Acquiring Deadpool Technology to Leapfrog a Services Company into Products: Canara CEO Steve Cotton (Part 6)

Sramana: Are you launching new products to have access to increase your TAM?

Steve Cotton: We have just announced the introduction of a new product that will be available late in the summer of 2013 called Branch Circuit Monitoring. We believe that will add more to our addressable market. Our market is very large. What we make is different than what the big three make and we have a better margin.

Sramana: TAM and margin are difference conversations. I am starting to see why you did not succeed with the VCs. You have a fine business and there are people happy to invest. The VC business is a very particular type of investment business. They are looking for very large bottom up TAM. They want growth at a very high pace, and that is probably what you encountered.

Steve Cotton: We did not fit their model. Our challenge and our passion are to show the marketplace that we will be able to grow to very high levels.

Sramana: You already have a fine business and it will get bigger. Not everything fits the venture model and that is not a crime.

Steve Cotton: Exactly. They have very formulaic methodologies for the types of businesses they are investing in and we did not fit those formulas.

Sramana: That is not a value judgment on your or them. It is just trying to fit a square peg in a round hole. We constantly tell people not to do that. Every business has its own characteristics. Not everything fits the VC model. A lot of entrepreneurs struggle because they believe that everything should be venture funded. That is a big myth.

Steve Cotton: My recommendation to entrepreneurs today is to go as far and deep as you can. Build value before you present an idea.

Sramana: Our philosophy is to bootstrap first and raise money later.

Steve Cotton: It is really hard. The lifestyle change that I had to make was substantial. I went from working in downtown San Francisco with an incredible compensation package to selling my condominium so that I could live off of my home equity. I worked out of a garage in the middle of the Valley while I got this off the ground. It was really hard.

Once the company started to make money I found myself back in the bootstrapping mode. There were times when payroll was on a credit card. You have to run that gauntlet to build value. When you do that, you become very passionate about it because it is yours.

This segment is part 6 in the series : Acquiring Deadpool Technology to Leapfrog a Services Company into Products: Canara CEO Steve Cotton
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