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Parallel Entrepreneurship: Serguei Beloussov, Founder of Parallels (Part 5)

Posted on Monday, Oct 15th 2012

Sramana: When you established an ERP software company [for] Asia, what size of clients did you target?

Serguei Beloussov: We sold to companies of all sizes. We also established a partner network. We got involved into customization for localized requirements. At the same time I established a side project where we developed, from scratch, a software package to estimate financial derivatives. It was started in Singapore by Russian engineers. I brought several engineers over and we used the latest Microsoft technologies. In 1997 when Bill Gates came to Singapore, it just so happened that the local Microsoft Office decided to have him visit us. We spoke for about 30 minutes and he told us we had a great architecture.

In 1998 we then convinced Solomon Software to let us rewrite their major product line. That product line represented about 95% of their revenue. Our proposal was to rewrite it using the architecture that Bill Gates blessed. We expanded our engineering team to about 60 engineers, all Russian, to rewrite the ERP software in the correct architecture. Altogether that went to about $5 million in revenue. It was very profitable, and we just sold it to Microsoft recently. We had about 1,000 customers in the region that were mid-market companies and about 50 active value-added resellers.

We also wrote software for several U.S. companies in Singapore. They would then take our software and resell it globally under their own brand. It was not exactly outsourcing. Having engineers in Singapore is not very cost efficient. We would build the software using our designs and then re-license it back to the companies. They were rather complicated arrangements.

By this time I had opened offices in San Francisco and I had some sales people in the U.S. I also had a variety of other weird businesses. I had a 35-person office in India doing outsourcing from 1996 to 1997. I had an ecommerce store opened in the U.S. at the end of 1995 that had tens of thousands of dollars of revenue in 1996. That was pretty large for e-commerce at the time. We did not pursue that.

Around the end of 1999 it was becoming clear that Solomon Software would not scale and that my consumer electronics business was limited. In 2000 I started what would ultimately become Parallels and, like my earlier companies, it was started as more of an accident than a well planned ideal.

Sramana: Tell me about the accidental founding of Parallels.

Serguei Beloussov: At the time we did engineering for a lot of different U.S. company product lines. One was for Plan B, and operating systems company. We also did engineering for Curvaceous Software, which could have been as popular as MySQL.

Sramana: Did you do all of those projects from Singapore?

Serguei Beloussov: We did them all from Singapore. I am actually a citizen of Singapore; I don’t have a Russian passport at the moment. If we had engineers in Russia we might have become an outsourcing business. They were living in Singapore, which meant they were more expensive. We could not do outsourcing, so we had to do product design and extract license fees.

We did this for mid-sized companies. Some of those companies went public and hit market caps of around 600 million. Solomon Software was not public but it was aspiring to be. All the companies had around $50 million to $200 million in revenue. The common thing with our clients is that in 1999 they were all in trouble. They were all pretending to be Internet companies, but they really were not. They all tried to acquire Internet-related businesses for crazy prices, and they were running out of money. We built good product lines for them, but they were not Internet product lines. As a result, it became clear that I could not scale that business because our clients were getting into cash flow problems owing to their Internet aspirations.

This segment is part 5 in the series : Parallel Entrepreneurship: Serguei Beloussov, Founder of Parallels
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Nanesh Thursday, October 25, 2012 at 5:14 AM PT