Zonehaven is in the life-saving business.
Software that assists authorities in planning and executing evacuations was developed by the San Francisco-based software company. It has partnerships in place with more than 12 California counties, which includes most of the Bay Area. According to SEC filings, Genasys, a publicly traded company, sold the company of 25 employees for $24.2million in June. Charlie Crocker, Zonehaven’s co-founder and chief executive officer discusses the sale.
What was your method of finding your buyer?
Alameda County fire chiefs were considering outdoor warning speakers to help with evacuations last fall. Genasys was the company they were speaking to and advised them to work with us. Genasys then called us and told us, “We were supposed to integrate. How does this look? This sparked a number of conversations.
At some point, we knew that scaling was necessary. To take it to the next stage, I had been trying to get VC financing. It wasn’t my intention to acquire. The next six months were spent getting to know Genasys not only from a financial perspective, but also from a personal standpoint. A lot of people invited me to San Diego and I would be working from their office. I was interested in getting a sense of the office. It was important to get to know the people. Their culture was important to me. It was at this point that I trusted their leadership and direction and the decision made sense.
How were negotiations?
It was important that there was trust among the parties. Counsel was trying to push us both harder. During negotiations, there were points when I and Richard Danforth, Genasys’s CEO, said to each other “Please leave the area.” After the negotiation ended, Richard Danforth (Genasys CEO) and I had a discussion. Everyone would return and tell the counsel our decision. We thought that if we couldn’t resolve this problem, we shouldn’t be able to come together as businesses. We knew from the start that it had to be win-win and that we needed to find a solution that was mutually beneficial for us both. We didn’t want to squeeze for a small sum of money. Although you can get $50,000 more from someone else, it won’t make you a successful team. These last cuts are the most important.
Was there anything that happened once you had reached an agreement with your counterparts?
The end of June was right as fire season approached, so we closed. We assured them that we wouldn’t be able to stop our customers from being supported during this time. No rash pricing decisions, personnel changes or other issues. They understood it. They agreed to let us add more staff members, which has allowed us to bring in a couple of new people. The team is now scaling in the same way as we would if we had received VC funding. That’s because that was what we really needed. Now that we had proved the model, it was time to scale.
Do you have any thoughts on the choice to take VC money and sell?
Calculus was involved in all of that. Genasys, which is listed on the stock exchange, has a higher liquidity than any VC company. You still don’t have liquidity if we were bought by another startup, a Series B company or Series C firm. Our employees were able to be paid and receive stock that could eventually trade. We will also add value over the long-term by joining this company.
Taking VC loans comes with additional oversight costs and more people steering your company. It also brings in more people to the board. You may also have to wait longer before you can actually exit the company.
Genasys has staff in these regions, which allowed us to increase our ability to scale nationally and internationally. Although we had started to develop alerting software, Genasys already has all of that in their platform. We would have needed to wait two years for it to be available. We are now able to bring it on the market faster than if we received VC funding.
Genasys hired your staff and retained you as the CEO. How has the daily grind changed?
Except for expense reports and bureaucracy, I do not think that much has changed in the workplace for other employees. Although I am still Zonehaven’s chief evangelist at some levels, it is not always me that has those discussions with potential customers. That makes me anxious. It can’t happen to me. It’s impossible to be present on all sales calls. “I can’t control all the messages.” It’s difficult. For me, it’s possible to let go of some control.
This company, in a way, is my baby. It wasn’t an easy job. They’ll keep me there for as long as I want.
Do you remember a time when the plan was to sell your company?
I didn’t intend to make an exit like this. I wanted to expand this company and provide public safety to an ever-larger audience.
Others will argue that we sold too soon. You might be asked if you don’t want to take VC money or scale. Imagine where you will be in the next two years if you get this far in just two years. There are people who believe Genasys was too expensive. Time will reveal. However, there is always risk on the market.
How would you advise founders to think about selling?
You can make it if your sole goal is making money. You have to accept that it will cost you a lot. A little “What’s enough?” type of person. I’m a “What’s enough?” type of person. We could have sold them to entities who would have been able to pay a bit more but that might have caused us to lose our culture and torn apart. There have been many founders that maximized profits but did a lot more damage to their creations and the people who helped them. Think about the true priority. It’s important to me that you are in this because you do good work, create jobs and help the environment. It’s more than just about money.
Publiated at Mon, 23 August 2021 09:58.55 +0000