Bootstrapping From Germany: Cleverbridge CEO Christian Blume (Part 5)

Sramana Mitra: The natural question that comes to my mind based on what you just said is, how do you price?

Christian Blume: Our business model is, we take a share of the transaction. If somebody wants to work with us, they only pay for actual performance. There are no upfront setup fees. Nobody has to invest anything in us. They can get a full-fledged solution in 30 different languages with all of the different payment methods and currencies. They’re ready to go and sell worldwide when they switch on our solution. We only gain something out of this relationship if they sell something through us. Unless they do that, we don’t earn anything.

Sramana Mitra: You get a cut of every transaction. Is that how you charge?

Christian Blume: Exactly.

Sramana Mitra: Let’s go back to 2005 to 2006. How did you finance the company to get to your first launch?

Christian Blume: Here’s the story to it. Element Five were actually venture-funded. They have, all together, received double digit million dollars to fund their growth. When they were sold, it was also an impulse decision by the venture funds driven by the thought, “There’s a good opportunity here. Let’s sell the company.” All of us working in the second-level management team were caught off guard. It was under covers at that time.

When we got together, the thing that we said is, “Let’s try and see whether we have enough money to fund the operation by ourselves.” We did a very superficial business plan at that time. We put together the numbers. We were very fortunate because we participated in a stock option program at Element Five, which was vested at the time of the sale. We actually had a little bit of money available in order to fund the startup. We scrambled all the money that we had. We went through different scenarios and very quickly realized that there was an opportunity to self-fund. That obviously fired us up.

Sramana Mitra: How long did it take you to get cash flow positive?

Christian Blume: It was fairly quick actually. We launched our beta in November 2005. We were cash flow positive in January 2007.

Sramana Mitra: That’s very fast. How many customers did that entail to get to cash flow positive?

Christian Blume: It was only a handful. Maybe 10 to 15 clients.

Sramana Mitra: What was the revenue threshold at which you were able to become cash flow positive? How many people did you have working on the project at that time?

Christian Blume: At the end of 2006, we reached revenues in excess of around about €6 million.

Sramana Mitra: €6 million in one year. That’s awesome.

Christian Blume: This is gross revenue to us.

Sramana Mitra: Okay, sorry. That’s gross merchandise volume that was sold through your platform?

Christian Blume: Yes. You could probably calculate that we get a cut on depending on the size of the client. It would range from 8% to 15%. Our external revenue was at €6 million. In 2007, we had already reached a threshold which was in excess of €30 million.

Sramana Mitra: In 2006, your net revenue was €500,000. In 2007, you were doing about €3 million.

Christian Blume: Yes.

Sramana Mitra: How many people did you have in 2006 to 2007 timeframe?

Christian Blume: In 2005 when we started the operation, we were seven people. That’s how we started off. The good thing is during the first two years, the executive team did not receive any kind of payment. It was basically living off of our savings in order to ensure that we could invest all of the money that we have into the operation.

We had started hiring in 2006. We hired an additional three people. One of them was a network administrator and we got two doctorate degree students from the University of Cologne. By the end of 2006, we also had a couple of people already working in customer support. At the end of 2006, we were roughly 20 people.

Sramana Mitra: At the end of 2006, you were about 20 people and half a million euros in revenue. The next year you were about €3 million. You were still about 25 people?

Christian Blume: That scaled up as the run rate picked up. There are a couple of things that scaled really nicely. Customers scaled alongside the actual revenue that we were generating.

Sramana Mitra: You became cash flow positive in January 2007. Did you decide to continue bootstrapping?

Christian Blume: No, we didn’t take on any money at all. As I said, it was extremely important. At that time, it was something that we felt strongly about. At the same time, we wanted to ensure that we could fund all the growth that we would need. Obviously, that’s always a trade-off. You have to understand if it makes sense right now to fast track. For us, the really good thing was we were able to fund our expansion out of our own cash flow.

This segment is part 5 in the series : Bootstrapping From Germany: Cleverbridge CEO Christian Blume
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