Raising Funding on AngelList: Contactually CEO Zvi Band (Part 6)

Sramana Mitra: Let me get a couple of specifics there. What was the price point that you settled on?

Zvi Band: We’ve continually changed our prices. When we first launched, we charged $10 a month. By the beginning of 2014, we charged $20 and $40 a month.

Sramana Mitra: What does that mean?

Zvi Band: We had two different pricing plans. What we’ve learned is that customers were not just willing to pay one price. There were customers who were a little more budget-sensitive who didn’t care about all the functionalities we had, and who were willing to pay a lesser price for lesser functionality. That was our $20 a month price point.

Then we had a price point for people who were wiling to pay us more, and they were willing to pay for some of our power functionality. We actually started off with five pricing points and simplified it down to two.

Sramana Mitra: Talk to me a little bit about the competition. There are substantial players in that price point. Zoho, for instance, goes after this same customer base that you’re going after to some extent, and has been very successful. They’re close to half a billion dollar a year. How do you compete with these guys?

Zvi Band: I truly believe competition is an important thing to look at. Zoho, Salesforce, and Sugar all have significant presence in CRM in  general. When you look at the average lawyer or the average real estate agent, Zoho, Salesforce, Sugar don’t come into play. We said, “Let’s be laser-focused on realtors first.” They didn’t need the pipeline, the custom objects or anything like that of a larger CRM.

What they wanted to do was just what they need to do everyday. We built everything in Contactually around telling them what to do that day. That made it very powerful. Even to this day, leaving to another CRM is usually only 10% of our churn reason. Most of it is because, “I just wasn’t using it.” The biggest challenge is not trying to compete feature for feature. We’re very much focused on solving the needs of the user and not trying to compete with other CRMs. Rarely do we even get that question and if we do, we say, “Zoho is great for running a sales team. If you’re a a real estate agent or a lawyer, Contactually is a better product for you.”

Sramana Mitra: What is your customer acquisition strategy? What works?

Zvi Band: We’ve largely relied on being thought leaders and building a presence. Ideally, whenever anyone is talking about relationships or networking, Contactually is part of it. We’ve produced high-quality content. We understand that real estate agents go to conferences. We understand they work with coaches. We’ve made sure we understand our user base. It’s largely inbound and content marketing.

Sramana Mitra: You hit $1 million in annual revenue run rate at what point?

Zvi Band: Early 2014.

Sramana Mitra: Until that point, you’ve raised half a million dollars in financing?

Zvi Band: Yes.

Sramana Mitra: What happens next?

Zvi Band: In 2014, we set about scaling the company. We grew from $1 million to $2.5 million. We ended up raising an additional $2 million in capital in 2014. As you could see, our story started going from building new things to scaling. The game was around getting more customers and building products that will keep customers longer. By the end of 2014, we were doing around $2.5 million in revenue. That’s why in 2015, we ended up raising another $8 million.

Sramana Mitra: $2 million in 2014. Did you raise that from AngelList as well?

Zvi Band: It was part AngelList and part existing relationships.

Sramana Mitra: Can you talk a little bit about your experience of raising money on AngelList? Was the fact that you had 500 Startups as an investor something you used to raise money on AngelList?

Zvi Band: It was definitely something we used. Investors, in general, look for social proof. It mainly came from the money already raised. By the time we ended up raising AngelList in 2014, we already raised a million dollars in capital for that round. When we spoke to one of the syndicates on AngelList, they said, “You’ve already raised a million dollars. Could we put in another million dollars on top of it?”

This segment is part 6 in the series : Raising Funding on AngelList: Contactually CEO Zvi Band
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