Quagga Time

How two guys went from zero to $34 million and lived to rap about it

Back Longreads Apr 1, 2010 By Rich Ehisen

For Ken Apperson, the pivotal moment came in fall 2002. He was shuffling through the sporting goods section of Walmart in search of tennis balls when his cell phone rang. The caller, his old chum Scott Knorp, wanted them to quit their lucrative sales jobs and start their own telecom company.

“I should have said no,” Apperson says with a laugh. “But I didn’t.”

Since then, Folsom-based Quagga Corp. has grown to about 90 employees and nearly $34 million in revenue last year. For the past two years, Inc. magazine has listed it as one of the fastest-growing companies in the nation, including the No. 55 slot among all telecommunications companies in 2009. Its clients are a who’s who of America’s top companies: Apple, eBay, Pixar, Safeway, Blue Shield and Cigna, among others.

“When we started, our goal was to be a $100 million company,” Apperson says. “Now, we can already see that, so we’re looking past it. Now, we can see $200 million.”

Before Quagga, the pair were self-described “prima donna sales reps,” each making about $400,000 a year. Apperson worked in video conferencing hardware and Knorp in telephone systems. Their idea was to pair these specialties into a single platform. That concept, unified communications, was new at the time, given that voice and video systems each required their own expensive hardware and networks to operate. But with technology emerging to allow those systems to run as software applications on just one data network, Apperson and Knorp, now both 46, saw an opportunity.

Each of them quit their jobs and contributed $150,000 to the business as startup funds. They named the fledgling company Quagga after an extinct African zebra that bore stripes on its front half, with the back fading to solid brown like a horse. That strange convergence of two unlikely patterns seemed the perfect analogy for their own efforts to merge what had always been two distinct technologies. The company was off and running — or trudging.

They had indeed left the starting gate, but the pace was more of a lumbering sumo wrestler than an Olympic sprinter. They had no real location, no employees and no income. Apperson was working from a spare room in his Folsom home. Knorp was doing the same from his home in Redmond, Wash., but their telephones and laptops were Quagga’s real office. They spent 15 to 18 hours a day cranking out cold calls and emails to “anyone with a phone system.”

The long-distance partnership proved too cumbersome, so Knorp moved his family to Folsom. Once in the same locale, Knorp and Apperson moved into a tiny, dark, windowless space they called “the sensory deprivation tank.” Day after day, they showed up at 6 a.m., went home for dinner at 6 p.m., then hit their laptops until bedtime trying to drum up business. In between, they broke the tension by razzing each other over any piddling sale the other made. Those secondary sessions often went late into the evening.

“I spent a lot of nights there sleeping on a blowup mattress,” Apperson says.

While that sounds more like a sad takeoff on “Glengarry Glen Ross” than a recipe for success, Apperson and Knorp had an ace to play that would soon help them hit the jackpot. Most state-of-the-art equipment was coming from Avaya (formerly AT&T and Lucent Technologies), but Knorp says the company wasn’t looking for any new distributors, and was in fact “looking to thin the herd” among those they already had. Fortunately, Apperson had spent years building a relationship as one of the top sellers of Avaya products in the country. His reputation helped convince the company to make an exception. Freshly armed with the industry’s gold standard product, they amped up their efforts even more.

“Initially, and I know it sounds corny, we were really just selling a dream,” Apperson says. “I mean, who in [his] right mind would trust two nontechnical sales yahoos with their corporate infrastructure?”

The answer to that question soon came from the San Francisco Museum of Modern Art. It was a huge victory not only because it marked the company’s first major client, but because its competition had included industry giant Cisco.

“That was probably the greatest moment of my career,” Apperson says. “The SF MOMA is a marquee San Francisco account, and everybody wanted it. But the stars aligned, and we brought it home. It was never as hard after that.”

One year in and a heavyweight reference in tow, Quagga was on its way. While he won’t name specific numbers, Knorp says the company has been profitable all but its first and third years.

While many industry sectors have struggled through the Great Recession, Quagga’s growth has remained steady at 25 to 30 percent annually, even with many companies holding off on infrastructure upgrades. Although many companies pushed their orders off to a future date, a large number switched to leases, pushing that end of the business up 30 percent in 2009, Knorp says.

Along the way, the two have managed to create a corporate culture that takes pride in being a few area codes away from typical. That effort includes any number of goofy antics, from posting satirical “news” stories on the Quagga website to Apperson and Knorp hosting company lunches where they perform their own rap songs — complete with hip-hop regalia.

“Most corporate cultures are just so boring,” Apperson says. “We just choose not to take ourselves too seriously. We’re hypercompetitive, but we’re also irreverent.”

It is rare to hear either of them discuss the culture without mentioning competition. Both men live and breathe finishing first in everything they do, and that same competitive drive is expected of every member of the team. Most employees are paid on straight commission, and they have invested up to three years in recruiting some of their current personnel.

“The key to our success is the ability to recruit,” Apperson says. “We don’t micromanage because we only bring in people who don’t need to be managed. We said early on that we would only bring in the best of the best. I know everybody says that, but we have lived up to it.”

Accepting anything less is simply not an option. All the fun and irreverence is fine, Apperson says, but to land top-notch clients you have to prove your mettle beyond any doubt.

