Fathom: Why Fixing Retention First Was the Key to Hitting $1M ARR – with Richard White [449]

This is a machine-generated transcript.

[00:00:00] Omer: Hey Richard, welcome to the show.

[00:00:01] Richard: Hey, thanks for having me.

[00:00:03] Omer: My pleasure. Do you have a favorite quote, something that inspires or motivates you that you can share with us?

[00:00:07] Richard: I have a bunch. I think probably the most work appro, like work related one is Eisenhower quote about planning. Plans are worthless, but planning is everything.

[00:00:15] Richard: Which I think we, we look we idolize a lot here at Fathom 'cause we are very much a planning light kind of culture. We try to move pretty nimbly.

[00:00:23] Omer: Cool. Tell us about Fathom. What does the product do? Who's it for and what's the main problem you're helping to solve?

[00:00:29] Richard: Yeah. Fathom is the number one rated AI note taker.

[00:00:32] Richard: So joins your meeting, summarizes 'em for you. It's really for anyone who's on meetings a lot, which is a pretty big tam and got started with it because I had this problem myself, right? I was in a lot of meetings four or five years ago and just struggling to. Talk to people and take notes at the same time.

[00:00:48] Richard: Clean up those notes after the meeting, look at those notes two weeks later and still not know who was what. And so we built Fathom really to solve that problem. And I think one of the key things for us is we wanted it to be something for everyone. And so one of our big kind of go-to-market strategy was to make a really good version of Fathom that's completely free.

[00:01:04] Omer: And give us a sense of the size of the business. Where are you right now in terms of revenue, customers size of team?

[00:01:11] Richard: Yeah, it's about a 80% team. We're about eight figures, we, mid eight figures. We had 175,000 companies that use Fathom any given month.

[00:01:20] Omer: Okay, great. So the business was founded in, as you said, I think 20, 24 or five years ago.

[00:01:26] Omer: And we'll you took, you touched on, I guess where the idea. Came from. Before we get deeper into that you have a really interesting background and when you and I were talking earlier I told you that, when I first came across Fathom, I was like, oh who's the founder of Fathom?

[00:01:42] Omer: I found your LinkedIn profile. Started reading that, and then the thing that always stuck with me was the. The, your, the thing at the bottom of the profile, which was a product you'd worked on initially, and you'd said a crappy piece of software that taught me more than all my college CS classes combined.

[00:02:00] Omer: And then I was like, this is a really interesting guy. It's seems very down to earth. It definitely, it seems like a conversation that we should have. It's taken me, it's taken a long time to get this scheduled and mostly that was my fault. But I'm glad we're finally doing it.

[00:02:11] Omer: So why don't we just. Get the audience up to speed and just tell us what that product was and then what other things you did before getting started with Fathom.

[00:02:23] Richard: Yeah. I was very fortunate that my, I got into computers at a real young age and my parents very much fostered that or tearing apart computers putting back together.

[00:02:31] Richard: I remember in. High school. I was running like a cheat codes website for like PlayStation games. My, it was the number one website for PlayStation cheat codes. My, my best friend ran the number one website for video game cheat codes, like PC cheat codes, and I was always a little bummed. He was always about 50% larger.

[00:02:47] Richard: I. Gross traffic than me, but I remember my getting, a check in the mail every month for 400 bucks for ad revenue and my parents being thoroughly confused. From a young age, had entrepreneurial parents and got really into big computers, so was doing websites, was I think I wrote some software for the TI 83 calculator that ended up being like some standard software for all the calculus classes and the.

[00:03:08] Richard: The city I grew up in, in Raleigh, North Carolina. So always kinda had this bug. And yeah, on my, on LinkedIn it mentions this company I made in college that was like basically software. If you ever go into a hospital back in the day and they have all these channels to teach you about, here's how to deal with diabetes or you have a newborn.

[00:03:26] Richard: And it was, my stepdad had a company that sold. Software sold stuff to like technology, equipment to hospitals. And I learned that what drove all of those TV channels back in the day was like VHS tapes. Like racks and ratchet of VHS players and there's all these old servos that were like, click play, click rewind, click play again, type thing.

[00:03:45] Richard: I was like, that's insane. And so I made some software that like. Basically digitized all that. And it was terrible software. I didn't even know what a database was back then. I was like, I skipped the database classes in cs, so I didn't even use the database. It was just like a flat file. It was terrible.

[00:03:59] Richard: I think it got used by one hospital, but I learned a lot in building it. And kinda set me on the path to continue this kind of journey of entrepreneurship.

[00:04:05] Omer: Cool. And then you built, actually then you started working as a product design lead at Kiko, and that's an interesting story as well about how you landed that role.

[00:04:15] Richard: Yeah, I was I, went to school for computer science. I was very much a, an engineer programmer, but I really wanted to be a product designer more than a, than an engineer. Early wanted, do both. And I remember this was back, I'm gonna really date myself. This is back when Gmail had come out.

[00:04:30] Richard: When Gmail comes out, everyone wants to make everything desktop. Let's put it in a web browser, right? And the next obvious thing to build is the calendar. And so I was talking to my coworkers like, oh, I wish I really wanna build kind of Gmail for calendar. And Google Calendar wasn't even out yet.

[00:04:44] Richard: And one day my colleague came, wrote to me, say, oh, bummer. Someone just built it and showed me a TechCrunch article. These guys had built this like really robust kind of web calendar, which. It didn't really exist at that day and age. And I remember playing around with it and first I was really bummed.

[00:04:57] Richard: I was like, Ugh. Like it's someone beat me to it, right? And then I played with it more. I was like, oh, but it's crappy. Like it's like technically really impressive, but the design is terrible and like it's doing all these things that are unintuitive. And so I just cold emailed the guys and I was like, Hey, saw your product.

[00:05:11] Richard: It's super cool. You're doing lots of innovative things. Design is terrible, and. Then I went on I wanna help you. Like I'll help you fix the design. I wanna be a designer, da. And first of all, huge kudos to them to even opening that email and replying to it. But they were replied, they're like, okay, like EC would be better.

