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Graham Griffin
Graham Griffin
Articles (8) 

1,000 Entrepreneurs: Jie Song on Selling Prototype Software and Becoming the Premiere Data Center Monitoring Service

Our seventh profile covers the co-founder and chief technology officer of LogicMonitor

January 13, 2020 | About:

Jie Song, co-founder and chief technology officer of LogicMonitor, grew his business from a two-man operation that coded in his apartment to the premiere SaaS-based data center monitoring software service. The company grew to employ over 200 employees in the U.S. and overseas in China. It acquired over $140 million in funding and had over 1,500 enterprise customers as clients, including the likes of Adidas (XTER:ADS), Netflix (NASDAQ:NFLX), PayPal (NASDAQ:PYPL) and Blackstone (NYSE:BX).

After being acquired by Vista Equity for an undisclosed amount, Song has found himself venturing into the investment realm, though he still finds himself coding every day.

Background

Prior to creating his business, Song was invited to the U.S. by one of his friends. “In 2000 it was the internet bubble, so a lot of crazy money. My friend graduated from Stanford. Then he got eight million in funding to build a software company to develop an email server for China. Then he just called me and said ‘Hey Jie! Come to the U.S. There is a lot of opportunity,’” Song said.

Unfortunately for Song, shortly after coming stateside, the tech bubble burst and he found himself in a difficult situation. After working for companies to deliver billions of ads a day and develop platforms like GoToMeeting, the immense funding for these companies quickly dried up. At the time, the company he was working for went bankrupt and he found himself jobless.

Fortunately, he was accepted into UC Santa Barbara and began his path toward a graduate degree. Here he would forge a relationship with a professor that was an entrepreneur himself. This professor would go on to secure his own venture capital funding to start a company called Expertcity.

As the IT industry was in a disheveled state in the early 2000s, Song asked his professor if he could work alongside him at this new company. Within the first two years there, Expertcity was acquired by Citrix Systems (NASDAQ:CTXS). Song would find himself working for Citrix Systems along with a few other companies over the next several years, gaining experience that would draw out the idea for his own company.

The issue to be resolved

Over the course of his career, Song found himself working to deliver thousands of ads per second across the internet. If there was any slowdown in the systems, that would be a loss of money for the company. Clearly monitoring data performance at this level is a massive task, and they tried every solution to be able to accurately monitor what was going on.

Alongside his friend, and in agreement with other professionals in the industry of a missing product, Song set out to create what would become a necessity in the industry. Together, they would work to build the software that could monitor everything going on within the IT infrastructure of a company.

However, Song and his friend would continue to maintain their daytime jobs. After work, Song would go to his apartment and continue to code on this new project. Together, he and his fried would work tirelessly over the next six months to design the framework for their monitoring system. Luckily, costs were negligible at this time, with only a single server totalling a few thousand dollars a year.

From prototype to profit

With the prototype in hand, Song approached friends in the industry as potential business partners. Their first customer would be a company founded by the same professor that Song had previously worked for. Another customer would be the business located across the street from Value Click, the company Song was working for at the time. Utilizing the network of peers he had built over the years, he would develop a core customer base with only a prototype.

“After we got the first batch of customers, what we called pilot customers or lighthouse customers, we think we may succeed,” Song said with a laugh. “Then we quit our jobs, and worked full time for the company.”

Alongside initial funding from a friend, totalling around $500,000, Song would begin the process of hiring on a team. They first brought on a customer support engineer who would help answer technical questions alongside running sales for the company. Shortly after, they would have the retired director of sales from Citrix Online join their team, as he was a friend.

At this time, the company was still short on cash and Song required help writing the code for the software. “I started to exploit the talent pool in China. We hired two part-time engineers from China,” Song said. These two engineers would help him write the entirety of the code for the first two years. These two engineers would remain with the company for the long haul, becoming the vice president of engineering and the general manager of LogicMonitor’s China department.

Prior to 2014, the company was seeing its customer base expand by around one contract per month and then things would increase in pace. However, 2016 was the year that the business took off, signing its first million-dollar deal. It was at this time that LogicMonitor transitioned away from middle-market businesses and began to solely take on enterprise customers. While the smaller businesses were large in number, they simply did not bring in enough revenue to support the company long term.

