Sridhar Vembu | Hustle Con 2018

Sridhar Vembu

I'm here to talk about a topic that's not very commonly talked about in silicon valley because this is the home of venture capital but we bootstrapped our company entirely never raised a single dollar and it's a 22 year journey and I'm going to talk about some of the lessons we learned and I'm going to share and the biggest one that's there in the title it's the mindset I mean bootstrapping is more than anything else it's your you have to conquer your own mind first and then only you are you know able to build the business first question how many of you recognize this slmp what it stands for I would not be surprised if most of you didn't know because it's a very obscure thing it's simple network management protocol and this actually is if you look at that was our very first product actually this was 22 years ago we called it a java snmp api that's really very popular product right it's popular brand name but you know it's actually there's a lesson here for bootstrapping in fact I I remember even at that time I mean you're selling something like this even your mom won't recognize what this is right and actually we still sell that product by the way it's still we have a website where we sell that product but this is a very tiny part of our business and we sell a lot more these days I mean you have probably seen the zoho you know commercials watched all of this zoho is now we call ourselves the operating system for business and that's over 40 products in that suite including this presentation this is actually made from zoho show our online presentation software that is part of zoho 1 so that's what we are known for these days but as I mentioned we still sell that original that java snp api and here's the thing that I liked about that starting there well it paid our bills it's not a huge sexy market but it paid our bills and it trained our engineers when we learned how to do how to build software and we learned how to build software outside the pressure cooker of large scale right we learned to build you know smaller kind of software and that's valuable training and then it taught us business actually it taught me sales and marketing I'm an engineer you know I still know how to write code but the thing that I had to learn is how to sell how to market in fact if I had to go back and redo it I probably learn a little more of the sales and marketing because that's one thing that probably in the early years I had to struggle with and it taught us the business you know how to how to build a business how to run a business and it allowed us to invest in more software and more and more in 22 years now we have built a lot of software and we are now you know we would be considered one of the largest private companies now in definitely largest one of the largest private software companies in the world and having never raised money and we are going to stay private we have never now that we have tasted this the freedom we are never going to go public and snmp also this thing kept us alive to fight another day this is something that I would tell our people early on that this puts food on the table and it keeps us alive to fight and fight and fight and we built from that experience of staying in business and fighting living to fight another day and this is actually something that really I stress for a particularly for a bootstrapping company you have to find ask yourself what is my s n m p that's a good way to ask the question and today this is our zoho 1 the operating system for business and it is the full suite of sales and marketing and accounting from email collaboration all of this in one suite let me give you some simple ways navigating the whole bootstrapping how you do this I won't be the person to approach if you are raising lots of money and I don't say that this is the only way in fact there's something that's important everything I say in this you should the disclaimer any advice in any philosophy you ought to realize that it's very contextual there isn't some universal truth that applies to all people at all times this is what from our experience what you can learn and apply it to your context see what you what makes sense for you and the 1st 5 years for us I was thinking only one thing that is survive survive survive survive survive and this is actually true for a lot of startups but particularly bootstrapping right you you literally have to bring in the money to keep the doors open and if you I know the the most common thing in business failure is so you just run out of money simply your idea may be good your product may be good your vision may be good you keep customers happy you keep employees happy but if you run out of money you're it's game over particularly true in bootstrapping so this is the first thing that I would tell myself tell our team that we have to survive if we can survive we can thrive we can even win but we first have to survive and if a market segment is particularly in a bootstrapped mode actually if you go back 22 years and those of you who are old enough to remember that was the time yahoo and Google and ebay they were all born amazon they were all young companies at that time in fact I remember this when we were starting out yahoo had not yet reached a $1,000,000 in revenue that was the time and why didn't we go and compete in that space well all those guys I mean yahoo had raised maybe 20 30 $40,000,000 at that time there's no way we with no money could compete with them then why don't we go and raise money it's not actually easy even today with all the capital floating around most people still will get rejected right most so most people who approach venture capital are going to get rejected so and most people who even apply for incubators are going to get rejected so the default assumption you should make is you're going to get rejected for funding and and so my advice is how do you build in spite of maybe not being able to raise money or maybe you don't wanna raise money in our case it was a mix of both I mean we we knew it was going to be not easy to raise money but we also maybe at at you know early on we didn't really want to be raising money so you find the market opportunity that's not heavily contested heavily funded and bootstrapping works best if you find that niche but make sure something exists right there's a market that's a balancing act I mean if the market is too large too hot too many players are already heavily funded or chasing it your opportunity is going to be limited in that market so you have to find that cross between a market that is there but not so succeed that too many players are chasing it typically venture capitalists will avoid anything that is not you know $1,000,000,000 potential at least and this is a true story actually in 97 we were exhibiting our software in a trade show in las vegas where I actually drove from here to vegas I mean I couldn't afford a plane ticket it was cheap and we stayed in this like $15 or $12 a night hotel where they subsidize you for gambling there right except that I didn't gamble so and we were hawking this is this was the show we were showing showing this and we actually found some really valuable customers at that event that particular event probably got us half a1000000 in revenue eventually that was the particular event where we got started in a in effect and a vc saw this and asked us what do you guys do and he said we are doing this software he asked how big is this market I mean we are at 0 right we are at 0 revenue I took a wild guess and said maybe $10,000,000 that was a wild guess I had no idea and this was the thing why are you so unambitious remedyt this was the question I had no answer except that I thought to myself well if I'm too ambitious then I wouldn't have a business because I wouldn't be able to raise any money for all the ambition ambition is good but you know then you ought to tell the story and somebody has to trust you put in the money all of that and if I start in this niche maybe there is a way to find it and yet it exactly worked out that way in the event where we actually pulled in about 2 critical customers who each paid us about quarter of a $1,000,000 so from that single event we made half a $1,000,000 and yet vc told us why are you so unambitious and so you ideally want a small niche that could become bigger right and except that this niche we found actually I you know I don't know why in what reason I uttered the 10,000,000 number because we found ourselves actually saturating at about 10,000,000 about 7 years later that's exactly what happened so in after 7 years we reached the 10,000,000 number that I had predicted and there was no growth left I mean we're just completely flat and this was also the time if you remember the post september 11 the economy was bad things were generally crappy and a lot of dotcoms were dying or dead and even our own customers were label customers before now we're going away so it was that 7 year itch we faced with the doldrums and well we had a business it was profitable the bad news was it wasn't there wasn't much growth left I could see the trend clearly I could see the writing on the wall if we had stuck to that business we would just stay tiny forever basically it was clear so here's what we did we just simply became our own vc at that.

