Sramana Mitra: How much were you burning during this period?
Richard Hoehn: We were running $45,000 a month for a while. You definitely need some runway.
Sramana Mitra: Where does this money come from?
Richard Hoehn: We are five partners. We actually have five founding partners and they all contributed. To be quite honest, we decided that we would all invest on a monthly basis. Instead of getting a paycheck, we were sending money to the company.
We didn’t come with a big pot of money and just dump it in, although we initially we did. We did on a monthly basis. If we had too much money in the bank, we were going to do silly stuff. We’ve seen those cases.
Sramana Mitra: We have one unfolding in the media right now – the whole WeWork saga.
Richard Hoehn: Yes, $9 billion.
Sramana Mitra: You managed to get through this $45,000 a month through monthly contribution by founders. How long did this go on? How long did it take you to break even?
Richard Hoehn: We were at breakeven a year and half into generating revenue. We believed in only spending money that we had. That was the benefit of bootstrapping. In those days, we had a tiny office. We shared offices. It was very bare.
Sramana Mitra: Very frugal. That’s the only way to bootstrap.
Richard Hoehn: We shared hotel rooms. It’s not great, but you can save a lot of money by not having a very nice office, going to your clients instead and being able to manage your cost that way.
Sramana Mitra: That is the secret of bootstrapping. Between 18 months of pure development and then another 18 months of generating revenues, we are talking three years of bootstrapping before you broke even.
Richard Hoehn: That sounds about right.
Sramana Mitra: Between the five of you, how much money did you end up putting in over this three-year period?
Richard Hoehn: About $1.2 million.
Sramana Mitra: How many clients did you have at this breakeven point?
Richard Hoehn: 12.
Sramana Mitra: These are all heavy manufacturing companies?
Richard Hoehn: Most of them were. In general, most of them have the same needs, so we have the same product offering. We know the language. Quite frankly, if one client talks well of Freightwise, that word of mouth gets around to others. We get referrals from clients. We allow potential clients to call for referrals.
If you stay in the same industry, it’s a lot more valid than if you try to get a referral from a different industry. They wouldn’t trust each other as much.
Sramana Mitra: This is very much what we recommend – choose a vertical and really execute the hell out of that before moving to another industry.
Richard Hoehn: Just a few days ago, an email came from our EVP of Sales saying, “We’re going to go an inch wide and a mile deep rather than a mile wide and an inch deep.”
Sramana Mitra: Was there any kind of geographic concentration within the heavy manufacturing industry?
Richard Hoehn: Illinois, Wisonsin – that corridor along the great lakes. It’s geographically good for where we are, we’re at Nashville. There’s still a lot of manufacturing up there.
Sramana Mitra: 12 clients in the Midwest in heavy manufacturing got you to breakeven. This was 2017?
Richard Hoehn: Right around there.