10: Raghu Ravinutala | Yellow Messenger
Co-Founder at Yellow Messenger | Building Chatbots for Companies Worldwide.
Ingredients for Success:
Seek investors with conviction. Raising capital from investors is a ‘signaling’ game. Founders want validation, and they seek this out by getting an investment from brand-name, storied firms. This works, but it’s also worth considering investment firms that lead with conviction rather than as brands. As Raghu selected VCs to work with, his main criteria was the enthusiasm and passion the investors brought to the business. Because that, in Raghu’s view, is what determines how a VC speaks about a founder’s business behind closed doors.
The power of an OKR. An objective and key result (OKR) is the north star for a startup; what drives every decision and what defines its purpose. At inception, Raghu’s OKR was clear: increase annual recurring revenue. By doing this, he’s cleared the air when it comes to any strategic decision; all teams and leaders are aligned.
Big goals, small decisions. Yellow Messenger’s global expansion strategy is core to its success - after all, the firm has a presence across the globe and its product is used in over 120 languages. Yet, Raghu’s strategy for expansion can be boiled down into two key components: providing autonomy to the right sales leaders and building a product with an agile foundation. A simple strategy is not a wrong strategy.
Reaching out to customer service is rarely a good experience. Several years ago, the only option for contacting a service rep was over the phone. This typically resulted in drawn-out wait times and fatigue for customers. But haven’t you noticed that with time, and through the proliferation of chatbots, the need to actually speak to a rep has reduced?
The world of conversational AI has led to this change. And although the large tech behemoths tried their hand at it and failed, a few survived…
One of the survivors and thrivers, Yellow Messenger, boasts an impressive client list: Microsoft, Accenture, SAP, and TCS, among others. Let’s dig in to learn more about Raghu and his team’s approach to building a customer-first, global SaaS company.
Eye of the Tiger
They say that some people are born entrepreneurs. There is always that itch to hunt for ideas and develop better solutions. While requiring grit is often an understatement, through my conversation with Raghu, I found that he has plenty.
Although he spent almost 15 years of his career working for a company, he was always scoping the next big opportunity. “I was in the semiconductor business for 15 years. It was fulfilling, yet I spent a lot of time thinking about ideas. Initially, the plan was to launch a startup in the semiconductor space but given the capital-intensive nature of the business, I decided against it.”
As building a product for semiconductors was set aside, Raghu moved on. He had a single criterion for his to-be-launched business: it should fall under the consumer internet category.
“This criteria stems from what I was seeing in the market. I could see how consumers were engaging with WhatsApp – it was being used for almost everything even in 2015! I knew then that things would evolve, and WhatsApp would be used for transactions eventually. And luckily, I was right.”
With this in mind, Raghu shifted focus to chatbots – an area that was ‘hot’ at the time. The opportunity was there, he was just finding ways his product could differentiate itself. “First, I noticed that a lot of the other players in the market were focused on automation delivery – that is, simply finding high-level solutions for customer queries. It saves time, but we wanted to do that and go further. So, we started to think of our product around not only automating delivery, but the task associated with it. For example, if you order a Pepsi over WhatsApp, delivery automation is simply tracking and taking the order. But we automate the task by plugging into Pepsi’s CRM and standardizing their backend workflows. Second, we wanted to serve both B2B and B2C users, while a lot of the competition at the time was focused on just one. By focusing on both segments, we were able to innovate technically.” For consumers, all chatbot experiences might feel familiar. But for enterprises, Yellow Messenger’s point of differentiation is a game-changer.
The World is Flat
One of the main reasons I wanted to speak to Raghu was to garner his insights around Yellow Messenger’s global playbook. The firm provides multilingual chatbots in over 120 languages and has a presence across the globe – from Southeast Asia to the US. Although I was expecting a complex response to Yellow Messenger’s expansion story, Raghu replied with a two-pronged approach: hiring the right sales leader and building an agile product. Simplicity has its charm.
Great leaders trust their team. In doing so - Raghu empowers his employees (more so, his sales leaders), in providing them extreme autonomy and agency. “Hiring a leader for a new market is a big role. And so, we take our time and are quite particular about what we look for. But our strategy since inception has been that we first sell the product, then build. Clients understand that the product is initially imperfect, but we need our sales team to craft a vision for the future. To tell a story that companies buy into. It’s like the analogy – build the plane while you’re flying it. That pretty much sums up our approach to growing our client base.” Curious whether this focus on selling first leads to any friction with the product team’s roadmap, Raghu responded with a simple solution: “From the start, all teams and employees have been focused on a single OKR: growing annual recurring revenue (ARR). This clears the air whenever a product decision has to be made”.
