Bootstrapping with a Paycheck: Axosoft CEO Hamid Shojaee (Part 4)

Sramana Mitra: Let’s step through the customer acquisition strategy. How did this $50,000 to $300,000 to $3 million happen? What was the customer acquisition strategy that was driving this growth?

Hamid Shojaee: While I was working at Microsoft, the way I treated it was that I don’t need this extra income. 100% of that extra income went into advertising. I experimented with Google AdWords as well as print ads. Back then, people still read magazines. I took out a full-page ad in MSDN magazine.  A full page ad costs $6,000 per month. When we hit $6,000 in revenue, we had a full-page ad in MSDN magazine. 100% of our revenues were being spent on marketing.

Sramana Mitra: Did you get conversions out of that advertising?

Hamid Shojaee: No question about it, definitely. What was great is that no one could possibly have known how small we were because everything looked very professional. When you are looking at one of the top magazines in the development industry, and you see a full-page ad, you assume that they must be a very reputable company. Then, we started doing the Google AdWords in the early days as soon as pretty much Google AdWords was available, so advertising was really cheap. I remember Google AdWords used to start with a nickel per click. You could get good traffic to your site with clicks that cost only a quarter of 50 cents.

Sramana Mitra: What kind of keywords were you getting that traction from?

Hamid Shojaee: For our tool, it was bug tracker, development tools, or software languages. They were very cheap so we were reaching developers and letting them know that we exist.

Sramana Mitra: Was there a segment that you were particularly appealing to? Was it small companies or large company developers? Who was resonating with your message?

Hamid Shojaee: Most of the teams that were using our product were smaller teams. We actually kept our products free for up to two users. Anywhere from three to 50 users were the bread and butter. The size of teams grew over time from there.

Sramana Mitra: Everything was happening online. People were coming to your website, downloading the free product, trying it out and as they were growing, they were paying for it online. You had no sales involved?

Hamid Shojaee: That’s right, although one of our hires in 2005 was a sales person to respond to inquiries. There was no outbound type of activity.

Sramana Mitra: All inbound.

Hamid Shojaee: That’s right.

Sramana Mitra: I assume that’s the growth strategy between $300,000 to $3 million in revenue, yes?

Hamid Shojaee: Yes. All the way through now, the strategy has pretty much been the same.

Sramana Mitra: Between the $3 million in 2007, how did the revenue ramp from there? What was the employee growth that you needed to support that revenue?

Hamid Shojaee: On an average, our employee growth was lower than it should have been. I think I was trying to keep it at approximately $200,000 in revenue for the number of employees that we had. When we had $2.2 million in revenue, I think we had somewhere on 11 employees. That was definitely a mistake.

Looking back, that probably prevented us from being able to do more things later. Most of our revenues came from on-premise. Our average sale was $2,500. We get paid on-prem. We went through the economic turmoil between 2007 and 2009 time frame where we slowed down a little bit. In 2010, the growth restarted.

Something interesting happened in 2010 onwards. The on-premise sales started declining very rapidly and then the on demand sales started increasing rapidly. As a result, between 2010 and 2013, we were pretty much flat – hovering around this $5 million number – because one number was decreasing rapidly and the other number was increasing. We expect growth to pick up again this year. We grew a little bit last year but not as much as you would typically expect.

This segment is part 4 in the series : Bootstrapping with a Paycheck: Axosoft CEO Hamid Shojaee
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