This week, I spoke to Daryna Kulya who is the co-founder of OpenPhone, a modern business phone for startups and small businesses. OpenPhone adds a work phone number to your existing devices. No need to carry two phones or extra SIM cards. Daryna and co-founder Mahyar Raissi quickly joined Y Combinator and then launched their initial product in July 2018. A year ago, in April 2020, they launched version 2.0 as a culmination of some big product changes and have since seen their growth skyrocket.
In our conversation, Daryna talks about:
My questions are in bold; this interview has been lightly edited for clarity.
Let’s start at the beginning. Can you give me a quick overview of how OpenPhone started?
Daryna Kulya: My co-founder, Mahyar, and I started OpenPhone three years ago. There were a few things that gave us the idea. First, my co-founder was at a startup where his job was to find a business phone solution for their sales team. He looked in the market and was shocked by the lack of quality consumer friendly products. Phones are a very critical channel of communication for many businesses, but the software powering this channel was outdated, clunky, and hard to use. You're stuck with solutions literally from the 90s.
Also, we are Canadians and fun fact Canada’s cell phone bills are the most expensive in the world because the country is so big, but there are only 33 million people. So a lot of Canadians get creative to save money on their phone bill because it's outright ridiculous how much you pay. My co-founder’s friend actually ended up porting his phone number from a regular carrier to the cloud, making calls through VoIP essentially with a virtual phone number app. When we saw this it was quite amazing. You get amazing quality of calls, because these days everyone has great internet. You can use it on your computer, you can use it anywhere you go, and you can really modify how the phone works, how messaging works, et cetera.
So seeing his cloud based phone everything clicked and we thought, wait a minute, now we can create a product that has a great consumer experience and allows businesses to communicate better with their customers. We wanted to focus on businesses first because we saw that many businesses rely on their phone so much and they're stuck with those clunky options. So that's really how we started.
And you participated in Y Combinator, can you walk me through the timeline of when you thought of the idea, went through YC and then launched?
DK: We started YC in June 2018 and then launched OpenPhone 1.0 on Product Hunt a month and a half later. We launched the new version, 2.0 about a year ago in April 2020.
Can you tell me about what you learned from the initial launch in 2018 and how the product evolved from 1.0 to 2.0?
DK: Our initial version was very much aimed at the solo entrepreneur and freelancer market. For a long time, the company was just my co-founder Mahyar and me. Mahyar was writing code and building the product. I was doing everything around it. So talking to customers, marketing, sales, support, you name it. As a team of two, there is only so much you can do so we had to be very focused on the customer persona. The best way for me to describe the difference between 1.0 and 2.0 is that 2.0 is applicable to teams. That is a really big shift and it was a huge shift for us as a business.
So back to the 1.0 launch because we were focused on the individual who didn't want to give out their personal phone number, who wanted to have a separate number for work, we only built a mobile app. There was no web app. The biggest thing we learned, spoiler alert, is that many of our customers spend a lot of time on their laptop and wanted a desktop client. Yes, a mobile client is convenient for people on the go, but people really wanted to use it on their computer. We actually had customers hacking around our product a bit to figure out ways to build a desktop client on their own. When we saw this we thought, “OK, we probably have to support this.”
So did the idea for supporting teams come out of work on building out desktop support?
DK: It was definitely gradual. One interesting thing about our product development process is that for a long time, and still in a way, we are a startup building for other startups which means we understand a lot of their pain points because we experience them as well. The way we learned that people wanted to manage OpenPhone as a team was that we saw customers sharing their passwords with other people so that they could talk and text from the same number. In fact, we were doing the same thing, so it was pretty clear that this needs to happen.
We were very iterative and we didn't just launch everything at once, we added things one by one. The first thing our director of engineering did was change our architecture model so that we could have multiple users in one workspace. Then we shipped the web application that allowed customers to use it on their laptops. Initially it was quite clunky, but we improved on it. Then we added collaboration and ability for multiple people to text and call from the same number. So we got there gradually.
I really love the collaboration aspect of OpenPhone 2.0, it almost feels like a Zendesk for your phone. When you added multiple users were you just trying to solve the problem of people sharing their password or were you thinking that collaboration and managing customer communication for a business would be a core piece of the product?
