Happily Bootstrapping: Zoho CEO Sridhar Vembu (Part 2)

Sridhar’s experience in bootstrapping is something to learn from, especially for entrepreneurs in India, who keep complaining about the lack of funding availability from venture sources. Along the way, he weathered many storms, as all good entrepreneurs learn to do.

SM: How did you fund your early initiative? SV: It was all bootstrapped. My wife worked, she is also an engineer, so I was able to stay home and work on the venture. Tony had taken a buyout from his job. At the time Lucent bought out a lot of smart people, meaning they gave them money to leave. That is how it all started.

There was no investment money of any kind, only some family and friends. The software started selling well, we stumbled upon an opportunity and sold a lot to companies here in Silicon Valley. We also had a good market in Japan. Japanese companies would buy the software, customize it, and ship it with their equipment. That was our early phase of growth through 2000. We had grown to 115 engineers in India and we were 7 people here.

SM: What kind of revenue were you doing in 2000? SV: We were doing about $10 million by 2000. Then in 2001 and 2002, the networking business had a huge meltdown. By then, however, we had a huge exposure to optical communications business. A lot of the equipment was moving to optical. We had something like 100 startups, and you can imagine the whole thing collapsed in the 2001 – 2002 timeframe.

We had a lot of engineers and now they were idle because the software was not selling anymore, so there was no need to keep investing in what we were doing. We had all of these resources, so we just had to figure out what we were going to start doing next. We looked around and decided to go in two directions. With the first, we took the same network management software and converted it to a more enterprise model, as opposed to the OEM model we originally sold in. We also had an on-demand effort, so we put some engineers on that path. That is how Zoho got started.

The network management engine that we call Manage Engine is now doing well again. Both of these paths were born around the same time, 2003 – 2004, because the seeds were planted in the downturn. Throughout all of this we had abundant resources which we had built up during the previous bubble. We had a very engineering focused company, and we did not want to let anybody go – it was just better to re-focus and re-design ourselves.

This segment is part 2 in the series : Happily Bootstrapping: Zoho CEO Sridhar Vembu
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