Service vs. Solution: How YouMail Broke $10M ARR Stopping Bots

tell me welcome to the stage Alex from umil Alex come on up thanks for being here thank you for having me did I get it right about 60% B2B it'll be there next year it'll be there next year it'll be there next year so look stage is yours I'll let you take it away you actually I'll control this you sit there um 60% will be B2B coming up but the reason I want to bring you on and feature your story is because a lot of folks think if they start off as sort of consumer or they have to start off as

B2B Enterprise motion but there's a lot of ways to get to a big sort of B2B software company so take us back uh to where you started with the reference of this being where you are today so stop spam calls text and voicemail let's go back uh 2019 is when you broke 7 million of Revenue but take us back before then how long did it take you to hit the first million so the first million took about two years uh the first three million took five or six years and eventually we got to you can see the chart it was 7 million which was about

10 years MH so it was a pretty slow growing consumer business very very steady but what we realized at one point is to grow it faster we needed to get money we need to get either get capital or find a new source of Revenue and the the team had been we our our app blocks robocalls right and the way it works is we build up a big list of all the numbers that are behaving badly either sending calls or texts and the app blocks them from ringing your phone or leaving you a text message pretty simple what we we realize is there were a lot of people coming to us saying hey we

want your list of bad numbers right and so we said hey maybe there's an opportunity to sell that list to others and grow the business faster so that was our entry into B2B so we built a simple data API back in 2019 and put it out there and what happened was a complete surprise to us we thought hey this is great people are going to dip we're going to make money on dips we'll be able to get a couple million dip a dip is when they go and give us a number and say is it good or bad I see right so it's an API where

where the other carriers mostly would come to us and say I want to know if this number is good or bad so I can block the call we had visions of billions of dips tons of money very simple we could use that to grow our consumer business so what happened was our main customers were the bad guys who wanted to understand when we had a number that we were blocking so they could change and call from another number so we got some decent Revenue but we had all the wrong customers but that was our entry into B2B what what that taught us though after a while we

realized the problem we needed to solve was not blocking and helps businesses solve was not blocking calls when they hit the device but blocking the calls from ever getting started and so carriers didn't want uh a good carrier doesn't want to get a bunch of bad guys using their Network to create calls that go harass people and so then we changed and built a first API and then a service that allowed carriers to see what was going on their Network by hitting our consumers so we have 13 million people

who've signed up for email we've answered billions of calls we have a huge platform of data so our superpower was the data we were using it for consumers but making us use it for businesses what finally got us to where you can see some growth yep and you guys are seeing some of that growth here on the screen over the next 15 minutes we're going to get the full backstory starting with this beauty yeah so I didn't actually found Emil I came in as an investor after selling a different company to to AOL

and the original company was a voicemail company and the original Vision was hey voicemail sucks um so instead of saying well let's not use it let's go help carriers get a better voicemail and that Vision didn't really work well but it ended up with a ton of people using the consumer app and that's how Emil started and that's why we collect all this data because we're all these people's voicemail and you couldn't sell the B2B product you have today without that wide top of funnel early on getting all the consumer data exactly that's our unique

thing nobody else has a consumer data we have which is what's enabling the entire B2B business one thing I do want to touch on before we go too far down the story because there are folks in here that are exited Founders that now write Angel checks and maybe they have a favorite portfolio company they love to get more involved in you were an Ang you were an investor in youil how much did you invest originally it was 50,000 50,000 and how much revenue were they doing at the time do you remember oh it was Zero it was a a first solicitation at Tech Coast angels with an idea and a

demo and I think 10,000 free users okay so what created you could call an opportunity or not depending on whose side you're on but what created the opportunity for you to say man I should come come in here and run this thing cuz uh I've done a voicemail service at AOL that had a million users paying $50 million a year in Revenue so when they bought our company that's what we did so I thought hey maybe there's an opportunity to take advantage of lots of other things to build an even bigger business outside of like an AOL but at youil what was happening where they said we now is the time to bring in another CEO did you buy out the other Founders

was there conflict it's uh one of those cases where the person who'd raised the original Angel money was not the right person to run the company and it was discovered with within the first two weeks of that process wow so I ended up coming in to help and then after about a year I raised some money and grew the started growing the company okay so when you can I ask me when you took over as CEO I mean did you reset the cap table do you own 40 50 60% personally at that point or how did you do that uh well I do own quite a bit now but the reason is the original Emil failed so it was

trying to sell the carriers yeah the original just completely failed couldn't sell the carriers couldn't get any revenue and so after about 3 years we recap the and said well the one asset we have is we've got a we've got a million Blackberry users that's got to be worth something which of these rounds was the recap would you say uh that's not even on there oh that's 2010 Venture around 2011 series B it was like an ongoing recap I see so that September 1st 20110 row we there for 400k Venture so you guys had You' raised a you participated

