What is Dialpad: A voice communications system for businesses with 5,000 Enterprise Customers and $60 million in revenue as of October 2019
Has raised $120 million in funding with 40 months of runway in the bank
DialPad is burning $1 million per month in cash investing in product. CEO Walker says on target for “$100 million in revenues by the end of 2020”
CEO Craig Walker bought DialPad.com back from Yahoo for less than $100,000 in 2015.
“Kill all the desk phones!” roared Craig Walker, the CEO and founder of a cloud-based business communications platform called DialPad, marching into the studio, beating his chest, grabbing the nearest landline phone we had, ripping it out of the desk and throwing it out the window.
Alright, maybe he didn’t do that—and maybe I interviewed him virtually—but that is pretty much DialPad’s mission statement.
You may know DialPad from their hilarious conference-call-waiting-room-jingle, and popular app UberConference launched back at TechCrunch disrupt 2012.
Back in 2011, when the company was founded, Craig was shocked at how real the need was for businesses to switch their voice comms from landlines over to something that’s easier to install, manage and, well, make use of.
Today, they are north of $60m in annual revenues.
DialPad Pricing is $5k/mo For First Customer
“Box was our first real customer and UberConference was our only product,” Walker recalls on DialPad’s beginnings. “
“…Then they came in with a $5,000/mo order. It legitimately blew my mind. I could not believe someone was gonna give us that much money.”
8 years into the VoIP revolution, DialPad has secured four rounds of funding, totaling $120M. Their Series D was a healthy $50 million completed in mid-2018. Walker says they’re burning around $1 million per month and have at least 40 months of runway in the bank.
With that last round of investment, Walker says, they “already had plenty of money in the bank”, but it seemed like a smart investment to enable the development of their AI department, the recently acquired TalkIQ.
Download DialPad Fast Like These 5,000 Current Customers
Today 5,000 enterprise brands are using DialPad, with the average yearly ticket amounting to $12,000. DialPad’s churn rate, according to the CEO, is “definitely below 10%.”
Downloading Dialpad is easy with many teams using the DialPad chrome extension and millions more downloading UberConference and other free tools.
What’s the context, and what makes DialPad succeed in this context?
The Problem: Desk Phones Are a Relic
Why do the desk phones need to be killed?
For individual consumers, they’re already pretty much dead. According to an Ofcom study, the number of minutes spent on landline calls in the UK has gone down by nearly 50% (from 103 billion minutes in 2012 to 54 billion minutes in 2017.) At the same time, the amount of time spent on mobile calls has risen to 148 billion minutes.
The number of cell-only households in the U.S. has risen from 5% in 2004 to 54.9% in 2018. That does not, however, reflect actual usage of the landlines—even if they’re there.
A similar shift is happening on the corporate scene; however, several challenges arise. De facto, most employees end up using their mobile phones even for business matters. Companies end up using several voice communication tools—one for conferencing, another for call center/customer support departments, and yet another for internal comms.
This creates a largely fragmented business communications environment, which lowers productivity and makes accountability a nightmare.
As VoIP services become more sophisticated and adapted to business needs, corporate users are actively migrating to the cloud, too. The total number of corporate VoIP subscribers worldwide is projected to reach 204.8 billion by 2020, which constitutes a $140 billion market by 2021 (an almost two-fold rise from $83 billion in 2015.)
In Walker’s words, the “telecommunications market is the last significant market that is yet to make the transition to the cloud.” He is positioning himself to be at the forefront of this transition.
Will Any Business Use Landlines in 2024?
There are several reasons why companies are actively exploring VoIP solutions:
- Businesses are becoming increasingly remote. 48% of U.S. employees work remotely at least once a week. Telecommuting has increased by 22% between 2017 and 2018. Whichever way you spin it, we’re moving fast towards a highly mobile workforce, and landlines, by definition, can’t cut it.
- Over-the-phone support quality. In a saturated marketplace, customer experience plays a decisive role. In fact, 81% of companies expect to compete mostly or completely through customer experience. Customer support is more important for buyers than the price or even the product itself. VoIP companies such as DialPad equip agents with real-time AI-based intelligence, which enables them to provide better assistance to the customers (more on that in a bit.)
