4 ms·

But Zoho, a company based in Pleasanton, Calif., that offers similar services, is solidly profitable, with revenue of more than $50 million a year. And it has n

But Zoho, a company based in Pleasanton, Calif., that offers similar services, is solidly profitable, with revenue of more than $50 million a year. And it has never taken a cent in venture capital or bank loans. I would love to hear from someone more in the know on how Zoho was able to pull this off. Conventional wisdom seems to be that bootstrapping a product company to tens of millions is near-impossible. Is Zoho just a random aberration or do they offer lessons to others trying to do the same?

inovica 17y ago
I think the problem these days is that there is a lot of talk, on sites such as this, that VC is the way to go. I don't think that Zoho are unique in being able to do this - I think with software/web there are a good number of companies that have managed to quietly build their business and get great revenues.
- SamAtt 17y ago
  I could be wrong but I suspect most small companies in the United States are funded by business loans not VCs. If you have decent credit and real faith in your idea it makes sense not to give the valuable shares away.
  - eru 17y ago
    And if you do not need millions of dollars.
- webwright 17y ago
  Zoho quietly did it by getting funding from a source other than VCs. Growth like this generally requires cash.
  - ryanwaggoner 17y ago
    Zoho quietly did it by getting funding from a source other than VCs. Source? Or is this just conjecture on your part?
    - sridharvembu 17y ago
      I think he meant funding from already profitable products. If that is what he meant, that is true. Zoho quietly got funding from our own earlier products, which got funding from our even earlier products, and so on, until we reach http://www.webnms.com/snmp/ http://www.webnms.com/snmp/ which was bootstrapped ... :-)
      - webwright 17y ago
        Right-o. Not meant to be derogatory. It's a great story. It's just a helluva lot LONGER story than most people make it out to be. Funding (in times of success) is an accelerant. Zoho had funding, which fueled growth. It wasn't VC funding, but cash is cash. I'd MUCH rather take cash from previous successes (and have in the past) than from VCs, but it's not entirely true to look at Zoho as a bootstrapped business, especially if you're thinking of it as a model. VC funded businesses are a long road. Bootstrapped businesses are a much longer road.
deleted 17y ago
[deleted]
randomwalker 17y ago
One thing Zoho does very differently is "outsourcing." I put that word in quotes because Zoho is partly based in Chennai, India, where I believe the CEO Sridhar is from. In fact the majority of the employees are based there, which keeps cost way down. Now, they don't treat their Chennai office as a second-rate sweatshop to whom you parcel off grunt work and forget about it. That is a recipe for disaster. At the same time, they are very open about the fact that CS education/programming skills in India aren't nearly as good as in the U.S. So what do they do? They train their Indian programmers in house for 9 months. You can definitely take smart people without a great educational background and bring them up to speed if you're prepared to do that. Sridhar is http://news.ycombinator.com/user?id=sridharvembu http://news.ycombinator.com/user?id=sridharvembu, hopefully he can give us more details and correct me if I've gotten anything wrong.
- zhyder 17y ago
  A better term for what Zoho does is "offshoring". Outsourcing and offshoring are orthogonal. It's only when the two go together that you get sweatshops.
  - sharpn 17y ago
    Good point. I like the term 'smart-sourcing' - having a presence 'on-shore' & 'off-shore' & having the customer-relationship stuff done near the customer (on-shore) & the non-relationship stuff wherever's best (sometimes, but not always 'off-shore).
  - sridharvembu 17y ago
    An even better term for us is "and Indian company with an American HQ" - in early days due to foreign exchange restrictions in India, it was painful to have the HQ in India. Increasingly that has faded as India has liberalized. We just imported a ton of Macs for our development team in Chennai; 10 years ago that would have sucked, now it is easy.
    - eru 17y ago
      So with enough liberalizing (and perhaps more Indian customers) the American HQ might move to India?
markbao 17y ago
Because it was created under the server/network enterprise IT management company AdventNet (which now changed its name to Zoho Corp., and AdventNet's stuff is now under ManageEngine.) So basically, some intrapreneurship happened, funded by the company. The CEO's on here, so he probably can give you a better idea.
aditya 17y ago
Zoho grew out of parent AdventNet (now Zoho Corp) which has been around 13+ years. They became successful selling server and network management software and then started up multiple divisions of which Zoho is the most recent (and glamorous). More here: http://blogs.zoho.com/general/so-whats-in-it-for-zoho http://blogs.zoho.com/general/so-whats-in-it-for-zoho
vchakra 17y ago
The statement is misleading, because it does not provide the revenue splits. My assumption is that the Zoho side of the business (web 2.0) is responsible for less than 10% of that money, if that. Also its easy for a particular part of the business to be the fastest growing business if it starts out close to zero. I'm not trying to put down what Zoho has accomplished (brand awareness in a crowded field, as well as competing with the big boys), but merely point out that people should not assume that they are making a ton of money on their web 2.0 stuff.
senthil_rajasek 17y ago
perhaps this post by Sridhar would throw some light as well... http://blogs.zoho.com/uncategorized/why-we-compete-with-google http://blogs.zoho.com/uncategorized/why-we-compete-with-goog...

inovica 17y ago

I think the problem these days is that there is a lot of talk, on sites such as this, that VC is the way to go. I don't think that Zoho are unique in being able to do this - I think with software/web there are a good number of companies that have managed to quietly build their business and get great revenues.

