Scaling to Over $10 Million From Delaware: Ye Zhang, CEO of Katabat (Part 3)

Sramana Mitra: Go back to when you started with the collections value proposition with this digital marketing technology and tell me how long you did the business focused on collections agencies. How far did you get by selling to that class of customers? How much revenue were you able to build up?

Ye Zhang: We had been focusing on collections agency for only the first two years from 2004 to 2006. We actually collected on behalf of our customers. That business model is totally different. We were making a couple of hundred thousand dollars a year and we felt that it’s very heavy. Starting 2006, we pivoted into a software company. We sell technology instead of selling the service of collection. Starting from 2006 to 2013, we have been focused on the collection domain. We have been using marketing technology to effectively manage the collection lifecycle. During that process, we have grown pretty significantly. We have signed the top 10 banks in the United States.

Sramana Mitra: Those banks have a collections arm and you work for the collections arm. You provide the technology for the collections arm of each of the banks who issue credit cards.

Ye Zhang: That is roughly correct. Every big bank has a collections department. That department will typically use their own system to collect some earlier stage delinquent customers. For some of the customers, they don’t think that they have the capability to collect efficiently. They will outsource. We can give you a platform that can help your internal agent manage the collection process much more efficiently.

You can collect even more with less people. That is our value proposition. Those banks are on our platform. They use their own internal employees and manage the platform to increase their internal efficiency.

Sramana Mitra: How big are these deal sizes?

Ye Zhang: We are doing a subscription-based model. The deal sizes vary from a couple of hundred thousand a year to a million dollar a year. We’re actually charging by the volume. Given the bank’s strategy of putting different accounts on our platform to achieve their best performance and based on that, it could be a couple of hundred thousand to a couple of million dollars a year.

Sramana Mitra: If you look at the strategic maneuvers you have done, it seems like a relatively straightforward to understand business. You’re selling to big banks and you’re addressing their collections problems with technology and you’re selling large enterprise software deals in a SaaS model. That’s the crux of the business.

Was there any strategic maneuver that you did in the process of going from 2006 to 2018 that has helped you build this business, accelerate it, and hit any inflection point?

Ye Zhang: I think that we had three strategic maneuvers from 2006 to 2018. The first one is at the beginning of 2006 when we changed it from an operational collection agency to a software company. That is very important.

Sramana Mitra: Sure, major change.

Ye Zhang: Collection is a pretty narrow focus. It helps us when we are small because there aren’t that many players in the domain to compete with us. As we grew, we found that the market was too small. We found that we needed to identify more markets. That is when we added customer service.

We figured that with the same set of omni-channel management platform, not only can we do collection within strategy, but we can also do customer service within strategy. We have been selling the customer service part of the platform and as ofl today, we are 60% collection business and 40% customer service.

This segment is part 3 in the series : Scaling to Over $10 Million From Delaware: Ye Zhang, CEO of Katabat
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