Trevor Schmidt: Hello, and welcome back to the Founder Shares Podcast! We’re so happy that you’ve chosen to spend some time with us. I’m your host, Trevor Schmidt. I’m an attorney at Hutchison, a law firm in Raleigh, North Carolina. Every day, we work with founders and entrepreneurs as they fight, grind, stress and push to bring their visions to life. We are inspired by their incredible stories of success, failure, reworking and trying again.

At Hutchison, we help technology and life science companies start up, operate, get funded, and exit, but we’re excited for the chance to share some of these stories with you. So whether you’re already an entrepreneur, have a business idea or are just fascinated by the stories of how a venture goes from an idea to a success — or sometimes a failure — this podcast is for you.

On the Founder Shares Podcast, we hear about these journeys straight from the founders and learn the keys to their success, lessons they learned and advice to others.

Today’s guest Bob Freedman, co-founder and CEO of Blue Dog Software. Blue Dog is an auction software platform, which means they provide the software so auction sites can sell their sports and political memorabilia, fine wine, artwork, and so much more. We’re talking about the early struggles of running a company — including not getting paid for months at a time — and what so many founders listening to this are hoping for one day: the successful exit.

For Bob, being in the auction industry didn’t happen by accident.

Bob Freedman: Yeah, along with being an IT for many, many years, 20 or 30 years, I collected baseball cards and baseball memorabilia and I got to be friends with them, some of the dealers. And so as I learned what they were doing and how they were doing it, by post it notes and pen and paper, I decided to give them 2 cents and say, you should be doing it better.

And they asked me to do it for them. So one thing led to another and we got one customer and then two and three just by listening to them and talking to them and what they needed and what they wanted.

Trevor Schmidt: That was back in 2007, and Bob decided to start this new venture with his brother Steve, who’s still the CTO.

Bob Freedman: The good points outweigh the bad, but with your brother, you can be brutally honest. You can say things that you can never take back, but, but that’s good. Sometimes you need to hear the truth or say the truth.

Trevor Schmidt: Well, and you’ve obviously been very successful with it, so you guys must’ve made it work.

Bob Freedman: We did. Fortunately for us, for me, my brother is very patient and forgiving. Otherwise, any other person may have just told me that he quits. With any company, there’s a lot of friction and learning how to grow. But we worked through it, obviously, and we’re the better for it I think.

Trevor Schmidt: That’s fantastic. Now, you mentioned that when you first started the company, you were working somewhere else at the time, right? So you’re doing this on the side?

Bob Freedman: We did it for about three years where we basically worked two jobs – our day jobs, and then this.

Trevor Schmidt: And what was the tipping point that made you decide, now this is really, this is what I’m going to do and I’m going to jump off?

Bob Freedman: Well, it was a, it was a couple of things. One, it was really beginning to interfere with my day job and I couldn’t really do my day job without this spilling in.

And one of the things that kind of convinced us is that. We knew that with anything practical, things were needed and one was health insurance and my wife has health insurance so I could quit this and still get health insurance. I mean, I know it sounds kind of a trivial thing too, but obviously important.

Trevor Schmidt: Yeah. These are the realities that some people don’t think about when they think about starting a company. Okay. All of a sudden, not only do I have to pay myself, but I get these benefits I have to all these other things that you might not think of.

Bob Freedman: These practical points came to a point where we thought we could do it and thought we could give it a go for six months to a year, and if it worked, we were great, and if not, we’d just go back and do what I did.

Trevor Schmidt: So was that the mindset, we’ll do this for six months and see where we’re at? We’ll do this for another six months and see where we’re at?

Bob Freedman: Not at first for Steve, it was, I mean, he was given by his wife a timeline and said, if you’re not making money in six months, then you’re done. With me, it was more all in or nothing.

You know, my skills were that I could find a job anywhere as an IT manager or as a, you know, developer, whatever I wanted to do, I could always find a job around here doing that. So I never really looked at it as an end point.

Trevor Schmidt: Yeah. So what, what is it about some of the skills that you had from prior experiences that that helped you with the company?

Bob Freedman: Yeah, so one of the past jobs that I’ve had, one was a consultant. And so we would just go into different companies such as an insurance company or a publishing company. And try to get an understanding of what they were doing and how they want to differentiate themselves in the marketplace with their others.

