Bootstrapping To 20 Million: Replicon Co-Founders Raj And Lakshmi Narayanaswamy (Part 6)

Sramana: What techniques have been the most consistent for you?

Lakshmi Narayanaswamy: We tend to be very opportunistic. We would market to accountants hoping they would recommend our software to their clients.

Sramana: You said you cleanse your leads in India. How does that work?

Lakshmi Narayanaswamy: We use a team in India to receive the leads. They examine each lead and cleanse it. The team examines the name of the company, verify the phone number and email to make sure they are formatted properly, and visit the website.

Sramana: What is the sales cycle from the point a lead comes into your system? How long does it take to close that customer?

Lakshmi Narayanaswamy: It depends on the type of customer. On the SMB side it is 45 days. On the mid-sized list it will take about 120 days. Enterprise deals take about nine months. Early on we saw that the median had to be played, so we packed our sales cycles appropriately.

Sramana: What do you do during those 45 days to move that customer along to a close?

Lakshmi Narayanaswamy: Once the lead is cleansed, we immediately put a telesalesperson on it. They call and qualify the lead and pass it on to a sales rep, who can follow up and close the sale. We still close SMB sales on the phone.

Sramana: Would you talk a bit about the financing of the company? How did you finance your different stages of growth?

Raj Narayanaswamy: Our first investment came from an angel investor who was a client. In our early stages we had a map with a pin on it for each customer. He saw that map and saw the number of pins increasing. He approached us with an investment offer. That was very early on in Canada, and he is still an investor in the company today. By late 2000 we had received several offers from companies asking to purchase the business.

We decided the market was ready for us to raise some money, so we did an investment round and raised $2 million. We raised that money mostly from angels in Calgary and $500,000 from a local venture capital firm. That investment round turned out to be a disaster.

As part of raising those funds, we brought in a CEO. Then the market crashed and we went from three employees to 40. Neither Lakshmi nor I had ever managed anyone, so we had to deal with a lot of personnel issues. That resulted in parts of the product turning buggy. There was a lot of disagreement between the investors and us. They wanted their money back during the slow months. We ended up buying out a lot of those shareholders, including the VC.

Sramana: How did you do that? How was the buyback structured?

Raj Narayanaswamy: It was painful. The company was profitable, so there was cash. The company spent cash to buy those shares back. We brought in an outside business valuator who valued the business. We made an offer to all shareholders based on that valuation. A lot of them took it and they all made money, anywhere from 15% to 30%. We did that buyback in 2004.

Sramana: Does the company ownership now remain with the two of you?

Raj Narayanaswamy: The only investor left is our original angel investor. We have built up a strong balance sheet of the past several years. We had to decide if we wanted to turn this into a lifestyle business or if we wanted to put that money back into the company to grow. We decided to invest, and we have made a lot of commitments in growth over the past 12 years. Part of that investment was physically moving to Silicon Valley.

This segment is part 6 in the series : Bootstrapping To 20 Million: Replicon Co-Founders Raj And Lakshmi Narayanaswamy
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