Episode 066

St Pete X features business and civic leaders in St. Petersburg Florida who share their insight, expertise and love of our special city. An initiative of the St. Petersburg Group, St Pete X strives to connect and elevate the city by sharing the voices of its citizens, and to bring awareness to the opportunities offered by the great St. Petersburg renaissance.


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04/06/2020 | Episode 066 | 42:37

Arnie Bellini, Founder of ConnectWise

On returning: Arnie Bellini talks building ConnectWise, the effort to create 77,000 jobs in Tampa Bay and his passion for saving wild Florida

On this episode of SPx, unicorn entrepreneur Arnie Bellini joins the podcast to tell the story of ConnectWise. He shares how the managed IT services provider went from its founding in 1982 in his parents' house to the area's first company with a billion dollar valuation. Then, he shares his efforts to give back, starting with connecting the dots of business and higher education. Finally, he shares his next venture, saving wild Florida.

Key Insights

  • On this episode of St. Pete X, unicorn entrepreneur Arnie Bellini of ConnectWise joins the podcast.
  • ConnectWise has been called the area’s only “unicorn,” a designation for tech firms with a valuation of $1 billion or more. However, ConnectWise, with a valuation of $1.2 billion and $243 million in annual revenue, is considerably older than the startups or young firms that typically are labeled unicorns.
  • The managed IT services provider and software developer headquartered in Tampa agreed to be acquired by Thoma Bravo, a technology-focused private equity firm in February 2019.
  • On being a homegrown Tampa Bay tech company: "We planted ConnectWise in that fertile soil here in Tampa Bay and everything that we needed allowed us to grow the company here and that's pretty special. You don't find many places in the world where you can say that could actually happen."
  • Bellini says he believes in coopetition, over competition. "It's always been the case throughout history that when human beings cooperate and collaborate amazing things can happen."
  • Bellini shares stories of founding ConnectWise in 1982 with his brother David Bellini. He talks about the mission and the vision of this company that has grown to define Tampa Bay's tech scene.
  • Does entrepreneurship run in the family? Bellini talks about his father's work at IBM and why he didn't see the PC revolution coming.
  • On building technology for people: "If you're really going to have success in technology you do have to understand that technology, but you really have to understand people because at the end of the day people are going to have to use that technology and if you're not making it so simple for them to use and convenient and now even desirable and even pleasurable, if you're not doing all of those things you're not going to get the human behavior that you're trying to get by building that application."
  • Bellini is always up for a challenge. He recently raised $152,000 for the American Heart Association by riding across the entire state of Florida from the East Coast to the West Coast. In a challenge two years in the making, Bellini also swam the English Channel.
  • On motivating employees: "I've always realized the energy source is entrepreneurship and ownership, through Lauren's guidance I agreed to put together a stock program for colleagues. And what's really cool is that we had 70+ millionaires with the ConnectWise transaction that happened last year."
  • "Our stock program gave 18% of the company out to colleagues. So, a bit unprecedented, but we never needed to take private equity money, we never needed to take venture capital money or seed money. And so I knew that it was because we had such a great team of people that they were the ones that needed to be rewarded. And so we started giving out stock, it made a big difference."
  • On going through the due diligence process: "You know, I think it's really for me going through due diligence made me realize I don't really know that I want to sell this."
  • On choosing not to go public: "Steve Raymund corrected me on that as a public CEO of Tech Data when he came on the board he talked some sense into me he said, 'You can't do this like the English Channel Arnie, this is not the English Channel and there's consequences for the decisions that you're going to make. Do you really want to be a public CEO? Do you understand what it means to be a public company these days after Enron?'""
  • On giving back: " I did my learning, I did my earning, and now I'm doing the returning. And so Lauren and I are very focused with our foundation, The Bellini Better World Foundation, of finding ways to help others be successful, others that are in many ways less fortunate to become successful and it starts with education."
  • "Well, I look out there and what's great about Tampa Bay is everything is ready, it's like all the enabling points are there to make some really interesting things happen, you just have to kind of connect the dots."
  • On acquisitions: "We took chips and we put them on the table and then we said, "How much do you think we could buy this one for? That one for? That one for?" We couldn't afford it, right? So, we ended up doing 50% deals which every lawyer told us we were nuts for doing."
  • "What was great about that it assured culture. We didn't have control, they didn't have control, we had to collaborate. And so we forced ourselves into a business deal where we were forced to collaborate."
  • On life after the ConnectWise sale: "It is fun, but also it's a responsibility. You know, I'm not the kind of person that will sit around idle. I feel like if I'm given something that I've got to go do something with it and I've got to do good with it."
  • What's next for Bellini? Saving wild Florida. "If we take a few basic steps to preserve our wild spaces to connect the corridors so that we can have animal passage through those corridors so that we can have animal passage through those corridors, we can preserve a unique ecosystem forever here in the state of Florida."

"I do feel a responsibility to put a bit of a spotlight on what can happen here in the Tampa Bay area and the resources and the amazing ecosystem that we already have here. You can build a very viable high-tech company here."

