Bootstrapping Using Services, Managing a Successful Pivot: Oomnitza CEO Arthur Lozinski (Part 3)

Sramana Mitra: You have ten customers that you got rapidly. Where are we in the chronology? What year are we in now?

Arthur Lozinski: 2014. 

Sramana Mitra: What kind of contract sizes was this from a financial point of view?

Arthur Lozinski: Initially, we were at an average cost value of $10,000 ARR. It was small. 

Sramana Mitra: What happens next?

Arthur Lozinski: We had two businesses at this point. One was making $100,000 a year and another one was making a few million. We shut down the services completely.

We left a healthy lifestyle business on the table and pursued raising capital for a product company because we were striving to become a product company. We left behind a multi-million business and started from scratch. We raised a seed round from various investors and went off to the races. 

Sramana Mitra: Was the $10,000 per year business from ten customers the one you wanted to scale? 

Arthur Lozinski: We always wanted to be in the connected device space because we felt strongly about the world looking different. Having been exposed to a lot of manufacturing automation, we thought that it was possible.

We looked at IT assets as a way to build the product out further while the rest of the world caught up. If we could help manage drop boxes of the entire internal IT system and manage these internal devices, we are getting back into enterprise asset management. We are getting back to capital equipment.

There is a company called Pacific Dental. They have over 800 dental offices across North America. Those dental offices manage X-ray machines which are not your traditional computers, but they are connected to the internet. We are coming full circle back on it. In 2015, we were raising funds based on this vision. 

Sramana Mitra: The ten customers that you had, was there any vertical bias in that? Where were they from? What industry?

Arthur Lozinski: They were mostly companies in our backyard because these were IT teams that were working off referrals. We had Optimizely, Dropbox, and some others. They were our first customers. 

Sramana Mitra: How much money did you raise first and foremost?

Arthur Lozinski: We raised $2.5 million in the seed. 

Sramana Mitra: That was in 2014? What happens next?

Arthur Lozinski: We raised the money, which was a huge milestone for us. We had trying to find our way for five years. There was a lot of self-doubt and phone calls telling us, “Hey, it’s not too late to go back to college.”

There were a lot of reasons not to continue, so it was a big deal for us to have finally raised money. We felt really good about it. My Co-Founder Trent said, “We worked so hard to get to the starting line.” We drove right in. We made a lot of things right but we made some mistakes. We grew the business rather quickly – we went from $100,000 revenue to about $1.5 million within a year.

When we look back at the business, we realized that we had a transactional sale in a problem set that was quite complex. We were solving big problems and not charging enough for them and not positioning it correctly. We were finding out all these things and realizing that we didn’t want to rage against metrics that didn’t feel like they could scale because we didn’t crack this enough.

We wouldn’t be able to put the money to use, so we had to reinvent ourselves. From 2016 to about the beginning of 2018, we worked on reinvigorating the company. The average contract value went from $10,000 to $100,000 in that time frame. 

Sramana Mitra: Let me probe that a little bit. That is quite interesting and it is a great learning opportunity for those who are going to be reading this. You had $10,000 per pop revenue from how many customers at this point when you started the journey towards reinvention? 

Arthur Lozinski: We had an average contract value of $25,000 and maybe 50 plus customers. 

This segment is part 3 in the series : Bootstrapping Using Services, Managing a Successful Pivot: Oomnitza CEO Arthur Lozinski
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