Bootstrapping Using Services: InRule COO Rik Chomko (Part 4)

Sramana: That year in 2003, how many customers were you able to bring on? I assume you were targeting the insurance industry and all the customers who are from the insurance industry.

Rik Chomko: Yes. Interestingly enough, while we were targeting people from the insurance industry, the customers we actually landed were completely outside of the insurance industry. While we thought insurance companies were more likely to jump on-board, we struggled, like probably a lot of other entrepreneurial companies, to convince them about us despite a great reference. Our next customer was a company that did roommate matching for students going to college. They found us through the website. Sramana: You were basically targeting the insurance industry but other people are finding you and asking for the same solution in other sectors?

Rik Chomko: Yes. They were asking for our technology to be used for their specific problem.

Sramana: How did that develop? What are some of the next major milestones?

Rik Chomko: We continued that way through 2004, and we landed a couple of new customers. One was, as I had mentioned, this roommate matching company and then a few that were a little bit smaller, but they typically tended to be smart companies. Around June 2004, we had four customers. We realized that in order to turn the corner and make ourselves a true product company, we needed to raise some money. We were still bootstrapping with our services work and it was getting to be very distracting. We knew we had a product that people would buy. We had four committed customers including the insurance company Aon, the roommate matching company, and the Ohio Department of Education. However, we knew that we need to do a lot more work on the marketing and sales side and start to scale the business. I had never raised money nor had my business partner, so we decided that it was time to bring in a CEO who would run a software company and help us raise some angel funding. So that was quite a big turning point for us in 2004 to make that decision. As you know, from an entrepreneurial perspective, it’s a little hard to give up control.

Sramana: Yes.

Rik Chomko: But it was a good decision. We raised about a million dollars in the first round of angel funding.

Sramana: Where were you operating at this point?

Rik Chomko: We have always operated out of Chicago.

Sramana: Was the angel round also from Chicago angels?

Rik Chomko: Well, a few angels were across the United States. We had engaged with an investment banking firm to bring in some angel investors, but most of the money came from our friends and family.

Sramana: Angel round is happening in 2004, right?

Rik Chomko: Late 2004, early 2005.

Sramana: And at this point, you have four customers, and now you have a bit of money, right?

Rik Chomko: Yes, that’s correct.

Sramana: What was the next step?

Rik Chomko: The next step was trying to truly become a product company. We hired people for marketing, running our services business, and build our engineering team. So it took us a couple of years to put all that together and, as we’d like to say, turn the corner to become a product company. The revenue ratio of product to services had now shifted from 30:70 to 80:20.

This segment is part 4 in the series : Bootstrapping Using Services: InRule COO Rik Chomko
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