The public aspects of a start-up's path to IPO are often well documented. But what about the mental journey the company's founders take? 


This time I talked to Scott Dorsey, the co-founder and CEO of ExactTarget, an interactive marketing software company that went public earlier this year and has a market cap of over $1.3 billion.

You went from starting a business with three people to ringing the bell at the NYSE. Was that the master plan?
Twelve years ago we sketched this thing out on a napkin. What it has become is unbelievable. It's been very rewarding. Seeing it all come together has been really special.

But no, I don't think any of us dreamed this. It's funny: At our recent Connections conference they ushered me into makeup... as I sat there I had thought about how I never would have dreamed I would someday be sitting on a stage, with Michael J. Fox, talking to over 4,000 of our clients and partners.

So what was your plan?
When we started the company we hoped to build a software product that added enough real value that customers would want to use it, and in the process to try to build a business. That's the extent of our original plan.

Yet you made smart financing choices along the way that impacted the future of your company. Clearly you had some kind of long-term vision.
We knew if things went well we would need outside capital at some point. So our funding evolution was definitely guided by our strategy.

But early on our funding options were extremely limited. We started the company in late 2000. The Internet bubble had burst. We were three first-time software guys starting a software company in Indianapolis, so our friends and family were the only people interested in backing us.

A year in we saw our product was gaining real traction and we wanted to scale it, and that's when we brought in angel funding. We found individual investors with experience in software who could help us grow. One of them, Bob Compton, became our lead investor and, just as importantly, our mentor.

The success of our business and the backing of our investors helped us decide we should grow the company.

Most entrepreneurs just want to grow. You say "decide" to grow. What made you decide you should really try to scale ExactTarget?
We feel we're a part of the democratization of software: building software for the biggest, most sophisticated brands in the world that is at the same time also useful for some of the smallest businesses. We really knew we were onto something when our platform became truly extensible.

When Microsoft, the world's largest software company, decides to standardize its email, digital communications, etc. on your platform, and a small local restaurant decides to use a sub-set of the same platform, you know you've created something of real value.

When you can serve anyone, vertically and laterally, you've built a great product and a great business model.

So when did you start thinking about an IPO as a realistic goal?
I never thought of going public as a main goal. I wanted to build a great business, to build a great environment that terrific people want to be a part of, to serve our clients in a remarkable fashion, and to see what happened along the way.

So I was always hesitant to make an IPO a goal. If at some point going public was the best way to set the stage for our next phase of our growth then by all means--but it was never a stand-alone objective.

Plus I'm a very private person, so while there certainly are upsides, going public does require certain changes to how you operate, both as a company and as an individual.

Eventually we decided it was time to grow the company to a different level and becoming a public company was the best way to accomplish those goals.

Bringing in investors often changes a company. How did you hang on to the "soul" of ExactTarget along the way?
A major factor was how we raised capital. When we raised venture capital we brought in primary capital to grow the business but we also brought in secondary capital so our early investors had the opportunity to take some money off the table. That kind of quenched their thirst, so to speak.

As a result we never felt pressure to sell prematurely or go public prematurely because every step along the way we provided a strong return to our early investors.

I know a number of entrepreneurs who look back and feel they sold prematurely.
For a lot of entrepreneurs selling the business is all or nothing: You've maxed out your debt, you're not paying yourself anything, and the only way to really change your life is to sell the business.

That's why many entrepreneurs end up selling too soon. Their companies don't reach their full potential because that life-changing monetization opportunity was available and they felt they had to take advantage of it or their investors made them feel they have to take advantage of it.

We were fortunate to have outside investors who were willing to do a split of primary and secondary; that allowed us to retain our individual identity while continuing to grow the business.

In part two of my conversation with Scott we will discuss how to make sure expansions and acquisitions can not only help your business but also reinforce and extend your company's culture.

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