Sramana: When it comes to equity strategy things, can get very tricky, very fast. Most entrepreneurs have no clue how to build an equity strategy.
Thomas Massie: The first step might be friends and family, followed by angels. I have seen a shift in venture capital which is trending towards less risk and less venture.
Sramana: If you have a business that fits the venture model, then you can go that route. The trouble is that fewer than 1% of the businesses out there fit that model. There are other financing models available, including bank financing.
Thomas Massie: I have never raised any venture capital. I have always been able to raise money through angels, sometimes up to $4 million. Combined with bank financing, we have never had the need to raise venture capital.
Sramana: I would consider $1 million to $4 million of angel money the same thing as venture capital. You can call it private investors instead of institutional; the dynamics are the same. All of your companies went public. There was a growth pattern built into it.
Thomas Massie: Don’t you think the terms and conditions are better from the angel investors? I don’t think they have the aggressive ratchets.
Sramana: It depends on the angels. Some of them will gorge on young entrepreneurs.
Thomas Massie: I have not raised angel money in a decade; things may have changed some.
Sramana: I had someone who came to me recently with a deal from an angel investor. He wanted to raise money but did not like the terms, so he asked me to look at it. The angle wanted to take over the company and leave the entrepreneur with 7% equity. I told him that what he was offered was not a deal.
Thomas Massie: Sounds like an angel was trying to gorge. I like that phrase.
Sramana: You have a $35 million company right now. Where do you want to go with Bridgeline?
Thomas Massie: We are going to continue to grow organically. Our margins get better every year. Internally we have a $100 million business plan, and we know exactly how many engagements we need to sell to get there, both domestically and abroad. We have yet to expand into Europe and we are just starting our channel partners, in E MEA and Asia Pacific.
We have great relationships with UPS Logistics where we are their ec-ommerce solution of choice. We just announced a brand-new iAPPS version that supports the franchise and large dealer network. We are very excited about that product because it is all self-service and is a very profitable model. We recently signed a large franchise customer to that product, and that customer is launching more than 4,000 of their stores on the platform.
Sramana: Do you need to raise money to achieve your vision?
Thomas Massie: I think it will be a combination of small outside financing from time to time along with our bank line. I have been doing business with Silicon Valley Bank for more than 20 years, and they have been a great partner of ours. We continue to drive $3 million of positive cash per year ourselves as well.
Sramana: Very good, you are building a great company with excellent navigation. Congratulations, and best of luck.