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Watt Factory: Bootstrapping your business

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Slides to be presented at Watt Factory on May 29th.

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Watt Factory: Bootstrapping your business

  1. 1. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business Bruno Lowagie, Founder/CTO iText Group Watt Factory, May 29, 2017
  2. 2. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Why are you an entrepreneur? Bootstrapping your business2 This was my reason: I didn’t really wanted to start a business, I wanted to right a wrong about PDF.
  3. 3. © 2017, iText Group NV, iText Software Corp., iText Software BVBA iText, PDF technology since 2000 Bootstrapping your business3
  4. 4. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Making money? To me, that’s like playing a game of American Football Bootstrapping your business4
  5. 5. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business5 Seedtime: 2000-2007 Developer facing three open source challenges: Open source is not documented The IP of open source isn’t clear Open source isn’t backed by a company
  6. 6. © 2017, iText Group NV, iText Software Corp., iText Software BVBA 2004: Free Online tutorial Bootstrapping your business Free online tutorial: • Google AdSense • 2004: $8,900 • 2005: $14,500 • 2006: $6,200 • 2007: $2,350 • 2008: $1,900 • 2009: $1,500 • 2010: $280 • 2011: $520 • 2012: $350 • 2013: $160 6
  7. 7. © 2017, iText Group NV, iText Software Corp., iText Software BVBA 2006 / 2009: iText in Action books Bootstrapping your business 1st Edition: 2006 • 11.600 copies • Approx. $33K 2nd Edition: 2010 • 9.200 copies • Approx. $30K 7
  8. 8. © 2017, iText Group NV, iText Software Corp., iText Software BVBA 2006-2007: IP Review Bootstrapping your business8
  9. 9. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA Proof that there was interest  Huge amount of web site visitors  Thousands of developers had bought the book  Large corporations asking for IP clarification / license
  10. 10. © 2017, iText Group NV, iText Software Corp., iText Software BVBA I could have raised money, but… At that time, the startup scene was inexistent in Belgium:  BizIdee jury 2006: “You will never make money with this idea!” At some point, I had a potential acquirer, but…  There was no iText company; it was just a project! What was there to sell?  Help was hard to find; eventually, I went to IBBT (iMinds). In 2007, I only talked to a single investor:  Together with Dries Buytaert (Drupal), I met Steven Coppens (GIMV)  Dries decided: I’ll go for Venture Capital,  I decided: I am going to bootstrap Getting VC money would have been hard, because I talked technology, not product:  I didn’t know that the technology was not the product,  Investors didn’t understand what was so special about the technology,  Fortunately, developers understood, but developers aren’t customers... Bootstrapping your business10
  11. 11. © 2017, iText Group NV, iText Software Corp., iText Software BVBA And also… Bootstrapping your business11
  12. 12. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business12 Growth phase: 2008-2012 Founder facing the open source challenge: How to turn an open source project into a business? How to ensure sustainable growth?
