CP11: Podcast with Tony Jamous from Nexmo about cloud-based Communication APIs
Welcome to the 11th episode of our podcast!
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Martin: Hi, this time we are having a very interesting entrepreneur with us, and talking about his entrepreneur journey. Hi, Tony, who are you? And what do you do?
Tony: Hey thanks, Martin. I’m Tony Jamous. I’m the CEO and co-founder of Nexmo. We started the company exactly five years ago, both from here in the UK and Europe, and also in the US. My role has changed since the beginning of the company. Each phase has a different role. When you start, you start by doing a bit of much everything. Then as you hire people and build teams, your role becomes different. That’s the journey I went through.
Martin: Cool. How did you come up with this business idea, Tony?
Tony: I used to work in the communications industry. Nexmo is a cloud communications platform. This is where I started my career as an engineer, and later on in business development. Then I took a year off, and I went to do my business studies. During the whole year, I got obsessed with how can you make this better for the customer, and how can you make this more scalable. That thinking process led me to build the first plan or the first idea to streamline that industry and build up more scalable, more efficient business.
Martin: Great. At what point in time did you really start developing the first iteration of the product?
Tony: Right away, actually. When we started, the first person I hired was a senior architect, Paul, who started coding the platform right away from day one. We were obsessed with time to revenue, because as you probably know when you’re starting a company, you want to prove your model, you want to find your market fit. Revenue was a key indicator we focus on, in order to prove to our ourselves but also to the investors that later on we’re going to raise money from, that actually you do have a good product.
Martin: So if you are telling me that you’re focused on time to revenue, how many days or months did it take you?
Tony: It took us probably four months from the first time we touched the code to get in the first customer paying us.
Tony: Very quick, if you compare to other entrepreneur opportunities.
Martin: And how did you acquire this customer?
Tony: In the beginning, it’s really about the relationship. You don’t have any brand name. You don’t have any web presence. So actually, you need to leverage your network. I was lucky to have worked in this industry before in sales. So we knew you lots of customers. I knew exactly their pinpoints and as we designed the product, addressed this pinpoint, it was appealing them to talk to us.
Martin: You said before that you started as a generalist, and then later on overtime became more of a focused kind of senior level executive? Can you walk us through this journey? What was it like in the journey?
Tony: Yes, so, in the beginning, you’re a small team. Essentially, everybody does everything and initially you don’t need to spell out a specific plan or specific strategies. Everybody understands the vision as it’s a small team. As you start growing and creating new divisions and have new senior leaders coming into the business, making sure that everybody is aligned, is a very, very hard problem. So therefore, you’re going to start to need to formulate things and communicate things in order to get the team with its various departments to get aligned and moving in one direction.
Martin: When I talked to entrepreneurs, one thing that they often tell me is the customer acquisition cost were extremely high in the first place. And maybe you’re not often justified the revenue or customer lifetime value afterward. How did you try to decrease the customer acquisition cost through this learning process?
Tony: Yes, exactly. So initially, it was based on relationships, so we needed to reach out the customer, traditional direct sales approach, which we actually developed and approved overtime in increasing efficiency of that. But at the same time, we’ve opened up the web inbound marketing channel, and that has actually enabled us to scale faster and reduce the cost of acquisition.
To be honest, today if you’re in technology and you’re selling software, you need to be online. You need to be visible to be able to capture some of that demand out there.
Martin: Great, today you have a suite of different products targeted for like mobile phones. With what type of product did you start out?
Tony: So we started with messaging because:
- I came from that industry, and
- We’ve seen all the problems we can solve and how we could streamline that value chain for the customer and for us to be able to scale fast.
So the first two years of the company, we were focused on only one product, and then as we, as actually as the world changes, you have new technology trends, you have customer behavior changing. Then you start adding new products and actually evolving your vision that we have today.
Martin: And was the evolution of this kind of product suite more driven by customer demand, or was it more like that you find out actually the basic technically infrastructure for all those different products is the same, so we could leverage our existing infrastructure by just adding one or two more products?
Tony: It all starts with the customer pain points. And as we talk to customer, we’re selling them product A, based on asking them: “Hey guys, why don’t you do a product B as well and product C?” Secondly, we’ve also looked at the competition and what the competition was offering, and we’ve seen that we have opportunities to offer actually similar API or similar product as the competition. Lastly, we look at the market trends and what are the major technological trend that is shaping our industry, specifically, the API economy is really, the… APIs are becoming the new way of building software, and also mobile is coming big time. So we started building SDKs so that our API started being compatible with mobile, be it you know iOS or Android, any platform out there.
