Bootstrapping to $300 Million: Faisal Husain, CEO of Synechron (Part 5)

Sramana Mitra: Tell me more about your thinking around that. It sounds like there’s a philosophy around being self-financed. You must be getting lots of calls from private equity all the time.

Faisal Husain: Yes, we’ve been getting calls for several years. I have met all of them and am on fairly good terms with them. In one or two cases, I’ve even gone down the road of bringing an investor on board. Twice now, I have walked away from the altar. First of all, capital is a business need. As a business that is profitable and is generating cash flows, we do have a source of capital that we use for our growth. On top of that, we have been working with developing good relationships with banks. I can always use more capital.

As a person who has built up his business and brought it to $300 million by myself, I’m hesitant about outside ownership in the company that is only in it for short-term financial gain and doesn’t really care about the soul of the company. >>>

Bootstrapping a Virtual Company to Scale: Taso Du Val, CEO of Toptal (Part 1)

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

There’s a lot of controversy around whether virtual teams scale. Taso Du Val has scaled a sizeable business using a virtual team. Read on to learn more.

Sramana Mitra: Let’s start at the very beginning of your personal entrepreneurial journey. Where are you from? Where were you born and raised? What kind of background?

Taso Du Val: I grew up in Massachusetts and Westchester, New York. I’m a high school dropout who started Toptal at the age of 25.

Sramana Mitra: What was going on in your life around 25 that led you to start Toptal? >>>

Bootstrapping to $300 Million: Faisal Husain, CEO of Synechron (Part 4)

Sramana Mitra: Where is your team? Is it all in New York?

Faisal Husain: We started out of New Jersey. We had a development center in India from day one, because almost all of our clients were interested in leveraging the global delivery model to manage the cost in these projects.

To your question about what things we did strategically, we invested in professional sales. We also made a strategic decision not to raise money >>>

Bootstrapping to $300 Million: Faisal Husain, CEO of Synechron (Part 3)

Sramana Mitra: It sounds like you did a bunch of e-commerce systems at a couple of hundred thousand dollars a pop in the early days of the company. What’s the next major milestone? How long did it take you to get to a $100 million in revenue, for instance?

Faisal Husain: We started in mid-2001. We did about $400,000 in revenue. We reached the million dollar mark fairly quickly. In the third year, which was the second full year we had, we did about $2.8 million in revenue. Then we did $5.5 million. We grew extremely well in 2004. The next year, we did $14.4 million.

Sramana Mitra: All this was still in the same business model? You were still building e-commerce systems in a services mode? >>>

Bootstrapping to $300 Million: Faisal Husain, CEO of Synechron (Part 2)

Sramana Mitra: What was the concept around which you founded Synechron?

Faisal Husain: The concept was based on being a customer of this industry. I saw a gap in the service that I was getting from the company out in the market. The gap was that they didn’t have sufficient business skills. The whole outsourcing model was very appealing to clients and they wanted to embrace that, but these firms really lacked sophisticated technology capabilities. They lacked business knowledge. They lacked an agile and iterative approach to projects. Those were the gaps I saw.

I left my job at Merrill and tried to start this venture that involved very high-end technology capability combined with very deep business knowledge, and what today we all recognize and call an agile approach. 15 years ago, there was no term for it. We decided on that vision and that’s what we followed. That’s what got us to where we are. >>>

Bootstrapping to $300 Million: Faisal Husain, CEO of Synechron (Part 1)

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

Faisal is one of those rare entrepreneurs who have managed to grow his business with no outside financing to significant scale. We discuss his journey here.

Sramana Mitra: Let’s go to the very beginning of your story. Where are you from? Where were you born, raised, and in what kind of background?

Faisal Husain: My roots are from India, but I was actually born in West Africa in Nigeria. My parents had moved from India to Nigeria in search of jobs and they were in the education field. My father was a principal and my mother was a math teacher. While they were doing their jobs and building their careers in Nigeria, I was born there. I lived in Nigeria for 13 years. At that point, my parents decided to move back home to India. I was then home schooled for about three or four years, and then came to the United States. >>>

Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey (Part 6)

Sramana Mitra: Would it be fair to say that you were able to expand your margin substantially through this process? What kind of numbers are we talking? In the kind of strategic shift that you described, what does that do to the business in terms of margin?

Jeff Mullarkey: After that, we delivered a much higher margin. Managed service companies tend to deliver 10% to15% to the bottom line. Professional service companies, if they do it right, may deliver 5% to 10%. We’ve a mix and we still do. We probably tripled our net profit and doubled our margin along the way on the same efforts. That was a significant change. It also gave us positive cash flow. In fact, a lot of these contracts end up being pre-date contracts. Sometimes, we have more cash than we have profits. You end up having cash and essentially you don’t take it as profit until that month passes. At the end of the year, we have more cash than we have profit, which is a great problem to have.

Sramana Mitra: Absolutely. Cash is king. You have a lot more options when you have cash. >>>

Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey (Part 5)

Sramana Mitra: You started with the model of doing value-added resellers primarily. VARs are not hugely profitable businesses as you know from your previous experience as well as earlier versions of this one. Can you talk about how the business model evolved as you made this next strategic move into the cloud data center?

Jeff Mullarkey: You’re 100% right on the VARs. That was our biggest frustration. We realized that the reason why a lot of these VARs go out of business is they eventually have a slow month. That slow month drains all their money because they don’t have enough to cover their bills. We, early on, started this recurring revenue model. I knew this was going to be very significant for us along the way. VARs’ growth is limited by the risk of the ups and downs. >>>