Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft (Part 6)

Sramana Mitra: What do you do with the venture capital fund? Do you invest in companies in the Czech Republic or in eastern Europe? What is the scope?

Vaclav Muchna: I suggest we take it chronologically.

Sramana Mitra: Sure.

Vaclav Muchna: Today, we are doing a lot of things, but the biggest pie of revenue is from the print management product. Back in 2006, we had another big milestone that opened the German market for us. I mentioned in the beginning of the interview that we have these external control units that were basically terminals that we use for user interaction. >>>

Bootstrapping Using Services to an Awesome Business Model: Inspyrus CEO Nilay Banker (Part 6)

Sramana Mitra: How long did it take you to be able to know that you could actually save money and for you to make money on that gain share model? How long was that process of fully validating the business model?

Nilay Banker: Typically, it takes from 6 to 12 months by the time the customers start seeing benefits. The benefits are multi-fold. There are soft benefits which are in terms of process efficiency and just reduction in head count. We consider those as soft benefits. Then there are the hard benefits which is the draw dollar cost savings through discount management.

It also takes some time for the hard dollar savings to ramp up adoption not only by our customers but, more importantly, by their suppliers who get on to the discount management program and slowly start taking advantage of early payment discounts. In most cases, they start realizing about 75% of the benefits >>>

Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft (Part 5)

Sramana Mitra: It must have been very helpful for you to recruit a bunch of channel partners who would then go and sell that same solution to other major players.

Vaclav Muchna: Exactly. Once they started with us, there was another deal with the headquarters of a central European bank. That helped us to build the relationship through the channel. We took the decision that we would be 100% indirect. Later on, we developed that model where the vast majority of our partners not only sell our product, but they also support it. We only support our partners and they go and support the end customers. If something goes wrong, the customer would call the channel partners. >>>

Bootstrapping Using Services to an Awesome Business Model: Inspyrus CEO Nilay Banker (Part 5)

Sramana Mitra: When did you start selling the product in this whole gain share model? You said that 2008 is when you started two and a half years of services mode while you got the handle of what the problem was and what product to develop. Was 2011 your first year of selling the product?

Nilay Banker: Yes, 2011 was when our first product came out. We started with invoice automation. Then in 2014, we came out with total discounting. It took two to three years for the base product to mature. We got a healthy base of happy and large customers. We focused on the large customers.

Sramana Mitra: How much did you do in 2011, for instance? >>>

Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft (Part 4)

Sramana Mitra: What year are we talking about?

Vaclav Muchna: 2003. In 2002, we launched that web server. We had to produce 20 terminals and we had no money. I tried to go to the bank but, of course, they didn’t let us borrow anything. There were only few VC funds. The VC market almost didn’t exist. The few VC funds that existed said that this was not an interesting project. Eventually, I found a business angel. He lent me money personally – not to the company. You can understand the impact on liability. The interest rate was 40% per annum.

Sramana Mitra: My goodness. >>>

Bootstrapping Using Services to an Awesome Business Model: Inspyrus CEO Nilay Banker (Part 4)

Sramana Mitra: How do you do that? How do you take an internal operation and turn it from a cost to profit center? What did you that was innovative there?

Nilay Banker: That’s a great question. It all starts with making sure that you can achieve process efficiency. Process efficiency, in this case, is how long does it take for you to process an invoice that a supplier sends you and eventually make the payment to the supplier. We started off with that as the core of the solution – helping automate that business process and getting it down from 20 to 25 days to 2 to 3 days. >>>

Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft (Part 3)

Vaclav Muchna: The three of us started again. I kept 20% and they both got 30%. We started again without really knowing what to do next. One customer came and said that they would like us to develop a software that would secure printing. They wanted to remove 200 desktop inkjet printers and install 20 shared network printers. The problem was that if you print something on a network printer, you have a problem with data protection.

They wanted us to make a system where documents would not print unless you go and swipe your badge on the printer. We developed that and thought that it was interesting. We worked for that customer so we knew that the industry was going towards removing these inkjet printers and work with centralized >>>

Bootstrapping Using Services to an Awesome Business Model: Inspyrus CEO Nilay Banker (Part 3)

Sramana Mitra: Let’s talk a little bit about some of the nitty-gritty processes. What year did you start Inspyrus?

Nilay Banker: I started Inspyrus in 2008.

Sramana Mitra: You said you started by consulting. How long did you operate this company in a consulting services mode that got you the opportunity to understand the problem at a deep level?

Nilay Banker: We did consulting services for about two and a half years.

Sramana Mitra: How many customers did that expose you to? >>>