1M/1M Strategy Roundtable: Bootstrapping Comes in Many Flavors
Recap of the 21 October 2010 roundtable by Sramana Mitra
At today’s roundtable, we had some very interesting discussions on creative bootstrapping. I am always fascinated by how innovative entrepreneurs get when faced with resource crunches.
First up today was Justin Beck with PerBlue, a mobile and social gaming company that makes the iPhone and Android game Parallel Kingdom that has been in the market for a couple of years. PerBlue develops and markets its own game, and today, is at about a $35-40k per month run rate from 200,000 users.
Justin is looking for a more efficient customer acquisition model, and my suggestion to him was to look into using distributors, instead of trying to do all the development and then also all the distribution himself. With limited resources, this is a tall order, and it seemed to me that Justin’s heart really is in the creative.
One of the members of the audience asked a question: Is the gaming space too crowded? Well, yes, and no. Is the movie business too crowded? Is the book business too crowded? Yes, but various titles find various kinds and sizes of audience still, and I believe that gaming will go the same way. Today, I think gaming is still in its infancy. I talked about the lack of interesting stories in games today … something that could add a much more sophisticated dimension to games.
Then Aaron Dormer presented Social Affect, an Australian company trying to help retailers provide e-commerce solutions. Aaron’s business concept assumes that Australian retailers who have not really adopted e-commerce much yet, will essentially outsource their online storefront to Social Affect. Aaron wants to provide the service on commission, and assumes that the retailers will do the pick-pack-and-ship.
I think both assumptions have problems: commission-only is a dangerous game. How is Aaron going to cover his substantial costs? And retailers without adequate skin in the game may not have enough incentive to make this a success.
Finally, I am queasy about the assumption that retailers will fulfill their part on the merchandising and logistics side adequately, because other than catalog companies, most retailers do not have the infrastructure to service consumer orders – packing, shipping, inventory management.
Trinity Business Solutions
Next Laval Bhatt with Trinity Business Solutions discussed his fledgling consulting company in India offering business requirements analysis and a set of other services to IT consulting companies and a variety of other segments. Laval is a good business analyst and has so far been “leasing himself” to do this work for certain clients. He is thinking about other services, including corporate training, and he is also looking at multiple international geographies. Finally, he is wondering if he can raise money for this venture.
Well, investors do not fund consulting companies, so this business will need to be built organically. The summary of my advice to Laval was: Do not spray and pray. You cannot scale this business by being so all over the place. Choose one segment, one service, and one geography.
Vinod Soman then discussed D-Logic Inc. Vinod wants to raise a significant amount of money to buy out an IP vendor that sells semiconductor interconnect IP, and offer value added services around them. The IP vendor does about $2-3M/quarter, but the market leader is EDA giant Synopsys.
In my opinion, EDA is not a space that can attract investment today. The TAMs are much too small, and the M&A activity is very small. I recently wrote an article on this topic, calling all EDA entrepreneurs to build $5-$10-$20M cash businesses that are self-financed, bootstrapped, and built organically. Read EDA Entrepreneurs: Build To Enjoy.
I also advised Vinod to look at the NimSoft case study in which the entrepreneur Gary Read started off as a VAR and eventually bought the company whose product he was reselling. Read Creative Bootstrapping to a $350 Million Exit.
About Online Strategy Roundtables
I started doing my free Online Strategy Roundtables for entrepreneurs in the fall of 2008. These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million (1M/1M). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. In 1M/1M, I teach the EJ methodology, which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures. In addition, we are offering entrepreneurs access to investors and customers through our 1M/1M Incubation Radar series. You can pitch to be featured on my blog following these instructions.
About Sramana Mitra
Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies, writes a business blog, Sramana Mitra On Strategy, and runs the 1M/1M initiative. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her Entrepreneur Journeys book series, Entrepreneur Journeys, Bootstrapping: Weapon Of Mass Reconstruction, Positioning: How To Test, Validate, and Bring Your Idea To Market and her latest volume Innovation: Need Of The Hour, as well as Vision India 2020, are all available from Amazon