DK: Yeah, one of the pain points of a phone is it's not collaborative. To be honest, seeing people share passwords was validation for something we already knew we wanted to do. Our whole premise is that the phone can be very annoying because it's a black box, it's tied to a device, and you can't collaborate with your team. We've been surprised by all the use cases. I think customer support is a classic use case for having a shared number, but we found a lot more. We found people using it in operations, even for recruiting, for sales. We have even seen a founding team sharing a number. I think the reason why we're seeing these very unique use cases is because we made this sharing experience very simple and very easy. Unlike some of our competitors where you have to commit to giving someone else access to your number. You have it forever type of thing. Ours is much more lightweight. So we even have cases where a team member goes on vacation and someone else can look after their calls while they're gone because it's separate from their personal number. So essentially, if a salesperson is off, their customers are not left in the dark because someone else is looking after the number. So because we built it very lightweight people are using it in ways that we’ve been really surprised by.
Let’s talk about the 2.0 launch, in April 2020. How did you position the 2.0 product? Was team collaboration the main focus?
DK: To be honest, the 2.0 Product was very much a step function for us. Even though we had been releasing the pieces gradually we decided to make a big announcement and officially launch all of these improvements at the same time. Teams were a big part, but we also had several integrations, like Slack, and also had a new web experience. Being able to use OpenPhone on the computer significantly increased engagement, because if you think about it, for a lot of people, I know myself, my laptop, my whole life is here. Being able to text and call from the computer is a big productivity boost. That was absolutely critical. So the web experience and team collaboration were two really big things together and really impacted our growth as a company. Things just really skyrocketed from there.
I recently saw on Twitter you hired your first person in sales. Can you tell me about your business model and customer acquisition strategy?
DK: We charge per person, or seat, and there is a small additional charge if you want multiple numbers. The biggest factor in what you pay is how many users you have. We have a $10 per month and $25 per month plan. Up until a couple weeks ago when our first salesperson started, we were entirely self-serve. That made sense because it’s a very easy product to get started with by signing up on our website. It’s pretty straightforward. The reason why we decided to start a sales program is because even though our product is easy there are many customers with more complicated setups who value being able to talk to someone, especially for a product that is critical to their business. If you are setting up a team of one hundred people on a new communication platform, or if you're switching from another solution, there is an element of change management, of the comfort knowing you’ll be able talk to someone and make sure that your problems are going to be solved. I played that role for a while and realized that we are not growing as fast as we could be if we had someone to focus on helping these prospects and clients. At the end of the day, for us, customer experience is paramount and we learned that buying experience could be so enhanced by a sales team. We think of them as a non-traditional sales team, more of a sales assist. We are very customer focused and that aligns with our sales approach. Are you enjoying it? Are we delivering value? That's the approach. So far the feedback has been phenomenal, which makes me confident that we're going to have a great big sales team.
We have a couple key channels of acquisition. We're growing rapidly through word of mouth, that’s the biggest channel for us and I know that this is sometimes hard to hear because you’ll say, “cool, but like, how do you control it?” The key is that our customers love us and talk to others about us. We never take that for granted. The second best channel for us is SEO. We have invested quite a bit into our blog and making sure we show up for relevant search terms. Those have been the two main channels for us.
I really like that approach to sales. Let’s talk more about word of mouth. Do you have a referral system that drives these customer referrals or some other incentive?
DK: We actually haven't done much on that front, it’s just been genuine word of mouth. I think one thing I would have done right away, well maybe not immediately, but earlier on was to build a referral program. We actually just had a meeting about it earlier this week, and the team is working on it as we speak, so stay tuned.
In the earlier stages of our product, every single piece of our energy and time went into building the product because there was so much to build. We literally had to catch up to all the functionality of your phone and have it working on all the platforms like iOS, Android, Web, and desktop. We always prioritized core functionality over a referral program because we felt that the best way to grow is through our customers and our customers will refer us naturally if they have a great experience. So we put them first. Now we feel that we have a pretty solid base and we've grown the team so we have the bandwidth to do a referral program. I'm really happy about it and excited to see how it accelerates referrals.