[00:05:27] Richard: And so that kind of random cold email ended of me. Quitting my job and working with those guys full time. They were in this whole program called Y Combinator, which I had never heard of up in Boston. I was over in North Carolina, and so I was flying up to Boston for half the month, freezing my butt off in the winter and working on this office with the founders of Reddit and the founders of some other startups.

[00:05:46] Richard: And it was like. At the time I had no idea what was happening. I was just, oh, this is cool. We're just like hacking on something. Turns out it's like the most formative thing that ever happened to me. 'cause it's I got into the slipstream of really amazing entrepreneurs. The guys I did Kiko with, the founders were Justin Khan Sheer who went on duty, Twitch, and obviously we know how Reddit turned out and stuff like that.

[00:06:03] Richard: And so that kind of was like my sliding doors moment that got me from, call it the minor leagues of entrepreneurship where I was in North Carolina hacking on stuff on my own into oh great. Now I'm surrounded by some of the. You know now some of the best entrepreneurs in the world, and that got me from Boston to California.

[00:06:17] Richard: And there we go.

[00:06:18] Omer: That's so cool. And then you worked on a couple of other products and then eventually you launched user voice.

[00:06:25] Richard: Yeah. And so I actually, I think through that experience on Kiko, I wrote down like three or four different ideas around problems we were having running Kiko.

[00:06:32] Richard: I. And one of them was trying to gather, we were three person team and we had thousands of users, and we were trying to gather feedback. And so I was like, oh, Reddit for customer feedback. Like, why don't we get users to basically crowdsource their feedback to us. I don't have to spend all day trying to figure out, what's the most important thing and that.

[00:06:48] Richard: Instead of going to work on Twitch, which maybe I should have done I had said, went to work in Serve my own company called Uservoice, which is basically that, which is basically like a Reddit for customer feedback. And did that, worked that company, ran that company for about 10, 12 years.

[00:07:01] Richard: And really learned a lot. 'cause we did everything that business we started off bottom up PLG, by the time I left it was basically an enterprise company. We'd actually pivoted. We were, pM product. We were a customer store product and we're a PM product again, and so I got to experiment with different markets, different business models, like it was a kind of I call it like my finish finishing school for entrepreneurship.

[00:07:20] Richard: Are you still involved with user voice today? I'm still on the board. Yes.

[00:07:23] Omer: Okay. And so was it an acquisition or is it still a privately held thing?

[00:07:27] Richard: Yeah it's still a profitable, privately held company.

[00:07:30] Omer: Cool. Okay. And then, all right, so you're doing well with that. It's growing you you're serving enterprises.

[00:07:37] Omer: And so you talked about the pain that, that you identified with Fathom, but what, what pushed you to say, okay, I'm not gonna spend the next five, 10 years of my life now I'm building this product.

[00:07:47] Richard: I asked myself every year kind of two questions when I was running user voice. One, am I uniquely learning from this company?

[00:07:54] Richard: And two, am I uniquely qualified to. Pushed this company to the next level. And for the first time in 2019, I said no to both those questions. And I was like, okay. Like I think I know, right? It's time for me to find something new. I felt like I'd done all I could do to put my vision into that company.

[00:08:11] Richard: It was time to put someone else's vision into that company. And yeah. And so that's around the time started thinking about new products and new ideas, and that's pandemic happens. We're all on Zoom, this idea predates the pandemic a little bit, but obviously pandemic happens now everyone's on Zoom meetings, and the value of building something that can, take notes automatically on Zoom meeting just becomes so obvious.

[00:08:29] Omer: So how did you get, how did you get started with Fathom? A lot of founders or aspiring founders have these ideas. Some can start, building a product. Maybe that's a curse if you start building a product too soon. Others, have their own sort of. Challenges, but just getting started with it, what were the initial steps you took here?

[00:08:49] Richard: I think, Fathom looked very different than the first days of user voice, right? First days of user voice. I'm a first time founder. I've never raised funding. And I'm like basically falling asleep on my laptop coding day and day out, right? And I wrangle a few other people into following that same sort of crazy lifestyle.

[00:09:06] Richard: And, I think we. Got some friends and family money, like a hundred K. That got us a year and a half of runway sort of thing. Fathom is very different. Fathom. I basically started with four of the best engineers from user voice. 'cause we actually worked on some stuff at User Voice and actually spun it out of user voice.

[00:09:21] Richard: So I got to take some of my top engineers. So I kinda started on second base, if you will, of Fathom, where I've got four amazing engineers from day one. At this point now I've raised some money. I've built a, multimillion dollar business I can raise for my network, I can raise from folks.

[00:09:34] Richard: And so we've, raised money on day one, literally just on the strength of the idea. So very different starting pattern. And I think in general, a lot of what we've done Fathom feels like I call it like speed running a video game we've played before. And I use a lot of video game analogies when.

[00:09:49] Richard: Thinking about startups, but my favorite one is like playing Minecraft. Like I think when you're doing your first startup, it's like you getting dropped into Minecraft for the first time and you have no idea what to do, right? It takes you half an hour to figure out, I gotta punch a tree to get some wood, and then, like it, it doesn't tell you what the rules are.

[00:10:02] Richard: It doesn't seem to be any rules. It seems to be completely open-ended. If you've watched 10,000 hours of Minecraft or played 10,000 hours of Minecraft, it's a very different experience than the first hour, than the first hour. You've got a moat, you've got a castle, all these things. And that's what it feels like.

[00:10:14] Richard: I think doing kind of the second startup, right? You know all these things that felt like open-ended questions are actually like multiple choice questions when you really boiled them down. And so I think that's what was fun with Fathom is we had to kinda start and be like, okay. We know what our go-to-market model is gonna be for this stage.

[00:10:28] Richard: We know what we're building. We know that's a big enough market. Like we've done the research sort of thing. But at a high level, as a product, I knew I could use myself. I knew. That it's solved a problem. I have, I tested, I talked to, all of our sales team at User Royce.

[00:10:41] Richard: I talked to the CS team at User Royce. Yeah. I just, everywhere I went, I found people like, oh my gosh, I'd love to have that. And there were some people in the space, there's a company called Gong that was doing call recording specifically for sales teams. And we looked at that and we interviewed about a hundred different.

