Bootstrapping to 25 Million, Then Raising A 23 Million Series A: Coverity Cofounder Andy Chou (Part 7)

Sramana Mitra: What have you done with the venture money you raised?

Andy Chou: We still have $22 million of venture money that we raised sitting in the bank. We are cash flow positive and do not anticipate having to go back and raise another round. We now have 200 employees, and we have 5 billion lines of source code under management distributed across 1,100 customers. The renewal rate of our business, which is our lifeline, is at 95%. We have been responsible for shipping 11 billion applications or devices, including every Ericsson and Nokia phone. We have an amazing culture of smart, engaged, competent people who also happen to be really nice. It is a fantastic place to be.

Sramana Mitra: You have created the ability for organizations to apply quality standards to software development. Are you looking at consulting them in best practices as well?

Andy Chou: If you are a large organization, you want to have the ability to control what is getting into your code base. It is not just about individual defects, but rather about the aggregate picture. Larger organizations tell us that they want to be able to set a policy for their software components that specifies how many defects are allowable, what defect densities are allowable, and what kind of complexity is allowable. They want to be able to enforce that policy and ensure, from a big picture perspective, that the software they are delivering is up to par.

This will allow them to measure teams against each other and components against each other to enable them to deliver software of a standard level of quality. We see this as an opportunity. Managers in every organization I have talked to struggle to gain visibility into software development. That is something they definitely want to fix.

Sramana Mitra: I love that you have bootstrapped to $25 million and did your bootstrapping after that. I constantly preach to the entrepreneurs in the 1M/1M program how important that strategy is, as it allows them to get into a position to control their companies’ futures and execute their vision. It is not always possible to build a lot of technology by bootstrapping, and this is where leveraging the resources at Stanford seems to have been incredibly beneficial. Bootstrapping is an increasingly viable option, especially when you do it using consulting services as you have done. That is a tried and true technique of entrepreneurs.

Andy Chou: I feel fortunate that we did not have to do that for very long. I will mention that we do a lot of work with the open source community. We have a project that was started with the Department of Homeland Security where we scan more than 250 open source projects. We provide this as a service to the community. We get press and publicity from the development community from this, but we also believe it is good for the open source community because it helps them deliver better software. We believe open source is important; after all, it is used almost everywhere. We even use aspects of open source software in our own development.

This segment is part 7 in the series : Bootstrapping to 25 Million, Then Raising A 23 Million Series A: Coverity Cofounder Andy Chou
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