufacturing shrink wrapped software in disks and boxes and we were signing channel agreements with stores.
And at the same time we were doing a lot of traditional, getting reviews from all the, you know, PC magazine, you know, this is back in the mid-90et.
And that's how you did it.
You focused on getting great reviews from the reviewers and you invested in, you know, you invested in putting the product in channels and convincing companies, these distributors to pick up your product and put it on store shelves.
And we actually had an amazing start to our company.
We had amazing reviews.
I mean you start with Walt Mossberg and then we had tons of great reviews in the PC press and we were really selling the product.
You would walk into Egghead software and there was our product and it was selling.
And so we were getting great press.
We were spending some money on marketing.
We marketed to travelers, so we were in airline magazines.
We took out full page ads in like the American Airlines Backseat magazine.
This is pre wifi and in flight entertainment.
So you didn't have anything to do on your flight.
People actually browse through those things all the time and those things worked.
We had great success selling in the early days to consumers.
But the interesting thing is we realized within a year of launching our product that the real opportunity was not selling to consumers and it was going to be selling to corporations.
The first really massive shift we made in our business was to basically say we need to become a B2B business and not a B2C business.
And made a decision to do that really about a year after we launched our product.
Omer (17:33.430)
What was the product called at the time?
Because it wasn't called Concurrent, it was not.
Mike Hilton (17:36.790)
The company at the time was called Portable Software and the product was called Quick Expense.
It was no E, just an X Quick Expense.
Omer (17:45.230)
Got it just by the shrink wrap Windows product.
And the great start you got with the review from Walt and his support and launching, you kind of just basically were doing that.
And that was the path to the first, what, one or two million dollars for that business.
Mike Hilton (18:05.910)
Correct.
Omer (18:07.110)
And so it was around that time that you decided that you were going to focus on becoming a B2B business or what drove that decision?
I mean was, did you see like sales slowing down or what were you seeing that, that kind of Told you that we need to change direction of the.
Mike Hilton (18:25.430)
I think we had some data points.
We were starting to garner some corporate interest.
It was a pretty viral product.
You would get into a company and then a whole group would start using it and it would start filtering up.
And in certain companies we were starting to get interest, like could we use this for all of our employees?
And have you guys thought about automating the back end of this, the workflow approvals and could you integrate all this data you're gathering into financials?
So we started seeing an opportunity there from interest.
But we also played this out.
We knew that we had touched a nerve of a pain point with the consumer.
We were starting to see interest in solving the whole problem for the company, which was sort of adding in workflows and approvals and sort of getting rid of the re keying that happened into finance and integrating into the company's financial systems.
Steve and I wanted to build a long term great business and we knew that the real opportunity here over time was going to be solving the problem from end to end.
So we made a pretty courageous decision at the time because we could have kept going, probably had an okay outcome and been on our way.
But we realized there was a much bigger business here, much, much bigger opportunity if we could solve the whole problem and sell that whole problem solution to corporations.
Omer (19:50.380)
So the kind of first iteration of the product was sort of a client server type product.
When you move to BE space, can you just explain how that product changed in terms of a client server model?
Mike Hilton (20:02.020)
It's comical to think about a little bit in 2018, but you have to go back to 1994, 95 and think about the state of the world.
There was no Internet.
There was no Internet.
There was barely email.
There were two email standards, Microsoft Mail and a product called CCMail from Lotus.
Omer (20:22.150)
I used to use CCMail and I remember the first time someone showed that
Mike Hilton (20:25.470)
to me, I was like, yeah, it was DOS primarily.
PC Mail was really the dominant DOS Mail product and then had a Windows product.
And then Microsoft Mail was kind of the Windows product.
Very primitive client server mail solutions that were fledgling.
Not everyone had those.
They were kind of adopted by that point.
But those were the two standards, really the only two real email packages around.
Email was one of the few connected solutions that was used by every employee in a company.
There were very few enterprise work tools in the workplace.
PCs were not super connected.
You might have a network file sharing.
But we had this really interesting idea which was we're going to leverage this Windows product we created, and that's going to be the client.
