4:10am Beep, Beep, Beep. Like a hungover Ninga I rolled out of my future wife’s bed in a small flat in Sandringham. Stumbling down the stairs my eyes found their focus on a flashing luminescent green screen of a Nokia 3210 cellphone. The stop loss trigger had activated on Nasdaq listed CMGI. My shares had been automatically sold, but not before taking a horrifying fall. I had purchased it at just over $150, and now it was less than $50. I was wide awake now.
‘What did this mean?’ I pondered as I downed my breakfast ritual of 2 Diet Cokes, albeit a little earlier than most days. CMGI had been the best performing stock in America. They had the perfect business model – they invested in Dot Com companies.
‘Oh well, this sure bet tech thing is looking a little like how some property developments end up. Burned.’
‘CollaborIT is different though,’ I thought. ‘Our customer base is growing and it is gong to be amazing once we launch in Chicago.’
…
Less than a year earlier I had confronted my boss, Tony at Verve Cafe in Parnell over breakfast.
“Look, all my mates are going to London to work in finance and tech. They are earning huge amounts of money. And to be honest I am a little bored and frustrated trying to coordinate contractors and consultants on our projects. I want to go to the UK.”
I had only been working in property development for a couple of years, but had become more interested in technology. At night I self taught HTML and Cold Fusion coding. I built a website for Eden – in 1998, as far as I could tell, it was the second property development in New Zealand to have its dedicated own marketing website. I started a business with my flatmate and we started building websites. Our lawyer was one of the first to buy. I was the property development manager slash website guy.
But by this eggs benedict breakfast in the Spring of 1999, I wanted more. I truly was frustrated with the inefficiencies of property development.
‘Why couldn’t architects figure stuff out with the engineers without calling me?’
‘What do you mean you don’t have that version of the drawing?’
‘I gave you that variation request last week, where is the answer?’
All too common words in the property developers vernacular.
Tony sat there, expressionless, I imagine expecting a Dear John resignation.
“But,” I started to continue.
“But?” Tony replied. I am pretty sure he was thinking I was about to ask for a raise, using the going to London thing as some sort of juvenile employee leverage.
However, I was serious and finally brave enough to broach the question. “Tony, what if we – you and me – do our own Internet thing. That keeps me here and who knows what we can do?”
And like a true bona fide entrepreneur, one who I am eternally grateful to for that opportunity, without a second of thought he replied, “Sure, 50/50 You can wind down everything else you are doing and come back to me with a proposal. What are your thinking?”
“I have no idea, but what if I come back to you with a proposal say a couple of months after Christmas?” I said.
“Sure.”
And CollaborIT.com was born. [Note: The url CollaborIT.com has since been acquired and in use by a company not related, in any way, to the business I started as we discuss in this article.]
Well that name came many months later.
I truly had absolutely no idea what sort of Internet thing to do. A few weeks later, I was on a plane home from the gold coast after celebrating New Years eve on the dawn of the 2nd millennium. Actually I recall we spent midnight in McDonalds in Coolangatta, because you could experience the countdown in NSW and walk out the back door, wait an hour and do it all over again in Queensland. Anyway, the inflight magazine had an article about an Interent service called Buzzsaw that had just launched in the States.
And CollaborIT had found its mission.
“Buzzsaw is one of a few new applications that is using the internet to facilitate collaboration and document sharing in construction projects,” I said addressing the three others in the dark boardroom at the top of one of those towers along Symonds Street (New Zealand’s silicon valley of the day) one autumn evening.
“There are a few others also starting, including some guys in Melbourne with Aconex but they are focused on procurement as well and targeting contractors. We can do our own one and I believe the key to project collaboration, to make it successful is to get clients on board, the developers and the owners. Then, once they are sold on the concept they will ‘force’ everyone on their projects to use it.”
“Ok, we are in then. A Redwood and Greenwood Technology joint venture. We will build the software and sort out the administration and seek out further venture capital with our recently made American friends when we need it and you run it Crosby. Craig will help with business development once you have a product to launch,” Simon the CEO said. [Of course I am using some literal licence here, as the details of how and what we would do took months to figure through].
CollaborIT.com had a board, funding, a technology delivery partner and was in business.
