Son of Indian immigrants, a former lawyer and now a CEO, Reggie Aggarwal took on an industry worth more than the GDP of 90% of countries in the world and built a billion-dollar business in the process.
I recently hosted Aggarwal on the DealMakers Podcast. He de-coded a lot of what he has learned both as a corporate M&A lawyer for tech startups and through building a SaaS business which is now worth the better part of two billion.
Although he took what some might call a detour into corporate America, Aggarwal was always very entrepreneurial. As a kid, he ran a paint company, a lawn care and snow removal service, and rarely worked for anyone else but himself.
Founders: Why You Should Listen to Your Lawyer
Aggarwal attended the University of Virginia to major in finance. Then he went to law school and started practicing law in Tysons Corner, the Silicon Valley of the Washington D.C. area. He specialized in the M&A to IPO process for technology transactions. That got him excited about the startup space.
His experience also gave him substantial insight into founding companies. Law school teaches you not to be a team. It’s you on your own. Though you do learn work ethic and to work hard. He saw the difference between being a solitary worker and team builder and the greater potential of the latter.
He also learned a lot about structuring companies and where most founders go wrong. There are countless exciting things to work on at the beginning of a venture, but ignoring the startups’ equity structure is a common pitfall he saw and knew to avoid.
If there are cofounders, you make sure you vest equity. Otherwise, when one of three co-founders leave a company after one year, they still own a third of the business. Then the other founders are dying, working 80 hours a week, and are basically working for this person who still owns a third of the company. Aggarwal says “that can literally tear a company apart.”
In most cases, people tend to give up far too much their equity too early. Reggie points out that if you start a company with four people, and you've just given away 75% of the equity, you could have waited six months and hired the same person for 1% or 2%.
It’s your lawyer's job to walk you through the best and worst case scenario and be sure you are protected. Let them help you. They’ve seen it again and again.
Networking, Pain Points & Creating Your Own Aspirin
Reggie went on to found the Indian CEO Tech Council while a lawyer to bolster his networking opportunities. When it launched, members were required to have at least $10 million in revenue and 75 employees, or have raised $10 million in venture capital. Back in 1996 and 1997 that was a lot of money.
Once they had recruited all eligible members to join, he realized he needed to broaden the criteria to continue to grow. By opening up the organization to a larger group, he successfully grew it to over 2,000 members, becoming the largest CEO networking group on the East Coast.
There were four things he found common amongst the high achievers in this group:
1) They were willing to take high risks
2) They were persistent and consistent, and just never gave up
3) They really believed in what they were doing and success was possible
4) They were patient
Eventually, Reggie said to himself, "Hey, if that person can do it, I can do it." Shortly after, he founded Cvent, the company he has now been at the helm for over 19 years.
At the same time, it was painful organizing these events. He decided he needed to create the aspirin for his own headache. He would be his own first customer. That's how Cvent got started. He wanted to do away with tools like Excel, Outlook, and yellow sticky notes and automate it.
The Leap
One thing he learned from all the other failed entrepreneurs was that most founders never really take the leap full time. They don't execute because they don't go all in. They try to say, "I've got to build this business, work my job, and once the business brings in more revenue than my job, then I'll quit." Most people never get to that. Or it takes three years. If it takes three years, someone else already got your idea, and they're already building it.
Ideas are like buses. You've just got to get yourself on the bus and close the door as quickly as you can. Especially, because you have guys like Reggie. They're going to quit their job, work 100 hours a week, and put everything they own into the business. You're not going to be able to compete against someone like these other entrepreneurs that just go all in. You have to go all in.
Reggie embodied all in. He gave up a nine-year career making good money as a corporate lawyer. He was starting a tech business and didn't even code. He even moved in with his parents. They thought he would stay a year. He was still there at 35 years old. It was a proverbial write-it-on-a-napkin business plan, but he did take three to four months to build a team. Eight of his eleven original people are still working with him now, nearly two decades later.
One trillion U.S. dollars will be spent on events in 2019 across the globe. That's bigger than the GDP of all the countries in the world except 17 of them. Cvent is automating the event industry from picking your hotel to registering to your onsite experience like mobile apps. AWS is one of their big customers, and they now do around a million events a year.
Cvent ended up raising over $136 million in venture capital in 2012 - the largest raise following the recession at the time and subsequently went public via an IPO on the New York Stock Exchange in 2013. The dark days of the dot com bust were just an early chapter in the company’s history, where they laid off 80% of their staff, and Aggarwal had to personally take over a $5 million office lease. Still, with grit and perseverance, Cvent’s early investors ended up getting a 45x multiple.
To Sell or Not to Sell: It’s Not About You
After going public, Cvent began getting hit with unsolicited acquisition offers. The prices were 40% or 50% over stock prices, and they ended up getting a 70% premium. You don't want to be that guy or that gal that doesn't sell their company at such a high premium and misses the boat. You could get sued if you turn it down because people are going to be like, "Are you crazy that you turned down the highest premium ever paid for a software company in the last 15 years?"
He didn’t really want to sell but says he realized “It was my fiduciary duty, it's not what I wanted. It's what's best for the shareholders.” That’s your real job as CEO. Vista Equity Partners took the company private again for $1.65 billion.
Reggie’s Two Top Tips for Startup Entrepreneurs
Cvent now has over 4,000 employees. However, out of the first 1,000 employees, he probably interviewed 800 of them. He was the chief. That's what he spent time on. He says “You could always get customers, but it's hard to get good people. If you get a good person, they'll get you, 100 customers.”
So, if you want to create really big success:
1. Have patience
2. Hire really good people
Listen in to the full podcast episode to find out how his family landed in the wrong Manhattan, the details of how he raised his first funding rounds, and what his mother told him to get him over his darkest days as an entrepreneur.
