Bootstrapping From Germany: Cleverbridge CEO Christian Blume (Part 6)

Sramana Mitra: Was it a very profitable situation right from the beginning?

Christian Blume: This is the interesting part. When we started the business, we always said, “We’re only going to enter actual business opportunities if there’s a win-win situation.” I would never have signed off on any kind of deal in order to buy market share and saying, “I’ll go in with a very low price just in order to win that business.” We always sold on the value we could generate. We would typically be always a little bit higher priced than the competitors out there. At the end of the day, what’s a percentage point in additional cost if you have a percentage point in additional revenue? It makes a lot of sense to do that and work through it. That’s why we always went into a very profitable situation with our client. >>>

Long Journey To Realize a Vision: Limeade CEO Henry Albrecht (Part 6)

Sramana Mitra: So in 2010, you got a couple of mid-sized customers. What kind of revenue were you able to get to in 2010? How did that correlate with your burn rate?

Henry Albrecht: We were still burning fast. We got past the million dollar mark in 2011. I think we went about a million in 2010. We raised our first institutional round in the fall of 2012. Our run rate was in the $4 million to $5 million range.

Sramana Mitra: About six years from inception, you raised your first institutional round?

Henry Albrecht: That’s correct.

Sramana Mitra: Who did you raise your institutional funding from? >>>

Building an SMB SaaS Business: Stitch Labs CEO Brandon Levey (Part 5)

Sramana Mitra: You said that until 2013, things were really cash-strapped but it sounds like you were picking up customers and that you were getting validation for your thesis at some level.

Brandon Levey: Correct. By the fall of 2011, we had about 60 customers. I think our total revenue was $500 a month. That was also when we started learning about venture capital.

August 2010 was when we did our first pitch. It was with Ann Miura-Ko, a partner at Floodgate. She’s a phenomenal woman. At that time, I think she was 8 months pregnant with her third child and she was taking this meeting as a favor. We got to the third slide on the deck. She cut me off and said, “No business has ever been able to penetrate the small SMB market. Give me an example of one that has.” I gave her of one that I thought was good. She said, “I wouldn’t exactly call that a big win.” >>>

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? >>>

Long Journey To Realize a Vision: Limeade CEO Henry Albrecht (Part 5)

Sramana Mitra: How did you finance the alpha and beta phases?

Henry Albrecht: The first funding came from my life savings of which I put in every dime. Next came friends, family, and mostly Seattle-based angel investors. In 2008 and 2009, we started to accumulate real customers. We started as a 30-person employer. Then, 100 on to 1,500. We charge a per-employee per-month fee for a couple of dollars. Even if you have a core team of five people working on this, we’re still moving a lot of money.

Sramana Mitra: How much did you put in of your own savings?

Henry Albrecht: $250,000.

Sramana Mitra: How much did you raise from friends and family? >>>

Building an SMB SaaS Business: Stitch Labs CEO Brandon Levey (Part 4)

Sramana Mitra: How many of these 300 that you talked to converted into actual customers?

Brandon Levey: Maybe one or none. This was more than two years before building the initial product. I came back from Las Vegas completely dumbfounded that this is the way the world was working. I just needed to talk to more people to find out if this was just a one-time thing or if this is the way the world was. From my perspective, the answer was this is the way the world was.

Sramana Mitra: How did you get the company going? What were the next steps besides getting your friends to move out to San Francisco?

Brandon Levey: Getting Michelle to move out was big. In the fall of 2010, a former roommate of mine was finishing his MBA. I was talking to him about what he was doing after that. Eventually, he, I, and his wife agreed that he was going to leave his full time job and come on to Stitch to help with existing customers. He joined at the end of January, 2011. >>>

Building an SMB SaaS Business: Stitch Labs CEO Brandon Levey (Part 3)

Sramana Mitra: You guys moved back to San Francisco at that point?

Brandon Levey: I was already living in the city. Michelle flew out here. She moved to Berkeley with my sister. One of my favorite stories from that year was, Michelle had no money. She would hop over the bar terminal because she didn’t have money to pay for the bar ticket. One Thanksgiving of 2010, she completely ran out of money and didn’t realize it was Thanksgiving. She went to go shopping but she had just $10 in her account. So she ate rice cakes and mustard. It’s a nice example of the hardships of early days of entrepreneurship.

Sramana Mitra: When you went to that trade show, you saw that people were taking orders on pen and papers and reconciling with Excel spreadsheets. Talk to me about who these people were who you talked to get a sense of what that opportunity was. >>>

Bootstrapping From Germany: Cleverbridge CEO Christian Blume (Part 3)

Christian Blume: What it allowed us to do was put different checkout processes. We didn’t care whether this was checkout processes built on our engine or something that we would compare against—somebody that was running on an in-house solution or an outsourced solution. We really compare how the conversion rates really evolve with the implementation of those different checkout processes. The good part about this was that our engine’s flexibility allowed us to generate much higher conversion rates. Most of the time, we came in there and we were able to bump up the bottom line revenue by, sometimes, up to 20%, which is huge.

Sramana Mitra: 20% bump-up in revenue is huge. If you don’t mind, I’m going to dig deeper. Let’s do a use case. Were you going after large e-commerce sites? What kind of sites were you going after?

Christian Blume: Our target market was never the small shareware publishers who were selling a couple of licenses on a monthly basis. We were going after those organizations who would be selling 100,000 licenses on a daily or weekly basis. It was experienced e-commerce companies. >>>