In this episode of the SaaS Revolution Show our host Alex Theuma is joined by Preston “PK” Keller, Founder at Emergent 3, who shares how he overcame an industry Goliath trying to kill his SaaS business.

$120,000+ ARR in just six months. 10 employees on the payroll. It was all going so well for Emergent 3 until a knock on the door…

For this episode of The SaaS Revolution Show, I spoke with Preston ‘PK’ Keller, the Founder of Emergent 3 (E3). During the interview, PK explained how his former company tried to sue him personally – and his new business – just for competing in the same market. It was one of the toughest and most inspiring interviews I’ve done. 

For founders going through hard times, whether it’s legal issues, layoffs, debt or emotional strain, here’s how bravery and resilience can help you get through it.

A promising start

PK worked for a software start-up trying to bridge the gap in emergency communications. After pushing the concept with the founder for a few years, a big defence contractor acquired the start-up. However, they only wanted the founder’s skill set and treated the start-up as just another project in their huge system. In four years, they won just 20 accounts. 

“It’s like all the horror stories you hear in business school where a big company buys a little company and drives it into the ground. That’s exactly what happened.” 

The founder left and PK tried to stick it out. But when a friend asked if he’d signed a non-compete (PK hadn’t) and suggested revitalising the concept with his own company, PK quit. 

After getting financing, PK hired a development team to rebuild a similar platform and brought on Dalton Mickelson, then VP of Sales at iWorQ Systems, as a co-founder. With a ‘real salesman’ at the helm, E3 surpassed what the defence contractor had achieved in four years in just six months of going to market.  

“Things were going so well for us. Then I got a knock at my door and the sheriff served me a summons for a claim against me.”

The anticompetitive lawsuit

The defence contractor was suing PK personally for breaching an NDA (non-disclosure agreement) signed during onboarding. The development team, which had built both the initial product and the E3 version, was also wrapped up in the lawsuit as they had signed a non-compete (unbeknownst to PK). The defence contractor was also suing E3 for patent infringement; a federal court issue that would take years and huge amounts of money on lawyers to resolve. 

At the time, E3 had $27,000 in the bank account and 10 employees on payroll.  

“Our legal bills started raking in. I remember just thinking E3 is going to go under and they’re going to come after all my personal assets and I’m going to lose my house.”

Fortunately, moved by the unfairness of the situation, a major law firm took the case at a much lower fee. They pulled together a motion to dismiss the claims, but this still took 13 months and hundreds of thousands of dollars. Over this period, Dalton and PK did everything to keep the company going, including:

  • Taking themselves off the payroll. 
  • Hiring their siblings to work in the set-up team.
  • Doing 14 demos a day to bring in new business (supported by part-time college students hitting the phones).
  • Taking out $38,000 on a 0% interest credit card for a year.
  • Selling an MVP with no Dev support for 12 months (unable to fix bugs, the support team overcompensated to help retain users).

The happy ending 

Eventually, they got in front of the judge (via Zoom link due to Covid restrictions). After listening to both sides, the judge dismissed all claims against PK and E3, noting ‘you can’t patent an emergency process’. 

“The judge made his ruling and it was like Christmas.”

While the outcome was a success (E3 is now performing and scaling), being pushed to the point where you can lose everything taught PK a few things about leading a SaaS business through a crisis. 

  • Focus on the good things. “When you’re going through hell, you cannot control all the environmental factors around you, but you can control how you react to it.” For PK, that was making someone else smile every day.
  • Swallow your pride. “I just had to trust my gut and swallow my pride that maybe I’m not the best fit to lead E3 right now.” Having been excited to run his own company, PK realised that Dalton’s contagious belief was the best fit to lead E3 and handed over the CEO role to him.
  • Prioritise your relationships. “When you think you’re going to lose it all and money is irrelevant, you realise that your relationships are the most important thing in your life.” For PK, this was his relationship with God, himself, his family and friends.

Don’t struggle alone 

SaaS founders go through so much. Whether it’s debt, fear of failure, or scaling struggles, growing a SaaS company is tough and it takes a huge emotional toll. 

If you’re going through hard times, seek out support from friends, family and the wider SaaS community. Or find your tribe with a dedicated group like the SaaStock Founder Membership (of which PK is a member!).