YouMailrevenue & funding

hello everyone my guest today is alex quilichi he is the ceo of umail a smart telephony company with a popular app to block robo calls before that he co-founded and sold quack to aol for 200 million bucks this was essentially siri over 1 800 number back before smartphones and then he helped lead aol voice services to million paying customers with the first scalable consumer voip answering and voicemail to email service platform alex you're ready to take to the top yep let's go all right man robocause well especially as politic the political kind of system is heating up here we're all getting these robocalls we don't want how are you solving the problem so we basically play an out of service message when the bad guys call your cell phone so when they hear that this number's out of service they tend to stop calling you so that's how we go to calls interesting so how do you okay so how do you know that the inbound number is coming from a robocaller so there's a couple of ways so so they're one of the best things we do is something called voicemail fingerprinting so the bad guys often leave audio messages when they call people we have a shazam for voicemail so we can take that audio message look it up in the database and go hey that was tagged as a bad behaving irs scammer a social security scam we now know this number is misbehaving and we can start blocking it so one call to the email base from a number and it's blocked for all the email users so you rely on some kind of endpoint from someone whether it's you manually doing it with mechanical turk or you capturing you know your user's data you have to identify that number first from somebody what is that data source you're using are you sourcing it from your user base or is it some other method so we replace your mobile voicemail in order to play that greeting to the robocallers and so because we're a voicemail service we have all the voicemails and so we can algorithmically look at the database of bad voicemails in the same way that say gmail would look up bad emails to know hey this is a scam email so if i connect with you today you'd look at my historical like you look at all the voicemails and my call thing and you'd say oh my gosh this is definitely a robo call we're gonna take this number block it for nathan and block it for all of our other users as we go forward that's right so not only do we have the voicemail fingerprint but users will tell us when we get it wrong they can report something as spam or a scam and then we know hey we missed this one it can get added to the database there's also times where numbers just behave badly like it looks like a verizon wireless number is calling millions of people and you know leaving not leaving a message we know that number is misbehaving too so there's a number of things we do but it's mostly anchored by what we call shazam for voicemail that's interesting okay how are you pricing this thing what do people pay on average per month for it so it's free and the reason it's free is we couldn't stomach charging people to block calls they don't want those calls shouldn't be there in the first place but we do have a freemium model so we do have paid stuff that people move to and that's how we support and grow the business okay so just looking at your paid cohort i mean give me a sense we're talking 10 bucks a month 100 bucks a month what are people paying think of it it's 120 a year or so 100 a year or 12 bucks a month that's that's our model okay so and the the target for the paid audience are the people who are lawyers contractors plumbers the people who rely on their phone for their business they get us originally to stop blocking or to stop the robocalls block all the robocalls but then they realize we have a lot of features that help deal with a high volume of phone calls and so that's a no-brainer at you know 12 bucks a month interesting all right put all this on a timeline for me when did you launch the company what year so it's really interesting i didn't launch the company the company was launched in 2007 to try to sell better voicemails to carriers and i came in as an investor wound up on the board and somehow wound up running it and raising bc money and the rest is history we've been at it for a while how much did you guys raise so we've raised about 15 million over time it was about seven million from vcs uh we raised five million in a crowdsourced round because we had to recap the company and the rest is me why did you come in i mean there was obviously something happening where growth wasn't what you guys wanted it to be and you said i'm going to come off the board and operate this thing well i came in pretty early because i'd been at aol and i thought there was a need for an a scalable platform for cloud-based voicemail for the carriers i thought if you could get that you could start doing a lot of interesting stuff and the company had that they had the basic pieces to do that so i thought let's go try to sell it to carriers it just took us three years to realize that carriers moved really slowly and our runway wasn't that long and at that time we discovered we'd put out a blackberry app that's how long ago it was and you're aging yourself i'm dating myself but blackberry i've had a million downloads and we're like we're not even we just did that as a prototype to show carriers what we could do maybe there's an actual business so we switched gears and then focused on consumer and that's what got me really excited was going direct to consumer okay but alex i want you to there has to be a tough story in here and this happens all the time where investors can replace the ceo for a variety of reasons sometimes good sometimes bad where where is the original founder what happened to the original ceo uh the original ceo stayed with the company in different roles after i took over because he had some talent then left a few years later because the company was just going in a different direction than they'd planned the original marketing guy wound up in new zealand with his own startup there and you know we just had had to change the whole team it wasn't about carriers anymore it was about consumers it wasn't about you know web-based voicemail it became we have to build apps and so everything changes and basically the cto and i are the ones that have stayed the whole time with a few developers and we've built the team up from there interesting okay and then so you come in you take over the company now what have you scaled to today in terms of total customers using you so we've had almost we're just under 10 million umail users who have accounts with us which is pretty cool and the thing we're most proud of is there's over 150 million people who've called a umail user and interacted with our service in the past 