How Voicea CEO Omar Tawakol grew to $1.1M revenue and 1K customers in 2019.

hello everyone my guest today is omar tawakal he is the chief executive officer of voicia prior to the company he was the founder and ceo of blue kai which was the world's largest consumer data marketplace in dmp oracle acquired the company in 2014 and he served as the svp and gm of the oracle data cloud omar earned an ms and cs from stanford where he's researched and published work on ai agents all right um are you ready to take us to the top yes why didn't you drive me why did you stay at oracle you didn't like the data cloud no i had a good time there i stayed there for two and a half years and sometimes you just get the entrepreneurial itch and uh here we are two and a half years in mountain view is like eternity right that's how it works you're supposed to stay for 13 13 months past the cliff then move on and then get your equity in a new startup right you know uh it was a fun ride there because i was reporting to thomas curien who was uh just a great guy to work for yeah well i was reporting to steve miranda also who was amazing all right let's talk about voicia so what's company doing what's your revenue model is you peer play sas yes it is uh basically our it's a pure place sas we emulate uh things like dropbox zoom where uh i call it consumerized b2b anybody can use us there's a free model you can upgrade to paid and then when we see multiple people in an organization using us then the team tries to engage and sell enterprise solutions okay great so bottoms up and then i mean give me a sample of a customer and how they're using you yeah so we have some financial institutions where whenever they speak to customers they'll have either their on the call capturing uh items updating salesforce updating trello after the call so they know what the follow-ups are okay interesting and is that your main target financial institutions you know it's um it's a bit broader than that anybody who uses webex or zoom or google meet is a target for us essentially those systems are are the plumbing they get you into the call they make the call smooth our job is to be the intelligence so that you can just focus on the conversation we capture everything we transcribe it we help you identify moments that look like actions and then we can help you automatically update workflow so instead of going back to your desk after five hours of meetings trying to remember five hours of actions uh we we try to nudge nudge you along and do some of that for you and give me a general sense here of what your sweet spot is so on average what's the company gonna pay you per year to use your technology yeah it's uh it ranges from nine dollars a month to thirty dollars a month per individual user and um we have seen a lot of viral growth so we'll get in with it to you know one or two people and then it grows to five twenty five hundred 100 500 and you know we've only been uh charging for about 12 months oh great and just to avoid going i mean i i'm sure you have like hundreds of different customer profiles based off team sizes but if you take your total kind of you know paid companies using you today divided by how many kind of seats across all of them what would you say the average team size is using are we talking like 10 or like a thousand i'd say average would be 10. we do have some people who are like you know between 500 and a thousand yeah but uh right now let me give you a sense why we only introduced the enterprise option really in january so um that's where we've seen the growth if you look uh a year ago it was dominated by individuals and now we're dominated by uh by groups and teams in terms of the the number of licenses so it's changing quickly yep no that makes for sense basically that's code for that average is going up five months ago is maybe five per account now it's ten and maybe by the end of the year it's you know fifty or sixty yep that's the goal but at ten bucks on average i started ten seats on average per account with yeah nine bucks a seat minimum you're talking kind of price points somewhere around 100 bucks a month in terms of uh in terms of your historical base and what they pay you and that's obviously increasing with new customers today yeah yeah i'd have to check the exact number but you're in the right ballpark yeah okay interesting um i want to get this kind of on a timeline when did you launch the company 2017 uh january so we started full time uh we went into uh alpha in the summer uh beta by the end of the year and we started charging in the summer of 2018. okay i always like to ask especially like a guy like you who's been through the the wheel before would you spend on the mvp before your first dollar revenue how much did i spend to get to the first dollar revenue yeah like you know some people will pre-sell an idea before they spend a dollar some will spend five million dollars before they go out and make one dollar of sale i'm just curious where you fall on the spectrum what'd you guys put into the tool before you sold your first dollar yeah good good question so really the first thing the most thing i was focused on before even charging a dollar was really usability and usage and growth so um i'd say we we worked for about five months actually our cto came in february and we launched at the uh june so you know it was like i'd say about uh five months and we were ramping up people so it was a fairly small spend initially yeah and then we said alpha and beta we started hiring a bunch of people so we started ramping up spend and we stayed in that mode for a year so you know it you could argue somewhere um under you know somewhere between four or five million before we started charging but um but we started seeing signal in usage way before we started charging so for example in 2018 all our usage parameters went up about 100 x what are they what are your key usage parameters um so in the beginning before we started charging we started really looking at how many people come in the door and start inviting eva to four meetings in the first month and that was really a signal that they trusted eva enough to have it in their meetings participating and that was our bread and butter like how how much could we do that and that one grew like i said about 100 x uh in that year well what percent was that right so if you had 100 people come in today how many of them invited four people in the first month yeah so we've moved on to a different metric and we're no longer tracking that now that we have conversion to pay that's where we start looking at different metrics so if you look at conversion to pay um you know i think we're somewhere between three and five percent of the people who will come in we'll use it and we'll convert to pay but the problem with that number is it also includes um we acquire users in two basic ways the first one is through advertising the other ones through virality our virality coefficient now is it about point eight uh oh you're so you're so get it above one and you're showing a