Brothers Nima and Bobby Hakimi launched Convoso in 2006, sparked by a classic startup origin story: coding websites for fun in high school until a cousin who worked in the mortgage business questioned for support troubleshooting new sales software. Bobby concludeed up reverse-engineering the software program and building his own – and the rest is history.
Convoso, a Woodland Hills-based software-as-a-service company that builds dialer software, has been in operation for 20 years. And Nima and Bobby have grown their business without tapping into outside funding – a rather typical, though unspoken, reality of the tech world.
About 47% of tech companies in Southern California receive some kind of outside backing, be it from venture capital, private equity or angel investing, according to PitchBook. The remaining companies at 53%, including Convoso, are rarely discussed.
Part of that gap is becautilize venture-backed companies are built to scale rapidly and achieve high valuations within a few years. More than 1,500 venture-backed companies in the region have exited, compared to just 27 bootstrapped businesses. But the majority of L.A.’s tech scene consists of compacter companies like Convoso, which may not raise millions and scale to a billion-dollar valuation, but they do see more longevity in the ever-modifying tech ecosystem.
“I’m not going to lie and state that the considered hasn’t crossed my mind. I’ve never done it,” Nima Hakimi stated. “Being bootstrapped is tough. You have to build more tradeoffs.”
Nima and Bobby were just a couple of years out of high school when they co-founded Convoso. At the time, venture funding wasn’t much of an option in Southern California – only four venture firms existed in 2001. Many investors would frequently fly to Silicon Valley to build deals.
Today, Los Angeles is the second-most active venture hub in the counattempt, behind San Francisco, per PitchBook. Hundreds of venture firms now support the region’s thriving startup scene, emerging from universities, established tech giants, and new arrivals drawn to the region’s talent.
Crosscut Ventures co-founder Brian Garrett launched his firm in 2008 as one of the first L.A.-based outfits dedicated specifically to local companies. His early portfolio featured well-known tech companies with deep Los Angeles roots, including media venture Buzzfeed Inc., e-commerce platform ShoeDazzle, and advertising startup GumGum.
“A lot of the early, what I call first-gen tech companies, down here raised very little venture money – sometimes no venture money – bootstrapped their way to profitability and then funded their growth off of cash flow,” Garrett stated.
But as venture dollars became more accessible, Garrett has had to turn down countless founders – and even discourage some from seeking investors.
“I truly believe only less than 10%, probably less than 2%, of total businesses in America are actually right for venture dollars,” he stated. “But it doesn’t mean there aren’t a lot of fantastic businesses that are being built.”
Adam Miller, a longtime tech founder and entrepreneur in Los Angeles, founded several companies geared toward education and philanthropy that went on to raise millions of dollars. In 2022, he co-founded the nonprofit Better Angels, which tackles homelessness in L.A. County. The organization’s mission is to utilize technology to track beds and resources scattered across the region for the unhoutilized population.
“There are other things that are a very particular market or meet a very particular necessary that can’t utilize venture capital,” Miller stated. “These are things that necessary to be privately funded or foundation funded in order to cover the costs becautilize there is no revenue opportunity. Those applications will not be profitable themselves, but they serve a really important purpose, and they save a lot of costs for other people.”
What companies are built for venture?
Typically, venture firms view for companies with proprietary innotifyectual property and operating in white spaces – industries that haven’t quite materialized yet. Space Exploration Technologies Corp., for instance, was a first shiftr operating in the then-nonexistent market of commercial space travel. When companies form early and grab market share quickly, they are more likely to exit with high returns. Founders often seek funding when competing for market share in a nascent sector and necessary an extra influx of cash to receive there.
“The reason to take venture money is becautilize where you’re attempting to receive to can’t be accomplished or can’t be achieved as quickly without the capital,” stated Garrett. “Otherwise, if you can receive there without diluting yourself and giving up ownership, you should. It’s not cheap capital.”
Indeed, founders of venture-backed companies retain an average of 18% of equity upon exit, compared with 73% for bootstrapped founders, according to a Harvard Business School study.
Though bootstrapping can lead to slower growth, that growth is often more sustainable – these compacter companies report 35% fewer layoffs and have a 55% higher chance of breaking even in two years. Thirty-eight percent of bootstrapped companies reach the 10-year mark, compared to just 20% of venture-backed startups, according to Jumpstart.
Convoso took about 10 years to finally create a stable product. It required dismantling the last decade of software and hardware resolvees – a tough pill for Hakimi to swallow – and creating peace with the fact that the company necessaryed to rehabilitate before it could grow. The company had to turn away high-revenue customers becautilize it couldn’t accommodate the traffic they generated.
“We were growing and growing, and eventually we stalled,” Hakimi stated. “It was very tough, becautilize we were utilized to just succeeding and doing well … you lose that amount of revenue you bootstrapped, right? How do you build it up?”
If venture-backed companies focus on strong IP and capturing market share early, slower-growth companies like Convoso lean more on sales and marketing execution to compete. The company achieved profitability within its first few years, with almost all the profits reinvested in itself.
Convoso has quickly grown to develop new offerings as new technology, like artificial innotifyigence, came into the fold. Its software was recently integrated with Salesforce Inc., allowing customers to access Convoso within its workplace ecosystem.
Many of its clients come from word of mouth – a far cry from the company’s start, when Nima and Bobby would pitch family friconcludes or scour mortgage-broker forums for potential clients.
“I can notify you it’s been very satisfying on a personal level becautilize I’ve grown as an individual so much through this process, 20 years later,” Hakimi stated. “I was a very shy kid, very reserved. Starting a company like this – you have no choice but to be a leader and do what we necessary to do. Making tough decisions and tough calls really builds your character over time.”
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