MEET YOUR NEIGHBOR

In this installment of our “Meet Your Neighbor” series, SLO LIFE Magazine sits down for a conversation with Rick Stollmeyer. In 1998 he co-founded MindBody, a software company that provides a studio management online program to small businesses in the health and wellness industries. The company currently has 600 employees and is set to build a new campus near the San Luis Obispo Airport. MindBody is one of the Central Coast’s fastest growing companies—ever. RICK We had a long, wide-ranging conversation that touched on everything from the wisdom of going public to instilling work ethic in young people and the psychology of small business owners. Here is his story…

STOLLMEYER

PHOTOGRAPHS BY CHRIS BERSBACH

So, Rick, how did all of this get started?

I had family in the area—my dad moved up to Morro Bay to retire. I was a submarine officer in the Navy when I came out in the early 90’s. We had been in a recession. I ended up in San Luis Obispo, right up the street here in the Arbors, and was working in engineering management and commuting to Vandenberg Air Force Base. I had three kids at the time. I was happy to have a job and to have moved here to the Central Coast; but, to me, what was missing in my work was a real passion for the mission. We were sending things up into orbit, like a satellite that could track terrorists, and do really important things. But, there was a lack of passion in the people I saw around there. Since I had come from submarines where—talk about passion— we were truly driven by the higher-level purpose of what we were doing. And so I was hungry for an opportunity where I could really be all-in and really excited by it and with a team that was really excited. That was really the story of my career for several years. I kind of bounced around doing different things, moderately successful on the surface but not really that happy or that engaged.

When did things start to change?

One day a high school buddy of mine, Blake Beltram, gave me a call and asked me to meet him after work in Santa Barbara at a coffee shop on State Street. He said he wanted to show me something. He demonstrated an early version of the MindBody software program on his laptop. It was called “HardBody Software” at that time. He and I were talking about that meeting recently and he reminded me that I wasn’t very impressed at the time. [laughter] I wasn’t like, “Wow!” It was more like, “Okay.” I didn’t really get excited about it until I started to spend time with the customers and could start to see the sort of impact that the software was making for them in their businesses. He had like nine clients [today MindBody has nearly 30,000] and Blake was by himself, developing the software, delivering it, training them how to use it, and taking the support calls. So my initial job was to go out and sell it. Three weeks into it I realized that Blake was getting buried by support calls. So I took the support responsibility from him and hired some Cal Poly students to start doing tech support out of my garage—and that’s how we got started.

So, you quit your secure but uninspiring job. What next?

In the early days the most natural thing for me to do was to get a laptop and just start heading up to San Francisco and down to LA and just spend time with the customers to really understand them. And the more I learned, the more I just fell in love with them. It touches everything I care about. I love small business. I love local. I love health and wellness. And, you know, something that America is just so uniquely good at, it’s the people with the dream that go chase that dream. Leave the safe job, cash in their 401k and borrow money from friends and family, take a second mortgage on their home and sign a lease on a space in a strip mall somewhere.

How has understanding the customer helped?

Having that insight about who these people are gave me an understanding to know that, for example, when we went into the recession in 2008, I knew that we weren’t going to lose that many clients because they are all-in. They’re

not going to quit because their revenues went down 30%. They’re going to reduce staff, cut costs, work six, seven days a week. You’re going to go to the mattresses, man. That’s how local businesses operate. We had many competitors who didn’t understand that. We knew that. We went out and raised money and accelerated during that time. And that was a critical moment. We raised $5.6 million in March of ’09 when it was not an easy time to raise money. The markets were in turmoil and we had to do it at a discount, meaning that those investors got more equity in the company than they would have a year prior. But, those dollars were so much more valuable. The trade shows we attended were cheaper, the Google AdWords were cheaper, talent was cheaper, even the airline tickets were cheaper. So, while our competition was back on their heels waiting to see what would happen, we were accelerating. And, that was a critical moment. It’s very interesting to me that you can succeed in good times and bad. It’s all about your approach and making the right decisions. It does not necessarily mean going where the herd is going.

Whatever happened to your high school buddy?

Bob Murphy, my partner now, bought him out. Blake had grown tired of the business. We weren’t making any money. I mean we were busting our butts and making nothing. Early on he said, “This really isn’t my lifelong dream.” And I said, “You know what, it might just be mine.” I was falling in love with it while he was falling out of love with it. Start-ups have these sort of strange paths like this. The clean start-up story with the perfect conception of an idea rarely is the real story. The real story is usually, how did that idea lead to the next idea and the next idea after that. So, when Bob bought him out, he embraced the notion of the online version. Blake didn’t get it. Blake, frankly was invested in the notion of the desktop software. That was his baby. He built it. And going online, as I was suggesting, was going to kill his baby.

