Bootstrapping Products with Services

5/13/13Follow @sramana

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pioneered a low-cost gigabit optical link that made optical drives more affordable. By 1994, their product had changed the fiber channel standard, and sales of their optical components doubled every year after that for seven years in a row.

Even while Finisar was taking off, the company remained fully self-funded. Jerry and Frank bootstrapped Finisar for the first 10 years of its existence and received no outside funding until 1998. In 1998, they were approached by TA Associates and Summit Partners, two private equity firms who bought 20 percent of Finisar in anticipation of an IPO. Jerry estimates that the company’s sales pre-IPO were in the $30 million range in 1998 and, by the time the company went public in 2000, sales were around $67 million. Finisar went public at $19 and closed the first day of trading at $86.

Optical communications components and sub-systems, for all practical purposes, are considered to be extremely capital intensive. Yet, Frank and Jerry, obviously, managed to bootstrap their venture using services almost all the way to an IPO.

Each of the four companies I have introduced you to bootstrapped to profitability via services. Not only is this a viable method of getting your startup off the ground, it’s a proven method of reaching profitability, as well. In some cases, it can take you to the enviable position of having Sequoia Capital knock on your door. In other cases, you could even have investment bankers come calling, wanting to take you public, and a whole slew of late-stage funds wanting to shower you with funds.

All those are desirable outcomes!

Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. She is a Silicon Valley entrepreneur and strategy consultant, she writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020. From 2008 to 2010, Mitra was a columnist for Forbes. As an entrepreneur CEO, she ran three companies: DAIS, Intarka, and Uuma. Sramana has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Follow @sramana

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  • http://www.facebook.com/jtstine Johnny T Stine

    Biotechs can do this too. For example…. North Coast Biologics discovers therapeutic antibodies for out license, but provides the technology as a service for antibody discovery and generation to pay the bills. I wish I had $15M in revenue by now, but a few hiccups here and there in our growth since ’08 slowed that trajectory a bit……but we are getting closer to that.