Butt heads, SLOBS and BUMS make this one hot firm

San Diego Business Journal, June 28, 1999 by Andrea Siedsma

Edwin T. Lester was just tickled to death that his year-old company was selected by Entrepreneur magazine and Dunn & Bradstreet as one of the nation's Hot 100 Companies for 1999.

The Hot 100 accents the nation's fastest-growing businesses. Lester's firm is ranked No. 45.

"All of a sudden you have this reward to you and your troops that you're doing the right thing," said Lester, founder, president and chief executive of Maxim Systems, Inc. "It's like having a surprise Christmas gift from Santa Claus."

However, it's no shock Maxim is being thrust into the spotlight only a year after its inception. The company is going like gangbusters.

A small, employee-owned firm nestled in the heart of Mission Valley, Maxim provides systems and software engineering, development, integration and analysis primarily to the Defense Department. The company's main customer is the San Diego-based Space and Naval Warfare Systems Command (Spawar), the U.S. Navy's multibillion-dollar telecommunications arm.

In the first seven months of business, Maxim generated a little more than $4 million. Sales for 1999 are expected to hit $15 million. Maxim's staff (mostly technicians and engineers) has jumped from 28 to 55.

Lester expects the company's revenues and employees to start doubling every year. That increase also includes beefing up Maxim's Washington, D.C., office, which currently has a staff of four.

"Spawar's move to San Diego and their emphasis on supporting small business has been a major factor in our growth," Lester said.

While things seem to be going well for Lester and his Maxim team, it hasn't been an easy ride. Just a year ago, Lester and his fellow workers experienced the most frightening day of their lives.

It was on June 14, 1998, that Lester and his colleagues at Sierra Cybernetics in San Diego did an employee buyout of their division and spun off on their own.

"Sierra wanted to proceed in a different direction than we did," Lester said about the Yorba Linda, Calif.-based high-tech company.

"It was sheer fear on the morning of June 14, with 28 employees and not a penny in the bank."

Along with the employee buyout, Lester and his group also purchased a couple defense contracts, which helped keep the young Maxim alive.

"With the employee buyout and the purchasing of contracts, we were able to do the purchase and not go into debt," he said.

Lester also recruited help from the Foundation for Enterprise Development, a local nonprofit designed to show companies how to set up equity compensation plans.

The 12-year-old foundation was the brainchild of Bob Beyster, founder and CEO of San Diego's Science Applications International Corp., the nation's largest employee-owned tech company. The foundation helped Maxim develop a stock program similar to SAIC's.

"It's a whole different culture when you have your employees own stock," Lester said. "Our goal is to emulate the basic SAIC architecture with the emphasis of teamwork."

Ron Bernstein, the foundation's associate director, said Lester's decision to offer employee ownership of Maxim was a smart one.

"It creates a situation where you can use ownership to recruit and retain your people," Bernstein said. "You can get them excited about the business. In Maxim's case, what's extremely interesting is they created a stock purchase program in the early days of the company and they had great success with that."

Bernstein said it's rare for so many employees to invest in a company that had a lot of risk because it was a start-up.

As far as Maxim's business goes, "They have a niche market and they're doing well with it," Bernstein said. "There's a lot of potential there. The U.S. government is a good-paying customer."

Maxim is netting about $7 million a year as the prime contractor for Spawar's Ocean Surveillance Information System Evolutionary Development program (OSIS).

The program, which is indefinite, focuses on building U.S. joint intelligence centers in the United States, England, South Korea, Japan and Australia.

"The special capability of this program is it can automatically manage the multiple levels of secure information, store them in an integrated database and develop products tailored to the needs of individuals and commands," Lester explained.

Two South Korean naval officers are even using one of Maxim's labs to work on the OSIS program.

The U.S. government has put about $700 million into OSIS since the program was launched 20 years ago.

Maxim is also involved with the Contingency Theater Air Planning System (CTAPS), in which the company assists Spawar in developing software to coordinate air battles.

Maxim's third project is helping Spawar coordinate the installation of computers and communications systems aboard Navy ships.

Lester, whose work week consists of 60 to 70 hours, said doing business with the government is a lot easier these days.

"The commercialization of military information systems has been a significant improvement in recent years," the retired Navy commander said. "This change has made it a lot easier to train as we bring these young kids into the military."