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Building a SMS API Company from London: Nexmo CEO Tony Jamous (Part 7)

Sramana: I see a lot of virtual organizations emerging in the startup space. We are a virtual organization ourselves. In your opinion, what are some of the pros and cons of running a company in that model?

Tony Jamous: My experience is that it depends on the person. When I first hired the first few people, I tried to make sure they were self-starters and knew how to manage themselves. One of the communication challenges is that we need to know how to get things done via chat. We have an internal team Skype chat, which was easy to handle when we were small. >>>

Building a SMS API Company from London: Nexmo CEO Tony Jamous (Part 6)

Sramana: What were the major business milestones of 2012?

Tony Jamous: First and foremost, we turned profitable and cash flow positive. We were a small team of 10 people. Our model has a lot of success with high volume senders because we let them cut out the middleman. We target the existing market first and foremost. Each time you move a hop in the chain, you lower latency and increase deliverability, and we did all of that at a lower price point. >>>

Building a SMS API Company from London: Nexmo CEO Tony Jamous (Part 5)

Sramana: What was your gross margin on the $2 million of revenue that you generated?

Tony Jamous: Our business is wholesale. The industry average margin is 17%, and we are in that range.

Sramana: You presumably had some funds available to you from your revenues. Were you profitable at that point?

Tony Jamous: No, we had not broken even yet. >>>

Building a SMS API Company from London: Nexmo CEO Tony Jamous (Part 4)

Sramana: Can you talk about the technology required to accomplish the SMS market arbitrage? Typically VCs don’t like to invest in pure arbitrage model companies. How did you convince them you were a technology company as opposed to an arbitrage company?

Tony Jamous: The arbitrage was our minimum viable product. We did not have a lot of funding, and we needed to survive. That is how we got started. The strategy of Nexmo is to have many carrier connections. We started carrier relationships around the world, and that is where we created value. Every time we added a new carrier, we gained more traffic. >>>

Building a SMS API Company from London: Nexmo CEO Tony Jamous (Part 3)

Sramana: First customers are critical to an entrepreneurs success. How did you find your first customers and sell to them? How did you know that you really understood their problem well enough to get them to wire you €5,000?

Tony Jamous: In our case our market is a commodity marketplace. The commodity I was selling, SMS, was highly needed in the market. I knew that from my previous experience, and I leveraged my previous experience and contacts. I was able to identify a list of five potential clients that I knew had a need for our commodity. >>>

Building a SMS API Company from London: Nexmo CEO Tony Jamous (Part 2)

Sramana: What came next for you?

Tony Jamous: My dream has always been to be an entrepreneur. I thought that getting an MBA would put me on a better path. That was completely wrong, obviously, but I left the company and went to IMB, which is one of the top MBA programs in Europe. I spent a year there, and after I graduated I had highly paid job offers from various corporations, but I turned them down to start my own company. One of my previous customers was interested in investing in my company, so I decided to reject the job offers and get started on my dream. >>>

Building a SMS API Company from London: Nexmo CEO Tony Jamous (Part 1)

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Tony Jamous is the CEO and co-founder of Nexmo, a company that hosts a cloud-based SMS API which allows high volume transmission of messages at wholesale prices. Tony spent 12 years in the wholesale messaging industry at mBlox and Paymo, where he opened mobile messaging and payment services in more than 82 markets. He managed carrier relationships and helped aggregators and resellers increase their revenues in the fast-growing A2P market. He graduated from IMD business school, the Institut d’Administration des Entreprises , and the Institut national polytechnique de Grenoble.

Sramana: Tony, let’s start with your personal background. Where do you come from? What kind of circumstances did you have in your early life that lead up to a life as an entrepreneur?

Tony Jamous: I was born in 1980 in Lebanon. I spent 17 years in Beirut, after which I moved to France to study computer science. There was a civil war the entire time I was in Lebanon, so for the first 17 years of my life that is all I really knew. That has taught me a lot about having a survival instinct, which is needed by entrepreneurs. That impacts the way I do business. >>>

Bootstrapping with $120k Credit Card Debt to $7m Revenue: Scott Skinger, CEO of TrainSignal (Part 7)

Sramana: I think you have a tremendous advantage because you have 50,000 customers who already know you. They know what quality you deliver. They are your customers, and I think that is why you are getting the higher conversion rates.

Scott Skinger: In our financial models we were trying to be conservative. We were looking at what other companies in our space did. We projected a 5% conversion rate for annual subscribers. The actual conversion rate for the annual subscription has been 30%. That is phenomenal for us because we may become profitable in 60 days as opposed to six months. That points to the value we are offering at this price point. To the point you are making, I think you are exactly right. It is an advantage and it is very nice. We are not a true startup. We have an established brand and a huge head start. >>>