How to Create a Monopoly in an Esoteric Niche: Steelcloud CEO Brian Hajost (Part 3)

Sramana Mitra: You mentioned that you started building the solution in 2012 and then launched it in 2014. Did I hear that correctly?

Brian Hajost: That is correct.

Sramana Mitra: This period between 2012 to 2014 and the five people that were working on this, how was that financed? Was it from the sale proceeds of the other two divisions of Steelcloud?

Brian Hajost: No, that money had been spent. I brought in investors in the summer of 2012. We still had some of the investment money that was brought in in 2012. The investors, including myself, bootstrapped the company until it became cash-flow positive. 

Sramana Mitra: In 2012, how much money did you bring in?

Brian Hajost: We brought in about $2 million in 2010 when the original money was brought in. In total, we brought in $3.5 million. 

Sramana Mitra: When did the first revenue start to show up?

Brian Hajost: The first revenue started showing in 2014.

Sramana Mitra: In 2014, you financed with $2 million of angel financing, and then the first revenue started showing in 2014. What average deal size are we talking about?

Brian Hajost: When we started, it was probably in the $40,000 range. Today, it’s close to $100,000. 

Sramana Mitra: When did you make your first partnership with the system integrators? Who was it?

Brian Hajost: It was the fall of 2014. It was Lockheed Martin. 

Sramana Mitra: How did you get that deal?

Brian Hajost: I think they met us at a trade show. 

Sramana Mitra: And they took interest in what you were doing?

Brian Hajost: Yes. If you look at most of what we do, most of our sales are call-ins, write-ins, or referrals. They aren’t traditional salesmen knocking on doors and convincing someone that they needed to do something. We try to capture a market. We do a lot in digital marketing. We do a limited number of targeted trade shows. We do social media and digital marketing to drive people to what we do. They have a big problem.

Sramana Mitra: It is a niche problem – a particular solution to a very particular problem. If you do adequate content marketing and write about the topic, then sooner or later people will find their way to you through Google search because there aren’t many people working on this problem.

Brian Hajost: We are the only one. We have foundational patents on the primary technology. There is no other solution that does what we do. We have competition because there are multiple ways that you can accomplish the end goal, but we are the only out-of-the-box package software solution. As I told my Board, people generally try to solve a problem many times when they are having a problem.

They would say, “I am not doing this again. There has got to be someone that can fix this problem.” They probably went to their boss and their boss told them, “No, that is impossible to fix. No has fixed it, so get back to work.” They would probably go online and do a Google search to find Steelcloud and they realize that there is a company that can fix the problem. They reach out to us and say, “Tell me about your solution. I’d like to do a demo. I’d like to do an evaluation.” That is the way it works.

This segment is part 3 in the series : How to Create a Monopoly in an Esoteric Niche: Steelcloud CEO Brian Hajost
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