YouMail Revenue & Funding (2019)

[00:00] What is going on YouTube? You know, we are just two weeks away from Founder500 in Austin, Texas on September first and second. There's over 500 B2B SaaS founders all coming together. You don't want to miss it. Ticket prices increase every three days. I have it on an automatic accelerator every three days, and we're almost sold out. You can see there's about nine left when you go to the event bright link, about nine left, and it's updating [00:23] real time. So check it out today. It's founderpath.com. Then in the upper left, you can hover over our product dropdown and click the event stream. I'll also put it in the description here of the YouTube video. I'd love to see you there. Hey folks, my guest today is Alex Quilichi. He's the CEO of youmail. Before that, co founded and was the CEO of quack dot com, which provided a consumer voice portal service that was essentially Siri [00:44] over a 1-800 number back before there were even smartphones. AOL acquired Quack for 200,000,000 in August 2000 and just eighteen months after it was founded impressive short life cycle there. And at AOL, he was vice president of voice services where he helped drive the acquisition, the division to multiple product launches and over a million paying subscribers and over $50,000,000 in annual revenue. Today's building youmail, which helps you stop spam calls and messages. Alex, you ready [01:09] to take us to the top? [01:10] >> I am. Let's go. [01:11] Alright. Now I love this. When I had you back on in early twenty nineteen, you had an ARPU. You remember that what you told me, you had an ARPU about $12 a month on average. You are B2C only. What has changed? [01:22] >> So the biggest thing is, youmail wants to stop spam calls either before they get to the consumer's handset or even better when they're actually made. So we've created products that enable carriers to monitor their network and detect when they're originating these bad guy calls. And we've created tools that allow enterprises to shut down imposter scams. Those calls you get to pretend to be Marriott or pretend to be your bank. [01:46] So when you say, so Carrier would be AT and T. So you help AT and T monitor their networks to prevent these like bad guy calls or these fake Marriott hotel, fake social security calls. [01:56] >> Actually, it's not AT and T, T Mobile and Verizon are the carriers that are interesting here because they're not really responsible for making the calls. It turns out most people don't know there's almost 3,000 wholesale carriers in The US. And those carriers can provide things like hospital telephony, they can provide international telephony, they can provide call center telephony, They provide all these different ways to make phone calls. Well, the bad guys just abuse many of those [02:22] >> carriers and sometimes they don't even know it. So we try to have them discover one or two of those. [02:28] What's that? Can you name one or two of those? [02:30] >> Sure. There's like Airstream is an example of a wholesale carrier that provides services for enterprises, but bad guys can use their network. There's tons of them. The way to find the full list is go to the FCC. They have something called a Form four ninety nine that you have to file if you're a carrier. There's the list. [02:49] Interesting. Okay, so let's just get the backstory though. So in 2019, what were consumers paying you for? [02:55] >> So they were paying us for essentially robocall blocking and privacy protection, as well as second phone lines that were robocall free and had a number of business phone features. That was the consumer model. [03:08] Now, these notes could be wrong, so feel free to correct me. But my notes say that you had about $12 a month per customer. Had about 65,000 customers, right? [03:17] >> Yeah, that's spot on. [03:19] Okay, so multiply that. I mean, you were doing like almost a $10,000,000 run rate B2C back then, right? [03:24] >> Pretty close. That's right. [03:26] So, I mean, I would say that's a pretty successful B2C company. Why pivot at all? What did you realize? [03:32] >> Well, we realized that the carriers of the enterprises needed help. They're willing to pay up for that help. If you're an enterprise and someone's using your name in making tons of imposter phone calls to rip people off, that not only gives you customer support costs, but it causes brand damage. And you may even have to reimburse those people as a form of goodwill. So there's tremendous damage there that they're willing to pay a portion of to [03:56] >> stop the problem. And enterprises are not $12 They're not $120 a month. They're substantially larger when you can find and get these contracts successfully. Carriers are the same way. [04:08] That's really interesting. And just to build up the backstory before we focus throughout the interview on the enterprise motion today, what year, do you remember what year you passed? I know you launched in 2007, but what year did you pass a million in revenue? [04:18] >> That was a while ago. That was probably 2009, actually. [04:22] Oh, wow. Okay, so you went from zero to a million in about two years. [04:25] >> Yep, that's correct. In fact, we did it in about eleven months because we were completely free service. We're running out of money. We needed a business model and we quickly pivoted, found a subscription and got to a million. [04:37] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders. But imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect [05:00] your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna [05:24] get a different valuation. A VC is gonna pay a different valuation, private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is [05:46] not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation and the multiple. Maybe you're [06:12] going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if [06:34] you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into the [07:00] interview. That's amazing. You bootstrapped or have you raised? [07:04] >> So it was an interesting company. I actually came in not as the founder, but as an early investor. They've raised a couple million in angel money before I even got there. I came in as a board member to help them raise VC funding, and then I became the CEO. So we're a company that has VC funding. And then we also did a crowdsource round in 2015, which was really transformative for us. [07:26] How the hell do you keep a cap table clean with all this going on? [07:29] >> Well, you don't at first, but we keep it as clean as we can. You know, one of the things is even in the crowdfunding round, we didn't go after the thousand dollar investor, we went after the 50,000 plus investor. So that doesn't add too many new people to the pool, you know, even if you raise a few million dollars. [07:45] I see, okay. So I guess maybe just let's get the most up to date data. So what was the last round? When did you raise it? Was it your series B or C or what? [07:52] >> So the last round was a series B and it was 2015. So since then we've been acting like a bootstrap company. We try to keep breakeven as roughly where we run. Sometimes we'll lose a little money as a project to help spur growth, but we've been growing all that growth as a breakeven company. [08:09] Well, that's okay. So last round, just to be clear, was 15, 5,000,000 or 15,000,000? [08:14] >> It was 5,000,000 in 2015. [08:16] Yeah, which is maybe a big round for 2015. And maybe, know, today markets are now correcting, but okay. So 5,000,000 series B, and I guess what, including the 5,000,000, what's the total you raised it, including crowdfunding? [08:28] >> So we've raised a little over $15,000,000 in our history, but what's important to know is youmail with several different companies. It started off as a voicemail for carrier company and ran out of runway trying to sell to carriers, which turns out to be pretty difficult, right? If you're trying to help them do something that affects consumers. We then got stuck around for about four or five years where we're embroiled in a bunch of lawsuits over a [08:50] >> feature we had. They were all dismissed. We pivoted to a call blocking company, raised the 5,000,000. And that's really how we view youmail now is we've done almost everything with the 5,000,000. [09:00] What year did you officially come in as CEO? [09:03] >> I came in in 2007, 2008. So very early in the life cycle. Yeah. Yeah. Basically Day one. I've been through the first wave of trying to take a strategy someone else had and executing it with carriers, seeing that fail, moving to transition to a consumer company, seeing that struggle because of lawsuits and other challenges, and then pivoting to a call blocking company. And now we're pivoting again, but to some degree, to be call blocking for carriers [09:29] >> and enterprises, not just consumers. [09:31] A lot of founders listening today are doing ambitious things that sometimes run into sort of like legal issues, right? Competitors just trying to be nasty and sue them because they're early to kill them. You won that battle. Mean, give us some funding. How much did you spend on legal bills back in the day? And like, how much time and energy did it take? How did you get the team morale high to make it through that? [09:49] >> So it was pretty ugly. We had four class action lawsuits over a feature we had where if you called me, it would send you a text back saying, I'm busy, go to my website, send me an email, whatever the user wanted. That was called auto reply. People said, Oh, that's violating TCPA, and sued the founders personally, right? And the executive team personally, as well as the company. It took three years and about a $250,000 to get [10:14] >> out of that mess. Ultimately, the FCC found we were doing nothing wrong. We're actually innovation that they like to see. If someone calls, they're giving you permission to call them back. That was essentially it. Totally. And so that, but that was extremely draining. The team stuck with it because we believed in the vision. Even in 2012, 2013, we saw call blocking coming. We started our first variance of our features to make that easier. And once we [10:42] >> got done with the lawsuit, then we were able to raise the crowdfunding round and the rest is sort of history. Everybody's really glad they stuck around because we're making such a huge difference now. [10:51] Now, this makes tons of sense. Really interesting story. Okay, now let's fast forward to sort of present day. So what are you selling today? What's the average enterprise paying when they sign up per year and what are they getting for that? [11:01] >> So, you know, they're paying what a typical enterprise pays, which means, you know, five digits, but we can't talk about all the details, obviously. It can be somewhere in that range. [11:09] That's kind of But like $10,000 a year is fair, right? [11:12] >> What's that? [11:13] More than, you have customers paying more than $10,000 a year. [11:15] >> Yeah, yeah, for sure. That's the enterprise and the carriers are similar. And what an enterprise gets for that is if there's somebody out there that's being an imposter, that's pretending to be them, we will let them know how many of those calls are out there and we will shut them down. And so we will make it so those guys can't pop up. If they pop up again, we whack them. And so that's a really great business [11:36] >> because