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Scaling to Over $10 Million From Delaware: Ye Zhang, CEO of Katabat (Part 1)

Posted on Thursday, Jul 19th 2018

The state of Delaware has been working with 1Mby1M to stimulate entrepreneurship. Here is a wonderful success story from the region.

Sramana Mitra: Let’s start at the very beginning of your journey. Where are you from? Where were you born, raised, and in what kind of background?

Ye Zhang: I was born in China. I came to the United States in 1998 to pursue my Ph.D. in Artificial Intelligence.

Sramana Mitra: Where was that?

Ye Zhang: At the University of Delaware.

Sramana Mitra: Then what did you do after your Ph.D.?

Ye Zhang: I funded a company called Ensuredmail with a couple of my friends who are in the banking industry. The first company was focused on security and electronic communications. That was around 2001. The personal email and text message was just getting started. Our product provides solutions for secure communication. One is for enterprise and the other for personal. We sold these secure communications solutions to companies and to individuals. That’s probably my first journey to entrepreneurship.

Sramana Mitra: What is the timeline of this?

Ye Zhang: We started in 2000. I and a couple of my friends coded for about six months. Then, we got the VC funding. We sold the company in 2004.

Sramana Mitra: Was it in Delaware?

Ye Zhang: Yes.

Sramana Mitra: Tell me a little bit about what it was like to seek venture financing with a prototype from Delaware. How did you get to investors?

Ye Zhang: There are two stories. One is prior to 9/11 and the other one is after. Two of my partners were working for a big bank at that time called MBNA. MBNA was, at that time, the biggest independent credit card issuer. It was acquired by Bank of America in 2005 for $30 billion. At that time, the funding part was handled by my partners. I was there to do presentations. They knew a lot of people in the VC world. It didn’t take a lot of effort.

Sramana Mitra: Where were you raising money?

Ye Zhang: We got money in Philadelphia. It’s about a 40-minute drive. That’s the first VC fund we got. The second VC fund is after the first company. We founded another company, which was renamed to Katabat. We received the first VC funding for it in 2006. It was an angel round of $2 million. For that round, I founded the company with a couple of my partners. We asked friends and family and raised about $2 million.

Sramana Mitra: What was the product?

Ye Zhang: This is my current company. We changed it a lot. We wanted it to be a collection agency. Two of my partners were actually bankers. We figured out that we had a lot of experience in that domain and we have a lot of technology background. We want to build a technology system developed by ourselves from the ground up.

In 2005 and 2006, the market was changing. At that time, text messages, email, websites, and the omni-channel communication model has been developing for a while. Finally, we saw that you could harness a lot of effectiveness if you do omni-channel management pretty well. We happen to know finance and things about the product. We decided that we should go to that vertical. That was the whole idea at the beginning. That was the product at that time. That was in 2005.

This segment is part 1 in the series : Scaling to Over $10 Million From Delaware: Ye Zhang, CEO of Katabat
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