Now the American friend, was the technology founder turned venture capitalist Chris Coffin who came to New Zealand with a view to take the America’s cup back to San Francisco. His money was made, if I can recall the story correctly, by developing email and modem software many years earlier that allowed bands on tour to get paid quicker, essentially on the night of their gig. Before his technology, it could take weeks for bands to collect their payment. He also was partly responsible for scaling the Palm Pilot when he worked at US Robotics in the 90’s.
With a substantial war chest in the hundreds of millions he funded the America True campaign, and whist in New Zealand planted seed capital in a handful of tech start-ups through his investment vehicle Vision Ventures. Eventually, Chris settled on one company that was pioneering SaS using a Citrix systems platform as well as building leading edge applications. Greenwood was providing Software as a Service, a dumb terminal linked to a central server technology – where you subscribed for applications and all your centralised IT support on a monthy basis. Yes even back in 2000 you could access all your applications via a cloud from anywhere there was an internet connection.
One reason for his angel investments in New Zealand, was that it was cheaper to produce software in New Zealand than in the United States, especially given the exchange rate at the time. Chris’s view was, build and test software in New Zealand, where it was cheap and the isolate market represented a low reputation risk to trial new ideas. And then if an application showed promise, he would take it to the American and essentially the world via his headquarters in Lake Forest, Chicago.
CollaborIT had angel eyes looking down from a very high place.
So we built it.
The best way of describing CollaborIT is it was like a glorified online drop box for property development projects, with a twist. Not only could you access documents but you could also access software applications, using nothing more than a dial-up (remember those days?) internet connection and a basic computer.
That mean’t not only could the architect upload the latest plans, which would automatically notify the project team via an email, text of fax* but the developer could then mark them up (red line) online to discuss with the project team in real-time. And every version was kept, and an audit trail recorded who did what and when. That way, there was no more ‘Have you received the latest detail from the architect Mr Engineer?’ because with two or three clicks you could check yourself. With some automated workflow integrated into the software, variation management, a big bug bear of mine as a young development manager, was enabled.
[* Yes CollaborIT was fax friendly. In 2000, in the real estate and construction game we worked in an interesting technology transition phase where I would print out emails to fax to people!]
Not only that, but with deals struck with Microsoft and other application providers, we could provide real-time access to applications without having the user pay for the entire software. Think of opening a Project schedule file or running CAD mark-up software without ever trying to install it on your computer.
The user interface was made as intuitive as possible. It looked like a folder tree on the left and files opened in a window on the right. And because essentially you were running software that normally ran on a desktop, you could drag and drop, create folders and do everything else in document management that was not so intuitive with a standard web based interface in those days.
One of my big learnings in software development, is you have to make it as easy as possible for users. Otherwise they simply won’t use it. Another learning is that every feature you add needs to be carefully considered. Once they get used to it, every user becomes an internet mogul with a wish list of features. However, every feature added creates complexity for new users, and often puts them off. So we released new features very judiciously. In the end, we made the features you had access to linked to your login, so advanced users might have the whole suite, and beginners, just the necessary functions.
Of course, and a unique selling proposition at the time, was if a user or a project had specialist software, we could make that accessible to all users. So CollaborIT had software within the software.
The business model was simple.
Primary revenue was generated from users who paid a monthly per user per project fee to access CollaborIT and a monthly per MB fee to pay for storage and bandwidth. The more projects and users the more revenue.
Secondary revenue was based on customization. As the number of projects grew, a third revenue source became apparent- consulting services to implement the system within projects and project teams. However, first we had to get a critical mass of projects online, and enough users familiar with the system before we could think about charging them a consulting fee.
The cost structure was also simple, CollaborIT was charged a per average user at anyone time fee and a per MB data storage fee. And there were all the normal expenses of administration and marketing and of course the capitalized cost of building the software in the first place, ongoing feature development and maintenance.
With enough projects fixed costs would be covered, and the fees were set to make a margin on each new user/MB and project.
Because I was an ex development manager, I and a few staff did all the user testing on pretend projects, pretending to be a developer, contractor or consultant on different computers in different places. Our first clients would facilitate the real user testing. And that worked out without many issues.
About a year after that boardroom presentation version 1.0 was built. Simon came up with the name ‘CollaborIT’ and we went to market.
I had to buy a suit. And a tie. I was transitioning from software development director to salesman.
We thought we started with a bang. Our very first meeting to demonstrate CollaborIT was with none other than Lendlease in Sydney. We finished putting together our sales presentation in the Symonds Street boardroom at about 2am, I went home for a few hours sleep and Craig picked me up to go to the airport at 6am.