We would build some server software and then we would sit on top of email as an ability to sort of automate workflow.
And so that was the idea we had originally for our product.
It was quite clunky and cumbersome.
Those mail products had some APIs, really primitive APIs that would allow you to sort of automatically create emails.
And so we basically had this product where we leveraged the Windows product we had built.
And you, you could now submit your expense report to your manager.
Instead of printing it out, you could hit submit, you would identify your manager in the email directory, you would hit submit and we would automatically create an email that would go to your manager.
The manager would see an email with an attachment, they would double click the attachment, it would launch their version of our Windows product.
They would see their employee's expense report and they could review and approve it.
And when they approved it again, it created another email that went to Finance.
Finance would open this back office tool that we created, sort of a processing tool that would basically open that expense report up in that tool.
And then from that tool we would integrate into the financials.
So we actually automated the workflow, created integration into financials.
And it was very crude.
And we actually had some success selling that product to some large companies and got pretty, some decent adoption of that product.
It was somewhat clunky.
It was kind of the best you could do.
And at that point in time, yeah,
Omer (22:34.850)
I mean, it sounds crazy now when you think about it, but the fact that you were fitting into your customer's workflow and trying to get to them to a point where they didn't have to print the expense report was actually probably quite a major breakthrough.
Mike Hilton (22:50.810)
It really was at that time.
Yeah.
Omer (22:53.730)
So you went on and then the next sort of iteration of the product happened, what, a couple of years later when you sort of then decided that the intranet model was what you were going to go after.
Mike Hilton (23:05.610)
Exactly.
Pretty quickly that Netscape came on the scene and browsers hit the world, I immediately saw that this is going to change everything for us.
Even in the really early days of the Internet, the browser was such a powerful tool because you could basically have this tool on your desktop where you didn't have to install any software, but you could have some capability.
And you know, in the early days of the Internet, no one was thinking about the Internet as a business productivity tool really.
You know, all the early usage of the Internet was for browsing content and all consumer oriented.
You think of all the early things that you used the Internet for were consumer things.
But we saw this potential of God, we could eliminate all of this crazy workflow stuff that we had had to do, and you could just run our product through a browser interface.
And so our first iteration where we leveraged sort of the Internet technologies was to still have a server sitting inside the company, but instead of connecting it to this email stuff, we had a web server and we connected it into a browser interface.
And so now you could just log in through a browser, fill out your expense report through a browser.
And the workflow was happening over an Internet connection, even though everything was happening within the company's firewall.
And it was a huge evolution because you didn't have to roll out Windows software to desktops, which is incredibly painful.
And that product really is what turned the corner for our success.
And we launched 100,000 person customer with that product and they went live in one day from zero to 100,000.
And it was wildly successful.
We made it work.
And we proved that you could launch at scale really easily and automate the process.
And as a huge turning point for our company in terms of really starting to turn on the hyper growth, and once we could prove that we could automate large numbers of people relatively easily, there was a proven roi.
The manual cost to fill out to process an expense report was 30 to 40 bucks.
And we were driving that down into the low single digits.
There's massive processing cost savings, massive pain savings.
And that's when the company really started to take off.
We kind of solved the scale problem for how do you get this in the hands?
Because you're automating huge swaths of your employees with expense reporting solved that.
Getting it out to everyone quickly and easily and automating the workflow easily.
The Internet, the browser, really solved that for us.
Omer (25:44.700)
Yeah, I mean, I remember the days of being in an enterprise and I spent many years kind of in the enterprise environment at Disney.
And it was a real pain to kind of manage thousands of clients and having installed software on there.
And it was not just the deployment, but continuous updates and et cetera.
Oh my God, this brings back memories.
But you went from $2 million business and in a matter of a few years going to this sort of intranet model, you were doing what, 25, $30 million?
Mike Hilton (26:17.590)
Yeah, somewhere like that around this time.
Absolutely.
Omer (26:20.870)
That in itself was kind of like a huge growth.
And you kind of continued to build up this business and then eventually, I think it was around 2001 that you decided to become Kind of a full blown SaaS business.
What did that mean for you?
