We applied to Y Combinator in spring 2018 and got accepted into the summer 2018 batch. Looking back at the application process, I fondly remember several nights we spent writing and rewriting our application. Two of the best things we did to prepare were reviewing successful YC applications and getting feedback on ours from alumni.
So we wanted to give back to the startup community and decided to publish our application.
A lot has changed at OpenPhone since we’ve written it, while our mission to build the best business phone for small businesses and startups still holds true.
Hopefully, it helps in your journey and encourages you to apply to YC.
Company url, if any:
If you have a demo, what’s the URL? For non-software, demo can be a video.
Describe your company in 50 characters or less.
Phone system meets CRM built for small businesses
What is your company going to make?
OpenPhone is a phone system equipped with CRM capabilities, built from the ground up to fit the needs of small businesses.
Through our mobile application, small business owners get a simple yet powerful business phone system with a dedicated phone number on top of their existing mobile devices.
We are not just another phone system though. We start by owning the communication channel and then use that data to help small businesses communicate better and earn more money.
Some of the values our product will offer are:
- Giving businesses full control over their phone system right from their mobile devices (personalized voicemail, greeting, business hours, etc)
- Enriching their texting experience with other interactions such as appointment scheduling, sending/requesting docs/signatures/payments and more
- Allowing them to share the responsibility of their business phone with their colleagues or partners
- Integrating with their existing systems to bring all communications and customer data to one place
- Helping them manage their relationships and close more deals
Which category best applies to your company?
Is this application in response to a YC RFS?
If yes, which one?
Where do you live now, and where would the company be based after YC? (List as City A, Country A / City B, Country B.)
Kitchener, Canada/San Francisco USA
Please enter the URL of a 1 minute unlisted (not private) YouTube video introducing the founders. (Follow the Video Guidelines.)
Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include URLs if possible.
A while ago, we did a fun little project together called Milkshake. Using the app, users could express what they were up to at anytime by using up to 3 emojis, their location, and optionally an image.
Our assumption was that the barrier to post a good picture on Instagram or tweet something interesting was too high and most people didn’t create content on those platforms often enough.
Maybe if people were constrained to 3 emojis and their location to express what they were up to, they would not feel too much pressure to post content.
During the prototyping phase, we learned that although creating content was easier, the generated content was not interesting enough for users to scroll through every day.
No working demo anymore but here’s one of the designs! https://imgur.com/a/u2jw0
How long have the founders known one another and how did you meet? Have any of the founders not met in person?
Known each other for two years and met through a common friend during a trip.
How far along are you?
In January 2018 we released the app up to the public. Since then we grew to 1,500 users.
We added a paid tier 2 weeks ago and are focused on converting our free users to paying customers while continuing to grow our user base.
Which of the following best describes your progress?
How many active users or customers do you have? If you have some particularly valuable customers, who are they?
We now have 1,500 users and growing at 200% MoM.
Do you have revenue?
What was your revenue in the last full calendar month? (Please use USD. If none, enter ‘0’)
Your revenue 2 months ago?
Your revenue 3 months ago?
Your revenue 4 months ago?
Your revenue 5 months ago?
Your revenue 6 months ago?
Anything else you would like us to know regarding your revenue or growth rate?
We started the app free while in private beta. Mainly to double down on product experience and making sure we are creating value for users.
We introduced billing 2 weeks ago and gave all existing users at least 30 days of free trial and 32 of them have already started paying and we expect many more once we get closer to the end of existing trials.
How much money do you spend per month?
How much money does your company have in the bank now?
How long is your runway? (e.g. 5 months)
If you’ve applied previously with the same idea, how much progress have you made since the last time you applied? Anything change?
- Launched and grew the product to 1,500 users.
- Started getting paying customers (32 people).
- Went from a three-tier pricing model to a simple $13/month plan.
- Launched billing in the app and improved our funnel conversions.
- Matured our thoughts about our distribution strategy.
- Launched new features to delight users.
If you have already participated or committed to participate in an incubator, “accelerator” or “pre-accelerator” program, please tell us about it.
We are a part of Waterloo Velocity Garage and have been here since Sept 25th, 2017.
Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making?
Before starting OpenPhone, I was building mobile products for over half a million trade contractors at Joist.com. I observed that contractors who looked more professional followed up with their customers, and were more organized, earned noticeably more money.
