Bootstrapping with a Paycheck: Axosoft CEO Hamid Shojaee (Part 7)

Sramana Mitra: Is there anything else that’s worth discussing in your story in terms of strategy and moves that led to big losses or wins?

Hamid Shojaee: From an entrepreneurial standpoint, I think that having that focus on a particular market segment is very important and then doing things for that market segment that creates value outside of the product offerings that you have is important because it helps establish credibility. Are things around raising money or things of that nature of interest to you?

Sramana Mitra: I actually forgot to ask you that. Is this bootstrapped or did you raise money for Axosoft?

Hamid Shojaee: It’s been completely bootstrapped. You definitely go through these ups and downs with respect to, “Maybe it would be nice to bring in investors.” Because of my first experience, I’ve probably been a little bit overly shy of considering investment, but we have been approached many times.

Sramana Mitra: For a software company with $5 million in revenue with a significant headroom, I’m sure you’re getting investors.

Hamid Shojaee: We end up not talking to them.

Sramana Mitra: That’s primarily because you are gun shy from your last experience?

Hamid Shojaee: For sure. That has left a residual effect. One other thing I wanted to tell you is that what’s interesting is that historically, software was this one-time expense kind of deal where you got paid a couple of dollars or whatever your average selling price was upfront. Now, you’re average selling price is much smaller on a per month basis. There are two methods of sales. One is on premise and one is SaaS. If you compare the way that revenue grows in those types of companies, the SaaS revenue growth is much more painful and slower. It’s much more difficult to create a software company today than it was 10 years ago because of that reason alone. Bootstrapping today is much more difficult than it used to be.

Sramana Mitra: It’s also become a lot cheaper to get things off the ground. Bootstrapping was really hard before when things were expensive. Everything was so much more expensive and now, everything is a lot cheaper.

Hamid Shojaee: Server costs and things of that nature are a lot cheaper today but if you were building a software company in the late 1990s or early 2000s, you didn’t necessarily need the servers. In the past seven or eight years, the things that you’re building are web-based and you need the servers, that stuff used to be expensive. Now, it’s super cheap. If you’re just selling a software in 2010, all you need to create a app was a laptop essentially, right? You could create your app, put it out on the Internet, have 100,000 users on it, and if you started charging for that product, you might get a million dollars in revenue fairly quickly. Whereas today, everyone expects those super cheap apps to be free.

Sramana Mitra: That’s the real problem. The real problem in today’s Internet is this complete hijacking of the industry by free riders. That’s a very serious problem. I have to say that I’m a huge advocate of not supporting free riders. I don’t believe that everything should be free. People should pay for value.

Hamid Shojaee: Right. It’s definitely an interesting debate. Just to compare, if you used to sell an install product for $2,000 on average, now that same $2,000 product is only $50 to $100 a month on average. You get 100 customers before you’re going to get $200,000 in sales. Now you have 100 times at the most $100 which is $10,000 in sales. It’s a very long curve that you have to survive and pay for all the expenses before you get to this point of survival in the SaaS world where that problem never used to exist.

Sramana Mitra: It was a pleasure talking to you. Good luck with everything. Hopefully everything will move well and move back to a growth curve again this year.

This segment is part 7 in the series : Bootstrapping with a Paycheck: Axosoft CEO Hamid Shojaee
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