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Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft (Part 6)

Posted on Saturday, Apr 15th 2017

Sramana Mitra: What do you do with the venture capital fund? Do you invest in companies in the Czech Republic or in eastern Europe? What is the scope?

Vaclav Muchna: I suggest we take it chronologically.

Sramana Mitra: Sure.

Vaclav Muchna: Today, we are doing a lot of things, but the biggest pie of revenue is from the print management product. Back in 2006, we had another big milestone that opened the German market for us. I mentioned in the beginning of the interview that we have these external control units that were basically terminals that we use for user interaction.

Around 2006, what happened was that the multi-function devices started to open up bigger interfaces for developers like us. That enabled us to integrate our solution inside the machine. There was no need for an external terminal. Everything ran inside the machine, which is obviously simpler, easier, and cheaper. We did that with Konica and Minolta. We were the first in this field to do it for for Konica and Minolta. Germans still didn’t work with us. Our competitors whom they worked with in Germany were unable to develop it for some reason. They tried and it didn’t work.

The entire eastern Europe had been selling embedded devices for one year. The Germans still had these old external boxes. They came to us and said, “We’ll give you a chance. We’d like to try your embedded solution.” Once they opened up the doors, we just focused on that. We almost failed many times, because we had to learn the German way of business support. It is very different. We always have been pro-customer. We had to professionalize ourselves like put processes and procedures in. We survived.

Once Germany said that it is working, the rest of western Europe started to use SafeQueue as well through the Konica and Minolta channel. We also had other vendors like Xerox and a little bit of HP, but Konica and Minolta was where we were able to grow. After that, we found a company in Japan. We acquired a small company in the United States. We started to expand beyond Europe. That was 2008 to 2009.

Sramana Mitra: When you started to expand beyond Europe to the US, where did you find traction?

Vaclav Muchna: We acquired that US company in 2009. We thought that we would get traction. In 2009, there already was a lot of competition. It was not like the beginning. US, as you know, is an extremely competitive market. That company had a US-based agreement with Xerox. We hoped that when we got the agreement, we actually would get an agreement with Xerox where we can supply our product through them. It kind of worked, but we failed to get a lot of traction in that market.

Our customers didn’t have good technical experience with our product. I was digging my head. I was thinking, “It works everywhere else in the world. We don’t have problems anywhere in the world. Why do we have technical issues in the United States?” Eventually, I found that we had to pay a lot more attention to the technical support people that we hire, because we still had the third-level support in the regions. Because it was third-level support, I had to focus on much more senior people for the support that we were used to.

After that, we got some traction. We won some huge companies together with Xerox. They were Fortune 500 companies. They are very well-known brands in different industries. Surprisingly, we were getting traction with Xerox. That was 2013. It took a couple of years. We believed in it and funded the company. It’s not that we didn’t do any business but we were around $0.5 million a year in the United States. Then when we landed these deals, we grew to $2.5 million within two years. I thought, “We finally got the traction.”

Then Xerox decided that they would standardize on one product and they chose our competitor. The main argument was that we were small and we were not global. They basically almost cut the business. In the next year, the business fell to $1.6 million from $2.8 million. That was mainly because we still had the other customers paying annual regular support fees. I remember we were on that call with Xerox where they told us the news. I remember I told them, “We respect that. There is nothing we can do. I promise you right here and now that we’ll continue to support you on the existing accounts. We’ll show you the great work we can do for you. One day, we will convince you.”

We did. We provided them fantastic support. It took a lot of goodwill to demonstrate that we would do anything for them. About two years later, they came back and they said, “We’ve changed our mind. We want to cooperate with you.” It was 2016 when Xerox announced that.

Sramana Mitra: That’s pretty recent.

Vaclav Muchna: Yes.

This segment is part 6 in the series : Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft
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