Bootstrapping Using Services from Helsinki: Juha Lehtonen, CEO of FA Solutions (Part 2)

Sramana Mitra: What were the deal sizes?

Juha Lehtonen: It was very little – annual fees of €20,000. It was more like an advertisement for us. In addition to developing the platform, we did quite a lot of projects. We needed to self-finance. After the initial investment, we didn’t raise any other capital. That was the only capital we got. We ended up building up a consultation business.

Sramana Mitra: It’s common to do services businesses to build up revenue and keep companies going while you’re figuring out other things.

Juha Lehtonen: That is true. That was quite valuable as well. That’s the time you learn the potential clients. You work with them and you learn what they need.

Sramana Mitra: What kind of clients were you working with?

Juha Lehtonen: We had a handful of clients. We had one mutual fund company that we worked with. We worked with one of the top five banks in Finland. Also, a life insurance business.

Sramana Mitra: So mostly financial services.

Juha Lehtonen: Yes. We were able to keep the focus on finance. That was helping us go in the direction where we are right now. We were working with the kind of clients that were potential clients for us. We were able to develop the product side as well. We learned how to do personal financial advice – not just investment but general household financing. 95% of our revenue was coming from services. Our product, even though it didn’t still exist, wasn’t a significant source of revenue. That was the situation for the first six years.

Sramana Mitra: How much revenue did you generate in that five to six years?

Juha Lehtonen: We were somewhere between €300,000 and €600,000.

Sramana Mitra: What happens next?

Juha Lehtonen: The focus of the venture company that had invested in seed was switching towards bigger industrial buyouts. They didn’t want to be involved in this company anymore. They wanted to sell their ownership. We were pretty close to selling the company to one of the bigger software development companies in Finland at a very low valuation.

However, I was able to find someone who was willing to buy out the VC firm. Along with that person, two others joined as well. There were three individuals. At that time, we were still rethinking the strategy a little bit. I was striving quite heavily to steer the company to being a product company.

There was an opportunity. There was a very small portfolio management system that was used by around 30 companies locally in Finland. The company that was supporting this software was closing this down. They didn’t see it as a big enough business for them.

We got an opportunity to develop a replacement for this. It wasn’t a project, but it was our initiative. We wanted to develop a portfolio management system that will do the minimum required things to be able to produce some reports on investments. We had done something similar as a project before. We had developed a portfolio management system for an online media, and we had developed some analytical services for another financial company.

We had the components, but we definitely needed to rebuild. We were able to convince these discretionary asset management companies that we can develop a system. We worked very closely with them. They were involved as a potential client. That was the turnaround. We needed to still do some projects to finance this switch but, as we got money into the company, we invested it into developing the product.

This segment is part 2 in the series : Bootstrapping Using Services from Helsinki: Juha Lehtonen, CEO of FA Solutions
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