Internet connections were not what they are like today. We had planned to test a few things in an Internet Cafe before the meeting, but we couldn’t connect. We didn’t know if it was an Internet connection issue or the software was down. Then came the meeting.
I can’t recall who we met, but he was high up in the organisation and in charge of rolling out the very concept of CollaborIT, online project collaboration, on their worldwide projects. What a whale of a client, if we could land them. And, the software worked well enough for us to bluster through a presentation that made it look like CollaborIT was 100% perfect.
That was the last we heard from Lendlease. But it gave us some experience and it gave us some confidence there was a real market out there for this type of product.
The next year, all of 2001 I was in sales mode. Phone calls, emails, meetings, presentations. All throughout New Zealand and in Sydney and Melbourne. In between scheduled meetings, I would don the suit and simply walk the CBD’s methodically going to every property development company’s office to try and make a contact, or if I was lucky to give a presentation on the spot. No LinkedIn back then.
My initial marketing strategy was:
- Get the private property developers interested and sold on the concept. The benefits being saving time and money on collaboration, having an audit trail to track project and consultant/contractor performance, less printing as documents could be formally issued via CollaborIT and overall improved project efficiency.
- Find a champion within their company who had enough power to influence/force others to use the system, as well as process and IT nous to ‘control’ CollaborIT – that’s called a super user today.
- I help the champion set up the project structure on the software and how they were going to use it and then they would role out CollaborIT on a test project or two.
- I would ensure the key users (architects, project managers, development managers, engineers, main contractor) were well trained. Live trained, because every new user became a sales target. Most were doing multiple projects or had other clients with projects.
- Momentum would build. We would use testimonials and champion CollaborIT advocates to convert prospects to users, and wala every private developer would be using CollaborIT on all their projects.
- With a few projects onboard we would hit Australia hard – they had the customer base market size we needed. Surely we would convert them as easily as Kiwis.
It soon became apparent we didn’t have enough resource to live train everyone and be able to rapidly scale the number of users. It took a long time to set the project up on CollaborIT. Not because of the software – that was super easy. But because when a project was set-up you had to think exactly how you would use it on a particular project and ensure that all who used knew their responsibilities. Otherwise it would just end up like a communal dropbox. People used it in different ways. Some simply used it for the online plan markup function. Others as a pure ‘cloud based’ document management system. My bluechips used it as a full integrated project management and collaboration tool.
Private developers loved the concept. Many were happy to get it going on their projects. The cost to value benefits were just so good, for any development manager who experienced on a day to day basis, like I had for two short years, the frustration of coordinating everyone and document on a project. But there were few champions within private developers actually willing to really enforce its use on their projects. And when a consultant or contractor moaned because they didn’t want to use a new system, or because they had their own system, or blame internet connection speeds (horribly slow at the time) most would relent. So CollaborIT, as easy as we made it, was just a bit too hard for them.
But there was substantial success with government projects. There, the project director in charge, often had the power to make sure everyone did use the system. Some actually wrote CollaborIT’s use into contracts and fee agreements.
With Super Power Champion Users like Shane on the Southland District Hospital Project, Derrick on Tauranga Hospital and Dunedin Airport, and others on 4 large Prison projects, the Northern Busway and wastewater upgrades we got traction. Plus these projects typically had the budget to justify CollaborIT to their boards and CEO’s.
Other uses came out of left field. One law firm used CollaborIT to manage retirement village contracts. An investment bank used it in the due-diligence for a large global M&A deal.
It wasn’t happening overnight but revenues were slowly increasing.
Then Chris made an offer. He would invest a substantial amount into CollaborIT for a substantial equity share. And we would take it to Chicago and market to America.
We mucked around a bit and turned down the initial offer, thinking it was better to build our user base up in Australasia first, so CollaborIT would become more valuable and we could demand a higher slice of the action. So we stalled.
However, even if we had taken it up it may have not come to fruition as by this time, the dot com bust was well under way. Chris would have been losing large back in the States and then later on, pretty suddenly he quit his investment in NZ. The relative exchange rate simply made no sense to continue developing software in New Zealand.
But I continued with CollaborIT. The software was a success on most accounts. Connection speeds still frustrated many – a problem with the Internet at the time moreso than our platform – but it worked really well. It helped development projects save money.
Two problems mean’t CollaborIT never made it to a listing on the New York stock exchange and why I don’t yet live in a modernist class box perched on a cliff facing San Francisco Bay.
