Doug McGregor sets precedent for banking solutions on-demand
Doug McGregor poses in WebEquity Solutions' office located in downtown Omaha. Photo by Danny Schreiber.
Before moving his recently-acquired Glenwood, Iowa, company to the 10th floor of the Omaha World-Herald Building in downtown Omaha, Doug McGregor went "dark" for nine months to repackage it.
McGregor, a recently transplanted Minnesotan and former managing director of the private equity firm Rational Equity, had partnered with ECI, a provider of enterprise-level lending solutions to financial institutions with $10 million to more than $500 billion in assets, to expand the lending market.
"It fit the model exactly, which is a software company that was at a certain level, had some growth to it, but was fairly flat," he said. "We hit it just right."
McGregor said he had looked at about 90 different software companies before partnering with ECI.
"It was a culmination of two main strategic thrusts," he said. "One was a financial model and the other was a technology model, which is cloud computing today."
While McGregor declined to reveal the total amount raised, he said the funds that sponsored this deal have about $2.2 billion of capital under management.
"We're well capitalized," he said. "We've done everything through the cash flows of the business."
In December 2008, McGregor relocated the company's headquarters, along with 35 existing employees, to the World-Herald Building, 1314 Douglas Street, to reach a more national market.
Just inside the front door of WebEquity Solutions. Photo by Danny Schreiber.
McGregor said he was drawn to the state's tax incentives per the 2005 Nebraska Advantage Act, which rewarded businesses that invested in the state and hired Nebraskans with reduced corporate income and sales taxes.
"We've actually changed over the staff about 77 percent with people from Omaha and Nebraska primarily," McGregor said. "We've [had a] 20 percent staff increase this fiscal year, so we grew 70 percent last year."
The 2005 Nebraska Advantage Act wasn't so rewarding of McGregor's business model, though, as it required software be delivered using computer disks and be shipped through U.S. mail.
Rather than relocating his business once more, McGregor took part in modernizing the legislation to support on-demand businesses. After being denied twice, LB918 eventually became law.
Amidst modernizing the legislation, McGregor went "dark" with the company for nine months to rebrand the company into WebEquity Solutions.
Since moving to Omaha, WebEquity has pounded $5 million into research and development (R&D) to enhance the company's existing on-demand platform, which currently streamlines commercial real estate, commercial/industrial, small business, construction, agriculture and consumer loans. Some of the advancements include a risk management dashboard, open integration and document management.
"We're the first ones in the country to do pre-loan and post-loan approval stress testing on one platform, so all of that has set us up for good growth," he said. "Our strategy, as it has been the last couple of years, is grow, grow, grow, gain market share, get bragging rights."
WebEquity Solutions' interface, above, automates each step of the lending process from initial customer interaction to credit analysis and decisioning, all the way to loan servicing, monitoring and on-going risk management. Screenshot from webequitysolutions.com.
Under McGregor's management, WebEquity has signed on more than 200 customers. The company landed its 600th customer, Bank of North Carolina, this year. The bank selected WebEquity's platform for commercial loan underwriting and credit risk management.
Signing on about 10 banks per month, WebEquity hopes to land more than 1,000 customers next year.
"We have a 98- to 99-percent retention level annually over the last 10 years, which is one of the highest in the industry," McGregor said. "People sign up for us every year again, because the product is so good and because we do a good job on customer support."
McGregor expects on-going success, as his model is recession-proof.
"We have increased our recurring revenue from 38 percent to nearly 79 percent recurring revenue, which is a much more predictable, sustainable model, so we can weather storms," he said.
According to a January 2009 Omaha World-Herald article, McGregor's goal is to raise the revenue of the company to $100 million within the next five years.
"While he declined to disclose the company's current or past revenue, a World-Herald estimate made from figures available a few years ago put 2005 revenue at $10 million to $15 million," the article stated.
Moving forward, McGregor said the company is currently in acquisition mode.
"We've tried to buy a few companies that are synergistic to what we do," he said. "We haven't consummated any deals at this time."