How Wilson Zehr Raised $60M—And Why Money Alone Isn’t Enough

[00:00:02] HSB - Wilson Zehr - Host: Hello, and welcome to another episode of the How to Scale a Business Podcast. My name is Hector Sania Esteban, and I am your host. Our special guest is Mr. Wilson Za. He is the CEO of cex, but their most popular brand is Za Mail. And so we're gonna talk about, , well, his journey, and all the things that they are doing, , at Zenix.

[00:00:20] HSB - Wilson Zehr - Host: So Wilson, thanks for joining us.

[00:00:22] HSB - Wilson Zehr - Guest: Thank you. Thank you for wrapping me on. Thank you for the opportunity.

[00:00:25] HSB - Wilson Zehr - Host: , You seem to have a lot of things that you're doing, , a lot of plates that you're spinning.

[00:00:29] HSB - Wilson Zehr - Host: And so I would love to hear what some of those things are and, and some of what some of the key stops along the way Were.

[00:00:35] HSB - Wilson Zehr - Guest: , So in terms of background, I have an undergraduate degree in finance with a minor in computer science. I started out my career as a software engineer, , for a of reasons. Spent four or five years just writing code writing, which was a lot of fun.

[00:00:47] HSB - Wilson Zehr - Guest: I enjoyed it. . I decided I wanted more control over the direction, both of my career and the business itself. So I felt like I was sitting in the backseat, which I didn't like very much. So I went back and got an MBA, went into product marketing, managed a couple of product lines for a software company. and I managed our strategic relationship with a couple of, , big computer companies, IBM, sun Microsystems, digital Equipment Corporation, people like that. I went on to, , work at a company called Sequin Computer Corporation, which was another startup here in the Portland area. , I managed a global relationship with Oracle Corporation, which is a million business for them, more or less. And then, , did my first large scale startup with a company, which was, , basically spinoff from Intel, funded , by Intel, Microsoft T Ventures and France Telecom. Managed to grow that one and sell it, and then we, we started Zir Mail and Zir Mail. It's a distant relative of the company we're running today. We started mail on 9 9 99. The idea was to use convergence. , a lot of the ventures I've worked on over the years are, , focused on convergence, looking at legacy systems and how. Dovetail those with the power and speed of the internet to kind of improve , you know, the linkage between legacy systems and existing systems. , So, , , we started Prebble on the internet. , And then we were hit with a triple whammy, which was the, the.com meltdown. It was nine 11. then of course we had, in the mail industry, we had the anthrax scare where people were, somebody was mailing anthrax and killing postal workers. As you can imagine, that was a chill on the mail industry.

[00:02:31] HSB - Wilson Zehr - Guest: It was, . We managed to sell the company one of our largest production partners. At that point. We started cex, our software company, and we still provided maintenance and hosting on it. , Along the way we've done a number of acquisitions. We bought companies, we've sold companies. , At some point we got s mail back and put it on our new platform and turned it on and order started coming in.

[00:02:51] HSB - Wilson Zehr - Guest: So we decided to do a little more of that. , And, Over time, I, I think I've, you know, raised over $60 million in venture capital, returned a lot more to investors, worked on a lot of interesting companies, both for myself and for others. And when I'm not doing entrepreneurial ventures in between, I, I teach at the university environment, , usually marketing, entrepreneurship, and so combination of.

[00:03:17] HSB - Wilson Zehr - Host: I'd love to go back to that time. I guess it was 2001. I'm in fifth grade at that time, far from my, , entrepreneurial business owner days, you know, are far ahead of me at that time. But we are in a similar, , at least global time of, , uncertainty. , you can put a bunch of different labels on it, but I'd imagine at that time there was a lot of uncertainty going around.

[00:03:44] HSB - Wilson Zehr - Host: And my curiosity for you is I don't know. What was the bigger battle managing that internal, , thermometer and, you know, the internal, , , forecast or whether it was managing, you know, the emotions and the feelings of your investors, all the stakeholders and such. , Because I feel like a lot of.

[00:04:04] HSB - Wilson Zehr - Host: business owners, at least those that are my age, this is the first time that they're going through sort of this cycle where everything seems to be just uncertain if nothing else.