- The price and ease-of-use argument. The average PBX system can cost between $500 – $1000 per user to set up. They’re also complicated and often require paid external competence to tweak even the most insignificant settings. Most VoIP services are, essentially, apps that work on the devices you already own—which means no extra hardware—and, according to the DialPad CEO, they’ll cost you $5,000 per year on average. That’s $5,000 in total.
The benefits of using solely cloud-based communications systems already outweigh the costs of removing the legacy systems, even for major enterprises:
- In 2017, KPMG Canada has switched to Skype for Business for all of its 5000 employees
- As of 2016, two-thirds of Canadian organizations already use cloud-based communication for at some of their employees, with one-third relying on VoIP services fully
- 70,000 business landlines were cut in 2 years, according to BCE Inc., a major Canadian telecom
The Solution: UberConference, DialPad Talk, DialPad Support, and DialPadSell
DialPad provides businesses with four products: one for conferencing (think Skype), one for regular calls (a replacement for legacy PBX systems), and two variations of their call-center product (one tuned for sales, other for customer support.)
Product names are UberConference, DialPad Talk, DialPad Support and DialPadSell, respectively.
These products combine seamlessly into a communications ecosystem that serves the lion’s share of business voice communications needs.
The competitive edge DialPad is aiming to establish is rooted in VoiceAI, its machine-learning real-time call assistant. Here’s what it does:
- It transcribes the calls in real time. Not only this AI feature puts every spoken word into a neatly structured dialogue, it also recognizes and notes call-to-action items, which essentially removes the need for meeting minutes. And, as displayed in their hilarious ad, it can help you deal with the more unusual accents.
- It offers real-time suggestions. This is where it gets interesting. Both call-center and sales products offer real-time prompts as a customer touches on a particular pain point or objection. For example, a prospect may ask during a sales call about the benefits of a product compared to Competitor X. DialPad recognizes the query and instantly suggests an answer, as displayed in their demo. “It’s real-time coaching,” says Walker. “If someone asks me a question or has a sales objection, I can get a battle card on how to handle that.”
- It trains on actual conversations in your industry. Voice AI wouldn’t be much use to the sales reps if it only trained on datasets such as “Alexa, play Foo Fighters.” DialPad voice AI trains specifically on their users’ product names, competitors and objections to provide actually usable real-time intelligence.
The Business: DialPad Crunchbase Profile
According to Crunchbase, DialPad is a pure play SaaS product which enables enterprise communications (conferencing, sales, customer support, internal comms) without any hardware required. The apps work across all devices—mobile phones, laptops, tablets—in an interconnected fashion.
DialPad Austin Hits 100 Employees, Company Is Growing at 125% Per Year
UberConference and the two variations of the call-center product remain DialPad’s entry-level products.
“[The Call Center product] you can sell at any time,” Walker explains. “Go sell to the head of sales, go sell to the head of support.”
Inversely, convincing companies to switch their entire legacy phone systems to the DialPad’s cloud version is much more difficult.
“It’s total tops-down,” says DialPad’s CEO. “Ask the head of IT, he’s gonna do a full switch, rip out his legacy stuff and is gonna switch everything to the cloud.”
In the $50-$100MM ARR range, many companies start relying on expansion revenue via customer support, who drive adoption, cross-platform adoption and expansion revenue. DialPad is no exception.
None of DialPad’s products are up-selling usage based offers. Instead, they focus on providing their clients with dedicated customer success managers, and motivating those CSMs with quotas. According to Craig, at the moment around 75 out of 500 of their representatives work under some sort of a quota.
However, customer success managers only take over after 6 months of the client’s lifetime. For the first 6 months, the credit goes to the sales representative. In Walker’s words, “the first implementation [of the DialPad’s service] isn’t the [full] contract value,” as many of their clients will sample things out with a pilot project and move onto a larger order soon after.
In terms of churn-versus-expansion, Craig says that that DialPad’s churn is “definitely lower than 10%”, which means their expansion is about 35% yearly.
DialPad currently employs about 150 engineers across San Francisco, Vancouver, Waterloo and Bangalore. They do not take advantage of the economic incentives in these regions due to “rules and regulations,” which make the payoff not worth the cost.
Besides headcount, what else is DialPad spending $120 million in funding on?
