Saying Yes to VS

It’s a simple fact of life in the computer world – sometimes you simply can’t get something to work. One option is to call a consultant, but an Issaquah-based company filled with ex-Microsofties and other industry veterans is offering another option.

Rob Laws, CEO of Solthree software calls it Venture software, but what a company in technical trouble might call it is an opportunity to skip the entire code and fix process.

“We look at the companies from a technical perspective. Did they choose the right technologies? Can they deliver what they say they can? Do they need help delivering that technology?,” says Laws.

The price of this advice brings to light the unusual nature of the company. Instead of a flat fee, Solthree charges approximately one-third of their price in cash, while the rest is paid off as a stake in their customer’s company.

“We charge enough cost wise to cover our light bills, what we take is equity in that company and really partner ourselves with them,” says the CEO. “We’re not a service in a sense that we just get pure cash from them, because we are actually taken a risk in that company by investing what would’ve made in money in equity.”

The concept has allowed the company to remain in the black with a strong portfolio from past accounts.

With this approach, however, the company must be very careful about the companies they choose to work with, as a poor choice ends up costing Solthree their investment.

“We do a technological evaluation as well as a business evaluation. We will not take on projects with no meaty business plan,” says Laws.

The level of risk is similar to that of other Venture Firms, where a bad choice can cause a significant financial backlash. Despite restructuring of many VC’s investment plans following recent trends in the Internet economy, the staff at Solthree doesn’t believe their clientele have changed at all.

“I believe the shakeout has brought a sobering reality to the market which I enjoy. I didn’t understand a lot of the business plans out there, nor did I participate in those plans,” says Laws. “It hasn’t changed our types of customers. If I couldn’t understand how they were going to solve a real world business need and thus have a viable fiscal market, we wouldn’t entertain it.”

In order to convince companies that their services are worth a percentage of that company’s equity, Laws and the rest of the tribe at Solthree often need to prove why they’re different.

“We have a significant IT tree that we’ve built over the last ten years. We can come in and build code quicker because we have a warehouse of code that we give license free to partners and that’s part of our advantage,” says Laws.

While giving equity in one’s company is a difficult decision, a number of Solthree’s customers seem enthused with the results.

“Basically there’s a shortage of top talent. They’re expensive, but they can get things done quicker. When you visit their facilities, you basically understand what a team is,” says Robert Smith, CEO of UBIQX, Inc., one of Solthree’s customers.

Jeff Anthony, CEO of SafLink Corp. agrees. “It’s a very reasonable amount of equity participation. These guys aren’t bandits, they’re professionals.”

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