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Zero to IPO by Frederic Kerrest: 5 Key Tips For Bootstrapping

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    Zero to IPO Book - Frederic Kerrest

    Zero to IPO by Frederic Kerrest

    The following is an excerpt from Frederic Kerrest’s newest book Zero to IPO: Over $1 Trillion of Actionable Advice from the World’s Most Successful Entrepreneurs. Fred cofounded Okta, a publicly traded software company now valued at over $40 billion. In Zero to IPO, he has collected a trove of nitty-gritty tips for each stage of a company’s growth and assembled them into a clear blueprint for how to build a business. Organized by topic in roughly the order that leaders will encounter them as they scale their businesses, this book is the ultimate guide to taking a company all the way from founding to IPO-and beyond. The following is an except from his book that Jordan Thibodeau has asked Fred to share with us.

     


     

    In Defense of Bootstrapping
    Because venture money isn’t always the solution.

     

    The Start Up: Medallia

    Amy Pressman and her husband and cofounder, Borge Hald, didn’t plan on bootstrapping Medallia, the startup they founded in 2001. Like most new companies in the heady days of the late dot-com boom, they envisioned fueling their business with venture capital. But then 9/11 hit. Medallia had been created to give brands real-time insight into their customers’ experience, and hospitality was one of their first target industries. The terror attacks all but shut down that sector, while also obliterating the venture markets. “9/11 took all the air out of the internet bubble,” Amy says.

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    They were forced to get very lean very fast. “We’d sold our house, and we were living off our savings,” Amy adds. Everything had to be scaled back: the size of the product, their staff, their operating costs.

     

    The Silver Lining

    The enforced scrappiness ended up having a silver lining: Medallia built enough traction with customers to survive on its own for 10 years. Along the way, Amy discovered something that’s not always widely understood in the startup world—selling to customers took the same amount of time as pitching investors. And after a sale, they still owned as much of the company as when they’d started, which would not have been the case if they’d been getting their money from VCs.

    Medallia only turned to the capital markets in 2011, when the emergence of social media meant they had to rapidly expand their product in new directions. By then, the company was doing so well, they ended up getting term sheets from five of the six firms they pitched, giving them a lot more leverage to gain favorable terms. In 2021, the company was sold for $6.4 billion.

     

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    Key Tips for Bootstrapping

    Here are Amy’s five key tips for bootstrapping:

    1. Find prospective customers who are really into what you’re doing. “If you can’t do that, then you probably need to find a new business.”
    2. Stay close to your customers to learn not just what they need but what they’re willing to pay. “You don’t want to spend a ton of time on products that people don’t really want to pay for.
    3. Know that overseas developers can lower your costs, but it helps if you have local knowledge. Medallia worked with teams in Norway (where Borge is from) and Argentina (where their head of engineering was from).
    4. Expect to still face competition when hiring overseas, especially from big companies like Google and Facebook. You won’t be able to compete with them on salary, but you can compete on the quality of work you offer. At the big companies, overseas developers rarely get the juicy projects. But at your company, they will be integral to the main efforts.
    5. Get creative when hiring locally. Medallia found great hires among women returning to work after having children, veterans getting out of the military, and spouses of international graduate students, who often have work permits.
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    If you like this excerpt, we highly recommend that you purchase Fred’s excellent book, Zero to IPO: Over $1 Trillion of Actionable Advice from the World’s Most Successful Entrepreneurs

    Check out the other parts of this series in our blog:

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