it essentially protects the enterprise's brand reputation, protects their call centers, and protects just random people from harm from a given impostor thinking it's whoever that enterprise is. [11:49] Did you just let the 65,000 B2C customers churn off or like how many customers are you serving today? [11:54] >> Actually, it's grown a bit. The thing is the B2C business is critical for us. They're a sensor network that tells us what's going on with scam calls. So everybody who has youmail is contributing to the fight to stop robocalls. There's data about this illegal call hit this person and let this message pretending to be, say, Amazon. That's extremely valuable for the enterprise side of the business because we have all this data we can use that tells [12:18] >> us, here's exactly what's going on, here's where those calls are coming from, and here's how we get rid of them. Same with the carriers. So if there's a wholesale carrier, we can look at what's coming from their network and show them, here's the illegal activity that's hitting our pool of consumers. So in our case, the B2C business is the critical enabler that allows us to have a differentiated B2B solution. [12:37] And so I guess, let me just split it up then, right? So how many B2C customers do you have now today? You know, critical part of your network. [12:43] >> So B2C customers, we have actually had 10,000,000 people sign up for youmail. And so a significant number of them are active every month as free users, plus the paid users. So that's the size of the network. It's literally hundreds and hundreds of millions of phone calls coming into us. [13:00] That's great. What I'm trying to measure is how successful you've been converting 10,000,000 free or active, which you still get value from because there are alerts in your ecosystem. But how successful have you been converting those folks into paid? Is it still about 65, 70,000 paid? [13:12] >> Yeah, it's in that ballpark. It's grown a little We actually focused on increasing ARPU rather than trying to grow that base. So get more money from the pool as opposed to make the pool bigger. That was the right thing to do, I think, during COVID times. But the data we've collected is fantastic because the free business keeps growing. We keep getting more and more people in there, and eventually they convert. [13:33] You've touched on enterprise motion of $10,000 ACVs, but we were before talking about a B2C motion of $144 a year, $12 a month. To your point, with 70,000 customers, if you increase ARPU by $10 a year across 70,000 customers, that moves the needle for your business. It's adding almost a million bucks of new ARR. You haven't talked about what products you've started selling more into the B2C range to increase that ARPU by a couple of dollars [13:53] every year. You want to talk about that? [13:54] >> Yeah, so one of the things we did is we have a product called youmail plus which is our privacy protection offering. What we did to that offering is we added something where we can guarantee you won't get robocalls. A 100%, no robocalls are gonna get through. That's something that consumers found worthwhile and that enabled us to move from a $4.99 ARPU for that particular product up to where it looks like it's $5.99 $6.99 even with discounting [14:18] >> and with annual plans. And so it was creating a better value It was one thing to, we'll block most of them, we'll give you some customization. It's another thing to say, nope, we guarantee it. We're gonna block every single robocall. There is no way a robocaller is gonna get through. And when we were able to deliver on that promise, we're seeing that churn goes down and we can charge more. [14:37] That's amazing. Okay, that's the B2C side. How many folks are paying on the B2B side today? We're like a handful, ten, twenty or more like a thousand? [14:44] >> No, we're in the 20 ish range, think somewhere in that ballpark. It's something that started with one paying customer two years ago. And so that's pretty good to get that kind of growth. And I think we're going to see it double or more in the next year, just at the pace. [14:57] But I guess, so then just to be clear, if we break, like if you look at your full, like all your revenue from last year on a percent basis, the majority is still B2C versus B2B. [15:06] >> Yep, I'd say eighty twenty is a rough approximation of where we've gotten to somewhere in that ballpark. I think if you look out two years, it's going to be the other way around. We can see it for three years, it's going to move to, well, probably 40% B2C, 60% B2B and go from there. So consumer is growing steadily, but slowly B2B is doubling every year or more. [15:27] That's great. Let's talk a little bit more about your team here. How many folks are full time today? [15:31] >> So we have 30 full time employees, but the really interesting story is that during COVID, we were able to take advantage of remote work, which enabled us to hire people all over the world, including as contractors. So the total team size is approaching 70, but a lot of that are people who work on a contract basis. And we found that it's a really efficient way for us to get development done, get certain kinds of marketing done, [15:53] >> do customer support. You don't need to have an employee sitting in California. They can be somebody at home in Jamaica and be just as good at doing that customer support. [16:01] Okay, everyone wants the playbook to using contractors. Someone's gonna build a billion dollar business and have one FTE as the founder and then a network of contractors. So you gotta teach us here. I mean, who are you using for development and how did you find them? [16:15] >> Well, so the really key