How Jivochat grew to $8.5M revenue and 37K customers in 2020.

hello everyone my guest today is tim avalashev he's a tech ceo who coded the first version of gevochat together with his partner and bootstrapped the company from zero to five million bucks in the arr and 10 worldwide market share by installations now tim runs distributed team of 120 people from a dozen countries that rebuilds jiva chat from scratch every two years in order to stay up to date tim is based in moscow rush to tim are you ready to take us to the top hi nathan how are you how are you doing i am doing well so i'm looking forward to this tell us about the company what do you guys do and how do you make money uh we run the software software as a service business it's a messenger for online companies it helps you to convert people who come to your website and uh to communicate with your clients on facebook by email by phone so it's a piece of software that handles all your communications with clients okay and all different channels and you said in the bio that you guys have passed five million dollars in annual kind of annual run rate today is that accurate yep that's true and talking about growth so where were you about a year ago it sounds like today if you're at a 5 million run rate that means you're doing about 410 420 grand per month in september of 2017 a year ago what were you doing uh our growth is pretty linear we add 1 million bucks in revenue every year so but recently we've been like accelerating uh well with our product we had more success on the growing markets so for example it was surprised to me to find out that brazil is growing very fast nowadays and we're running experiments in turkey in indonesia and spanish-speaking countries latin america and africa so all every country who has growing internet economy is a good market for us and the fast economy is growing better is for us because all those new businesses people who come online and open their ecommerce websites are our potential clients yep and you're still bootstrapped today right no capital raised yes yes i love that and how many customers are you serving today our live chat is installed on 230 000 websites worldwide and how and what does that mean in terms of paying customers that you have uh 31 000 paid customers okay today that's great so 31 000 paying customers divided being businesses okay paying businesses divided into your five million run rate means each customers or each business pays about 13 bucks a month on average is that about right yes that's right okay and this strikes me i mean this is very much in kind of the intercom drift space right uh well not really okay intercom targets more advanced technological companies with their complex product that can be integrated in your software uh product that can be like used to automate customer service grow your retention and stuff that's a bit complicated we help businesses at the smaller scale so if you open your e-commerce you have like a website with a couple of 100 unique visitors per day and you need to optimize your conversion to make sure that you get most uh from every dollar invested in advertising and you want to decrease the chaos inside your small sales team so that's where we come in okay our product is very simple it's like a business it's like business messenger it's almost as whatsapp but for teams and that helps them to communicate with customers intercom is more like a advanced tool that helps to optimize more complex business models but tim like when i go to your website and look at examples it is it pops up in the bottom right of someone's website it says you know okay you know i'm here to help you you know what do you need help with and it says start chat or enter phone number here we'll call you back instantly right so how does the talk to me about how the call side of this works if i click this call button what happens that's that's where magic happens yeah uh the idea here is to you give do you try it yourself by the way yes basically so it's very instant you click this button and you get call in like 27 seconds or or usually faster than that what happens is we automatically call several people on the company's side and whoever answers first then we'll speak to the customer ah i would say that is magic that's good magic yes the idea is to provide positive effect to show that the company is really ready to speak with the customer right away without keeping you on the line and without going into ivr and everything will happen instantaneously so tim just to be clear if one of one of my listeners right now says i want to try this out what'll happen is once they install this on their site let's say they have a sales team of five people and someone clicks the call in this kind of live chat in the bottom of their website you the software jivochat will basically call all four salespeople whoever picks up first will then be the one that's directly connected to the person calling to the site yes and after one of those people picks up we immediately start calling the client and connect i see very cool i love that okay tell me more about the backstory here so when did you launch the company what year it was january 2012 2012. okay and i mean where were you in life i mean did you just leave corporate and say i want to start my own thing or what were you thinking actually i was running my previous company i was the ceo of another tech startup it was actually you it's a virtual pbx service for small businesses that's also a software product that i created while working at another company then i came to a ceo of that company and offered him to start this business together octaline and i was running it for a couple of years and was struggling with conversions so we didn't have a lot of marketing budget on uh spend on advertising we need to make sure that uh our website works to