[00:10:56] Richard: People that use Gong Managers ics and that gave us a really strong conviction of ah, okay. I see where the weaknesses in that model. It's a very expensive product in a, because the inputs were used to be really, transcript used to be really expensive. Transcripts get really cheap, so you don't really need to charge $150 per seat anymore.

[00:11:12] Richard: In fact, we can give away for free. And it's more than just sales. Yeah, sales definitely benefits from this, but again, so can product, so can marketing, so can cs, everyone in meetings benefit from this? We did some market research, got the engineering team, and so really it felt like we really started with a pretty strong plan and sense of conviction around what we were doing and how.

[00:11:31] Omer: So what was what did that first version of the MVP look like? What did it do?

[00:11:36] Richard: The first version, actually, all it did was it recorded a meeting and then after I could go into the transcript and I can like highlight sections of it and turn that into kinda like a highlight reel very quickly.

[00:11:46] Richard: It was obvious to me as like the personal user, the last thing I wanna do after I have a meeting is wait a half an hour for the recording and then go back through it and do all the, like it shifted from one work kind of work to a different kind of work. And so from that we came up with we need to make it really fast.

[00:11:59] Richard: And or the engineering team telling the engineering team, like it needs to be faster. And they're like, how much faster, like in terms of getting you the content after the meeting and it's I don't know, just keep making it faster and all. Tell you when it's fast enough. And I think we had to about 30 seconds.

[00:12:11] Richard: I was like, okay, this is fine. This is, this feels almost instant. And then we did some work so that instead of me having to highlight things after the meeting, I could do it in the meeting. I click a button and it'd be like, oh, remember, that's an important segment. And we always knew though that was like a kind of a bridge.

[00:12:27] Richard: Like we basically built this whole company with the assumption of two things. One, the transcriptions gonna become free, and two, the AI was gonna get really good and the hard part of this business was actually not the AI or the transcription. It was building a reliable recording architecture that sits on top of Zoom and Google Meet Microsoft teams.

[00:12:45] Richard: ‘Cause there's no actual APIs for doing that. They're all, it's an undocumented kind of API. And so we're like, we're gonna spend a year just basically building the recording infrastructure that's highly scalable, real time fast. We'll build in some AI features. You can highlight things, but we're really building this business for the day when AI gets really good and we can drop that as like a new engine into an old car type of thing.

[00:13:04] Omer: So initially you focused on doing, just supporting Zoom users. And what were some of the challenges there? Even today at, I mean in my personal experience like trying to use Zoom APIs and there is, I can see documentation. But it's like it's really frustrating.

[00:13:23] Richard: That was the number one thing we saw is we, we saw that there were some people back in 2020 that were building some products in the space.

[00:13:30] Richard: I. And the reviews on all of them were, it works. It works most of the time, right? And for a product like this, if it's, if you're trying to replace something as consistent or reliable as note taking, whether it's with a Google Doc or pen and paper, it has to be reliable, right? It can't be, oh, I'm gonna commit to using this tool and it works 80% of the time.

[00:13:46] Richard: It needs to work a hundred percent of the time. And to your point, the challenging thing is there's probably easily 50 to a hundred different scenarios. Where you might join a Zoom meeting, or it might be operating right? It might be, you're the host, you're not the host, you're on, a bad connection, you're on a good connection, you're da and so you know, you joined after the start time, you joined ahead of it.

[00:14:06] Richard: You after, there's all these scenarios and what you realize that working versus not working is like the perception of the user, right? Like I am sure all these other products actually were working in the very specific way. They were to build, but it felt like it wasn't working. If it shows up late, it feels like it's not working right.

[00:14:21] Richard: If it leaves early, it feels like it's not working. There is no definition of what's, what working is except for what the user thinks it is. And so we actually, I think the hardest thing we had in the beginning was I. There's no like specific API. The only way we could figure out is this thing working is we literally paid people after their first experience to tell us how it went.

[00:14:40] Richard: And we just we built from day one, a really good pipeline for if you have a problem on this meeting, tell us and we will go debug, where this gonna cause between your expectation and what actually happened.

[00:14:51] Omer: Usually at this point I'm digging to figure out how you got your first 10 customers, and one of the things that you had said earlier was, our first 10 customers weren't nearly as important as our first 10 stable users.

[00:15:06] Omer: Can you just explain what you mean by that and why that was important?

[00:15:08] Richard: I'm a big fan of kind of attack your core metrics in serial. And so like some people try to like, Hey, launch your product and when you launch your product and you're trying to monetize and you're trying to acquire customers and you're trying to retain them, like you're trying to figure out all three of those metrics at once.

[00:15:21] Richard: And I find that's like really challenging and hard to do because they all confound each other. And so I tend to kinda look at it as what's the riskiest metric, what's start there and work our way down the least risky metric. And so for us, the riskiest metric was retention, was user retention.

[00:15:33] Richard: Can we just get, can we just build a product, not even a multiplayer version. Just a single player version that people used day in, day out. And we knew at some point we would monetize and we'd monetize by selling a version that's to a manager, right? That's like a different value prop, right?

[00:15:49] Richard: You wanna roll this out to your team. But I had high confidence that like if we could get to a point where we had really good retention and then we were really good at acquiring customers and they got really good at referring other folks 'cause they're in a meeting and our products. In the meeting we built this like really good kind of viral flywheel engine and then we monetized on top of that.

[00:16:08] Richard: I'd already run, a, a high seven-figure SaaS company. I wasn't super interested in doing that. Again, I only wanted to this company if we could really get escape velocity. And so we really just focused first and foremost on let's just prove that we can make a killer experience for folks.

[00:16:22] Richard: Because I've always believed that if you can build a killer experience and folks and they use it day in day out, you almost always can find a way to monetize it. They only use it once a month. Maybe more challenging, but if you can find something people use every day. If there's not a product I don't know of that doesn't find a way to monetize that.

[00:16:35] Richard: So yeah, so I think the killer thing for us, how do we get those first 50 stable users.

[00:16:41] Omer: And what were some of the challenges with getting those users? Using the product or activating them. I know trust was an issue in the early days, right? 'cause this was this completely unknown product and AI note takers weren't that common.