[00:04:15] HSB - Wilson Zehr - Guest: Sure, yeah. Uncertainty in a business environment. I mean, just starting a business is. Not a popular thing to say, but most businesses are not successful. Something like 90% die the first year, another 90% the year after. you really have to be, not only do you have to have a good, plan and a good product and good execution, but you need some good fortune as well. I mean, so everything's got a kind of align. . For us in that timeframe. , We were jointly funded by, , Draper Fisher, JSON Tier one, California vc. They did people like, , you know, Skype and, and stuff like that. And, Hewlett Packard And he Packard had a billion dollar portfolio of internet companies at that point too. So our investors, at least at that point in time when we started out, we had angel investors Managing a whole group of angel investors gets a little more challenging. , They have different levels of experience with investments. . And, the money means a lot more to them. , It's not like, it's not important to the bigger investors, but the bigger investors have a whole portfolio they're working through and they're doing triage and, and working with a lot of portfolio companies because it's environmental in nature.

[00:05:25] HSB - Wilson Zehr - Guest: Everybody's impacted. It's not just to us. The fortunate thing for us is that even though in that timeframe, what the investors would say would spend, spend, spend, right? Just build revenue and spend, don't worry about it. We got plenty of money and so people went out and, spent a lot. And when the market fell apart, money became either very expensive or even non-existent. , A lot of people were left in alerts, but we just managed our funds responsibly. and the way we felt was responsible at that time. And we let investors know what we were doing. We had a plan, and when it fell apart, we still had fun. As a result of that, we were able to acquire our largest competitor, a company called E-Letter. , They were funded by Hummer Winblad and they were blowing through about $20 million a quarter, and we managed to buy the business operations of that company for, you know, a fraction of that. We acquired a company called Speed Greetings. We acquired a call center called International. You. Just pivot for a second to business strategy, which is a topic I teach. I mean, we think about the business cycle, right? This idea that, our economy doesn't always experience economic growth. It expand. Sometimes its, hopefully it, you know, the long up the right so, and contractions and so as. , , of course you'd love to be all, , invested and, tuned and ready to go as you move into an expansion, so you can really leverage the returns that come with that. As the expansion gets closer to its peak, , that's when you wanna be careful about spending too much in capacity and head count, things like that, because, if things turn around, you're saddled with all those costs. And even if you're, you've structured your company so that you can peel away those costs relatively quickly, there's some emotional damage that you do to your business. And downsizing and things like that. So that's often not a healthy place to be. the thing about downturns though, you know, , contractions is contractions also present an opportunity when we talked about the case of e-letter, and by the way, if you type in e-letter today, you'll still go to mail.

[00:07:41] HSB - Wilson Zehr - Guest: I mean, we still own all those assets. the contractions create an opportunity in that we have a lot of assets that will be underpriced, assuming we have capital, right? Assuming we have, , dry powder to work with. , We have a, a number of competitors that are struggling.

[00:07:56] HSB - Wilson Zehr - Guest: We have another business opportunities that we might be able to do. If we have a traditional business and we're investing in plant equipment or things like that, that's a great time to do it. We can get deals from landlords, we can get deals from equipment suppliers. We have downtime where we can put everything together and make it work so that it's, humming well when the economy comes back or when the environment comes back. . So pluses and minuses. The trick for an entrepreneur or even any kind of a business, you know, manager, senior executive, is knowing where those transitions take place. you know, if you think about on surface, you say, well, why would that be difficult, right? I mean, I could, pull up the chart, I could see where the spikes are. The problem is that the. A downturn is, well, I wouldn't say the formal definition. The economists have something, a very detailed definition, but the, definition we would use in mainstream business is two consecutive quarters of negative GDP growth. Well, the problem with that is that it's a trailing indicator, which means I never know if I'm in a recession or a, contraction until I've already been in it for six months. constantly you have to look at what's going on around you and guess, right? and the farther out, you guess, the murkier things are, the more variability, the closer in you, guess, the less good it does here. Right? If I'm trying to figure out what's going on tomorrow, I'm, pretty certain I don't always know what's going on tomorrow, but I have a better chance of knowing on what's going on tomorrow than I have of knowing what's going on six months from today. And so. What's the right timeframe to look at and what direction am I going to go? You know, depending on change the economy, it may create an opportunity for a pivot, or it may require a pivot, right? Sometimes entire industries just disappear overnight. I guess this wouldn't necessarily be overnight, but think about. Of large companies that control most of the market for paper checks. You know, if you wanna write somebody a check, well, what's happened to that business over the last 20 years? And those guys are hammered, right? They're, you know, if they wanna survive, they'll have to find another business opportunity. Thankfully they've got a, you know, pretty robust, , steady cash flow that gives them the, you know, the tools they need to try and find those opportunities. But not everybody's so lucky. I mean, think about the Yellow Pages, right? You know, the internet pops up, people start doing search, the yellow pages went away, just like that. .

[00:10:24] HSB - Wilson Zehr - Host: , The challenge today is that I feel like those cycles seem to be, happening quicker. maybe 20, 30 years ago. It might take X amount of years, for that cycle to go through.

