Bootstrapping to $18 Million: Vlad Friedman, CEO of Edge Hosting (Part 4)

Vlad Friedman: Over the course of time, it was almost like there was an impasse where by the time the recession hit in early 2000, we had just reached our stride. We were sitting in a good place. We were starting to build these relationships with more and more customers. As the market bottomed out, our business just exploded. While all of our competition wasn’t focused on services before, as soon as they lost their funding and valuations, they drastically slashed staffing and quality of support.

My organization was already positioned for high-quality support and high-quality service, and we had this huge rush of customers into our business, which really helped the foundation of Edge. We flourished in the recession because all of our competition fell off the map because they weren’t focused on value and service. As companies cut people out of their organizations, their IT still needed to be managed and needed to be serviced. I think these are pretty basic business principles. You focus on quality and delivering great outcomes.

If you find ways to make things more efficiently and take what people don’t want to do and figure out how to do them efficiently at scale, you can create fantastic long-term value regardless of your particular industry or market segment.

Sramana Mitra: Was this bootstrapped? Did you take any financing? How did you drive the business?

Vlad Friedman: The only financing that we ever took was when we started building our first Big Data centre. We were really bootstrapping it. In mid 2003, we said, “This business is just ripe.” We decided to build a data centre facility here that aligns with the expectations of our customers. It took about two years from the initial thought to the day that we opened. That was the only time that we ever took money from the outside.

Interestingly enough, the business wasvery well-positioned because it had this recurring revenue model. We didn’t have to go to the venture capital and private equity community. We were just able to raise money from our bank because we were able to demonstrate that we can predict our revenue for the next 24 to 36 months. That’s very easy to do because our contracts are annuities over a particular time.

If you can demonstrate that to a bank, you don’t really need to go to the venture community and raise capital that, very often, has a price that is much higher than the interest that you pay. Very often, those communities have  the ability to influence your direction, which sometimes is a good thing. Sometimes if you’re an entrepreneur and you’re passionate about fulfilling the vision, change for the sake of change can take you not in the direction that you want.

We were so focused and passionate about being successful at that time that our banks got behind us and actually gave us the loan that we needed to build this facility. These days they built data centres the way that we built it back then. I don’t  know if I would go through that process again because there are folks who do that component more efficiently at scale than we do. Back then, data centre was a differentiator. That is no longer the case.

I think it’s important to know that if you’re really passionate, you got stay focused on what you’re doing really well. You have some level of deviation. You’ve got to respond to markets and customer demands and changing conditions. You’ve got to focus on your core mission and know that you can do it better than anybody. Interestingly enough, looking back, I think it was a good decision at that time to go the bank route versus the private equity route because it allowed us stay focused especially being a small company back then.

This segment is part 4 in the series : Bootstrapping to $18 Million: Vlad Friedman, CEO of Edge Hosting
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