Bootstrapping a $175 Million Business with Services: TEOCO CEO Atul Jain (Part 3)

Sramana Mitra: What was the intellectual property that you bought? From whom did you buy it?

Atul Jain: It was a one-person entity. I hired a person that had a bit more telecom knowledge than I did. I asked him about what I could build and he talked about doing something in the billing reconciliation system. I said to him, “Is there something that I could buy as a starting point.” He told me that there was this one guy who had an intellectual property. I bought that and found out that it was incomplete and didn’t have a back-end. We bought a little something that didn’t quite work as a standalone.

Over time, our first software product became BillTrackPro, a product focused on doing billing reconciliation of what we call expense invoices in the telecom carrier space.

Sramana Mitra: How much did you charge for that?

Atul Jain: In the beginning, we used a license-based model. We typically charge over a million dollars.

Sramana Mitra: How many of these million dollar deals were you able to do with this product?

Atul Jain: We just got one to start out with. It took me probably two years to find two customers.

Sramana Mitra: Million-dollar deals can really have long sales cycles, but it can pay a lot of bills.

Atul Jain: The first client we ended up going live with was Williams Communications based in Oklahoma. I want to tell you a little story about this deal. We received an RFP and we answered pretty honestly about the things that we could or couldn’t do. They sent it to 10 people. They selected five people to come in and do demos. We were not one of those five because we honestly said we couldn’t do half the things. All the other five people came, but it turned out that none of them could hardly do any of the things they had asked for.

They invited us as the sixth person. We went there on a Friday. Our only laptop crashed at the customer site. They told us they would give us a second chance and that we could come back the next day. We bought a laptop and loaded it, and we did the demo on Saturday. They eventually decided to buy from us. They said the reason they were buying from us is because our values are aligned with theirs. We had not lied. We had not misstated our functionality. We were not as far along as some of the other companies, but we were the most honest. We got that deal partly because of our integrity. That was the first deal that we went live with. We had two other clients that had signed up but were struggling to get them to work with us.

Over time, we ended up realizing that a license-based model is difficult to survive in a situation where you have very limited target clients. Very early on, around 2001, we shifted to a monthly model. It was partly because the market had crashed. Capital was not as easily available. We felt that it’s good to get recurring revenue. We shifted to a monthly fee model where we would get $30,000 a month deals. That slowed us down in terms of building revenues, but it created a predictable revenue base. It took a while to get to critical mass, but once we got to critical mass, we were profitable. We ran our business profitably every year, but it was easier when we had the recurring model.

Sramana Mitra: You were doing direct selling with the telecom customer base?

Atul Jain: Correct.

Sramana Mitra: How big did this become over the course of the next years?

Atul Jain: We got to about $20 million.

Sramana Mitra: With this business?

Atul Jain: Yes, with this business. But then we realized that we were probably not going to have that much room for further growth. At that point in time, a fortunate accident happened. We were very focused on building a very strong culture. I didn’t have any desire to do any M&A because I felt that it will eventually make it difficult to create and preserve a culture. However, one of our direct competitors was in deep financial trouble, so we were able to buy it at a very attractive price. It was very much in our space. It was an acquisition that we did on cash. Two of the three of our direct competitors were also contacted about the deal but they didn’t have the cash in the bank. We have been very conservative. We have preserved our cash, so when the deal came on the table, we were able to pay cash.

This segment is part 3 in the series : Bootstrapping a $175 Million Business with Services: TEOCO CEO Atul Jain
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