Harnessing the power of data means big growth potential for Fort Myers firm.
Michael Peterman has had a long love affair with data. “Data to me is currency,” he says. “Information is the currency of the future for business, and if you’re not on the curve, you’re going to get smoked.”
For the past decade, Peterman has been helping to lead that curve as founder and CEO of VeraData. The Fort Myers–based decision science company uses machine learning to analyze data to help its predominantly nonprofit clients make better decisions around —and improve the results of — their marketing and fundraising efforts. It currently works with more than 300 nonprofits including the American Indian College Fund and National Children’s Cancer Society, and Peterman expects to add at least 20 new nonprofits to his client roster annually for the next several years.
The company and its systems are now also established and well-proven enough for Peterman, 46, to add — and grow — another line of business, in the commercial space, where he already has some corporate clients. He’s anticipating moves into sectors like health care and multichannel retail, among others. He projects revenue of more than $15 million in 2020 with the shift, growing at least 13% from $13.2 million in 2017. Revenue has dipped slightly of late, to $11.2 million in 2018 and a projected $12 million this year, Peterman says, while the firm focused on product development, building scale and executive development.
“We’ve built an engine — the term I like is human-assisted machine learning — that is impressively beating our commercial counterparts,” he says. “Our engine is now mature enough, and our processes are vetted enough where we can solve for X, and it doesn’t matter what you want to solve for. If you have the historical data, we can use it.”
‘Everybody was like, ‘If this guy’s crazy enough to do it for free, there’s got to be something here.’ It eliminated what was a big barrier to entry.’ Michael Peterman, VeraData
Although the possibilities are wide-ranging, Peterman is wary of a core entrepreneurial pitfall: growing too quickly. “I’m fatally conservative, and I like to grow brick by brick because I like to sleep every night,” the Naples native says. “The discipline for us has been keeping our foot on the brake, not the gas, in order to make sure we didn’t blow this thing up.”
Crunch the numbers
Peterman first got “heavy into analytics” while a partner at AccuData in Fort Myers in the early 2000s. The firm — which began as a mailing list company — had purchased an analytics business, and Peterman dove headfirst into the space.
“It made me realize that everyone was doing things the same way, except for these companies called Amazon and Netflix, the early-stage people who were doing machine learning at a preliminary level,” he recalls. “Everyone else in our business was doing things the old way. It was human driven. You looked at data in 10,000 dimensions in 10 days, and the new methodologies enabled you to look at data in 50 million dimensions in 10 seconds.”
He saw the potential, but the venture firm that purchased AccuData in 2006 didn’t want to jump on the machine-learning train. So Peterman left. He then began laying the groundwork for VeraData.
“The goal was to leapfrog what everybody else was doing,” he says. “If you use multiple sources of data and know where to go to get the pieces to maximize the accuracy, completeness and timeliness of all this data, you can fuel these machine-learning engines. So we were going to find a way to build this, and we literally had to build it from the ground up.”
Peterman hired a neuroscientist and a team of mathematicians and physicists to help him build the technology needed to pull it off, using about $500,000, funds from the sale of AccuData. Everything was ready to go in 2009 — right in the throes of the recession. “It was just a terrible time, and nobody even knew what machine-learning was,” Peterman says.
Peterman then made a decision that was both risky and career-defining: He told potential customers he would provide his services for free and only charge them if he produced better results than they were already getting.
“Everybody was like, ‘If this guy’s crazy enough to do it for free, there’s got to be something here,’” he recalls. “It eliminated what was a big barrier to entry. It made the sales pitch a lot easier.”
The company continues to operate on a performance basis, and Peterman doesn’t see that changing. “I think we will always have some skin in the game because it illustrates confidence in what we’re doing,” he says. “If our paychecks depend on it, you can bet we’re going to do it.”
Peterman didn’t set out to specifically get into the nonprofit space. But a large nonprofit gave him a shot, and VeraData kept on producing results for its clients, which led to more business. The need was definitely there for a service like his in the nonprofit sector. “We want to arm these folks with the practices, technology and capabilities that their commercial counterparts have but that they can’t afford unless it’s on a performance basis like we’re offering it,” he says.
