Can Authenticity Drive Bottom-Line? This Startup Shows You How (Part I)
Q&A with Alan Zhao, Co-Founder and VP of Engineering at YC Startup Warmly,
***This series is being moved to Substack; read and subscribe for free here***
This story is part of the Entrepreneurship of Life series, a collection of interviews with immigrant startup founders, venture capitalists, and tech business leaders.
Introduction
We talk a lot about founder-market fit for startups, but even so, you don’t often speak to founders for five minutes and get the feeling that, in a way, they are exactly what they build. Alan is one such founder.
With his three partners, Alan Zhao co-founded Warmly, (comma included, as in the sign-off to an email), a platform that helps B2B companies authentically connect with their customers, starting with tracking customer job changes that may trigger relationship maintenance dialogues. In less than a year, Warmly, graduated from Techstars and Y Combinator, raised $2.1 million of seed funding, and had its four co-founders featured in Forbes 30 Under 30.
This is not a team of ordinary humans: Max Greenwald, a Princeton graduate and 50-mile finisher in the 24-hour World’s Toughest Mudder challenge; Carina Boo, a tech guru and chicken farmer in her free time; Val Yermakova, a circus aerialist, ex-competitive wrestler and figure skater, and Fulbright scholar; and Alan, a self-taught engineer, ex-restauranteur, and Wushu (Chinese martial arts) master. Despite their unique backgrounds, the quartet all seem to live and breathe what Warmly, stands for at its core — authenticity and warmth, against a backdrop of business savvy.
Alan recently sat down with me and shared about his Warmly, journey and the nonlinear path that took him from the Wall Street trading floor to Silicon Valley. Among other things, we talked about:
- How was Warmly, born in an urgent pivot after the team’s last idea had failed?
- If this makes so much sense, why hasn’t someone done it already?
- Insider scoop on the legendary YC (Y Combinator) program?
- Advice for startups raising a seed round?
- How do the four co-founders work together and bond?
- Why become an entrepreneur?
- Craziest story while running a pho restaurant?
- Experience growing up and navigating careers as a Chinese American?
Let’s hear what Alan has to say.
Warmly, Experience & Reflections
How did the four of you come together, and what was the iterative process that led to Warmly,?
My three co-founders — Max, Val, and Carina — met at Google and bonded over their shared interest in starting a company. Max (our CEO) was a product manager, Carina (our CTO) an engineering manager, and Val (our CPO) a designer. Max and I met in late 2019 at On Deck, a fellowship program for would-be tech founders, and we grew close through a Hackathon project where we co-built a Twitch-like gamer streaming platform that allowed spectators to vote real-time on what the streamer’s next move should be.
It was a fun ride, so we decided to team up again — this time with Val and Carina — on PushPull, an authentic digital business card. We created an online community where professionals connect through personal PushPull cards that “push” things they are willing to offer strangers and “pull” asks that anyone could respond to. The idea was inspired in part by Adam Grant’s Give and Take, a favorite title of Max’s. We wanted to bring more authenticity into the business world, where authenticity can be a luxury.
The four of us applied to Techstars with the PushPull idea and got admitted. We started the program in Boulder, CO in January 2020. As we talked to investors, however, critical questions started to emerge: are there enough “givers” to sustain our community? Can we create an effective “throttle” so that someone with a sought-after “give” would not be overwhelmed with a flood of requests? How do we match people with asks to those who might help them? Halfway through the Techstars program, we weren’t growing at a satisfactory clip and didn’t have a conceivable path to monetization. It was a hard decision, but we knew we had to pivot. Time was running out, and we could only afford one week to figure out a new direction.
Influenced by Techstars’ strong B2B DNA, we contemplated turning PushPull into a community for enterprise customers. This drew our attention to the growing customer success function in SaaS companies. We realized the authenticity concept that we built PushPull around has a bigger role to play in customer success versus, say, in sales, and became even more intrigued. As all of us came from a B2C background and were B2B newbies at the time, we set up over a hundred informational calls with anyone working in customer success that we could get on the phone. As we learnt about their job and pain points, five product ideas began to take shape, and tracking customer job changes — what Warmly, does today — was one of them.
For B2B businesses, the job change of a key individual on an existing account represents both a threat and an opportunity. If whoever replaces the job changer prefers a different vendor, the B2B company risks losing the account. On the flip side, if the job changer was a happy customer, the B2B company now has a warm sales lead into his/her new employer. Therefore, knowing about customer job changes real-time could be highly valuable.
As the five product ideas seemed equally relevant for our prospective clients, we had a heated debate about which one to go with. We landed on tracking job changes eventually, because it appeared most straightforward and likely to gain traction by our next milestone merely six weeks away — the Techstars Demo Day.
Since that decision was made, it took us less than a week to land our first sale. We spun up the first iteration of Warmly, and announced it within the Techstars community. Soon we got our first inquiry from a fellow Techstars founder and set up a demo with him. We had not completely figured out our backend at the time and had to “hack” it. We were demonstrating how Warmly, would automatically detect Max’s hypothetical job change when he updated his LinkedIn profile. Our prospective customer said: “Ok, let’s say you just joined the CDC.” As Max was editing his LinkedIn, Carina was putting CDC into our database real-time so that it could capture Max’s “new employer”. We were so nervous that a typo might blow the demo and repeated “Centers for Disease Control and Prevention” again and again to make sure she got every word right — our potential customer probably raised an eyebrow on the other side of the call.
Finally, Max saved his LinkedIn edits and refreshed the Warmly, page while the rest of us held our breath. There he was — right on the job change dashboard!
“Great,” our prospective customer said without hesitation, “how much does this cost, and how do I pay?”