So we would do an analysis, we’d have a business team go in there and do an analysis and try to find out what they were doing and what their competitors were doing, and then give them an it edge. Above those, and I worked on the IT department. So understanding what the business goals are, understanding what the business processes are, those are all really, really important and key to understanding how  you build a platform for that industry.

Trevor Schmidt: So you were essentially then taking the same idea and then applying it to auction company  in figuring out what their problems and their pain points were.

Bob Freedman: It’s a repeatable process that we used on many different companies. You asked a series of questions, you look for the reasons and the why’s, and then you kind of implement something after that.

Trevor Schmidt: Interesting. So what were some of the initial challenges as you were you either when you’re still doing it as a side gig or once you kind of jumped off and were doing that full time.

Bob Freedman: Well, obviously the biggest roadblock for any startups is cash and trying to be able to bootstrap what you’re doing. And fortunately for us, we never had to borrow money.

We never went into the red for anything that we did. And the biggest reason I guess for that is that our very first customer was as patient as you could possibly imagine. We made mistakes. We made just some dumb mistakes along the way, but he was very patient and he paid us along the way. So we found somebody that was a very good benefactor, was easy to work with and would grow with us.

Trevor Schmidt: And how’d you come up with that? How’d you find that first client?

Bob Freedman: Just dumb luck. It was just a friendship. And one of the things that I kind of tried to do along the way each new customer, I tried to become friends with. It makes life a lot easier, although when they owe you money, that friendship starts to break down at that point.

But it’s really just a relationship business that I do. And creating a relationship between me and my customer base is extremely important now.

Trevor Schmidt: And that’s interesting. And do you think it helps that you have this kind of passion in this background for collectibles and you kind of share that same

Bob Freedman: Oh, absolutely.

Because the, the owners of the auction companies, they are basically. Providing people, the collectors this thing that they have to have. And as, as collectors, you know, when you see something, you, you know, you have a passion for it. And so not only did I have a passion for collecting, but I had a passion for this business.

And that’s one of the hardest things ever to give up is that passion. So once you have it, you never let it go.

Trevor Schmidt: I think it’s an amazing gift. I think for you that you found a way to tie your passion and with the business that you’re doing. Bu I think that’s great. So what’s the coolest thing that you’ve seen listed with your software?

Bob Freedman: Well the most expensive thing, and I was able to, like World Series rings, like Bob Gibson’s World Series ring, I got to put on Kirk Gibson’s jersey. He hit the home run that won the world series for the Dodgers against the A’s back in 1980. I got to put on. Uh, Babe Ruth

Trevor Schmidt: You wore it?

Bob Freedman: So a lot of, part of my job is going to the client’s site and get to see what they have and what they do, you know, and understand their processes. So a lot of the material that they have is sitting right there in the open. So they would let me try it on the the World Series rings and the bats that Ty Cobb held and Honus Wagner held.

It was just, it’s a thrill to, to, to actually be a part of the historical memorabilia.

Trevor Schmidt: That’s incredible. I, you know, I pictured you as, you know, a software as a service business. You’re sitting back in the office, you typing out code and selling the code to people, but it sounds like you’ve got to be a lot more hands on.

Bob Freedman: I did. And don’t tell my brother because he’s really jealous. He’s as big as a collector as I am, although we collect different things. It’s just that one of  our favorite parts is just being part of history and getting to see these really cool items.

Trevor Schmidt: That’s fantastic. So as you’re building this company, what were some of the big challenges that you face?

Where  were your roadblocks?

Bob Freedman: In the beginning, we tried to chase too many things in the beginning. One of the things that we always tried to keep in mind is, you know what’s paying the bills. And so when somebody would come to us with an idea about something and that they wanted to implement it and their software or a different software platform, we would tend to go do that because that would pay the bills.

And that’s low hanging fruit that we would go after. So unfortunately, three or four times we did this and it got in the way of us doing what we do best. And so we learned pretty quickly stick with what we know and, and just do that the best.

Trevor Schmidt: Interesting. And so you mentioned earlier that you never had to take outside investment. You were kind of able to, to grow this organically. If you had to do it again, do you think you’d take that same approach or was there a point in time where you felt like outside investment would’ve been really helpful but you just didn’t have the time to go seek it out?

