Sramana Mitra: What did you have to plug into to make this happen? Based on what you’re describing, integration was involved. Can you talk a bit about what it entailed to get this client to a point where you could start charging them on a gain-share basis?
Richard Hoehn: A good amount of client integration was involved in terms of how they needed to bring the data back in for their ERP systems. We often try to provide value on multiple levels.
One of the big levels where we saw a lot of value was making sure they made better decisions on their shipping habits but at the same time alleviated a lot of pain on their accounting and accounts payable side. The client integration with one of our first clients was a pretty big play on how to make it easier for the accounts payable team to get information into their ERP system.
Sramana Mitra: How long did it take for you to demonstrate savings such that you could start charging the gain share?
Richard Hoehn: About three to four months.
Sramana Mitra: Wonderful. Three to four months is a great payback time.
Richard Hoehn: It’s good, but if you’re a bootstrapped company, four months is pretty long. You’re starting to chew your nails a little bit.
Sramana Mitra: How did you manage?
Richard Hoehn: I was quite lucky that before I started Freightwise, I had a pretty high-paying job as a global Product Manager for a pretty big company. I was able to save money to not pay myself a salary for a good year and a half.
Sramana Mitra: So four months of bootstrapping to get to a point where you start charging.
Richard Hoehn: There was at least one and a half years of development and then four months with the client.
Sramana Mitra: You had two years of no-income bootstrapping, which you financed yourself from your savings. What was the first denomination? How much savings were you able to show? How much did you start getting paid and what kind of contract terms did you work with?
Richard Hoehn: We bill on a weekly basis. We even framed that first check for $187. That’s very low. That client is still our client. Now we’re easily making $5,000 a week with them. In the meantime, we also have 50 other clients.
Sramana Mitra: But that’s now. What year was this when you had the first client?
Richard Hoehn: End of 2015, early 2016.
Sramana Mitra: Tell me more about how you get out of this red ink bootstrapping phase. What are the next milestones?
Richard Hoehn: This is a really critical thing for Freightwise. We leaned on sales. We said, “Now we need sales to go out and sell this even if it’s not ready.” It was stressful. When you give sales a green light, they’re going to go and sell this stuff as fast as they can.
Sramana Mitra: And they should.
Richard Hoehn: From the technology side, that’s where I live. Alex, our VP of Sales, and his team are going to sell this thing hard. It’s tough keeping up with it sometimes. We invested in quite a bit in sales. We bought lists.