Bootstrapping Products with Services
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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.
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