Bob Freedman: I would do the same thing. I would not take outside investment. Just for the mere fact that I control what I do and what we do. It’s not a $10 million dollar industry where you know, I’m going to bring on 20 developers all at once. So there’s a bit of difference between the size of my company, what it’s going to be, and you know what could be. So I would probably do the same thing.

It’s keep the, keep the same path that I went on. Go after you know the money and make sure that what we do best is stick with what we do best. I don’t think I would go without I outside investors because we have the technology to do what we did. We just, we could have used more money with more developers to build it faster and quicker and better and, and more, gee whiz, bells on it. But I think the path we took was probably the best one for us.

Trevor Schmidt: That’s great. And so was it immediately apparent that this was going to work out or was there a point in time you’re like, Hmm, maybe I’m going to have to go back to consulting?

Bob Freedman: There’s a couple of times I think that I thought, well, this is just not gonna work out. I know in the first six to eight months, there was times when I didn’t get paid and you know, we’d have to wait two months to get paid. So there was times when I was really concerned about it, but with everything, you know, you keep persevering, you keep selling, and you keep doing what you do and believe in a product and you just push through it.

You know, you can’t let doubt creep in or, or you’re just gonna give up.

Trevor Schmidt: Yeah, that’s very true. And then I think that’s separates the personality of the successful entrepreneurs from those who are working in law firms. I guess I was just joking. Aside from that first client who you said was very patient with you and it was really kind of key that you get in getting that initial traction?

Was there one client that really kind of pushed you over the edge where you’re like, all right, we are, we’re comfortable now we can continue to to roll? Or is it just been a steady growth of clients coming in and clients going out and you just continue to be. Build the company?

Bob Freedman: Yeah, that’s a great question. I think it’s a combination of both.  There were several customers that were very key along the way for us making it bigger, whether it be our third customer or our 50th customer or the size of the customer. I know when we did our very first big, large scale customer who does $80 or $90 million a year in sales, that was a very key customer to us and everybody in the world knows them.

So we could always use them as a reference. Along the way, the $300,000 and $400,000 auctions, those are extremely important to us because they are very steady income. And when investors take a look at you or a company that’s going to look at you, it’s the whole picture. And they certainly don’t want to see that 50% of your revenue comes from one client.

So having as many different clients on a different levels is extremely important.

Trevor Schmidt: And has it been a lot of word of mouth as far as how you kind of gain those additional clients? Or are you just out there hitting conferences and kind of drumming up new business?

Bob Freedman: It’s about as cliche as you can be, is that your references are your lifeline.

I mean, without being able to use them as references or without them talking about you and recommending you, we’re nothing. I mean, it’s just unbelievable.

We put our logo on the bottom of all of our clients and we negotiate that in front, and that’s the single biggest thing that gets us heard and known about.

Trevor Schmidt: Okay. Interesting. Now, this may actually be an ignorant question, but why, why does  one of your customers come to you to do their own auction site rather than going through like an eBay or kind of an established kind of big auction company.

Bob Freedman: It’s not an obvious answer.  The collectors, they need to make sure that the, what they’re buying that $4.4 million Babe Ruth jersey or that $100,000 Ty Cobb bat is legitimate. That’s the auction companies job. On eBay, there is nobody authenticating what this material is. So the big difference is, is that the auction companies are making sure that what people are buying are legitimate and real.

Trevor Schmidt: Interesting. Okay. Yeah that makes a lot of sense that they provide kind of that verification service.

Bob Freedman:  Absolutely.

Trevor Schmidt: A level of trust that may not be

Bob Freedman: Right, and then that’s why the auction company charges 20% buyer’s premium or 10% consigner commission. Those are all part and parcel of what they do, and that’s what they get paid for.

Trevor Schmidt: Now, let me ask you, when did you start thinking about a potential exit? Was that something you had in mind from the beginning or were you just, did it come some time as you were growing?

Bob Freedman: Well, I’d like to say we didn’t start thinking about it until like year 10 but we thought about it from day one.

Everything we do, we try to make sure that we’re purchasable, that everything that we do is for reason and end goal. It’s important to do that from day one and try to get everything lined up. As you go, because doing 30 seconds worth of work once a day is easier than doing 20 hours worth of work in one day.