Just to clarify, this was a critical decision in that you had opted to go with the online version and charged a small monthly fee for use of the software, which is sometimes called a subscription model instead of selling the desktop software for thousands of dollars a pop, correct? And who exactly is Bob?

Yes, that’s right, 100% online. It’s often referred to now as “cloud computing” or “SaaS,” which is software as a service. So, Bob was one of our first clients in New York. I had gone out and set up Bob in New York City. He had multiple locations of his studio called Be Yoga. He and his wife ran the studio, one of the more successful yoga studios in the country. But he was burning out on running the studios and he ended up selling his business to YogaWorks, who was another one of our clients. So, he took a portion of the proceeds and used it to buy out Blake. So, Blake was able to get his capital out and go pursue some other things that he was interested in and now Bob’s my partner. And, when he and I started talking about where we wanted to go, we were in complete alignment. So, now I call Bob a co-founder because the company that pivoted at the time and became web-only is a very different business model, a completely different product than the one we started with. We had co-founded a new company because if we had stayed with the desktop software we wouldn’t be here today. So, it was really kind of a Phoenix rising out of the ashes of the old company.

You got the right partner and hired hundreds of happy employees. You must be a pretty decent judge of character.

It took me hundreds of tries over several years to develop a method by which I could really understand someone’s value system. I can’t really describe it to you, except I ask a lot of questions about who they are and what motivates them and let them do most of the talking. Lots of open-ended questions. It isn’t that we are trying to find the flaws in people, it’s just that we are trying to find the fit. And, when you find the fit, it’s a big “Yes!” And you just go, “Wow! This person will do great here,” and it becomes a bidirectional interview where the candidate is also trying to determine whether they would flourish in this place. What are the purposes driving you? What do you want your life to be about? Are you hungry to have your work have meaning? Those people are fundamentally different than people who are the opposite of that, who may be apathetic or fatalistic, cynical perhaps with a the-world’s-going-to-hell-andthere’s-nothing-I-can-do-about-it attitude. Happy people are amazing. They just seem to be happy regardless. We look for values, not skills. It isn’t the “What” you’ve done that’s the most interesting, it’s the “Why” and what it meant to you. So, let’s say you majored in English Literature, okay. Why? And what did you get from it? The development of human ideas can be found in literature. I mean pick your author. There are so many exciting things you could say about authors and literature. So, if somebody majored in English Literature they better have some very interesting things to say about it. I’ve interviewed a lot of college grads and the ones that didn’t have to work, or the ones whose future was really scripted by their parents, you can really tell from a mile away. And when you see the ones where their parents, with all the best intentions just funnel their children a certain direction and paid for it all, they get to the end of their college time and they are really ill-prepared to enter the workforce and they cannot explain to you why they majored in English Literature.

What advice would you give to a young entrepreneur just getting started locally?

Well, first of all, avail yourself to the unique resources that we have in this community, the Center for Innovation and Entrepreneurship at Cal Poly, and the HotHouse [learn about the SLO HotHouse by turning to page 44]. That’s amazing. That’s extraordinary. I mean, how many communities have that? Second, don’t be afraid to talk about your ideas with the right people. A lot of times entrepreneurs get freaked out thinking that they’ve got to hold all their cards believing that their idea is so valuable. Ideas are cheap. Chances are a hundred people have already thought of your idea. It’s the execution of ideas that matter. We weren’t the only ones thinking of making studio management software, there were dozens of other people. We just did it better. And, so being afraid to share ideas can be detrimental because in the process of sharing them and having a conversation like we are right now— and you’ve given me some interesting things to think about today—every conversation I have, I gain something back. So, listen very carefully. And, I think you need a business partner. I don’t know any start up stories where one person did it all. I’m trying to think of one. Not Steve Jobs, not Bill Gates, not Google. So, get a partner that believes in you and is complimentary so that you’re not both trying to occupy the same space. But then you have all of the challenges of creating the relationship and there are about a hundred different ways that the relationship will fail. It’s like putting together a hit rock band, right? [laughter]

Is there a name for the burgeoning tech industry on the Central Coast? Silicon Coast?