Because in many ways that meant that you were cannibalizing your existing on premise business.
Right.
To build this new SaaS product.
Mike Hilton (26:46.340)
We actually got into SaaS before that.
We were truly a SaaS pioneer and we were leveraging web browsers, but we were still effectively a licensed software company.
We were selling software licenses, we were selling consulting revenues.
That's what our business looked like and that's what we went public.
We went public in December of 98 on that basic business model.
And basically what happened around 1998 is that we were mainly selling to large companies and we basically decided that we wanted to go look at the mid market.
And we had this idea that at the time no one was thinking about, which was the problem in the mid market is people are going to really struggle to have to set up servers and install software on servers and maintain that because mid market companies don't typically have IT staffs.
That was going to be a huge barrier to sale.
So we had this idea of well what if we could host the servers for these mid market companies and just deliver the software over the Internet.
It was a truly revolutionary idea at the time.
And we decided to go build a product.
We basically created a small team.
We, we gave them this sort of on prem product we had that had a browser interface and we created this small team internally and we said, you guys go figure out how to create a mid market product that those companies will be able to use over the Internet that we will host.
We had to work with a data center and we had to configure and run the servers and all this stuff.
This new days it was relatively crude but it was like let's figure out how to do that.
And so a team went off and did that and during that time we ended up forming a partnership with adp, the payroll processing company.
And so we actually launched our first cloud product in late 1999 and sold it through a partnership with ADP.
We actually had a co branded product with ADP and ADP sold that product.
So our first entrant into the SaaS space was that.
And it was not cannibalizing our large market business.
Our large market business was still on premise.
And so we entered into SaaS through a new market.
Didn't cannibalize initially and we ended up just slowly growing that business over time.
And that's how we started basically in SaaS.
Omer (29:01.850)
Now your story is really amazing one and within that I love these kind of mini Stories that you kind of been telling us in terms of really.
It just really makes this even more of an interesting story.
I'm using the word story a lot.
But anyway, now people listening to this will probably say, hey, you know, it sounds great.
These guys had some luck.
They worked hard, they hustled, they self funded, effectively bootstrapped a business, at least for the first year out of an apartment.
And 21 years later they went on and you know, had this mind blowing 8.3 billion billion dollar exit.
And we've been talking about a lot of the, the kind of the process that you guys went through and the iterations of the product and how you kind of went from one stage to the next and had that breakthrough after breakthrough.
But it wasn't always smooth sailing and it wasn't as easy as people may be thinking.
So let's talk a little bit about the tough times and the low points.
And I know that you guys decided to go public in 98, which on the face of it sounded like in itself a great milestone, but things turned pretty ugly after that, right?
Mike Hilton (30:23.550)
Yeah.
So again, you have to go back to that time.
We did go public in December of 98, right in the center of the dot com boom.
We really weren't ready to be a public company.
We were very much unprofitable.
But those were the signs of the times.
We were an incredibly interesting story.
We had the Internet attached to us.
One of the very first sort of business to business companies to go public that sort of had this Internet component to its story.
And our stock just took off.
We went public at 12, $15 a share.
Within a few months we were at $60 a share.
We had a billion dollar market cap.
We were high flying.
We had no business with a market cap like that.
We were maybe 40 or 50 million in revenue.
Highly unprofitable.
We had a billion dollar market cap.
We did a couple of acquisitions after we went public that kind of distracted us and got us away from our focus.
And then inevitably we started missing quarters and we started not executing very well.
And over the course of about a year to a year and a half, we just fell apart in the public markets.
And our stock went from 60 bucks to a low of 28 cents.
We went from a billion dollar market cap to a market cap of $8 million.
We were one of those companies of that era that for a while had far more cash in the bank than our own market cap.
We weren't even worth our cash at one point.
Almost none of those companies survive ever.
We Were getting warnings of getting delisted.
We were having massive attrition.
Our company basically shrunk to half its size, employee wise, over relatively short period of time.
Really got written off for dead.
Analysts stopped following us.
Our earnings calls turned into sort of like crickets chirping.
No one was on the phone.
Really got written off for dead.
