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.

Sramana: What were the strategic evolution points in 2012?

Tony Jamous: By the time 2012 arrived, we had a product and our focus was on scaling the customer base. We needed to capture more of the market. We also had the challenge of building our team. We needed someone in support and someone at the help desk. We needed someone to manage our relationship with carriers. These were key hires as they laid the foundation for the future. We took our time and did not hire quickly. We finally found the right people with the right fit. Once we had the right team in place, we started to build relationships with VCs around the world.

Sramana: As you approached the VCs in 2012, what were the story and vision you presented to them? How did you illustrate that this was indeed a large market opportunity?

Tony Jamous: Our market is mature, and there is a lot of data out there about the size of the market. We know how much money the incumbents are making and what their revenues look like. Our model did not need to be defended; it all came down to the team. The VCs we talked to really liked our approach and they liked the global construct of our team. Most of the leadership team have worked on other successful startups.

Sramana: You convinced investors on the market opportunity based on comparables. That is a good strategy that a lot of entrepreneurs do. The next question that would come up would be comparative positioning.

Tony Jamous: We had to drill down on why we are different and how we created a sustainable comparative advantage. One of the key differentiators is our carrier relationships. We are in the last mile throughout the globe, and that lets us sustain the business. That model has been proven to the investors because we were able to capture some of the reseller traffic from very large companies even though we were a very young company.

Sramana: If a competitor wants to get inventory from carriers, wouldn’t they be able to go get that inventory?

Tony Jamous: They could,d but it does not seem to be their strategy. We have a lot of experience in that market.

Sramana: The pitch you are making would not work in Silicon Valley. Securing SMS inventory supply would not fly here. You were successful in raising VC capital in London, right?

Tony Jamous: We also raised from Intel Capital, which is a U.S.-based VC firm.

Sramana: Were you funded by their London office?

Tony Jamous: We were funded by their Silicon Valley office.

Sramana: That’s very interesting. How much did you raise in your second round?

Tony Jamous: We raised $3 million.

This segment is part 5 in the series : Building a SMS API Company from London: Nexmo CEO Tony Jamous
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