  13. 13. © 2017, iText Group NV, iText Software Corp., iText Software BVBA First company Bootstrapping your business13 January 2008: 1T3XT BVBA 8 year after initial release Combined the company with a day job Transfer of the IP (CLAs) After an IP project with IBM in 2007 No success in business: Son diagnosed with Cancer EU companies didn’t understand open source ≠ gratis I discovered that developers can be mean…
  14. 14. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Rebooting the business in the US Bootstrapping your business14 February 2009: iText Software Corp. (ISC) incorporated in California Founded by a friend, Andrew Binstock 1st sale: The Hartford (CT), insurance company 2nd sale: Charles Schwab (CA), bank Sales people on commission 30% on every sale If they didn’t sell anything, they didn’t get paid December 2009: license change AGPL
  15. 15. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Importing the US success into Europe Bootstrapping your business15 2010: Bruno Lowagie fulltime at iText: iBoot (iMinds) helped me make the decision: “needs funding to grow faster.” I got a second offer to sell the company: $1.5M distributed over 4 years *LOL*! August 2011: iText Software BVBA (ISB) First employee on payroll August 2013: Office in Cambridge, MA Sales people on payroll in the US April 2015: iText Software Asia Pte. Ltd. (ISA)
  16. 16. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA Going to the next level  Option 1: Milk it  Option 2: Pedal to the Metal  Option 3: Drive it
  17. 17. © 2017, iText Group NV, iText Software Corp., iText Software BVBA I could have raised money, but… We didn’t need any money:  iText had been profitable for several years in a row,  We had millions in the bank. I chose the “Drive It” strategy:  I asked VCs: what would you do for us if we worked together?  I made a list of all the responses, and changed it into a priority list.  We realized a mini-exit (cashed about 2M€):  We changed 1T3XT BVBA into iText Group NV, and  We sold ISB and ISC to iText Group NV (reduce the risk with 2M€). We made the decision to prepare for an exit:  We knew we could grow to a $100M valuation  We had our own valuation in mind (between $20M and $30M)  Do we want 25% of $100M? But what if the VC screws up?  Or do we want 100% of $25M? But what if we screw up?  We preferred the risk screwing up ourselves ;-) Bootstrapping your business17
  18. 18. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business18 Harvest time: 2013 – 2015 2014 ING, Brussels
  19. 19. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Further growth Bootstrapping your business19 2011 2012 2013 2014 2015 2016 Revenue 1.4M€ 3.1M€ 4.5M€ 4.9M€ 6.5M€ 8.1M€ EBITDA 504K€ 1.4M€ 2.6M€ 2.3M€ 2.3M€ 3.4M€ Growth 117.9% 44.6% 8.9% 32.4% 24.6% Transition Year • From BVBA to NV • Install a Board of Directors • New accountants (BE GAAP) • Commisions vs. Discount • Human Resources Made a decision: • Eventually we want to sell the company. • How do we prepare the company to attract a buyer?
  20. 20. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business20 December 2015: exit Mobile World Congress, Barcelona, Spain
  21. 21. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA What’s next for iText?  Short-term goal: exceed the $10M threshold,  Create a strategy to a justify a $100M valuation,  Prepare the company for an IPO to support further growth.
  22. 22. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA What’s next for us?  Sitting on the “other side” of the table: Limited Partner,  Ingeborg: catching up on “lost time”,  Bruno: 3 year commitment ; increase the value of the 23.6%
  23. 23. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business23 We’ve bought a new garage
  24. 24. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Nobody tells you, but it’s implied: Bootstrapping your business24 Sorry, I just have told you this at the start of my talk… However: I also told you to gain ground yard by yard.
  25. 25. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA Contact info  Twitter: @bruno1970  Company: itextpdf.com  Mail: bruno.lowagie@itextpdf.com
  26. 26. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA Three Things Watching House MD Taught Me About Doing Business Bruno Lowagie, Founder/CTO iText Group Watt Factory, May 29, 2017
  27. 27. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Fact #1 Bootstrapping your business27 There are as many diagnoses as there are specialists. The developers say: “Your product needs more features!” The salespeople say: “Your product needs to be less technical!” The VCs say: “You need more funding to grow faster!”
  28. 28. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Conclusion #1 Do not follow any advice, before you know the background and motives of your adviser! Bootstrapping your business28
  29. 29. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business29 Fact #2
  30. 30. © 2017, iText Group NV, iText Software Corp., iText Software BVBA The Four Innovation Lies Lie #1: Target customer: “Of course I’ll buy that!” Lie #2: Product developer: “We’ll be ready to ship in six months!” Lie #3: Salesperson: “Of course I can sell that!” Lie #4: Senior executives: “We’re open to anything!” Bootstrapping your business30
  31. 31. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Conclusion #2 Don’t be angry with people who lie, just make sure you don’t lie to yourself! Bootstrapping your business31
  32. 32. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business32 Fact #3 Tests take time, treatment is quicker. We treat it: If he gets better, I’m right; if he dies, you’re right!
