Endurance Beats Speed

7 Lessons from Eric McDonald on Building a $1.25B Company in a South Dakota Basement

Most startup advice worships speed. Move fast, raise fast, exit fast, then go do it again. Eric McDonald did the opposite. He spent nineteen years building one company, in a basement, in South Dakota, and walked out the other side of a $1.25 billion outcome. Here’s what that kind of endurance taught him about capital, identity, and why the founder who stays usually beats the founder who moves.

I recently sat down with Eric McDonald on the podcast. Eric wrote the original code for DocuTap himself, in his basement, and scaled a healthcare tech company from nothing to a $1.25 billion valuation. The company ran through every stage of the money game: angel investors, a family office, venture capital, private equity, a merger with its biggest competitor, and a final exit in 2022. Today he keeps his hands in tech with a couple of startups, including Coin Lion, an algorithmic crypto trading platform. He still lives in South Dakota, on eight acres down by the river.

What struck me was how little of his story is about being the smartest person in the room. Eric almost shut the company down six or seven times. He raised money $50,000 at a time from corn farmers. He nearly killed himself tying his identity to the work. And he came out the other side with one of the better outcomes this state has ever produced. If you’re early in the grind and wondering whether you have it in you to keep going, these lessons are for you.

Pick a Vertical That Grows Without You

Eric didn’t start with urgent care. He started by trying to sell electronic medical records to everyone. Primary care, then an ENT group, then orthopedics, then cardiology. Every specialty looked like a customer. And every specialty turned out to have its own data sets and its own workflow, each one a separate product to build. As a small company, he could only point his time at one thing.

So in 2004, four years in, he picked urgent care. Two reasons. There were no big competitors focused there, while everyone else was crowded. And the category itself was exploding. A client who signed with two clinics would be running eight or ten within three years. Eric got the growth without having to go re-sell it. The market did the selling for him.

This is the thing we talk about constantly at Wildfire. Founders show up with a broad vision to change an industry, and the actual work is finding the beachhead inside it. Eric found the rare kind: a vertical that compounds underneath you, so your customers expand whether or not your sales team does.

What to do this week: Pull your customers from two or three years ago. Did their usage, seats, or spend grow without you re-selling them? If the line is flat, your product might be fine and your vertical might still be the problem.

Get to Break-Even Faster Than Feels Right

I asked Eric what he’d do differently. No hesitation: they were undercapitalized, and he chased growth when he should have chased profitability. He raised in $50,000 and $100,000 increments from pig farmers, corn farmers, and local business guys, because there was no large investor group in the region until 2011. And the business model made it worse. It was transactional. He had to hire three people at $80,000 each to chase revenue he was earning a dollar fifty at a time.

His number one rule now, for almost any startup: get to cash flow break-even as fast as possible. And he names the counter-pressure honestly. The venture and private equity guys will tell you to run as hard and fast as you can, and if you run out of money, they’ll give you more. That sounds generous. It’s a way to take more equity and more control of your company.

We’re living through the swing back. At Property Meld we’re counting the days down to profitability, and the investors are supportive of it, precisely because nobody knows what the market is going to do next. Free cash flow you can reinvest puts you in a different negotiating position than a runway that ends in someone else’s term sheet.

What to do this week: Run two numbers. Your months to break-even at current burn, and your months of runway if you raise. If the first number is reachable and you’re still optimizing for the second, ask yourself who that actually serves.

Trust Is Yours to Lose, Not Earn

Eric has a hiring philosophy I keep thinking about. New hires get his trust instantly. Not “earn it over time,” but “it’s yours to lose.” And it comes paired with something most founders won’t do: he puts his own weaknesses on the table. He told his sales team plainly that he could close any deal you put him in front of a client for, but he was never the guy waking up thinking about how to close more deals, so they needed to push him. He has, in his words, no problem being the dumbest person in the room.

This is the heart of what I call “no black boxes.” Most founders are a sales person, a product person, or a technical person, and they over-index on that one strength and quietly black-box the other two. When the business hits a rough patch in marketing or ops or hosting, the founder who black-boxed those functions can’t call BS and can’t add value. Eric’s fix wasn’t to master everything. It was to say out loud what he didn’t know and build a team that would push him there.

What to do this week: Name the one function in your company you understand least. Tell the person who runs it, out loud, that it’s your weak spot and you want to be pushed on it. Watch how fast the black box opens.

Your Best Ideas Aren’t Yours

I asked Eric what his superpower is. He said he can talk to ten people, and when one of them says one thing, he knows immediately: that’s money. “Rarely are they my ideas,” he told me. People ask how he comes up with all this stuff, and his answer is that he doesn’t. He’s just good at listening and recognizing signal when he hears it.