rocket ship man that's exactly what i do we were at point two when we started so we're just getting better and better and better pretty good so um so that's one way to require users and the other way is of course just through advertising and the the problem with advertising is it brings in some consumers and some business people and we're getting better better really just focusing on business people yeah uh because it's just cheaper to advertise and mechanisms that get you both but uh as we get better at the way we construct the ads and the landing pages we've seen the percentage of people come in with work emails and word calendar much much much higher and they convert better i want to come back to the viral coefficient but i want to compare the two real quick so on the paid side what's fully weighted cac uh you know i'm not sure i would disclose that um or maybe maybe what i'm actually asking is how maybe how aggressive are you being in terms of payback period are you comfortable with six months or you go for 12 months or more um good question uh i don't remember the answer to that i do have a sas dashboard and i don't remember the payback period but here's i think i'll give you a sense of it this way so um we acquire a user they convert to paid um and they generally uh are just if you look at their lifetime value in terms of how long they stay with us we we make money but not a ton why do we do it because many of those people convert to teams and then we make a lot of money because what happens is you you paid several hundred dollars for a user and if you're coming in and you know more than half our users are in our higher tier of um of offerings so the 30 bucks or nine or 30 months exactly and half of all people do a yearly commit so we look at it that way when we pay to acquire someone we we basically just get our money back but then a percentage of those people convert to teams and those teams are getting better bigger and bigger and so that's how we're making our money back yeah let me try and submit the real numbers and you correct me if i'm wrong when you pay on ads to get a 30 a month user and they pay 360 or 300 bucks up front if you give a discount and you paid 300 bucks to get them on a gap in cash basis you basically get it back instantly and you're willing to do that because you're confident that that user one they might extend it to year two but more importantly they're gonna invite their team with your valve coefficient and that's gonna go to a bigger account you've got it you've nailed it exactly right so let now let me dive into the other channel which is the viral coefficient how did you move it from i mean that's a big move from point two to point eight one's a sweet spot but how'd you move it that far yeah essentially um by fine-tuning the product experience uh and honestly we're not we're nowhere near done i mean um so for instance we've had this back and forth where we try to do all this training up front in the onboard process but what we saw is our conversion numbers go down and so you try to skinny it down so people can get in and you try to nurture them into learning but a lot of people don't um kind of go through the full nurture and your conversion numbers at the top of the funnel may be okay but then you haven't trained them the rest of the way so there's this constant back and forth about how we how we uh get people to really understand uh how to work with us and then what we try to do along the way is make sure that it's easy for them to share notes with other participants because that's the way that other participants are going to see the notes and say yeah i like it and then the third area that we've found you know really impacts virality is the quality of what goes into the notes so if the notes look good someone's going to look at and say i want this and in that world there's actually this really interesting back and forth that we have to and we're still in it right now where you can put a lot of interesting content in the email notes that comes after the meeting not the full meeting uh transcript but you know some sort of extract from it and if you do that there's there's more for someone to read but it could be noisy and if you put very little there's not much to read and get excited about so you're constantly but it's more functionable potentially correct and you're and you're experimenting with that and even like as of two days ago we we rolled out another feature to to kind of test out that that operating point that gets people happy and drives virality so omar when you look at both these channels since 2017 i guess you really started really charging 12 months ago or so but how many customers have you scaled to now today well we just um i typically don't say these numbers but you're such a good interviewer i appreciate appreciation a million um in kind of equivalent uh it's kind of net we call it arr and it mixes you know what comes in at a monthly and a yearly basis so we just hit the million dollar point um over uh a 12-month period that's uh a pretty aggressive growth omar just to be clear that is essentially saying you know today or last month you did north of eighty three thousand dollars a month and you exactly run rates more than a million months yeah that's great okay so again if earlier you said team sizes on average were uh where 10 folks right at that nine dollar minimum 90 bucks a month that would mean you probably have somewhere you know between 800 and a thousand customers or logos on the platform in terms of do you mean licenses or customers i mean actual brands and logos which then make up all the seats underneath yeah um i think that might be right i know we have over 10 000 domains but a lot of them are free yeah um so and i know we have several thousand paid licenses uh some of them individuals so i i'd say it's in that range um sub a thousand yep uh paying domains yep that's great and then take me back so if you're doing kind of that run rate today where were you a year ago um i think we actually officially started about 13 months ago so in the 13th month we hit a million okay but so i guess what i'm asking is go back 12 months so a month in were you doing like a grand a month in revenue or how low were you 7 000 maybe less yeah see that's nice you can say 10 000 year over year growth come and come invest in my billion dollar valuation all right speaking of valuations did you decide to bootstrap a raise oh definitely raised um i had to uh if you look at the engineers we hired um our cto ran applied ai at facebook he uh was pulled in by john le so he's he's really good and he pulled engineer engineers from google microsoft apple facebook linkedin that's really hard for a company our size i figured we could we could use some cash for that so how much did you bring in um over our series a and um kind of the notes uh around it you know close to 25 million okay about 25. and was um by the way good friends with the avengers folks they said very nice things about you is one of the reasons i want to get you an invite so