12 months so basically half of america has called and interacted with umail at some point i love that and then when we look at just the paid cohort how many folks are paying you for the service because they love it so much so so we haven't said but it's pretty significant we're able to convert a decent percentage just like everybody else out there like the dropboxes and and everybody else so we're we're doing pretty well what is dropbox i don't know that number on top of my head what does dropbox convert kind of free to pay like i think what dave and most subscription services convert two percent to five percent somewhere in that ballpark yeah so i mean can is it fair to say then two percent of your 10 million that would be low end you have north of 200 000 people have decided to pay you uh over time it's actually been higher than that but people turn off and you know try it try different things so but it's you know it's in that ballpark over time how do you so b we talk about b to b churn all the time at these low kind of acvs i imagine if it's it's even worse in b2c and it can be frustrating sometimes right because you do pro formers around acquisition and cac and lifetime value and all that jazz how do you manage your churn so it's really interesting for us the big thing is to get people onto an annual plan if we get someone set up you know so they're happy with the service and they move to an annual plan the churn rate's really low the hardest ones are sort of the low price i'm just going to try this little premium offering for a month or two it's not quite what i wanted there's a lot of spinning there but once you move people into the more serious plans you can actually do pretty well and get churn rates in the one to two percent a month category which is pretty solid okay so when you look at a blended average though across your total paid user base i mean you're talking like 30 or 40 annual churn is that accurate or i'd say it's less than that but you know churn is an extremely complicated topic because as you get an older your company gets older you get people who've been around for 10 years which makes it look like your churn rate's extremely low so the ratio of new people coming in to old people if you want to study churn it's probably a phd dissertation just just trying to enumerate all the things that can uh affect your churn ratio and make it look better or worse yeah yeah i mean there are tons of different ways to measure i mean but generally speaking if you take the code signed up a year ago whether it's a monthly plan or an annual plan and generally look at how much revenue you lost versus how much you expanded them right you can you can kind back into those churn metrics and look the only reason you'd really care about churn is well one if if you want to get sas multiples you want to prove that your thing is sticky but two it allows you to determine how aggressive to be to get the customer right if so that's my next question for you right is is is how aggressive are you being fully weighted cac wise to get a new 12 a month customer well so what's really interesting is it used to be zero so believe it or not we paid nothing so we just were growing organically and casting a net that way you know with referrals people would find us in the app stores etc so we're not paying anything for that and then a certain percentage would move to paid the challenge then is your growth isn't that fast right because it's just purely organic so now we're starting to get more and more aggressive every month we spend more and more acquiring customers and we're willing to pay 50 maybe even a hundred dollars for a customer it depends on the source and the channel and how good the customer will be and our lifetime's pretty good we have customers you know certain plans it's 500 dollar lifetime maybe even more so then it becomes an interesting thing about just how long are you willing to wait for that return yeah yeah yeah yeah as i say if you if you kind of take a weighted average and you're right they're cohorts especially with a 16 plus year history but on average if you're turning 30 annually that gives you a lifetime value of 40 months at 12 bucks is a basically 500 ltv right so if you feel good about 70 to 100 bucks i mean that's an eight month payback period you would do that all day long especially if you have funding to bridge the cash gap uh that's exactly right and so the key is to prove that you can keep scaling and that price will always be there right like a lot of companies find hey we can buy five thousand customers at a hundred dollars each that five thousand and first customers suddenly 500 oops and so a lot of it is you want to spend very carefully to figure out where each of those kind of step function points are so you don't suddenly go oh what happened we spent all this money but we didn't get anybody else yeah so i would i would argue that you're and i'm going on a limb here because we've known each other for approximately 10 minutes and 18 seconds i'd imagine your creative genius is actually finding new kind of honey pots right to go after it's actually finding new channels new oil wells you can kind of jump into whether that's a new app store you stumbled upon or a new affiliate partnership or things like that would you agree with that and if so what does your process look like for finding new channels well so what's really interesting is for us we focus acquisition on people with a robocall problem right so it's all about where do you find those folks a lot of it is those folks are searching they're like you know stop bad call stop telemarketers stop robo calls that's a great channel it's just a question of where are they searching other people are you know they're on a on facebook and they happen to see an ad at the same time they got a robocaller that ad is going to perform pretty well so a lot of it is just trying each channel and figuring out the way to talk to people in that channel when people are searching for a solution to robocall blocking it's just a search really easy to say hey we block robocalls here's how let's do it excuse me if people are on facebook it's a little bit more challenging to get the right graphic the right message so people are just kind of floating around going oh yeah i had that problem i had those calls yesterday let me try this yeah i mean but but it's extremely competitive right if i type stop robocalls into google you got 10.4 million results right and most of them are like like the fcc the ctia cnn fox news doing stories on that stuff i actually don't see many tools on the front page except maybe robokiller.com right so how do you guys play the seo game well so what's really interesting is most people are searching for robo calls or not doing it on their desktop right it's because