ONE. I didn’t make enough sales. Simple. My responsibility and I failed. In my defense were a few mitigating circumstances that we hadn’t appreciated before we started.
New Zealand is a small market, and there simply were not enough big projects around. Private developers did not stick to it as I initially expected. Yes they could all see the benefits, but any hassle (and change means hassle for many) meant few would persist to enforce CollaborIT’s use.
Each project sale took a huge amount of effort. It wasn’t showing people how to use the software – that was relatively basic. It was setting up the offline process/rules in which they would use the software. Some architects would issue documents via CollaborIT and still send a printed set around – until this was explicitly listed in their fee agreement.
Some had their own internal software that meant they felt they had a double up of internal process to comply with. Others simply didn’t want to adjust their firewall.
Some contractors simply didn’t like it because it exposed their own contractual management misgivings. And they like the fact the variation process was a mess, it made their ability to make claims easier. I will always remember one principal client on a massive billion dollar project telling me the contractor had spent weeks putting together a multi million dollar dispute claim blaming lack of principle responses to variation change requests as a reason for cost overruns. But for him, he simply printed out the CollaborIT audit trail and took that to court. And won.
Superusers, the disciplined ones that utilized CollaborIT to its full potential were few and far between. Probably like great project directors are often few and far between.
I couldn’t convert Australians. Aconex, albeit targeting contractors moreso than developers, was making reasonable progress so there was some sort of competition. But they would of been facing the same issues above that I was. They managed to invest themselves through this and come out the other side a billion dollar company 15 years later. Face to face contact was necessary in those early days, and we needed fulltime staff on the ground to give it a good push – not just a fly-in and out guy. Still a few, mainly architects on international projects, like the World in Dubai became dedicated users. More would have come if I could have sorted the second issue out.
AND TWO. Our back-end technology was not scale-able. Now I didn’t now this at the time and until very late in the piece but going with Citrix was a mistake. And so did the backend server costs. It cost us an ongoing fortune, so the incremental margin per additional user was not that much. In retrospect we should have done a pure website based application, and offered SaS applications a side product. But because how CollaborIT was built, we had to run it through Citrix and on expensive equipment in the cloud. Nothing technically wrong with Citrix, just at the time not cost effective to run to hundreds or thousands of part-time users on a development project. The backend server and date charges, well let’s just say you could do it for one tenth of the cost today.
That extra cost meant we did not have sufficient money for more marketing, or full time staff to get Australia humming. Or to get the original investors fed. That’s what we needed to do to increase the value so we could keep a decent equity stake before taking it to America.
In New Zealand, I don’t believe spending extra on marketing or staff was an issue as I pretty much talked to every single developer, government entity and consultant out there, and simply made myself available without additional cost to anyone in New Zealand at anytime, in person. There were just not enough takers. Our conversion rate was too low. And our price structure meant it would never be a mass market product.
With enough users we would have changed the back end technology, unfortunately no one had the will or funds to redo it. Chris was gone. The technology boom had collapsed. Softbank didn’t exist to throw squillions at it. By 2003 me and Tony decided that was enough, we had given it a shot, the concept worked ok, but CollaborIT did not make enough money. The business model and our execution was flawed. There was no appetite to continue. So let’s move onto something new.
CollaborIT was transferred to its original namer. I went back to property development 101. And until this article I never really gave it that much thought or had much desire to do another dotcom.
That’s why when I read articles and success stories from those who are making it in PropTech, like these fellas, emerging from the New Zealand market and going international I know how hard it is, and how amazing they must be. A decade ago I would have been jealous. Now I am just in admiration.
Here are the only two articles I can find about CollaborIT from almost 20 years ago. About the only thing else I can find from those days is a letter from Donald Trump, whom I interviewed for CollaborIT’s blog at the time.
P.S.
Of course, Dotcom has turned into a proliferation of PropTech in recent years, so my interest has piqued and I have done extensive research into the ‘next big thing’. That’s how the book Destiny came about. Everything about PropTech (from the history of technology, to where it could go in the future) – related to real estate development and construction, wrapped up in a story about a developer from Chicago… If that sounds like a good read you can get a copy and take a free look at the first chapter or so here from Amazon.
https://www.amazon.com/Destiny-Future-Real-Estate-Development/dp/1095425676/
Cheers
Andrew Crosby