My Bootstrapped SaaS Company was Acquired by SurveyMonkey
L-SPARK: Can you give us a brief synopsis of who you are?
Eli: My name is Eli Fathi and I’m a serial entrepreneur. I founded my first company in 1982. Since then I have either co-founded or founded six companies, and I have had a number of successful exits.
My last exit was Fluidware Corporation, a company that I co-founded with Aydin Mirzaee, Amin Mirzaee, and Samuel Cormier-Iijima in February 2008. Over 6.5 years, we grew it to a level with successive, substantial increases in annual sales and free cash flow year over year. We were acquired by SurveyMonkey from Palo Alto in August 2014.
Can you describe establishing Fluidware and the challenges associated with starting a new SaaS company?
Eli: Aydin and I were the full time employees of the company, whereas Amin and Sam were students at McGill University. They were part-time and they were the ones that worked on the product.
The interesting thing that I like to describe in the case of us and Fluidware is that we really stumbled upon this product. We spoke to a lot of customers, asking them ‘what problem do you have?’, and as a result, they identified surveys as one of their primary needs. That is how we started our first product called FluidSurveys. This was not something we had planned; it was based on customer input.
When I look at our activity and our success, it was really all about the timing. In our case, legislation (the Patriot Act) and basically the need to have a Canadian-based technology addressing surveys for the government, impacted how we built the product. Once we succeeded in attracting government customers it was then very easy to attract other customers worldwide.
L-SPARK: In the [company’s] early days, what sort of metrics were you looking at to indicate success?
Eli: Initially, since we did not have the product ready to sell, we measured the number of customer face-to-face meetings that we had. In the early stages, we relied on customers to be our guide, because we did not have the domain knowledge.
That’s the key — when you build a SaaS product, you need domain knowledge in a certain category.
L-SPARK: When was the first iteration of the product released?
Eli: We sold our first product a year after we launched, in March 2009. It took us that long. That first quarter, in the calendar year, we sold 5 licences. We knew after the first quarter, that if you have 5 you can get 500 — it was just a question of scaling the company. At that point we still hadn’t scaled it, but we were looking to get additional customers, which we did. We got 5 to 6 customers per quarter in Year 2. And then we quadrupled again and quadrupled again. By year 4 the real explosion started to take place. And it was at that point we started to look internationally.
L-SPARK: What were the next steps for you and your co-founders?
Eli: In our case, we also had a second product that we developed in a different category — however, it was developed from an R&D perspective, not sales. Once we had established ourselves in Canada, we started to sell at the enterprise level in the US. Then we started to scale internationally and into the online world. We ended up in 60 countries around the world. We had two sets of products — a DIY online version, and the enterprise level where we had a direct sales strategy.
L-SPARK: Would you say there’s one formula for success for all SaaS companies?
Eli: The cool thing about SaaS is the customers pay for your success. We did not raise money — we were bootstrapped. We literally had the customers paying in advance and they financed the company. So with SaaS, you basically have a lot of free cash flow because the customers pay a year ahead of time.
But no, there’s no one success formula. Clearly you need a motivated team because the first year of operations is very, very tough, especially in a bootstrapped operation. You don’t have the product and you don’t have a customer base. You’re just going and talking to people in the hope that they’ll talk to you. And when you do have a product it’s not fully baked. You try to sell to interested parties that are willing to be the guinea pigs; they’re the ones that are motivated to help and they tend to be the early adopters. But once you go through that initial process you get some lead customers — that’s the key, lead customers — then you can get to the next level.