your mobile phone got something like how do i block calls they do it in the app they go to the app store and they do it there they also sometimes they when they search you know robo calls they'll see articles or they'll see us have seen us on the news the next day so actually or the previous days will actually search for us so for us pr has been a really important part of our strategy which is we're out there on a lot of different news stations talking about the problem what people should do why it's there and that's been a great channel for us even though we sort of stumbled into it yeah what's your team says today how many folks uh i'm looking around the room trying to count quickly about somewhere between 25 and 30. okay that's i mean fair enough and uh any plans to raise additional capital uh you know we're always looking for opportunities i think for us at this point that's a really interesting possibility is to go raise a big round and start scaling up the marketing yeah what would you consider big you're talking like 10 15 30 million you know when you get to a company that's been around for a while 10 really is kind of the magic number and then it's plus or minus depending on the enthusiasm of investors right yeah and why is why is kind of a raise the right decision versus uh you know sell the company you've done this that you've done that before as well right what basically how do you if you had a term sheet from other vc at a valuation you liked and a another version of aol right at the same valuation that the term she gives you which one do you take well you know what's really interesting is when we sold the aol we had a term sheet that was going to give us 15 million dollars at a post of like 45 or 50 right yeah and we had a plan that said hey in about four years we'll we'll be at 30 million in revenue or 25 million in revenue and aol came with a much bigger offer it was like wow we'd have to work four or five 200 million right to get there yeah exactly so it's a no-brainer let's not take the money let's do it do you really have to look at your acquisition offers versus where you're going to grow versus what capital does and do some math and a little bit of you know finger in the wind like where do we think we're going to wind up yeah interesting now in terms of where you're at today and i i think these numbers are going to be conservative because you i think gave me minimums but at a 12 rpoo right and say you're converting on the low end of the two to five percent range you told me that's 200 000 customers paying 12 bucks a month puts you at like 2.4 million a month right now in revenue is that generally accurate no because the 200 000 is people who've ever signed up it ends up being less when you start applying churns so we're not that high in revenue we're doing fine we're we're well above kind of the magic number to go raise bigger rounds but we're not up there can uh i won't ask more except this one last question i mean have you passed 10 million in run rate right now we haven't said i'd say that's our next target okay pretty close i was gonna say is that feel like a stretch goal for this year or does it feel like achievable um you never know right i'd say everything is always a stretch because you never know what's gonna go wrong but i would be shocked if we don't get there in the you know in the relatively near term yeah i asked that question because i feel like founders have the most leverage once they get their arr basically to match the fund the total funding they've raised right so if you hit a 15 run right and you raise 15 you have a lot of leverage to go do whatever you want to do next eight you're you're exactly right or you can show that hey we're gonna hit this within six months with this money or whatever the time period is you're on the right trajectory everybody just draws a straighter line or slopes it that's when you're in good shape yeah and now what does growth look like so if you go back a year i mean you're going still like 10 20 50 100 year over year you know we've been we've been a very steady 25 grower right so some years it's better some years a little bit worse but surprisingly it's just been along that line which is one reason to raise capital which is to move that number up right and get go from 25 to 50 or a bigger percentage of growth yep no that makes good sense very good all right let's wrap up here alex with the famous five number one what's your favorite business book uh that's a great question um i'm struggling with that one because i haven't read a lot of business books what's your favorite book do you read a lot so well i do i think actually free the book by i think it was chris anderson that talked about the power of doing things for free was a huge book for me and it's been a lot of the thoughts there have have helped us design the email products number two is there a ceo you're following or studying uh yeah actually jack dorsey of twitter i find him to be very interesting and he's got a really tough row to hoe politically yeah he sure does uh number three what's your favorite online tool for building your company uh surprisingly it's slack i really like slack and number four how many hours i sleep you get every night i have a teenager and 11 year old so i'm usually about six and a half if i'm lucky all right so two kiddos and married i am married yeah in 19 years amazing that's great okay and how old are you uh that i'm not saying publicly i'll say 25 years young all right last question what do you wish your 20 year old self knew uh i wish my 20 year old self was more aggressive and more of a and when i got to 30 yeah i became it not it not a 20. yeah well why do you say that by the way i mean you sold a company for 200 million bucks now you're jumping back into this a vc funded thing i mean i'd say you took on a lot of risk i didn't take it early enough i wish i'd taken it right out of school i had the opportunity to go work for a company that became extremely large where i would have been one of the early employees and i'm like no i think i'm going to go to grad school make sure i've got a lot you know kind of work down that path yeah and i wish i just left off left off the bridge guys youmail.com helping stop robocalls call it 65 70 80 000 ish customers paying 12 bucks a month for call it 700 800 grand a month right now in revenue he's got 10 million in ar in his sites growing the company 20 year-over-year 15 million into the company to date 25 folks on the team 30 churn obviously that's difficult to measure about 30 lifetime values anywhere in the 500 ish range totally willing to spend up to 100 bucks to get a new customer for eight nine ten month ish payback period alex thank you so much for taking us to the top thank you and you asked some great questions it was really fun