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Bootstrap First, Raise Money Later from Oregon: Paresh Patel, CEO of PayRange (Part 6)

Posted on Saturday, Jan 15th 2022

Sramana Mitra: What is an average deal size from your direct customers?

Paresh Patel: It’s very skewed. We have customers whose deal sizes are in the millions. We also have deal sizes that are in the hundreds or thousands. We have customers that have more than a hundred thousand machines with us. Then we have customers that are buying 50 machines. It varies quite a bit.

Sramana Mitra: Did you do another financing round?

Paresh Patel: We have not. We became cash flow positive with our existing funding. We didn’t have to go out and raise additional funds. It’s hard. Even though we’re investor-funded, we still have that bootstrapping mentality. It’s surprising how having limited cash focuses you.

Sramana Mitra: We are huge fans of capital-efficient entrepreneurship. It seems like you have made some business model changes from purely selling a device to device plus software subscription. At what point did that start to kick in gear?

Paresh Patel: That was one of the things that was the hardest – trying to figure out what to price our product in a way that makes money for the company. You have no competition and you’re trying to figure out what the market can bear. When I say no competition, there is no direct product. You have to figure out the alternatives and how much they’re paying for the alternatives.

We tried different models. Initially, we were just selling the hardware. Then we just gave away the hardware and just charged a high transaction fee. That didn’t work out very well. Then we charged some for the hardware, licensing fee, and a transaction fee. We had to try different things to figure out what works.

Sramana Mitra: Have you figured out what works?

Paresh Patel: Yes. We need a model that had a little bit of both. There’s some upfront cost. Then there’re some recurring licensing and transaction fees also. That allows us to continue to invest in the platform and continue to build features. Our customers continue to get additional benefits from the platform.

Sramana Mitra: What is that combination and at what point in your evolution did you hit upon that model?

Paresh Patel: It probably took us three years to end up on that.

Sramana Mitra: 2019?

Paresh Patel: Early 2018.

Sramana Mitra: What is the split in your business?

Paresh Patel: Almost none of it is actually device revenue anymore. Even when we sell the device, what we’re actually doing is charging an activation fee. The hardware itself is usually free or low-cost.

Sramana Mitra: Now your business is SaaS enabled by a hardware device.

Paresh Patel: Exactly.

Sramana Mitra: What about the team? Are you all in Oregon?

Paresh Patel: We run two offices. Our Portland office is our headquarters. That’s where our business team is based out of. In our San Jose office, we have our engineering center. That’s where our engineering team works out of. We have sales people who are remote and we do have a few engineers who are remote.

Sramana Mitra: How big is the team?

Paresh Patel: 22 employees.

Sramana Mitra: Fantastic. Can you give me a range in revenue? Over $20 million?

Paresh Patel: Yes.

Sramana Mitra: Over $50 million.

Paresh Patel: Not over $50 million. Not yet.

Sramana Mitra: Over $20 million with 22 people. That’s an extremely capital-efficient business.

Paresh Patel: Yes, it’s very capital efficient. We think there’s going to be a time where we’ll put in more investments, but we didn’t need that to get to where we are.

Sramana Mitra: What about the VC’s? You still have a large chunk of venture capital on your cap table. You raised $12 million. I’m curious. How do the VC’s deal with a company like this?

Paresh Patel: We had a few stumbles early on. The core business is solid. We think we’re getting positioned to take some additional capital. There is a next iteration of what we’re doing that can scale us.

Sramana Mitra: I would imagine so. The gas station use case is still unsolved.

Paresh Patel: Correct. It’s still a big opportunity.

Sramana Mitra: It was very nice to meet you. Thank you for your time.

This segment is part 6 in the series : Bootstrap First, Raise Money Later from Oregon: Paresh Patel, CEO of PayRange
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