posted 27 Apr 2004 in Volume 7 Issue 8
The knowledge: Anthony Bettencourt
Now in his seventh year at Verity, Anthony Bettencourt has been instrumental in transforming what many saw as a broken company into a multi-million-dollar technology firm. Having faced testing challenges along the way, Bettencourt talks to Sandra Higgison about his role as CEO and president, his biggest achievements and the advice he would offer his peers.
Although the success of a knowledge-management programme is not solely reliant on its supporting technology, IT is still an integral part of most knowledge-focused strategies. In these turbulent times we have become accustomed to seeing start-ups come and go, which is a major concern for any organisation investing in software solutions: how can they be sure that the technology company they select has the staying power to deliver long-term support? Too many organisations have been left high and dry after buying from seemingly strong firms that later go under; Divine’s demise last year and Smartlogik’s bankruptcy in 2002 are chilling examples. Working at the heart of this whirlwind, Anthony Bettencourt, CEO and president at Verity, has first-hand experience of the IT industry’s capricious nature. Now entering his seventh year at the company that provides search, classification and recommendation technologies, he has led Verity from near ruin to an organisation that, at its peak, has enjoyed a market capitalisation of $1.2bn, and can call himself a veteran of the still relatively young unstructured-information market. Bettencourt is a composed and self-aware man who is enthusiastic about his work and family. With 550 employees and four daughters to manage (three of which are 16-year-old, cheerleading triplets) Bettencourt is clearly experienced at meeting challenges head on.
Having grown up and studied in the Bay area of California, Bettencourt began his technology career straight from university when he joined hardware company Altos Computer Systems, and was based at the heart of the industry in Silicon Valley. “I thought I was going to be a technical writer,” he says. “But after a couple of months they took me out of documentation and put me in technical support, which was a shock. Within six months they figured out I was inept technically and transferred me to sales.” He stuck to this field and worked with a number of IT and artificial-intelligence firms before joining Verity as vice president of sales in 1995, just four months before its IPO. “I was there 18 months, which was long enough to take the company public and double revenues,” he says. However, his relationship with the then CEO, Philippe Courtot, whom Bettencourt describes as a smart and innovative man, was not a good one. He believes the company was dysfunctional in the way it was run, but when asked what caused the friction between them he tactfully replies that they just did not get along. Somewhat reluctantly, he left Verity and joined a dotcom start-up that had raised $32m in funding to create virtual communities. “On-Live had a great board and big investors,” he recalls. “It just did not have much product insight.”
Bettencourt’s time away from the fold was short. In his absence, Courtot acquired four companies and depleted much of Verity’s cash. The board moved him out in July 1997 and Bettencourt returned in September as senior vice president of worldwide sales. He was appointed president and elected to the board in 1999, and in 2003 became CEO. As he says, making the decision to rejoin the company wasn’t difficult. “The products were interesting and intellectually challenging, and the people were great,” he says. “I was anxious to get back in but what the company lacked was a bit of discipline in terms of pricing the products and building metrics to measure growth and profits.” These were areas that his team focused on as they attempted to repair what was essentially a broken company. “Revenues had plummeted to about $5m in the quarter I joined, we had a loss of close to $10m and about $12m cash in the bank,” he says. “Realistically, we had about 120 days to either figure out a solution or shut Verity down.”
Along with his team, Bettencourt was forced to look carefully at the business. “First, we had to address the burn rate, so we took the employee base from 360 down to 230, which was gut wrenching,” he says. “We looked at our different products, their quality and pricing to assess which ones to keep. We decided to focus on the enterprise and OEM marketplace, where we had real strengths, and got out of the client-desktop business where we were still building a presence.” Employee morale and communications issues were, and continue to be, high on Bettencourt’s agenda. “When you cut 40 per cent of your workforce it creates new challenges within the organisation: how do you keep the remaining employees buckled in and avoid a further ten per cent attrition?” he asks. “We were lucky because Verity had a strong core of employees who had faith in the company’s capabilities.” Revenues began to climb, as did equity value, from $38m when he joined to a peak of $1.2bn, before steadying at its current value of $0.5bn. “We got there because our staff are so good and focused, and hung in when things were just awful,” he says.
It is clear that Bettencourt places much of the company’s success on the shoulders of its employees. Indeed, their wellbeing is a constant area of focus for him and they are the source of what he describes as one of his greatest achievements. “Keeping the team focused on the company while being mindful that we have to take care of the employees as we grow has been a big achievement,” he says. “I can think back to employees who bought their first houses or put their kids through school while at Verity. These are really important things and are probably the business’s best accomplishments, even though they are probably the most hidden.” Staff turnover within Silicon Valley is typically high, yet Verity has a number of employees that have been with the company for over five years. “When you have people stay through such difficult times, it’s a magical thing.”