"It's not just about these 70,000 tech jobs we're trying to create here in Tampa Bay area, we want to do that, and we want to see Florida grow pretty much where it's already existing - on the edges - to preserve the wild spaces and connect the wild spaces that we still have in the state of Florida."

(00:00 to 1:00) Introduction

(1:00 to 04:02 ) About ConnectWise

(04:02 to 9:49) The Start of the Industry and Beginning Vision of ConnectWise

(9:49 to 11:01 ) Family in the Business

(11:01 to 18:17) The Success of ConnectWise

(18:17 to 22:01 ) Becoming a Publicly Traded Company

(22:01 to 25:06 ) The Bellini Better World Foundation

(25:06 to 32:40 ) Seeking Talent and Building Mechanisms For New Jobs

(32:40 to 38:15) Arnie’s Philosophy On Acquisitions

(38:15 to 39:20 ) Setting An Example for the Technology Industry

(39:20 to 41:16) Preserving Florida

(41:16 to 42:34) Conclusion

 

Full Transcript:

Transcription begins [00:00:50]

 

Joe: Joining me on SPx is the co-founder of ConnectWise and I think for the first time ever on SPx I can say, unicorn, Arnie Bellini, welcome.

 

Arnie: Thank you very much Joe it’s great to be here. 

 

Joe: You know, it’s every start-up founder’s dream to have a billion dollar company, what were the unexpected pressures that came from being our first grow-your-own unicorn in the area? Were you surprised at how much of an impact that made? 

 

Arnie: I am surprised, I’m also very delighted, but it needed to happen and it was bound to happen in Tampa Bay because there’s so many great factors here that allow a unicorn like ConnectWise to evolve. I like to say it like this, we never went outside of the Tampa Bay area, we planted ConnectWise in that fertile soil here in Tampa Bay and everything that we needed allowed us to grow the company here and that’s pretty special, you don’t find many places in the world where you can say that could actually happen and Tampa Bay is one of those new up and coming tech hubs. 

 

Joe: And you started ConnectWise in the early 80’s and I think one thing that doesn’t get enough appreciation is that not only did you grow this company as you said which was inevitable, but how lucky are we that you had such a collaborative mindset when you did it. And get a conference where you brought competitors together to share ideas and really set the tone that working together we can be better. 

 

[00:02:13]

 

Arnie: Absolutely, it’s always the case. It’s always been the case throughout history that when human beings cooperate and collaborate amazing things can happen. And so, you know, I believe in co-opetition, right? You know, cooperating with your competition because it sharpens both of you and makes you better. And so we in all cases at ConnectWise always have and always will bring all various competitors together because we’re all trying to solve the same problem, we’re trying to solve the problem for the IT solution providers and it’s them that we need to focus on not our little chunks of the market. 

 

Joe: And so let’s familiarize those who may not be familiar with ConnectWise. You started a platform that allows small businesses to basically run managed service providers and then you grew it to much more than that. Can you give us a brief overview?

 

Arnie: Yeah, well I mean 80% of the United States economy is powered by small to mid-sized business and those businesses are powered by technology these days. Well, that’s been a new phenomenon since the PC hit the market, small to mid-sized businesses could finally afford really sophisticated computer systems. And so, it’s always been the mission of ConnectWise to enable the technology solution providers that implement those solutions for small to mid-sized business to be able to run their entire business in a very effective way so that they can really use technology as a leverage point for their companies. And when you think about that if you’ve got 80% of your economy highly turbo charged with technology that’s going to have a real lever effect inside of any economy. And so that’s always been the big vision, the big mission, how do we make both rise in this tide and the ability to increase productivity with technology even in the smallest of companies. 

 

Joe: And that’s true now, but that technology wasn’t as ubiquitous when you started the company, so can you talk about the very early days and what your vision was when you started and how that changed as you saw opportunity? 

 

[00:04:06]

 

Arnie: Sure, the early days started at Pricewaterhouse, that was my first job out of the MBA program at USF. I took a job with Pricewaterhouse as a technology consultant, 1982 hit and the PC came out and we convinced our partner to buy the first one in the Tampa Bay area. And so, on the 29th floor of the downtown Lykes building in the downtown Tampa Bay we were there till midnight, 3:00 a.m. playing with this PC, the first one in the Tampa Bay area, shuffling 360k floppy drives in and out just to boot the operating system. So, some people are going to laugh and go what is he even talking about? But some of us who are older know what I’m talking about. About three discs and you finally had the operating system booted on a PC. But it was obviously that was going to change business and that was going to change the world. And so, at a very young age and I announced to my father I was leaving Pricewaterhouse and he was very upset with me he said, “You’re crazy, you just got your MBA, you’ve got your CPA certificate, you’re going to become partner, why are you leaving Pricewaterhouse?” And I told him because PC is going to be the next big thing. I think the funny thing there is that my dad was branch manager for IBM in town and so he felt like he was an authority on that and he told me no way, PC is a joke, I mean, we’re going to make maybe 5,000, 10,000 of these worldwide, it’s really just for the hobbyist, Arnie. And so it was interesting because here was a second generation computer son of a computer executive bucking with the times there and going with the PC. But it’s obviously become such a big deal, what’s really interesting is to see how everything has evolved from power to individual people to now bringing all of this compute power into the cloud. And the implications of that is really pretty astounding for the future of technology and the future of productivity. 

