The Unica Story: Yuchun Lee’s Journey from MIT Blackjack Team to IBM Acquisition

8/30/10Follow @gthuang

Because of his past, Yuchun Lee is legally barred from certain establishments. Luckily, IBM is not one of them.

Lee is the co-founder and CEO of Unica (NASDAQ: UNCA), the Waltham, MA-based marketing and analytics software firm bought by IBM for $480 million in cash earlier this month. Much has been made of Lee’s past experience as a key member of the MIT blackjack team in the 1990s. Not as much has been made of Lee’s vision, strategy, and decision-making in leading Unica from its founding in 1992 to its IPO in 2005—setting the stage for one of the bigger tech acquisitions in New England this year.

The company has survived four recessions and three wars over its 18 years. So, this is the story of how Unica went from being a small startup led by three MIT alums to a leading public company focused on selling marketing and analytics software—and a key purchase for IBM in a rapidly evolving business area. Along the way, of course, there were plenty of bumps in the road and important lessons learned.

“The hardest thing is having the emotional fortitude to have conviction in what you think is the right path,” Lee says. “It’s kind of like blackjack. You may get a string of bad hands, but that doesn’t mean you don’t have an edge on the market.”

Unica’s software helps companies across different industries—financial services, insurance, retail, telecommunications, travel, hospitality—do things like personalize their marketing campaigns, manage interactions with customers, and analyze the behavior of website visitors to optimize sales. IBM, for its part, has shown increasing interest in helping companies do marketing, sales, and commerce more efficiently. In the past few months, Big Blue has acquired AT&T’s Sterling Commerce (helping companies interact more efficiently with customers, partners, and suppliers) and Coremetrics (Web analytics). Unica appears to fit with this acquisition pattern.

Yuchun Lee (photo: Jon Chomitz for Unica)

Companies usually reflect the personality and drive of their founders, and Unica is no exception. Lee (see photo, left) is a born entrepreneur who came to the U.S. from Taiwan when he was 13. By then he was already “fascinated by the concept of commerce,” he says—in particular, “how to accumulate business and make more money.” He started a software company while in high school in Houston, TX, and says he got in his proverbial “10,000 hours” of experience with computers and programming during those formative years.

In the mid-1980s, Lee came to Boston to do his undergraduate and master’s degrees at MIT in electrical engineering and computer science. After graduating in 1989, he went to work for Digital Equipment Corporation, the venerable Route 128 computer company. (Lee laments that these days, billion-dollar fund managers on Wall Street, who look like they’re “just out of high school,” don’t even know what DEC was. “It’s quite sad,” he says.)

Lee left DEC and started Unica in 1992, together with two other MIT grads, David Cheung and Ruby Kennedy. In the beginning, Unica was not focused on marketing. Instead, the firm more generally applied what its founders knew about data mining and statistics to problems such as financial modeling. A few years into it, however, Lee and his team realized they needed to focus on a particular segment in analytics, which was too broad a field for a startup to tackle. Some brainstorming and market analysis led them to focus on software applied to marketing.

“Marketing was not automated then,” Lee says of the mid-1990s. “We thought it was pretty interesting, and a big-budget item for companies.” Also, at that time there weren’t many competitors trying to make marketing more efficient with software. “After 15 years,” he says, “I know why—it’s really, really hard.” That’s because the tasks and processes involved in marketing are very diverse, they involve a huge amount of data and analysis, and also, marketers are inherently creative types. “They hate to be automated,” Lee says.

By the late ‘90s, Unica was focused on marketing and customer relationship management—helping companies better understand and reach their customers by organizing their sales and marketing processes. During this time, Lee was also moonlighting with the MIT blackjack team. He’d leave for Las Vegas on Friday night, work with the team, and take the redeye back on Monday morning—sometimes with large amounts of cash strapped to him. He didn’t say whether he used any of his winnings to help keep Unica going in the early days—but it’s worth noting the company didn’t take any venture money until 1999 ($12 million from Summit Accelerator Fund and JMI Equity Fund).