[00:16:55] Richard: Right. Yeah. So I think I. Yeah, most of the people, when we were getting those first 10 users, it was almost all me reaching out to folks on LinkedIn, friends of friends being like, Hey, will you tried this product sort of thing. One of the challenges was just making sure it was reliable, right?

[00:17:09] Richard: And so that, that feeds back into that having a feedback loop and like I said, what bit paying people for their feedback. The other part we noticed like people don't just, they're not immediately gonna bring into their next meeting. Like they were all basically oh yeah, I want to.

[00:17:20] Richard: Play test this thing first before I expose it to my colleagues, my customers, my prospects, right? And so we saw that too. And a lot of our feedback was like, oh, how's your first call go? Oh, I just met with myself to try to see how this thing would work. And it actually doesn't work that when you meet with yourself.

[00:17:35] Richard: 'cause they mute themselves. They wouldn't talk to themselves. They were kinda like, what's, it only really works. So we actually. Noticed this and we, we have a bot that joins the meeting to record and I went to my engineering team. It's can we have a bot that goes to the meeting instead of recording?

[00:17:49] Richard: It just plays a video. So you can have a fake meeting with someone and they're like, thought about it like, yeah, I guess so. And so we built out this pretty cool apparatus that allowed you to have a test call if they call with a recording. And we kinda made it fun, right? It looked, you thought you were talking to real human.

[00:18:03] Richard: I was this person talking and then they're like, oh, I'm just recording. When people like, message on their voicemails kind of thing. And so that really helped. Like then we saw, oh, great, people now have a way to play with this product. And again, get the trust to understand how it works before they bring it to a meeting with their colleagues or customers.

[00:18:17] Omer: It's funny you say that because I had a identical experience this morning where I was looking at some software, I won't mention which one to use instead of what we're using now to record these interviews. And so I was like, oh, great, I'll just test it and so connected to it, started recording and talking to myself, and then, downloaded the files, and I was like that was a pointless exercise because I don't have anybody else on the other end. I didn't see whether it records two different tracks and how it separates the video and audio between me and the other person.

[00:18:49] Omer: And if I had a bot who had come along to that meeting, that would've been super helpful. So completely understand that. One of the other challenges you mentioned was that. People had to remember to bring Fathom along to meetings, right? What was going on there?

[00:19:04] Richard: Yeah, so the way our app worked is like you had to, once you join the meeting, you'd have to go to our app and click a button and be like, okay, great.

[00:19:11] Richard: Now add Fathom to the meeting. I. It seems okay. That seems like good work. But then you realize every single person, the way they join a Zoom meeting is they set up their workspace first. They get their docs in place, they got their notes in place. Then they click start, they join the meeting, and once they join that meeting, they aren't opening anything, right?

[00:19:29] Richard: Because they're now locked in and Hey, they're, and so we're like, oh crap, we had this huge problem. People were really excited to use that. And they do that test call and they're like, oh, I'm really excited to use this. And then they'd forget, right? They just like, oh, it just. Cook the zoom link, get the scheduled time.

[00:19:43] Richard: And so we're like, this is a huge problem for activation. And so we actually ended up building. A desktop app that would actually, you know, one so we could know when you're on a meeting and then be like, Hey, it looks like you're about to join the meeting. Do you wanna bring Fathom into that meeting? And even better, we could just have them say here, do you wanna opt in just to have Fathom join when you join?

[00:20:01] Richard: I. That was like one of those things that like, took, it was like a 10 x metric improvement. Oh, all of a sudden we had no one activating, do we add 60% of people activating. And so just a good reminder, it's to really understand how people actually operate when they're using your software.

[00:20:15] Omer: So beyond those initial 10 users, as you started to scale, the wood is getting out, you're getting more and more users here. What, what was going on? How did the product hold up? What were, what was like, what type of people were signing up for Fathom?

[00:20:31] Richard: Yeah, so I think it took us about. Almost a year to get to a first version where you had 50 stable users, right?

[00:20:37] Richard: That were, one cohort that just continu to use it over and over. And I was like, okay, thank God. And right around the same time we were about to launch and we had actually, I think in startups, like the key thing is you gotta have like good hypotheses that are directionally correct.

[00:20:49] Richard: And then you gotta get lucky on the timing of some things. And one of the things we got lucky on was Zoom was launching a marketplace. And so we kinda like my email to. To Kiko back in day, I cold emailed the person running that program and was like, Hey, I think you should include us in it.

[00:21:04] Richard: We're this great startup, we're building this cool product. I think it'd be perfect fit for your Zoom app marketplace. We're wanna launch exclusively on Zoom, et cetera, et cetera. And so it was like us and 50 established companies launching on day one and Zoom marketplace. And, we quickly got to the number, the top of the list, maybe because it was alphabetically sorted and we changed our app name to AI Notetaker by Fathom instead of Fathom maybe.

[00:21:26] Richard: I don't know. I think we always have the thesis that at scale, you're gonna bring Fathom in your meetings, people are gonna see it, they're gonna, you have to explain why it's there and they'll be like this kinda na, natural kind of word of mouth virality. But the challenge with all those kind of business, like how do you get the first 10,000 users and the.

[00:21:42] Richard: We got gifted, like a, here's a simple solution to that, right? You're going join this new marketplace and Zoom's gonna put you in front of tens of thousands, a hundred thousands people. And that was true. And so we got really excited. We launched, I think we got, I think about a hundred thousand signups in the first month.

[00:21:57] Richard: And then at the end of the first month we had 100 DAU. And so we had this real kind of. Panicked moment of what did we get wrong here? And we're kinda freaking out like, I, I said this point, it's oh, we don't have a business, right? Like we had a hundred thousand signups and only a hundred people were using it.

[00:22:15] Richard: And we went back through the data and we were like, what? Analyzing? One of the things you do to set a Fathom is you connect your calendar. That way we know what meeting you're on. And so that's, important to, the system to run. And we just ran this announced how many of these people actually have I don't know, a normal number of Zoom meetings and we're like, oh, like 0.1%. 99% of these people had no meetings on their calendar. And then you have to remember, this is middle, this is mid 2021. This is like deep in the pandemic. Zoom is being used for all sorts of things, not business related. And Zoom initially opened up this marketplace to their like free users only.