If there’s a word to describe Yellow Messenger’s product, it’s agile; features are adjusted based on client region, size, and budget. According to Raghu, it’s what is core to their success. “When we initially launched in the market, our major point of differentiation was the ability to customize our product for client demos. We’d walk into a room having already added a personal touch for each company. Our competitors struggled to do this, and I think it really benefited us. All of this is attributed to the agility of our product. And all credit here goes to my two co-founders [Rashid Khan and Jaya Kishore], and their teams. We made the decision to be flexible with our product early on, but they are the ones who executed flawlessly. Egos have been kept aside for the greater good and it’s made me realize that having a strong technology team is a God-given gift.”
Mix It Up
Yellow Messenger’s success hasn’t been understated. A wide range of competitors have propped up with the goal of displacing Raghu and his team. This has forced Yellow Messenger to innovate and expand in creative ways. “We realized that after a certain point, only building sales teams to get the product in as many hands as possible is not efficient. We needed to adapt and adopt a new strategy. So, we recently began targeting developer communities to roll out our product. We provided free trial bots for platforms, creating a low friction point of entry into various companies. This is starting to show traction and we plan to build on this strategy. After all, in our category, distribution trumps all.” Community growth is something that we’re seeing across a wide range of enterprise-focused companies. Beyond providing bots, Raghu and team have also launched hackathons, training sessions, and chat rooms for developers.
Although it might seem that the bulk of Yellow Messenger’s product development feels reactive – that is, listening to the customer – Raghu argues that there are always aspects of being proactive, too. That’s how he stays ahead of the curve. “Launching with developer-led communities, for example, is completely proactive – nobody asked for that. We approached our go-to-market strategy with creativity and found that it was an avenue less traveled. Yet, it’s paid off. That said, several strategic initiatives have been propelled into motion based on our customer’s needs. For example, we launched voice recognition within our chatbots because we noticed an increase in this use case across the market. Still, we find a balance… whenever we react to customer pain points, we ask ourselves: does this align with our broader product vision?”
It’s asking the deeper, meaningful questions that eventually aligns a company to its stated purpose. For founders that I’ve spoken with, this rings true across the board – while they are open to customer feedback, they are rarely driven by it.
Stories Are Forever
Venture investors, having to invest at the earliest stage of a company’s lifecycle, rarely have loads of data to do due diligence. Their willingness to invest is based on potential traction at the time, size of the market, a product’s defensibility, and the strength of the team. This ‘uncertainty’ that investors have to deal with sometimes leads to a herd mentality; if a marquee investor puts in capital, then others quickly follow suit. But Raghu keeps an eye out for this – he wants investors that bring genuine enthusiasm to the business.
“The main thing I look for when I add an investor to the company is their conviction. Because that conviction is what drives how a VC speaks about Yellow Messenger when the founders are not in the room. Investors that don’t believe in our mission have a natural disinclination towards speaking about Yellow Messenger with passion”.
As it pertains to the institutional fundraise itself, Raghu has two pieces of advisors. First, similar to Sonal at Fittr, he encourages all founders to raise from a position of strength. During his Series A raise, for example, Yellow Messenger went in with $1MM in annual recurring revenue; he wasn’t dependent on the money - it was almost a nice-to-have. Second, as he looks back at his raise, Raghu highlights the value in building a compelling narrative; being an engaging storyteller. “The ability to sell the story, especially early on, is what separates a great founder from a good one.”
Age Is Just a Number
The culture at Yellow Messenger is defined by trust. There is a tendency for Raghu and his team to ensure that each new hire has a ‘stretch’ job – that is, they are empowered with responsibilities far beyond what they’re used to. “We hire junior folks and immediately put them in front of CEOs. This might sound crazy and unconventional, but it works – employees show signs of nervousness initially, but they grow into the role.” This is a key component that explains Yellow Messenger’s low attrition and high employee engagement. Many leaders speak to trusting their employees, but Raghu truly walks the talk.
As COVID spread its wings across the world, and most prominently in India, many businesses were forced to become digitally native. This acted as a tailwind for Yellow Messenger, and the firm capitalized – in 2020, the firm grew its topline by 2.5x and currently has an annual recurring revenue of $15MM-$20MM with 1 billion+ quarterly messages being sent through the platform.
Clearly...for Raghu and his team, the sky's the limit.