So essentially, it was a process of focusing on getting feedback from customers, understanding the competition and the trends and actually reshaping our product strategy and our vision as we move forward.
Martin: Tony, how is your company currently structured in terms of locations and in terms of functions?
Tony: Nexmo on the location wise, we actually were one of the few startups at the time that were global from day one. From day one, we started in the UK. My co-founder, Eric and our CTO, building the engineering and producting from here. I was in the US building the sales team in our US presence. And very quickly in year two, we opened Asia. Today we have Hong Kong and Singapore and Seoul as well. Because Asia is the fastest market in the world and in our industry and in many industries. So we really needed to have a good hold in that region. And we grew really fast in these three regions.
Of course, we got into certain challenges as you grow especially with cultural differences, but that was kind of the initial thought is to capture the demand everywhere in the world especially with the web today. You are everywhere even if you don’t want to.
Martin: And how is the company structured in terms of functions?
Tony: Of course, we have engineering and product, and developer relation. This is a team that built the community of developers. This is under our CTO.
We do have the finance. We have a Chief Financial Officer that also manages other admin function like HR, legal. We also have Chief Marketing Officer that’s on marketing, this is marketing communication, sales enablement, growth marketing, and marketing operation.
We also have our sales force and our sales forces has evolved to become much more mature. Now we have a new business team going after a new logos. We have account management to manage the existing customer base. And last year, we built as well an insight sales team to deal with the inbound flow of request.
Last but not least, we have our customer support team. We like to see everybody in the company is customer support. But we do have a 24/7 global customer support team. And also a newly created business operation team to help us improve the business as we grow.
Martin: Cool. What are the major differences in terms of the customers and adoption rates if you’re looking at US customers and Asian customers?
Tony: So I would say in the US, in Europe actually customers especially software developers are much more empowered to make decisions about which API vendor they want to use. We’ve seen lots of success in inbound marketing. Customer just singing up online and turning to become major customers, like AirBnB, or Uber, or SnapChat, or booking.com here in Europe.
In Asia, however, it was much more a business development, relationship based type of sales. And we see less online demand from that market.
Martin: And did you know this before, or did you have to have this as a hard learning?
Tony: We learned it the hard way, yes.
Martin: So what happened?
Tony: Initially, we wanted to design our sales first and our sales process in Asia similar to other regions. We quickly realized that selling to Asian customers requires a different approach. Much more relationship based, much more traditional business development type of process. Essentially, the time to revenue in Asia seems to be longer because you don’t have that inbound channel that helps you to jumpstart the revenue quicker.
You also get into issues of payments as well. Like for instance, today we support payment platforms like Alipay that enables us to tap into for instance the Chinese market, but at that time, we expected Chinese customers to pay us in Euro, and that didn’t really fly.
Martin: Great. When you think back in the beginning of the company, how did you find investors and at what point in time did you approach them?
Tony: Funding was part of our strategy from day one. We focused initially on what we call the three Fs: Family, Friends and Fool. Essentially, people investing in your company because they know you, not necessarily understand the business opportunity.
So we raised a seed round of funding from people who trusted us on our plans. Later on, we got introduced through the same investors to a series of VCs. We’ve done traditional road show to be able to fundraise and you’ve got a couple of term sheets. And then we raises our fist VC round.
Then later on, it was exactly the same process. So new investors that joined us on the board will help us make introductions to new VCs. and this is how the cycle starts again.
Martin: Great. And as a European company, did you try to approach US investors because back then there was not a big trend of US investors investing abroad?
Tony: Yes, so five years ago, the European VC community was very small. There was pretty much no funding, large scale funding here in Europe. So we knew that, so when we started the company, we registered the company, we incorporated company in the US.
One of the reasons why we did that is because it’s easier for US VCs to invest in US companies. They don’t need to learn new laws and new financial regulations of other countries.
Yes, luckily our angel investors had connection with US investors and therefore most of our funding efforts were focused on the US. Actually, we only have our angel investor in Europe, but initially most of our discussion with VCs were based in the US because economy of scales they have more cash to invest in companies like us.
Martin: You’re right.
BUSINESS MODEL OF NEXMO
Martin: Tony, let’s talk about the business model of Nexmo. What are basically the customer segment that you’re trying to address?
Tony: Yes, so Nexmo offers cloud communication APIs to enable software developers to embed communication into their flows. So our customer base today is composed of the following segments.
