The Early Days of Partnership

Mike Farrell: My journey to CINC was an interesting one. One of our associates told me I should go meet Bill. I probably had five or six meetings in his Atlanta office, and every single time he’d have a huge plate of barbecue. At the end of every lunch I’d ask, “So can you tell me a little bit about CINC?” After the fourth or fifth meeting, he finally started opening up. There was definitely a courting period where Bill had to get to know you before he could do anything.

Ryan Davis: I’ll never forget meeting Bill for the first time. He’s such an individual. I was hoping to find my first CEO job at the right place, and the more I learned about CINC, the more I realized the product-market fit was absolutely unbelievable. Then I started getting to know Bill and it only became more appealing.

This was early 2020, so Bill would come visit me on my front porch. We had to sit some distance apart. I remember getting a burrito and Clorox-wiping the foil – I was not going to kill the founder before I actually started my job. My kids would have their noses pressed against the window watching because it was very exciting if someone actually came to your house in early 2020. They called him “Mr. Bacon.”

Every time Bill came, he had more ideas of what could be done with the business. I just got more and more excited. By the time I accepted, you and Bill were already one. You couldn’t have more different people, as Bill liked to point out regularly. But I never had to make two phone calls. I’d call one of you, and that was it. You had won Bill’s trust, and because of that, he trusted me.

Farrell: What did you see in CINC when you were getting to know the business?

Davis: I got excited about CINC when I realized this was about as unsexy a space as you could imagine. Being a management company that runs HOAs is a really, really hard job. It was an underserved space where technology could make a huge difference.

When I finally got out to meet clients, they’d say things like, “We wouldn’t be here if it wasn’t for CINC.” One client told me, “I have a business to pass on to my son” – his son was sitting right there at the table – “and I only have that business because of CINC.” The product created so much efficiency for these thin-margin, heavy-manual-work businesses that owners could build something sustainable, something they could pass down for generations. How cool is that?

Farrell: That’s what software is supposed to do – make people more efficient.

Davis: Our customers kept saying the same thing: “I have the same number of people now as when I was one quarter this size.” They grew without having to grow their teams.

In the Trenches

Farrell: Your first day was supposed to be April 15th, 2020. I remember during those times, I was very nervous about how the business was going. I’d call Bill and he’d tell me, “You better just relax. We’re going to be fine. And don’t make Ryan as nervous as you are.”

Davis: I never felt that nervousness from you. Interest rates had dropped to effectively zero overnight, and that had real implications for our business model. I remember telling my wife – she said, “Wait, you’ve accepted this job and you told me interest rates have something to do with it. What’s the deal with the fact that they’re zero?” I told her Spectrum had thought about all of this in diligence. They understood how the business would be okay. That was incredibly calming to me and my family.

Farrell: It was one of the risks we’d spent a lot of time on in diligence. It’s one thing to have a theoretical view that you think will work. It’s another thing for it to get tested five months after you close.

Davis: I started on June 1st, and by early July we wanted to make a major decision about how we worked with banks – something the business had done one way for 15 years. I showed up with three slides that basically said: I’d like to change this. Bill’s exact response was, “Well, we didn’t give you the keys for nothing, Ryan.” He trusted you, and therefore he trusted me. I can’t imagine walking into a better scenario.

Farrell: One of the great things about the business was the culture Bill created. There were no sacred cows. If we thought we needed to change something to make it better, nothing was untouchable. As long as we kept the product and customer first, everything flowed from there.

Davis: It was so unique. Bill had been involved in this business – his baby – for 15 years, but he could be one step dispassionately removed and just see how things were. Every one of his advisors told him not to bring in an outside investor. But after meeting the Spectrum team, he decided to do it anyway. And that trust made my life so much easier.

Farrell: What’s remarkable is that when we closed, there were probably four senior team members. We brought on a whole new C-suite – you as CEO, along with a CRO, a CFO, a CTO, a head of implementations, a chief product officer, a head of HR. Seven or eight key hires in the first 18 months. But we kept the existing team, and they were happy to stay. That almost never happens. It’s a tribute to the culture Bill built.

Davis: You made a decision before I even joined – starting an outbound sales motion. You got the database organized so we could reach out to prospects, got a calling motion going. It still needed to be perfected, but the fact that the engine existed meant our CRO could work on something rather than build from scratch.

I was skeptical that we could sell software to small mom-and-pop businesses over the phone. But it turns out, if you run a property management company for HOAs, you have to answer the phone because residents call constantly. And when the person on the other end isn’t yelling at you – when they’re actually trying to help you improve your terrible software – you’re thrilled to take that call.

Farrell: In the first six months, we tried a bunch of things on sales and marketing just to see what would work. Once we found a few things that clicked, we dug in. We were making some of those investments during a global pandemic, but we had the courage to stick with them.

Davis: That set the tone for everything we did together. You gave me comfort that it was okay to fail. One thing I’ll always value about our relationship is that yes, I call with good news, but I’m faster to call when something’s gone wrong – because you’ve made clear we’re not going to get everything right. Recognize it quickly, share it, and you’ve got a thought partner to figure out what’s next. That’s a tone I could pass on to the whole team: we don’t have to be perfect, we have to make progress.

The Long Game

Farrell: There was real conviction that we’d have to make investments that would pull margins down, but ultimately accelerate growth. We doubled the growth rate over the first two years of our investment. That’s not easy to do with a company at scale.

Davis: If Bill were sitting here, he’d say, “Yeah, you two got rid of all my margin. Look at those two, they killed all my EBITDA.” That’s the joking way of saying it. The serious way is there was faith from Spectrum and Bill to take margins down significantly in order to grow. And the margins came back – but only because there was trust that we could make those bets.

I still remember Bill on my porch at the beginning of COVID with a notebook full of ideas for growing the business. For years, we set those aside – there was a “do not touch” lever because we weren’t ready yet. What’s fun about now is that notebook is incredibly relevant. We’re finally getting to do what Bill envisioned five years ago. It’s the key part of our plan today.

Farrell: What excites me most about CINC today is the base we’ve built. Great customers who love us, a product that drives massive efficiency. The next chapter is about pushing that further – we have a big AI investment going into the company that will let our customers rip out manual tasks and focus on higher-value work.

Davis: We still have a lot of communities left to reach, and the impact we can have within each community is growing. We made it our mission a few years back to make it a great experience to live in a professionally managed community association. HOAs don’t have the best reputation – “I live in an HOA” is almost a dirty word. But so much of that is because the technology serving these communities was lacking.

AI creates so much opportunity to turn a challenging property manager job into a meaningful one – where someone can focus on human interactions instead of answering the same questions over and over. With our acquisition of ONR, new payment experiences, AI to help residents – we can actually make it a good thing to live in an HOA.

I envision the day two people are sitting down and one says, “I live in such-and-such HOA and we have this amazing experience” – not “I live in an HOA, it’s been tough.” We have the ability to drive that through tens of thousands of communities now. I’m so excited about that.

Farrell: Me too.

Ryan Davis is CEO of CINC Systems, the leading software platform for community association management. Mike Farrell is Managing Director at Spectrum Equity, where he leads investments in internet and software companies. Spectrum Equity partners with founders of bootstrapped and capital-efficient growth companies who are looking for a collaborative investor to help scale their business.

Spectrum Equity partners with management teams. Results reflect company-provided historical information and management execution for a selected portfolio investment. To improve readability, this interview has been edited for clarity and conciseness. These edits do not materially alter the meaning of the discussion.