“For a company like Apple or eBay to let you touch their network is a big leap of faith,” Apperson says. “To earn their trust you really need to show that you know what you are doing.”

Knorp and Apperson admit the company’s “work hard, laugh harder” mantra can be challenging for some employees to adopt. The company has found highly skilled workers — sales and technical — who don’t go sideways over the laid-back atmosphere. But Knorp says Quagga has learned from experience to reject even the best producers if they don’t think they’ll fit in.

“I mean, who in [his] right mind would trust two nontechnical sales yahoos with their corporate infrastructure?”

Ken Apperson, principal, Quagga Corp.

“The culture just churns those people out,” Apperson says. “Some people can’t cut it, and they’re gone pretty fast.”

The unusual approach isn’t always easy for customers to handle either. A quick peruse through the Quagga website can leave the uninitiated wondering what the hell is going on.

“Some customers really don’t get it,” says Allan Pederson, director of enterprise networks for Quagga’s Reno office and one of the workers Knorp and Apperson courted for years before coming on board. “They think our site has been hacked.”

Clearly, most come around, particularly when they learn it is all by design. Apperson says they consciously chose to make the site quirky to counterbalance “the black hole of creativity” that comprises most company Web pages. Once potential customers figure it out, he says they usually become fans.

“For most of them, it has become kind of a cult thing,” Apperson says. “Pretty soon they’re asking for more of our spoof stories or whatever. It has really become a litmus test for the kind of customer we want.”

As Pederson notes, “Governments and corporations can be monolithic, but people aren’t that way.”

It is a system not without precedent. Leib Lurie, chief executive of One Call Now in Troy, Ohio, the nation’s largest message notification provider, says humor can be a great tool for helping a company connect with customers.

“There is no reason for a company to be totally boring, and then act like that somehow makes you professional,” says Lurie, whose company has also made the Inc. list the past two years. “Showing you are human doesn’t need to detract from your professionalism.”

But Lurie says company leaders should not lose track of humor’s purpose along the way. He notes that a previous company he ran had a page on its website dedicated specifically to jokes, from super clean to X-rated. Customers could choose which jokes they wanted to see and even submit some of their own. Not surprisingly, it was the most popular page on the site, making it a natural place to also showcase part of the company’s product line.

“We generated over $1 million in annual revenue from that page,” he says.

But Lurie also believes Quagga may face more resistance as they grow into certain markets. “I wonder if that style will really work outside of California?” he says. “I think it could really alienate most Midwesterners.”

Quagga already has offices in California, Nevada, Arizona, Missouri and New Jersey, but Apperson says going international may be in the cards.

Knorp and Apperson are also turning their sights beyond system integration to professional services such as communication-enabled business process, or CEBP, and virtualization. CEBP is a concept in which technology is used to help remove the latency found in human decision-making processes. In short, when it comes to making decisions, such as on a loan request or a large product buy, humans tend to get bogged down for any number of reasons. But with the right business process technology, such delays can automatically be discovered and brought to the attention of the right people for fast action. In theory, that makes a company far more efficient, which usually equates to a better bottom line.

Last fall, Quagga landed a major contract with Children’s Hospital of Los Angeles — again beating out Cisco — giving the company inroads to produce custom software for the health care industry.

“We have a whole division now with programmers working on this,” Apperson says. “Our hope is that we can write custom applications not just for health care, but in any other place where they are looking to streamline their processes.”

Streamlining is also the goal with virtualization services. It would allow a company with huge data needs to ditch giant hardware. Doing so alleviates the company from having to buy and maintain a lot of expensive equipment and also protects the company from exposure to losing that hardware through a fire, flood or other disaster at its own site.

Virtualization is the way of the future, says Scott Howard of Shandam Consulting in Sacramento, which manages information technology networks for numerous state agencies. Howard says the state now mandates virtualization in its technology management. Still, he says, it has not proven to retain its popularity in the private sector.

“A lot of large companies, like Wells Fargo, have tried outsourcing data management and then gone back to doing it themselves,” he says. “They felt like they had lost control over their systems.”

Russ Fellows, a senior partner with the Evaluator Group, a Broomfield, Colo.-based IT consulting firm, says small companies are much more likely right now to outsource their data management needs.

“Companies that are efficient at managing their own IT will keep doing it. Others will be more inclined to outsource,” Fellows says.

Bigger companies, he adds, are also still hesitant over security concerns.

“The market will shift gradually,” Fellows says. “All the key elements have to be in place: The technology has to be sound, you must have good management, it has to be secure and the metering and monitoring has to be there, meaning you have to be able to bill correctly for your services.”

Apperson and Knorp are aware they are treading on what is, for them, unfamiliar ground. As they have already demonstrated, that reality isn’t likely to be a deterrent. If anything, they are more encouraged than ever that the relationships they have rapidly built over the past seven years will open whatever gates they encounter.

“We fortunately already have the trust and confidence of our customers,” Apperson says. “They trust us with their voice systems, which is the one thing you can’t be without.”

Whatever the future holds, Apperson and Knorp deny it will include being bought by a deep-pocketed competitor or anyone else. Apperson says the calls come almost monthly, and he isn’t interested.

“I would consider it if I thought it would make the company better,” he says, “but that’s just not the case.”

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