Truly got written off for dead.
And this was the early 2000s, and it's part of the concur story a lot of people don't really know or appreciate.
And we found our way out of that.
And it's one of.
I'm a huge believer as an entrepreneur that the stories that define you are not the up and to the right stories.
It's those stories.
What do you do in those scenarios when you're staring in the abyss and it looks hopeless to me?
Those are the stories that really show you who you are, what your company is about, what your culture is about.
Those are the stories that define you, not the good times.
Omer (32:58.550)
So what did you guys do?
Mike Hilton (32:59.910)
We were very fortunate.
We had a core group of employees that really believed in the company, believed in the leadership, believed that there was still a company there.
We still had an amazing set of customers if we could just get back to what had made us great, that there was a really fantastic business there and we just needed to get really focused.
And we became completely obsessed with becoming a profitable company.
We knew that that was objective number 1, 2, 3, 4 and 5 is if we couldn't become profitable, it wasn't going to matter.
We were in no state to raise money.
We had to figure out a way to become a profitable business.
And so we became utterly obsessed with that.
We made some very important cultural decisions in our business at that time that I think defined the company from there on out.
One of them was we decided to just tell our employees the truth.
We had these amazing employees that stuck with it.
And we made a very conscious decision to say we're going to just tell our employees the truth.
We're going to tell them exactly where we are.
And a really good example of that is we started inviting the entire company to listen to our earnings calls.
And we would sit around with our employees after the earnings calls and basically have a Q and A session and basically say, you can ask us anything you want.
We'll answer every question.
You know, it's kind of an unusual thing, but, you know, here's a company that's written off for dead.
Is this company going to survive or not?
We decided you're going to hear exactly what we're telling investors, you're going to hear the same thing.
Some of it might not make sense to you, but ask us any question you want and we'll be as honest as we possibly can.
And ironically, that was a tradition that ended up staying with the company even through all the good times after that.
Once the company turned it around, it was one of those cultural traditions where people loved that transparency and honesty.
And it became a point of sort of the culture from there on out.
And it engendered trust, which was one of the most important things we needed at that time to survive.
Omer (35:04.199)
And how long did it take you guys to, to turn a profit?
Mike Hilton (35:08.240)
Yeah, so we, we were doing multiple very bold things at once.
We were becoming profitable and it was really around that time that we made a really fateful decision which was we bet the entire company on a SaaS model.
No one even knew what to call it at that point, but we were at a point where we had this fledgling mid market business that was all SaaS based and we could start to see the power of that before anyone else.
You could start to see like, wow, this is a really different way to think about a business model around software.
And we were having success there.
We were proving to ourselves that it was possible to do it, that it was super compelling and it was a very different kind of model and that we were going to have to remake our DNA as a company.
And we had started experimenting with a SaaS model in the large market and we were having some success there.
And so we made this radical decision which said we're going to become a SaaS only company.
At a time when almost all of our customers were not SaaS customers, they were on premise customers.
And we went to them all and basically said, look, we're going to give you this really long sunset window, several years, but at some point you're going to have to come with us to the SaaS world.
Fairly crazy strategy.
And with the risk of our customers going, I'm not coming with you and I'm going to go to somebody else.
And we really thought it through and made that bold bet, started orienting our product efforts towards really becoming SaaS only.
And we made it through that conversion loop.
We kept virtually all of our customers, we had very little attrition through that time.
We got them all off of their on premise product, onto cloud product.
And by kind of the mid to late 2000s, by sort of 2007, 2008, we had all but eliminated that license revenue and that business model.
And we were this very high growth SaaS company that had kind of dialed in a business model that really worked and scaled.
The mid market had really started taking off by that time and we had completely transformed ourselves and we're a really different company.
Omer (37:19.670)
It doesn't sound like such a big deal now, but back in those days, going to an enterprise customer and saying, we're moving to this model where instead of you having a server on your premises with your data, we're going to move that to a server somewhere else that we're hosting and we're going to look after all your data.
That wasn't an easy decision for people to make.
Mike Hilton (37:46.540)
It was insane, Elmer.
It was, it's crazy.
