Building a Capital-Efficient Niche SaaS Startup from The Netherlands: Hatch CEO Joris Kroese (Part 3)

Sramana Mitra: Business model is SaaS?

Joris Kroese: It’s SaaS. Our clients are the brands where we basically add these e-commerce capabilities on a fixed fee per month per country.

Sramana Mitra: It sounds like your primary channel was tagging along with the sales team of this content syndication company. Was that the only channel?

Joris Kroese: Initially yes.

Building a Capital-Efficient Niche SaaS Startup from The Netherlands: Hatch CEO Joris Kroese (Part 2)

Sramana Mitra: How long did you do the IT services work?

Joris Kroese: For a year and a half, after which, I sold the company. I actually had a new business idea in my mind while I was still running the e-commerce business. We did a lot of turnovers. We were a much-appreciated business partner for business brands. All those brands, back then, had a dealer locator.

Best of Bootstrapping: The Buy Side of Bootstrap to Exit Startups

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

I am sure you are following the Bootstrapping to Exit (let’s call it B2E) articles. Last time, I showed you some case studies of larger companies who are acquiring bootstrapped startups.

In this post, I will double-click down on the buy-side psychology of the B2E phenomenon.

There are several factors that play into a relatively larger company acquiring a smaller player.

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Building a Capital-Efficient Niche SaaS Startup from The Netherlands: Hatch CEO Joris Kroese (Part 1)

Often niche ideas are great to build capital-efficient, profitable startups on.

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

Joris Kroese: I was born in a small village close to Amsterdam. I was born in 1977. I studied Information Engineering. After my studies, I started my first venture which was an e-commerce venture selling, mainly, consumer electronics in Benelux and Spain. I did that for about 10 years.

Best of Bootstrapping: More Bootstrapping to Exit Case Studies

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

I hope you read my article Bootstrapping to Exit. As a follow-up, let me offer you some case studies.

From Freshworks Has Acquired Nine Capital Efficient Startups:

All the nine acquisitions by Freshworks have been for undisclosed amounts. Cloud-based video collaboration platform 1CLICK, acquired in 2015, was founded in 2012 and had raised an undisclosed seed round from Blume Ventures and The Chennai Angels in 2014.

Online social discovery platform Frilp, acquired in 2015, was founded in 2012 and had raised $500K in funding from angel investors, including Freshdesk CEO Girish Mathrubootham in August 2014 and an undisclosed venture round with Microsoft Accelerator. It had over 100K users.

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Best of Bootstrapping: Bootstrap First, Raise Money Later

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

I wrote a book called Billion Dollar Unicorns a few years back. Writing this book took me through the extensive process of talking to entrepreneurs who have built tech companies with valuations above a billion dollars. While there is a tremendous amount of serendipity involved in any extraordinary success story, one recurring theme comes up in these case studies. I am particularly excited to share this nugget because it applies broadly to all classes of entrepreneurial ventures.

Bootstrap first, raise money later.

That’s what Fred Luddy did when he founded ServiceNow back in 2005. Leveraging his domain knowledge and expertise in IT ServiceDesk software, he rapidly acquired 12 customers before raising funding. Initially, he started charging $25 per seat and the 12 customers paid up. He raised $2.5 million in venture capital WITH 12 customers, and ample validation.

Soon they clocked $850,000 in revenues in their first year as a real company. In 2010, they had grown to $45 million annual revenue run rate with 350 enterprise customers. They ended fiscal 2013 with revenues of $424.7 million.

Prior to listing on the NYSE in 2012, ServiceNow was venture funded with $83.7 million in investments received from JMI equity, Greylock Partners, and Sequoia Capital. They raised $162 million in their IPO. Soon after listing, ServiceNow had touched a valuation of $3 billion. Since then, the stock has skyrocketed. It is currently trading at $234.03 with a market capitalization of $41.96 billion. Clearly, a mega hit Unicorn that started, however, by bootstrapping first.

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Best of Bootstrapping: Excess is NOT a Requirement for Success

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

Let’s do a thought experiment.

List all the things you want to do with your life if you had additional resources.

How many of these require additional money?

How much additional money do you need to acquire to afford these things?

How many of these require additional time?

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Best of Bootstrapping: Don’t Go to VCs as Beggars – Go as Kings!

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

Negotiation is a straightforward game. You can only negotiate if you have options.

A long time ago, when I was a young entrepreneur making my way in Silicon Valley, I found myself at the mercy of people who knew I had no option.

I did not have a Green Card.

My negotiating leverage was limited, almost non-existent.

And people took advantage of me.

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