  33. 33. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Conclusion #3 The treatments don’t always work, but symptoms never lie! Bootstrapping your business33
  34. 34. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business34 And remember: You don’t always get what you want, But if you try sometimes you get what you need…
  35. 35. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA The Founder’s Dilemmas by Noam Wasserman Bruno Lowagie, Founder/CTO iText Group Watt Factory, May 29, 2017
  36. 36. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Why this book? Bootstrapping your business36 IT’S UNFORTUNATE BUT TRUE: IF ENTREPRENEURSHIP IS A BATTLE, most casualties stem from friendly fire or self-inflicted wounds.
  37. 37. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Making decisions Cofounders (Chapter 3-7) Solo vs. Team Relationships Roles Rewards Hires (Chapter 8) Relationships Roles Rewards Investors (Chapter 9) Self-fund vs. Outside capital Sources of capital Terms Board of Directors Successors (Chapter 10) Trigger of succession Openness to succession Desired role after succession Other factors Preferred rate of startup Capital intensity Core founder’s capitals Bootstrapping your business37
  38. 38. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Pick your Quadrant Bootstrapping your business38 Complete control < $$$ Little control > $$$
  39. 39. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Control decisions Cofounders (Chapter 3-7) Solo (or weak cofounders) Relationships: immediate circle Roles: be the CEO Rewards: maintain most equity Hires (Chapter 8) Relationships: close personal network Roles: keep control of key decisions Rewards: hire less expensive juniors Investors (Chapter 9) Self-fund: “bootstrap” Friends, fools, family Resist investor-friendly terms Avoid official board Successors (Chapter 10) Avoid succession until forced Resist giving up CEO position Prefer to leave Other factors Gradual to moderate growth Low capital intensity Can build startup without help Bootstrapping your business39 Most likely outcome: • Maintain control • Build less value “KING”
  40. 40. © 2017, iText Group NV, iText Software Corp., iText Software BVBA The “King” Quadrant Bootstrapping your business40 Complete control < $$$ Little control > $$$ KING
  41. 41. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Control decisions Cofounders (Chapter 3-7) Build team Relationships: find the best founders Roles: delegate decision-making Rewards: share equity Hires (Chapter 8) Relationships: hire experienced staff Roles: delegate decision-making Rewards: incent with cash or equity Investors (Chapter 9) Take outside capital Target angels or VCs Be open to terms Be open to losing control Successors (Chapter 10) Initiate succession “in time” Be open to giving up CEO position Remain executive (expertise) Other factors Fast to explosive growth High capital intensity Fill gaps by involving others Bootstrapping your business41 Most likely outcome: • Imperil control • Build financial value “RICH”
  42. 42. © 2017, iText Group NV, iText Software Corp., iText Software BVBA The “Rich” Quadrant Bootstrapping your business42 Complete control < $$$ Little control > $$$ KING RICH
  43. 43. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Chances at success If you go for being King Maintain control: 80% x 80% x 80% = 51% probability Build fullest value: 20% x 20% x 20% = 1% probability If you go for being Rich Maintain control: 20% x 20% x 20% = 1% probability Build fullest value: 80% x 80% x 80% = 51% probability If you go for something in-between Maintain control: 80% x 80% x 20% = 13% probability Build fullest value: 20% x 20% x 80% = 3% probability Bootstrapping your business43
  44. 44. © 2017, iText Group NV, iText Software Corp., iText Software BVBA The “Exception” Quadrant Bootstrapping your business44 Complete control < $$$ Little control > $$$ KING RICH EXCEPTION
  45. 45. © 2017, iText Group NV, iText Software Corp., iText Software BVBA The “Failure” Quadrant Bootstrapping your business45 Complete control < $$$ Little control > $$$ KING RICH EXCEPTION FAILURE
  46. 46. © 2017, iText Group NV, iText Software Corp., iText Software BVBA Bootstrapping your business46 Conclusion If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them. Henry David Thoreau, “Walden; or, Life in the Woods” (1854)
  47. 47. © 2017, iText Group NV, iText Software Corp., iText Software BVBA© 2017, iText Group NV, iText Software Corp., iText Software BVBA Contact info  Twitter: @bruno1970  Company: itextpdf.com  Mail: bruno.lowagie@itextpdf.com

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