Today Lytx (previously known as Drivecam) announced that it has been acquired by leading private equity firm GTCR for more than $500 million. Lytx is – by far – the leading company providing video and analytical safety solutions to commercial vehicle fleets around the world, with a dominant position in the US and growing rapidly in other countries.
But things weren’t always so rosy at the company. When Menlo invested in Lytx’s first round in 2005, the company had developed an initial good idea: combine the features of an aircraft flight data recorder and cockpit voice recorder into a camera unit for vehicles. This was packaged and sold to customers as an enterprise software sale, but left it to the customer to install the units and analyze the data themselves. We learned that customers either didn’t want a do-it-themselves solution or couldn’t figure out how to get it up and running. The company then implemented a business model that included installation and analysis of the recorded driver behavior. This approach was much more attractive to customers, who quickly signed up for the service.
Encouraged by the initial success, the management team decided to go for instant world-wide dominance and immediately spun up multiple new initiatives, including an international effort, a consumer business, an insurance partnership, and a small and mid-sized fleet offering. It took three years for the company to hit the wall. The software wasn’t reliable, and the overall product quality suffered as the development team tried to fulfill five different sets of requirements.
Brandon Nixon stepped as the new CEO in fall of 2008. He concluded after a thorough analysis that all new initiatives had to be terminated, and 100% of the company’s focus should be on serving its core constituency of self-insured, large domestic fleets. This required some painful decisions, including multiple layoffs at the VP and General Manager level. But at a crisis point in Lytx’s development, Brandon also recognized a number of director-level employees from within who were promoted to re-build the company, thus ensuring that everyone clearly understood the company’s goals moving forward. As a result of the refocus, product quality improved, and bookings resumed as the company’s sales team concentrated on a single type of deal that resulted in a dramatically-reduced burn rate. It also helped the company raise additional venture funding when the company needed it most.
After turning their attention completely on the core market segment for the next two years, Brandon and the rest of the team did extensive planning and preparatory work before starting to staff and fund the additional ideas at a more measured pace. Together, the management team rolled out an international expansion, an insurance plan, and a small and mid-sized fleet offering. Instead of burning cash and resources on new ideas, the team added revenue growth by focusing on each initiative incrementally rather than pursuing all at once and effectively killing the company.
Since Brandon joined as CEO, revenues and customers have grown more than 1000%. The Lytx story is proof that while having a worthwhile initial idea is important, the secret sauce is in the execution. Management teams who are able to work together to focus fully on what their customers want – without getting distracted by other ideas – can clear a path for sustainable growth. It may not happen overnight – and it may even be a bumpy start – but ultimately, a focus on what matters will result in success.