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How this startup makes $20 million a year without funding

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Deimos is a 100% bootstrapped cloud and cybersecurity company that increased its revenue from $1.3 million in 2019 to $15.2 million in 2022 according to Financial Times”s Africa’s Fastest Growing Companies 2024.

By most standards, this rapid growth is impressive for a six-year-old bootstrapped company, but according to the CEO, Andrew Mori, revenue is a vanity metric that doesn’t really matter in the grand scheme of things.

“Revenue is vanity, profit is sanity, and cash flow is king.”

This principle is what Mori has worked with since the company started, which is probably why the company has been profitable from the first month it started.

Deimos offers technology services that range from custom software development to security, cloud-native architectures, and large-scale cloud migrations.

Some of its customers include Moniepoint, Kuda Microfinance Bank, Sterling Bank, and even the Central Bank of Nigeria. This, according to Mori, demonstrates the company’s proficiency in the services it offers.

He believes customers are the investors of a bootstrapped company, and just like companies that have gone on to receive funds from investors, those funds need to be used wisely.

On a call with Techpoint Africa, Mori shared how Deimos has stayed bootstrapped and is growing faster than some investor-funded companies.

It started at Konga

Mori was CTO at Konga from 2016 to 2018, a role that provided him with the experience needed to run a technology startup. “Being in a leadership role at a startup makes you comfortable with a lot of context switching.”

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What Mori means by context switching is interfacing with different parts of the company, such as marketing and HR, and seeing how they complement the overall technological objective of the company.

Besides Konga, Mori has also gathered quite a number of degrees. He has credentials in physics, computer science, and advanced degrees in astrophysics. In fact, he paused his PhD program to take on the role of CTO at Konga.

His love for education can be linked to his passion for technology, as he’s a curious person and loves all forms of science.

This love for science is one of the reasons he started Deimos with his wife, Jana Schoeman and Co-founder David Anderson.

Deimos became the largest Google Cloud partner in Africa in 2022, which means it has the largest number of customers that are supported on Google Cloud.

However, in an ecosystem where companies are shutting down or entering administration, one of Deimos’ greatest achievements is reaching huge growth milestones as a boot-strapped company.

How Deimos did it

One way to summarise how Deimos achieved growth with zero investments is that they focused on the “right metrics”, while other companies tend to focus on what Mori describes as a macro view of success.

However, he understands why some companies focus on wrong metrics like fundraising.

“I would love for Techpoint Africa to announce that Deimos raised $10 million at a $50 million valuation; it would be nice.”

Fundraising announcements are indeed nice, but in reality, the main task of a startup is creating value. “I feel a lot of people think half the job is done when there’s money in the bank.”

Money is a good thing, but there’s a big difference when it’s put there by your customers or by investors.

Deimos make $20 million yearly in revenue from its customers.

Mori sees it as an investment, and there’s one simple way to put it to good use.

“We do some work. If the work is good, I’m going to send the customer an invoice. The customer must pay, and I must spend less than I collect.”

Mori puts Deimos’ burn rate at around $800,000 a month.

Making money is a must

A bootstrapped company is forced to create value and make money because, as Mori puts it, your customers are your investors.

Deimos has high-profile customers in South Africa, the Democratic Republic of Congo, Kenya, Egypt, and Nigeria.

However, one way Deimos has been able to attract valuable clientele is because of its mission.

“Our mission is to help businesses use technology in the right way. We feel technology is magic, and it’s supposed to be an enabler for a business.”

Another secret ingredient in Deimos’ value creation is its engineering team, which is also one of its major competitive advantages. According to Mori, the company has an excellent engineering capability in Nigeria.

He said this engineering capability, rivals competitors such as Ernst and Young, Deloitte, and Accenture because Deimos is a “young dynamic company that is laser-focused on technology whereas our competitors are not as nimble so it takes time for stuff to happen.”

Lower pricing is another advantage he highlighted. This means Deimos can attract customers that would otherwise have gone to the big players like Deloitte.

Interestingly, there is a disadvantage to being smaller and nimble.

Because of its size, it would be hard for Deimos to attract a Guaranty Trust Bank as a client, for example. Its already existing customers could also leave when they get big.

While the company is also working on getting bigger, there is a long way to go. Its competitors on the same scale as the likes of Accenture, have about 200,000 clients while Deimos has about 80.

Deimos also has its own problems

A B2B business model has its advantages, advantages, and Mori admits this. For example, it has made $20 million in yearly revenue from just 80 customers.

However, there is a disadvantage to this. Unlike a B2C company, losing one customer could deal the company a big blow.

“We have suffered losses of big customers, and while it looks like a pretty picture on the outside, it’s actually a roller coaster.”

One of Deimos’ biggest roller coaster rides was during the COVID-19 pandemic. The pandemic affected its customers, which in turn affected it. Unfortunately, it had no money in the bank when the pandemic hit.

The event reechoes Mori’s principle “Revenue is vanity, profit is sanity, and cash flow is king.

“You must collect your money, and you must have a very tight debtors book because that produces the cash flow, and you need cash flow.”

Cash flow is perhaps a company’s most important metric. Revenue tells a company it’s good at selling, profit is a way of knowing you’re spending less than you make, but cash flow is what determines whether you live or die.

Will Deimos ever raise?

Deimos is currently looking at fundraising for one of its subsidiaries. Mori clarified that the company does not need to, but the exercise is a skill set he’d like to learn as it’s essential. As he put it, “the world’s richest man is still fundraising.”

Fundraising crossed Mori’s mind when Deimos first started, but based on his experience at Konga, he didn’t want to go through it.

Besides that, Deimos wasn’t an attractive company to investors in the beginning.

He noted that companies that offer services have low margins and need more employees to scale, which increases costs.

“Investors are looking for companies that scale as software. With software scaling, you write a piece of software, and hopefully, it can serve millions of customers.”

But now Deimos is an attractive company to investors. Its cloud programme alone generates $1 million monthly.

The plan now is to scale to 500 and hopefully 1,000 customers.

While more customers mean more money for the company, Mori hopes that Deimos is showing other companies that they can grow fast without necessarily taking investment and retain 100% of the company, as Mori and Deimos’ original shareholders have.

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