 

Joe: So, what specifically about the cloud do you think offers the most opportunity?

 

[00:05:58]

 

Arnie: Well, because at the end of the day what’s really valuable in all of this equation is the data, okay. So, with where we’ve evolved technology now we’re able to now bring data together from many different sources. Well, once you have the data you actually have the patterns of reality somewhere encoded in that data. And so if you use data analytics, machine learning, you can learn everything that you need to understand about any set of data and there’s a lot of secrets that are unlocked by doing that, right? Medical secrets, historical secrets, lots of algorithms are being discovered that are resonating and allowing us to move forward in a lot of ways. So, it’s not just about the fact that we have the technology, it’s that we have the technology creating the data and gathering the data and now analyzing the data to solve a lot of problems we’ve never been able to solve before in medicine, in education, and in many other areas. 

 

Joe: When you went to your father and told him about leaving Pricewaterhouse, at that point was being an entrepreneur just sort of in your DNA and it was just a matter of when? Or was it really an opportunity that drove you that you just saw and you just had to go for it?

 

Arnie: The funniest thing was my father would sit on the back porch and we would always have discussions about business and his career and what was going on at IBM. And so, from the very young age, you know, I was kind of his sounding board, if you will. And it was always on the back porch and it was always rocking back and forth in a chair smoking a Winston cigarette, you know? The discussions would happen in that setting. And he told me he said, “You know Arnie, I’ve really worked really hard for IBM for all these years and I just think that if I had gone out on my own I would be in a much better place now.” And so, he always promoted entrepreneurship. And so that was the funny thing, right? Here he is a technology executive, you know, one of the first ones. I mean this guy graduated from the 1959 class of sales people for IBM. You know, where they took the class photo and it was all 25 of them with pocket protectors, you know, that was IBM graduating class of sales people back then. So, it was in the very infancy of computers that he started his career. So, it was kind of interesting for him to promote entrepreneurship, promote technology, but that’s a good example of how even people who are totally tuned in when technology will zig or zag in front of them or the future is starting to change, they don’t see that necessarily. I think that’s one of the things that people in technology have to be very cognizant of, this thing is always moving, always changing, you have to stay on top of it.

 

[00:08:37]

 

Joe: And maybe back then there wasn’t that sort of middle way, there was either big, big, big or hobbyist. And maybe there wasn’t enough of a path laid down where you can have a ConnectWise type of company and grow it from small to big because it hadn’t really been done at that point.

 

Arnie: Yeah, well I mean if you think about the original PCs they were $5,000, not a lot of people could afford that, right? And so, what he didn’t see and what no one saw except for George Moore and Moore’s Law, you know, that this cost of technology was just going to just keep dropping and dropping and dropping so that it would be affordable and that it would be miniaturized. I don’t think anyone saw that. But with all of that what’s really interesting is how it’s now come from power to the people and the data down to individual departments, individual people, and now all of that data is coming back to the cloud. So, I think that’s all getting centralized so we went from completely centralized data with mainframes to de-centralized and now we’re centralizing it again, but now we’ve got the data in one place and we’re going to analyze it and so we’re going to get answers. 

 

Joe: And those conversations you had on the porch with your dad, that’s a tradition that you pretty much carried on in your own family involving your sons, your wife. So, talk about wrapping your family into ConnectWise.

 

[00:09:51]

 

Arnie: Well, just as my father always had me involved in what was going on in his career it really did help me gain great perspective as I went through school and college and MBA program. I wanted to do the same for my family, and so my wife Lauren is also a graduate of USF, she’s got a marketing degree. So, at dinner it was always interesting discussions. We have two sons Arnold and Peter, always interesting discussions about business, about technology, a lot about marketing. And so we made that just sort of common place. It was always just part of the discussion. But yeah, discussions on the porch have always been a tradition in the Bellini family and it’s a place that we tend to reflect, but we do focus a lot on business because I think there’s a lot of magic in the ability to create a business, there’s magic in the fact that here in the United States you can very easily and quickly create a business. I don’t think a lot of people understand the restrictions that are imposed by almost every other nation to become an entrepreneur. So, I think it’s really great what we have here in the United States. 

 

Joe: And how much do you think that wide ranging passion for entrepreneurship and respect for entrepreneurship and understanding for entrepreneurship played into ConnectWise’s success because ultimately the people you’re building the software for need to be successful business people too. Just the software alone isn’t enough, so do you feel like that understanding helps you craft your product and your presents and partnership with them to help them be more successful than they would have been with just straight software alone? 