[00:22:49] Richard: And so they basically sent us the worst users they have from a frequency perspective. And so obviously we weren't this, we're a little hardened. Okay. We're not as bad at this as we thought. And in the end, it actually I think ended up being a silver lining because. It basically gave us a lot, like what we also learned is our onboarding process wasn't very good, right?

[00:23:08] Richard: Even those users are not the best users. Our onboarding process is not very good. And so we spent, I basically stapled myself to one of our engineers for three months and every day we woke up and we're just like, great, what are the top three things we can do to improve the onboarding process?

[00:23:20] Richard: And usually that's a hard thing for Sharp to do. 'cause usually you're only getting in the beginning. A couple signups it's hard to get any statistical significance of like, how good is this process getting? Thankfully we were getting thousand signups a day. Just so happened. They're pretty low, like low quality.

[00:23:33] Richard: 'cause they're people that aren't very, very good, but they're still earnestly going through the signup process. And so we got fortunate because now we got three months with a lot of users to really hone in this onboarding process. We took it from like a, yeah, I think it was like 25% success rate to a 75% success rate.

[00:23:49] Richard: That really served us going forward. Once we started getting better users, zoom started to open up the platform to more and more folks. But that was like a real crucible we had to go through of figuring out like, oh gosh, I thought we're dead to no. This is just the quality of the users and we can, get something positive out of this.

[00:24:02] Omer: So did you have to change anything to get different types of users or reaching different types of users? Or was it just Zoom changed the way they were? Exposing the app store.

[00:24:13] Richard: We basically have lobbying Zoom to okay zoom at this point was very conservative for a bunch of different reasons and so around security.

[00:24:18] Richard: And so we weren't, they weren't open this app store to their best users, but they did over time. I. And so again, it kinda worked out. 'cause in retrospect, they'd actually sent us a hundred thousand good users and we had onboarded, even a third of them, we would've fallen over. Like they were like, we, those are the thing we were scared of is we don't know how to load test this thing for going from 50 users to 50,000 in a month.

[00:24:39] Richard: That would've worked. So it's kinda one of these crazy, like the universe gives you just what you need kind of thing. Situations.

[00:24:45] Omer: Yeah. It feels at the time, but then you look back and go, oh, that was a good thing.

[00:24:49] Richard: Yeah, exactly.

[00:24:50] Omer: And also around that time, I think somewhere in 2022 you were forced to start monetizing ahead of plan.

[00:24:58] Omer: What, what was going on?

[00:24:59] Richard: So I mentioned I don't like, to do things in serial and the metric. So we had figured out retention, we'd figure out onboarding, kind of activation. And we are really focused now in early 2022 on like, how do we kinda ramp up virality? How do we make it easier for people to, share Fathom with other folks.

[00:25:16] Richard: And that's when the kind of the bottom dropped out of the market, if you will on funding. And we had a pretty, honestly, probably pretty aggressive fundraising strategy as maybe the hubris of a second time founder that grew up in probably the most bubbly period ever. 20 20, 20 21. People were raising crazy rounds with.

[00:25:34] Richard: Very loose metrics at that time. And so our original plan was we're not gonna monetize for at least another year. We're gonna keep focusing on just on growth, right? We just wanna focus on getting this free product out there, get as many as possible, and at some point we'll build out kind of our team product that we sell to managers.

[00:25:49] Richard: That's where we're gonna monetize and. And part of that is like we, I was fundraising every six to nine months. I don't think we have ever had more than 12 months of runway intentionally. I just had such confidence in what we're doing. And I also know that I only work well under pressure, so I didn't want us to have four years of runway sort of thing.

[00:26:07] Richard: But then the bottom falls outta the market and it's very clear very quickly. You'll never fundraise again unless you can prove. Unless you even show you can actually monetize this, which is really frustrating. It's I'm like, look, these people are using this day in, day out. There's, even if we don't monetize these users, TAM is huge, it doesn't matter, right?

[00:26:23] Richard: The hive mind of investors has shifted and now everyone is yeah, they wait for talking about growth to profitability. And so we had to very quickly pivot and start figuring out how to monetize. And I think the biggest challenge there was just like balancing growth for monetization.

[00:26:40] Omer: Yeah. Yeah. Let's talk about that because now suddenly you're in this situation where it was very clear cut. We are focused on a great product growth and then now monetization suddenly, almost overnight has become super important one. How did you flip the switch? What happened?

[00:26:57] Omer: And then I'm curious, what did that do to. Did it slow down growth?

[00:27:03] Richard: And this is the thing I was most afraid of. Like I, one of the things I saw at User Voice in my previous company is we were free for the first year as well, completely free. And we saw, we actually similarly had a natural invo virality to the business.

[00:27:14] Richard: And I remember the day at User Voice, we put up a pricing page and we put our pricing page, we lost half our signups, even though the same free product was still available. Now they're just even showing that there were paid plans. We lost half our signups. And this time around I was like, okay, I don't, I wanna learn from that.

[00:27:30] Richard: And so I really struggle with how do we monetize this without ruining that growth lever that we had. Thankfully we always had a plan around this and the plan was always like, we're not gonna try to monetize individuals. Even if they say they will pay for it, which we did have a lot of people saying oh, I'd be happy to pay for this, which is, I think a really good sign.

[00:27:48] Richard: We always knew, no, we don't wanna charge the sales rep or the, CS person or the freelancer. We want to charge folks when it's a founder, an executive that's saying, I want a role set for my entire team and I want visibility in what's happening on my team's meetings. And the good news, the nice thing about that is it's a different value prop.

[00:28:05] Richard: It doesn't, it kinda keeps this clean separation between like your growth engine and where you're monetize. The downside to that is it's a whole new product, right? It's a whole new set of feature functionalities. It's not just going back to existing folks and say, oh, by the way, now everything costs 10 bucks a month, thing.

