The time was right: "I’d run out of gas"

After serving as chief technology officer of Weta Digital (now Wētā FX), and establishing the New Zealand Supercomputer Centre, Scott Houston delved into the startup world in 2004.

What followed was a decade-long journey during which Houston’s company GreenButton forged a strategic partnership with Microsoft and rode the wave of interest in cloud computing, helping enterprise customers move their applications online.

Microsoft bought GreenButton in 2014 for an undisclosed price, with the company’s technology incorporated into the software giant’s Azure cloud platform, and many of GreenButton’s 30-strong team transferring to Microsoft.

Here he talks to Peter Griffin about the story behind the exit.

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After selling pretty much everything to keep GreenButton going during the global financial crisis, what did it feel like to sign the deal with Microsoft?

I’d sold both my houses, I was living on my boat. It was a relief. But it’s also your baby, and it's really important that your team is going to a good place. We didn’t have any concerns on that front; we’d worked enough with Microsoft to know what we were getting into.

Linda and I were getting married three months after we sold GreenButton. We actually took the entire company to Santorini for our wedding. I woke up there one day and I thought ‘wow, I slept through the night’. I didn't need to worry about cash flow and money in the bank and payroll. Goodness gracious, it took three months for that to happen.

It was ten years of hard, hard slog. There was a level of fatigue among the investors, who wanted to see a return, and from me as founder. I was living in the US, I had kids and didn’t see much of them during their secondary school years. From a family perspective it was just hard. 

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How did the opportunity to sell to Microsoft come about?

Microsoft was second to Amazon in the cloud market, and Steve Ballmer, who was running Microsoft at the time, told the Azure team to do anything to catch up, including look at acquisitions. 

The tipping point in the Microsoft relationship was the work that we did with Boeing. Boeing said to us, with all due respect, we don't really want to pay a company in New Zealand every time we push the green button. We like all of the orchestration tools that you created for Azure, but we want them as a product. 

A Fortune 500 company had adopted our product and found it really useful. Microsoft looked at that and thought, this can be a key point of differentiation for our other customers. That’s when they wanted another conversation about an acquisition. That was their third look at GreenButton.

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What's it like dealing with a big multinational during acquisition negotiations? Was there a lot of haggling over price or was it a fairly straightforward transaction?

We couldn't agree on the price. I’d gone to my board chair for advice on what our asking price should be. He said, ‘give them the biggest number you can while keeping a straight face’.

We eventually got about a quarter of that number. We had around $1 million in revenue at the time, but we were able to estimate the revenue GreenButton could generate for Microsoft as part of Azure and it was considerable. 

There were some conditions. They wanted 70 percent of the development team to come across to Microsoft. They also said one person in particular would have to come across or the deal was off. I puffed my chest out thinking it was me, but the key person was our CTO, Dave Fellows. They also offered me a great role, but I’d run out of gas. Dave went across and did great things and is still with Microsoft nearly a decade later.

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Were there any specific advisors, services or resources you found helpful through the process?

Jenny Morel introduced me to John Cromwell and his team at GrowthPoint Technology Partners in Silicon Valley. They were really fantastic. They led the negotiations, which was important. By that stage I was too close to it. Everyone really wanted to sell and come out with some money.

We left it to the experts, and they got us more money. It was about a 15 times return for the original investors and four times return on the last investment round, which was just a year earlier.

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In hindsight, was it the right thing to do, and the right time to exit?

We were running out of cash, we were fatigued. I had some challenges with the board. We weren't hitting our milestones. So it was a really good outcome for everyone. I owned 25.6 percent of the company. 

You see these $1 billion exits of 20-person companies, and you go ‘wow, that could have been me’. But the majority of exits for these large multinationals are in that sort of US$20–$50 million range.

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What’s life been like since the sale?

I have a great lifestyle. I’m mainly involved in artificial intelligence companies these days as an investor and board member. I’ve written a novel about AI, which is coming out soon. 

I've made more money since GreenButton through investments in tech companies than I made from the sale of the company. But selling it allowed me to go on to do these things, which are very rewarding.

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As told to Peter Griffin 

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