Yet the company never spent its investors’ money. Unica’s revenues were growing at a steady clip, and the company was doubling in size about every three years, Lee says. (The company had about $4 million in revenue in 1999, according to this profile.) He attributes its growth to having a “fairly grounded, intellectually honest culture” at the company. “We try to be self-reflecting and brutally honest,” he says. “That helped us read the market correctly early on” as the company evolved its online marketing business, with the rise of the Web in the late ‘90s. It also developed a successful software-as-a-service model.

So what made Unica unique? Lee is much less blustery about his company’s strengths than a lot of public-company CEOs—which makes him sound more credible. “I don’t mean that Unica is the best company and is always 100 percent right,” he says. “We’re not perfect—we made mistakes, hundreds of mistakes. But we correct them quickly.”

In 2005, the company had some $40 million in the bank, Lee says, and was looking to go public. Technology had gotten to the point where Unica’s software could help companies track and optimize digital marketing campaigns, among other things. But the field also had become much more crowded. Companies with related products in online marketing and e-commerce included Aprimo, aQuantive, Art Technology Group, DoubleClick, Epiphany, Oracle, Onyx Software, and many other smaller players and startups.

Unica pushed forward with its IPO in 2005, netting $48 million, while racking up more than $60 million in product sales that year. By that time, the company had more than 250 employees and was continuing to grow. In 2006, Unica acquired Sane Solutions, a move that Lee calls “most pivotal,” as it solidified Unica’s position in Web analytics, as applied to understanding online customer behavior and digital marketing.

Then, in 2009, the company fell back to earth—along with the rest of the market. It was the worst of the four recessions the company had seen. “2009 was the only year in our history that we declined,” Lee says. “Customers stopped buying.”

But in 2010, Unica has come back, Lee says, with “record cash and record profit.” The company now has about 500 employees and more than 1,500 customers, ranging from small companies that sell eye-care products or class rings (including MIT’s brass rat) to giants like GE, American Express, Best Buy, eBay, ING, Monster, Starwood, US Cellular, and IBM.

Which brings us to the company’s future with its new owner. Lee couldn’t say very much about the IBM acquisition or the upcoming integration—always a tricky process for any company—since the deal won’t officially close until later this year. But he had some broader thoughts on the digital marketing sector, and on Unica’s and IBM’s roles in it.

“This market is at a pretty critical point in its evolution, where it really can be accelerated with the right set of investments,” Lee says. “IBM is in a really good position to shape the conversation in this market, to drive adoption in general…The next stage is pivotal.” He continues, “Marketing is undergoing a major transformation…through digital and social channels. The trend is very clear in our mind. The move is toward digital and toward [software suites and software-as-a-service] even for smaller companies.”

Asked about his own future, Lee says, “My plan is to stay on. I’m personally very excited.”

Reading between the lines, my gut feeling is that Lee knows when he’s playing with house money, and when it’s time to walk away from the blackjack table and cash out. Unica’s rebound from a tough year in 2009 seems like a pretty good time for an 18-year founder and executive to move on to the next stage of his career, at a big company like IBM.

Plus, I couldn’t help but notice the exact price of Unica’s acquisition: $21 a share.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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  • http://www.freshaddress.com Bill Kaplan

    Congratulations to Yuchun on building Unica into one of the industry’s leading marketing automation players, resulting in its attractive sale to IBM. It’s great to see him continue in the tradition of many of our former MIT Blackjack Team players, who parlayed their learnings and experiences with the team into successful business careers.

    Other notable players who successfully transitioned their careers from the blackjack tables to the software world include Chuck Whitmer and David Weise, who sold their company to Microsoft in the mid-80′s. While at Microsoft, David went on to create Windows 3.0, the product that Steve Ballmer said cemented Microsoft’s dominance in the PC world.

    Another MIT Blackjack Team graduate who deserves mention in this regard is Jon Hirschtick, the founder of Solidworks, a cad-cam company that he sold to Dassault for over $300 million in 1997.

    I’m sure that this is not the last we will hear of Yuchun and other MIT BJ Team graduates. Whoever knew you could learn so much from a simple game where all you need to do is count to 21?

  • Baltazar Morales

    Great news about this guy and his team. With perseverance, knowledge and acumen, he succeeded. Glad to hear he was a DEC person.
    More power to him.

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