Pilgrim’s
Progress
by Bridget
McCrea
What tech rubble? This nine-year-old software company, built
by immigrants, has expanded to Europe, snagged a slice of
venture money and reports mushrooming sales.
The technology
downturn has taken its toll, particularly on companies with
“software” in their names. Some have succumbed to
the pressures, while others have fought back and come out
stronger. Like Pilgrim Software Inc. Over the last two years,
the Tampa company has watched its cost of sales rise 50 percent,
its sales cycle double and its customers become ever more
cautious.
Daunting
as that may seem, Pilgrim’s sales last year grew by
10 percent, sales this year are on track to double, the
company snagged $2.15 million in venture capital and it
has expanded into Europe.
Accomplishing
that required a strategy that any
good small business consultant would advocate:
find a niche, stick with it and fill it better than anyone
else can.
“Sales
cycles that took six months now take 12, which means you
have to have more work in the pipeline or you’re not
going to make it,” says Ami Utji, Pilgrim Software’s
president and CEO and one of the company’s four cofounders.“Higher
cost of sales requires more people in the field making sales,
while the caution in the market has driven customers to
want every solution proven before they make a commitment.”
The
market niche carved out by Pilgrim – a developer of
Enterprise Quality Management (EQM) software solutions –
is to a group of FDA-regulated industries that by 2005 must
be able to fully trace their manufacturing processes. Made
up of pharmaceutical, medical device, biotech, food and
beverage and cosmetic manufacturers, the industries are
under pressure right now to comply with FDA rules that were
announced two years ago.
Calling
those industries “bulletproof recession areas,”
Utji estimates that in 2002 Pilgrim Software gleaned about
half of its $7.4 million in sales from them, up from 35
percent of $6.7 million in sales in 2001. This year, she
says, the share should grow to 65 percent as the large manufacturers
scramble to meet the looming deadline.
Yet
Pilgrim (www.pilgrim-software.com)
could face “cultural” challenges in trying to
penetrate these FDA-regulated industries,
says Michael Burkett, research director with
AMR Research in Boston, which follows these
industries. “There’s a lot of organizational inertia
out there, companies that are stuck in their
ways.”
Nonetheless,
that should not prohibit Pilgrim
from targeting the industries, he says. “These firms
are under pressure to beat the mandates.
They’re looking for solutions, and Pilgrim
Software is a good candidate to provide
them.”
“Pharmaceutical
manufacturers need to be able to trace problems back, or
they won’t be able to sell the drugs,” says Utji.
“If there’s a problem with the drug, companies
need to be able to quarantine certain areas instead of shutting
down the entire production. Our solutions allow them to
do that.”
All
large pharmaceutical and medical device companies fall under
the federal
mandate to implement systems that meet certain requirements.
“Our system
meets those requirements,” says Utji. “The mandate
started as a warning two
years ago, but the grace period ends this year and the FDA
expects everyone
to be compliant by 2005.”
For
those prospects and customers, Pilgrim creates a quality
management platform that enables multiple sites, organizations,
customers
and suppliers to effectively coordinate
activities and share critical information.
Utji says the company works in a “business-
to-business type” of environment
targeted to large corporations. “We can’t
sell to mom-and-pop companies
because our system would be way too
big,” she says. “It would be like driving
a Jaguar to go buy groceries.”
To help
companies comply, 90- employee Pilgrim hired several new
executives last year and opened a European division with
a staff of five. Utji says the company tapped one of Oracle’s
cofounders in Europe to head up the new overseas operations,
which will begin work on its first few projects in the second
quarter 2003. “We’re hoping the European group
will put us on the> map as a global company,” she says.
Along
with Utji, the company’s other
founders include Prashanth Rajendran,
executive vice president of sales and
marketing; Atulya Risal, executive vice
president of software engineering; and
Maya Leeflang, comptroller, who also is
Utji’s sister. The sisters are from Indonesia,
Rajendran is from India and Risal is
from Nepal. They are all naturalized
U.S. citizens,
except for Risal
who soon will
be. They met in
graduate
school, at the
University of Florida and the California
Institute of Technology.
The
name Pilgrim Software is an allegory,
they say, for the founders’ journey
to the land of promise. Hardly fluent in
English 20 years ago at the time of her
arrival in the U.S., Utji embarked with
great hope and has been on a steady
course to fulfilling her dreams.
To further
those dreams, Pilgrim took on its first round of outside
financing last year. In October, the company netted $2.15-million
equity investment by Stonehenge Capital Corp. Hyde Park
Capital Advisors LLC, a Tampa-based technology- and healthcare-focused
investment banking firm, arranged the funding on Pilgrim
Software’s behalf. Steve Bennett, director of Stonehenge
Capital in Tampa, says he sees about 600 business plans
annually and invests in three or four of them. Pilgrim was
particularly attractive because it was clearly a “market
leader in enterprise quality management,” says Bennett.
“We’re always interested in investing in market
leaders.” He says revenues are above expectations so
far and that first quarter 2003 is going exceptionally well
in “what is obviously a very difficult market.”
He will not disclose the percentage ownership that Pilgrim
surrendered in return for the investment. Utji says the
money so far has been used to open the European operations,
increase its current workers’ technology skills and
hire sales and marketing employees.
In addition
to the FDA-regulated
industries, Pilgrim also is focusing on:
(1) airlines/aerospace and defense; (2)
automotive; and (3) high-tech/general
manufacturing. Within those primary
markets, the company has successfully
sold software to more than 150 client
companies and currently has approximately
350 site installations.
Pilgrim
seems to be on a success
track that would make any technology
firm drool right now. According to Utji,
the company has maintained a “top
three” ranking in the information technology
industry. So, whether Pilgrim is
competing on the FDA-regulated side
or the “highly engineered” products,
she says, Pilgrim often “makes it to the
top three” in a selection process. “We
win about 50 percent of the projects, so
if we’re competing against 10 other
companies,” she boasts, “that means the
other nine competitors share the other
50 percent.”
The
company is on track, Utji says, to double its sales to $14
million this year and the company’s staff will grow
to about 110 by the end of the year. Pilgrim’s average
project cost is about $250,000 but can go as high as $1
million. Utji attributes the increased sales to the company’s
three primary strategies: moving into Europe; taking on
venture capital to help fuel growth; and targeting the FDA-regulated
industries.
SUCH
HEADY GROWTH HAS NOT
always been the case. Back in 1994, its four cofounders
tapped a total of $250,000 on their personal credit cards
and started Pilgrim Software. This seed money was used for
research, development, sales and marketing. Success soon
came. By 1995, the company had $500,000 in sales –
an accomplishment that Utji calls “very significant.”
“Without that 1995 revenue,” she adds, “there
would be no Pilgrim Software.”
