Recently, we spoke with John Nahm, the CEO and co-founder of Phonevite (www.phonevite.com), a new startup in town which recently relocated from Silicon Valley. We caught up with John to learn a little bit more about what the firm's services offer, as well as how the firm ended up moving to Los Angeles.
Explain what Phonevite is?
John Nahm: Phonevite is a community-based, voice broadcasting service, which allows the "average joe" -- or any small organization -- to send event reminders, emergency alerts, or any kind of group communications out over the phone.
How much does this cost, and how does the business work?
John Nahm: We offer a basic service, which allows you to send up to 25 calls at a time for free. People use the free service for small parties, groups, or gatherings. Usually, those people are also parts of a larger organization--whether that's a school, church, a Boy Scout organization, or similar--and they tell their larger organization about the service. Those organizations have larger calling needs--maybe calling five hundred, or a thousand people--so they end up buying our premium service. If you are a premium customer, we charge for the calls. It's 5 cents per call. The premium customer can buy that premium service in denominations of $25, $50, $100, or $200 dollars. That amount is a prepaid balance, and goes down as calls successfully complete. The only difference between the free and premium services is the free services are limited to 25 calls at a time. They're limited to four times a day, and a maximum of 100 calls a day. Also, the free calls have an ad at the end of the call, saying that the free call is powered by Phonevite. Premium calls don't have that ad, and you can blast out to thousands of numbers with no problem. One of the key differentiators between our services and others, is we're really gung ho about privacy. We do not currently allow our service to be used for telemarketing or solicitation. That means we give up a lot of potential revenues from that kind of usage, but we're conscientiously no going there until we have a system that will allow businesses to filter information and only call their opt-in customers.
How are you finding your conversion rates working with the freemium model?
John Nahm: Freemium has been working spectacularly. We have a conversion rate of between five and ten percent of users on a given month, who convert to premium usage. Then again, these are also the heavy volume hitters. They make calls to hundreds and thousands of people at once. So, that generates significant revenue for us. The revenue we get from them covers all of the cost of the free calls, and more. Even with the free users on the coattails, we're able to get some very healthy margins.
How is the company funded?
John Nahm: We started in January of 2007, and self-funded for a year. Kalvin, my co-foudner, and I, started at Dialpad, an early Internet telephony company that was a precursor to Skype. Dialpad was acquired by Yahoo in 2005, and became the voice engine for Yahoo's VoIP services. Last year, in 2008, we raised about $670,000 in a seed round, with a bunch of venture capitalists participating at the seed level--some of them are very well known in Silicon Valley, but we haven't released their names yet.
What are you currently focused on with the company?
John Nahm: Last year, we were focused on getting lots of users, at all costs. We were bleeding lots of money trying to position ourselves. This year, naturally--because of the economic situation--our goal is to become profitable ASAP. We will do some fundraising, but with the picture in mind that we are becoming profitable at the end of the year, with cash in the bank. Any funding we do receive will be used for expansion initiatives. We'll reach profitability this year--if it weren't for salaries we'd already be profitable.
Speaking of the economy, what's working for your firm, and what are you doing differently that you wouldn't have done last year?
John Nahm: Last year, we were passively waiting for our customers to sign up, and see what percentage would covert to premium usage. This year's approach, is we're doing lots of calling, reaching out to resellers, knocking on the doors of target customers, such as schools, churches, nonprofits, municipalities, government agencies, and so on. Last year, we were passively trying to get users to come to web site, experience things, and buy, this year we're going after them.
So how did you end up in Los Angeles, and why did you move down here?
John Nahm: The main reason, is we have a lot of entrepreneurial friends here in Southern California. We really like the tech environment here, plus--secondly--I also had some family reasons. I own my own house and have family here in Los Angeles, and it is very hard to be commuting to Northern California every week.
Finally, having been deep into your startup in the Bay Area, how would you compare it with the Los Angeles technology community?
John Nahm: The Northern California technology environment already assumes you already know a lot of stuff, and it's very competitive in nature. It's like you are entering into a jungle full of lions, who are already industry giants. When you are a newbie, it's sometimes a little intimidating. In Southern California, the technology community is much more welcoming of new startups. Entrepreneurs here really enjoy helping each other. It's really part of being something that is developing, and blossoming--whereas when you're in Silicon Valley I think it's almost like being somewhere which has a legacy and mature status.