 

Arnie: Absolutely really good point. ConnectWise has always been about a holistic experience, it’s not just about the software, the software is just a tool. If it’s not implemented the right way it won’t have any measurable change on the business so it has to be implemented the right way, it has to be used the right way. And what’s really interesting is, you know, whenever you put in any system you’re changing the way the business operates, you’re changing their processes. And I can tell you that is the biggest challenge of all right there. And so that’s a human thing, that’s not a computer thing. So, what’s interesting is if you’re really going to have success in technology you do have to understand that technology, but you really have to understand people because at the end of the day people are going to have to use that technology and if you’re not making it so simple for them to use and convenient and now even desirable and even pleasurable, if you’re not doing all of those things you’re not going to get the human behaviour that you’re trying to get by building that application. And so, that’s the real interesting part of where we are today. 

 

[00:12:19]

 

Joe: You’re up for a physical challenge. I think you just did a 120 mile run across the Everglades? 

 

Arnie: [Chuckle]

 

Joe: Is that real? A bike? What was it?

 

Arnie: For the American Heart Association. I was very proud of this, it was very exciting. We raised $152,000 for the American Heart Association. And what we did is we rode the entire state of Florida across the entire state from the East Coast to the West Coast. So, we started in South Beach Miami and we ended up on Marco Beach, it was 111 miles and we were able to raise $152,000 for American Heart Association, so we’re excited about that.

 

Joe: That’s fantastic.

 

Arnie: Those are just fun things to do. Lauren was nice enough to let me train and swim the English Channel, that was about a two year effort, that was a lot of fun, I’ve done a bunch of these kind of crazy things, it keeps life interesting.

 

Joe: So, obviously there’s a certain level of determination, a certain mindset that one has to undertake that kind of training, how much of that was required in the early days of ConnectWise from the infancy up to sort of teenage years? Was there often sort of cash flow stress? How did that sort of determination map onto the early days of building ConnectWise?

 

Arnie: Well, for me ConnectWise was easy, and I say that in a sense that I had total support from Lauren. She told me early on, she said, “Look Arnie, go for it. If that’s what you want to do, if you want to build this business and you’re really passionate about it I’ll get a job and we’ll live an apartment and whatever we’ve got to do we’ll do.” And so having that support means everything to an entrepreneur. And so having a partner that gives you that support was everything. That made it easy, right? And because of that I always kind of got up a lot of gusto and went at it with a lot of energy, we never really had cash flow issues at ConnectWise. I’m Italian, I don’t like owing anybody money. I like people owing me money. [Chuckle]

 

[00:14:12]

 

Joe: [Chuckle] And I would say the other side of that coin is people who achieve at that high level who are doing, swimming the English Channel and building these businesses. I think you can build a core group that can maybe kind of keep up with you, but obviously as you get more and more and more employees there’s going to be a drop off of people who it’s just a job for and don’t come with the same passion, which is understandable. So, mentally how did you handle people around you not being as invested as you are, especially as you grew bigger?

 

Arnie: It hit me hard in 1996. I came home from work one day and I was just dejected, I was working so hard. And it didn’t seem like anyone else was and I didn’t understand that. And so I told Lauren I said, ‘I don’t get it. I mean I’m just busting my butt and I’m not seeing anyone else really caring that much.” And she said, she said, “Well, they’re not owners, why would they?” And then I went back to everything I’ve always realized the energy source is entrepreneurship and ownership and that’s when through Lauren’s kind of guidance I agreed to put together a stock program for colleagues. And what’s really cool is that we had 70+ millionaires with the ConnectWise transaction that happened last year where we sold the business to the largest and most successful Silicon Valley private equity firms Thoma Bravo. I’m also proud to say that a year into this acquisition Thoma Bravo has put ConnectWise up as an exemplar to the rest of their portfolio saying these guys are the superstars. So, it’s really nice because here you have a Silicon Valley private equity firm who has a beautiful portfolio of Silicon Valley companies, but you’ve got a couple over here on the East Coast and the East Coast one in Tampa Bay is the shining star. 

 

[00:16:00]

 

Joe: That’s great. Well, one of my favorite things to ask founders who have gone through the exit process is what were the most surprising things you learned about ConnectWise from the due diligence process?

 

Arnie: You know, I think it’s really for me going through due diligence made me realize I don’t really know that I want to sell this. [Chuckle] But I’m that way, when I’m going to sell a car I clean it up and I, you know, you have to clean everything up before you sell it, right? And so you look at it and you go why would I want to sell this? So, but the answer was easy for me because I’m 61 now so it was, you know, at some point the real measure of success isn’t how much money you made, it isn’t how much money you sold your business for, it’s about what that business is doing and what difference it’s making. And so, to answer your question about people and people that didn’t care, well stock makes you care, okay, everyone got stock. Over 250 million dollars’ worth of proceeds were given to colleagues, not founders, but colleagues, right? We created 70+ millionaires as results of the transaction. So, I think that really makes a difference, it’s a lesson that I’d like other technology companies to understand and learn and can certainly help them with it. But our stock program gave 18% of the company out to colleagues. So, a bit unprecedented, but we never needed to take private equity money, we never needed to take venture capital money or seed money. And so I knew that it was because we had such a great team of people that they were the ones that needed to be rewarded. And so we started giving out stock, it made a big difference. 

 

Joe: Was that felt immediately? Or did people really need to get their head around, obviously there’s a liquidity issue when you put out options, so was it absorbed by the people who got it right away and then sort of spread out to the later adopters? Or what was the sort of psychology throughout the company? 