[00:10:36] HSB - Wilson Zehr - Host: And so more, like you said, more businesses are. Failing. We're seeing some of these businesses that are coming up, popping up, having a ton of investment, and then you look around two, three years later and they're nowhere to be found. there's so many more examples today of those types of companies that, , or reminds me of, you know, our California leadership.

[00:10:55] HSB - Wilson Zehr - Host: You're just like, where did the money go? You know, like, it just, sort of evaporates. and I'm curious for you if that is, , you know, a subjective. What's happening because of, like I said, media, social media things.

[00:11:16] HSB - Wilson Zehr - Guest: There's a couple of different topics. , but in general, you're, right. I mean the, pace of, innovation and growth has really exploded. you think about the time it took automobiles to, penetrate 50% of households, and then radios, and then televisions, and then you look at something like Facebook. I mean, exploded. I mean, it's billions of users now. I mean,

[00:11:38] HSB - Wilson Zehr - Guest: , Uber was very specific, right.

[00:11:40] HSB - Wilson Zehr - Guest: and what it does and who it displaced. , And so I could see those kind of applications, , I see is more of a kind of a horizontal tool, something that everybody can use as opposed to, you know, generally disruptive.

[00:11:54] HSB - Wilson Zehr - Host: I would liken it to some, a technology that's more akin to the internet what it requires it's like a road. It's like having a freeway. That's great, but if you don't have anywhere to go or you don't have anything to do on it, it's not as valuable as that network connectivity that happens once the airport's there and the mall's there and you know, now there's this, value that has been created because like you said, people have been building upon it.

[00:12:17] HSB - Wilson Zehr - Host: And so I think, we'll, we'll see the effects of that in the coming years because we'll start to see some of these app specific stuff that allow, , somebody to not have to figure out the use case. that's what I find is if someone can't figure out why they would use it.

[00:12:33] HSB - Wilson Zehr - Host: I'm the person who's constantly tinkering and constantly looking for a better way to do everything. and that's whether it's, you know, gardening or brushing my teeth, no matter what I wanna optimize it. And so in those instances, I've found dozens of use cases.

[00:12:46] HSB - Wilson Zehr - Host: And on the other hand, I see somebody who, they are good with how they're doing it, and that's great. there's no perceived problem. , Thus, , they're not looking for any solution. And, , I think the more specific use cases, like whether it's health trackers

[00:13:02] HSB - Wilson Zehr - Host: I think health is gonna be a big one that that brings a lot of people into it. But I'm curious about some of these other, foundational things, timeless things, if you will, that a business owner , can be doing despite these cycles.

[00:13:17] HSB - Wilson Zehr - Host: And so if we sort of frame it like that, . If you were to step outside of these cycles, what sort of other frameworks, mindsets, , you know, methodologies do you think are critical for a, business owner who wants to scale?

[00:13:32] HSB - Wilson Zehr - Guest: Yeah, that's a great question. . The thing that we know is that. Or at least I think we know is that when, when businesses are, growing and there's a lot of activity, , there's a lot of things, especially with a, , high growth enterprise. There's a lot of things that don't get done. we have a lot to do just to keep up with the momentum, rolling out new products, to responding to customer compliance, , or customer concerns and adapting products and services and, which is all great.

[00:13:57] HSB - Wilson Zehr - Guest: I mean, that's, part of the business. But a downturn in addition to being an opportunity to do strategic things like look at new business opportunities or acquisitions. It's also a time to clean up and to reset and to make sure that where everything's, , working the way it needs to, you know, get everything polished up and get ready for expansion. I mean, because we know that when we're, in the process of expanding and everything's, you know, going at a hundred miles an hour, it's really hard to change the tire, you know, it's like. this one of the few places we get to do it. we see it software too, you know, have, if you're building software, . There's always a list of things to do, and it's quite often it's bigger than you'll ever get to, and you have to prioritize it and make sure the most important things get done. And sometimes along the way you'll say, well, we'll come back to that. Let's just do this to, to get to the next step.

[00:14:50] HSB - Wilson Zehr - Guest: And we'll come back, we'll come back. But lots of, we never come back. Right? I mean, it just sits out there. creates a little window and we can go back and start thinking about some of those things. Oh, you know, what happened with, we thought that was important at the time is still important. Do we have some more resource to put on that now? , So, , looking for new kinds of, , strategic alliances, business opportunities, you know, reexamining. Our financials and our business statistics, and are we headed the right direction and what does all that look like? Oh, there's a lot of things that we don't always have time to do that we may have more time to do in a.