Sridhar Vembu

We had a 10,000,000 business it had reasonably you know profitable it had good cash flow we invested our own money in ourselves this time we became our own vc and bigger market and we found market segments again this time bigger but again not potentially too hot that was part of our mission because if you find it too hard if somebody else has raised 100,000,000 and if you are going up with your like say 5,000,000 capital how are you going to win so that's a calculus always in my head I would always be looking for who's raising what in this because simply so that we can condition ourselves in what kind of money we have to compete with them there's a lot of times people loudgen you in sales and marketing so we actually found a bigger market segments and we invested and that took off and after we gained strength in that we invested again in bigger market this time this time we had a 100,000,000 kind of revenue now we could reinvest a lot more right our scale had grown we could invest a lot more we reached a. At some. Now really just a vc money cannot outgun us anymore we can go ahead to head against any venture capital kind of money so that is no longer a niche and that is our zoho.com essentially our 3rd act in the serially but we are still in the first two we are doing quite well in our first two the very first one I mentioned the tiny niche and then the second one we call it manage engine the third one is zoho they're all divisions in our company now and of course zoho is the biggest of them all it's the it's playing in the largest playground essentially every business could be a customer for zoho that's how vast the market segment is but to be able to do that we need capital and we have succeeded in the 1st 2 enough to bring in the capital to invest and now zoho has taken off in a big way and this is the you know biz stone was a cofounder of twitter it's familiar that timing perseverance and 10 years of trying but one modification I'll say 20 years that's the bootstrapping story right and I'll just give you a couple of quick tips it's useful to think of yourself starting at year - 5 not year 0 that's why it's very useful when you're bootstrapping because otherwise if you are comparing yourself to people who have raised money it'll always will feel like they are ahead of you but when you don't have any money you use the mindset of - 5 and if you reach year 0 you've gone 5 years but you still have only gone to year 0 right and the total number of people who really care about your business I mean how much truth can you handle right you gotta assume that okay you gotta assume that actually well after maybe 5 years 7 years we still had to convince ourselves that we were in business actually we were a business and in fact the 0 is an optimistic count right because if you include all the active naysayers that's a negative count but let's stay optimistic keep it at 0 right so your business number of people who care about it 0 that's a good number and you know what that includes the near and dear too they may not tell you but most of them actually don't believe in your business yet keep that in mind because you know it's useful to have that realistic mindset and that way I never got upset for example you know when my own cousin or somebody doesn't even know what we do we have learned to not get upset right and after like the first $1,000,000 in revenue is when we could feel that we are a legitimate business that's what bootstrapping does to you so you are because you're constantly battling that you know existential doubt are we in business are we not and they you know they have a name for it the the imposter syndrome for a bootstrapper that's like imposter syndrome squared you have like you feel that even more strongly so you have to kind of overcome that self doubt and that's part of that mindset I talked about in the beginning so that's like the real essence of bootstrapping here that the mindset of that you bring in you start and you have - 5 and you assume that nobody will really care you have to overcome your own self doubt and then the practical advice of your own the finding the market niche all of that so it's ultimately now I'll go into a little bit of philosophy you have to realize that it is a self discovery process you are discovering your own inner strengths over the course of time and for myself that is absolutely true that it's some things I learned to do things I never thought I would be able to do like actually presenting now I'm an engineer I you know I I only thought I could quote but and then later I realized I could do these things and you are when your self discovery is funded by someone else what happens is it it kind of becomes self indulgence often which we see right when people raise too much money too quickly and they kind of become self indulgent or you know we call this the or familiar bootstrapping is about yeah the trustypharian that's the name right the self indulgent you don't have any kind of self discipline in the way you spend money but bootstrapping that's the nice thing about it you have that balance between discipline and that indulgence you are your discovery is tempered by your discipline and finally I'll just leave you with this because you are in oakland you are in san francisco bay area it's something important we are in the most expensive real estate in the world as a bootstrapping person you have to give yourself all the advantages you can give yourself because you don't have many advantages so ask yourself why am I paying the highest rent in the world and and and suffering from the highest cost of living in the world go figure out somewhere that's cheaper that's something very important there's something that I constantly tell people you don't have to be in a particular location to achieve your goals and the the cut your personal burn rate when you do that you give yourself a longer runway even with the limited funds you have so and finally we have actually I'm we are outside we have you will have seen our our trailer outside the zoho big yellow one and I have 1 on ones now after this so you can sign up and this is the zco.tooneonone that's the url so you can go register I'll be here the rest of the evening so feel free to meet me thank you thank you