From $100k to $1 Million: How to Minimize Ownership Dilution

If you have managed to get past $100k in revenue, that tells me that you have some sense of who your customers are, why they are buying what you have to offer, and how to sell to this customer base.

This may also be a time when you are starting to consider your first funding round.

I want to tell you a story.

Christian Chabot, the founder CEO of Tableau is from Milwaukee, Wisconsin. He arrived in Silicon Valley to study at Stanford, and got inspired to become an entrepreneur by Irv Grousbeck. Soon after graduating from business school in 2000, Christian founded BeeLine Software that came up with a better way of doing digital mapping. The company only had 3 people, and was sold in 18 months to Vicinity, offering the founders some early cash.
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Bootstrapping an Education Company: Tod Browndorf, CEO of Coggno (Part 5)

Sramana Mitra: Who pays you?

Tod Browndorf: When we sell a course, we retain a percentage of revenue.

Sramana Mitra: I got it.

Tod Browndorf: Let me go back to the HIPAA example. That was created by a company called Teach Privacy. Teach Privacy is an expert in HIPAA compliance. We had a customer who wanted 900 courses. These courses reside in our system. They bought them through our system and we share revenue with the company that created the course. >>>

Bootstrap First, Raise Money Later: RJ Metrics CEO Robert Moore (Part 7)

Sramana Mitra: Where are you right now in terms channel, or other strategic pieces that enable you to grow? How do you acquire customer? Is it a direct channel? Is it an online channel?

Robert Moore: We have two main channels through which we acquire customers. One of them is inbound marketing and one of them is outbound sales. On the inbound marketing side, we made a really big effort from day one to be a thought leader in the space of data analysis, business intelligence, and e-commerce. We published very frequently everything from blog posts to white papers, to industry benchmark reports. We hold webinars every couple of weeks. We’re very prolific on the content side when it comes to providing people operating businesses with advise on how to use their data to make smarter decisions.

That content ecosystem is a really helpful source of leads for us because people become aware of us and then they say, “What’s this RJMetrics?” They click through and raise their hands to try the product out. We have a free trial as part of our on-boarding process. Because there’s a very low amount of risk, we’re able to get a lot of people in on the free trial on a monthly basis. As long as we convert a good amount of them, it works well. >>>

Bootstrapping an Education Company: Tod Browndorf, CEO of Coggno (Part 4)

Sramana Mitra: So you’re a B2B platform software company.

Tod Browndorf: Correct. We just delivered 600 HIPAA compliance courses. Then we give them an interface where they can then distribute it within their organization. We didn’t create the course. We’re the distributors of the course. Our software is able to report who did what, when they did it, and how many times they did it. Then we issue Certificates of Completion based on the results that we get.

Sramana Mitra: Let’s go back to 2009. You’ve got a couple of beta customers, and then you got some friends and family financing involved. What happens next? >>>

Bootstrap First, Raise Money Later: RJ Metrics CEO Robert Moore (Part 6)

Sramana Mitra: You said you’ve raised about $22 million. Let’s talk about other strategic moves during the past four years that you’ve been a venture-funded company.

Robert Moore: One thing that we did quite recently that I think was very strategic in nature was we decided to release a second product. For most SaaS companies, your brand is also the brand of your product. It’s all nice, clean, and simple. If you’re using Zendesk, you’re using Zendesk. There are some companies out there in the SaaS universe who end up releasing multiple products for various reasons. For us, we saw a trend happening in the market where we noticed that a lot of our customers had a desire for much more control over how their data was stored, where it was stored, and what tools  they use to analyze it in addition to RJMetrics. >>>

Bootstrapping an Education Company: Tod Browndorf, CEO of Coggno (Part 3)

Sramana Mitra: Let’s talk a little bit about the specifics. How long was the period where you worked with personal savings and what kind of numbers are we talking? How much of your personal savings did you have to put in to get it to some level?

Tod Browndorf: Probably two years and about $100,000.

Sramana Mitra: In that period, what milestone did you achieve?

Tod Browndorf: We got to a beta site and then we got to a working business. We were able to get some customers.

Sramana Mitra: Tell me a little bit about what specifically was the beta product, and who were the customers you were going after.
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Bootstrap First, Raise Money Later: RJ Metrics CEO Robert Moore (Part 5)

Sramana Mitra: What were your metrics when you were putting this round together? What kind of monthly revenue run rate did you have at that time?

Robert Moore: At that time, we were less than a million in revenue. That would translate to something to the order of a hundred customers, or just below a hundred. We were profitable when we raised that money.

Sramana Mitra: Awesome.

Robert Moore: We had to file a business tax return in 2011. We raised in 2012. When we started raising money, that’s when we made the deliberate decision that a lot of SaaS companies do, which is we know that we can put $1 out and we get $2 back in. It just takes a year to get those $2 back. If we want to make $2 million, then we have to put out $1 million today. That would mean that you burn cash in the short term. We made a deliberate strategic decision to make this be a growth business rather than a traditional net present value business. It started dipping into being a company that burns cash. We grew really rapidly. That’s when we started to achieve some real scale. >>>

Bootstrapping an Education Company: Tod Browndorf, CEO of Coggno (Part 2)

Tod Browndorf: I ended up moving back to California. I went into a consulting business with a friend of mine. He was basically in high-end contingent workforce business. This is in the late 90s. We placed all sorts of different types of contingent folks inside companies. As a result, we placed instructional designers into companies that were looking to create training initiatives.

For instance, a company like Washington Mutual, which doesn’t exist anymore, might want to train their 5,000 bank tellers on something. We would find the instructional designer or course developer. We would put them all together and find someone to deliver it. We deliver these packages to these organisations. That’s how I got into what I’m doing now.

Sramana Mitra: When was this company founded?

Tod Browndorf: Coggno was founded in 2007. >>>