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Bootstrapped First, Raise Money Later: Manick Bhan, CEO of Rukkus (Part 2)

Manick Bhan: Just a few years after that, you had these rumblings of the next big tech boom. When Facebook went public, it was an incredible experience to see a company that had grown up quietly and become so huge and valuable. At the same time, that same roommate who infected me with the finance bug ended up going to tech.

A year after leaving Duke and working on a tech company, he sold it for $10 million. It was clear that there was an opportunity in tech. I didn’t really understand that until he sold his company. He helped me understand what’s happening in technology. At that time, I wasn’t a technical person. I was always good with computers. As I said, taking things apart was my forte. I didn’t have all the skills I needed but I had the curiosity. Now, I’m the CTO of Rukkus and I can code in almost any language.

At that time, I didn’t know how to do that. This was maybe two to three years ago. >>>

Bootstrapped First, Raise Money Later: Manick Bhan, CEO of Rukkus (Part 1)

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

“My journey was as unexceptional as you can imagine,” says Manick, in describing how he got to $1 million Annual Revenue Rate in transactions before raising financing. Read on for the whole story.

Sramana Mitra: Let’s start by going back to your very beginnings. I want to hear about where you were born, raised, and in what kind of background.

Manick Bhan: Both my parents come from Kashmir. They raised me in Baltimore, Maryland. That’s where I was born. I’ve grown up mostly in the United States. In the very early days, I liked to take things apart. When I was nine, they bought me this bicycle. The first thing I did was I opened the whole thing up. I took out all the screws and basically dismantled the beautiful bike. They were a little horrified about it because it was a birthday present. This has been pretty constant in my life. I like to take things apart and figure out how they work. >>>

A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 7)

Sramana Mitra: What were the financing rounds? You raised your first financing within 18 months when you were getting real traction so you did bootstrap the first phase.

Jason Cohen: Right. In August of 2011, we raised our first little A round. Then a year later in the same month, we did a B round. Then, we more publicly raised a C and a C1 round in January 2014 and January 2015, respectively.

Sramana Mitra: January 2015 financing round means you’re in the middle of the Unicorn bubble. Valuations are really running high. What was your experience in raising that round?

Jason Cohen: We didn’t do that. I think it’s a big mistake to optimize the valuation and not the optionality of what happens next. It’s tempting just to think not to be diluted too much. Plus, there’s an ego component to having a high valuation. We can understand that, but it’s not fiscally prudent. To get to the next step, whatever that means, when you’ve oversold your valuation, you have a big hop to come over. >>>

A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 6)

Sramana Mitra: Where are we timeline-wise now?

Jason Cohen: We’re still in the mid-2000s. Just accelerating through that, I sold Smart Bear in 2007. I left in 2009. I had to stick around for a year.

Sramana Mitra: To whom did you sell this company to?

Jason Cohen: There was another company called Automated QA. They made testing tools. Of course, we made peer review tools. They’re both in the quality arena. What happened was Automated QA, themselves, had sold to a venture firm out of New York called Insight Partners. They manage a few billion dollars right now. >>>

A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 5)

Sramana Mitra: Being the author of a book gives you huge credibility.

Jason Cohen: Even now when everyone knows you can publish, it does. We were doing enterprise sales where credibility is even more important. I remember being with a potential customer in San Diego. Our champion inside the company threw one of our books on the table. He points to it and goes, “We’re with these guys.” That wasn’t even us telling. He was our champion. There’s something different about a tactile physical thing that you can point at.

Sramana Mitra: I agree. We’ve used this very extensively actually.

Jason Cohen: Here’s another thing that’s not obvious. To get the book, we have to ship it to you which we’re happy to do for free. That means we have to ask you for information but people are happy to do that because they get something. Unlike all the usual lead >>>

A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 4)

Sramana Mitra: Let’s go down the path of your content marketing. You said you published a book. Tell us more about what was the marketing strategy around your code review product?

Jason Cohen: I have to give credit where credit is due. In ITWatchDogs, Gerry had this idea because it had just become possible to self-publish. It was still hard. You would send them a PDF and they’d send you a trial book three weeks later. You had to iterate slowly. It wasn’t cheap. It was weird but you could do it. You could have a real paperback.

Gerry had this idea. He said, “Why don’t we make a product catalog? For the first 20 pages, let’s really pitch this whole idea that we’re doing ITWatchDogs.” The first 20 to 30 pages was a long infomercial on why it’s important and why things quickly burn up when >>>

A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 3)

Sramana Mitra: Did you go to work for them?

Jason Cohen: I did for just a little while, but at that time, I had already started another company with Gerry’s encouragement. In fact, when we started ITWatchDogs, I was hesitant to join a startup because I thought, “Maybe I should just increase my savings a little bit more by having a real job for a while.” He said, “Listen. Why don’t you come over and do ITWatchDogs with me?” ITWatchDogs was a month old.

He said, “At the same time, I have another idea for a startup.” That turned out to be Smart Bear. He said, “You do that and do ITWatchDogs. Maybe one of them will work and you can focus on that one.” I did and it turned out both of them worked. I had this insight about version control, which is a thing that software developers use to track the versions of the software that they write. Every time they edit some code, they save a copy of that. You can look back and you see years and years of all the code changing and shifting. They do this mostly to coordinate with each other. >>>

A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 2)

Sramana Mitra: It is very difficult to get any kind of financing for new companies from these community banks. I’m curious about how you managed to get that. Was Gerry offering a personal guarantee of some sort to get that money out?

Jason Cohen: Yes. He also had a history with the bank. Of course, you’ll say, “If I’m starting out, how do I get a history?” You don’t. That is a dilemma of course. Local banks don’t know how to finance startups. We had a rule with how we price things internally, which is “a third to sell, a third to build, and a third to keep”. The total cost wasn’t more than a third of the price. The rest of the expenses of the company like marketing and finance weren’t more than a third. That was the unit economics that we settled on. It worked well. Our products were cheap.

The competitors were maybe five times more expensive than our devices. We were very inexpensive. Because it was a small company, we didn’t have a lot of >>>