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Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 6)

Sramana Mitra: How did you price this new product?

Feris Rifai: The original OEM agreement started out as a royalty fee. The Symantec folks were selling it directly to the client. That grew from there to cover more of the Symantec portfolio of products. It also grew to Symantec actually including it in their product portfolio.

Sramana Mitra: Your go-to-market strategy for this product was an OEM business model?

Feris Rifai: That’s exactly right. That helped us fund our own ambition on the R&D side. Back to your point about services companies transitioning into product companies, that actually continued to help us drive that growth because we were able to use a much larger organisation’s sales force to sell our product.

Sramana Mitra: How long did you continue in this OEM mode? >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 5)

Sramana Mitra: Let me see if I got this. You had a bunch of partners and you were doing value-added type of work for these people?

Ferris Rifai: It was not reselling. It was more services-focused. They would use us as an extension.

Sramana Mitra: In that process of doing integration and consulting, it sounds like you were getting a lot of customers from these partners. That’s how you managed to immerse yourself in these customers, but I’m still looking for the nugget of what product opportunity you identified.

Ryan Stolte: That’s a great question. Take the systems management security products. The products that were on the market were focused on detecting things. They did a poor job, generally speaking, of turning the things they detected into reports, dashboards, and visualisations that the customer could understand and make sense of. They would go detect individual events. The niche that we got in as a consultancy was to help systems get up and running. Where we really added value was, “How do I take that raw data and turn it into a picture that an executive can understand and actually make an informed decision?” That really was the niche – taking that data and turning it into actionable business intelligence. That was the opportunity. >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders, Feris Rifai and Ryan Stolte (Part 4)

Sramana Mitra: What year did you start this consulting company?

Ryan Stolte: 2001.

Feris Rifai: Precisely on October 16, 2001.

Sramana Mitra: You did analytics consulting. How long did you continue in this consulting mode?

Ferris Rifai: When we first started, we started with consulting in analytics and, in parallel, information security and IT. What we saw was a gap in the market that nobody was addressing. Through our expertise in analytics, we identified this gap. Then we introduced the product into the market in 2007. That was our first entry into becoming a vendor. >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 3)

Sramana Mitra: You were Head of Technology there and Feris joined as the Head of Sales?

Feris Rifai: Yes, I joined as Head of Sales and Business Development at that time.

Sramana Mitra: What is the name of the company?

Ryan Stolte: The company is called Caspio.

Sramana Mitra: Caspio is still around?

Ryan Stolte: It is. I can fill in the gaps there.

Sramana Mitra: Go ahead. Give a little bit of what happened at Caspio. Under what circumstances did the two of you pair up to start Bay Dynamics? >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 2)

Sramana Mitra: Just one little piece of information, did the previous company where you were head of sales exit?

Feris Rifai: Yes, it was a sale to another company.

Sramana Mitra: Was it a good exit? Did you make money off that company?

Feris Rifai: Yes, it wasn’t just through the exit. I had done pretty well. Prior to the exit, we did a private equity infusion into the company. Parts of that was the management founding team.

Sramana Mitra: You had a successful exit in a company that you had joined and rose through the ranks. Then you tried to do a dot-com that was, timing-wise, not a very good time. Then you joined another company and that’s where you and Ryan met. While we are there, why don’t we stop and get a bit of Ryan’s history. Ryan, what’s your background? >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 1)

Feris and Ryan wanted to work together on a new venture. They first built a services company, then introduced an OEM product, and eventually bootstrapped a product under their own brand. The company has recently raised its first venture money after many years of being in business as a profitable, growing entity.

Sramana Mitra: One of you should probably get started. I want to go back to the very beginning of your journey, and learn about your pre-Bay Dynamics story. Where were you born, raised and, in what kind of background?

Feris Rifai: I was born in Beirut, Lebanon. That’s where I was raised till I was 18 years old. I then came to the United States to go to college. I went to school at Indiana University. It was a great experience for me. Throughout my journey when I was much younger in Lebanon, it was a bit of a difficult upbringing because we couldn’t find a way to get safety to be a part of our lives. I think it’s taught me a lot. It has helped me be, believe it or not, very optimistic. >>>

Buying Control Back from VCs: Jason Robbins, CEO of ePromos (Part 7)

Sramana Mitra: The scenario that you are pointing out is a scenario that a lot of venture-funded entrepreneurs face. Business is not the rocket that the VCs thought it would be, but it’s a healthy profitable long-term business that the entrepreneur may be interested in running. That’s a scenario where VCs and entrepreneurs have to sit down and go through this negotiation to set things on a different track.

Jason Robbins: I’m very fortunate. I don’t want any of your readers to think that mine is a normal case.

Sramana Mitra: No, it’s not. It’s not a normal case but the scenario that you’re describing – that after some amount of execution, the investors realized that they have not invested in a rocket. The whole model is based on investing in rockets.

Jason Robbins: It’s one out of 100. That’s right. >>>

Buying Control Back from VCs: Jason Robbins, CEO of ePromos (Part 6)

Sramana Mitra: You had a $5 million round. You were pretty much profitable. What are some of the major inflection points?

Jason Robbins: The $5 million basically almost disappeared. By the time money came in, the investors wanted a CEO that was known in the marketplace so they then can then raise the next round of money. We literally paid $50,000 to Spencer Stuart, which is a head-hunting firm. We were paying money. Then we needed a COO. We hired a COO so he could manage all the legal spending so we can convert into a C Corporation and develop stock option plans.

Before you knew it, we weren’t focusing on the business because we’re spending all of this money. It was very different from what I ever did. Another big lesson is the number of employees. >>>