Startup turnaround specialist Matt Hulett on unlocking growth, and surviving turbulent times

Our guest on the GeekWire Podcast this week is Matt Hulett, a veteran of the Seattle tech community and the author of the new book, Unlock: 5 Questions to Unleash Your Company’s Hidden Power, published by Page Two Books.

A former executive with companies including Expedia, Mpire, Rosetta Stone and RealNetworks, Hulett is now the CEO and president of PetMed Express, a publicly traded, Florida-based online pet pharmacy. 

We talk about finding the right market segment to pursue, how startups and investors should approach the potential of an economic downturn, tips for competing with tech giants, the role that private capital can play in turning around struggling businesses, and how to think about competition, among other topics.

Read an excerpt, listen below, and continue reading for our notes on the discussion.

Listen above, or subscribe to GeekWire in Apple Podcasts, Google Podcasts, Spotify or wherever you listen.

This book goes behind-the-scenes of your jobs at various companies. Was there one story that you just couldn’t wait to tell in this book?

• The Expedia experience for me was my MBA. I was impressed with how the company attacked the online travel space very early in the days, when Travelocity was number one.
• There was this brilliant move they made, from agency hotels into merchant hotels, which in essence created a multi-year advantage for the business.
• I had nothing to do with that pivot. It was Rich Barton, Lloyd Frink, Erik Blachford, a bunch of other folks. But I don’t think that story has been told. So I had a great time telling that story.

Your first role at Expedia was creating their B2B business. We just had some interesting news about Expedia creating a technology platform. What do you think of how they’ve evolved?

• The business started out being very entrepreneurial, spun out of Microsoft by Barton and others.
• Then it became very corporate under Barry Diller’s IAC, with a series of independently run businesses under the Expedia Group umbrella.
• Travel is a size and scale game. It’s important to be large to control how suppliers interact with you, and also to have scale to spread out the R&D spending over a larger swath of revenue.
• What you’re seeing now is a different kind of Expedia that really focuses on integration, and leveraging size and scale together.

This gets to one of the first questions in your book: “Is the market big and growing?”

• Market size and timing are key. Many companies don’t focus on these questions enough.
• It’s important to think about not just the total addressable market, which is often crowded with competition, but also the service addressable market, the specific slice that is small and often growing faster.
• Stripe is a on example in the book. Rather than trying to compete in the broad fintech space against PayPal and others, they started with mobile technology focused on startups, and grew from there.
• Lack of focus is usually where I see the biggest problems with businesses. They try to be all things to all people.

Regarding timing: we’re at an interesting time for startups and all companies with what’s going on in the markets. What is your advice to startups trying to navigate a volatile situation, or maybe even a recession?

• Warren Buffett’s quote applies: “Only when the tide goes out do you discover who’s been swimming naked.”
• For private companies, preserve your cash and make sure you have the right unit economics.
• Many businesses that have been benefiting from growth multiples in their valuations are going to get hammered. And the next round of financing is going to really depend on on whether they’re really growing their business.
• Private markets are going to start closing up, valuations are going to start going down, and some really great companies will emerge.
• But the companies that are run in real sloppy way, of which there’s many, are are going to suffer, and we’re starting to see some layoffs already.

Could it be a good time to start a company? The old adage is that a recession is often a good time for that.

• Absolutely. There’s tons of examples of great companies that were started in a recession.
• Also. from an asset class perspective, this is probably a good time to invest in startups, if you’re an investor, since there’s a long hold time on those investments, seven to 10 years.
• Now you’ll have the pick of the litter, you’ll have valuations going down, you’ll have more professional assessments of those businesses, and there’s going to be better businesses overall to invest in.

Advice for companies looking at the markets and thinking about pivoting or expanding into adjacent markets?

• Do it once, do it thoughtfully, be decisive. (Learning lessons from Hulett’s own experience pivoting a startup three times, from WidgetBucks to Mpire to AdXpose.)
• Be quantitative and logical, and your investors will be more likely to stick with you.
• Too many companies keep trying new ideas, and think they can keep going and going and going. They don’t step back and think thoughtfully about capital needs, where they’re going, and how fast they can grow.

One thing that stood out in the book was the difficult dance startups sometimes do with industry giants. Lessons from RealNetworks “poking the bear” in the streaming media competition with Microsoft?

• There was no malfeasance or legal issues, there was nothing in fundamentally illegal about what RealNetworks did in in its licensing deal with Microsoft, as detailed in the book.
• But there were definitely components to the agreement that upset Microsoft, and this constituted a full-on war.
• A key question is, to what extent did that war distract RealNetworks from executing on its vision?

Thoughts on the possibility of RealNetworks founder Rob Glaser taking the company private?

• I don’t think there’s anyone as smart as Rob, both technically and in terms of marketing. Rob’s ability to find talent is unmatched. I don’t think he gets the credit that he deserves for putting that company on the map.
• If you’re not growing anywhere, and you’re struggling in lots of different verticals, those are big warning signs.
• Focus is key. If you’re not growing in one core market that you really want to grow in, you either have to decide to double down and invest in that, or you divest, but you can’t do multiple versions of that.
• A lot of times, it’s difficult to fight those battles as a public company. You can do a lot of things in the private markets that you can’t do as a public company.
• Back to the earlier question about the downturn, we’re going to see private equity come back and start repairing some of these businesses that are hammered on the growth side.

One surprise in the book was how much you think about competition. How should a young entrepreneur or startup think about competition?

• I hate it when people say, I don’t focus on the competition. Everyone is lying. I think it’s fun to have competition. You’re better when you have competition.
• I always start with, who’s the customer? And what’s their pain? Pick your bowling pin. When you go into a market, you knock the first bowling pin down, and then the rest.
• You only start to understand these things when you understand the moves of your competitors. Understand their business model, understand how much capital they have to deploy.
• You can find spots around that, especially when you feel like you’re being outgunned. Sometimes the person with 10,000 features can be defeated with one feature.
• Spend as much time understanding your competition as you do working on your strategic plan.

You love graphic novels and superheroes. Revisiting one of our questions for the GeekWire Awards finalists on last week’s show: Which superhero best describes your ethos as an entrepreneur?

• It’s definitely Batman. for a variety of different reasons. I find him to be a very fascinating character. I have a full Batman outfit uniform to the right of my screen, so no one can see it. I look at it all the time for inspiration.
• One reason is his dark side, because I feel like there’s a tragic piece that for some reason I associate myself with, but it’s also that he’s super scrappy, and super entrepreneurial. He always has something in his utility belt.
• He uses his mind to fight crime, prevailing in situations in which he’s otherwise overpowered.

Unlock: 5 Questions to Unleash Your Company’s Hidden Power, published by Page Two Books, is available on Amazon or wherever books are sold.

Podcast hosted by Todd Bishop and John Cook. Edited by Curt Milton. Theme music by Daniel L.K. Caldwell.

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