Chicago-based startup hardware appliance maker Branserv has an incredibly lofty vision – to rebuild the American economy. “We’re trying to lead the way in creating a new generation of financially-sound technology companies. We want to help many companies get their feet back on the ground before they fly away,” says Alex Pyatetsky, Branserv‘s VP of strategy and marketing.
Branserv was founded by Ilya Stolyar, who previously founded systems integrator International Computer Concepts (ICC) in 1993. 49-year old president and CEO Ilyar may be no young upstart, but Alex is only 22-years old. VP of engineering, Alexey Stolyar, is 23. Alex and Alexey may be young but bring experience to the table. Alex had run his own successful event promotions company, High Contrast Events, while Alexey had worked as lead sales engineer and development director with ICC since 2002.
When Branserv first started, the company was intended to leverage on ICC‘s existing manufacturing facilities and vendor relationships to build OEM appliances. However, they realized that the appliance market was already pretty well saturated, and worse, all the competition targeted the exact same segment – networking security and data management.
Reworking the Business Model
So they went back to the drawing board. When they analyzed the market further, they found that all six major players presented the appliance business model in, in their opinion, an unattractive way. ” They all bombarded the prospect with too much information (and) made it appear incredibly difficult. So our first inspiration was to drastically simplify the appliance model.” But which market should they target?
And then it hit them – many software startups, open source software shops and micro independent software vendors (ISVs) need a better way to make money. “Google was not longer acquiring. Ad revenue was no longer paying,” Alex points out. All other revenue options – including freemium models – had flaws of their own, as evidenced by this article in the Wall Street Journal by Chris Anderson of Wired. Branserv was thus reborn, to serve this market.
“We were going to enable small companies with great software to leverage a whole new revenue model. We’re not going to charge them a startup fee or set any inventory minimums or make them do any extra work. All they would have to do is sell, and we’d handle everything else, from product design, manufacturing, to shipping, to return processing, etc.” In the meantime, the software company enjoys a revenue stream, support down and lower risk. Put that way, in the words of one software entrepreneur, “it’s pretty hard to ignore”.
Branserv recently announced an Appliance Pilot Program where they’d give six software startups, ISVs or open source shops the opportunity to create appliances around their software at cost. “We’re going to break our backs to make sure they are successful so that the rest of the community can see how versatile and effective this revenue model is. The Pilot Partners will walk away with a real product that they can then sell at high margins for as long as they want. All in all, the opportunity is worth well over $5,000.”
But it’s hardly surprising that Branserv is targeting this segment with such an offer of course. Like traditional venture capitalists, all they need is for one of the six startups they help to be a runaway hit, like a Twitter or Facebook, and their own success will also be sealed.
Challenges and Opportunities
The greatest challenge facing Branserv so far is the need to educate the community and target market about their offering. “We want people to understand why our offering has value so they can help us spread the word to potential partners. The somewhat technical and complex nature of what we’re doing has definitely been a challenge,” says Alex.
“(But) we’ve been lucky to receive a decent bit of word-of-mouth on Twitter and elsewhere. I was surprised how quickly people started thinking of us as a legitimate startup and treating us with respect… we’re just trying our hardest to spread this word.”
Branserv may be a bootstrapped startup, but thankfully unlike most others, it is fortunate to incubate with its parent – it shares ICC‘s office, assembly and testing, and warehousing facilities (and a dog named Oscar) – and hence a lot of infrastructure costs don’t exist for them.
One of Branserv‘s key company values, which they believe is critical to entrepreneurs, is to be remarkable. “From Day 1, we’ve intentionally chosen to pursue something that is remarkable – as in ‘worthy of remark’ and not neccessarily ‘amazing’. Anyone who have not read Seth Godin‘s “Purple Cow: Transform Your Business by Being Remarkable” that has any vested interest in marketing a product of any kind should really read this book. You have to build marketing into the offering. Some offerings are just more worthy of recognition than others. We try to do this as much as possible.”
Another important value it believes in is the familiar mantra ‘launch early, launch often’. “The principle of rapid iteration and continuous innovation (in software companies) is very important. Its not something that’s widespread in the hardware world, but we’re trying to adopt this mentality as best as we can. The key is to always strive to improve and listen to what the market is saying.”
But the entrepreneurial life is not all work and no play – all three do have lives outside of work. Ilya is passionate about photography and gadgets, Alex is a professional DJ while Alexey is an Age of Empires maniac. “We’re all pretty interested in getting rich. Not necessarily quickly, but could never hurt,” laughs Alex.