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Bootstrapping Using Services to $10M: Zimit CEO James Cramer (Part 5)

Posted on Friday, Aug 6th 2021

Sramana Mitra: Three out of the fifteen customers you started the process with converted into customers. What kind of average deal size did they convert at?

James Cramer: The initial deal size was maybe $50,000 to $75,000 in ARR.

Sramana Mitra: What time frame are we talking about?

James Cramer: Paying customers showed up in 2018. In 2017, there might have been one early adopter. 2018 was when it started picking up. 

Sramana Mitra: From a bootstrapping with services methodology point of view, did you structure these 15 deals as paying services projects?

James Cramer: Absolutely. This was when the services background changed everything for us. We showed up to the game a bit naïve about software, because we had never built an enterprise-scale software at this level of sophistication or with this level of technology. We were on a steep learning curve for the first few years.

The one thing that we did know what to do was to deploy software and manage a services business. We knew how to do that inside and out. When we worked with large enterprise customers, they realized that there is going to be a deployment and that there was a professional service involved.

We charged for it. We charged less than what they would be otherwise paying others. We looked inexpensive for them, but for us, that cash flow was the single reason why, financially speaking, we have been able to do what we have done. We have made a habit of delivering high-quality projects at a pretty good margin and using that cash flow to fund the business. We subsidize the software until the critical mass of that software catches up. 

Sramana Mitra: Let’s start talking about revenue growth. As you were trying to find product-market fit and the product was going beyond the services mode into the product side, how was the revenue ramping up?

James Cramer: It grew quickly. As soon as we put out our product into the market, we found a few different avenues, a couple of ponds, where our target market tends to congregate. It took us a while to figure out. We figured that they were in some conferences and certain venues online where we can do blog posts. As soon as we put our product out, we just got overrun with demand.

Not all of it was going to translate into immediate revenue, these are sales cycles. We just got overrun with so much demand. We had a hard time processing it because these are large companies mostly and we had a few employees. Trying to manage the sales cycle took more capacity than what we had. We had to be very clear on who was going to be focused and who the right customer is and treat them accordingly.

We shifted our energy to the biggest, most interesting, best fit for us from our perspective, and we put our energy there. From 2018 to 2021, we’ve had hundreds of percent growth every year. 

Sramana Mitra: What was the sweet spot that you identified and why? The reason why I like to spend time on that is that positioning makes or breaks companies. How do you position your company and how do you define the segmentation that makes or breaks your company. What was that for your company?

James Cramer: We learned something interesting that I think only a small percentage of the world understands. Unless you sell to these groups, you don’t really understand. Imagine two markets for my software. My software is quoting and pricing software for enterprise services. I could sell it to a consulting firm that implements the technology or I could sell it to an embedded services team.

You would imagine that these groups are doing the same job. They are both deploying technology. What we realized is that each one of these groups buys from their perspective of paying and what they want to focus on; and it is completely different. Even though they are running essentially the same business, one group buys for one reason and another buys for another reason and is worried about other things.

What it turns out to be is that the embedded services teams were ones that felt the most pressure and the most pain. In the work case, it’s $500 million out of $3 billion, and yet they have the lowest margins. They are under constant pressure to go faster, be better, use less money, deliver the product, and slow down our deals. What we realized is that all the services businesses inside those technology companies are under a lot of pressure. 

Meanwhile, the consulting companies have no relative comparisons. They don’t have a technology product being sold, so the way they perceive pain is different. They want the quoting data so that they can forecast resource demand. They go at the problem for completely different reasons. The first focus that we had was to focus exclusively on the embedded services team. Dell, Siemens, and all the companies like that went on to adopt our technology. 

Sramana Mitra: That is extremely easy to prospect for in some ways because there are a lot of software companies that have professional services arms. There is a head for professional services in those companies that you can go for. 

This segment is part 5 in the series : Bootstrapping Using Services to $10M: Zimit CEO James Cramer
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