No More Hustleporn: Did you know that Zoho was bootstrapped???

By Yiren Lu — Jan 15, 2023

Tweet by Aleksandr Volodarsky 🇺🇦
https://twitter.com/volodarik

@volodarik:

Did you know that Zoho was bootstrapped???

Sridhar Vembu grew it to 80M+ users and $1b annual revenue without ever raising a penny. Pretty wild.

Here is what I've learned from their bootstrapping story:

@volodarik:

In 1996,

@svembu

& his co-founders used their savings to launch Advent, a network management startup.

They didn’t pay themselves until $10M+ in sales, instead invested all of it in the business.

But the 2002 dot-com bubble reduced their customers from 150 to 3.

@volodarik:

To avoid failure, Sridhar pivoted & tested different ideas.

In 2002, Advent built digital tools to help customers manage their businesses better, which helped them survive the bubble.

Similarly, it researched & launched other products.

@volodarik:

In 2009, Sridhar renamed Advent to Zoho Corp and divided the company into 3 domains:

• WebNMS: IoT platform that provides cloud solutions.

• Manage Engine: Offers Enterprise Management tools.

• Zoho: 50+ productivity tools for sales, marketing, collaboration, & more.

@volodarik:

What drives its success?

a) Clever product strategy

Zoho runs entirely on its software tools—so it builds all the products you'll need to run a company.

It’s smart because it's the first user of its software and will release only those that serve their needs best.

@volodarik:

b) Low cost

Zoho's product costs $8 versus Salesforce's $65. How it keeps the price low?

• R&D investment

It invests 60% of its profits in new projects, identifying ways to lower manufacturing costs, & build products ahead of competitors to take the bulk share of profits.

@volodarik:

• Low labor cost

Zoho runs Zoho schools—a program that trains Indian students with coding skills and then hires them.

The difference between the developer salary in the US and India is 3X-5X.

• It spends only about 5% of what its competitors do for marketing purposes.

@volodarik:

c) Freemium model

Zoho offers free editions of every product. This attracts users, & if it's good enough, they'll buy it (which is often the case).

But even if they like and still don't buy it, they will recommend it to others (of which some buy it)—generating sales.

@volodarik:

d) Unified offerings over single products

Zoho bundles its most popular products under Zoho One, which has 50K+ customers.

The bundle lowers the cost, which persuades many to buy it, ultimately increasing Zoho's revenue.

@volodarik:

How Zoho is self-sustainable?

• It didn't chase growth at all costs, hence no debt whatsoever.

• From day 1, it prioritized profits, which has helped it fund new products and increase its revenue, making it self-reliant.

@volodarik:

Why Zoho doesn't raise money?

Here's an answer from

@svembu

: "It keeps us independent and beholden to only the customer, permitting a long-term view to naturally unfold. Besides, the VCs are too exit-focused, that's an incorrect strategy for a startup."

@volodarik:

As you see, bootstrapped companies can compete with venture-backed startups and large enterprises.

While not every company can be bootstrapped due to heave R&D we, founders, should always find a way to grow by selling more.

At least, this is my fundraising strategy.

@volodarik:

That's the wrap.

If you are building something and hiring engineers, DM me. I run a marketplace of engineers in Europe and LATAM and will gladly give you a discount.

We test and interview every engineer, show you the candidates within 48 hours, and have competitive rates.

@volodarik:

If not:

1. Follow me

@volodarik

. I share everything on the way to growing to $100m/y. People say it's fun to watch.

2. RT the tweet below to share this thread with your audience.

@volodarik:

Did you know that Zoho was bootstrapped???

Sridhar Vembu grew it to 80M+ users and $1b annual revenue without ever raising a penny. Pretty wild.

Here is what I've learned from their bootstrapping story: