Solo Student Entrepreneur to $5M: David Liu, CEO of Deltapath (Part 2)

Sramana Mitra: How did you find these customers?

David Liu: They came to us. They found our website.

Sramana Mitra: Google search?

David Liu: Yes. SIP is the industry standard for VoIP and PBX basically means phone system. I remember if you type SIP PBX, we would come up on the first page.

Sramana Mitra: Very interesting.

David Liu: I didn’t know SEO back then. I didn’t do any SEO. These companies were basically Vonage wannabes. They got a lot of customers. They wanted to make international calls. They wanted to leverage VoIP.

Sramana Mitra: You were going to be the technology provider for these telecoms.

David Liu: Yes, kind of. The early version of cloud service companies.

Sramana Mitra: How much were they willing to pay you to do this?

David Liu: They would invest along the lines of $50,000 to start with.

Sramana Mitra: That’s not small money for the early stage.

David Liu: Yes.

Sramana Mitra: Is that $50,000 a year?

David Liu: Back then, it was about buying a perpetual license.

Sramana Mitra: How many of these did you do?

David Liu: We did about five in total. Then I realized the selling cycle is relatively long with these kinds of companies. They needed to do a CapEx investment. They needed to do a business case. As more and more players started entering the market, the landscape changed. These telecom IT service providers started changing their mindset.

In 2005, I started to change course. I said, “Let’s not focus on these telecom service providers; let’s focus on enterprise, which is where all the demand was originally. Why don’t we change the platform from a service provider platform to an enterprise platform that businesses can use? There will be a lot more phone features that are typically used in the company. That was the right decision.

I had a manufacturer who manufactures Nike and Timberland. They wanted the solution. They had a couple of factories with a couple of hundred people. That was the right size of target customers.

Sramana Mitra: What was the business model in that scenario?

David Liu: It was also perpetual licensing in the early days. One of the things that we did early on was, in selected markets, we understood that it’s difficult to sell software with a high price tag. We’re talking about $10,000 or $20,000 minimum. In order to charge that, you can’t sell a piece of paper or sell a CD-ROM. In Asian markets, people don’t value software as much.

Sramana Mitra: At that time, they didn’t.

David Liu: We packaged the software into an appliance. We manufactured a custom appliance. It had a single motherboard embedded with flash. We were selling a piece of equipment. You can sell for a lot higher price with that equipment. Then people felt that this is a much more solid solution. They didn’t feel as solid with just software.

Sramana Mitra: When did you make the switch from software to the appliance?

David Liu: 2007.

Sramana Mitra: What level of traction were you at by this time? You were still bootstrapped at this point?

David Liu: Yes. Our business started to take off in 2007. In the first couple of years, there were losses. It’s just using family funding and asking my dad for money.

Sramana Mitra: It was just you at that point?

David Liu: Yes.

This segment is part 2 in the series : Solo Student Entrepreneur to $5M: David Liu, CEO of Deltapath
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