You know, it’s just an easier way to do things

Trevor Schmidt: So what were some of the things that you did from the beginning that in your mind where we’re positioning yourself well for an exit?

Bob Freedman: Well, we made sure we had a bookkeeper in place so that all our books were auditable and anything that we did, any money that we spent, it was completely transparent.

The paperwork, the contracts that you created for us along the way. We kept those and we made sure that those were always up to date and the, whether they were, the way you phrased them in there and how they renewed automatically. And that just made it easier when a company was looking at us to say that we’re not going to lose customers.

So there’s a lot of little things along the way that you gave me great advice along the way, as well as just looking ahead to the future.

Trevor Schmidt: I really appreciate that. And what is something that caught you by surprise, I guess as being a CEO of a company? That was a challenge that you didn’t necessarily anticipate when you got started.

Bob Freedman: Yeah. The hardest thing in the world is to get money from people when they owe you money. It’s just a terrible way to end friendships and relationships, but if they’re not paying me, then they’re stealing from me almost, you know? So it really is caught me by guard. How many people think that they didn’t have to pay us up, you know, in the beginning.

And how many people thought they could just pay a little bit now. And it really, I just didn’t think we’d have this much trouble. Not that it’s a huge issue, but you know, out of a hundred clients, I might have five or six delinquent at any one given point, which I never thought about when I started.

Trevor Schmidt: Well, and especially when you talk about how you try to establish friendships with your clients, you’ve built these relationships to then have to come down and knock on the door and say, Hey buddy, what are we doing?

Bob Freedman: We’d have to turn off their website, you know, restrict access to it. And it’s just a terrible thing you do. It’s their livelihood, you know? And I hope that along the way, I pay people on time and it’s made me more aware of making sure that I pay within the 30 days net or 45 days.

So whatever it may be, because now I see it, the repercussions it has down the hill too.

Trevor Schmidt: So going back to the topic of exits, so when did that start to become a real possibility for you?

Bob Freedman: Yeah. Around about year seven or eight, we had a company knock on our door and, you know, kick our tires and things didn’t work out there, and we gained some valuable insight to what worked then, and what was wrong with that type of the way to go at that time. So, you know, the next we knew, the next time somebody came along, we knew what to do right away and what not to do to get at it.

Trevor Schmidt: So even that, that, that offered, that didn’t come through, it sounds like you learned something from and were able to kind of strengthen the company going forward.

Bob Freedman: Absolutely. For example, you’re investing money into lawyers and to start doing the research and start putting the books together and all that stuff. So the second time we made sure that there was money in escrow or we were going to ask about having money in escrow in case it didn’t work out. Cause we didn’t want to spend tens of thousands of dollars on lawyers fees again.as good as they are.

Trevor Schmidt: No, I appreciate that. You want, you want to make sure that you’re getting your value for it.

Bob Freedman: Yeah, absolutely. So we did learn. Everything is tuition along the way. So it just depends on how you use it.

Trevor Schmidt: So what were you looking for in a partner or a future partner?

Bob Freedman: That’s a great question. And you don’t know it until you actually meet them, but it was somebody that we could work with, that understood what we did, we understood what they did, and that there was definitely synergies and both of what we did. So the company that we ended up merging with or being purchased by is a company that really does nothing in our area, except they provide advertising for auctions.

We provide software for auctions. But we don’t provide advertising. So it’s a really good fit. You know, we complement each other, and that is probably the single most important thing that we, you know, we found out is how do we complement each other along the way.

Trevor Schmidt: And how did you get in touch with this company? Did you meet them in the industry or did something else come about?

Bob Freedman: We got a phone call from Barnaby’s who, which was the name of the company that bought us, and they were trying to pitch us on some advertising. But again, we don’t do advertising. And you know, our clients are the auction companies themselves, but we start to talk right away and we recognize instantly that there’s something there.

So she passed me off to their CEO and we instantly talked and we got along well and we flew over to Sweden to do negotiations and things worked out.

Trevor Schmidt: That’s fantastic. So how was that process, once you kind of made that connection and he knew that this was a, a good fit culturally and that it seemed like a real possibility, how was the kind of the M&A process for you?

Bob Freedman: It was really good. It’s an emotional time because again, the passion that you have. So obviously you guys represented us and the lawyers that representatives were very articulate. They were reasonable, they understood what we were doing, and they understood our passion for it. So a lot of the times, if you negotiate directly with the company, emotions get in the way, and then heads start knocking.