Arnie: Yeah, well first of all my psychology was no, I’m not going to give them options because that’s a maybe, that’s a maybe that will be worth something. I gave them legal rights to the stock free and clear so they made that stock worth more, it made their cash out worth more. And so to me I wanted that direct relationship. At first it was, you know, that’s great, what’s my raise? Oh, I’m getting stock, okay, that’s a pretty piece of paper, but it’s not going to be worth anything and I got that for years, but that’s okay. So, I kept printing it out on very beautiful thicker paper- 

 

[00:18:17]

 

Joe: Right.

 

Arnie: [Chuckle] I made it more beautiful. Well, if you remember the early days, and people don’t realize this it’s an intangible, right? I mean, the very first intangibles that were successfully sold was insurance. And what they did is they made their documents, their insurance documents very pretty. So, if you get like your grandmother or your great-grandmother’s insurance policy you’ll see it. It’s like it’s this beautiful document thick and it just feels like it’s worth something, right? So, I ended up doing that with stock, I made it feel like it was worth something, but it was always the goal to truly make it worth something. And I think as the company grew people did get it, people did see. We showed them what the value of their stock was every year and how it would grow. And so when people got ahold of that it became real. 

 

Joe: That’s great. And why not do an IPO?

 

Arnie: Well, we did, we didn’t. We spent nine million dollars going through the process. We had Goldman Sachs as our lead banker to take us public.

 

Joe: Before private equity?

 

Arnie: Before private equity. So, in 2014, in fact Goldman Sachs was saying, “We’re going to make you the technology IPO of the year of 2015.” So, for me the ultimate goal, right, just like English Channel check can I swim it, right? And I want to see can I do an Ironman, I want to see, right? Can I take a company public? So, for whatever reason that was on my checklist because I thought that was the ultimate. Steve Raymund corrected me on that as a public CEO of Tech Data when he came on the board he talked some sense into me he said, “You can’t do this like the English Channel Arnie, this is not the English Channel and there’s consequences for the decisions that you’re going to make. Do you really want to be a public CEO? Do you understand what it means to be a public company these days after Enron after now living with Sarbanes–Oxley, which is good, but it’s just a lot of extra scrutiny and a lot of extra work. That coupled with activist stockholders and how that’s become so popular at some point it just didn’t make that much sense. But more importantly the process took a little while, we needed to get some things in place at ConnectWise to make sure that we could report on time as a public company, and that took time. So, there were a lot of reasons why we decided you know we really need to look at other alternatives at this point.

 

[00:20:30]

 

Joe: And so when you got to that point where you saying we’re not going to do an IPO? Or were you going to pause it while we explore the other options?

 

Arnie: Well, we had gone all the way- We were literally at the threshold of IPO and we had already had our organizational meeting, we had already gone into our quiet period. And then we just went into this long delay because we just weren’t quite ready for it with our financial reporting yet. So, it just became something that- It just didn’t make sense at some point to go down that public offering route. 

 

Joe: I think now, unlike in the past, PE firms can bring equivalent money to the table, which is huge. 

 

Arnie: Well, you want the math on it. It’s like one of the things that was really disappointing as we looked at going public was software companies are significantly discounted in the public market. So, the only way that we could go public was to actually discount the value of the company by about 25% to 30%. The average for software company public offering is a 30% discount off the true valuation. So, that’s not too cool, right? And it shouldn’t be that way. I’ve actually as a result of that and as a CPA and an MBA I studied it really hard because then we spent nine million dollars on it so of course we were doing it for a while, but I will just leave it at this without being critical we need to fix public offerings in the United States or we will not have nearly as many public companies because private equity alternative is just way simpler. We’ve got to simplify the process. 

 

[00:22:01]

 

Joe: So, you talked about when you did the due diligence process and not wanting to sell because you liked what you saw and you then counted that by saying I’m 61. And at the top of our conversation you talked about all of the potential with cloud computing and bringing that data into place. So, I have to assume that some sort of opportunity, you know, neurons are firing in your brain. So, how do you handle you being out of place in your life where you’re sort of disengaging, but I’m sure your brain is still seeing all of this opportunity knowing that you could go down that road and really have a great time doing it, how do you reconcile that?

 

Arnie: That’s easy. There’s three phases to your life, there’s learning, there’s earning, and there’s returning. So, this is the returning phase, right? I did my learning, I did my earning, and now I’m doing the returning. And so Lauren and I are very focused with our foundation, The Bellini Better World Foundation, of finding ways to help others be successful, others that are in many ways less fortunate to become successful and it starts with education. And so one of the things that we’re very passionate about is taking this money that we’ve been blessed with and then pushing it back into the Tampa Bay community to do good things. So, one of the things that we’ve been focused on is trying to help education take a new modern approach. And one of those modern approaches that’s going to be very important into the future given the technology future that we’re looking at is going to be bringing back the arts, performing arts, arts of all kinds to education, right? That’s something that has been discounted out of education that needs to come back.