in the series a in 2007 1.9 million yeah bottom one and you raised more they raised more money after that 4.5 million yeah and a big chunk of that was me the Venture round the 2010 recap was me believing in the company and it was more that we had a bunch of consumers we had a platform that was producing data it was like Hey I'm into this let's see what we can do with it probably not the path I'd planned with the first 50,000 I no I love this this is good I want you guys to see this story because I'm foreshadowing we're going to go back now and look at what the site looked

like a couple years ago but a little bit more foreshadowing first you said you own a quote sort of a big chunk today can you sort of share you above 60 70% today no I I'm at like 30% blaz Zone another 15% and then the employees you right own about 15% and the rest is uh VCS and there's a hedge fund that came in in 2015 okay so Allin sort of internal operating folks 30 plus 15 is about 45% the others are owned by sort of investors these later around institions and Angels right yep yep okay great let's get more of the backstory

here so 2007 purple website fails what are you in 2011 we're a consumer voicemail app which is another failure but the really interesting thing is we listen to Consumers so the reason consumers got our app was not because they cared about voicemail but because they we had a single feature which was playing an out of service message to certain phone numbers call blocking right and so this was supposed to be the hookups gone wrong feature that was everybody talking I've never had a bad

hookup so I'm calling I call you bring bring what happens uh it would be do do do this number's out of service but not really but not really and that's what started growing the company and that's what moved us into the call block space because there were two reasons we thought it was the hookup scenario it turned out it wasn't it wasn't protecting against stalkers or hookups it was protecting against robocallers we saw all of the people were blocking the same 1 1800 number the same 312 number it's like ah there's our finally our

product Market fit okay so you you learned that in 2011 or 2012 or in a it was a gradual process between 2011 20 and 2015 mhm so let's go back 2011 to 2015 so you put in the 2011 so by that ju that series B4 million 2011 have you already figured out the new business at that point or you still tinkering uh we were tinkering we also had a it's a long story but we got sued for a another feature we had that took three years to clean up oh tell me more

so we had a feature that now everybody has on their iPhone which is an automatic reply when someone's calling right so we'd send the text message it would say go to my website send me an email I'll talk to you later we got tcpa lawsuits class actions five of them that just locked us down for three years we couldn't shut down the company we couldn't grow the company we couldn't do anything until that cleared up that was 2011 to 2014 2014 2015 once we cleared it up everybody saw the opportunity around call blocking and that's when we finally got going so we like to think of

Emil as three companies a failed voicemail company on the the uh carrier side a failed voicemail company on the consumer side and then a really successful call blocking company on b2c and now B2B and when that successful story you would say the start of that was that Jan first 1.8 million funding round 2014 uh yeah exactly okay so what were those folks betting on that put in the 4 million series B in 2011 what were they betting on knowing that there was a lawsuit happening well it was before the

lawsuit we had that that little feature actually was causing really fast growth we grew like we added like three million users in a year I see and so they saw that and said okay this is how this is going to grow I see do you remember what valuation that was at back uh this is this is a history lesson for me it it wasn't great I mean yeah yeah I I don't know what things were trading at back in 2011 either okay so let's go for this is this is what website looks like in 2011 blackberries remember those uh barely

right that's when my daughter was going into kindergarten so that's wild I I saw I was putting working on these light like oh my go blackberries all right let's move forward though this is the money maker now right is this accurate 2019 you know what you're doing yeah we know we're doing we decided this is going to be a good consumer business we're going to focus on actually it was even more General than stopping rooc calls communicating safely get a vision of you don't want Robo calls you don't want robotext you don't want Robo voicemails we you don't want uh your numers showing up in different places we're going to make it so with our app

you're suddenly safe that was that was the real Vision so this is I mean this was this is the website homepage this isn't the side page this is in 2019 what you were showing to folks so you made this very I think there's a lot to learn from consumer brands on how to do a B2B plg motion uh you did this at AOL as well what was the thinking around the funnel here to just grow millions and millions and millions of users it was like uh the bad guys were doing our job for us so the bad guys were ringing people's phones off the hook right and

so people were like how do I make this stop so was just show up which is why it says stop robocalls people like stop robocalls how do I stop them and that's what drove a lot of the downloads uh on the App Stores people come to the web and sign up we also were in the app stores for for searches for robocalls sort of standard playbook for a consumer business that was the one problem we were going to solve yep okay so this is growing nicely how many users are now using or paying for the tool today well so we have we've had 13 million sign up we have millions that are active free

users and we're 50 to 100,000 paying users on the consumer side say that all one more time now that they can see the revenue graph again one more time so we have about 50,000 to 100,000 paying users consumers we have millions of active free consumers they're great for us they produce tons of data we have no no qualms people can use us for free we don't force them to upgrade or do anything like that and that's the for the consumer business and that's what's driving that seven eight million a year business dark blue dark blue Yeah question I have for you there's a lot of

folks that are very good at launching on prun they get a thousand people on their weight list they get 100 beta users but they never quite know where to show the pay wall and what to charge for and what to save for free you have a very large sample size because you're doing this with millions of consumers where do we set up the pay wall where do you set up the pay wall so it's a number of different things in the app so the the free app basically has a known spammer list it's going to block a bunch of stuff the paid app has a capture so every single caller who you don't know has to press a key to get in 100% robocall blocking so there's a natural

