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Building a software company from scratch

By Art Reisman, CEO, CTO, and Co-founder, APconnections, Inc.

At APconnections, our flagship product, NetEqualizer, is a traffic management and WAN optimization tool. Rather than
using compression and caching techniques, NetEqualizer analyzes connections and then doles out bandwidth to
them based on preset rules. We look at every connection on the network and compare it to the overall trunk size to
determine how to eliminate congestion on the links. NetEqualizer also prevents peer-to-peer traffic from slowing
down higher-priority application traffic without shutting down those connections.

When we started the company, we had lots of time, very little cash, some software development skills, and a
technology idea. This article covers a couple of bootstrapping pearls that we learned to implement by doing.

Don't be Afraid to Use Open Source

Using open source technology to develop and commercialize new application software can be an invaluable
bootstrapping tool for startup entrepreneurs. It has allowed us to validate new technology with a willing set of early
adopters who, in turn, provided us with references and debugging.

We used this huge number of early adopters, who love to try open source applications, to legitimize our application.
Further, this large set of commercial "installs" helped us ring out many of the bugs by users who have no grounds to
demand perfection.

In addition, we jump-started our products without incurring large development expense. We used open source by
starting with technology already in place and extending it, rather than building (or licensing) every piece from scratch.

Using open source code makes at least a portion of our technology publicly available. We use bundling,
documentation, and proprietary extensions to make it difficult for larger players to steal our thunder. These will
account for over half of development work but can be protected by copyright.

Afraid of copycats? In many cases, nothing could be better than to have a large player copy you. Big players value time
to market. If one player clones your work, another may acquire your company to catch up in the market.

The transition from open source users to paying customers is a big jump, requiring traditional sales and marketing.
Don't expect your loyal base of open source beta users to start paying for your product. We use testimonials from this
critical mass of users to market to paying customers who are reluctant to be early adopters (see below).

Channels? Use Direct Selling and the Web

Our innovation is a bit of a stretch from existing products and, like most innovations, requires some education of the
user. Much of the early advice we received related to picking a sales channel. Just signup reps, resellers, and
distributors and revenues will grow.

We found the exact opposite to be true. Priming channels is expensive. And, after we pointed the sales channel at
customers, closing the sale and supporting the customer fell back on us anyway. Direct selling is not the path to
rapid growth. But as a bootstrapping tool direct selling has rewarded us with loyal customers, better margins, and
many fewer returns.

We use the Internet to generate hot leads, but we don't worry about our Google ranking. They key for us is to get every
satisfied customer to post somethig about our product. It probably hasn't improved our Google ratings but customer
comments have surely improved our credibility.

Honest postings to blogs and user groups have significant influence on potential customers. We explain to each
customer how important their posting is to our company. We often provide them with a link to a user group or
appropriate blog. And, as you know, these blogs stay around forever. Then, when we encounter new potential
customers, we suggest that they Google our "brand name" and blog, which always generates a slew of believable
testimonials. (
Check out our Web site to see some of the ways they use testimonials.)

Using open source code and direct sales are surely out-of-step with popular ideas for growing technology
companies, especially those funded by equity investors. But they worked very well for us as we grew our company
with limited resources to positive cash flow and beyond.

For more news, click here for the archives.
 
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