Editors note: We wrote this article about a year ago before the blog was established. Although this article chronicles the model used to bootstrap the NetEqualizer from open source, the basic formula applies to any aspiring open source developer.
When we started the APconnections (APconnections makes the popular bandwidth shaping tool NetEqualizer), 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 torapid growth. But as a bootstrapping tool direct selling has rewarded us with loyal customers, better margins, andmany fewer returns.
We use the Internet to generate hot leads, but we don’t worry about our Google ranking. The key for us is to get every satisfied customer to post something 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 we 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.




NetEqualizer the Safe Bet for Optimizing Internet Link During Economic Downturn
September 25, 2008 — netequalizerWe just announced a record profit for the quarter ending September 2008. I have included a copy of that announcement below.
Although we do not believe (or want to see) our success come at the expense of other players in the market, there is a strong contrast if you compare our performance to the higher-cost publicly-traded players in this market (see charts below).
I suspect these high-end shapers with expensive sales channels may have trouble in this slowing market as they come under price pressure. IT departments continue to cut costs and the main play of optimization products, reducing ROI, will lose some luster as Internet costs slowly fall. At some point, a high-end piece of equipment will lose out to adding more bandwidth.
NetEqualizer, on the other hand, is priced so much lower than these other products that our window of value will extend out at least another 10 years — perhaps more.
Although we are private company, we would be happy to share financials under NDA with any customer that has concerns going forward. We have plenty of operating cash on hand and will likely expand as we pull out of this downturn and customers continue to look to reduce costs.
Stock charts for major players in the Internet/WAN optimization market
http://finance.yahoo.com/q/bc?s=RVBD&t=1y
http://finance.yahoo.com/q/bc?s=ALLT&t=2y&l=on&z=m&q=l&c=
http://finance.yahoo.com/q/bc?s=BCSI&t=1y&l=on&z=m&q=l&c=
Now, here’s our latest press release reporting profits…
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APconnections Announces 50-percent Increase in Profits During Current Quarter
LAFAYETTE, Colo., Sept. 22, 2008 — APconnections, a leading supplier of plug-and-play bandwidth shaping products, today announced that sales revenues have increased by 50 percent during the current quarter.
Company officials report that APconnections is finding that a growing number of ISPs, businesses, libraries, and universities are looking to the NetEqualizer to solve their Internet bandwidth congestion issues, oftentimes switching from more expensive traffic shaping solutions.
As companies deal with the ongoing economic struggles that have hit the nation, the NetEqualizer’s rare combination of effectiveness and affordability has been a major factor fueling this growth.
Other factors driving the upturn are:
The NetEqualizer is a plug-and-play bandwidth control and WAN/Internet optimization appliance that is flexible and scalable. When the network is congested, NetEqualizer’s unique “behavior shaping” technology gives priority to latency sensitive applications, such as VoIP and email. It does it all dynamically and automatically, improving on other bandwidth shaping technology out there. It controls network flow for the best WAN optimization.
APconnections is a privately held company founded in 2003 and is based in Lafayette, Colorado.
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