LEADERSHIP IN A CHANGING ENVIRONMENT

SciQuest as a Case Study

Stephen J. Wiehe

FORWARD-LOOKING STATEMENTS

This presentation contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements. Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in SciQuest's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement you see or hear during this presentation reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.

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• SciQuest transformation timeline

• Our key leadership concepts

• My leadership misconceptions

• Principles we live by

DISCUSSION POINTS

THE STORY OF QUESTIE

A LITTLE BEAKER AND A LOT OF MONEY

• $375M of Invested Capital

• $2.2B Market Capitalization- Early 2000

• $60M Market Capitalization- Late 2000

SCIQUEST.COM

• A B2B Exchange for lab supplies

– “Amazon.com for the lab”

• > 500 Employees

• $25M per Quarter cash flow burn

– (2 ½ Quarters operating cash in bank)

• $64M Revenues

– 2.5% Gross Margin (revenue less cogs) *

– $3,200 per employee

• Market Cap (‘00) $2.2B

• Enterprise Value less than $0

• A bank, a web site, a publishing company and a software company

• A charismatic CEO

• A proud and headstrong culture

• 1995: Founded

• 1999: IPO

• 2000: Dot com crash

• Feb 2001: New CEO

Timeline

• We are a family.

• We are changing the world.

• It’s not about the numbers – it’s about doing something different.

• Our culture is special – it’s something we are very proud of.

• Profits don’t matter – they will come with time.

• We can’t be wrong – we were worth over $2B.

• It’s only a short-term valuation problem in that the market doesn’t really understand us right now.

• We are a new economy company.

THE MINDSET

A B2B Exchange for lab supplies“Amazon.com for the lab”

Understand how value was created

500 Employees Terminated over 425 Employees

$25M per Quarter cash flow burn2½ Quarters operating cash in the bank

$2M per Quarter cash flow burn$50M at year end ’00

$64M Revenues2.5% Gross Margin*$3,200 per employee

Subscription fees80% Gross Margin

Market Cap (‘00) $2.5B Went private 2004/IPO 2010

Enterprise Value $0 Enterprise Value $25.25M

$375M of Equity raised $20M of Equity raised

“It’s all about the vision” “It’s all about our customers, shareholders and employees”

“We are family” culture” A new culture, which is our culture today.

THE CHANGE

COMPANY OVERVIEW

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SCIQUEST TODAYMarket leader with $500M market cap

SciQuest is the largest publicly held pure-play provider of cloud-based business automation solutions for spend management – offering deep domain knowledge and a leading, customer-driven portfolio.

• 500+ customers

• Proven ROI

• Highly satisfied customers

• 500 global employees

• Based in Cary, N.C.

2011Acquired AECsoft

2004Taken Private

1999IPO

New Management2001

Taken Public2010

Founded1995

Acquired Upside2012

2012Acquired Spend Radar

Acquired CombineNet2013

SciQuest GROWTH

INVESTMENT HIGHLIGHTS

• Multi-billion dollar, growing addressable market

• Leading provider of spend management software with differentiated cloud-based platform

• Multiple long-term growth drivers

• Proven ROI and customer success withhighly-satisfied customer base

• Recurring revenue driven by multi-year subscription agreements

• Generating attractive long-term growth rates, profitability and cash flow conversion

NASDAQ:SQI

CONSISTENT REVENUE GROWTH 34 Consecutive Quarters of Growth

($ millions)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

$12.5 $12.9 $13.8 $14.2 $14.4

$15.2

$17.6

$20.8 $21.3 $22.0

$23.5

$25.8

2011 2012 2013

OUR KEY LEADERSHIP CONCEPTS

KEY LEADERSHIP CONCEPTS

• Collaboration over

consensus

• Respect and recognition for the individual

• Facts then opinions

• Proper use and respect of power

• Focus on the ‘right things’- Environment

- Incentive programs

- Shareholder value

MY LEADERSHIP MISCONCEPTIONS

CULTURE

is a tangibleresult of…

LEADERSHIP

LEADERSHIP

MANAGEMENT

and

are not the same things

LEADERSHIP

• Leadership is a process

LEADERSHIP MISCONCEPTION #1

• Leadership is a behavior

Why?

