Troy Henikoff was a college student in 1984 when he wrote his first program, a piece of software to help his grandfather’s steel warehouse manage their inventory. That summer project led Troy to start his own software consulting business a couple years later. This is an atypical Distance story about beginnings, endings and unexpected legacies.
Transcript
WAILIN: Troy Henikoff describes himself as an unintentional entrepreneur. Today he’s a well-known figure in Chicago’s tech scene, but when he began dabbling in computer programming and setting up his own business, there was no established startup culture for him to absorb. No networking events, no hoodies, no cliches about hustle or crushing it or changing the world. Troy’s story starts in 1984, at his grandfather’s steel warehouse on Chicago’s south side. He had just finished his sophomore year of college.
TROY HENIKOFF: So that summer when I got to Chicago, I was given a bunch of tasks to get done, all the things that they hadn’t gotten around to, so getting quotations to get the roof fixed on the warehouse. The air conditioner in the office wasn’t working well. I had to find someone who could repair this like antique air conditioner. It was 1984 and my uncle actually was the one who said, “You know, these computers, these PCs are getting to be powerful. Maybe we can move our inventory from index cards” — literally three-by-five cards — ”onto a computer.”
WAILIN: Welcome to The Distance, a podcast about long-running businesses. I’m Wailin Wong. Today’s episode is a little different from the kinds of stories we usually do. For starters, we’ve never featured a tech entrepreneur on The Distance, mostly because I’m more drawn to things like embalming fluid and tofu. But I really wanted to tell Troy’s story. So stick around, you won’t be disappointed.
ROSA: The Distance is a production of Basecamp. I’m Rosa, a programmer at Basecamp. Basecamp is the better way to run your business. It’s an app for communicating with people and organizing projects and work. If you’re feeling overwhelmed by email, chat and meetings, give Basecamp a try. Sign up for a 30-day free trial at basecamp.com/thedistance.
TROY: There used to be computer stores. There was ComputerLand and Entre, and I went to all these stores and asked, “What software do you have to help me manage inventory?” And it was all software designed for what you’d think of a hardware store. You have a certain type of product—a hammer, a screw—and you’d have a quantity of that product, and when you ran low, you’d order more of that product. The problem was, in my grandfather’s business, every single thing that came in the door, they did a chemical analysis of it to find out exactly how much chromium and zinc and nickel was in the steel. When people needed specialty steel, they’d call them and say, “What do you have that’s high nickel, low chromium?” So they never replaced inventory with something like it. Everything was unique, and so none of these software programs worked. And I was about to give up and I was at a ComputerLand and I saw a guy entering into an inventory system for them and I said, “Well, what program is that?” And he said, “Oh, I wrote that. That’s in DBase.” I said, “Well, what’s DBase?” And he started telling me about it and he’s like, “Let me show you the code.” And he did and it looked really similar to Pascal. And so I went back to my grandfather and my uncle and I said, I don’t think there’s a program out there that’ll do what you need it to do, but I think I can write one.
WAILIN: Troy had taken one computer science class at Brown University, where he was studying mechanical engineering. That class was in Pascal, so he felt like he could figure out Dbase. The next step was to actually buy a computer.
TROY: I just went to the Yellow Pages and started calling and trying to get the best deal I could ’cause I was afraid it was too expensive and my grandfather wouldn’t pay for it. And so finally, I found this place called MPK Computing and this guy named Michael, and he had the best price by about a thousand dollars, really cheaper. It was a PC with a hard drive, an external thing called a Bernoulli box made by Iomega with external hard drives, um, a printer, a monitor and a copy of Dbase.
WAILIN: The guy who sold Troy the computer was named Michael Krasny, and he delivered the system from the trunk of his car. It cost $6,000. Troy studied the Dbase manual and started working on the inventory program. When he got stuck, he called Michael for help. Troy got it done in four weeks.
