Businesses Shouldn't Need To Raise Money
ZOHO, an Indian technology company with 8000 employees just set up their first Canadian office in Montreal. Zoho's largest investment into Canada will soon be a data center. There first two employees in Montreal are tasked with finding the right location for the data center. A data center located in Canada is a requirement under federal law. Its purpose is to ensure that technology companies do not export customer data to other countries.
Announced at the Zoho Conference on November 6, 2019 in Toronto, ZOHO is trying to decide between building out a new data center in the Middle East or Canada. The Toronto Zoholics conference has grown from 150 attendees to 500 this year. They now have 20,000 customers in Canada. This rapid growth has encouraged the Indian company to put more money into developing their Canadian market.
Only a month ago, Zoho hired their first two employees in Montreal and put them in a temporary office space in a Regus office. One of the main tasks of these employees are to evaluate the right space for the data center.
ZOHO Is Against Investors
ZOHO is bootstrapped and has no plans for an IPO. In speaking with Raju Vegesna, Chief Evangelist at ZOHO, he said that raising money from investors puts a company in a conflict of interest. Being bootstrapped is the right way to do business if you are in it for the long term. Investors are in it for a quick exit and often don't care about long term growth.
Back when ZOHO was starting in the late 90s, they didn't have money, and no investors were interested in them. Their products were not sexy, and they didn't have a take over the world mindset. Instead, the company focused on building the best product they could.
There product was something very niche. It was a small probe that goes into printers to tell you when you are out of paper. It was a very small niche, and a potential investor once asked them what the size of their market was. The response was only $30 million. Needless to say, the investor was not interested. The investor said, why are you even trying?
Start At The Start
But the way that Raju saw it was it was a step in the right direction. You have to start somewhere. In the late 90s there weren't many people willing to invest in them. And they didn't want to wait around for an investor, they wanted to get going.
Instead, they were frugal and always remained debt free. 10 years later when their company had greatly grown, venture capitalists became interested in them. But by that time, it was too late. ZOHO no longer needed money.
When the venture capitalists approached them, they wanted to see a timeline. But ZOHO didn't have one, they wanted to continue creating great products for as long as they could.
Bootstrapping Isn't For Everyone
While I understand the ZOHO culture, I think they will have a lot of challenges up against other companies that have access to cheap cash. Canadian company Clio, which has many competing products with ZOHO, just raised $333M dollars. Clio will be able to build a strong brand quick due to their massive marketing spend and large account representative team.
For this reason, my law firm is raising capital (https://clearwaylaw.com/investing-in-law-firms/). We don't want to save up $1.5M in after tax profit, it will simply take too long. We want to raise money to be able to quickly out market other law firms. Also, we would be able to hire a sales team, and customer service teams. It's not that we want a quick exit, we just want to build a strong company as soon as possible.