Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 7)

Sramana Mitra: You have chosen to keep this bootstrapped until this point?

Jagan Reddy: Yes.

Sramana Mitra: What are your thoughts about that? You have a profitable structure. You must be getting tons of calls from investors, but it sounds like you have chosen not go in that direction.

Jagan Reddy: We have spoken with several investors in the past. This is a very niche area. Not many investors understand this. If we want to create a scale for this market, it will take time. We have built this market for the past seven years. Today when we talk to the same investors, they clearly see how huge this market is. They see an amazing market opportunity. From an investment perspective, we are talking with investors. We are looking forward to do our first round of investment, maybe, in the next six months. >>>

Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 6)

Sramana Mitra: How did that revenue split between large enterprises and SMBs?

Jagan Reddy: About 75% of revenue is from large enterprises.

Sramana Mitra: You said you had to increase your marketing to get into the SMB customers. What did you do in terms of marketing?

Jagan Reddy: It’s more outbound. The only trouble in our field is, we’re trying to reach through the accounting team members. If you look at the market, there are no groups where the accounting team comes together to discuss. It’s very hard to bring all these guys together. You have events to meet IT people. You can go for a CFO event. You can meet CEOs at a conference. You can get into a forum for sales people. Everybody has a forum or an event happening where these people go. Accounting group is something which was never tapped into. >>>

Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 5)

Sramana Mitra: You still had enough cash to go through this SaaS transition and finish it in 2012?

Jagan Reddy: We started the transition in 2012. It was a major shift, so it was not going to happen within a year. It has taken us, at least, two years to do the transition.

Sramana Mitra: So 2013 was actually when you finished the transition?

Jagan Reddy: Yes.

Sramana Mitra: When the dust settled after this transition, where were you in terms of your bookings or run rate? >>>

Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 4)

Sramana Mitra: Awesome. Can you talk about cash flow in all this? The startup story is all about cash flow. How did you navigate your cash flow journey in all this?

Jagan Reddy: I bootstrapped the company, and then we sustained the business with our own cash flow. We manage the business very lean, but our license was priced very high. We were generating a lot of cash in 2010. We, in fact, ended 2010 with a cash balance of more than $4 million.

Sramana Mitra: How many people did you have on staff in 2010?

Jagan Reddy: Maybe close to 40. Most of the people were implementation teams. We had a very lean development team. Implementation team is paid by the customer. >>>

Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 3)

Sramana Mitra: How did you negotiate the deal with Brocade? How much were they willing to pay you for doing what you were going to do for them?

Jagan Reddy: Today for a $2 billion company, our price point would be anywhere between $300,000 to half a million dollar annual subscription fee. At that point, I gave it to them for just under $20,000.

Sramana Mitra: Oh, wow!

Jagan Reddy: That’s just for the software. They paid for the services.

Sramana Mitra: How much did they pay for the services? >>>

Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 2)

Sramana Mitra: What was the conclusion? What was the insight that you drew from this process?

Jagan Reddy: One of the fundamental things that I understood from the requirements perspective is, if you look at the FASB, which is the standard for accounting, it is very direct and clear about how you need to do the accounting. The biggest challenge is that the same type of two different companies may be adopting different accounting methods. When I looked into it, I found that the most challenging thing for any ERP vendor would be to come out with a product that can solve all those different ways of accounting. I started working on a software which would be heavily configurable to meet different requirements. That’s where the idea came from and I decided to build a software. >>>

Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 1)

If you haven’t already, please study our Bootstrapping Course and Investor Introductions page. 

Jagan built a niche software that solved a very specific problem and started selling it to enterprises for a lot of money. This story is a textbook case study of how well you can scale with no outside financing if you can identify a burning pain point in customers who are willing to pay a LOT to solve that pain.

Sramana Mitra: Let’s start at the very beginning of your journey. Where were you born, raised, and in what kind of background?

Jagan Reddy: I was born in India. All my schooling was done in India.

Sramana Mitra: Where in India?

Jagan Reddy: In Chennai. My schooling was all done in Chennai. >>>

Bootstrapping to $23 Million: Michael Nemeroff, CEO of RushOrderTees (Part 4)

Sramana Mitra: In terms of strategic moves, what were some of your moves that were driving this growth?

Michael Nemeroff: We invested in people, getting the right people in place, and learning about management, which wasn’t easy for us. We don’t have any formal education on management. We don’t have any background on that. I don’t know if I told you. Customers just keep coming back, which was a big thing. We realized that customer experience is huge.

Technology came in around 2007 to 2008 where we invested in technology where customers can self-service. You can go online, design online, and checkout online. We invested on that but it didn’t really take off until we started putting marketing dollars behind it. We hired someone to handle the marketing and focus on e- >>>