• You lead others by what you do, not what you say.

• Transparency is a vehicle, trust is the key. 

• It must be continual, not periodic.

LEADERSHIP MISCONCEPTION #1

• A leader needs to be ready with an answer

LEADERSHIP MISCONCEPTION #2

• A leader needs to be ready with a question

Why?

• Initial questions allow for clarification of the issue or problem.

• Questions allow for conflict without stating such.

• Questions allow you to send a polite message of incomplete staff work without embarrassment.

• Asking for input or ideas could be viewed as weak or losing power, which is a fallacy.

LEADERSHIP MISCONCEPTION #2

• A leader needs to be a great speaker

LEADERSHIP MISCONCEPTION #3

• A leader needs to be a great speaker, but an even better listener

Why?

• Seek to understand – then be understood.

• At the center of every joke is a nugget of truth…

• You can listen and think faster than you can talk and think…

LEADERSHIP MISCONCEPTION #3

• Great ideas come from debate and conflict

LEADERSHIP MISCONCEPTION #4

• Great ideas come from an open, constructive and positive discussion driven by questions

Why?• “Facilitator” style leaders are more powerful than “Directive”

style leaders.

• Conflict creates situations where ideas and people become positions – and positions are very hard to change.

• Everyone contributes and therefore buys-in to the idea.

• The situation will change over time and course is easier when everyone was part of the original idea.

• Three parts to every conversation

LEADERSHIP MISCONCEPTION #4

• A leader mandates change

LEADERSHIP MISCONCEPTION #5

• A leader mandates change can mandate change in times of crisis; in all other times, a leader must coax change

Why?

• CEOs are used to being direct – “tell” is the normal behavior; Asking by “how” or “why” are more powerful and longer lasting. 

• Focus on positive reinforcement, not negative.

• Removal of stress from a situation yields better results than the addition of stress.

LEADERSHIP MISCONCEPTION #5

• A leader needs to be tough- they set the standard

- they need to maintain power and an air of authority

LEADERSHIP MISCONCEPTION #6

• A leader needs to demonstrate the correct use of:

LEADERSHIP MISCONCEPTION #6

- Power

- Feedback

- Anger

- Respect

Why?• Power: Give power and authority away daily. Understand where the

power is in a meeting and respect the lack of it.

• Feedback: Asking for it opens a dialog. If you are willing to receive it, you are teaching others how to receive it so they are more willing to take it.

• Anger: It’s counterproductive. Stops all dialog and problem solving – at the worse possible time – when you need it. People will pass it on.

• Respect: Always give respect unconditionally – then you can expect it back.

• Great leaders are successful people

LEADERSHIP MISCONCEPTION #7

• Great leaders surround themselves with successful people

Why?

• Growth and opportunity come from below, not above.

• Don’t think of problems as personal. Great leaders always put needs of the company, its customers and employees first.

LEADERSHIP MISCONCEPTION #7

PRINCIPLES WE LIVE BY

PRINCIPLES WE LIVE BY• Have an “open kitchen” (rule of

Buca di Beppo)

• Measure outputs, coach inputs

• First the bad news

• Set the table

• Time of warning = time of delay

• Feedback is a gift- Find a mentor and ask for feedback

- Say “THANK YOU” for feedback – all feedback

- Say what needs to be said, right time, right way

• Lead or be led

• Deal in facts … “seek the truth”- Microdata not micromanagement

- You can’t communicate enough!

• Focus on defining the problem; it should be 95% of the effort

• It’s ok to call ‘Time out’

• Focus on the journey… not the destination

• Trust & respect are key ingredients in success

- You have to give them first before you can earn them

- They simplify all interactions

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• It should be our #1 priority

• Leading is lonely

• Mandates fail

• Collaboration over consensus

• Investment is a requirement

SOME THOUGHTS ON EDUCATION

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• Education is our #1 priority- Perception versus reality

• What’s the goal?

• We can’t legislate growth and success- We need to get out the way and let it happen naturally

• Invest in many small initiatives not a few large

SOME THOUGHTS ON OUR ECONOMY

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