um so you have you have fans over there yeah okay good so about 25 uh to date and then talk to me about total team you mentioned some of the talent specifically but what's the total team size um it's in the 40s okay when i include some um kind of uh contract uh uh folks yep and then you know obviously stickiness is critical in any sas company so when you look at past 12 months revenue churn on a gross basis what was it we look at it at a monthly basis okay um and we target somewhere to you know three to four percent okay because it's a collaboration offering and obviously our goal is to get that um is to get that down uh over time are you in that range right now three to five percent oh uh three to four percent yes that's where we are now okay um i think we're actually better if you look for work users what we really started diving in and finding that we're the highest churn which is bringing us to the numbers i quoted is coming from people who are individual consumers non-work domain coming from the app store whereas when we get someone with a work domain who kind of authenticates their calendar and they come on the web and they're kind of mainly using it for conference calls those uh turn numbers are a lot lower yep yep yeah that makes good sense now let me ask you a question you mentioned earlier the economics around the payback on one customer you pay 300 bucks for them expanding to their team with your 0.8 viral coefficient um does do you have expansion revenue that more than makes up for the three to four percent churn each month and the expansion makes up again that hole oh yeah oh yeah okay so you're above 100 net revenue retention then you know i have to dig um i have to dig into the definitions make sure i'm saying it right so um because i'm on the error and i hate to like no no you're wrong by the way i i appreciate you doing that i mean basically i mean i would guess yes and the reason i'm saying that challenges if you think it's wrong is because you have strong economics around expansion revenue in teams based off how people send out invitations all expansion revenue measures is how much accounts expand how much domains right teams expand by over a year and it sounds like you're expanding them fairly aggressively oh for sure i mean if you look at our growth like last quarter was 70 percent total ar growth so yeah what percent was coming from that yeah i was going to say do you know what percent was from expansion versus new customer ads altogether i don't i don't have the answer off top of my head that's okay that's why cro does but that's okay all right um last question here you're in the valley it's different depending on where you are in the world but when you raise right uh a convertible note especially after a series a some people might assume that you raised a valuation that was too high in 2018 and you need to grow evaluation a little bit more to avoid a down round before your next round and maybe that's why you do a bridge node is was that the pattern you followed and if so how do you manage that storyline no not at all i think what happened was um it was my goal was always to cross a million arr and go out for a round uh it was january uh and the folks on the board were like hey why don't you just raise now we don't know how the economics back then people were afraid that the economy would turn uh if you remember back in december january yeah they still are uh and that but but it turned out it didn't turn so quick at that time but anyway they said hey why don't you raise around now you're growing so fast and i'm like you know i'd love to but uh if i go out before i hit a million arr i want to be able to prove this concept of going from individual to teams so i want to wait till later before i go out um so like well what if we gave you a note so we did a note it had a whole bunch of strategics we targeted to raise a certain amount we um almost tripled the amount we were about to raise and it filled really quick so it's a pretty uh it's a pretty safe story i was going to say that what i was hoping what i was trying to tease out of you there was the convertible was highly useful because it allowed you to get people like cisco and salesforce and some of these highly strategic folks in the round and in the company absolutely very good all right let's wrap up with the famous five number one what's your favorite business book oh um you know i like adam grant's uh books in general give and take uh they were really uh really good i i put that uh high on the list um great number two is there a ceo you're following or studying right now oh um uh satya nadella has been impressive i i knew him when way before he was ceo and was always an impressive character i had an uh experience with him right before right at thought when he was taking over as ceo i met him for a meeting when i was still running blue kai 150 person company and it was at 5 p.m by the time i got home at 7 pm he had already written the note delegating all the actions and he beat me to the follow-up i was like how did he do that that's so funny i love that that's a good leader number number three what's your favorite online tool for building your company ooh um we use intercom uh and salesforce uh as a company uh quite a bit um i personally use trello a lot for my own personal stuff great how many hours you sleep together tonight um i'd say about six okay and uh how old are you uh 50. 50. okay that's good by the way i always try and guess before someone says i was type it started with a three and i'm so 50 that's good it's a young 50. all right um i should say that at the beginning of the episode i'd probably get more information out of you right if i give you compliments at the beginning versus the end all right and omar what's your situation married single kids uh married with four daughters oh my gosh you're busy okay four daughters uh take me back to your 20 year old self what's something you wish he knew uh um i don't know be careful what you wish for because you might just get everything you wish for uh and then you then you have to sit back and think is that is that really the most important thing guys there you have it uh voicea again basically an enterprise voice assistant for meetings think of it like a layer on top of webex and zoom that deals with meeting notes agenda items after the meeting a call between 800 and a thousand logos using platforms today many thousands of seats under those logos they just broke a million dollars in terms of run rate up from almost nothing a year they'll call it seven grand a month healthy growth there obviously with small numbers 25 million dollars raised team size of 40 today 36 on an annualized basis again three to four percent monthly in terms of revenue churn on again gross basis expansion i sounds like more than makes up for that for 100 or 100 net revenue retention spending up to 300 bucks to get a new seat so call it a payback period there that is obviously pretty healthy as they look to continue to scale omar thanks for taking us to the top thank you