Academic journal article Journal of Critical Incidents

Serus: Continue to Bootstrap or Seek VC Funding?

Academic journal article Journal of Critical Incidents

Serus: Continue to Bootstrap or Seek VC Funding?

Article excerpt


It was 7pm on a warm and sunny Friday evening in Mountain View, California. Unaware of the glorious weather outdoors, Indu Navar and Barbara Hoefle were huddled together in the office, deep in discussion about the future of their company, which had reached a crucial crossroad. Indu reminisced about the early days of the business when they had focused on market validation, and when every sale was a huge achievement in reducing the burden on their personal finances. Now, there was a new challenge facing the company. Three years after founding Serus Corporation, the two women wondered whether or not to continue with their strategy of bootstrapping the company with some support from angel investors. Or was it time to approach venture capitalists (VCs) to help grow the company at a faster pace?

The two co-founders of Serus Corporation, a company providing supply chain management software solutions for global clients, had self-funded or 'bootstrapped' the initial stage of their start-up. They had used their experience to grow Serus with minimal external funding. Serus' sales revenues had grown steadily since start-up, as global companies continued to buy and install software applications to improve their transportation, warehousing, and distribution operations. However, Indu anticipated that sales revenues would soon reach a plateau unless the company accelerated its business development, marketing, and sales efforts. If the VCs invested, they could bring in millions of dollars into the company that could help to fund the development efforts, and attract new customers and employees. But Indu knew that this was not just about the money. If the VCs invested, she and Barbara would no longer have complete control over Serus. Was it worth ceding control to grow the company? Involving VCs would also go against Indu's principles of self-funding her venture. Besides, would the company's growth prospects necessarily improve with VC funding? Some of their VC-backed competitors had already closed down. Would Serus end up the same way? These were some of the many questions that Indu asked herself. She knew she had to make a decision quickly. She wanted to build a strong company with a core ideology that was "built to last" (in the words of Jim Collins in his book with the same title) and that would make a lasting impact on the enterprise software industry.

The Founders

Born into a family of entrepreneurs who were technologists, Indu Navar, one of the two founders of Serus Corporation, always had a passion for finding solutions to complex problems. Just like her father, who was an entrepreneur and also her role model, she had always wanted to start her own company. After completing a Bachelor of Science degree in Electrical Engineering from Bangalore University in India, Indu came to the US to pursue a Masters degree in Computer Science at California State University, Chico, and went on to work at NASA, Silicon Graphics, and Healtheon (WebMD). She was one of the initial team of engineers for WebMD, which was her first experience of working in a new venture.

In February 1999, Indu met Barbara Hoefle, who was then employed at UPS and had over 15 years of experience in the supply chain, logistics, and manufacturing market. Indu, who had recently quit her job at WebMD to explore new opportunities, approached Barbara with a business plan and the two women arranged to meet. Barbara was not impressed by the business plan, but at their meeting she "quickly assessed that Indu had all the qualities of being a successful entrepreneur...Indu came across as a brilliant technologist, who had a clear understanding of business problems and their challenges."

Thirty days later, Indu approached Barbara again to brainstorm some new business ideas. Indu felt she had found the right partner in Barbara, whose extensive supply chain experience and excellent customer skills complemented her own background in software. …

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