Bootstrapping to 25 Million, Then Raising A 23 Million Series A: Coverity Cofounder Andy Chou (Part 3)

Sramana Mitra: How did you go about raising funding?

Andy Chou: We talked to all of the VCs interested in this space and told them that if they wanted to invest in us that we would only consider certain types of deals. We presented them with our range of acceptable terms and indicated that if we did not received offers in those ranges, we were content to continue bootstrapping the company as we had a solid clientele. We were in a sweet position where we had revenues and did not need to receive additional investments to succeed. As a result, we got a good deal from Benchmark Capital. They invested $22.3 million in us in 2007.

Sramana Mitra: What did you do with that funding?

Andy Chou: We received the funding in 2007 and brought in executives to help scale the company. At that point, we became very focused on building the company.

Sramana Mitra: Who was running the company at that point?

Andy Chou: Our CEO was one of the other founders, Seth Hallem. He was the CEO from the beginning of the company until that point, which is when we brought Anthony Bettencourt on board. Seth was running the company and I was part of his executive team.

Sramana Mitra: What was your revenue when you raised $22.3 million in 2007?

Andy Chou: Our revenue was in the mid-$20 million range. I think that might be a bit unusual for companies.

Sramana Mitra: I think it is great. RightNow was just purchased by Oracle for a billion dollars. That company was bootstrapped to the $5 million point when they received a $120 million Series A valuation and a $5 million trading revenue.

Andy Chou: That was similar to the founders here. We gave up about 20% of the company, which I think is very good for us. We were fortunate to be able to bootstrap to this point. Bootstrapping is very hard to do and we had several close calls. We were fortunate to have our research funded through DARPA during our time at Stanford. We had something the very first day, and I don’t think that a lot of companies have the luxury. We were very fortunate.

That is a definitive advantage of coming out of a university. We have access to prototype funding, research & development, and quality talent. We had the freedom to explore our ideas without having constraints of a business. That turned out to be great for us because we figured out a lot of things in a safe, harmless environment that we may not have had in a corporate environment.

This segment is part 3 in the series : Bootstrapping to 25 Million, Then Raising A 23 Million Series A: Coverity Cofounder Andy Chou
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