Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft (Part 4)

Sramana Mitra: What year are we talking about?

Vaclav Muchna: 2003. In 2002, we launched that web server. We had to produce 20 terminals and we had no money. I tried to go to the bank but, of course, they didn’t let us borrow anything. There were only few VC funds. The VC market almost didn’t exist. The few VC funds that existed said that this was not an interesting project. Eventually, I found a business angel. He lent me money personally – not to the company. You can understand the impact on liability. The interest rate was 40% per annum.

Sramana Mitra: My goodness.

Vaclav Muchna: I took it. Of course, some things can go wrong. We had the customer. We had to produce it. We delivered and installed. It took us five months to repay the $50,000 that I had borrowed. We repaid and we still got some amount of money from profit, but not enough to fund the event where we wanted to demonstrate our solution publicly. So we borrowed again from that person. He lent it to us for just 20% per annum.

This time, it was much riskier, because there was no customer. We just would spend that money on the event without knowing when and how fast we can get another customer. It was also less money. It was about $15,000. We went to that event and we knew that we had hit the nail on the head because we had a lot of interest in that event.

We had the standard 10 square feet tent. It was very small and in a row of very similar tents. I remember it was a Friday. Three o’clock was the official end of the event. All the other booths started to pack around 12 o’clock. We still had people on our booth at 4 PM. We felt like we had something special. Since then, we’ve been growing in double digits every year.

Sramana Mitra: What did you show in that booth that generated so much interest?

Vaclav Muchna: The solution that we’d done for the hospital but on a centralized server.

Sramana Mitra: It’s a network print management solution.

Vaclav Muchna: Yes.

Sramana Mitra: What kind of a trade show was this?

Vaclav Muchna: It was a local IT trade fair in Brno.

Sramana Mitra: The clients were all local institutions.

Vaclav Muchna: Yes, local companies. The product was a good fit for anybody who wanted to get more centralized printers.

Sramana Mitra: This was 2003 still?

Vaclav Muchna: End of 2003.

Sramana Mitra: How much revenue did you generate in 2004 based on this exposure?

Vaclav Muchna: In 2003, we had about $100,000. In 2004, we had $400,000.

Sramana Mitra: That’s a very good solid resetting of your company’s trajectory.

Vaclav Muchna: The next year, we had $1.4 million.

Sramana Mitra: Selling the same product?

Vaclav Muchna: Yes.

Sramana Mitra: Still within Czech Republic?

Vaclav Muchna: Thinking of your audience, there were two things that were important for scaling out the business. First was the business model. What is our go-to market? How can we scale it? It was not that we were that smart. We were just a bunch of technical guys. We were thinking if we should go direct sales or indirect sales.

Our next customer was a big power plant. They really liked our solution but they were afraid of buying the solution from us. We were a very small company. They really liked it and wanted to support us. They issued an RFP and part of that RFP was that whoever was going to win, they have to buy and supply our product SafeQueue. They made our product part of that RFP. The channel, logically, would be the vendors like Konica, Minolta, and Xerox. When we talked to them, they had the same issue.

They said, “We like what you do, but you’re so small. How can we be so sure that you’re going to support us? When all the prints go through the server and the server doesn’t work, the company won’t be able to print.” Service and stability was important. Nobody wanted to take the risk to buy it. Especially in B2B, many of your readers would probably have similar experiences. When that power plant issued an RFP, the business for the machine was so big that eventually the vendors took the risk because without buying our software, they couldn’t participate in the RFP. The size of the business was their motivation.

This segment is part 4 in the series : Bootstrapping to $30 Million from Czech Republic: Vaclav Muchna, CEO of YSoft
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