It began over dinner.
Nancy and Randy Flamm, who worked for competing suppliers of materials to small
manufacturing companies, were out with a shared customer who wished that his
factory had the kind of MRP and ERP software that large manufacturers had. Randy
sensed opportunity: As production manager at a small manufacturer in the early
1980s, he had written his own software for inventory and scheduling. In short
order the Flamms quit their jobs, took a second mortgage on their house in Los
Angeles, and launched IQMS.
They had 100 customers
within a year.
The innovations came quickly.
Randy converted his software to the newly introduced Windows platform, creating
one of the first Oracle-based client-server programs for small manufacturers.
Then he connected the application to factory equipment so that the machines
automatically sent operating information to a data warehouse. Next, he linked
the warehouse to back-office financial and human resource systems for the
industry’s first end-to-end solution. He changed the whole game by delivering
comprehensive views of factory performance in real time.
Now IQMS enabled small
factories to do what the big ones did: monitor operations moment by moment
around the clock, adopt lean principles, organize just-in-time supply chains, cut
downtime with proactive maintenance, and determine production cycles and unit
costs within minutes and cents.
With growth came both challenges
and opportunities. The Flamms had moved IQMS to Paso Robles, a wine region midway
between Los Angeles and San Francisco, which made them one of the handful of
high-tech companies near mid-state universities such as California Polytechnic
University (“Cal Poly”). But then Silicon Valley began attracting talent from those
schools, and the Flamms had to get creative with their recruiting. One tactic
was doing interviews on local talk radio, encouraging parents and grandparents
to tell college-age kids that Paso Robles had its own high-tech employer.
Meanwhile Randy was the
company’s CEO, CTO, and software designer, and nearly everybody in the company
reported to him. Nancy, the controller, pulled in her brother and his wife to
run sales and marketing. When the Flamm’s babysitter Shannon Holloway showed
interest in IQMS, they discovered she had management talent and hired her, too.
At the 20-year mark, IQMS
had annual revenue of $35 million, no debt, a strong competitive position – and
the Flamms were turning down dozens of investor inquiries each year. When they
decided to recapitalize in 2014, one company stood out. “TCV was heads above
everybody else,” Randy Flamm says. “We spoke the same language, and everything
they ever said was exactly what happened.”
“IQMS caught our
attention well before we invested, because of our experience with other founders
who achieved the same kind of technological and competitive breakthrough,”
explains Jake Reynolds, general partner at TCV who led the investment with
fellow general partner Kapil Venkatachalam. “We weren’t worried that they had
taken little or no outside investment, because that meant they were going to judge
us based on what we could do for their business, not the size of our check.”
TCV presented a roadmap
for moving IQMS toward cloud-based, SaaS solutions that generated revenue from
subscriptions rather than licenses. TCV also advocated for tools to surround
the company’s customer-focused products with stronger support and professional
services, and for increasing speed by building out the software architecture to
a true multi-tenant solution. Significant investments in all these areas would
take several years to accomplish but prove decisive for scaling the company.
Just as importantly, TCV
had abundant experience with transitioning founder-led, family-run companies to
experienced manage teams. That’s why everyone was delighted when Gary Nemmers,
formerly COO of HighJump Software, agreed to become IQMS’ new CEO in 2015. Nemmers
was a veteran of other founder-led businesses, and he had helped grow and scale
multiple businesses and prepare companies like HighJump for its successful exit
via acquisition. “The first time I met Randy and Nancy, we clicked, and I knew
it in my gut that the time of the transition was right,” Nemmers recalls, and
that was the beginning of IQMS’ next phase of rapid and sustainable growth.
Respectful of IQMS’s
close-knit culture, Nemmers worked closely with TCV and brought in seasoned
veterans to take leadership positions the company had never staffed before, including
Matt Ouska as CFO, Dan Radunz as CTO, and Cheri Williams as SVP of professional
services. Under Nemmers’ leadership, the team formalized and aligned the
company’s core business processes so they could accelerate product management
and development, serve more customers, and scale more efficiently than in the
past. They also established an office near San Francisco to increase the
company’s accessible pool of software talent.
“Our mantra was ‘people,
processes, playbook’,” says Nemmers of his first year leading IQMS. “Once we
added a few key people, we could bring in strong processes across the entire
firm and establish playbooks to do things in a consistent, repeatable way.” As
for working with private equity, his advice to other CEOs is equally clear.
“You listen to and align with your board and your investors. At the same time, you
follow what has made you successful in the past because that’s why they hired
you to run the company.”
IQMS flourished and
significantly increased its customer base. Growth was not always smooth, but
TCV had Nemmers’ back. “License revenue is inherently lumpy,” he points out,
“so sometimes revenue was a rollercoaster. We’d crush our plan one quarter and
miss the next, but we had a plan and knew how to execute. The board was super
helpful in thinking long-term and strategically versus focusing on quarter-to-quarter
swings. They were great sounding boards.”
With a broader and deeper
solution set plugged into a professional marketing engine, IQMS emerged as one
of the top software providers for small and medium-sized manufacturers around
the world. The company naturally started attracting attention from the strategic
players in the ecosystem. “We knew that IQMS offered the best route for enterprise
software providers who wanted to expand into the SMB space,” Nemmers points out,
“so we played from strength. It wasn’t just the enterprise players evaluating
IQMS, it was also us looking for an ideal fit.”
Dassault Systèmes of
France stood out for exactly that reason, and Nemmers seized an opportunity to kickstart
the conversation. During a visit to Europe, he picked up the phone and called
Philippe Charles, SVP of manufacturing and supply chain for Dassault. “I told
him I was in Zurich and a whole day had opened up on my calendar,” Nemmers
recounts. “He said ‘Give me five minutes.’ Then he called back with an invitation
to meet him and his team in Paris, and that was the beginning of the great
relationship we built with Dassault over the next year and a half that led to
Nemmers and his team had carefully and strategically grown the business and poured energy into building relationships with customers, serving 1,000 manufacturers located primarily in the U.S. whose 2,000 manufacturing facilities in 20 countries produce for the automotive, industrial equipment, medical device, consumer goods, and consumer packaged goods industries. The core MES and ERP platform could be expanded with more than 20 additional modules including CRM and payroll, all integrated in a single database.
“Dassault is a strategic
vendor for enterprise manufacturers and was looking for a way to get into the SMB
segment,” explains Venkatachalam. “Initially we talked about channel
partnerships, but we had a feeling the discussion would pivot toward something more
strategic.” Nemmers worked with TCV to conduct a robust M&A process that
included more than 20 strategic vendors and investment firms. Dassault won the
deal and completed the acquisition in early 2019.
The two companies already
share around 600 customers, who use both IQMS solutions and Dassault’s
SolidWorks platform to run their factories. From this foundation, IQMS can
market to over 55,000 SolidWorks customers and Dassault can now address the
world’s estimated 250,000 SMB manufacturers. Even the timing is perfect,
because so many SMB manufacturers are now replacing legacy software that is
reaching end-of-life. Randy and Nancy Flamm are happily ensconced on their
ranch near the Pacific coast, while Nemmers guides his team and IQMS through
its integration with Dassault and onward toward even greater success.