Bootstrapping from Australia: Emagine CEO Dave Peters (Part 4)

Sramana Mitra: 1998 was when you started. How long from then did the sale happen?

Dave Peters: I think it’s about 2000.

Sramana Mitra: A couple of years later.

Dave Peters: Yes. I was consulting the first year or so. Then, we started selling it.

Sramana Mitra: How much were you charging for the product?

Dave Peters: We did a deal where it was an open book cost plus a percentage on the people to do the work. Then, there was an ongoing maintenance fee, but it was quite small. We were just covering the cost of our IT team in doing that first sale. It wasn’t a premium price at that point. What that allowed us to do is, at the same time, we had started the business in the Australian Technology Park in Sydney, which was a tech hub with lots of startups. There were different types of services. We made a lot of contacts and learned as much as we could. I met with a guy there who subsequently led us through some angel capital funding.

We raised a little bit of capital at the start with some angel investors and then with one local VC here. We don’t disclose the amount, but the Australian VC market at that time was pretty much non-existent. There was lots of money for growth capital. There was lots of money for acquisitions, but early stage was just through people you knew who would put in money. There were very little to bridge them from that first angel round to what you’d call today as the B round. We took some initial money on and took a small amount of capital from a local VC, which was a tech individual. That allowed us to fund the development of the platform for the next few years, and also fund the sales and marketing effort to win our next few deals.

Sramana Mitra: How much was the total round of financing between angel funding and the VC?

Dave Peters: We don’t disclose that.

Sramana Mitra: Are we talking $10 million or smaller money?

Dave Peters: Much smaller.

Sramana Mitra: I’m trying to understand the capital structure of the journey. You can give me a range? Was it a couple of million dollars?

Dave Peters: Yes, it was in that range.

Sramana Mitra: When you raised that money, what did you have? Did you have a bunch of customers?

Dave Peters: No, we had a bunch of consulting customers. We had some revenues. We had this one client in the software sector. We were breaking even. The business was proven but tiny. The guys who were backing it said, “We’ll put in some funds to expand the product and expand the sales and marketing so that you can grow the revenue to the next level.” That’s where we were. We had a proven business model. We knew we could sell the software. We had a pretty clear focus on the business need, which was this churn problem. We managed to land our first customer.

Plus, what helped a fair bit was it was 2000. It was dot-com time. Once we got the right contacts, within six weeks, we closed this round of funding. It was equity only and the terms were very fair to everyone. At that point in time, it was relatively straightforward. Emagine was one of the companies with an E in our name along with others like eBay and others at that time. We got some pretty good terms on the funding as well.

This segment is part 4 in the series : Bootstrapping from Australia: Emagine CEO Dave Peters
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