Wednesday, December 11, 2019
Interview with Laurence Sotsky, The OIX
Our interview this morning is with Laurence Sotsky, the CEO of The OIX, a startup providing tax credit and tax incentive management. Sotsky is an experienced entrepreneur, who last founded and led Hopscotch; The OIX is backed by Brett Markinson, the angel investor who has backed such companies as Hautelook and LowerMyBills. We spoke with Laurence about the startup.
What is The OIX?
Laurence Sostky: We have an interesting product that we've created over here, which is a specialized part of Fintech. We're in the tax credit and incentive market. You can think of it as a CRM for complicated tax credits and incentives. The way we got started was in the entertainment industry. Most of the major studios are using our solution. When you film a picture, there are lots of state, city, counties, and other jurisdictions that want to move your film production to their locale, because it spurs the economy. That can be built around a major motion picture or series, anything you can spend time working on that creates jobs. There's usually job credits based on creating a number of jobs, which typically are a large percent over the average income of a county. If you build something, there's lots of capital expenditure incentives. Most people are aware of this because of the effort around Amazon's HQ2, which made this very public. In that case, they said—we're going to build a new headquarters, and we want the states and cities to come with whatever incentives you might offer to have us consider moving our property there. That's the kind of space we're in. What's exciting, it there are multiple-trillions of dollars around the world in terms of the number of tax credit and incentive programs, both with countries offering tax credits and every state in the U.S.
Here at OIX, what we've done, is purpose built a cloud-based solution that allows customers to find those tax credits and incentives, and incentive discovery database. You can look at a map, and click on a specific state or country, and find all of the incentives, sort by what type of incentives exist. For example, if you're a manufacturer, and looking to build a new manufacturing facility, it lets you compare Texas to Georgia, for example, and what incentives are available in one place or another. It shows job credit incentives, where in certain states they provide incentives to spur the economy and bring in big business. Brownfield is also a big area of interest these days, which is taking an area that wasn't develop or was not developing, to encourage development in those areas. There are incentives for the fleets of Fortune 500 companies, transportation companies, distribution, and manufacturing, to encourage converting those fleets from fossil fuels to sustainable energy. There's all kinds of programs out there than need to be managed and accounted for. Some of our companies are sitting on billion dollar portfolios of credits, and there's lots of complexity to manage those credits.
Going a little deeper, once companies get those credits, that gets into centralization, where you are bringing all of that into one place. For Fortune 100 companies, or multiple operating companies, the question becomes how you structure your incentives and run your incentives. Some of these programs run for as long as ten years, and there are lots of regulation and compliance requirements. Our system handles the whole workflow.
For those who aren't familiar with your background, talk about how you ended up at OIX?
Laurence Sotsky: This is my second time as a CEO. The first time, I founded a company called Hopscotch, in sports and entertainment. I wrapped that up, and had an exit at Hopscotch, and spent some time deciding what to do next. I started looking for a product in a massive market, and stumbled upon OIX through a recruiter. I took a look at what they were doing, the maturity of the market, and saw that all of my experience could help drive it forward. I've been here since June, and it's been an excellent ride so far.
What was it at OIX that made you think it was the right opportunity for you?
Laurence Sotsky: There were several things I was looking for, and where I would not compromise. There were lots of deals flowing my way, because Southern California is a hopping market, and I've had a lot of success in my career. What I was looking for, was an established market, a large total addressible market, a quality product, and who the investors were, and if they were strong. This deal really checked all of those boxes for me. It's a big addressable market, a product for entertainment, and they had just closed a couple of customers in the Fortune 500 for manufacturing, and it was something where I could bring all of my expertise and connections and resources to take them to the next level.
Who are the backers behind OIX?
Laurence Sotsky: The main investor is a gentleman you probably known, Brett Markinson, who has behind behind such companies as HauteLook and LowerMyBills. As you know, HauteLook sold to Nordstrom in one of the biggest exits in Southern California, as was LowerMyBills. He has a family office out of both Los Angeles and Connecticut. I methim while running and managing a couple of companies, and he's been incredible, with those two unicorn runs. He knows what he's doing, and I had confidence he was on the right track with OIX.
What are the big areas you are working on now?
Laurence Sotsky: The product is really fantastic, so we've been focusing on marketing and sales. We're trying to figure out the markets we can go after, and we've been hiring a world class sales team to take this to those markets. We're also spending time with our existing customer base, and working with the product team to dial in the product. We also are working on a rebranding, because OIX is a name that doesn't mean as much to folks, probably by the end of the year. But, the largest amount of time, probably 80 percent, is spent on sales and marketing.
What's the biggest lesson you learned through your experience at Hopscotch?
Laurence Sotsky: I came up through sales and marketing, and had been running sales teams as VP of Sales and Chief Revenue Officer for venture backed companies in the last 10 years or so. I then started Hopscotch, raising the venture capital and serving as the actual CEO. I learned a lot at Hopscotch, having to manage other parts of the organization, learning how to organize and contribute to the product, how to interface with the technical team, and how to raise venture capital, and how to get meetings. I raised almost $20M at Hopscotch from venture capital firms, and had to figure all of that stuff out. That took a lot of energy to figure all of those things out, and which I think I'm able to apply now a second time. These guys had a great business, and I've been able to amplify that because of my experience at Hopscotch.
Is there anything that you learned that you maybe wish you'd known before, that other entrepreneurs might learn from?
Laurence Sotsky: Especially, for the young entrepreneurs reading this, I can think of two things. If you're on the business side, have a great technical co-founders. If you're on the technical side, have a great sales and marketing co-founder. It's really useful to have those two people tied at the hip. The other thing, is be careful what you ask for. If you raise a lot of money, there's a lot of pressure to spend that, and end up with a burn rate that is higher than you ever wanted. The beauty of venture capital, is you can do things really quickly, and compress time with money. The danger is, with venture capital, you can raise a little too much, and can be somewhere where your business really isn't ready to support your burn rate. I think, with our business already profitable, and because we've kept things very lean over here, when we do go to raise again it will be growth capital. You learn a lot about how much money to raise, and how quickly you need to spend it.
Finally, what should we be watching from you now?
Laurence Sotsky: Look for us signing a lot of new customers in the entertainment industry and within the Fortune 500. we have some big deals under way, and I think as we expand to additional industries, you'll be seeing us work with the leaders in each of those segments. For us, it's mostly focusing on the segments that are easy for us to go after, which are the industries which are getting the msot amount of tax credits and incentives. There's lots of customer excitement about our product.
Thanks, and good luck!