Delaware’s economy is changing.
And so is the way it backs local businesses.
Gov. John Carney is considering a proposal that would shift the state away from trying to attract huge companies with taxpayer grants and loans. Instead, many of the state’s economic development powers would be turned over to a public-private partnership that would place greater emphasis on using those funds to incentivize entrepreneurship in high-growth science and tech fields.
But with a little luck and patience, several could become the next Smart Button – a relatively tiny tech business in Newark that helped to bring corporate loyalty rewards programs into the internet age.
Now a subsidiary of a $1 billion Canadian company, Smart Button was launched before most Delawareans had discovered email. Today, more than a 100 million people across the globe use its software to earn points with every purchase – rewards that later can be cashed in for discounts and freebies.
While the name Smart Button may not be familiar, its software is used by teens who shop for gear at Hot Topic, parents who buy Pampers and Leslie’s Pool Supplies products and grandmothers looking for discounts on Hallmark cards.
“We’re kind of behind the scenes and below the radar,” co-founder Jim Altrichter said. “But in a lot of ways, I think we’re a model for what Delaware is trying to do now.”
When Altrichter was in college, entrepreneurship degrees, business incubators and the tech hubs that Delaware is trying to emulate were virtually unheard of. The path for most computer programmers at that time typically involved landing a job with a major corporation.
The 51-year-old began his career with Autotote Ltd., a Newark-based company that made computer systems used to tally bets, figure odds and compute payoffs at race tracks around the country. Once a significant employer in Delaware, the company departed for Georgia in 2003.
After leaving Autotote for another Delaware-based tech startup called Envirometrics, Altrichter and his co-worker Sam Forker began moonlighting on software applications that helped race tracks shift their back-office operations from paper to computers.
“It’s hard to remember now, but back then there were a whole series of industries that were excluded from software applications,” he said. “The technology just hadn’t reached them yet.”
The duo built up enough clients to launch Smart Button as a standalone company in 1997. Three years later, they hired Phil Sugar, their former boss as Environmetrics, as their CEO.
“The first thing I did was take all these things they were doing and focused them on one thing they were doing really well,” Sugar said.
That one thing was player-tracking software that allows racetracks to offer perks to high rollers – similar to the comps long offered at casinos.
With an early investment from the late Delaware venture capitalist David Freschman, Smart Button later branched out to the retail industry, just as shops large and small were rapidly adding loyalty rewards programs to keep their customers coming back.
“Loyalty points, airline miles and player tracking are all the same value-added concept,” Altrichter said. “It’s an idea that goes back to the early 1700s but computers have made these programs really efficient.”
The turnkey software developed by Smart Button’s 18 engineers allows corporations to roll out a ready-made system without reinventing the wheel. The company’s code automatically tracks purchases made by customers who opt into a loyalty program, emails out marketing tailored to individual customers and helps the businesses collect data on who is buying what and when.
“That information is not sold or traded,” Sugar said. “We really work with our clients to keep that data private.”
Smart Button’s subscription-based, software-as-service model eventually attracted the attention of venture capitalists and large companies. Aimia, a Montreal-based marketing and loyalty analytics company with 4,000 employees in 20 countries, purchased Smart Button in 2013 for $18 million.
Forker retired after the acquisition, while Sugar and Altrichter remained on as vice presidents at Aimia. They continue to run the business out of a 7,000-square-foot office off Casho Mill Road.
“We like our team, we like our business and we like getting up and going to work every day,” Altrichter said.
Those are the same traits that will help determine whether entrepreneurs in Delaware’s nascent tech scene flame out or build enough companies capable of collectively matching the employment numbers of the state’s largest corporations, Sugar said.
Most startups will fail, he noted. But Delaware still could see long-term rewards if it can stay patient while the people behind those companies pivot, innovate and grow.
“In technology, a lot of people think they are going to build something and flip it in two years,” he said. “For some lottery winners, that can happen. But the vast majority will have stories like ours filled with slow starts and long periods of hard work before they get to a payoff in the end.”
Contact business reporter Scott Goss at (302) 324-2281, [email protected] or on Twitter @ScottGossDel.
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