Acquiring Deadpool Technology to Leapfrog a Services Company into Products: Canara CEO Steve Cotton (Part 3)

Sramana: How did revenue scale as you following this strategy?

Steve Cotton: We started with revenues of $470,000 and then went to $1.5 million and got up to $7.5 million. This cash revenue gave us some flexibility to develop a strategy for the future. We looked into the marketplace and found a technology company that had a next generation battery monitor. A lot of money had been put into that by venture capitalists and family investors. They had become insolvent, and we found a great match where we had market access, context, and customer access and they had IP. The technology itself was great. It had a green, yellow and red light for every battery, and we could control that with our monitoring operation center that we staffed.

We made the leap and transformed from a manufacturer reseller to a product design and manufacture company. We launched our product from that effort in the fall of 2009. By then the company was doing $7 million or $8 million, and we had 15 employees. We launched the product in the fall of 2009. We had very conservative market expectations, but the market received it well. We thought we would sell 5,000 units the first year, but we sold 20,000.

That migration and inflection point in the growth of the business was significant. That is how we went from $8 million of annual revenue to the $20 million of annual revenue.

Sramana: Did services generate the $8 million in revenue that you were able to leverage to become a product company?

Steve Cotton: The $8 million dollars was a combination of buy and resell of other companies products, as well as our data monitoring center services. Our data monitoring center effectively grows every time you sell a monitor. A lot of companies will sell a software package with the monitoring device. We are different in that we have an ongoing relationship with customers where we monitor it for them.

Sramana: At this point you went out into the market to acquire intellectual property from a company that had VC money and was going out of business. How did you identify this company?

Steve Cotton: We are involved in an organization called IEEE. They have all sorts of standards committees, and the guys in this company were going to those meetings to learn and network. We met them at an IEEE meeting and they approached us saying that they had a really interesting technology. They noticed that we were growing really quickly, and they wondered if we had ever thought about having our own product. The timing was just right because we were longing for our own product and were not sure if we should start from ground zero.

This segment is part 3 in the series : Acquiring Deadpool Technology to Leapfrog a Services Company into Products: Canara CEO Steve Cotton
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