One other thing that we did to boost our word of mouth, and I wish we had done it earlier was that we built a presence on B2B marketplaces like Capterra and G2. We asked our customers to recommend us and write reviews on these platforms.We've seen quite a bit of organic demand coming from these platforms and that surprised us. I wish I knew that earlier because we would have had more time to build up our reputation and presence there.
That’s a great tip for other founders in the B2B space. Have there been things that you’ve spent time on that have turned out not to matter as much?
DK: I think this is in some sense a bit of a tough question, because for the longest time and even now, we're building out core functionality of our product. The tough thing about building a product like ours is that you need to do all the things a phone can do and more. So, do I feel like we've spent a lot of time on things that were not that impactful? I just wish we got here faster. Maybe we wasted some time on rewrites, architecture decisions, and things that were not user facing. At the end of the day, we are very careful and diligent about shipping things people want. Anything we did that went out to our customers and our customers felt the difference, there’s nothing I would take back. So maybe some backend architecture things prevented us from shipping to customers faster. But of course, there are lots of trade offs to be made and our infrastructure is very complicated. I know that it would be nice if I could say, “we shipped this thing and it failed.” But we have a diverse customer base, so even if a feature is not used by everyone, for some customers, that feature is critical. That's the challenge of being a horizontal product, is that you have some features that are used by everyone, but most are specific to a smaller use case.
Transitioning to fundraising, you raised a Series A recently, can you tell me about how the pandemic has changed fundraising and your interactions with VCs?
DK: I think it became much easier simply because you no longer have to travel and instead you can do all your calls from Zoom. You have the ability to close things out much faster because there’s no wasted time. You can also talk to people no matter where they are, so suddenly you are talking to investors, not just from the Bay Area, but from all over the world without any constraints. All this meant that we were able to close our Series A really quickly. I frankly didn't expect it because the experience of raising the seed round, which was pre pandemic, was a lot longer, we were constantly traveling, and it felt wasteful. Our experience fundraising in the pandemic was, “oh wow, that's it?” It was very refreshing.
I think that some people might be wondering, “well, you aren’t meeting in person, so isn’t that harder when you are making a big decision about who you partner with?” In my mind, that's why it took more conversations to get to know each other virtually, but I still feel like we got to the same point and we did it without the travel. And again, we had the benefit of being able to fundraise and stay focused on growing the company. When we raised our seed round, it almost felt like because we were fundraising and going to tons of meetings the company was not moving forward. It felt like nothing was getting done, we were only fundraising. For our Series A we were able to talk to investors and continue to grow and build the business. So I'm very happy it was not that much of a distraction.
That’s great to hear that it’s been easier to raise. Going back to your 2.0 launch. A lot of entrepreneurs struggle in that first year as they try to find product market fit and the buzz from the launch has worn off. How did you manage to stay motivated and focused after the excitement of a launch?
DK: I definitely resonate with that. Also, I think the first thing after launch, at least for me, there's a feeling of relief. Maybe the first couple of days you think, “OK, we did it!” But then you're right, it can be a little demotivating to go from such a high to more of a low. The way that we stay motivated is that we stay focused on the customer. No matter what we launch, we typically get a ton of feedback from customers and while I love launches, what I like even more is iterating on customer feedback. So we put something out there, get feedback, improve it, and then go back to the customer and say, “hey, remember you asked me this, well we now have ABCDE…” So I stay motivated by that and knowing that after launch in another month or two we're going to do it again and we're going to launch something more epic. There's always another launch coming up so you need to make sure in between launches you are addressing customer problems, you are delivering value, and you are iterating on the feedback you get.
Another thing I'll add is there are pivotal moments or features that we launched, but it wasn’t clear immediately after launch. You need to let it sort of marinate. Maybe this happens to all founders, but it's not always obvious to me that something was a great idea. Of course, customers will say, “hey, great job, I'll give it a try.” But you won’t know until maybe a month or two months. The metrics we care about are retention and revenue so it takes a while for a feature to be reflected on our revenue graph or our retention churn graph. But now, when I reflect on 2020 and look at our graphs, I can see those pivotal things. But, again it took two months for it to really show in the numbers. If you're launching things at least every quarter and you see the results two months later, then you are just another month from another launch so you’re never really sitting around. You're always ready for the next launch.
Thanks so much for taking the time to speak with me today. Where can people go to learn more about you and your business?