I mean, you can imagine we're walking into Fortune 10 companies.
They didn't even know what we were talking about.
A lot of the times their IT folks would look at us like we were crazy because it was a new concept.
And you had emerging companies like Salesforce that were really starting to gain traction.
But most of the early SaaS, companies that were pure SaaS from the beginning, like Salesforce, really started in the mid market and worked up over time.
Most of our customers at that time were large customers and they were, you can imagine what those conversations were like.
And in the early days of SaaS, there were massive concerns about security and privacy and scalability.
CIOs would look at you and go, there's no way you can run an infrastructure like this better than I can.
And we had to overcome the security and the scalability concerns every single conversation.
No one believed that you could do it.
Over time, that changed.
But that was really hard to overcome.
Extraordinarily hard to overcome.
We were educating people on what SaaS was.
As much as we were trying to convince them to make this move, we were evangelizing the whole concept of SaaS alongside talking about our business.
Omer (39:00.490)
When you said everyone left you for dead when you were losing employees, people thought, this is a sinking ship, time to move on.
Where the market was kind of looking at you as pretty much near death.
What was going through your head and how did you get your mindset in the right place to then take on this next challenge and figure out how to turn things around?
Mike Hilton (39:29.870)
I think it's one of those traits that entrepreneurs have if you're going to be successful, which is you have to almost have an irrational belief in what you're doing.
You know, when I think back to those times in my state of mind and the most unimaginable trying of times, you're staring no one believes you're going to make it.
You're looking at statistics.
Less than 1% of companies that get to this point ever survive.
There's no rational mind that's going to look at all the data points you have and go, oh, there's absolutely a business here and we're absolutely going to make it.
And I think that's part of the entrepreneur mindset.
And the three of us who started the whole thing, I think we just knew that there was something that was still there.
And I will tell you, I was particularly one of my biggest inspirations during that time was, were the amazing people that I got to work with that really believed.
One of the things that carried me through those days was getting to work alongside a group of people that really, truly believed, that believed with you.
And that gives you incredible buoyancy.
It gives you, there's a sense of accountability to those people that, you know, you don't want to let those people down.
And if you're going to go down, you're going to go down fighting to your last breath.
You have this amazing gift of having a group of people that really believe in what you set out to do and continue to believe.
And I know for me, and I could probably speak for Steven, Raj as well, was a huge part of what kept us going during those times.
Omer (41:00.670)
And then it was from being near death or left for dead, it was, I guess what, another 14, 15 years that you, then you guys eventually sold the business.
How did that come about?
Mike Hilton (41:16.400)
Most people know that this phase of Concur, which is kind of the last half of the company's life.
And if you just step back, one of the most fascinating things about Concur is that it's one of the only companies that actually had a scaled up on premise software license business.
We were a $50 million a year software licensed business in 2001 with virtually zero SaaS revenue.
And by the time we sold the company, we were a billion dollar pure SaaS company with zero of that legacy business.
That business went from about 50 million to zero.
And starting in the early 2000s we went from zero to a billion in in SaaS revenue.
We completely changed our business model 100% from 100% on prem to 0% on prem and from 0% SaaS to 100% SaaS in those early 2000s is where that started.
And they overlapped for a short period of time, a period of years and then we became a pure SaaS business.
And so by the time we got to the mid to late 2000s, we were starting to leave the license business entirely in the dust.
We had oriented our product efforts 100% around building a SaaS offering.
We were selling only a SaaS offering.
And we had started dialing in the business model and we were starting to dial in the mid market business model.
And by the time we got to the late 2000s, that's when the company really had become a rocket ship growth company.
We were growing 25% plus a year.
We were profitable.
Wall street loved our model.
We had high growth plus high margins, which was an unusual thing for a SaaS company, still is.
And we had just kind of dialed it in and we became started really growing internationally and we experienced a very long run of, you know, 20% plus growth, a good decade plus of that kind of growth rate profitably before we sold.
Omer (43:20.310)
When you kind of hear stories like this, it's kind of easy to think it was like an overnight success.
But from talking to you and this conversation, it was kind of, you know, overnight, you know, 21 years in the making.
