Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software (Part 3)

Sramana Mitra: How did you negotiate the deal with Brocade? How much were they willing to pay you for doing what you were going to do for them?

Jagan Reddy: Today for a $2 billion company, our price point would be anywhere between $300,000 to half a million dollar annual subscription fee. At that point, I gave it to them for just under $20,000.

Sramana Mitra: Oh, wow!

Jagan Reddy: That’s just for the software. They paid for the services.

Sramana Mitra: How much did they pay for the services?

Jagan Reddy: I don’t remember exactly. Maybe a couple of hundred thousands.

Sramana Mitra: How long did it take your to implement Brocade?

Jagan Reddy: We did a POC for six weeks. As part of the POC, we also developed some functionalities that they needed. Once the POC was completed, we spent another four weeks to put that in the real implementation and make them go live. Overall, we spent around 10 to 12 weeks to get them up and running.

Sramana Mitra: It was a pretty fast implementation.

Jagan Reddy: It was.

Sramana Mitra: In three months, you basically had a reference customer that was up and running.

Jagan Reddy: Exactly. That was the main catalyst for us. Bay Area is full of technology companies. All over the US, Brocade is among the top 10 to adopt this new revenue accounting that was coming up. We were helping them with the automation. That spread very quickly in late 2009 and got us very big brands in 2010. We added around 10 to 15 customers in the next year. If you look at our price point, we were selling licenses for half a million to a million dollars right after Brocade.

Sramana Mitra: How did you generate these customers? Were you doing direct selling at this point?

Jagan Reddy: It was all word of mouth. People would reach out to me. I didn’t have any sales team for two years. It was all me.

Sramana Mitra: How many people did you have to do the implementation?

Jagan Reddy: It depends on every implementation. We would staff around three to four people.

Sramana Mitra: How many people did you have in your payroll?

Jagan Reddy: We continuously grew. In 2010, we were around 40 people. Today, we are around 120. We are more than 200 worldwide. We have an office in Chennai, but just in the US, we are around 120.

Sramana Mitra: Let’s go back to 2009 to 2010. Was Brocade your only customer in 2009?

Jagan Reddy: Yes. Right after Brocade, we got SGI as a second customer.

Sramana Mitra: How many customers did you get in 2010?

Jagan Reddy: Around 10 to 13.

Sramana Mitra: Did you switch to the more current pricing model in 2010, or did you still price substantially lower?

Jagan Reddy: Our price went up pretty high right after Brocade. The big difference is we were selling perpetual license at that time. That means people pay for the bulk of the software upfront. Then they pay annual maintenance for the software. We were generating a lot of cash in 2010.

Sramana Mitra: How much did you finish 2010 at in terms of revenue or run rate?

Jagan Reddy: Instead of revenue, we can talk about how much we booked because our revenue recognition is different. It doesn’t reflect what we sold. In 2009, we were less than $300,000. In 2010, we were close to $7 million.

Sramana Mitra: These were multi-year bookings?

Jagan Reddy: That’s correct. This is just one year. We don’t count the second year.

This segment is part 3 in the series : Bootstrapping to $20 Million: Jagan Reddy, CEO of Leeyo Software
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