 

[00:23:52]

 

And so Lauren and I we’re making a gift to Tampa Catholic Alma Mater to build a center for the arts. And that’s just the beginning of what we’re doing there. We’re working with the University of South Florida, we’re also going to be working with Saint Leo University, two universities that we have personal interactions with, members of our families have gone there. And so we’re looking to find ways to help them with modernizing their educational systems to be prepared for this onslaught of technology that we see coming in the future, right? 50% of the jobs that we all know about today will not be there in 20 to 25 years. And that’s going to be just this huge change that we got to be ready for. So, one of our commitments is to create 70,000 high paying high-tech jobs with the money that we’ve been given as to put money back into the Tampa Bay community so that it gets 70,000 high paying high-tech jobs coming here. It starts with education, it starts with some other things. So, I guess I would say that I’m done earning money, I’m very focused on how we can take the money that we have and leverage a better community and leverage it to create a better world here in the Tampa Bay area. 

 

Joe: So, as you dig into the mechanisms for achieving that goal of 70,000 new jobs do you feel they exist? Are you finding places that you can comfortably put your money and say if they just had more resources they can make this happen? Or do you think to some extent you’re going to have to create some of those mechanisms yourself? 

 

Arnie: We’re creating them. Well, I look out there and what’s great about Tampa Bay is everything is ready, it’s like all the enabling points are there to make some really interesting things happen, you just have to kind of connect the dots. And one of the examples is this, University of South Florida is an amazing university. And think about it, it’s the only major university in the state of Florida that’s in a business district area. The opportunity for us to connect USF to the business community in the Tampa Bay area is immense. I had tremendous success at ConnectWise bringing in interns from the University of South Florida. I have many other entrepreneurs in the area who have done the same thing. So, we’re going to actually make that simple, right? Click, simple, right? You know, how do I get an intern from USF? And so we’re working on ways to connect the business community to this internship at USF. Interestingly enough the state collegiate system has now got a brand new KPI, guess what it is? Jobs! Okay?

 

[00:26:25]

 

Joe: That’s helpful. 

 

Arnie: It’s not degrees, it’s not research papers, it’s do these students get jobs, okay? And we need to worry about that because we’ve got to get that educational financial debt that they hold, we’ve got to make sure that they can pay that off, right? So, these are some things that are really sort of layups almost that if with putting a little bit of effort and expertise and some money and some places around the Tampa Bay area we think that we can very quickly connect some dots and start seeing many jobs happening as a result of that, right? So, think about USF, we’re going to turn it into the Stanford of the South, right? I mean really having a tight relationship, the business community with the university. 

 

Joe: We actually have a name for that, that’s a big part of our business model with the St. Petersburg Group, we call it the constellation model. And we recently put a book out and did an event. The gas plants district is where the Tropicana Field is now which is where for non-St. Pete listeners where Tampa Bay Rays baseball team plays. And initially that was a large and thriving African-American area, lots of storied neighborhoods there. And they were moved out to make room to build what was then the Thunder Dome and then became the Tropicana Field. And so, you know, there were some of the jobs that were promised never came to fruition and essentially that community was just displaced. So, we have been doing some work and consulting in the African-American community and we’re connected with the group called Tiger Bay, we were able to have a panel equity to start the conversation. In the audience was a woman Kara Behar who had an employee named Sarah Vatelot who had just done her dissertation on this Gas Plant District. And so she sent her to us. And she ended up writing an article for us in the Catalyst. And about 10,000 people read it locally which is a good number of reads for this type of topic. 

 

[00:28:11]

 

One of the readers called and said, “Hey, there’s an 80 page dissertation behind this, let’s make a book out of it.” So, we were able to print a book and it’s called ‘Where Have All The Mangos Gone?’ Mentioned it to Beth Gelman who runs the Holocaust Museum in town. She said, “Well, let’s do a big launch because our traveling exhibit is civil rights in St. Pete.” And so we had this launch with a couple hundred people showed up. And Gwen Reese who is a black leader in town spoke. And so long story short it’s all these beautiful stars that already existed to your point and all we had to do was sort of reveal them and align them and we were able to get all of this goodness done from this great article to turning it into a tangible book to this great event. You know, event planning aside with just a few hours of connecting conversations and I made the joke at the time that we had formed a gas plant shaped constellation with all of these different people and then you could just simply look at those stars with a different configuration for the different need and show that different kind of constellation. And so it’s nice when you can just reveal the stars that are already there or help define the constellation. 

 

Arnie: Yeah, those enabling points are there. There’s so many organizations that are doing this and doing that and it’s like if you can kind of connect their efforts a little bit I think it becomes pretty amazing. One of the things that we’re doing is we’re sponsoring a leadership internship program with the Tampa Chamber of Commerce, now known as the Tampa Bay Chamber of Commerce which is controversial I’m sure. 

 

Joe: It is.

