Winning Against Heavily-Funded Competitors: Al Lalani, CEO of Social Annex (Part 2)

Al Lalani: I had hired a few developers in my first startup. I didn’t know what to do when I was losing money every month. I wasn’t making much on the e-commerce side. A friend of mine said, “I’m in a little bit of a fix. We need to build this site. I have a budget of $100,000, but I need to build it in the next two and a half months.” I said, “I can do that.”

From there, we built a very profitable web development agency. That was the first project that we got. This failure turned into a services business for a little bit. That was good for me personally because it was good money. It wasn’t very gratifying because it wasn’t what I wanted to do. I had always been a product-focused person. I wanted to build something.

Then there came a client that grew to Social Annex. We had this focus on e-commerce. I realized there was a lot of social going on at that time. We wanted to connect the dots of how social can make you money. No one knew how to do that. We got a couple of customers through our e-commerce services. That’s the genesis of Social Annex. This time around was very different. We didn’t build anything. We had a couple of customers. We said, “We’re going to build this for you if you pay us.”

I bought a booth at IRC, which is the largest retail show, in 2011 saying, “This time around, I’m not going to build anything till I get a bunch of customers who want to buy it.” It was just a booth with some screen shots. The booth was looking pretty horrible. The first two people to man the booth were hired out of Craigslist. The concept was so easy to explain. We got this social product where it allows you to share with your friends and if your friends buy, you’ll earn revenue. That was the first foray. I started presenting to people and we got a bunch of customers. One of them said, “We’re interested. What is the cost?”

Sramana Mitra: How did they find you?

Al Lalani: This was at the booth. We said, “This is what our product is.” One of those companies said, “This is interesting. We’d like to do this.”

Sramana Mitra: What did you end up building for them? What were the terms of the contract? Did they pay you to build it while you kept intellectual property? Explain to me how that first engagement turned out.

Al Lalani: It was a SaaS product. This was a basic referral product. If you’re an e-commerce site, we will put a simple referral engine on your site. This was around 2012, the early days of Facebook being used in a commerce context. If your friends come back to the site and make a purchase, the original sharer would get a reward of sorts. It’s like a basic referral program.

Sramana Mitra: What was the type of company that first came to you?

Al Lalani: This was an e-commerce company – a large global watch manufacturer. They bought the first product. I didn’t even know what the price was. The pricing was you would pay us for a setup fee for customizing and you’ll pay us a CPA on any referral revenue that we generate for you. It’s sort of an affiliate program.

With affiliate programs, you get some revenue when you drive affiliate traffic. This is easy enough. You don’t have to worry about budgeting for this expense. That was the start of the process. We realized very quickly that the model was incorrect. It’s more of a SaaS model because we’re providing this as a software that sits on their site and does all these different things. From there onwards, we grew to about $100,000 in ARR.

This segment is part 2 in the series : Winning Against Heavily-Funded Competitors: Al Lalani, CEO of Social Annex
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