Bootstrapping using services/consulting and generating the flywheel effect - By Frank Levinson - Small World Group at the NASSCOM Product Conclave 2010
“Bootstrapping using services/consulting
and generating the flywheel effect”
Some stories, some advice
Frank H. Levinson, PhD
Small World Group Incubator PTE LTD
16 Nanyang Dr., Innovation Center #01-110, Singapore 637722
+65 9118 2794 www.smallworldgroup.com
First, a little history ...
by telling a few stories
Raised in Indiana, USA - a more rural state,
Worked in family business - men’s retail
clothing - business grew strongly in 1970-80s,
but failed after 90 years in 1995 due to family
and competitive issues
PhD in Astronomy in 1980
Worked for Bell Labs in ﬁber optic Frank H. Levinson, Ph.D., is the founder and
communications managing director of Small World Group an early
stage venture capital and incubator that operates
out of Singapore. From 1988 through 2008, he
Started Finisar in 1988, today is largest ﬁber was founder, CTO and chairman of Finisar
optic component supplier in the world, Corporation, today the world’s largest optical
NASDAQ listed company communications subsystems company. Frank is
an active venture investor and serves on multiple
private small company boards with focus in clean
Started Small World Group in 2006 tech and optical systems.
Today we are invested in approximately 10
The Perfect Venture – Netek
(Netek was the first company I started)
Idea --> Business Plan
Business Plan --> Venture Capital + Strategic
Partner --> Raised $2.75M for 35% all in 1984
Money --> Building, People, Activity
Grow Organization --> Management (CFO, VPs)
Disaster --> Got Fired --> Deserved it!!
With Netek, I made all the mistakes that are
possible based on Steven Blank’s business and
customer development models.
All technology was essentially the same fors
Finisar started 4 years later that was very
The Finisar Start
Didn’t like current job!
Quit but they hired me back to do contract
Had revenue of $6K in month 1, $350K in ﬁrst
No business plan. (Ever, even up to IPO)
Had 2nd customer by month 4, third by month 7.
Chose name because I worked at too many big
companies and never ﬁnished anything
Never had too much money ... just barely enough!
Today, Finisar is a NASDAQ listed company and
it is the largest ﬁber optic subsystem and
component supplier in the world.
The company operates in the USA, Malaysia,
Singapore, China, Israel, India and Australia
with sales offices everywhere.
Annual sales run rate is approaching USD $1B
When bootstrapping ...
You must have confidence you will have many great ideas
! Because you must give away some good
ideas in order to gain customers !
! Do not hold ideas too closely, it prevents
you from working on new ones
! Develop a culture where new ideas are
expected with regularity ! many good
ideas every year
! Base all business thinking and
projections on this assumption
! The lifetime - today - of even very good
ideas is probably less than 3 years. Find
ways to license others in markets you
won’t access in that time frame.
As you build experience ...
Try to see elements in the contract where you want to own
the resultant IP or some core technology or component. If
you work on systems for others can you identify pieces that
are not core for the customer but maybe for you?
We built things like these and then incorporated
elements like these into designs like this circuit
board. We were paid for the circuit board and its
elements including the VHDL on the FPGAs and
the embedded S/W.
Early Customer Interaction
Try to have customers from day 1 1
Customers are people who issue
purchase orders to you, who you then
send product and upon delivery of
product they send money in payment.
Try to work with customers and not just
interested parties - governments,
partners, etc. It is so easy to see
people with interest as customers ... 2
but many are not customers.
Customer money is the best - no
dilution, keeps company focused on
business and not science projects,
loved by VCs and other investors,
indicates you are doing something of
#1 - Venture Capital
As Steven Blank famously has stated, the VC’s goals are to make a large company so that they make
a lot of money. Their goal says nothing about your growth, inclusion long term or even your hopes.
Every VC has a time table for their investment so if you take their money remember to know when
they want it back with profit. Their timetable, their exit and return of capital for their investors may not
be the same needs as your markets and customers.
#2 - Government Money
Every government on earth today is trying to figure out how to harness the power of their entrepreneurs
to transform the country more quickly. Their main goal is to get re-elected. Take government money
only on your terms. Their KPIs may be achieved just with starting a company and have NOTHING to
do with successful growth or exits.
There is a crude, funny but all too true joke in the USA - “What are the 3 big lies? #1 - the check is in
the mail, #2 - we are from the government and we are here to help. I cannot tell you #3 but you
may seek it out on your own.
#3 - F&F Money
Family money can ruin relationships you have to live with for your whole life. You cannot fire them.
They believe in you and believe you will be the next Steve Jobs - but 80% of the time you fail ... are you
sure they are aware of this key statistic?
Choose your partners carefully. I do not recommend friends but rather colleagues. My partner for 20
years is shown above. We are totally different in so many ways. We were never close socially, but I
would still take a bullet for him. When it came time for me to leave we both knew it was time.
If you ask questions ...
There is more we can Unlock!