Bootstrapping to Exit from Saudi Arabia: Emad Daghreri, Co-Founder CEO of Autobia (Part 7)

Sramana Mitra: So you exited this company, and you have started another company now, right?

Emad Daghreri: Yes.

Sramana Mitra: You and your partner bootstrapped the first company. You did not take any external financing and you were profitable all along. Can you speak on how you feel about bootstrapping to exit versus company that is built in the venture model? How has your thinking been in terms of building a bootstrap company versus a venture funded company? How is that thinking evolving as you go along? Tell me more.

Emad Daghreri: My second company is actually venture capital backed, so it’s a different story. It’s always about the north star of the company and your target markets. In the first company, our target market is government-focused market, which depended on contracts. We didn’t have this kind of the matrix that was needed at the beginning to make sure that we can maintain or have a relationship with the customer, ensuring the revenue stream is realized and the ecosystem is in place, which is what happens usually with SaaS and technology companies.

We didn’t have the need to raise funds for the first company. We actually IPO-ed with almost $15 million cash in the bank. Even the exit was not to increase the capital; it’s an exit for the founders and the shareholders rather than for bringing money back to the company to grow it even more.

So, we are lucky to be in that domain. It can happen, but that will depend on the target market, the type of the products, the startup itself, and the different revenue streams that you are planning to have in the company. I know a lot of examples that do only venture capital investment, not necessarily because they want the capital to cover costs until they reach the breakeven point or create profits, but because they want to expand the business even more.

It’s really a difficult thing to pull off with the current ecosystem, because we were working on basic foundation infrastructure. So it’s normal to be able to generate money from that at the early stage. However, today when the ecosystem, almost all the infrastructure, and the initial ideas are established, it will require capital to have a new layer and be able to reach to the next level.

Sramana Mitra: I disagree with you. If you look at the different layers of infrastructure of the technology stack, the more layers of abstraction exist, the cheaper it becomes to build on top of them, right? You know this from your experience. You had to build a lot of infrastructure that is today available. Amazon provides infrastructure, there are various models that are available from open source.

A lot of the pieces exist; if you can build on top of those pieces, you don’t have to invest that much in building those from scratch. Then you can really focus on where your domain knowledge is, and create the software, the workflows, the APIs, and the value proposition of automation on top of that. That model is much easier to build bootstrapped businesses with than the model where you build everything from scratch.

Emad Daghreri: I agree. At the end of the day, it depends on what type of business you are in and how you look at it. Sometimes this model makes sense and is suitable based on the idea. You need to know which one you will pick from an early stage to understand.

I have a great example. One of our friends here in the Silicon Valley created this amazing marketplace for cyber security – engaging hackers to help companies find issues in their infrastructure quickly with a huge subscription model for professional services. They did that without spending any money because they are the experts, they know the ecosystem; they just created the website and created healthy revenue streams for both sides by gamifying the whole infrastructure. They have tens of big companies in Saudi and thousands of hackers active on their platforms. They didn’t spend any dollars from any investors and they don’t actually need any money from VCs. This is a great example of capitalizing the infrastructure and experience to be able to build it off as a business.

Sramana Mitra: In One Million by One Million, we’ve emphasized greatly on bootstrapping. If you look at our portfolio of case studies, we have tons of bootstrapping case studies. We have all the different nuances of bootstrapping with the paycheck, bootstrapping using services, bootstrapping by piggybacking, which is building on top of platforms, and solo entrepreneurship. We have looked at bootstrapping at a very deep level.

To actually raise money from venture capitalists, you have to convince them that you can go from zero to $100 million in five to seven years. If that is not going to be your trajectory or if you’re working on a smaller idea that is going to grow more linearly as opposed to exponentially, then you have to bootstrap a business. There are many more businesses out there that are more in that linear growth trajectory than the exponential growth trajectories. A very small number of companies can reach that kind of exponential growth of zero to $100 million in five to seven years. For most companies, bootstrapping is a better way of building businesses. Especially, If you can bootstrap to exit, it is also a better way of making money for the most part. So much dilution happens in venture capital cap table as you raise more money that by the time you’re getting an exit, a lot of that exit value is being harnessed by the investors and the entrepreneurs are left with a lot less. In a bootstrapping to exit scenario, entrepreneurs make hundred percent of the exit value. So even with smaller exits, you can make a lot of money. This is why I really like bootstrapping to exit case studies.

Emad Daghreri: Yeah. I agree with you because usually they are thinking about the valuation, “How I can make a billion dollar company?” You didn’t need to have a billion dollar company. We exited with a $200 million valuation, but all the shares are for us, and it is good enough wealth for all of us.

Sramana Mitra: Exactly, you don’t need to build a billion dollar company. You can make a lot of money without building a billion dollar company and still be a big success.

Emad Daghreri: Yes. This is what the base of traditional business is today. In a traditional business usually, you’d start small, grow the business with your own income, and you’d have successful business at the end of the day. Technology doesn’t need to be go the billion dollar route. It can be your own small shop, but in a technology ecosystem, it can be built off. I totally agree with you. It is really possible.

Sramana Mitra: We have lots of great examples and lots of great case studies if you’re looking to learn the discipline of bootstrapping. The One Million by One Million portfolio of case studies and courses is a very good place to do that. Please help yourselves to all of that and learn from that.

Overall, the reason I wanted to showcase Emad’s story is to show you how far you can go. We have brought you many such bootstrapping to exit examples also, and it’s a very important way of building a business that you must learn and consider as your option.

Well, thank you Emad for sharing your story.

This segment is part 7 in the series : Bootstrapping to Exit from Saudi Arabia: Emad Daghreri, Co-Founder CEO of Autobia
1 2 3 4 5 6 7