So. Fortunately for us, we had some really good lawyers on both ends that were able to negotiate the way through the all the pitfalls.

Trevor Schmidt: Yeah. I think that’s a key that a lot of people may not realize sitting on the sidelines is how emotional it can be, how stressful it can be. Do you know at that point in time, how many years had you been working on it,  10? 12?

Bob Freedman: 12

Trevor Schmidt: 12 years of what, you know, this is your baby and you’ve been working on it and

Bob Freedman: Absolutely. And not only that, but you know, I’m running things every day. It’s my money. You know, every dollar I spend is dollar out of my pocket. So it’s hard to get that up, you know, and you have to be prepared to make sacrifices along the way.

Trevor Schmidt: I think you raise a good point though. It’s good to have counsel, or somebody who’s representing you, who understands your business, understands your passion, but at the same time can represent you in such a way that takes some of that emotion out of it so that they can advocate for you.

Bob Freedman:  Along the way, you and I, we’ve worked together on different problem customers and where I’m furious at them and everything, but you have a very calming sense about when you, in an email, it comes across very professional. Where if I wrote that same email, we would argue even further. So I think that’s a good point to have that calming influence next to you and telling you what’s right and what’s wrong and what’s good and what’s bad for you.

Trevor Schmidt: I think that’s important to be able to advocate and take your emotion and take your passion and convert it into something that we can work with.

Bob Freedman: Absolutely. Absolutely.

Trevor Schmidt: Now I want to go back to the one thing you mentioned as well cause I think sometimes it’s hard to realize how much of a distraction an M&A can be cause you’re still operating the business.

You still have a business that was taking up all of your time the day before and now you’re adding in 10-20 hours a week or more trying to get this deal done. So can you talk a little bit about that?

Bob Freedman: Well, yeah. You have to keep your eye on the business. You cannot let it off because it’s a property of six to eight to 10 week process.

It could be longer dependin the size of the acquisition. But like you said, every day you have to make sure the bills are be paying, that you’re picking up new customers, that you’re doing all the installs, that any problems that are along the way, or any outages that along the way that you’re responding to them.

And, and then you’re trying to talk to the lawyers and tell them where you stand on this version of today’s requests, or, you know, offers from the new company. And then there are obviously six hours ahead of us. So early in the morning you’re waking up the answering, those emails are late at night, they’re up late. So there’s a lot of

Trevor Schmidt: That’s right, cause, the company that was acquiring you was based out of Sweden.

Bob Freedman: That’s right. Right.

Trevor Schmidt: You get to throw a time change in there as well.

Bob Freedman: So there’s a lot of frazzled nerves and then you’re trying to talk to your customers and make sure that they don’t pick up on what’s going on because you don’t want to lose new customers because of a merger.

That’s the last thing you want to do. So you don’t say anything about that and try to make it as business as usual as possible.

Trevor Schmidt: So how do you feel now that. I guess you’re what, two years into the merger?

Bob Freedman: Yep. Two years. December.

Trevor Schmidt: Okay. How’s, how’s it been? How’s kind of the joining of two companies gone for you?

Bob Freedman: As with anything, there’s good things about it and there’s bad things about it, but on a whole, I would say 90% is great. If I had to do it all over again, I would do the same thing. The people that we work with are fantastic. They are very hands off, which makes me them fantastic to me. But they are taken our software platform that we’ve created and make it a 2.0 version of that.

And so we’re working with them on that. The things that we would have liked to have done in the beginning, now we’re able to do and get into the new version of the software and make it more user friendly. So there’s a lot of upside to this. But there’s also a lot of pain along the way, so every new customer that we get now, we eventually have to move over to the new software at some point.

Trevor Schmidt: How about do you have any kind of business leaders or other entrepreneurs that you look up to or have tried to, I don’t want to say model yourself after you, but maybe emulate a little bit?

Bob Freedman: There was a couple that have helped me along the way. One being Scot Wingo. That he talked to me a few times along the way, and then he started Spiffy as well.

And so he worked with me a couple of times and I really liked his style. I liked his laid back approach to everything. And so I tried to model myself after that, although I’m not as laid back as he is, but he was one of the key people that helped me.