TROY: I worked really late nights and long hours, but I got it running. And by the time I went back to school, it was working. It was printing out their inventory. It was managing the inventory. They were afraid to go entirely onto the computer, so what they had happen was the secretary — they had secretaries back then — would enter the steel as it came in and it would literally print out three-by-five cards that would go in the card file, which is how the salespeople were used to accessing the data. Except this time, instead of scribbling stuff out and erasing what was on the file when you sold stuff, it would get entered into the computer and a new card would get printed out.
WAILIN: The next summer, after his junior year, Troy got another software job through a connection of his father’s. He wrote a program for a manufacturer of EKG electrodes to track raw materials and finished products, and he bought the computer from the same guy, Michael at MPK Computing. Troy went back to Brown for his last year, and then it was time to graduate. He had a mechanical engineering degree but was unsure what he wanted to do with it.
TROY: You’re a mechanical engineer, what could be cooler than designing submarines and helicopters? So I was interviewing with General Dynamics and Sikorsky Aircraft and actually I got a job offer from General Dynamics and they were so excited. And you walked into this building that was just seven floors of football fields filled with cubes. It was horrible and you know, the manager sat in a little bigger cube at the front of the football field filled with cubes and he proceeded to try to woo me by telling me about this amazing project he had just worked on and how he had spent 18 months working on it and it was amazing. He had designed a hinge for a submarine door for 18 months. I couldn’t run out of there fast enough.
WAILIN: Troy had another offer, from a small software consulting firm in Boston called DesignOptions. He liked the vibe of that company much better than General Dynamics, but he realized he wanted to be in Chicago.
TROY: So I just turned to the only person I knew in the computer industry in Chicago, which was the person I’d bought our PCs from in the last two years, this guy named Michael. I told him the long story, I got this job at DesignOptions but I want to be in Chicago. Is there a DesignOptions in Chicago? And he says, “No, you should start one.” And I laughed out loud on the phone. And he said, “No, no, no, I’m serious. Why wouldn’t do it? You’re 21 years old, you have no mortgage, you have no car payments, no kids. You have the power of zero. The worst thing that could happen is you’d hate it and six months from now, you’d be 22, looking for a job. By the way, my company’s growing. I have four employees. I need a new accounting system. I’ve seen the work you’ve done in the last two summers. I thought I’d get a job cleaning up after this dumb college kid. I’ll be your first customer.”
WAILIN: Troy moved home and into his parents’ suburban basement. He had about a thousand dollars, which was well short of the three thousand dollars he needed to buy a computer. But he figured he would work on his clients’ computers. So he paid a visit to customer number one, MPK Computing.
TROY: I knock on Michael’s door. He says, “What are you doing here?” I said, “Well, I’m here to talk to you about your accounting system.” He said, “You mean my new accounting system? I just bought a Unix based one. It’s right here.” He had totally forgotten and he had gone out and bought an accounting system. So I lost my first customer before I was in business. It was definitely disappointing, but I wasn’t going to do this because I was going to write that one system. I was going to do this because I wanted to have a career in building things. You know, it was a very slow couple of months trying to get that first customer and the first customer came to me through — it was actually a friend of my parents, who we’re talking at dinner and said, “Oh, I have a friend who needs a computer system. You know, maybe Troy can help him.”
WAILIN: Troy’s first customer was a man named Ben, who specialized in doing payrolls for musicians. Troy bought a computer, wrote a custom payroll processing program, and delivered the computer with the software to Ben. Then he got a second job writing a program for an investment firm. That client had a bunch of PCs at their office, including one dedicated to Troy’s project, so he camped out at the investment firm and worked the same hours as the employees there. But it meant he couldn’t take on a second client. So he finally got his own computer. Once again, he went to Michael at MPK Computing.