[00:15:26] HSB - Wilson Zehr - Host: Yeah, I'd love for you to. Share what do you know about, you know, how businesses are, are utilizing their funds and,

[00:15:33] HSB - Wilson Zehr - Guest: Sure. It really depends on the kind of business of. The source of the funds too. You know, we talk a lot about, and when I teach entrepreneurship, we talk about funding a business and stage of development and where those funds are most likely to come from, you know, early stage business, friends and family tends to be pretty, , dominant, you know, personal savings or friends and family. And then maybe you move into a stage of an angel investor. , for a large high growth enterprise with, you know, some marquee quality leadership, , oftentimes they'll just go straight to VC and then, you know, large established enterprise, they're playing a different game, right? They've got a set of investors that they need to produce returns for and show growth for, and, and the really, the investors, you know, need to see progress. But if we just take that middle slice, the venture capital industry right now, I mean at at the time when we first started sel venture capital industry was big, but nowhere near the size it is today. I mean, you know, people are raising billion dollar funds all of the time. I mean, that was an incredibly large fund at that time. Now people do it all the venture capital. Professional investors, most of those companies fail, probably one in 10 is a winner, is, you know, and, there's probably a couple that all, maybe you'll get some of your investment outta or maybe even money on, and the rest is just lost. But if you have a billion portfolio, it's harder to make a 10 million kind of investment. You have to invest big because you can't manage thousands of portfolio companies. So you're investing big and you have to hope for a home run. Think about a scenario where you have a hundred million to invest, you invest, in 10 companies. And I just said, you know, if you had a billion dollar portfolio, you couldn't do that.

[00:17:16] HSB - Wilson Zehr - Guest: But for this example, you invest in 10 million each in 10 companies. Knowing that nine of them, you know, let's take an example. So you know, seven of them will fail, two of them will he be even money? You need that last one to be a home run. It needs to produce a hundred times returns to get the kind of IRR your investors want. So that 70 million is probably gone, right? I mean, it's spent on startup and hiring people and, but ultimately you won't get to a liquidity of that. And so that money's gone. Maybe you get to a even money on the other 20, but you're hoping for the upside on the other smaller piece. So when you take that example blow it up on a bigger scale, you can see how a lot of money would just. Disappear, I mean, appear to disappear. But the investors are really betting on the portfolio, the return of the portfolio, not the return of the individual companies within the portfolio

[00:18:11] HSB - Wilson Zehr - Guest: they don't know. I mean, they'll invest in those guys expecting, I mean, from a fiduciary standpoint, they have to believe each of those companies will be successful. But experiences tells them that they won't, so they have

[00:18:26] HSB - Wilson Zehr - Guest: to manage their fund appropriately.

[00:18:28] HSB - Wilson Zehr - Host: I'm sure you have, hours and hours of lectures that you can do on this. So perhaps we'll help you back for, , another appearance. , I got two questions for you. The first one is, Wilson, if people wanna follow up with you, go deeper in your world, get more connected.

[00:18:41] HSB - Wilson Zehr - Host: , where's the best place for people to go?

[00:18:43] HSB - Wilson Zehr - Guest: , On LinkedIn, LinkedIn com slash i Wilson Wilson, , my academic portfolio is out there, wilson com. You can see 'em, atex and mail and mail's got an 800 number. 8 8 8 8 9 8 0 0 6 6. Unlike a lot of our competitors, we love to talk to our customers. You won't talk to somebody at a call center offshore somewhere. You'll get directly to one of us and we'd be happy to talk about whatever you wanna do. You know whether you need advice or help or you'd like to do business with us.

[00:19:13] HSB - Wilson Zehr - Host: Love that. . That's great Hopefully the internet is nice to you. , Wilson, last question here. In your opinion, what is the, secret to scaling a business?

[00:19:23] HSB - Wilson Zehr - Guest: , , The number one point of failure for most small businesses, or most businesses is they just run outta capital. So we usually tell people, just don't run outta capital. that's first. you need a good team, you need a good idea.

[00:19:34] HSB - Wilson Zehr - Guest: You need to be committed. You have to be. In my opinion, looking for something more than just the money. I mean, there's a lot of people look at somebody like Elon Musk and say, you know, if that guy can make billions, I can too. So I'm gonna do a startup to make billions. money can be a great scorecard, it can't be, or it shouldn't be the primary motivator. Right. The primary motivator is to change the world, is to take something that you're passionate about. , and use it to bring about change. And if you can do that, all the good stuff usually follows. the guys at Hewlett Packard who started Hewlett Packard, they had a saying like that too.

[00:20:13] HSB - Wilson Zehr - Guest: they would send, we're just gonna focus you know, using engineering to solve cool real world problems. And if we're really good at that, the money will come. We're.