The first is what we call the chat apps. All the companies like Viber, WeChat Line, are our customers and they use us for primarily user acquisition and phone verification. You probably had that experience when you downloaded WhatsApp for the first time. You received a text message with a pin code. So we do that for many, if not all of these chat apps and we have them grow and acquire over four billion users in the last four years.
The second segment we address is the travel sector, so both, the new economy players like AirBnB or booking.com or even you know more traditional travel companies like Expedia or KLM. They use us for improving the customer experience, building that communication, embedding that communication into their flow. For instance, booking.com they communicate with their hotel chains to cancel booking through a text to speech call, automatic text to speech. AirBnB uses us to connect hosts and guests over SMS and protect the privacy of their users.
The third one is transportation. And again here is also the new economy players like Uber, GrabTaxi, EasyTaxi, where we enable them to connect drivers and passengers or voice and SMS. But also traditional transportation companies or transport companies, here in the case of, in Germany, we have Daimler, Mercedes Benz that use our APIs to communicate with cars. So it is internet of things use case.
And we also are strong in the social networks. So many social networks like Twitter and Sina Weibo in China, they use us for user verification and fraud prevention.
Lastly is the financial industry and fintech in a series of banks like BNP Paribas or Barclays and even new economy ones like Alipay and with Alibaba, they use us for their communication with their users.
Martin: Great. If you look at the business model and assuming you are covering like four billion of the seven billion people in terms of their mobile phones and the communication, is this some kind of asset where you think: “Okay, if most of the traffic and so on is going mobile, and you are at least tracking all or some of the mobile communications, then you can build a platform and then offer other kind of services that are mobile communication related?”
Tony: That’s correct. So essentially, the biggest trend in communication is contextual communication. And because software is merging with communication, now we can do much more things on mobile than before. You can imagine adding sensor data to the communication. You can imagine adding the context into it.
So for instance, let’s say you’re a bank and you want to send a notification to your customer because there’s an issue on their credit card, there’s a fraud. Usually, you block the card and then you communicate with them. Usually, you call them and they are not available. So it goes to voicemail. I need to call you back. So it’s really a cumbersome process that costs a lot of money for the bank and it’s not very cool for the consumer. So essentially that communication goes into the app, you push the notification to communicate that to the user. And the user clicks on that notification and automatically go into the phone call with the call center of the bank – that will improve dramatically the experience and add the context of the communication.
So this is where we see the future is heading. And because software is enabling us to enable developers to build these experiences, we believe that all these business communications is going to be disrupted by software in the next few years.
Martin: So just for clarification, so that I get it right. Is this what you’re telling me that you’re trying to get this kind of API network running and owning, or is it more of that you only want to own the API related stuff which is connecting mobile phones only?
Tony: There’s two aspects. There’s the ability to communicate to any phone in the world using programmatically a messaging or voice calls, right? Phone verification is one, IVR is another one. Telephony in the cloud is another one. Record Recording is another one. But we also provide a series of SDKs that sit in the app on the device and gather information about that communication, whether it’s sensored data, whether it’s the context of the transaction, and it’s connected to the information system, the CRM or the help desk software of the enterprise.
To give you an example, KLM uses us China, KLM is a large European airline. They use us in China to communicate, to actually support, to help desk support to their users in China over WeChat. Let’s say you were traveling on KLM, you lost your luggage. You can follow them on WeChat which is the largest messaging app in China. Then you can actually open a ticket and interact with the support agent over WeChat. In the future, we will enable that also to be done over a messaging box essentially replacing the help desk agent by an algorithm to improve the user experience. So this is a type of examples of contextual communication we enable.
Martin: Great. Tony, what do you think are the reasons why companies or your customers choose you over the competition? Is it more like that you are totally international and others are not? Is it that you have a more efficient, scalable, technical infrastructure? Is it your pricing? Is it your go to market strategy or is it just you? What are the reasons?
Tony: Well it’s a combination of reasons. You’ve touched on some important items.
First, it’s really about innovation. Our vision is to reinvent how developer embeds communication into their application in the business world. So we focus on building the latest type of API that a developer can adopt really easily and reduces their time to market, it helps them to solve their coding issues.
And the second item is to make it scalable. And scalable both: geographically, so today we can communicate with any phone in the world, but also from a quality point of view because it’s easy to build an app that can transact a million messages a day or months. But if you want to take it to a billion in months, then it becomes problematic. So we do focus on enabling companies to embed these tools and make it also scalable geographically and technically.