thing for us is that we have a core development team. We aren't outsourcing it a 100%. What we wanted to do was find support for tasks like maintenance or relatively simple tasks that don't require a really complicated skill set. If you're fixing iPhone bugs, that's completely different than if you're building an iPhone UI from scratch, you're building complicated data manipulations, that's a different group. So we contract out a lot of what [16:39] >> I would say is the easier stuff. And it was through our network, we found someone who basically built a contracting firm in Asia who knows how to pull people together with the skills we want, and has been able to staff up and down as we need. [16:50] It's amazing. What's the name? Can you share the name of that company in Asia? [16:57] >> It's actually a person. It's an individual who's one of our friends, who, one of our contacts. [17:01] Oh, so it's not like a network that anyone can go use? [17:05] >> No, it's, we got lucky that we were looking for someone, we found this guy to help us, who developed for us. And he said, I have a whole network of people I can bring in. And we just went from there. [17:14] What about support? [17:15] >> What's that? [17:16] Contractors, support. How do you find the support contractors? [17:19] >> So again, that was a contact from our past who'd done that for another company. He actually had done it for a company called Line two, which was a second phone line. And it built up a remote support team through essentially an agent who knew how to pull everybody together in Jamaica and knew how to evaluate customer support. So we put that together, leveraged him, and now the team's fifteen, twenty, something like that of just those contractors there. [17:41] >> They do a terrific job. [17:43] That's answering the live chat on the website, phone [17:45] >> calls Live chat on the website, emails, phone calls, phone support, all of that. [17:50] Nice. Can I if I wanted to use them, are you like, are you open to me reaching out? [17:54] >> Yeah. If you send me an email, I think I wanna be careful about having a zillion people contact him. But, yeah, he's perfectly happy to build support teams up for people. He's very, very That's amazing. [18:03] Okay. And then lastly, marketing. How do you find marketing contractors that know what they're doing? [18:07] >> So it's kind of the network effect there too. So there's a lesson here, right? So in our network, we had one person who's been kind of an outsourced CMO for a variety of companies. We brought him in to help us with strategy positioning, a whole set of things. And he started going, well, you guys really need help here. I know somebody, let's bring them in as a contract for twenty hours a week and work on something. [18:26] >> I know somebody else and gradually built that up. And then we've been hiring people too, like some of the contractors that become full time, they really like working with us. But you know, when you start out your online marketing guy doesn't have to be forty hours a week, your online marketing guy can be ten hours a week to run a limited set of campaigns and tests that they're trying to do to advertise your B2C stuff. So [18:46] >> we found the contractor model really, really works, but it's because we have trusted people who are bringing them in. We have not just gone to a random firm who's contacted me on LinkedIn and said, yeah, let's outsource development. So it's about building your network, right? And I think it's really critical to build up a good network that you can then leverage for this sort of stuff. [19:05] That makes tons of sense. Now, terms of size of business, say again, if you're doing 10,000,000 in ARR back in 2019 or around there with 65,000 B2C customers, sounds like you've grown that maybe up to 70,000, you increased ARPU a little bit, so maybe that takes you to 12. And then you have a little bit, maybe call it a million or so coming in through the B2B side. Are you sort of in that like twelve to [19:23] fourteen million AR range today? [19:24] >> Let's put it this way. I'm probably gonna get fired if I'm not hitting 15 by somewhere about the middle of next year, at least. So your estimate's not bad. [19:33] Fair. Well, so let me ask you this question. I mean, you raised Series B back in 2015. Those folks, this isn't a knock on you or anything, but they've written this investment off. Right? It hasn't tripled every year, which is ridiculous anyway, but that's what you sign up for when you do VC. So, I mean, can you buy those early folks out, clean up the cap table and get more of this bad boy back? Or if [19:51] not, why not sell the business and move on to the next thing? [19:54] >> So, you know, the thing is the value we've created in the last couple of years exceeds everything we created in the first, you know, ten, twelve years of doing this. So the whole point about when do you want to sell out? When do you want to try to buy out investors? Is when do you think you've hit the point where you can get a really good return for them and you're probably not going to do better [20:12] >> over time? If we'd sold this thing in 2018, the business was kind of flat growing slowly. We hadn't completed our transition. It would be completely uninteresting to get a 2X or maybe even lucky a 3X on 5,000,000 in revenue, right? Nobody's happy. Now we're growing at a good clip. Everybody can look out a couple of years and go, if you keep that up, this is going to be a nine digit plus business when it goes. Why [20:34] >> would I jump out now? And so it's a bit of a sunk cost fallacy people have, right? Because it's kind of the opposite, which is this isn't going anywhere. It's never going to go anywhere in the