Sramana Mitra: In 2007, JoonBug was sold, and you were fully into EZ Texting. Most of the proceeds from the sale have gone into EZ Texting, what happens next?
Shane Neman: I realized that I needed to quickly start scaling the business. I started hiring developers and salespeople. I went at it as a product-first company. I made sure that the product was so easy to use that any business owner could use it.
In the beginning, it was an educational process, because texting was so new. No one was thinking of it as a communications or marketing tool for businesses. When we first started, we would pick up the phone and cold call a business to tell them about the business and try to set up a demo. If we could demo them, that was when the lightbulb would go over their head.
They would get the text message, and they would sign up. We had a different scheme back then, but we refined it over time to a one or two-sentence email that would catch your attention. It is something very simple. I have a way that you can capture all the phone numbers of your patrons and send a text message to them to come back next time. When you say that to someone, they will ask, “How do you do that?”
Sramana Mitra: What segment did you point this towards? What was the positioning of the company?
Shane Neman: Initially, we went only for SMBs. We didn’t want to go down the enterprise route, because it’s a much longer sales cycle and there was already an enterprise company doing that. It was called Gold Pocket or something. From JoonBug, I already had experience dealing with major brands and I didn’t want to go down that route because it’s slow, clunky, and personnel-intensive.
Sramana Mitra: I understand all of that, but SMB is not a sufficiently narrow segmentation.
Shane Neman: Initially, we just went after the contacts that I had from JoonBug. These were nightclubs, bars, smaller brands, clothing lines, and that kind of stuff. I took all the data out of our CRM and started calling all those people.
We started running Google Ads, and at that time we were the only game in town. Nobody else was running it. We dominated search and we also dominated the organic traffic. When we would look at our signups, we would see what kind of businesses were signing up. We would then focus on that vertical. For example, we would get a lot of churches, religious institutions, or schools that wanted to do emergency texting. These are just examples that I am giving you.
Sramana Mitra: What kind of numbers were you seeing in your ramp-up as you were figuring these things out? Everything that you are talking about is an early journey to find product-market fit and finding segments where your value proposition resonates. How did that ramp up your MRR and ARR in that period?
Shane Neman: I am going to be honest with you. We didn’t know. I wasn’t measuring it then. I didn’t know how to analyze my company until a little bit later. I’m being straightforward.
Sramana Mitra: That’s fine. Do you, at least, remember what the revenue was?
Shane Neman: Within the first year, we were at a few hundred thousand dollars. By the second year, we were over a million dollars. The profit margins are large on these things, because all you are doing is selling software. We had some nominal expenses for the texts themselves.
Initially, we were doing pay as you go. You would buy a thousand text messages, and it would be in your account for as long as you wanted to use them. Then, you bought more when you needed more. We got more sophisticated later on as a result of SaaS becoming more sophisticated.
Part of it was the timing and the maturity of SaaS itself. We realized that the recurring model is the way to go. It is a much more profitable way to go so we switch to recurring plans. You would get a certain amount of texts per month, and if you don’t use them they may or may not rollover. It is the same concept.
That was a lot of experimentation. Just even figuring out what to call your plan and how to price your plan was done through experimentation. It’s more of an art than a science. It took a lot of testing to figure that out.
We did everything that you can imagine from listing the plan from the most expensive to least expensive – only showing you two plans to only showing you five plans and others that we tried. You have to try everything to see what works for you.
Sramana Mitra: What was the conclusion? What did you learn from those testing exercises?
Shane Neman: That also changes over time just so you know. What works then may not necessarily work now, so you have to constantly refine and change. At that time, what worked was showing the plans from most expensive to least expensive. Left to right, it’s usually least expensive to most expensive, but it worked the other way for us. We also found that for SMBs, the $25 to $50 range was palatable. That got updated and upgraded over time.
The other thing that we did is we quickly decided that it would be a better use of our time to not be hunters but instead become farmers. There is this concept of going out and doing outbound sales and that is the definition of being a hunter. Farming is doing inbound sales. We built a customer care team and a client success team. We call them community managers. We would funnel people in to sign up for a free trial.
Even that took us a few years to figure out. I figured all these out over time. A lot of times I was copying what other SaaS companies were doing too. There is no shame in that.
Sramana Mitra: No, not at all. One of the reasons that I do these entrepreneur journey series is precisely so that people can offer a perspective of what works and doesn’t work and how they go about doing what they did and how they, through trial and error, find success. This is done so that other people can copy that success. These are blueprints of what works.
Shane Neman: A lot of it was trying things that we came up with and a lot of it was copying what we were seeing other people do and being open to trying counter intuitive things. We decided that we would funnel people into the free trial and then we would call those people to welcome them and convert them into paying customers.
We tried a lot of different things where we would even experiment with the best time to call them after they sign up. Was it three hours after, the hour after, or the next day? Those are things that you need to think about. We experimented with drip onboarding emails where after they sign up, they get a series of emails that walk them through the system. That was a lot of work and challenging stuff that we were doing.