Bootstrapping Startups through Contract Work
AccelerEyes is a bootstrapped startup, with revenues over $1 million and less than $10 million. When we founded the company in 2007, everyone was telling us to raise money or asking us if we’d raised money yet. It was unheard of that you could actually build a startup without equity financing.
However, we looked at the history of outcomes for VC-backed startups in our market and were not impressed. It seemed that the VC model for software acceleration tool providers was not a good fit for us. We knew we would have a better outcome if we could both control the trajectory of the business and also retain high percentage equity.
So that left us with a dilemma: How do we pay ourselves while we are building our product?
To complicate things, of all the non-healthcare startups I know, there is not a single one that has had to build such a massively complex product before it could become minimally viable. This is largely due to the fact that we sell to some of the most advanced software developers and engineers in the world, and they have a very high-bar for purchasing a software tool.
It took us nearly 2 years (from 2007 to beginning of 2009) with 4 founders to produce our first commercial product. We did an alpha in 2007 and a beta in 2008 which were both too feature, performance, and stability deficient to sell.
In the end, we survived by starting two companies at the same time: AccelerEyes and DivEyes. DivEyes did contract work for a medical research lab at Emory University building custom software. That project paid $52,500 in 2007 and $157,500 in 2008. Two of our four founders spent most of their time building DivEyes, while the other two worked on AccelerEyes. The two founders working on DivEyes shared their income with the two founders working on AccelerEyes.
A secondary benefit of this approach was that we had two companies baking simultaneously. At the time, we didn’t know which company was going to be more successful. Ultimately, DivEyes was unable to scale its product from the Emory client out to other research labs and died. But by that time, AccelerEyes was ready to go to its first v1.0 commercial release.
On Jan 26, 2009, we released v1.0 and immediately started selling to our beta customers. Our first sale was the same day we opened our commercial doors and received a $2,400 order from the CDC in Atlanta. That kicked off a great first year of revenue leading to $300,000 in 2009 from product sales.
How have you survived financially in the early days of your startup? Have you done contract work, won grants, or used your savings account to weather the tough initial days?