future. You can't make that conclusion. You have to look at where it is now and say, what's going on? What's the evidence this is going to succeed or fail? [20:49] Well, it's less about you. It's more about those funds. Those funds that wrote a check-in 2015, where the life cycles of a fund is ten years, those funds are almost dead. Those fund life cycles are almost dead relative to what you're building now. So it's less about you, it's just more about timing on the VC side. [21:03] >> Well, and the interesting thing is there's mostly crowdsourced individuals and individuals are patient, right? If you put 50,000 in or 100,000 in, you're fine with taking your time to see that turn into something big. If it can turn into a million, you're over 7, 8 x. I see. You're happy. We do have some institutions and they of course always look for ways to kind of get out or trade, but they know that this is growing now. So some [21:25] >> of them are sitting there going, okay, well, this isn't bad, we stuck around and didn't try to force something. [21:30] Well, if you wanna buy out your investors, we have $145,000,000 of fresh capital. This is one of the top use cases, how we're working with bootstrappers or well, almost bootstrapping. We give them million, 2,000,000, 5,000,000, $6,000,000, they go buy out the early folks and they own more equity. [21:43] >> So, one I love, I love debt. So, we took some debt a couple of years ago in order to accelerate growth. We said, we're going to burn some money for a little bit. We have a very specific plan. We're going to build this B2B thing. We took some debt. The challenge with debt is always you've got to pay it back. That actually is money you cannot spend on growing your business. [22:01] How long did you have to pay it back? [22:02] >> So we have what, three years to pay a couple million in debt back, a little [22:06] bit more than that. And you weren't able to add, you weren't able, I mean, that's three years is still a long time. You weren't able to take the upfront cash and add enough MRR to more than cover the interest payments over three years? [22:14] >> We're looking at various strategies here, right? We want to figure out what to do. And so there are possibilities. We're always getting approached by people saying, hey, we'll give you $5,000,000. You can do this, this and that with it. But we're a little bit conservative because we think, well, if the B2B business grows at the rate it's growing, it makes a lot more sense to do this six months or a year from now because there's plenty [22:33] >> of EBITDA to cover it. [22:36] Yeah. A tough part. [22:37] You profitable? [22:38] >> Have to balance growth versus how much they want to burn. [22:40] You're profitable today? [22:42] >> Yeah. We're running breakeven, deliberately breakeven to maximize growth. [22:46] Yep, that makes sense. Very cool. Great story here. Alex, let's wrap up with a famous five. Number one, favorite book? [22:51] >> My favorite book is Still Free by, I think it's Chris Anderson from like ten, fifteen years ago. [22:56] Yep. [22:57] Number two, is there a CEO you're following or studying? [22:59] >> Well, every like everybody else, Elon Musk. I think he's just awesome. And I love the fact he's so honest about everything. He has no filter. And I think more CEOs need to be like that. [23:08] Number three, what's your favorite online tool for building youmail? [23:12] >> My favorite online tool for building youmail, it's really interesting. It's actually Slack now because communication is so critical to the business working, especially when you go remote. [23:22] Number four, what's your favorite, sorry, how many hours of sleep do you get every night? [23:25] >> I'm actually getting seven and a half now. My doctor told me I better. I used to get six and that wasn't That's awesome. [23:30] What's your situation? Married, single, kids? [23:33] >> I'm married, two kids, both now are gonna be in high school. I'm kind of aging out. [23:37] That's amazing. How old are you? [23:40] >> I'm not saying publicly. It's one of those things that's too embarrassing with all the kids listening. [23:45] That's fair enough. Okay. Last question. Something you wish you knew when you were 20. [23:49] >> I really wish I started being an entrepreneur earlier in life rather than later in life. And I didn't realize how satisfying it is as a career. Even if you hit wall after wall, when you finally don't hit a wall, it's just a wonderful feeling to make an impact. [24:02] Guys, youmail started off helping consumers block robocalls on their personal phones, built up 65,000 paying customers with $12 a month and 10,000,000 ARR around there back in 2019. The business has been sort of flat since then. However, they now have a B2B play that with 20 enterprise customers on there with higher ACV, call it $10 k a year, scaling nicely. And in his own words, I'll be fired in the next twelve months if I don't break $15,000,000 [24:24] in ARR. We're obviously rooting for you. Alex, thanks for taking us to the top. [24:28] >> Alright. Thank you. [24:31] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on three hungry buyers. They try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday one [24:56] p. M. Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at two p. M. Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's [25:17] an acquisition, a big fundraise, big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people [25:39] are saying. Sign up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, I do it so that we can all learn. We have to counter [25:59] those people. We got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you. Hi.

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