TROY: January of ’87. I was probably three or four months in and bought what was an original IBM PC with a 20 megabyte hard drive, which seemed huge. Just to put it in perspective, so that would store three photos from my iPhone and it would be full, three photos. And it had a color monitor. I sprung for the color monitor. It was probably around $4,000 for all of that. That was a big leap because it was every dollar that I had made so far and it felt like a commitment. Now it’s not going from something like, oh I’ll do this for a couple of weeks or I’ll do this for a couple of — like, I’m gonna do this.
WAILIN: Troy’s next customer was a man named Larry, who had a business running auctions of rare classical LPs. Troy wrote a software program for Larry to manage his auctions, and from there, his technology consulting firm kept growing. Troy called it Specialized Systems and Software. He brought in a partner, a friend of his from high school and college, and moved out of his parents’ basement into his own office. Meanwhile, his old friend Michael’s business was growing rapidly too, and he renamed it from MPK Computing to Computer Discount Warehouse, or CDW. The company would later go public and hit a billion dollars in sales, and they finally became clients of Troy’s.
TROY: In 1992, so we’re six years into it, had about a dozen professionals, having a ton of fun, had just beat out Andersen Consulting, which became Accenture, for Hyatt’s worldwide purchasing system and we’re doing great. We’re having a ball. We had done probably 10 or 12 projects for CDW. We had done work for Abbott Labs, McDonald’s. And we liked the bigger clients. The bigger clients tended to be bigger projects, more money over a longer period of time, so it was easier to schedule and manage.
WAILIN: One of those bigger companies was Medline, a manufacturer of medical products like bedpans and hospital linens. Around 1992, they wanted to digitize their old paper invoices, so Troy went to the Medline offices in the northern suburbs of Chicago for a meeting.
TROY: It was in the boardroom at Medline, the big boardroom, and there were probably about 10 people around the table and I was up at the front, giving a little presentation to try to build credibility. And as I was doing it, I talked about how we had just completed Hyatt’s worldwide purchasing system. And the CEO of Medline, who was one of the founders, Jim Mills, stopped right then. And he pounded his fist on the table and he said, “You did purchasing for hotels? Well, then you could do purchasing for hospitals. Hospitals are just like hotels, only the people, they don’t feel so good.” And I looked at him and I said, “Well yeah, of course, I’m sure we could.” He said, “Okay, I want to hire you.” And I said, “Well, who do I talk to to write a proposal for the purchasing system?” He said, “No, no, no, you’re not listening to me. I want to hire YOU. I want you to come here, work for me.” And I said, “Well, I can’t. I have partners, I have employees, I have customers.” And he said, “Okay, then I want to buy your company. How much?” And I didn’t know how to respond. I looked at him and I said, “Well, it’s not for sale.” And he got angry. He said, “Everything’s for sale. Everything has a price, how much?” And we hadn’t contemplated any of this and we said, “It’s not for sale.” And so he asked me a couple of questions, how many people we had, how much revenue we had, and he made me an offer right there on the spot and I said, “Well, thank you, but we’re really not interested in selling.” And he stormed out and then his brother who was the president, John Mills, kind of followed him out and then a couple of the other people around the table, and there were two people left — and I wanted the business. I didn’t care if it was the business we came for, doing the invoice scanning system, or if it was doing this new purchasing system, I didn’t even know what was involved but I’m sure we could write it. But literally I was asking people, “Who do I talk to about this proposal?” And they’re like, “I don’t know, we’ll get back to you,” and I clearly had disrupted the entire meeting.
WAILIN: Troy went back to his office. That afternoon, he got a call from John Mills, the president of Medline.
TROY: And John said, ‘You know, my brother was serious. He really wants to buy your business.” And he made another offer and I said, “John, I’m really flattered. That’s really nice, but we’re not for sale.” And we really weren’t. We weren’t thinking about selling. I mean, we weren’t building the company because we wanted to build something and flip it. We were building the company because we were having a lot of fun. And then he called me back again the next day. He said, “You know, you’d be able to play in a much bigger ball field.” And I remember him, he said, “You’re playing in Little League now. I want you to come play in the major leagues.”