And it required you guys to keep evolving and making some big bets on what you were going to do next with the product every few years.
And you face some really tough times, which could have easily killed the business.
But you guys decided to keep going and eventually you had a successful exit.
I appreciate you kind of sharing that with us.
And as you said, it's not necessarily about the highs, but also talking about the tough times and the lows that really help us to understand really what happened and to get to know the founders better in terms of what it was that they were able to do to get that kind of breakthrough in their business.
So I appreciate you kind of sharing that with us.
One thing I'm curious about is like, how much did you walk away with from the exit?
Mike Hilton (44:33.020)
I don't want to talk about that necessarily.
I have no complaints.
I'm very fortunate.
Post my Concur life, I got to choose what to do next and I decided to go do it again with one of the other founders.
Raj and I decided, along with some other folks from Concur, a few others, Rob Cavanaugh, notably, who ran a lot of the sales and marketing at Concur at the end, someone we've also worked with for 20 years, we decided to go do it again.
Crazy enough.
I mean, we did it for 21 years and actually decided to do another thing together again.
And that's why we're all here at Accolade.
So I'm very fortunate in that I'm Getting to continue to work with people I love working with and the financial success of Concur.
For me, it created an opportunity to go do something next that I was particularly passionate about and I feel very fortunate about that.
Omer (45:31.440)
So what's kind of the deal with Accolade?
Like do you guys have a stake in the business there?
Mike Hilton (45:37.670)
We have personally invested in it, yes.
Correct.
Omer (45:41.270)
Got it.
Okay.
And so what's the big vision?
What's next for you with Accolade?
Mike Hilton (45:46.390)
So Accolade has a really bold mission and so the company's been around for a while.
We joined a company that has an amazing set of founders and had a great business before we got here.
But Accolade's trying to change the healthcare experience for the US consumer.
That's really the mission.
We're very focused on selling to corporations, what's called self insured employers.
Most corporations even down into the mid market now choose to be self insured, meaning they'll use an insurance carrier to sort of do the administrative tasks, process claims and leverage the provider network and the provider agreements that that they have, but choose to basically take the risk on themselves for the most part and pay the cost directly.
They become what's called the payer in healthcare.
And so we sell to those corporations, but we have a service that's really focused on the consumer.
So the employees of that company and their families and we have what's called an advocacy service that's really focused on basically trying to make all the benefits and all of your healthcare just easier to understand, to navigate and to use.
The basic premise of the company is that healthcare is so insanely confusing and hard to use.
It's really hard for consumers to know what the right thing to do is for themselves.
And so we have a business that's a combination of human touch.
So we have very much a human component to our business.
We have a role that's called a health assistant and that's someone that you can call anytime, you can message anytime.
That's going to help you from the basics of healthcare like I need a new ID card, I need to understand what my benefit is.
I need help finding a doctor, I got a bill I don't understand.
We'll help you navigate those things all the way through to when you start using healthcare all the way to complex care situations.
I have a chronic condition, I live with diabetes, I have cancer, I'm pregnant.
We have a large staff of clinicians, of nurses that can help coordinate all your care for you.
We'll help you prepare for provider Visits, we'll follow up.
We'll basically stay with you through the journey.
And so the basic idea of Accolade is that the value we're providing, we get super high engagement from consumers.
Consumers love the quality of service you get, cause the bar so low in healthcare.
And we do a delightful job helping you navigate through healthcare.
We get super high engagement and satisfaction.
We're actually improving the health outcomes of the populations we serve.
And what pays for accolade is the fact it turns out when you do the right thing for the consumer and help them get the right care the first time and avoid all the costly mistakes and help them get educated and solve their problems for them, it turns out that you end up spending a lot less money on healthcare.
So we're actually saving meaningful amounts of money on healthcare costs for the employees, employer.
It's a basic model.
So we're serving well over a million people today.
Company is almost 10 years old.
We've been here coming up on almost three years.
It's a passionate place.
It's a very mission driven place.
We came here because of a lot of passion around the healthcare space and how screwed up it is and the opportunity and I feel really inspired to be focused on sort of improving something that impacts all of us so much.
