Extending Product Roadmaps with Generative AI: Acrolinx CEO Volker Smid (Part 1)

In this conversation, Volker discusses how his company is extending its product line with Generative AI, and also, very specific new startup ideas leveraging the capabilities of Generative AI.

Sramana Mitra: Let’s start at the very beginning of your journey. Where are you from? Where were you born and raised? What kind of background?

Volker Smid: I’m a German born in northern Germany close to Hamburg. I lived most of my life in Hamburg. I then decided to leave the country. I had the opportunity to work in the United States for quite some time. I came back to Europe and was then assigned some jobs that brought me to Asia.

Sramana Mitra: What field were you doing all this in?

Volker Smid: My background is in computer science but what I learned is that when you leave university, that’s the time you need to start learning. Back then, everything had changed. What I knew back then could be put in a museum. You can’t leverage that any more. If you work in a global workplace and you want to be successful, you need to live in other cultures to understand the complexities of the cultures.

Sramana Mitra: What kind of companies did you work for?

Volker Smid: My first significant assignment was me building my own company in Germany. It was a healthcare IT company that had the mission to rebuild the healthcare information system in Germany.

Sramana Mitra: What year was that?

Volker Smid: That was in the late 90s.

Sramana Mitra: What was the trajectory of that company? How did you build it? Was it bootstrapped?

Volker Smid: You need work two years in social environments in Germany. I was appointed to a hospital. The hospital needed a new information system. That led me to build my own company.

Sramana Mitra: You learnt what was needed by the hospital and then you productized that.

Volker Smid: Yes.

Sramana Mitra: It was bootstrapped?

Volker Smid: Today, we would say bootstrapped. We had to be cash-flow positive from the very first day. We grew the company to a hundred people without taking external money.

Sramana Mitra: What funded that? You said you needed to be cash-flow positive from day one. Did you have a customer on day one?

Volker Smid: The initial customer was the hospital. It became our reference. We have about 2,000 hospitals in Germany. They connect us to the next hospital. We had to learn how to run a company while we were developing a product. It was disruptive. This is why we got 10% of the market share in less than five years.

Sramana Mitra:: What was the average deal size?

Volker Smid: About €150,000.

Sramana Mitra: Great! One of the lessons of building bootstrapped businesses is to have large-ticket sized products and get early customers to write that check. One deal gives you the seed capital.

Volker Smid: You learn the beauty of working capital. If you have a large ticket that’s being paid upfront, this is how you fund your company. You don’t need to get external capital.

Sramana Mitra: How long did it take you to build it up?

Volker Smid: We had, at the end, 200 hospitals out of 2,000 in Germany. That took us five years. We sold the company after eight years.

Sramana Mitra: What was the revenue and what kind of multiple did you get?

Volker Smid: The revenue was about €20 million. It was cash flow positive. Back then, there was no multiple on revenue. All we could achieve was a multiple on EBITDA. We learned quickly that if we wanted to scale from where we were, we needed to have access to more resources.

Sramana Mitra: How much did you sell for?

Volker Smid: It was 10 times the EBITDA. About €15 million. Today the valuation will be very different.

Sramana Mitra: What year was this?

Volker Smid: 1999.

Sramana Mitra: So you started the company in?

Volker Smid: 1992.

Sramana Mitra: This was very early. Were you the 100% owner?

Volker Smid: No, we had a number of shareholders. We combined the asset with a medical equipment company halfway through. By the time we sold, we were fairly diluted.

This segment is part 1 in the series : Extending Product Roadmaps with Generative AI: Acrolinx CEO Volker Smid
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