WAILIN: That pitch from John Mills caught Troy’s attention and finally, he and his partners decided to sell Specialized Systems and Software to Medline.
TROY: It was about loving what we do. It took a decent price and arrangement for us to decide to sell. So we would not have sold had it been a cash-only deal. Part of the attraction of selling was we got a lot more resources and we felt we’d be able to do more of this fun stuff, and so, you know, we went from 12 people to 55 people over the course of a couple years. John was right. We went from the little leagues to the major leagues in a very real way and that was as attractive, if not more attractive, than the cash.
WAILIN: Troy’s business, Specialized Systems and Software, became Medline’s software division, and he negotiated the deal so that they could retain an entrepreneurial feel. They had their own office, in a separate suburb from Medline’s corporate headquarters, and they got a share of the profits they generated. Troy stayed at Medline for five years. After that, he founded or ran a series of companies. More recently, he’s become an investor and a mentor to other entrepreneurs. He founded an accelerator program that’s like a three-month bootcamp with funding for Chicago tech startups. Today he’s managing director at MATH Venture Partners, a venture capital firm he helped establish in 2015.
TROY: When I started that first business, I had no idea what I was doing. I literally did not know a balance sheet from an income statement. What I was doing was going into businesses and asking lots and lots of questions. And when things didn’t make sense, I asked more questions and I asked more questions because I had to understand how the business worked in order to write a system that would support it. And in hindsight, I probably learned more running that very first business to set me up for what I do today — coaching and helping entrepreneurs, investing in companies — than anything else I could have done. Because I got to look under the covers. I got to see everything about how businesses worked. I saw their accounting, I saw their finances, I understood their processes and it was such an array of different businesses.
WAILIN: I know this isn’t a typical Distance story. We usually feature independent businesses that have been running for over 25 years. Troy’s consulting firm is long gone, having been absorbed into Medline in 1992. But I wanted to tell you his story because some of the software he wrote way back in the 80s lives on in two of his earliest customers. One of these business owners is Ben, his first-ever client, who specializes in doing payrolls for musicians.
TROY: A bandleader would have done a gig at a wedding and then would get a check for $2,000 and would call up Ben and say, “Hey Ben, I did a gig, it was $2,000. I want you to pay Joey $150, Mary $200, and the rest of it, you know, send back to me in a check. And they would send him the check for $2,000. He would do all of the payroll, the withholding, union reports, and whatever was left over, he got his fees out of it and he returned the rest to the band leader. He called it TEMPO and I forgot what TEMPO stands for.
BEN: The Equitable Musicians Payroll Organization.
WAILIN: The other business owner is Larry, who runs auctions of rare classical LPs.
TROY: Larry was a reference from…I don’t remember.
LARRY: I don’t actually know. I had to ask my wife. I knew it was through my wife and it was through an acquaintance of hers who simply heard that I was in need of a computer system for a small business, and he said in effect, “I know a guy,” and the guy he knew was Troy. I sell out of print classical recordings. I’ve been doing it since 1978, so in my 40th year now.
WAILIN: Ben and Larry started their businesses when Troy was a teenager, and they’re still running their companies on the software Troy wrote for them. In the case of Ben, who handles payroll for musicians, he’s even kept the same hardware.
BEN: Dot matrix pin feed, you know what that is?
WAILIN: We’ll be bringing you Ben and Larry’s stories on the next episode of The Distance, coming up in two weeks.
WAILIN: The Distance is produced by Shaun Hildner and me, Wailin Wong. Our illustrations are by Nate Otto. Look for us on Apple Podcasts, Google Play Music, or wherever you get your podcasts. if you have suggestions of businesses we should feature, you can email me at [email protected] or you can tweet at us @distancemag, that’s @distancemag. The Distance is a production of Basecamp, the app for helping small business owners stay in control of projects and reduce email clutter. Try Basecamp free for 30 days at basecamp.com/thedistance.