Martin: Great. Have you thought of extending your product portfolio by rating those transactions? For example if I’m a customer of you, like a call center or so, and I’m having a customer calling me, I can have the communication arranged by your API for example. And then once you have a rated information of the transaction between the call center and their customer, then you would have this kind of information for several transactions from all over the world, you can put some data scientists on that in order to put some contextual information.
Tony: Yes, I think you’re hitting on an important element of the disruption we’re bringing in. We don’t necessarily provide the services, but we enable the customer to access them easily, right.
So because we’re a platform and we provide our services through APIs, therefore you can start recording important data points along the way of the conversation of the communication. Once you’re able to record this information, you can start doing things like machine learning. You can start doing things like cognitive computing on it. But if you’re not using this open API platform, and you’re like logged into, let’s say here that has a silo system, you’re not able to do so. So we make data break free and therefore our customers get more value out of it.
Martin: When I’m thinking of APIs, it sounds to me that they are very easily interchangeable. So as long as your APIs is good as mine, the question now would be, how are you increasing the barriers to competition? For example economies of scale or scope or something like that.
Tony: Yes, so this comment is valid for some APIs. For others, it’s actually less valid especially when it’s an SDK and it’s embedded into the device. But we focus on value creation and the value creation is what creates stickiness. So value creation is defined in many variables.
The first one is really about the quality of a service offering. So for instance, let’s say in SMS, we do go very long way to build the world’s largest direct care network, so we actually minimize the latency. We build algorithm that manage quality and make it consistent overtime. So there’s a quality component. There’s also a customer support component. We’re really obsessed about customer support, because our customers rely on us for their most business critical communication: acquiring users, confirming the transaction. And the carrier network is not fit for these new use cases.
So we essentially really get obsessed with support. Everyone we hire on the company, they go through the customer academy. They do customer, they sell customer tickets until they get the highest satisfaction rating. Then they graduate and they go to their job.
I think that’s kind of the two main reasons of value creation. Also we keep pushing the boundaries of what is possible of features and data. For instance, our analytics platform enables the customer to view more data of what’s going on in their communication and do some analysis on that. So this is kind of how we create stickiness and we help actually. It’s really about creating more value for the customer. And there’s no magic in our business for that.
ENTREPRENEURIAL ADVICE FROM TONY JAMOUS
Martin: Tony, now I would like to learn some more stuff about your entrepreneur journey and your learning’s. So what type of learning’s can you share with other people interested in starting a company so that they make less errors?
Tony: So it depends on the phase. So initially, one of the recurrent theme I see with people who wants to become entrepreneur is that they believe that they need to be ready to start doing it. What I realize is that you’re never ready. So the best is to jump in right away and try to do your best. I mean that’s kind of the first learning I had.
The second learning I think would be around going global quickly. At Nexmo, from one hand we benefited from that. We were able to get transaction and revenue across the globe. We have customers in every country today. But if you do it too early, then you’re going to start… I mean at least us, we had some issues in terms of the scalability of the organization, you have remote teams. And as the team grows, you need to deliver that vision, you need to make sure they are aligned and it’s not easy when you do it across regions. I think this would be kind of the learning that in the last four or five years.
Of course, it’s about it’s all about hiring the right people, and making sure, to hire people that can also help you scale the business from day one and that was an important learning. For instance, our CTO and co-founder, when I hired him, I gave him a coding task which is obviously the wrong thing to do. Because what was really important for him is his leadership skills, and that he needed to build a large team and manage it and scale it.
Martin: And what have been the major specific problems in terms of scaling the organization? Because what I’ve heard from other companies is this tribe theory that first you’re a family, then you’re a tribe, then something like a city and so on. And that in the beginning you don’t have processes and later on, you need to implement processes and then type of people might change because not everybody who is performing great at the 20, 30, 40 person company is performing great than a 500 person company. What have been your major problems in scaling the company?
Tony: The first one is I said before, is about aligning everyone around one shared vision, one plan, everybody is driving in the right direction. The bigger you become, the more important it becomes to over-communicate and align.
The second learning is really about putting in place the processes and structure to enable you to scale. Be it hiring the right people, putting in place the right structure. So it’s like the image I like to use is like building an airplane while you are in the air. You build one engine, and you realize you need another engine. So you need to go and build that as well. Then you need to make sure that these two engines are actually talking to each other. So that they can go in one direction and that process is ongoing, it never stops. How you learn about it is when you make mistakes, is when things are break, and you realize that: “Oh yes, I need to build a process here to make it work.”
Martin: Great, Tony, thank you so much for your time and sharing your insights.
Tony: Thanks, Martin.
THANKS FOR LISTENING!
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Special thanks to Tony for joining me this week. Until next time!