Bootstrapping Using Services to $10M: Zimit CEO James Cramer (Part 3)

Sramana Mitra: How did the acquisition happen?

James Cramer: We would occasionally get solicitations from bankers. We would always entertain it to get a sense of which company was worth it and what was going on in terms of acquisitions. One day, I got an email from a banker in New York that said, “I have a client that is looking to make an acquisition in the United States for a company that had these criteria.”

I thought that I was being punked because it was like Ali had written it about us. That caught my attention. At the same time when that was going on, I handled the go-to-market approach and we had decided to move from the mid-market to the enterprise market. Rather than the $500 million companies, we focused on the $5 billion companies. We wanted the much bigger deals that offered much longer relationships.

That took several years to pull off. When we made that transition; we won deals, but we won fewer of those deals. I ran into two problems that I could not resolve. The first one was that I was competing with companies that had huge offshore capabilities. They were able to bring down their rates so low that I couldn’t be price competitive. The second problem was the deals got much larger. It reached $10 million to $40 million. That was more than the revenue of our company. I couldn’t invest in revenue.

On more than one occasion, we would be told, “You guys are the best. You have the most expertise, but we just can’t take the risk of picking you because the contract is 50% of your revenue.” Those were the two problems that I couldn’t resolve. That was the first time in my career that I felt resigned that I may not ever be able to fully resolve these two problems. I couldn’t go and build an offshore practice. That would take tens of millions of dollars to be competitive and I didn’t have that.

In the first meeting with the company looking to acquire us, we met with the CEO himself. This guy had built a $500 million a year business. He was humble, smart, genuine, and he made us an offer that we couldn’t turn down.

Sramana Mitra: What was that company?

James Cramer: The company was KPIT Technologies. 

Sramana Mitra: Was it Ravi Pandit?

James Cramer: It was Kishor Patil.

Sramana Mitra: Now you have sold your company. What year did you do this transaction?

James Cramer: It was in 2010. 

Sramana Mitra: 13 years, $25 million, and you and your co-founder maintained full ownership, what was your earn-out? How long did you have to stay?

James Cramer: We had to stay three years, but we stayed a little longer than that. I left first and then Ali left about six months later. We stayed about four years in total. 

Sramana Mitra: 2014 is when you left KPIT?

James Cramer: That is right. 

Sramana Mitra: What happens next?

James Cramer: We took a few months off. We had sprinted for 16 years without much of a break. We had gone from zero to managing a $200 million global operation with GE, Cummins, and other companies. It was very demanding. We took a few months to rest. Ali and I started having lunch together and we said, “What do you want to do?” It quickly became, “What do you not want to do?”

We knew that the one thing we wanted to do was to start another services company but just didn’t have the passion. We knew that we could start another company and get to $5 million quickly, but we just didn’t have the fire for it. We decided to look at what we know and see if we can contribute. We built a lot of software, so we knew how to do that; but we had never taken software as the sole product.

We started looking back at what we knew best. What we knew best was the services market. What we recognized was that the software that had been built for the supply chain market has had decades to mature. We had a lot of experience with orders, order management, and coding. But when you get into the services market, literally without any exception it was all universally with a spreadsheet. This applied to companies that had millions or even billions of dollars of sales.

In the supply chain world, you are taking an order or giving a customer a quote and it is tied to inventory. In the services world, you are doing the same thing, but it is just tied to people. We decided that we were going to tackle this problem, use our supply chain experience and our knowledge of how coding is done in the services world, build a product, and take it to market. We were going to be the first ones to be able to do that. That is largely the story of Zimit. That mission from the beginning has never changed. 

This segment is part 3 in the series : Bootstrapping Using Services to $10M: Zimit CEO James Cramer
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