Ooh, that would be great. I like that. I like that a lot. Why don’t you start calling it that in your magazine? It’s true, we have that here. There was that company that Amazon bought; I’m having trouble remembering their name, they have 70 or 80 employees they are keeping here. Rosetta/Level is doubling down with their new building here. We’re doubling down with our new building. We’re going through city approvals right now. So, knock on wood, it’s all being approved. It will be a 60,000 square foot building located across the parking lot. It’s really going to be beautiful. The main thing is going to be the plaza. We’ll have a stage where we can have presentations and the occasional live music. We hope that playing the MindBody Plaza will become a desired ticket punch for local bands. We hope to get the permits this summer and

break ground in September and occupy it a year later, so September 2014. That will bring our total square footage up to 138,000 here in SLO because we will also be keeping our space in the buildings we are already in. That should be enough for a long time. We think that we will top out at about 800 employees in the area, right here. And, that’s probably enough for the Central Coast. I don’t know that the community needs more than that. We can also imagine satellite offices. But just looking at the roads and infrastructure there’s only so much you can do here. But this will always be our center. So, our intention here is to put our roots in deep. And this is the headquarters of the company. So, even with the satellite offices they’ll come to SLO for professional development meetings and trainings. Even though we’ll have 800 employees here, we’ll have probably another 200 to 300 employees that come here from time-to-time. They’ll stay in area hotels, eat in our local restaurants. The economic impact to the community will be huge. And I think the economic impact when we go public will be transformational. That will put us on the map. People will say, “Wow, this San Luis Obispo start-up went public? It’s headquartered in SLO right next to this great university? It’s got how many employees? This sounds like Silicon Valley thirty years ago.”

Tell us about your family.

I’ve got four kids—20, 18, 13, and 8-yearsold. I’m pleased to have a happy, healthy family. My two older kids really don’t want to be a part of MindBody. My thirteenyear-old, Madison, she loves this place. I had her come during spring break to work here; she absolutely loves it. I mean real work; no screwing around. I paid her out of my pocket because I’m not sure it’s legal to hire her. But, she turns 14 soon and this summer she’s excited to work at MindBody. I think it’s cool.

It seems that industriousness runs in the Stollmeyer family…

My formative years were working at my dad’s retail store. It was so good for me. He had a lighting store in Southern California; Covina. All of my brothers and I worked there. We gained our work ethics and values from that experience. I thoroughly enjoyed that. I want my kids, if they don’t work at MindBody, and by the way, the reason my oldest doesn’t work here is that she says that people treat her differently. She felt that she wouldn’t be challenged enough. She thought she would be mollycoddled because she’s my daughter. I don’t think that’s true, but that’s how she felt. So, instead she went out and worked fast food. I mean, she got a tough job. I said, “Why don’t you come work with me at MindBody?” And, Emily said, “Dad, I want a real job.” [laughter] That’s the kind of thing only a teenager can say to her father.

But, Emily’s college experience has to be an easier path than most other kids, right?

My daughter, even though I have enough income to pay for it, and she knows it, works 20 hours a week at a dining hall at UC Santa Cruz. She was recently promoted to manager. She called me a few weeks ago and said, “Dad, I came to this realization that I was the only one working there that didn’t have to.” Her colleagues, other students, were there busting their butts at this, it’s a hard job, and they are doing it because mom and dad can’t quite afford school. But, you know what? Those kids are going to have this gift of a work ethic. They’ll have the focus and they’ll know that they’ve earned it. And my daughter, I don’t have to push her, she feels compelled to work as hard as she can. Now, she’s also working at the marine center. She started off as an unpaid docent, a volunteer, because you have to work your way in. Now they’re going to give her a paid position, so she’s not coming home this summer. I’m not one of those empty nester parents, instead I’m like, “Yeah!” I do not want a failure to launch at my house, it’s not going to happen. [laughter]

You’ve got another one graduating now, right?

My son Marc has done a number of different jobs, including working at my brother’s light store, Stollmeyer Lighting. And he’s a good, hard worker. The most proud thing about my kids is that they all know how to work; they’re all self-sufficient. That’s our family’s ethic. I’m only two generations off of Dutch immigrants. Hard working people. My son is going to move down after high school to Santa Barbara—a buddy of mine runs an engineering company that he interned at last summer and did so well in computer aided design that he wants him back. Marc doesn’t want to go straight into a university, he’s had off-and-on effectiveness in a classroom setting. But, he’s been involved in robotics at Atascadero High. It’s astonishing, they have a world-class robotics team. We have this amazing robotics team that won the world championship in 2011 and is consistently in the top 5% of the 2,800 teams that are out there. They are going to St. Louis in a couple of weeks to have another shot at the world champs.