SaaS Interviews with CEOs, Startups, Founders
How he Broke $10m ARR moving from 65k B2C Customers to 20 B2B Enterprises
15 Aug 2022
Chapter 1: What was the initial business model before the pivot to B2B?
So multiply that. I mean, you were doing like almost a $10 million run rate B2C back then, right?
Pretty close. That's right.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey, folks. My guest today is Alex Quilici.
He's the CEO of YouMail. Before that, he co-founded and was the CEO of Quack.com, which provided a consumer voice portal service that was essentially Siri over a 1-800 number back before there were even smartphones. AOL acquired Quack for $200 million in August 2000, and just 18 months after, it was found an impressive short life cycle there.
And at AOL, he was vice president of voice services, where he helped drive the division to multiple product launches and over a million paying subscribers worldwide. and over 50 million bucks in annual revenue. Today's building, YouMail, which helps you stop spam calls and messages. Alex, you ready to take us to the top? I am. Let's go. All right. Now, I love this.
When I had you back on in early 2019, you had an ARPU. You remember that? Well, you told me you had an ARPU about 12 bucks a month on average. You were B2C only. What has changed?
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.
You know, those calls you get to pretend to be Marriott or pretend to be your bank.
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Chapter 2: How did YouMail evolve from B2C to B2B?
So there's tremendous damage there that they're willing to pay a portion of to 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.
That's really interesting. And just to build up the back story before we focus the rest of the interview on the enterprise motion today, do you remember what year you passed? I know you launched in 2007, but what year did you pass a million in revenue?
That was a while ago. That was probably 2009, actually.
Oh, wow. Okay. So you went from zero to a million in about two years.
Yep, that's correct. In fact, we did it in about 11 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.
That's amazing. You bootstrapped or have you raised?
So it was an interesting company. I actually came in not as the founder, but as an early investor. They'd raised a couple million in angel money before I even got there. I came in as a board member and I helped 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.
How the hell do you keep a cap table clean with all this going on?
Well, you don't at first, but we keep it as clean as we can. And one of the things is, even in the crowdfunding round, we didn't go after the $1,000 investor. We went after the $50,000 plus investor. So that doesn't add too many new people to the pool, even if you raise a few million dollars.
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Chapter 3: What challenges did YouMail face during its transition?
That was essentially it. 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 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.
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?
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. So it can be somewhere in that range.
That's kind of like 10,000 bucks a year is fair, right? What's that? More than you have customers paying more than 10,000 bucks a year. Yeah, yeah, for sure. That's the enterprise.
And then 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 because it essentially protects the enterprise's brand reputation, protects their call centers, and protects just random people from harm from a given imposter thinking it's whoever that enterprise is.
Yeah.
Did you just let the 65,000 B2C customers turn off? Or how many customers are you serving today?
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Chapter 4: How does YouMail combat spam calls and protect brands?
100%, no robocalls are going to 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 and with annual plans. And so it was creating a better value proposition. 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 going to block every single robocall. There's no way a robocall is going to get through. And when we were able to deliver on that promise, we're seeing that churn goes down and we can charge more.
That's amazing. Okay. That's the B2C side. How many folks are paying on the B2B side today? Are we talking like a handful, 10, 20, or more like a thousand?
No, we're in the 20-ish range, I 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 a double or more in the next year, just at the pace.
But I guess, so then just to be clear, if we break down, 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.
Yep. I'd say 80-20 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. And we can see it for three years, it's going to move to, well, probably 40% B2C, 60% B2B and go from there. So consumers growing steadily, but slowly B2B is doubling every year or more.
That's great. Let's talk a little bit more about your team here. How many folks are full-time today?
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's a really efficient way for us to get development done, get certain kinds of marketing done, 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.
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Chapter 5: What is the significance of B2C customers in YouMail's strategy?
Let's bring them in as a contract for 20 hours a week and work on something. I know somebody else and gradually built that up. And then we've been hiring people too. Like some of the contractors have become full-time because they really like working with us. But when you start out, your online marketing guy doesn't have to be 40 hours a week.
Your online marketing guy can be 10 hours a week to run a limited set of campaigns and tests that they're trying to do to advertise your B2C stuff. So 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.
And so it's about building your network, right? I think it's really critical to build up a good network that you can then leverage for this sort of stuff.
That makes tons of sense. Now, in terms of size of business, say again, if you're doing 10 million in ARR back in 2019 or around there with 65,000 B2C customers, it 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 12 to 14 million ARR range today?
Let's put it this way. I'm probably going to get fired if I'm not hitting 15 by somewhere about the middle of next year, at least. So your estimate's not bad.
Yeah.
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 not, why not sell the business and move on to the next thing?
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Chapter 6: How has YouMail's revenue model changed over time?
It's just more about timing on the VC side.
Well, and the interesting thing is there's mostly crowdsourced individuals and individuals are patient, right? You know, 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 over seven, eight, ten years, you're happy.
We do have some institutions and they, of course, always look for ways to kind of get out or trade. But, you know, they know that this is growing now. So some of them are sitting there going, OK, well, this isn't bad. We stuck around and didn't try to force something.
Well, if you want to buy out your investors, we have $145 million of fresh capital. This is one of the top use cases, how we're working with bootstrappers or almost bootstrapping. We give them $1 million, $2 million, $5 million, $6 million. They go buy out the early folks and they own more equity.
So the 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. And that actually is money you cannot spend on growing your business.
How long did you have to pay it back?
So we have, what, three years to pay a couple million in debt back, a little 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.
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 million bucks. You can do this, this, and that with it.
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Chapter 7: What role do contractors play in YouMail's operations?
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.
Guys, you may have started off helping consumers block robocalls on their personal phones, built up 65,000 paying customers with 12 bucks a month and 10 million 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 ACVs, call it 10 grand a year, scaling nicely.
And in his own words, quote, I'll be fired in the next 12 months if I don't break 15 million bucks in ARR. We're obviously rooting for you, Alex. Thanks for taking us to the top.
All right. Thank you.