[00:28:20] Richard: But I felt always the right thing to do because I knew if we just started charging money for the free product, it would ruin virality. It would ruin all the growth. So we started basically selling this product. The problem is, I think it was like June, may or June we realized like we need ize and I gave the team like, we have to start selling something in 60 days.

[00:28:37] Richard: Thankfully, one of the things I did with some foresight was I'd hired already, I already had three really good salespeople on the team. And again, I think it's the benefit of like speed running a video game before I, I went back to some of my best salespeople from user voice about a year and a half before this moment.

[00:28:51] Richard: And I said, Hey, I don't know if I had anything to sell today, but at some point in the future, we're gonna flip a switch and we're gonna start selling this other product. I'd love for you to join now. Basically play the role of customer success, get to know our customers, get to know the product, become a real product expert.

[00:29:05] Richard: And so when we flip that switch and say, great, it's time to sell something, you'll be ready. We'll hit the ground running. And I remember coming to them like and being like, okay, it's a little earlier than I planned. It's time for us to flip that switch when we need to start selling something. And we had a hundred percent sales process and it was important to have a sales team because we are mostly selling the roadmap.

[00:29:24] Richard: We had about 12 features in this team mission product that we thought people would want to buy. We only built two of those. But we knew we had to show revenue. And so I was like, great, you gotta just get on there and, pitch to, sell them on where we're going with this and they're gonna get in early and walk in good early pricing, et cetera, et cetera.

[00:29:41] Richard: It kinda worked. We actually got, a hundred K in a RR in the first month and it just grew from there. We got to a million in revenue in I think about 11 months. And, eventually built out that product while we're selling it sort of thing. But yeah, it was a very difficult pivot.

[00:29:56] Omer: So you had this outbound sales motion, k kind of kicking in earlier than planned. And then were you still offering, was there a premium plan at that point where a free user could switch over?

[00:30:07] Richard: No. So there's no individual paid plan that came later. There was just basically this team plan, it wasn't really outbound, it was actually like, it's more like farming.

[00:30:14] Richard: It was basically going to people. We were putting basically ads in the existing app saying Hey, we've got this new product team mission sign up for a trial for it. And I honestly think most of that first a hundred k, probably even most of the first half a million we sold was really the people that were just huge advocates of Fathom.

[00:30:30] Richard: They like, loved the product, they were big fans. They're like, look, the features probably don't warrant what we're gonna pay you for this, but we wanna support you, that sort of thing. And it was all inbound in that existing kind of free user base.

[00:30:40] Omer: So I remember when I first came across.

[00:30:42] Omer: Fathom. And I was like, okay, it says free Forever. And I was like, nothing's free forever. I'm like digging around, like trying to find more information and one of the things that struck me was how generous the free plan appeared to be. And I was like, there's gotta be a catch. You're gonna store this stuff forever.

[00:31:03] Omer: And, and honestly, I couldn't really find anything that kind of raised any alarm bells at the time. So I think it's really interesting that you still, most people would not have done that. Most people who would've said, we've got this user base, the easiest thing in the world would be to offer a paid plan and just convert some of those people.

[00:31:23] Omer: But you went down a different route and you started. Selling. Also you were selling you were selling the team's plan before you had a team plan, which is slides, right?

[00:31:35] Richard: Yeah. We had a couple of the features, but we didn't have really the full. Product built out. And that was the thing. It was like, we had a slide, here's the 10 features of the team plan.

[00:31:44] Richard: It's eight of these say coming soon sort of thing. It was a little vaporware for sure.

[00:31:48] Omer: Zoom I, was like your big I. Acquisition channel, at least for users. What else were were you trying, what were you able to get to work? What didn't work?

[00:31:59] Richard: At this point, it was Zoom and then it was a lot of that virality.

[00:32:02] Richard: And it's funny you mentioned the thing about being skeptical about it being free forever. That was actually one of the biggest. Challenge that we had. People would be like, this is too good to be true. This is too generous. What are you doing? Are you selling our data? We actually had to put a thing on the homepage.

[00:32:14] Richard: It's yes, it's free. Here's how, and like you, it's still on our homepage this day. You can click it and we actually explain, here's how our business model works. And it's no. We know at some point some of our users will convert this team plan. They'll pay money. We're not selling your data, we're not doing anything nefarious.

[00:32:28] Richard: The co, we've gotten really good optimized cost. So it was crazy that yeah, it was like a, I think 10 years of. Software companies put out free plans that are, when they're too good to be true, they really are too good to be true sort of thing. We had to really overcome that. But yeah, so I think during this era, we were, 95% of our traffic was coming in still from that Zoom app marketplace.

[00:32:46] Richard: That was really what got us off the ground. And then it started shifting over time to being driven more by our users, bringing Fathom into a meeting and telling other folks about it, and raving about it. And again, part of that's why the free play was so important to us. 'cause we knew. You only get that kind of rabid fandom and like people really spreading the gospel of your thing when you provide them a lot of value.

[00:33:08] Richard: By giving 'em, we're gonna give you this really good product and we're gonna be cheaper for free forever. There's no catches to it. And I still to this day, majority of our users are on free. And we're totally fine with that because the value we get is marketing. You're telling your folks about it.

[00:33:21] Richard: So what we saw over time was zoom started like a hundred percent and then slowly as we started replacing our Zoom traffic with our own kind of referral traffic around this time, we also did like product hunt early on as well. And that was something that like worked really well for us in terms of getting like really good early adopter users.

[00:33:38] Richard: And we also I think did a lot with like operationalizing, kinda like social proof with G two. We really invested a lot G two, which is like Yelp for software. It's not expensive product to buy, but we wanted people to not have to. Feel like they had to do a bake off and try three of these products before they bought one.

[00:33:54] Richard: So we're like, what's, we have a lot of people that love this product. Let's ask them if they'll write reviews for us, because if we get a lot of good reviews, we bet that shortens the sales cycle. And so people will just be like, oh, okay. I love this product and looks like a lot of other people do too.

[00:34:07] Richard: Great. Like I don't. Yeah, and I think that worked pretty well. And it turned into not only did it help us shorten the sales cycle we got so good at that, that it actually became another significant, like traffic source for us because we became quickly like the number one actually app on G two in terms of like user satisfaction.

