Sramana: It’s funny you mention the need for funding. At 1M/1M we are strictly against that point of view. Ideas don’t get funded. You were operating at a time and in a situation where things clicked, but most of the time you need to turn an idea into a business and the business gets funded.
Colin Day: I was very fortunate with timing, that is for sure.
Sramana: It was also a different time back then. The late 1990s was a time when idea funding was happening. I did an idea startup myself that year.
Colin Day: I agree. There really was a period where in all honesty, these ASP or SaaS companies were getting funded on ideas alone.
Sramana: What was the idea you sold to your CEO to convince him to invest in the startup?
Colin Day: Essentially we approached him and told him that he had the initial development completed for a recruiting platform. It was not originally designed as a SaaS product, but we felt it could work that way. I just asked him what he thought about starting another company. I proposed purchasing the rights to the original software and spinning it out as a completely separate company.
He was supportive, mainly because I had started an office for him. I began working for his company when I in New Jersey, but I later returned to D.C., which is where I grew up, and I opened an office for him there. It worked out quite well. That built a bit of trust and track record with him. He was very supportive.
Originally we were thinking about going out and getting VC capital. I can honestly tell you that if we did that, we would not be here today because we made so many mistakes initially. It took a while for us to get going, and a VC firm would not have had that patience. I am delighted we did the bridge loan concept instead.
Sramana: You are pointing out another theme we see a lot, which is friends and family funding to get things off the ground. You need somebody who knows you and your work. You need that relationship of trust. These are the kinds of people who are willing to bet on early-stage, first-time entrepreneurs.
Colin Day: That is exactly what it was for us. We ran 12 years organically before we did our first minority growth equity investment. That leeway to build up to profitability puts you in a really great position.
Sramana: What happened after you convinced your CEO to invest in you?
Colin Day: Early on we were able to use corporate facilities. Every two weeks I would call him up, around payroll time, and let him know how much money I needed. We would cross our fingers, and sure enough the loan would come in. It is amazing when you are going payroll to payroll how quickly things go by.
He was incredibly kind and supported us that way for two and a half years. Unfortunately, everything did start to fall apart in the dot-com world. They were in IT staffing, so they were hurt as well. I got a call one day during which he told me that he could not support us with those types of investments and that I needed to find a way to break even immediately. It was the hardest day I have been through because I had to take the company from 30 employees down to eight the very next day.
I told myself that I would never put myself in that type of position again. That put us in breakeven position, and from that point forward we have never looked back. We have run profitably with zero debt ever since.