Sramana Mitra: Did they come to you or did you approach them? How did you find that exit?
Shane Neman: We were friendly, but we were fierce competitors. I approached him and said, “Listen, something’s got to give, I would be willing to discuss selling the company if that was something that you were interested in. That way, we can get rid of this competition where we are driving prices up.” We came to terms that made sense for both of us.
Sramana Mitra: What level of an exit was it?
Shane Neman: It was a large exit. I was a solo entrepreneur, so I also had a lot of debt. I had smaller partners that I had to pay out. I was also financing the growth of EZ Texting myself through my own money. I took the majority of that money to supercharge the growth of EZ Texting because I believed in it. I was willing to go all in.
Sramana Mitra: Were other partners in EZ Texting or were you doing that as a solo entrepreneur?
Shane Neman: No, I did that by myself. I did hire employees. I didn’t have partners. I was the CEO. I hired a CTO, COO, and an inside sales team. We had the sales team. because in SaaS, there is this concept of farmers vs hunters. We had the farmer model. We would run ads and funnel people into a free trial of the software and then we would have an inside sales team that would call those people to convert them into paying customers.
Sramana Mitra: How long did you do EZ Texting?
Shane Neman: In the first year of EZ Texting, we did $500,000 in revenue. This was pretty impressive. It was growing like gangbusters, hundreds of percent at the beginning. I did that until 2013 where I exited to another strategic who happened to be a client of ours. They were solo entrepreneurs.
There were six tight friends who had started a SaaS company that was a call tracking software. It was a robotic calling software for government agencies and schools. They wanted to have an SMS component and they saw that they didn’t have that. They were using us as their backend provider. We worked out a deal to do an acquisition. They did it through a capital raise through Morgan Stanley.
Sramana Mitra: In terms of the journey with EZ Texting, how many people did that grow to and what kind of revenue level did that grow to in the seven years that you did that?
Shane Neman: I kept the team lean because I didn’t think that we needed it. We were growing organically. In the beginning, we had six people. We then grew our team. We had two teams, one in New York City and a team of developers in Ukraine. We did a plus model. They are not an outsourced team where we deal with a manager. We considered them EZ Texting employees, but we had to pay them through a third party. There are a lot of complications of doing payroll in Ukraine. We abstracted that away from us by hiring another company. We were in the order of 20 -25 people by the end of it. We were doing close to $10 million ARR.
Sramana Mitra: All these techniques that you are describing, like when you were doing JoonBug on your own and hiring an agency to ad sales and in EZ Texting where you hired a team in Ukraine. These are the classic techniques for building capital-efficient companies. You can do a lot as a solo entrepreneur by hiring agencies to do these things.
We are huge fans of these techniques because we are huge fans of capital-efficient and bootstrapped entrepreneurship. I will flat out tell you that I am a huge fan of solo entrepreneurship. It bugs me tremendously when I have to counter this industry bias that solo entrepreneurs are not popular with investors. That is where I point people to you, Shane, and also Fred Luddy who have built successful companies as solo entrepreneurs. Congratulations. It looks like you followed the textbook model of what we teach in 1mby1m.
Shane Neman: What I am telling you is a watered-down version of the tremendous amount of sleepless nights, days and days of work, worry, psychological breakdowns, and all the crazy stuff that comes with running your own business.
Sramana Mitra: Of course, but it’s not like those things don’t happen when you are running a venture-funded business. On top of that stress, you have these investors sitting on top of your head and asking, “When will you become a $100 million company? We need you to do that in five years.” That is also pressure.
Shane Neman: There is something to be said about that. When you bootstrap your own company, you are only responsible for yourself. You set your own benchmarks. What is sufficient for you is different from what is sufficient for a venture capitalist. Thankfully, I ran my business not to sell it. That is what eventually happened, but I wasn’t in the mindset of, “Okay, I’m doing this business. I am going to grow it to this much revenue and I’m going to sell it.” It happened organically for me. I ran my business for it to be profitable.