convert that traffic and i was looking for live chat uh tools to install on our website and i realized that there was no really good products that i loved as and as an engineer i understood i i i thought that i could do better to do better than that so all those products had some problems either too expensive or ugly or both so that's when i decided that i could do better and then it came to my classmate actually and suggested that him that we created together and that's how it started and since then we get we got linear growth how did you how did you get your first 10 customers [Music] i i think it's the same as any other product but from my phone book i just called my friends who had e-commerces and said that we have this product of course you can start using it for free just to get references and the the good thing about java chat is that it's visible when you come to some website you see that it uses java chat and that's actually how we grow through the past six years the brand where it says powered by kibo chat yes and you cannot remove that brand and free version that's how our premium model works uh that's uh how is got first client then we went through the forms of web developers i think and said hey guys here's the product you can get 30 commission installing it to your clients and and web developer developers usually hate affiliate programs they think they're like slimy but you were able to convince people to yeah go ahead turn developers into sales people uh well i think it's with the artwork it's really easy for them to install this the client they already created a website they just need to recommend the user to use java chat and of course it's very important to take care of your karma yeah so so not not to betray the trust of your partners yeah okay and in companies like this you know this as a bootstrap company retention is critical and churn obviously the inverse of retention what is your churn today and how do you manage it uh it's on average it's 45 so the average lifetime is a bit over two years for us right now uh the problem with our churn rate is that most of the times businesses just close and there's nothing we can do about it when you run for a product for small businesses it's inevitable and well compared to other small business products two years lifetime is actually not not a bad figure but of course we try to do something about it uh we started as just a live chat solution that we're targeting to optimize conversions or website now we've we're more like a business messenger that helps you to communicate across all possible channels you can buy a phone number from us and talk to customers on the phone you can connect your email address to jaya chat you can connect facebook your facebook page and uh that's one of the ways how we fight churn here so we try to show to our customers that if they don't want to use live chat on the site they still can use our product for other ways of communications so if somebody if somebody messaged me on my facebook page my business page it would go into my gevochat backend if i set up an integration yes exactly and same for a telegram by their uh some some other messages we hope that whatsapp and apple imessage will be there soon yeah that's great now you mentioned your 31 000 kind of paying customers uh how many total just users free and paid do you have as i said the 230 100 30 it's the total number of websites who run on our product uh i wasn't sure i'm sorry i wasn't sure if that was a one-to-one ratio i wasn't sure if some free users might have had two or three installations that's true that's just some of them have uh so if you want to know the number of businesses the travel tree is something like 170 or 180 i see you check that i see that's great and each month about how many new free folks are signing up uh a bit under to 20 000 users 20 000 new signups each month yes that's that's great and what are you doing you know what percentage of those folks are you converting to paid at the end of say 30 days we need to need to check on that the conversions are quite different on different markets for example there are markets where live chat solution is more popular than another for example in russia it's or or in brazil it's really popular nowadays but for example in turkey in europe or for that matter in the united states it turns out that it's harder to convert signups to active users i don't know why by the way yeah okay so you said you had 45 and that was logo churn annually correct yep okay so with that in mind you know customers and paying you 13 bucks per month what are you paying fully diluted or fully weighted to acquire a 13 a month customer well as i said um one of the benefits of our business model is that it mostly runs on word of mouth and a lot of those 200 uh 20 000 signups are organic signups so uh we mostly spend money on experiments for example our most recent experience was uh southeast asia where we spent a lot of money investigating how to kind of go in indonesia countries like indonesia thailand vietnam and others uh how much did you spend on that experiment about 100 okay and where did the money go uh a lot of different places of course mostly uh google and facebook and uh think about facebook it's it's very different than different countries so the effectiveness of facebook somehow depends on on the country that's also i think i didn't fully understand yet so what happened what were the results of that 100 000 tests um well indonesia south east asia is a really really hard market to to monetize they have huge growth for example they got like three million new users of internet every month that's uh insane and uh they have like growing uh uh e-commerce but uh it's really hard to get them to pay for a product same like for example in india it's it's like you know it's um if they have a free option they