VeraData provides nonprofits with information to help guide their decisions when creating omnichannel marketing and fundraising campaigns. That includes decisions from what font to use and how big an envelope should be a for a mailing to where to spend their digital marketing dollars. “All of the data is used to tell you that kind of stuff,” Peterman says.
What kind of data does a data company like VeraData produce? Outcomes include a 138% increase in online donations for a national park–related nonprofit and a 17% increase in response rates for a major charitable organization. The National Children’s Cancer Society started working with VeraData around five years ago, and its online donations have increased as a result. VeraData creates and manages a digital presence for the nonprofit that includes elements like Facebook ads and boosted posts and Google advertising obtained through a Google Ad Grant for nonprofits.
“They really have created a very strong online presence, and the engagement has been extremely high,” says Lori Millner, vice president of marketing for NCCS. “They’re very good at testing different audience selections and looking at different potential target donors and what affinities they already have. It’s a constant kind of reconfiguring of the ingredients in the overall pie to see what’s going to generate the best results, and they’re really good at that.”
VeraData’s growth in the nonprofit sector has come without a single dollar spent on marketing the business. Peterman attributes that to the spirit of what he calls “coop-etition” among nonprofits.
“They share information with each other because everybody wants everyone to win,” he says. “We have clients who sit on stage at conferences and say, ‘VeraData is wonderful; you should call them.’ If you’re a commercial business, nobody’s going to say that because you’re their secret.”
Growth hasn’t come without challenges at VeraData. One of the biggest, no surprise, is finding and retaining talent, especially because data science remains a relatively new field.
From the beginning Peterman has surrounded himself with a group of business mentors. “They protect me from myself and help guide some of the strategic decisions around how to scale a business,” he says. One of those mentors suggested he open a satellite office overseas, and after investigating several options Peterman settled on the Ukraine, where he’s assembled a 26-person team of mathematicians and physicists — most with PhDs. “There is a tremendous cost advantage in doing this in Ukraine,” Peterman says.
That move came with some challenges. VeraData, for one, had to abruptly move its Ukraine office to a new location 500 miles away after Russia annexed the Crimean Peninsula, losing some employees in the process. And although most Ukrainian employees speak basic English, the company has to train them on the slang and unusual nuances of the language.
A handful of other employees work in satellite offices in New Jersey, Maryland and California, with 19 staff members based out of the Fort Myers headquarters. Having staff spread throughout the world has its pros and cons.
“This remote thing enabled us to scale more easily and have access to a much broader qualified talent pool,” Peterman says. “And it forced us to learn to be better business leaders and managers.”
That’s because it made Peterman and his COO Matt Kaiser realize some of their weaknesses —and hire an executive coach to help improve them. “We were not good managers; we were entrepreneurs,” Peterman says. “We had to learn how to be better at this, and it wasn’t what we were comfortable with or what we were good at.”
Peterman hopes to grow his Fort Myers-based team and is getting involved with everything from Florida Gulf Coast University to the Lee County Economic Development Office to both boost his firm’s profile and help ensure Southwest Florida is an attractive place for talent to relocate to.
“He needs very niche, high end, very well-educated people by and large, like data analysts and PhDs in math,” says Marc Farron, an IT consultant at the Florida Small Business Development Center at Florida Gulf Coast University who has worked with Peterman. “That is the biggest challenge. But he’s very patriotic to Southwest Florida, and he wants to grow here.”
Ruth Buchanan, director of business development for the Lee County Economic Development Office, adds that VeraData is “the kind of company we need to be supporting and incubating locally. When you have a company like this, they end up attracting similar types of companies to Lee County. Once you start telling their story, others will pay attention.”
Peterman hopes for-profit entities will also being paying more attention to VeraData, which, in turn, he projects should have big impacts on the firm’s bottom line. “There’s not the same margin pressures as in nonprofits, so it enables us to charge market rates,” Peterman says.
He also plans on acquisitions of organizations involved in data, analytics and fundraising to continue growing the company. “We are acquisitive,” he says. “So hey, data companies out there, if you want to sell, I’m interested. Knock on my door. Let’s talk.”