[00:34:23] Richard: So that's pretty cool.

[00:34:24] Omer: So I'm guessing when you started, there were a lot of AI note takers around, by the time you get to a million a r. The market was probably pretty flooded by that time, I'm guessing.

[00:34:37] Richard: Yeah, I think you mentioned like our two core hypotheses. Were transcription's gonna come free.

[00:34:42] Richard: And AI is gonna get really good. And our corollary to those two was if you wait till those two things are true, you're like two to three years too late to build this business because it'll be an obvious thing to build and everyone will rush it. And that's exactly what we saw. It was like kinda late 2023 when you get to GPD four, and that's when.

[00:35:01] Richard: Like Quad two and that's when AI can now write notes. And so like the highlighting stuff I talk about goes away and it's great. Now we get to drop in really great meeting summaries written by ai On top of that really reliable recording infrastructure and transcription architecture we've built.

[00:35:15] Richard: And I. But it's also the point at which everyone else looked at that. It's it's someplace became like the new Hello World app. I think for founders it's oh, what can I do with ai? Oh, I can take a transcript and I can make a summary out of it. We're like, yeah we know. And yeah. So we started seeing a lot of startups pop up.

[00:35:29] Richard: We really didn't worry about it too much. 'cause again, we had this strong thesis that it's a virality based business and so you're, it's tough to beat a company that's already been. Building that. Yeah, that flywheel's been spinning for two, three years a gars had.

[00:35:41] Omer: What about, zoom itself because then they, they be became a competitor, right?

[00:35:47] Omer: With their own kind of built in meeting note takers and stuff like that. How did that change things for you?

[00:35:53] Richard: Yeah, so we were exclusive to Zoom for the first two years, and I. Part of that was, marketing related. We wanted to just tie ourselves to what we thought was the market reader for the people we're going after.

[00:36:04] Richard: And I think that worked really well. They were a great partner for us. Obviously they got us those first, 1,000 thousand users and beyond I can't say enough good things about them. We also knew at some 0.2 things would be true. They would obviously get into this game. We would obviously want to spread beyond the Zoom platform.

[00:36:21] Richard: The other reason we did Zoom only is because of the, it allowed me to constrain the complexity of the solution, right? As I mentioned, getting this to work on Zoom. Was the hardest part about this getting to work reliably, right? 'cause of all the different ways you could run a Zoom. Same is true for Google Meet and Microsoft teams.

[00:36:38] Richard: The each one of these things is starting from scratch with a huge complexity mountain to climb. And so I didn't want our engineering team to try to climb all three of those mountains and at once, in the beginning, we're just gonna focus on Zoom. And then once we feel we get Zoom really dialed in, we'll then move on to Microsoft.

[00:36:54] Richard: Teams and meet, and one of the things we knew early on is that we could look at all this aggregated calendar data from our users and see that kind of cross platform usage is really high. I. Maybe not as much within the Microsoft Teams ecosystem. If you're in Fortune 500 or you're in enterprise, everything's Microsoft.

[00:37:12] Richard: But for most of us that, live in the, what do you call it? The free internet or you've got Slack and Salesforce, HubSpot and all these things, we flip between Google Meet and, and Zoom the way, you flip between kind of Netflix and Hulu type of thing. And so we knew at some point that.

[00:37:27] Richard: Yes, we know Zoom will get into space, but we also know that Zoom is unlikely to build a solution that works also on their compet competing platform. And so that was at the same time they were competing with us. We started saying okay, great, it's time for us to move on and start supporting other platforms, which is the number one thing our users want us to do.

[00:37:42] Omer: So the businesses doing eight figures in a R currently, but. You had some huge growth in like just 20, 24, right? I think like revenue, like 10 XD in like the last six months. Like what drove that?

[00:37:58] Richard: Before we put really AI into the core of this product, we had a really good business. And when we dropped that in, then we could say, we can now automatically detect all your action items accurately.

[00:38:08] Richard: We can write amazing meeting notes. We saw every single metric we had in the business go up by about 20%. Whether that was activation, whether that was retention, everything went up. And that moment ha happened for us about. December of 2023. And from that point, I think forward it was about, like a 10 x increase very quickly.

[00:38:26] Richard: I think it took us about. A year to get from one to 10 million. And it took us a year to get from one sorry. It took us a year to get from zero to one. It took us another year to get from one to 10. And and then it just continu to accelerate beyond that. So I think it was one of the things where like we had a lot of good stuff in there and we took a good product and made it great.

[00:38:44] Richard: When we added the functionality in.

[00:38:46] Omer: We should wrap up. Let's get into the lightning round. I've just got one question for you, like it just hit me that, you. You're clearly a product guy. And you've had a, you build a successful business with user voice and now with Fathom, but I think a lot of it is just driven by, you just seem to be this guy who just sees problems and is just driven to build a solution.

[00:39:08] Omer: And it's not necessarily driven by. A kind of business or making money and like we talked about your background or these, there was a bunch of other things that you'd built that we didn't even talk about. Just what is it, like how do you approach things? 'cause you're probably seeing problems all the time and you're probably feeling like you want to go and solve them.

[00:39:26] Omer: And there's this one thing about being focused on what you're doing, but I think it's really also really healthy to have that. Mindset where you are always thinking about how to solve problems or build tiny solutions and I just wanna try and get inside your head a little bit because I think that might be helpful for people who are at the super early stages and not really sure about how to get started.

[00:39:47] Richard: Yeah. Again, I think I was very fortunate that I fell into this group of like amazing entrepreneurs, right? Reddit, Twitch Cruise, Dropbox, you name all these folks were coming up around the same time. I was moved out to San Francisco, was part of the y combiner kind of community.

[00:40:00] Richard: And I think to a person, what I noticed is that all of them cared about solving problems and building things and like external validation. I always say almost a problematic, desire for external validation from users. And I almost never heard anyone talk about. Revenue cogs, gross margin, whatnot, right?

[00:40:17] Richard: Like that stuff all came later, but everyone was just obsessed with building something. It's a the, it's on the t-shirt, right? Makes something people want, right? It's like the Y Combinator, t-shirt. I think it's, that's like the core ethos I think of that whole community that I think is really healthy.

