None can dispute that some measure of good fortune was shining on Bill Tatham when he sold Janna Systems in November 2000. After posting 16 straight quarters of growth, his once fledgling startup had eclipsed Siebel Systems as Wall Street’s customer-relationship software provider of choice, and his rival made him an offer. Just past the height of the tech bubble, Siebel acquired Janna for $1.76 billion. Now, a decade later, he is angling for a repeat performance. NexJ, the software firm he quietly built with a tight-knit team of former Janna executives, has grown a whopping 36,000% in the past five years, with 2009 sales of more than $18 million.
The creation of NexJ (short for ‘Next Janna’) signalled a departure for Tatham, who told reporters that after selling Janna, he ‘never wanted to work again.’ He could have easily retired; at the time of the sale, his 3.1 million Janna shares were worth about $240 million. But once he’d diversified his holdings and rewarded himself with a Ferrari and a cottage on Muskoka’s prestigious Little Lake Joseph, Tatham itched to get back in the game.
Limited by a three-year non-compete clause, Tatham was forced to broaden his gaze. Initially, he turned his attention to venture capital, and founded a private investment firm with a handful of former Janna executives who were also anxious to sink their teeth into something new. Aptly named XJ Partners, the company focused on tech firms in the health sector, where the software ‘lagged what we were doing on Wall Street by at least 10 years,’ he says. But the firms they backed weren’t able to meet XJ’s expectations. ‘Time and time again, the opportunities for value creation were never fully realized,’ says Tatham.
Believing that they’d be more successful if they poured their energy into one company that they could control, the partners went back to basics. NexJ was born in late 2003, after what Tatham describes as ‘an interesting confluence of events.’ In the same week as the non-compete expired, a health-care software project XJ had been working on for another company was cancelled, freeing up its architects — and their idea. Within days, a team of designers was in the XJ offices, mapping out the next generation in customer-relationship management software with a clear mandate: ‘Take the best of what we’ve done in this space over the past 20 years,’ says Tatham, ‘and starting from scratch, build better than ever before.’
As Tatham and the others began assessing the industry (their clients span the health-care, insurance and financial sectors), they found that the timing was right to launch anew. Following the tech bust, many of the companies Janna used to compete against were rolled up into bigger firms, leaving an opening for what Tatham perceived as his group’s specific area of expertise. ‘We focus on large-scale systems with customization and integration [where] there’s quite a gap in the market,’ he says. (Though he says Siebel, which was acquired by Oracle in 2005, is no longer his main competitor, it is in the same realm.)
Though the specifics of the technology it’s peddling may have changed since Janna, NexJ’s strategy is much the same. ‘We plan on 100% growth and try to sustain it,’ says Tatham, ‘because people who don’t plan for that amount of growth rarely achieve it.’ Though NexJ fell short of that goal in its first few years, it has more than made up for it since. After outpacing last year’s target by $6 million, Tatham says the firm is on track to double revenues again this year, with an eye toward hitting $48 million in sales by 2011.
To be sure, experience has made a difference. Whereas Janna often struggled to access capital, NexJ was able to tap into ‘a good circle of previous investors that were predisposed to work with us again,’ he says. After raising $22.5 million in 2009, Tatham says he’s planning to take the company public within the year. But perhaps his most significant advantage this time around is personal wealth. Once Janna began to flourish, having his net worth tied up in one stock made him more anxious for an exit strategy than he might otherwise have been. This time, he has the luxury of hanging on until the time is right for the company — either to sell, or to take it to the next level.
That said, if success comes, it will likely be without the tech bubble he rode to riches. ‘We don’t expect those market conditions will be recreated in our lifetimes,’ he concedes. But not having an easy go of it seems to have been part of the impetus for founding NexJ in the first place. More than the money, Tatham says he’s motivated by the desire to ‘create a working ecosystem that thrives’ — and, perhaps more important, ‘to prove it wasn’t about luck the first time.