Trevor Schmidt: That’s great. So what would you say is the best thing about owning your own business, being your own boss?

Bob Freedman: Well, the best thing is, is that you have nobody else to blame but yourself for the choices you make.

Trevor Schmidt: That’s the best thing?

Bob Freedman: Believe it or not, because you really can’t gripe to anybody about a decision somebody else made ,you made it. You stick with it, and if you believe in it, you see it through. I really, it sounds weird, but yeah.

Trevor Schmidt: That’s interesting. So, and then what’s the flip side of that? What’s the worst thing about being an entrepreneur or being your own boss?

Bob Freedman: I would say, I don’t know if there’s a huge downside to it, except that you financially, you’re responsible for the people, the employees, and they have to get paid first and they have to get their problems solved first before they can give you what they have. So probably the employees that are dependent on you. It’s a big responsibility.

Trevor Schmidt: Yeah. Talk to me a little bit about that cause you know, when did you first take on, other than your brother, when did you start first start taking on employees?

Bob Freedman: After about four or five years, we just grew so fast and grew so big. We had brought in a couple of developers and a customer service rep and we just recognized immediately that as much as I love my product, we couldn’t work together on a day to day basis and just knock heads the way we were. Like I said, you know, you just say things that you know, you can’t ever take back.

And so, you know, putting somebody in between us was very helpful. And then having somebody else to do the work, you know, the other than us obviously took a lot of the load off of us.

Trevor Schmidt: So what was that like? I was, I mean, you mentioned now that it adds some stress to  having people under you that you’re responsible for.

Bob Freedman: With any choice you make and any decision you make, there’s a good point about it. And then there’s going to be a con about it. So you always have your pros and cons about the decisions and the choices you make. Obviously getting the work done faster, getting more money in. It’s the good thing. But then now you have a personality you have to deal with and make sure that they fit within the team and now you’re responsible for their livelihood at that point. So it’s a risk versus reward thing. You just have to deal with.

Trevor Schmidt: And how do you approach kind of hiring new peoples to the company? I mean, do you have a strategy or do you just kind of get a feel for the people?

Bob Freedman: It’s a personality thing. I try to make sure that I’m not the only person that talks to them, that other people talk to them, get their opinions about that person makes sure that they’re a good fit within the team. There’s obviously technical, you know, the intelligence that we have to have about it. But with the first person that I hired to be a technical support person worked at a retail clothing store because I knew she knew how to deal with people and people that had problems and as bad as our problems are with customers, having 500 people come in and complain about the size of a shoe is 10 times worse. So you know, you try to find an area that you’re finding a problem for.

Trevor Schmidt: Wow, that’s great. Bob, imagine you are at a networking event and a new startup founder comes to you and says, Bob, what’s the one piece of advice that I need to know to, to kick off my company? What would you tell them?

Bob Freedman: Stay with your passion. If you like what you’re doing and you’ve liked the industry and that you’re in, stick with it. If you fail, at least you failed doing something that you really liked. And if it’s a passion, it’s not a job.

Trevor Schmidt: I love it. That’s great advice.

And Bob, this has been so much fun. I’ve really enjoyed our conversation. I could talk to you forever, but you know, eventually some people are going to stop listening. So I really appreciate you being our first guest. I appreciate you working with you over the years and thanks for all you do.

Bob Freedman: I appreciate it, Trevor. It’s been a wonderful 10 years working with you as well.

Trevor Schmidt: Thanks so much, Bob.

Bob Freedman: All right, take care.

Trevor Schmidt: That was Bob Freedman, co-founder and CEO of Blue Dog Software, which is now a part of Barneby’s, which you can find at Barneby’s.com, that’s B-A-R-N-E-B-Y-S dot com.

We hope you enjoyed the first two episodes of our podcast. If you missed out on episode one with Karl Rectanus from Learn Platform, check it out! He’s got a great story, too.

And if you’re a founder or business owner in need of legal advice, we’d love to hear from you. You can start by visiting HutchLaw.com. We have the capacity to help you out with just about any legal need your company may be facing.  We are passionate about the innovation economy and are ready to support you on your entrepreneurial journey.

This show was edited and produced by Earfluence.

I’m Trevor Schmidt, and we’ll talk to you next time on the Founder Shares Podcast!