Omer (49:04.980)
Yeah, I love it.
Yeah, the healthcare industry in the US definitely needs improvement.
So it's great to hear about companies like Accolade trying to make those kinds of improvements, particularly for the consumers.
I think it's awesome.
All right, so it's time for our lightning round.
I'm going to ask you seven questions.
Just try to answer them as quickly as you can.
You ready?
Mike Hilton (49:25.780)
Fantastic.
Yes.
Omer (49:27.140)
What's the best piece of business advice you've ever received?
Mike Hilton (49:31.780)
I'm going to have to go with the advice I give my two daughters all the time.
It's advice I got relatively early in my life and I've tried to live it, which is to follow your passions.
I know it sounds kind of simple and corny, but I think there's so much truth to it.
I think that if you're a person of passion and you want to wake up every day doing something you're passionate about, it's ultimately what ends up mattering.
I see so many people chase money, chase title, chase power, and I just am a huge believer that those things all fade away over time if you don't really have the passion for what you're doing every day.
And for me, it's the best piece of advice I ever got.
I try to live my life that way.
I try to instill it in my own kids.
Omer (50:18.870)
What book would you recommend to our audience and why?
Mike Hilton (50:22.390)
I'll actually go with a couple of old school books that for me are still pretty tried and true.
Let's start with Good to Great book back from the early 90s.
Jim Collins I just think the principles in that book have withstood the test of time for me.
We use that book at Concur during the Hard Times as sort of a framework for thinking about sort of what we needed to do.
And so I'm kind of tied to it emotionally from that time in my life and and continue to think about the principles in that book a lot.
The other one I would recommend is Crossing the Chasm.
It's another classic from a long time ago, but I still think the principles for entrepreneurs are absolutely relevant to this day.
Trying to get from early adopter status to that early majority.
That chasm is the foundation of every startup's challenge.
Early adopters don't buy the same way as Main street does.
And how do you cross the chasm?
I think it's one of the hardest challenges in building a business and I think that book's still relevant.
Omer (51:27.790)
Yeah, yeah, I agree.
What's one attribute or characteristic in your mind of a successful entrepreneur?
Mike Hilton (51:34.430)
Sometimes I get asked like how do you choose an idea to go start a business with?
And I always tell people like you better damn well believe in what you're doing.
You can't half believe in your idea.
You have to have an almost irrational belief in what you're setting off to go do because you are going to face those moments 100% guaranteed where no one's going to believe in you.
Everyone says it's the stupidest idea ever, you're going to absolutely fail and you better have some crazy irrational belief in your idea in order to persist through those times.
And so I think successful entrepreneurs latch onto ideas that they are so passionate about.
The core of the idea.
You can't get stuck with how to go implement the idea.
The core of the idea, its value, the fact that it's a great idea that can work.
I think you have to have an insane belief in that.
It's one of the most important attributes I think successful entrepreneurs have.
Omer (52:32.010)
That's great advice.
What's your favorite personal productivity tool or habit?
Mike Hilton (52:37.370)
That's a really good one.
That's changed for me over the years.
I could list off some of the tools I use online.
I don't think that's quite as interesting.
I actually find as I've gotten older.
One of my best habits is actually the things that I do to decompress and segmenting my life in a way where I make time to have time away from my phone, time away from my computer and time where I can really clear my mind mentally.
I think burnout is actually a bigger problem now than it even was 10 or 20 years ago for entrepreneurs.
And I think it's easy in the world we live in today, especially with phones, is just to have it be all consuming.
You go to sleep, you wake up and there's it's nonstop 24 7.
And it's one of the harder arts to master, particularly for super high performing individuals, is to avoid tipping over into sort of that black hole of never getting away from the work.
And I find that I make time in my days and my weeks, scheduling vacations, simple things like that.
A lot of people struggle with really executing on those kinds of things.
I really try to have those periods of time where I am completely away from the work part.
And I find for me that actually makes me massively more productive when I am at work.
Omer (54:01.590)
What's a new or crazy business idea you'd love to pursue if you had the extra time?
