Bootstrapping All The Way: Infinitely Virtual CEO Adam Stern (Part 6)

Sramana Mitra: In terms of the competition, when you started tinkering with virtualization in 2005, it was lesser known and everything was immature. Today, it’s mainstream and well-penetrated. What is your experience of the evolution of the competitive landscape in the market?

Adam Stern: It’s mainstream in that people know what cloud means. Quite often, I have conversations with decision makers and I tell them what we do. They’re dumbstruck. When people think of cloud, they think of what their iPad or their iPhone does. They think Box.com or Dropbox, but the concept of running their business applications from machines that are hosted on a virtualized infrastructure is still very foreign to a lot of people. The reason is that the push in the industry right now is very consumer-oriented. >>>

Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey (Part 4)

Sramana Mitra: Let’s talk about that next inflection point. What happened? What do you think drove that? What were the strategic moves that you made to get that next level inflection?

Jeff Mullarkey: It really started with us analyzing the value that clients actually got out of working with us. We were working, typically, with leading-edge technologies that customers were trying to bring on. We also had to do fairly large assessments, which were often bigger than the scopes for implementing the technology. We got very good at understanding organizations that were having challenges with executing IT strategy in general. We could see that sometimes it was due to design and sometimes because they were managing it incorrectly. We started talking to clients about IT maturity model. >>>

Bootstrapping All The Way: Infinitely Virtual CEO Adam Stern (Part 5)

Sramana Mitra: Did you continue to bootstrap the company, or did you, at this point, introduce financing?

Adam Stern: Early on, we financed purchases. Then we decided that from a cash flow perspective, it made a lot of sense to lease equipment. Our storage equipment, switches, and routers were leased. We only stopped leasing equipment a year and a half ago. The decision was made by the Board that future purchases will be financed out of revenue. Even now, we’re not going to pick up more leasing. We want the balance sheet to look very strong.

Sramana Mitra: The full company is revenue-financed. You did some amount of equipment financing earlier on but now, you’re not.

Adam Stern: That’s right.

Sramana Mitra: Fantastic. Where are you in terms of revenues in 2014? >>>

Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey (Part 3)

Sramana Mitra: For how long did the legal business run?

Jeff Mullarkey: We still work with legal today. We were predominant in legal from, I would say, mid-1998 to 2000. We expanded from there. When we started to shift our focus to security, we became non-vertical specific. We worked with everybody at that point.

Sramana Mitra: You still work with the legal vertical but the core offering became security. That was which year again?

Jeff Mullarkey: We were doing security all along, but in 2000, we made that shift. As a technology, it was being underserved in every vertical out there.

Sramana Mitra: In 2000, did your revenue cross a million already?

Jeff Mullarkey: Yes. >>>

Bootstrapping All The Way: Infinitely Virtual CEO Adam Stern (Part 4)

Sramana Mitra: Tell me a bit more about what was in the product.

Adam Stern: In the very early days, we were focused on terminal server environments and delivering Windows virtual machines to do web and SQL-based workloads. We did offer people the flexibility of building their own environments. They couldn’t build their own virtual machines. They had to rely upon us. It was a very managed type of service. The website was very simple. We just had a handful of products to offer. The amount of add-ons we had was very small. We basically gave you a machine with a licensed operating system, but we couldn’t give you the office applications. These are things that we were able to add.

One of our earliest customers was RPMC. They still are a customer today. They have 60 employees. We do their entire IT infrastructure. They use line of business applications and the typical back office applications. They do it through a terminal server environment that we built initially in 2007. >>>

Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey (Part 2)

Sramana Mitra: Let’s talk about that in more of a granular, step-by-step, chronological order. Who was the first customer in 1998? How did you get that customer and what did you offer?

Jeff Mullarkey: We decided to focus on the legal community. This is not our business model today. RKON stands for remote connectivity. We were helping them replace their old dial-up remote access systems, which was frankly going to cut their bill down from $100,000 to $5,000. The ROI was just tremendous. To be honest with you, I got on the phone and cold-called a bunch of law firms and said, “I know you have huge bills on remote access. I have a way to cut that down to 20%.” Our first customers were large legal firms.

Sramana Mitra: How many of these customers did you get in 1998 and how much did you charge them?

Jeff Mullarkey: We got probably 20 or 30. We probably averaged $10,000 in services per client. It turns out that we were bringing a lot of value to the table but there was not a lot of money involved. >>>

Bootstrapping All The Way: Infinitely Virtual CEO Adam Stern (Part 3)

Adam Stern: Because we are engineers, we are largely responsible for helping Tutor Perini build their infrastructure team. We worked with them to build their skill levels and ensure that the instructor was choosing the right people for his team, and even to help them with inter-political battles. During that process, we earned a lot of professional services fees. Those fees were poured directly into our first virtualization.

Sramana Mitra: It sounds like you were basically customer-financed all through?

Adam Stern: Yes.

Sramana Mitra: Great.

Adam Stern: We immediately made the transition from doing professional services. That was a big risk for us. >>>

Bootstrapping to $45 Million from Chicago: RKON CEO Jeff Mullarkey (Part 1)

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

Jeff has built a Managed Service Provider (MSP) business that he now wants to take to $500 million or a billion dollars in revenue. Read how he did it, and what he plans to do in the future.

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

Jeff Mullarkey: I’m from the Chicago area. I grew up in a modest environment. I went to Illinois State University. I graduated with a Marketing degree with little clue of what I want. Right at this moment in time, personal computers had started to emerge. I frankly had never even used one. I stumbled into taking a job selling PCs. That’s how I got into the industry. It was a little bit by fluke. It was a very small industry at that time. This was 1986. That was how I got into IT.

Sramana Mitra: What happens next? >>>