We were stunned in disbelief — what just happened? Did we really just make our first sale? We were in such early innings that neither pricing nor payment logistics had even been discussed. So Max improvised and said: “We charge — uh — $99/month, and we take… credit cards?”
After the call, we tore off a piece of paper, wrote “$99” on it, taped it to the wall and all took a photo underneath, beers in hand. This initial milestone kicked off the momentum: we had locked in 20 or so purchase commitments even before we built out the actual product. The pivot worked.
Why had nobody else before Warmly, successfully done what Warmly, attempts to do? What is the most non-obvious or tricky thing about your business that others failed to either appreciate or solve?
We were lucky to start Warmly, at the right time with a few tailwinds in the industry.
First, the “SaaS-ification” of enterprise tech in recent years has significantly increased churn risk for B2B companies, forcing them to invest in customer success to improve retention. The industry used to focus predominantly on the sales funnel, which was considered “close to the money”. During the on-premise IT era, once a deal was closed and the software or system was deployed across the customer’s servers, the lion’s share of revenue was earned, and the customer would be “locked in” for years. Today, with cloud service delivery, subscription models, and free trials becoming the default, customer churns are easier and more frequent than ever. Therefore, it becomes crucial to detect and mitigate potential churn risk, such as the job change of a key decision maker, as early on as possible.
Meanwhile, the industry is increasingly recognizing new sales opportunities from the existing customer base. Customer relations used to be intentionally walled off from sales (in part to keep the former “authentic”), with no expectations to drive revenue. However, the bright side of churns from job changes is a growing opportunity to sell into a new account through a customer advocate. Account churns are bad, but individual churns can be great. B2B companies are increasingly thinking about what we call LTVC (Lifetime Value of Champions, or customer advocates), and we are here to help them maximize it.
In the meantime, tracking job changes is a much harder technical problem than it may appear. We initially thought building the system would be a weekend project, and we couldn’t be more wrong. I cannot go into specifics here, but the bottom line is there is no universal source of truth. You need to combine and triangulate a variety of information from multiple channels and come up with smart ways to deal with edge cases. You also need to diligently maintain the freshness of your data. All these factors make this problem tricky to solve, but this is exactly why we’re here, because otherwise the problem would have been solved already.
Can you talk about your go-to-market strategy?
We’ve launched warmly.ai, our newest product that provides instant context on every person in a virtual meeting. We’re taking a two-pronged approach to promote its adoption: a bottoms-up “freemium” model facilitated by our Google calendar integration, and an enterprise-oriented top-down approach through our partnership with an established enterprise SaaS player. (I can’t reveal the name just yet, stay tuned!)
Individual users can grant us access to their Google calendar, and we will automatically enrich their future meeting invites with available profiles for all participants, so that they could head into meetings equipped with more context on who they speak to. Their guests will see the enriched meeting invites as well with an attribution to Warmly, and they can click through the link to sign up in a matter of seconds. This way, our early adopters naturally spread our name among their professional networks.
Meanwhile, our integration into the established SaaS platform was a critical milestone that grants us access to their growing ecosystem and deep pool of enterprise clients. We were lucky to be featured as one of their “Best-of-Breed” apps, alongside well-known SaaS players like Dropbox and Slack. This would not have happened without the relentless effort by Max and our go-to-market team: they were constantly working with our partner’s development team, iterating product ideas, reporting bugs, and doing everything else to add value and stay front of their mind. Kudos to Max and the team!
What was the YC program like? What were the highlights?
Our YC experience was a bit atypical, because we had a remote program, raised our seed round halfway through, skipped the Demo Day, and had to leave before program conclusion due to a scheduling conflict, but it was still valuable.
YC gave us access to great minds in the Silicon Valley hall of fame. The founders of Airbnb (YC Winter ’09) gave our cohort’s kickoff speech, Marc Andreesen came to talk at one point, and a number of well esteemed YC alums shared with us insights in areas where they made their name — the Twitch CEO discussing consumer virality, the Segment CEO talking about harnessing the power of data, etc. — the exposure and learning were priceless. [Keyi note: Twitch (YC Winter ’07) is a leading gamer streaming platform valued at around $15B, and Segment (YC Spring ’11) is a SaaS company offering customer data management tools, recently sold to Twilio for $3.2B.]
The program is structured tightly around YC’s philosophy of pursuing growth relentlessly. All the “technical” training for founders is packed into the first 2 weeks. Over the remaining 10, you focus on growing your business as fast as you can, sprinting through one milestone after another set out in YC’s product launch roadmap, until you finally reach the Demo Day. By then, you are expected to have good traction and a polished fundraising pitch, and you debut in front of an expectant seed investor community on the edge of their seats to bet on the next YC unicorn.
You learn by running through one new challenge after another along the 3-month journey — hiring the right team, handling conflicts, etc. — and by leveraging YC’s rich reservoir of startup advice. Whether from books, blogs, time with YC mentors, or partner office hours, the advice invariably becomes a lot more relevant in the context of real-world problems you are fighting. YC is highly opinionated and not shy about instilling their beliefs in its cohorts, such as “Build Things That Don’t Scale” [Keyi note: a quote from YC founder Paul Graham that means pouring resources into iterating initial products to gain crucial knowledge about the market and customers]. We generally find their framework insightful and effective, but it is also geared towards early stages in the startup lifecycle. Scaling sustainably and developing a 10-year vision are not their focus.
[Keyi note: for those interested, Alan’s co-founder Val has a post on YC vs. Techstars here.]
Continue with Alan’s story in Part II here, where we talk about tips for startup fundraising, his role as VP of Engineering, bonding with the other co-founders, personal path to entrepreneurship, Asian American experience, plus bonus stories as a Wushu master and Pho restaurant manager that you do not want to miss.