Taking hurdles in stride

Taking on bigger names as customers required the staff to continue to grow. The two engineers in China would become 60 by 2018. For Song, the success of the company came largely due to these engineers overseas. “I think if you are going to have a remote office, you should treat the employees in the remote office just like you treat the employees in the USA,” Song said.

To combat issues of trust, each month Song would bring employees from China stateside to work. At the same time, he would send stateside employees to China. Each week the company would alternate between working during China business hours and U.S. business hours. For Song, success was about keeping things “fair” and avoiding the ideals of outsourcing.

Communication, Song said, was the second hurdle to overcome:

“Some Chinese engineers are really good developers, but their english is poor. How do we handle this issue? Our solution was to add a new role in the company called TPM, technical product manager. They belong to their team, not the product team. We hired three of them, all from Microsoft, Oracle and Google. They can speak English really well and understand the product. They understand the technology. They became the coordinators between the product in the U.S. and the development team in China.” 

For Song, the business was less about his personal aspirations and more about creating something successful. “I am a good developer, but I am not a businessman. My friend, he is the expert of networks. He is the expert of data centers, but he is not a businessman either. I think we made the right decision after two years to hire a CEO to manage the company,” he said. For some, letting go of control of what they have created would be impossible. Song simply refers to it as a good business decision. Having a hands-off approach further allowed him to develop the best possible product without any distractions.

Reflections on the past

In the end, Song found a happy payout from the business he created. LogicMonitor took a focused approach to its product and brought the best platform to the market possible. However, Song believes it could have done even better.

He recalled back in 2015 when a new system was coming to the market called Kubernetes. In short, Kubernetes allows for automation in deploying and managing applications. At the time, Song felt that it was not worth investing time in because they were not going to see profit from it. This is where he would have changed their strategy.

As a revenue-focused company, they sought out ways to make money and avoided things that would not bring direct profits. If he were to have a chance to do it again, Song said that he would invest around 30% of their efforts toward emerging technologies like Kubernetes. He firmly believes the company could have found great success if they had ventured outside of their single product.

Overall, Song feels happy with the outcome of his business. Money is no longer an issue, so he takes pride in investing in companies and passing on the knowledge that he has gained through his business. He said that he has no regrets about how things turned out and that he will continue to program every day and help other entrepreneurs build their own successful businesses.

Question and answer

GuruFocus: When you started the company did you plan on selling it in the end?

Song: We do not know. We just followed the flow. I think I am very lucky that we worked with our friends to build such a successful company.

GuruFocus: Were you happy to sell when the time came?

Song: I think I am pretty happy to do it because first you get some return from your hard work. Second, you get opportunities to explore new ideas. Just like the current one that I am working on. It is a static code analysis tool that is pretty cool.

GuruFocus: What are you most grateful for at this point in your life?

Song: First is family. My two kids. I am not like Charlie, not almost done. My son is nine. My daughter is six, so there is a long way to go to grow with them. Also, I still like new technology. I am still reading a book about the AOP knowledge graph.

Song’s advice for entrepreneurs

There is no silver bullet so utilize your experience:

When Song built his company, he was looking to solve an issue that he was facing alongside the IT industry as a whole. He saw a problem that many people were facing and created a solution that he knew he could profit off of. If you are facing a problem, use the skills that you have to solve it and you may just find a business idea. At the same time, do not try to sell something that people do not need. If you would not use the product or service, than chances are other people will not either.

Find a partner you can trust and build a team:

Song said that the average exit period for an enterprise SaaS company pushes toward seven years in total. That is a long road to walk alone. Find a partner that you can rely on to keep yourself pushing forward and innovating. Once you get things off the ground, try to get the best possible people for the job. Song’s engineers did the work of companies that have three times their numbers. This was possible because he hired the best and brightest to work for him and kept them happy.

Tailor your media and sales towards your audience:

Know exactly who you are approaching with your product and adapt how you sell it to meet their expectations. Song would not sell his software to a CEO the same way he would sell it to the CTO. Know what your audience wants and show them that your product can benefit them. A CTO wants software that works well in their existing systems and CEO wants to save money and resources in the workplace. Tailor your sales pitch to give your audience what they want, and you will find much greater success.

If you are an entrepreneur or know one that would be a good fit for our series, please fill out the questionnaire and our editorial team will reach out as soon as possible.

Make sure to check out the podcast.

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