Bettencourt is modest about his personal successes, and cites his parents and Verity’s chairman, Gary Sbona, as two of the major influences on his life in terms of work ethic and achievements. However, he is more bullish when describing the company’s evolution, accomplishments and future. “We’ve gone from a company focused on search to one with a much broader portfolio that includes search, recommendation, taxonomies and security, all the things necessary to address large-scale enterprise problems,” he says. Manoeuvring the company through this evolution and the difficult economy has been one of Bettencourt’s biggest challenges. “Losing money was the norm in the late ’90s. It was all about grabbing market share and getting eyeballs,” he says. “I think we were successful at steering Verity well while it was in the boom, which has resulted in the company being profitable for six consecutive years.” He believes the next milestone occurred 18 months ago when the company started talking about its current area of focus: intellectual-capital management. “This is not just searching, classifying and organising information, but thinking about all the intellectual assets within the enterprise.”
Verity’s two most recent acquisitions, Nativeminds, a provider of customer self-service solutions, and e-forms and content-capture company Cardiff Software, both sit under this umbrella and are illustrative of the industry’s converging landscape. Verity has told Wall Street that it expects its annual growth to be 20 per cent or better through organic growth and growth through acquisitions. “We’ll take our time,” says Bettencourt, “but we have a desire to build a business that approaches $300m in annual revenues, which will likely include another acquisition in the coming year.” He describes Verity’s mode of operation as acquiring, integrating, proving the model, running with it and then repeating the process. “We’ll go slowly with these acquisitions before we look at the next ones. We want to get it right and make sure they are integrated and contribute to the business quickly.” There are currently no companies in his sights although he says he is always looking. As Verity has 150 developers and invests 18 per cent of its revenue in R&D, Bettencourt maintains it would take a very attractive product for Verity to buy a company rather than develop the technology itself.
The knowledge and content-management industries are living through what has become a lengthy period of consolidation. “I think that companies have a lot of cash on their balance sheets from the IPO frenzy of the late ’90s and, as interest rates are so low, they need to put it to work,” he says. “Some of the acquisitions are smart while others look a little haphazard. We live by hard and fast rules when it comes to acquisitions; staying in the unstructured-information marketplace is sacrosanct.” Bettencourt believes that large customers welcome today’s consolidation as they want to deal with fewer vendors with more strategic offerings. “There’s a lot of activity here and rumours in the valley are rife about who’s buying whom,” he says. “It’s a very interesting time.”
With Verity having recently celebrated its 15th anniversary, Bettencourt is rightly proud of his achievements although he is humble when asked what advice he would give to his peers based on his success. “I have probably made so many mistakes that this is an easy question to answer,” he says. “First, and I wish I would listen to my own advice, try not to watch the stock price,” he says. “But from a personal scorecard point of view, I think it offers a view of the company and how my performance is being valued. Second, stay focused on good operating metrics for the business. Pick what you want your target operating model to be, whether it’s operating profit or how much you want to spend on R&D, or sales and marketing, and run the business that way. Third, conserve your cash. Don’t put yourself in a position where you’re losing money. In the late ’90s it was easy to raise money; today it’s close to impossible. Finally, listen to your customers and employees; don’t get isolated.” Bettencourt is proud of his success here. “We have a very tight culture, people are open and can be critical,” he says. “They can attack issues as opposed to people and everyone knows that they have a say in the business. It’s not a democracy as we’re trying to run a multi-million dollar company, but it is good enough for people to be vociferous and demand excellence from each other. If something is broken, they’ll surface it to get it fixed.”
Having set the goal to turn Verity into a $300m company, Bettencourt will rely on his employees, loyal customers and his proven ability to face and overcome difficult challenges to meet this objective. Over the coming 12 months the company will continue to focus on the operational side of the business: conserving cash, doing the right things for shareholder value, building closer ties with its content-management and ERP partners, and staying in the unstructured-information marketplace. “I don’t see any sudden turn in the road for us. It’s pretty much steady over the next year,” he says. Over a longer timeframe, it’s harder to foresee what the technology dynamics will be and, as Bettencourt says, it’s equally difficult to know whether Verity will still be an independent company, particularly if consolidation continues at its current pace. Although his toughest challenges may be behind him, the future of the technology industry is far from predictable. Bettencourt and his peers must be prepared for the unexpected if they are to ensure their place in the knowledge-management and intellectual-capital projects of tomorrow.
Studied: Santa Clara University
Family: Married with four daughters
Car: Lexus SUV to haul the family, Porsche C4S to haul me
Top guru: George Washington, created the role of president
Must-read: Franklin and Winston, Patriarch, Last Train to Paradise
Gadget: Mobile phone