 

Arnie: But regardless they’re doing good work. So, we gave them a grant to explore bringing in the 25 top students from the three best schools in the area, right? USF, St. Leo, and University of Tampa. And they’re going to place these students in wonderful internships in the premier companies in the Tampa Bay area. So, this is our kind of pilot group for these interns. And once we get that going we’re connecting that to USF and once we get that going we’re going to start bringing it to the other schools in the area if we have success. So, we’re not really doing much of anything other than connecting dots there so it is an interesting constellation. There’s another interesting company in town here called Knack and they’ve created a platform that allows for peer to peer tutoring. So, if you think about college campuses and how tutoring is done right now there’s this tutoring center that’s bricks and mortar and you get there between 10:00 a.m. and 3:00 p.m. and you either get a tutor or you don’t.

 

[00:30:31] 

 

I mean, that model is broken and that’s not the way that it should be. And so what they’re doing is the complete digital platform that matches the very best students on campus with the students that need help in those subjects, how brilliant is that, right? So, these are some interesting and modern approaches to modernizing education that doesn’t cost the university system really anything when you think about it. So, there’s some really interesting ideas and technology will always be able to come and solve problems, so that’s what I’m excited about is knowing technology as deeply as I do and then looking out and saying okay, is it time to return, not earn, but to return, imagine what we can do applying technology to a lot of the problems that we have today. So, I’m just trying to get a heads up in the Tampa Bay area and trying to get some of these dots connected now so that we have a much better future. 

 

Joe: And what I love about the way you describe everything that you’re doing is that you call it connecting, I would say it’s value first. And a lot of times people or organizations that come in with big ideas and money they lead with we need a hub, we need to be the overarching x, y, z. And they come in and they want to sort of take administrative control and that’s how they express their desire to do good. You’re coming in and saying I’m going to deliver value, deliver value, deliver value, and connect value and bring utility and let that then grow into a nice garden. I think that’s fantastic.

 

Arnie: Absolutely, and that’s how I grew ConnectWise, right? I mean, you find the right talent, they’re doing the right things, you promote them, you enhance their talent, you invest in their human capital. You know, all I’m doing in this case is refining those enablement organizations that are out there and we’re saying, “Hey, if you had a little bit of money would you be willing to open a talent development center?” “Oh yeah, that would be great we could do that.” “Okay, good, well here is a grant.” You know? And by the way the chamber of commerce is interested in internships, how about we connect you together? So, everybody is out there trying to do the right things and you’re right, it’s like there’s no need for administrative control, right? I think we have enough enabling points out there we just need to connect them together into the proper constellation to solve the proper problem, right?

 

[00:32:39]

 

Joe: Yeah. So, one thing I need to dig into is that I love that you made some masterful acquisitions when you were running ConnectWise, talk about your philosophy on acquiring companies you had a reputation for being pretty fearless and how did you choose who you were going after and how did the culture piece fit into it? And I’d love to hear your philosophy on acquisitions. 

 

Arnie: Well, first of all I love technology and I love technologists. And I get really geeked out when I see an elegant or beautiful program design or database design, and so, I can find beauty in those things. And when you find the right solution that integrates with maybe a product that you already have it’s a question of can you afford that and do you have the confidence that you can cross-sell that to your existing customer base and I think that’s the real key. So, what you will find is in this technology world what you’re going to find is every acquisition is almost always about they’re in a similar customer base, we want to cross-sell the product. Okay, if you look at every Facebook acquisition, if you look at every Tesla acquisition, if you look at every Google acquisition, it’s either gaining technology, but it’s ultimately to cross-sell and grow their existing market. So, you know, if you apply those philosophies and concepts and you’re able to identify good software then you should be fearless. And we were very fearless there. 

 

[00:34:02]

 

I can remember sitting with my brother and I had reduced it down to the money that we had to go buy companies one year, it was 2010, and I said, “This is it.” I said, “We’re going to go buy three companies this year.” And he thought I was nuts. And I said, “How much money do we have?” And he said, “Well, you’ve got nine million dollars to go do this.” We took chips and we put them on the table and then we said, “How much do you think we could buy this one for? That one for? That one for?” We couldn’t afford it, right? So, we ended up doing 50% deals which every lawyer told us we were nuts for doing. So, we ended up acquiring one, two, three companies by buying 50% of them and then cross-selling them to our existing client base. So, that was just a very interesting way to do it, but what was great about that it assured culture. We didn’t have control, they didn’t have control, we had to collaborate. And so we forced ourselves into a business deal where we were forced to collaborate. I was told by every lawyer that reviewed it afterwards that was the most insane thing that he had ever seen, but what it did for the people that we were purchasing is said look, we’ll buy you, you’ve got to give us a discount on this first 50%, but as we cross-sell your product to the existing client base the value of that other 50% is going to skyrocket.

 

And so if you think just the association of our company can double the value of your company, then you’re going to win, but we didn’t, we quadrupled, quintupled. I had one entrepreneur, Greg Burke in Toledo, Ohio with Lab Tech and he told me when I went to visit him in Toledo and I proposed hey, why don’t we put our companies together? Why don’t I buy half of your company? He said, “Ah, you’d never afford us. You’d have to give me 10 million dollars, right?” Well, the funny thing is when I called Greg on the last of – when he got cashed out – he ended up getting an order of magnitude higher than that, you know? And so that was the fun conversation, the fun joke that we had amongst each other. The bottom line is that if you find the right people or find the right products and it matches with your client base you can create a lot of value for everybody and you just share it, you know?