Mike Hilton (54:06.150)
I'll tell you an answer I haven't told too many people outside of my corner circle.
I had a crazy idea many years ago.
I'll tell you a quick story.
I was an early Tesla customer.
I own one of the very first Teslas.
Produced one of the first couple hundred off the assembly line.
And I waited.
I put my money in two years before they started getting manufactured the Model S's.
And I had never seen the car when I put my down payment down.
And I was a huge believer in that idea very early on.
And out of that I developed this passionate idea that I pursued on the side.
Not seriously ever about wanting to do something in the long haul trucking space.
And the idea of a Class 8 semi being pure electric and sort of transforming that industry.
I actually thought for a while about wanting to pursue that seriously and start a business, maybe even or do something in that space.
The idea of an electric semi truck basically.
And I did tons of research, I did lots of math, I did constant research on is anybody doing this?
And several years went by where no one was pursuing it.
And it was one of those ideas that I just never had the time to really take it beyond a fascination stage and a research stage.
I was still at concur, I was still committed to other things that just prevented it from going anywhere.
What I'm heartened by now is that it's actually that's becoming know Tesla itself has now gotten into that space and I think it's still a very transformative idea and something that will come eventually, but it's something I had a really early passion for.
I think I saw that idea before maybe anyone else or hardly anyone else, but never pursued it.
And I think it's a fascinating idea.
Omer (56:03.520)
What's an interesting or fun fact about you that most people don't know?
Mike Hilton (56:08.280)
I had a really brief six month stint at the beginning of my career where I worked for a defense contractor and I actually had a top secret government clearance for a very brief period of time.
A lot of people have no idea that I went from working at a startup in Palo Alto to that.
And I did that for six months and I realized very quickly that I was miserable and there was no way that could be my life.
And I went back to the startup in Palo Alto and so I had this really interesting six month veer off where I ended up getting a top secret government clearance and then went away.
Omer (56:43.730)
Wow, that's amazing.
And finally, what is one of your most important passions outside of your work?
Mike Hilton (56:48.969)
Yeah, that's a good one for me.
I think this answer is in the process of changing.
I have two daughters and my wife and I just became empty nesters last year.
And so I'm in this new stage of life outside of work where my kids are out of the house and my wife and I are in this sort of age of discovery, loving life.
And we're in the process of moving to a high rise in downtown Seattle.
So we're kind of doing, we're going to live an urban life and we're building out a downtown apartment which we're really excited about.
That's pursuing, it's occupying a lot of our time.
I'm golfing more than I ever have in my life.
Golf's been a lifelong passion.
It wasn't something I pursued very much as my kids were growing up, as my energy was into their things.
And I'm rediscovering that passion at the moment.
So those are some of the answers I would give there.
Omer (57:39.670)
Love it.
Mike, thank you for joining me today.
It's been a pleasure and it's been great to hear the story of concur and how you guys built that business and the highs and lows that you've had along the way.
Now if people want to find out more about concur or accolade, they can go to concur.com or accolade.com and if people want to get in touch with you, what's the best way for them to do that?
Where do you hang out?
Mike Hilton (58:13.519)
You can find me on LinkedIn for sure.
Just search for Mike Hilton.
You can find me on Twitter.
My handle is Mhilton.
Happy to follow him there.
You'll see a lot of Seahawks tweets.
I'm a huge football fan.
Omer (58:24.950)
Go Hawks.
Mike Hilton (58:26.390)
Probably one of my bigger outside of work passions as well.
By the way, crazy Seahawks fan, you can find me on Twitter or LinkedIn.
I love engaging people.
I love the local Seattle startup community.
I'm fortunate to know a lot of the local entrepreneurs, and I love helping and working in that community.
I think giving back is a really important concept to me and I'd love to hear from you if you ever want to chat.
Omer (58:54.270)
Awesome, Mike.
Thank you.
It's been a pleasure.
And I wish you all the best with Accolade and with rediscovering your passion in golf.
Mike Hilton (59:03.390)
Thank you so much.
It's been a real pleasure.
Thank you so much for having me.
Cheers.
Cheers.