[00:40:31] Richard: Everyone just focused on what's an interesting problem and like, how can I solve it? And sometimes you get problems that there's only 10 other people that have this, that's the problem of that route. But I think that's a much healthier route. I, when I see people that come in and say, oh, my goal here is to get this business to a million, it's like I never thought about getting us to a million.

[00:40:46] Richard: I thought about getting us to, how do we get 50% of people to, use us. Week in, week out sort of thing. And so I think that's just the way I think about, it's I dunno, I get excited about hearing people say, I love using this product. And I think that's a, it's a very sustainable, much more sustainable resource than like hitting the next revenue milestone.

[00:41:04] Omer: Love it. All right. Let's go into the lightning round. I've got seven quick fire questions for you. What's one of the bus best pieces of business advice you've received?

[00:41:11] Richard: Not really advice, but the first thing that pops to my mind is I had an angel investor early on challenge me when I was at user voice and they said, you're not dynamic enough as a CEO.

[00:41:21] Richard: And what she meant by that I think was that like I was really focused on one thing and letting other balls fall on the floor. I wasn't juggling all the things you need to, as I always did CEO. And that was 15 years ago and many millions of dollars of revenue ago, and it's still.

[00:41:34] Richard: Burns me to my soul that someone says this to me like, I'm so competitive. And so I think about that constantly. Am I being dynamic enough today? Am I like, keep you on top of all the things I should keep on top of?

[00:41:43] Omer: It's funny how some, those things just stick, don't they? What book would you recommend to our audience and why?

[00:41:50] Richard: I love The Score Takes Care of Itself which is a book by Bill Walsh, who is the football coach of the 49 ERs in the eighties. It kinda speaks to what I was just saying. It's like his whole mentality of one big mentality is like he doesn't care about the scoreboard, doesn't. And in our case, revenue, he cares about the team doing all the little things right?

[00:42:06] Richard: So we do all the little things right. The score takes care of itself.

[00:42:09] Omer: What's one attribute or characteristic in your mind of a successful founder?

[00:42:13] Richard: I guess I'll refer back to what I said, which is I think it's like a need for external validation that kinda borderlines on problematic.

[00:42:20] Omer: What's your favorite personal productivity tool or habit

[00:42:23] Richard: right now?

[00:42:23] Richard: It'd be my whoop. It's maybe not exactly what you think of productivity, but I'm terrible when I'm not well rested like I am, like if I'm slightly tired, I am a shell of myself productivity wise. So I use it, it's like a, what gets measured, gets managed. And so like by measuring basically my sleep and what they call my recovery every day, I get a lot, I'm a lot more productive than I used to be.

[00:42:46] Omer: Yeah, me too. I woke up at four 30 yesterday. Never wake up that early and oh my God, I was just doing the dumbest things throughout the day. It was just like. Like I had to take a nap in the afternoon, but that's yeah. What, what's in your crazy business idea you'd love to pursue if you had the time?

[00:43:01] Richard: This might be surprising as someone who's only ever done kind of B2B products, but I really wanna build a really great VR experience. I. That is communal for you and your friends? I don't think that, I actually think VR is magical and it's kinda surprising that it hasn't really got widespread adoption.

[00:43:18] Richard: But I really wanna make like a, imagine alternative to what used to, as a kid you go to the club together or something, you listen some music together. Build something like that's almost time-based where you and your friends get on at the same time and have kinda a shared experience when even when you've got kids and you're all in different parts of the world sort of thing.

[00:43:34] Omer: Cool. What's an interesting or fun fact about you that most people don't know? I.

[00:43:37] Richard: I guess maybe I, maybe it's people do know now 'cause I tend to do it a lot. But I love to do analogies to video games. I talk about Fathom in terms of like single player mode, multiplayer we have a point system in Fathom.

[00:43:49] Richard: Yeah, I did my Minecraft analogy. There's a, I, I'm a big video game guy. I actually don't play as many as I used to. I actually watch a lot of video games on YouTube as a methadone. So I don't feel compelled to play them 'cause I don't have time for it. But I feel like I learn. No one does onboarding better than video games.

[00:44:06] Richard: No one does like user experience better than video games, and I feel like I learned so much from just being a student of how video, great video games are crafted.

[00:44:16] Omer: I once worked with when I was at Microsoft a PM who came from Xbox, and it was just so amazing to see this guy. We are building this web stuff and he would just bring this gaming mentality to it.

[00:44:29] Omer: Little things like he say how come when you click that it doesn't make some sort of sound just to register that you did that? I was like, but it was those tiny things like that they, they do with video games that. It just is a completely different immersive experience.

[00:44:42] Richard: Your favorite video games, if you think about like Zelda and stuff like this, especially the more modern ones, they're incredibly complex interfaces.

[00:44:48] Richard: There's so much to them. There's complex, even more complex than your average, piece of software, and yet it doesn't feel complex because of the effort they put into that. And because in Zelda they have the whole like tutorial zone where you unlock one basically button at a time.

[00:45:01] Richard: Have you ever heard of software where you unlock like one button at a time? No. We're just not that good at it compared to them. They're masters at it.

[00:45:07] Omer: And finally, what's one of your most important passions outside of your work?

[00:45:10] Richard: I am addicted to skiing. I don't know. It's something about putting very little effort and going very fast, just like speaks to my soul.

[00:45:19] Omer: Love it, Richard. Awesome. Thank you so much for joining me. It's been a pleasure. I really love this conversation. I think we covered a lot in a relatively short space of time, so I appreciate you sharing your story and your insights and kind of wisdom along the way. Hopefully it's gonna help.

[00:45:33] Omer: People listening, some founders to go and make a difference in their businesses. So I appreciate you doing that. If people wanna check out Fathom, if they haven't already, they can go to fathom.video and if folks wanna get in touch with you, what's the best way for them to do that?

[00:45:47] Richard: Just ping me on LinkedIn.

[00:45:48] Omer: Awesome. Thanks again and I wish you and the team the best of success.

[00:45:52] Richard: Thank you so much.

[00:45:53] Omer: Cheers.