DialPad Acquired TalkIQ For $50 Million in 2018
When the company was just founded, it only had UberConference—the conferencing product—and it really was just another cloud-based communications system. Millions of people downloaded and used Uberconference.
In recent years, however, the company recognized the enormous opportunity in combining their vast library of voice data with AI to set them apart from the competition.
Since UberConference is a freemium tool, it allowed DialPad to accumulate a rich library of industry-specific conversations over the years.
To take full advantage of their raw voice data stream, DialPad acquired TalkIQ for $50 million—a pioneer in the voice AI technology—which enabled them to accurately transcribe industry-specific conversations, distinguish action items and offer on-the-spot sales and support suggestions that actually help the reps.
“At the end of the day, you have a trillion-dollar dollar industry of phone conversations,” Walker explains. “And putting those two together (the raw voice data and the AI capability), you can change what happens on those calls.”
According to the CEO of DialPad, most of the acquisition was paid with stock, which shows a strong trust in DialPad’s vision on TalkIQ’s side. Dan O’Connell, the former CEO of TalkIQ, is now on DialPad’s board of directors and serves the company as the head of its Voice AI unit.
Will CEO Walker Acquire More Companies in 2020 To “Buy Up Voice Data”?
Based on the general mechanics of machine learning, you could argue that the company that gets the hold of the largest voice database will win the competition.
Walker corrects me, reminding that the quantity of the data isn’t the be-all-end-all solution, as there’s diminishing returns in how much value can you get out of the marginal minute of voice conversations:
“At a certain point, you have a minimum amount of training data you need for any language,” DialPad CEO explains. “And then, at a certain point, you have an overwhelmingly [large amount of data] – almost too much data to analyze. At the end of the day, […] it’s like lowering your golf score. Going from an 18 to a 12 is relatively easy to do, but from 12 to an 8 is like four times harder to do, and 8 to a 6 is eight times as hard.”
Instead, Walker emphasizes the quality of the data they’re working with.
“One of the things that is unique about our [voice AI] is that it gets trained on your specific company,” the CEO highlights the competitive advantage of their voice AI technology. “Let’s say, Customer A signs up for DialPad. They can put in their own lexicon, their own dictionary, their own names of their products, the names of their competitors.”
This type of individualized voice AI training enables DialPad to offer sales “battle cards” and transcripts in a way that DialPad customers can actually take advantage of.
“You can be some funky pharmaceutical company with weird product names, and […] everything is just gonna work really really well,” Walker adds. “Rather than this generic dataset of 100 million people saying ‘OK, Google, what time is it?’”
Craig Walker Founder and CEO of DialPad, Previously Firespotter (2012), Switch (2013)
Craig Walker has strong roots in both business communications systems and intelligent voice systems.
In 2001, Craig founded Dialpad Communications (a.k.a. DialPad 1.0, no direct relation to his current venture), a VoIP based Internet Telephony service which was acquired by Yahoo. After the acquisition, Walker led the integration of his technology, creating Yahoo! Voice.
He ended up buying the DialPad name back from Yahoo for under $100,000 years later.
The entrepreneur devoted his next 2 years to building GrandCentral communications, another telephony tool that allowed users to share a single phone number across different devices, among other features. GrandCentral was acquired by Google in 2007 for $50 million.
After this acquisition in 2007, Walker joined Google as the lead of Google Voice—a year later, Google Talk and Google Talk Video as well. He managed lead strategy, execution, launch and product direction, operations and partnerships for these products.
In 2010, Craig Walker became Google’s first Entrepreneur in Residence for a year, developing businesses in the enterprise communications space. After he left the company, it was Google Ventures who provided Series A funding for DialPad.
In 2011, Walker rebranded the business to Dialpad.
This year, Craig was a finalist in EY’s “Entrepreneur of the Year” contest.
5 Questions With Craig Walker
- Craig’s favorite business book: The Hard Thing About Hard Things by Ben Horowitz
- Is there a CEO Craig is studying? “No, but Bezos impresses the hell out of me.”
- Craig’s favorite online tool: Trello and LucidChart
- How many hours of sleep does Craig get: “Used to be around 4, now it’s about 7.”
- What does Craig wish to a 20 y/o self?: “It would probably be better to understand tech a little bit more. […] I think I could’ve been a Computer Science major instead of a Social Science major, but I wouldn’t have had nearly as much fun.”