I also noticed that almost all of them used their personal phone number for business and hated doing so. For them that meant:
- Giving out their personal number to strangers
- Not knowing when a call is personal or for business
- No way to share a business phone with partners or colleagues
- Phone constantly ringing off-hours
- All personal and business interactions mixed up and impossible to search for
This problem impacts almost all small business owners and a quick analysis of search volume shows that 2 million people search for small business phone systems every month just in North America so people are already looking for a solution.
We are the right team to go after this problem. Daryna has a lot of experience building communication products for businesses. She launched and grew Vidyard GoVideo to 200k+ users.
We both love building products that simplify complex workflows and make technologies that are inaccessible or hard to use, simple and accessible to everyone.
What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)?
At OpenPhone, we are bridging the gap between a phone system and a CRM.
A lot of small business owners rely on a phone system to communicate with their customers. Right now, 86% of them are using their personal phone numbers for business which is both limiting and problematic on so many levels.
The majority of small businesses don’t use a CRM because existing solutions put the burden of data entry on the user. Who’s got time for that?
We change that by owning the communication channel between businesses and their customers. This means that we can help small businesses stay on top of their customer relationships and ultimately close more deals.
Who are your competitors, and who might become competitors? Who do you fear most?
There are traditional cloud phone systems that have captured 14% of the market. Google Voice, Sideline, Grasshopper, Phone.com to name a few.
These solutions are outdated, not maintained, or barely updated, and compete on phone system features and pricing. They do offer a second phone line for business but outside of that, they are not solving enough problems. More modern phone systems like Dialpad are focused on larger businesses with different needs.
Communication products that offer CRM-like capabilities like Front, Intercom, Drift, and so on are primarily focused on email and live chat as their core channels. For our target market, live chat is not a channel they use and they are happy with Gmail as their email client.
Products like Facebook, WhatsApp, Telegram, and iMessage are offering their own business solutions and what they are doing is fragmenting the communication space even more and forcing small businesses to be active on many channels. This gives us the opportunity to integrate with all these channels and create a unified place for all business communications.
None of the existing players we named here can simply add a phone system or CRM to their product to compete with us.
Building a phone system first CRM is not an afterthought, it impacts every decision in the product.
I think our biggest competitor is some unknown startup building towards the same vision as us somewhere in the world right now.
What do you understand about your business that other companies in it just don’t get?
Instead of focusing on being the best and most comprehensive phone system in the world, our goal is to build a product that helps small businesses communicate more effectively, save time and earn more money.
We believe the product that will achieve this vision will be a fusion between a phone system and a CRM with integrations to further enrich the product as needed.
The best CRM for small businesses will look nothing like Salesforce.
How do or will you make money? How much could you make? (We realize you can’t know precisely, but give your best estimate.)
We are a subscription-based product with plans starting at $13/month. As the product grows, we will introduce higher-tier plans. We believe our product at its maturity can be priced anywhere from $50-$200 per month.
There are 33 million small businesses in North America alone and at an average of $100/month per user we have a total addressable market of $40B annually.
How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won’t be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that?
There are 2 million people searching for small business phone systems every month on Google just in North America. So we want to spend money on AdWords initially as an acquisition source.
Our initial target customers are people at the bottom of the decision-making funnel, those searching for solutions on Google, AppStore, Play Store, etc.
We will take the learnings from the kinds of users who sign up through these channels to create targeted FB and Twitter ads to capture people higher up that funnel.
We will also focus strongly on organic growth through referral programs, SEO and ASO.
Please tell us something surprising or amusing that one of you has discovered. (The answer need not be related to your project.)
Last year, we discovered that when we get a video interview with YC and the web page says “Wait until Adora connects” for longer than 3 hours, it probably means our connection dropped and the video interview is not happening. ????
What convinced you to apply to Y Combinator?
We want to be a part of a fast-paced program with big hairy audacious goals, surrounded by people who are building the future. We want to learn how to scale the product and user base from those who have done it before.
Looking at YC Alum Front that offers a similar product for a different audience, we believe OpenPhone can go through the same growth trajectory by joining YC.
Beyond being an accelerator, YC is a mindset and a set of values we believe in.
Daryna witnessed this at Vidyard where YC made a long-term impact. Many years later, the company has maintained YC values and principles. Being relentlessly resourceful and making something people want are some of them.
How did you hear about Y Combinator?
Hope this helps you craft your YC application.
And if you have any questions about the application process, leave a comment below, and both Daryna and I will be happy to respond and share our experience further.
Co-Founder and CEO at OpenPhone