pay wall When Calls get through did you not want this here's how you could upgrade and that's that's one there's tons there's a whole bunch of work that goes on to where pay walls go one Theory I've seen when folks have a plg motion they're trying to grow Revenue get more of their free to convert to paid is they'll go okay what's the price point I want to charge let's say it's 10 bucks a month then they'll say what percent of my free base do I need to convert to get the revenue Target I'm trying to hit and I'll say well I need to convert a th000 out of 10,000 free users and they'll go find a metric like how many are using a

specific feature and go find how uh let's say that feature gets used 100 times a month well 10% of the base uses it more than 100 bucks a month so boom that's where you put the pay wall 100 usage per month 10 bucks a month that's you get to your Revenue Target how did you reverse engineer this thinking both when you're at AOL and also as you continue to price test it you may well with this app the key was are they getting call Traffic they don't want anymore right are we is our free doing a good job but there's calls that we could Block in the paid that were not in the

free when those calls show up that's a perfect place to put a pay wall right so that was the core of our our mission was just can we offer you more here are you looking around to get better blocking are you fiddling around in the app and there's pay walls on anything related to that better experience okay so fast forward today we're now 50/50 what are you changing inside the business to grow that orange bar faster than the blue bar so emails now we consider ourselves a B2B company that has a consumer service

that produces the data that enables B2B so we're doing two things on the B2B we discovered that carriers at least some carriers want to stop these rooc calls and our data shows them which customers are misbehaving so we get data we get all these calls coming in it's ah this is an illegal call it's an Amazon scam we can tell the carrier this is the time of the call the phone numbers of the call the content of the call you have to find the customer who made that call right which is these are wholesale vipes mostly and you can shut them down that's

how you keep your Network clean so that's one service we call it watch we're watching what you're doing you can buy different forms of data from us to clean up your network oh sorry what about inside the company so like team size today and how many are Engineers building these new products so the team size for the B2B is about five to 10 people at this point but starting to grow much faster now that the revenue is growing okay and What's the total team size today it's about 70 all in and how many are Engineers uh 25ish the biggest are you an engineer by

heart uh yeah I'm a computer science okay you yes fair enough fair so you still code today only when I want to make a point okay that's a good answer the other engineers in the room they they're okay I understand what this means when was the last time you made a point uh a while ago maybe a year ago and someone said that's going to take two weeks and I got somebody to dump a database and wrote some stuff in 20 minutes there you go that's what making a point means right there velocity

Cadence yeah um what's a business worth today in your opinion 18.5 million bucks a revenue I I don't know right and I'm not too worried about that my my goal actually as a company is to solve the problem of spam and scam calls texts and voicemails across the network and I honestly don't care whether we stop it at the consumer level or we stop it at the business level the nice thing is stopping it at the carrier origination level is really great for everyone because you stop one bad guy that's tons

of consumers that never got the call Alex we got about a minute left before we wrap though let's talk about the most recent sort of pricing we can talk about which was the the series B in 2015 that was for 5 million correct yeah it was a mix of a convertible debt round and some new cash yeah okay so should we combine those top two rows the March and the June stuff there was actually 10 million total in the series no it's just one I don't know why they're both on okay so it's it was one in 2015 of 5 million bucks some was conversion some was New Capital what was was the valuation public on that round yeah it was

probably 15 to20 million it wasn't it wasn't great right it's a company that was Flatline and I think what's exciting for us now is the bdb business is growing so fast when you put that chart up you can see that you know this year this is the actual revenue is almost doubling the Run rate for the B2B business is scaling much faster than that and that's the beauty of you know quarter of a million dollar type contracts that you get the CEO like SN comes along and offers you forx top line so $100 million cash up front do you take it uh one thing I've learned is

never negotiate in public probably I would be disappointed fair fair fair fair fair that's a good answer that's a good answer um any questions guys for Alex on product we got about 30 seconds left draw anything coming to your mind product plg you're the opposite of plg but you're not okay fair enough you'll learn more from door later but any m&a in your future in terms of buying smaller companies or other point Solutions we actually did buy a smaller company in Europe because there's a lot of demand because rooc calls were

starting in Europe and we wanted to collect data it you can think of it like an aqua hire where it's a bit of stock bit of cash what was the total value of the deal like three4 of a million dollars something like that but we got you know four great team members from that so was worth it for that alone not to mention a subscription service that's kind of paying for itself in the UK yeah well guys incredible story again weird purple screen in 2007 for voice messages that thing failed three lawsuits Frozen

business for three years he came in put in a couple hundred grand and ran the business now today owns called 30% employees own 15 % growing nicely realizing there's a key play here in the B2B stas place which is why you see or the B2B Market that's why you see the orange bar growing so quickly now doing opportunistic m&a but doing it in a controlled Healthy Growth fashion please give it up for Alex from youil Alex thanks thank you that was great thank you so much