 

[00:36:10]

 

Joe: How do the other companies handle that 50% offer? Because it’s just as weird for them too. So, did they come around it pretty quickly? Or what was sort of the process as you went down that road with them?

 

Arnie: Well, ultimately we needed to buy the other 50%, right? So, we ended up doing that in 2015 we put all three companies together and that’s when we went to march for a public offering and ultimately sold it to Thoma Bravo, private equity firm. 

 

Joe: That’s great, not that you couldn’t do what you kind of wanted financially before you had the sale, but how have things changed with the influx of – I know I think you said the last transaction was just recently completed in full so when you have this large pool of resources and free time it’s got to be a pretty fun place to be. 

 

Arnie: It is fun, but also it’s a responsibility. You know, I’m not the kind of person that will sit around idle. I feel like if I’m given something that I’ve got to go do something with it and I’ve got to do good with it. And so, there’s a bit of a responsibility there. The only thing that I’ve ever really wanted for myself and all of my colleagues is the ability to go to work and do what you love doing without worrying about money. And so I’d say the marginal utility of any additional dollars to me in this last year have been not very high because if you don’t worry about financial issues then I guess that’s a good place to be, and it doesn’t matter how much more they give you. Now you’ve got to go do some good with it, but it’s been fun doing that, it’s been fun having the opportunity to talk to so many organizations in the area and finding ways to help them out and help them do good. 

 

Joe: And it’s lucky that you have this mindset because there is just an almost immeasurable need to have this win in the area. And there’s so many people pouring themselves into trying to build Tampa Bay as a tech hub and as a start-up hub. And there’s plenty of money here but a lot of it is locked up in the real estate mindset. And as a big reason we started our PitchLyst in our section is to just let people who have been investing in real estate watch founders being interviewed, watch success stories, watch start-ups, understand the nomenclature, understand the vocabulary and all of that to get more comfortable. And here and you come in as the ideal has the responsibility of that been different than you expected? Less than you expected? More than you expected to step up and really be the figurehead or the poster person for our tech success? 

 

[00:38:30]

 

Arnie: Yeah, well I don’t know that I am, but I do feel a responsibility to put a bit of a spotlight on what can happen here in the Tampa Bay area and the resources and the amazing ecosystem that we already have here. You can build a very viable high-tech company here and I think that’s exciting because I think the future is a lot about high-tech, it’s about the digital world. And I think it’s like you said, I mean, we’ve got some great real estate industry here in the Tampa Bay area, how great would it be to have a really vibrant high-tech community here because those are all great high paying jobs, you’ve got great highly educated people in those jobs. It will help bring the economic prosperity of the entire community up. And ultimately that’s what you’re trying to do. 

 

Joe: Wonderful. So, what’s next?

 

Arnie: What’s really next for me and the thing that I’m most passionate about is saving wild Florida. So, there’s an ecological side to me that’s very strongly calling now to do what I can do. And what I mean by that is if we look at the state of Florida there is a thousand people that move here every day and so we’re at about 20… I’m going to get this wrong, but I’m going to say about 22 million people, right? Third largest state in the union, that’s pretty cool, right? We just beat New York out about two years ago. Larger population than the state of New York. So, with that and with the fact that we’re going to have 10 million more people by 2030 here. So, what’s going to happen? If you look and you say if you do nothing here is what Florida will look like 10, 20 years from now, but if we take a few basic steps to preserve our wild spaces to connect the corridors so that we can have animal passage through those corridors so that we can have animal passage through those corridors. We can preserve a unique ecosystem forever here in the state of Florida. 

 

[00:40:29]

 

And so one of the things that we’re really focused on is trying to work with the legislature to get them to see this so they put some budget money into conservation easements. And so what we’re really doing is we’re actually working on the science and the data and the ecological as well as the economic argument for a plan that would preserve wild Florida as well as promote immense economic prosperity. And so it’s about having a balance of the two, it’s not just about these 70,000 tech jobs we’re trying to create here in Tampa Bay area, we want to do that, and we want to see Florida grow pretty much where it’s already existing, right? On the edges, right? And to preserve the wild spaces and connect the wild spaces that we still have in the state of Florida. 

 

Joe: Wonderful. We’ll make sure to link to all of the resources that you’re connected to or you would put forth to help you in that cause in the show notes that accompany our conversation.

 

Arnie: I appreciate that.

 

Joe: And I’ve enjoyed it, thank you for taking the time to come in and congrats again on building something pretty awesome. 

 

Arnie: Thank you, appreciate it.

 

Transcription ends [00:41:34]

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About the host

Joe Hamilton is publisher of the St. Pete Catalyst, co-founder of The St. Petersburg Group, a partner at SeedFunders, fund director at the Catalyst Fund and host of St. Pete X.


About the St.Petersburg Group

The St. Petersburg Group brings together some of the finest thinkers in the area. Our team is civic minded, with strong business acumen. We seek to solve big problems for big benefit to the city, its businesses and its citizens.