will go with it no matter what do they sacrifice you can explain them that it's more convenient it's effective and stuff but still if there's free version they will go with it that's that's one of the outcome of our experiment and are you doing am i hearing you correctly you're currently doing no direct paid spend for your other channels no facebook marketing no google ads nothing like that uh we do but it it's it's not a significant uh source of uh okay our new revenue it's like uh as support for our main channel like we for example in new markets where we started recently like in turkey we don't uh have enough organic traffic so first we need to invest in paid sources before we get organic role for example same happened in brazil a year and a half ago now we have a stable organic growth in brazil because everyone sees powered by gevo on all these websites yes exactly exactly we need to accumulate initial user base yeah before we start getting referred yeah how much did you invest to create the initial brazil user base do you remember in terms of direct spend i think something between two and three hundred thousand dollars because i i can't as i say exactly but i don't i can't moment in time when our gaining growth really started because it was accumulating like sure over time and and about i know you're back in the napkin in this but when you spend 300 000 bucks about how many installs did that drive in brazil uh well that's really hard to say because for example on facebook uh like i can give you this figure facebook is sometimes uh 10 10 times less effective in number if in terms of acquiring installation safety users then google for example in brazil but you cannot say that facebook is not worth investing in because google is quite easy to measure you immediately see the sign up source the outcome like if it's paid or not but on facebook you can show your banner to a user several times you can click make three clicks then forget about you for a month and then come back through organic search and and convert or he can like spread word about you he can remember what you later so it's it's really hard to track effectiveness of facebook channel but uh on average we we paid something between three and five dollars per person okay that's not bad if they're paying you 13 bucks on the first month right then you have a instant payback period right or is that for a free install uh that's for free installed oh i see i see okay so it's more expensive than that yes and sometimes we even pay more for signups than we earn but as i said it's uh for us so both are getting growth so we hope to monetize this later from the word of mouth makes good sense tim you said you have a team of 120 people right where is everybody based a lot of different countries uh latin america europe africa turkey russia india so everyone draws yes well we have an office in moscow russia for about 20 people but it's mostly accounting part of our sales team most of our programmers or all of our programmers from russia and uh some of technical teams from other countries uh but commercial team is distributed across their their respective markets for example we have a growing team from latin america from countries like argentina tim we're out of time here last few just quick answers if you can are you thinking about raising capital or do you want to stay bootstrapped you are starting to stretch for now okay and second question are you right now in talks to sell the company to anybody well i get a lot of different proposals about investing in our company selling a company well it's interesting to discuss that with investors but i didn't get any uh significant offer so far i see a ring on your finger if you go home tonight and tell your wife that you turned down a 30 million offer to buy the company does she kill you or do you have to take that offer well you're working in like startups world you you should know that there's everything's about term here right they can offer you 30 million but a lot of fine print yeah can continue to turn that down so it's not only about dollars right that's smart answer all right let's wrap up with the famous five number one what's your favorite business book business book well i read the art of war recently and i really enjoyed it number 10 that's a good one number two is there a ceo you're following or studying right now so you're studying well uh i think just the popular guys like elon musk and steve jobs just to and i i don't think that there's a lot of things to get from my personal experience it's just a lot of inspiration coming from them number three what's your favorite online tool for building your business besides your own i really enjoy asana asana all right number four how many hours of sleep to get every night no less than eight eight that's great and mary do you have any kids yes my daughter is three years old oh wow one kid okay and how old are you two years no how old are you i think sorry 32 last question what do you wish your 20 year old self knew um well that's a good question actually uh invest more in in myself i can sports and my health yeah guys there you have it invest more on yourself and sports and health he launched gevo chat uh you know they launched back in 20 let's see 2012 now doing about 5 million bucks in arr that's up from 4 million in ar just a year ago totally bootstrap growth which is great over 230 000 installs 31 000 paying customers paying an average 13 bucks per month when they do spend on paid channels they'll spend call it three bucks for a new signup and eventually wherever they're spending that money organic takes over because a lot of their growth comes from the powered by gevo branding they've got a remote team about 120 people lifetime value in months of about 24 months or about 330 dollars tim thank you so much for taking us to the top see you then