Among the biases of the Venture Capital industry that need to be categorically ignored, Bootstrapping Using Services happens to be on the top of the list. Zimit CEO James Cramer shares yet another fantastic textbook case study. Zimit was acquired by Workday in September 2021.
Sramana Mitra: Let’s start at the beginning of your journey. Where are you from? Where were you born and raised? What kind of background did you have?
James Cramer: I was born in Southern California. I grew up in a family that moved around a lot. My dad worked in the automotive industry, and so every few years we would change locations. That put me in Seattle, Southern California, the Carolinas, and then ultimately in Florida.
My dad worked for the same company his entire career. There were ups and downs in that business. I saw that translate onto my dad in terms of having long hours and quite a bit of uncertainty. I picked up on that as a kid. I made up my mind that if this is how it is, then I might as well be in control.
I assumed that all parents experienced the same thing. I’m capable of screwing it up for myself. I don’t need other people to do it for me. I didn’t appreciate that experience until I looked back on it. That upbringing of moving across the country and seeing my dad deal with that was influential as I started to think about my career choices.
Sramana Mitra: What did you do for education?
James Cramer: I was a dual undergrad in economics and accounting. That is just a terrible combination by the way. I don’t recommend anybody to do those two things together.
Sramana Mitra: Where was that?
James Cramer: At Florida Atlantic University, which is a state school here in South Florida. They are both independently interesting and they are both independently valuable, but they stretch your brain in opposite directions. Maybe that is a good thing. I am not sure. It sure was a lot of work.
The accounting degree did land me a job at one of the big accounting firms. I immediately went into consulting. I didn’t stay in accounting very long, but I did get pulled into consulting because I had a strong accounting background. That was my entry into technology. If you are going to be implementing financial systems and things of that nature, it helps a lot to understand the financial concept rather than just look at it from a technical perspective. That was the door that opened for me.
Sramana Mitra: Take me through a little bit of your career leading up to Zimit.
James Cramer: As soon as I graduated, I got a job at one of the big firms. I stayed there for three years. By 1997, I had co-founded my first company. I had a co-founder who is still my co-founder today. We have been together for more than 20 years. My story is his story vice versa when it comes to our business.
Looking back, I have been fortunate to have a partner that I enjoy working with. We enjoy working together enough that we have been able to stay together for 20 years, but we are different enough that we complement each other nicely. In 1997, we co-founded a company called CPG. It was a system integrator company. We were deploying large-scale software, which was other people’s technology.
We also built our own product to complement that. We also built custom software when customers needed that to fill gaps. We were primarily working with Oracle technology, but not exclusively. We were selling to those large Fortune 500 companies mostly. From that point forward, my career has been centered on the enterprise business market. We ran that company for about 13 years. It wasn’t a straight line.
We went through Y2K, 9/11, and the financial meltdown from 2008 to 2009. Although it was tough to go through those periods, I think we learned more during those downturns than we did when things were going well. That is probably cliché, but it’s the truth.
Ultimately, we were acquired in 2010 by a large international company. That opened the door for the next phase. We stayed at that company for the next three years as part of that agreement. They allowed us to manage and run the North American operation. Through a series of acquisitions and organic growth, that became a significant operation that amounted to $200 million a year.
That was the first time that I managed something at that scale. That gave me a bird’s eye view of what the services market looks like at that level of scale. That taught me a lot. That was the seed for Zimit. After we stepped down and took a little time off to rest and collect our thoughts, Zimit was born out of that experience.
Sramana Mitra: Was your services business self-funded?
James Cramer: The thing about services is that they tend not to consume as much capital.
Sramana Mitra: We have a full methodology track called Bootstrapping Using Services. It’s a tried and true method of bootstrapping. We see it all the time. It is a successful way to bootstrap companies.
James Cramer: If you ever need help teaching that class, I can help you. When we get into the Zimit story, you are going to see that piece of it. That lesson shows up in a major and fundamental way.
Sramana Mitra: I have one question before we go into the Zimit story. What was the scale that you got before selling it?
James Cramer: About $25 million.
Sramana Mitra: That is substantial for a bootstrapped company. What kind of multiple did you get in the acquisition?
James Cramer: The multiple was about 1.5
Sramana Mitra: It was you and your co-founder that owned the company, right?
James Cramer: We did. We had provided options and equity for our employees so we didn’t own 100% of it but we owned the majority of it. A lot of those folks showed up when the Zimit story kicked in. Taking care of the right people along the way is extremely important. It is something that I have focused on since the beginning.