That’s the whole game for a lot of great founders. Not generating brilliance in a vacuum, but pattern matching across a lot of conversations and grabbing the one piece that fits the problem in front of you. The skill isn’t talking. It’s filtering signal from noise, and then having the conviction to go act on the signal.

What to do this week: Think back over your last ten outside conversations. Which single comment was “money” and you let it slide past? Go do something with it this week.

Reinvent Yourself or Get Left Behind

The version of Eric who wrote code in his basement is not the version who ran a billion-dollar company, and he’s clear that the distance between those two people is enormous. He had three distinct executive teams over his tenure, each one suited to a different size of company, and for the most part one team didn’t make it to the next level. Leading ten people is a different job than leading fifty, which is a different job than leading a hundred.

The harder reinvention is the founder’s own. Once you’ve recruited a team that can run the thing, the question becomes what only you can do now, and that answer keeps moving. The founders who plateau are usually the ones who got good at one stage and stopped re-recruiting themselves for the next one. Eric credits his VC and PE boards for pushing him, but his real point was that if your board won’t push you, go find the rooms that will.

What to do this week: Write down the job you actually do today versus the job the company needs from you six months from now. The gap between those two is your next reinvention.

One Plus One Equals Four (And Where I Push Back)

The merger that made DocuTap was Warburg’s plan from day one: take the number one player and the number two player in urgent care, combine them, build it up, and sell it. Practice Velocity’s CEO said he wanted the top job, and Eric, twenty years in and with no ego about it, handed over the torch and moved to the board. It worked. A $1.25 billion valuation, roughly 70% of the market, and a sit-down with the DOJ to explain why that wasn’t a monopoly problem.

Here’s where my own experience pushes back. At Concur we did thirteen or fourteen acquisitions, and if I’m honest, at least half weren’t accretive to what we promised. We bought $40 million companies that turned into shelfware. So when Eric told me the merger worked, I wanted to know why his didn’t end up in that pile.

His answer is the lesson. The big merger worked because it wasn’t a bolt-on. Two companies of similar size, where everyone knew that if it didn’t come together the whole boat sank, so they made it come together. The deal that got messy for him was the small tuck-in, the one sold on “it’ll be accretive this way and there’s this revenue opportunity” that never quite materialized. That matches my scar tissue exactly. The dangerous acquisition is rarely the bet-the-company one. It’s the small one nobody respects enough to integrate properly.

What to do this week: If you’re eyeing an acquisition, ask whether failure would sink the boat or just dent it. Counterintuitively, the ones that can’t fail quietly tend to get the attention that makes them work.

Don’t Tie Your Identity to the Company

This is the part I most wanted to talk about, and Eric didn’t flinch. Burnout is real, and it nearly took the company down more than once. He described the lonely version everyone pictures: standing at the edge of the cliff called failure, wondering how to make payroll, carrying the weight of investors and customers and employees while everyone assumes you have it handled. But he also named the version nobody warns you about. Running a billion-dollar company with an all-star team that doesn’t need you, showing up and not knowing what to do, feeling like you have no value. Both ends burn.

The deeper trap is identity. When Eric stepped down as CEO and took a year off, people at events would ask what he did for work, and he’d hear himself spinning stories to justify why he was “between jobs,” because his sense of self was wrapped around the company. His advice is to anchor your identity somewhere the business can’t touch it. Husband, father, child of God, whatever your version is. Not “was my company successful this hour.”

He lived the reset literally. The week after he left DocuTap, with his new house still being built, he moved into a canvas tent on his eight acres for three months. Chainsaw, tractor, an outdoor shower he rigged up, trips to the laundromat to wash his clothes. Stripped all the way back to the basics. He says he wouldn’t do it again, but it’s some of his boys’ favorite memories, and it was exactly what he needed in that season. Sometimes you have to take everything away to remember who you are underneath the title.

What to do this week: Finish this sentence without mentioning your company: “I am someone who ___.” If it’s hard, that’s the work, and it’s worth more than anything on your roadmap.

The Bottom Line

Speed gets the headlines. Endurance builds the billion-dollar outcomes nobody saw coming from a basement in South Dakota. Eric’s career is a case for staying: pick a vertical that grows under you, get to break-even faster than feels comfortable, be honest about what you don’t know, and don’t let the company become the only answer to who you are.

What would change about how you’re building if you assumed this was a nineteen-year job, not a three-year one?

This article is based on my conversation with Eric McDonald on the podcast. We covered more than I could fit here, including his bet that nobody will be trading crypto manually in a few years, what it was like to argue your own non-monopoly case in front of the DOJ, and why he wanted a brand-new industry after two decades in healthcare.

[Listen to the full episode here.] (episode link)

Connect with Eric: LinkedIn (Eric noted LinkedIn is the only platform he’s on.)