Bootstrapping Using Services First, Raising Money Later: Rohyt Belani, CEO of PhishMe (Part 4)

Sramana Mitra: Walk us through the process of building the company. You spun the company off at what point? Did you already have clients when you spun it off?

Rohyt Belani: We did. We had about 20 customers at that point. It was a tightrope walk. As you can imagine, a product company in its early days does lose money. What we did first was, before we spun it out completely, we actually made PhishMe a subsidiary of Intrepidus Group for a year so it could still share financials. That gave us a year’s worth of overlap to figure out what exactly would be needed from a financial standpoint. A year later, we also realized that we had to get a blessing from the IRS to do a tax-free spin off. We were able to spin it out completely with much more of a level of comfort when we understood what it would take financially to support PhishMe. We then started looking for capital.

Sramana Mitra: How were you charging these 20 clients that you had before you spun off? What was the financial arrangement with these guys? Had you zeroed in on a pricing strategy for your product?

Rohyt Belani: We had. It was our early pricing point As you can imagine, it has evolved over the years, but the model has remained the same. It’s a SaaS. We offered it as an annual subscription and we still offer the same today. It needed to be a recurring revenue model. That’s how we were charging them starting day one.

Sramana Mitra: When you were going out to raise money, what was the run rate? What was the revenue situation that you were going into the round with?

Rohyt Belani: It was early days. We were sub-$2 million dollars in annual billings when we were raising the first round.

Sramana Mitra: That’s very good.

Rohyt Belani: It’s a lot better than, “Hey, I have an idea at the back of a napkin.”

Sramana Mitra: This is why we like the Bootstrapping with Services strategy. It gets you to a much more fundable state than going in with an idea. Frankly, we’ve seen so many successful cases on this strategy. We’re huge believers of this strategy. There are detractors who don’t believe in this strategy but we’re not one of those.

Rohyt Belani: Since then, we have raised a second round. That was earlier this year. Honestly, one of the things that we really focus on is building a sustainable business that  is capital efficient. We had several offers to put money into PhishMe but we did not have the mindset of, “Let’s go raise $50 million just because it’s available.” That has not really been our model.

This segment is part 4 in the series : Bootstrapping Using Services First, Raising Money Later: Rohyt Belani, CEO of PhishMe
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