PBX as SaaS: RingCentral CEO Vlad Shmunis (Part 6)

SM: How did you manage to leave the OEM model as your go-to-market strategy?

VS: The idea was to go straight to the customer. If you have hundreds of thousands of small customers paying you a small amount a month, it is better than one customer paying a lot at one time. I made the bet that communications was key and would continue through the PC in the future.

Because of the large OEM exposure, we knew how many units went out the door and how many users registered. We knew that 20% of the users registered, which may not sound like a lot, but you have to remember this is just one of many applications sitting on a new PC that someone has purchased. I knew that there were likely even more people than that using it, so there had to be a market there.

SM: Your aim was to do small business and SOHO users?

VS: Exactly right, but with a software-as-a-service model before the term was coined. The second key was it had to be straight to the customer.

SM: Was there anybody else out there who had done that?

VS: AT&T and SBC had their own models. Really any utility was following a similar business model. I have a friend who is very smart and business-oriented. She told me that it was a very difficult market to tap. She asked me how many customers I had, which was 300. She then asked me how many I needed, and at the time I thought 10,000 would be a good number. She thought I was crazy because she could not see how I was going to get there. I figured it would be done the same way you eat a whale, one piece at a time.

SM: How did you get customers?

VS: Initially we had registration lists from the OEM customers. We did an email campaign, which gave us a few hundred customers. The one thing we did right was we always looked at net/net. Customers were by and large happy and recommended it to their friends. We were always growing, and we hung onto that. It came down to staying power. We ran this out of a 1,000 square foot office with 10 people. It was very light but effective. We kept building and building. I had some money to keep it going, and that is what I chose to do.

SM: What kind of ramp did you see from your initial 300 customers?

VS: Our product shipped very late 2002, so we had 300 in 2003. When we closed our VC round we had 20,000 customers in 2006. That was our first round of funding every.

SM: How much were these customers paying you?

VS: It averaged about $25 a month. We did a lot of online advertising like Google Ads and some email marketing. I don’t think we would have made it without Google.

SM: A lot of SaaS companies selling to small audiences reach their audiences through Google.

VS: It is a great equalizer. We were using Google way before people knew about it.

This segment is part 6 in the series : PBX as SaaS: RingCentral CEO Vlad Shmunis
1 2 3 4 5 6 7