SamAtt 17y ago
I could be wrong but I suspect most small companies in the United States are funded by business loans not VCs. If you have decent credit and real faith in your idea it makes sense not to give the valuable shares away.
- eru 17y ago
  And if you do not need millions of dollars.
webwright 17y ago
Zoho quietly did it by getting funding from a source other than VCs. Growth like this generally requires cash.
- ryanwaggoner 17y ago
  Zoho quietly did it by getting funding from a source other than VCs. Source? Or is this just conjecture on your part?
  - sridharvembu 17y ago
    I think he meant funding from already profitable products. If that is what he meant, that is true. Zoho quietly got funding from our own earlier products, which got funding from our even earlier products, and so on, until we reach http://www.webnms.com/snmp/ http://www.webnms.com/snmp/ which was bootstrapped ... :-)
    - webwright 17y ago
      Right-o. Not meant to be derogatory. It's a great story. It's just a helluva lot LONGER story than most people make it out to be. Funding (in times of success) is an accelerant. Zoho had funding, which fueled growth. It wasn't VC funding, but cash is cash. I'd MUCH rather take cash from previous successes (and have in the past) than from VCs, but it's not entirely true to look at Zoho as a bootstrapped business, especially if you're thinking of it as a model. VC funded businesses are a long road. Bootstrapped businesses are a much longer road.

deleted 17y ago

[deleted]

randomwalker 17y ago

One thing Zoho does very differently is "outsourcing." I put that word in quotes because Zoho is partly based in Chennai, India, where I believe the CEO Sridhar is from. In fact the majority of the employees are based there, which keeps cost way down. Now, they don't treat their Chennai office as a second-rate sweatshop to whom you parcel off grunt work and forget about it. That is a recipe for disaster. At the same time, they are very open about the fact that CS education/programming skills in India aren't nearly as good as in the U.S. So what do they do? They train their Indian programmers in house for 9 months. You can definitely take smart people without a great educational background and bring them up to speed if you're prepared to do that. Sridhar is http://news.ycombinator.com/user?id=sridharvembu http://news.ycombinator.com/user?id=sridharvembu, hopefully he can give us more details and correct me if I've gotten anything wrong.

zhyder 17y ago
A better term for what Zoho does is "offshoring". Outsourcing and offshoring are orthogonal. It's only when the two go together that you get sweatshops.
- sharpn 17y ago
  Good point. I like the term 'smart-sourcing' - having a presence 'on-shore' & 'off-shore' & having the customer-relationship stuff done near the customer (on-shore) & the non-relationship stuff wherever's best (sometimes, but not always 'off-shore).
- sridharvembu 17y ago
  An even better term for us is "and Indian company with an American HQ" - in early days due to foreign exchange restrictions in India, it was painful to have the HQ in India. Increasingly that has faded as India has liberalized. We just imported a ton of Macs for our development team in Chennai; 10 years ago that would have sucked, now it is easy.
  - eru 17y ago
    So with enough liberalizing (and perhaps more Indian customers) the American HQ might move to India?

markbao 17y ago

Because it was created under the server/network enterprise IT management company AdventNet (which now changed its name to Zoho Corp., and AdventNet's stuff is now under ManageEngine.) So basically, some intrapreneurship happened, funded by the company. The CEO's on here, so he probably can give you a better idea.

aditya 17y ago

Zoho grew out of parent AdventNet (now Zoho Corp) which has been around 13+ years. They became successful selling server and network management software and then started up multiple divisions of which Zoho is the most recent (and glamorous). More here: http://blogs.zoho.com/general/so-whats-in-it-for-zoho http://blogs.zoho.com/general/so-whats-in-it-for-zoho

vchakra 17y ago

The statement is misleading, because it does not provide the revenue splits. My assumption is that the Zoho side of the business (web 2.0) is responsible for less than 10% of that money, if that. Also its easy for a particular part of the business to be the fastest growing business if it starts out close to zero. I'm not trying to put down what Zoho has accomplished (brand awareness in a crowded field, as well as competing with the big boys), but merely point out that people should not assume that they are making a ton of money on their web 2.0 stuff.

senthil_rajasek 17y ago

perhaps this post by Sridhar would throw some light as well... http://blogs.zoho.com/uncategorized/why-we-compete-with-google http://blogs.zoho.com/uncategorized/why-we-compete-with-goog...