Spoke Phone Ltd

Investment Details

Investment Target
$1,000,000 - $1,000,000 NZD
Pre-Money Valuation
$6,700,000 NZD
Investors
20
Time Remaining
Closed

Investment Status
150%
$1,500,399.37 NZD
150% of maximum target

CEO of Spoke Phone, Jason Kerr, pitched to EA members and guests in February. Since then, four Enterprise Angels members have undertaken a thorough Due Diligence process on Spoke and a summary of the report can be found in the Due Diligence tab below.

Overall, the DD team are impressed with the founders and experienced team.  Both founders have good experience in building companies and have been very responsive in dealing with the DD team and EA.  The DD team has also been impressed by Spoke as a product, the Spoke strategy, the market potential, the Spoke product development process and even more so with the product execution of Jason and Kieron as founders.  The risk is around product and strategy validation, both of which are not proven at this stage. 

 

Would you like to know more about this offer? Register here to get access to updates, investors DD summary and more.
Not ready to register today? You can subscribe to our newsletter to stay up to date with new offers as they are listed.

Business Summary:

Spoke is bringing voice back! Spoke believe more problems are solved in a two minute call, than in back-and-forth TXT, chats, or emails. Spoke allow businesses to cut free of clunky phone systems and their Telco, by connecting businesses, employees, and customers to each other directly, in a kind of “WhatsApp-meets-Business Phone System.”

Who we are:

Spoke have a proven SaaS software operating team, that has built and exited multiple businesses, the last producing $85M of recurring SaaS revenues. Their founder patented the original protocols for TXT messaging, their CTO built a call centre stack supporting 30,000 concurrent calls/agents, and their Chairman was President of Global Enterprise at Blackberry.

Customer Problem:

Spoke makes business calling easy and free. Call anyone globally in a tap; hold instant conference calls that require no dial in or pin number; transcribe notes while on calls - all while retaining the professional phone system features, security, and privacy required in a business setting.

Product/Services:

Spoke is a viral business-to-business global phone network, that connects business to their employees, their customers, and to other businesses - for free. Spoke replaces traditional business telephone systems with a simple to use mobile app, removing the need for wires, hardware, or any complicated setup and maintenance.  All you now need for a complete business phone system, are mobile phones on any carrier/network.

Target Market:

Spoke’s targets SMEs with 5-100 employees that have mobile and/or remote workforces, operating in professional industries/services.  These companies don’t want infrastructure and happily use their mobile phones for business use. 98% of companies are less than 20 employees, and 40% of the workforce will be mobile/remote workers by 2020. 

Customers:

375 customers across New Zealand, Australia, South Africa, US, Mexico, and the UK. 260 (customers) are still in free beta, ~115 are paying.

Sales/Marketing Strategy:

Spoke use paid search/advertising, and publish ~10 blogs a month that drive organic customers. They have signed a national brand  reseller that has 70 stores and 60,000 SMB customers. They acquire a lead for $22, a trial for $91, and a customer for $225. Their CAC Payback (customer acquisition cost), is 2.6 months.  When they launch the viral business-to-business network, customers can invite their customers and their suppliers to use Spoke for free. These viral signups are expected to significantly drive increased sales and lower CAC.

Business Model:

Spoke are freemium SaaS. Companies get limited but useful features for free, and pay (and pay more), as they see value, uncover features, and adopt Spoke across their business. Current pricing is based on company size bands, but future pricing moves to individual user pricing, where access to advanced/valued features, drive higher revenue per user.

Competitors:

Current competitors include Telcos like Spark, cloud PBX providers such as 8x8 and Vonage, and old time (PBX) providers such as Mitel, Vadacom, etc.  They also see a trend in smaller companies (under 7 or so employees) just using mobile phones. When Spoke release their virility business-to-business network, they will have no direct competitors.

Competitive Advantage/IP:

Spoke is mobile only, thereby unencumbered with the complexity of supporting historical telephony. Spoke sits atop existing mobile phones (Apple, Android), and the global internet/data infrastructure. Spoke integrates to the global PSTN when required. Their competitive/core competency/IP currently sits in proprietary IP built to deliver our differentiated features, coupled with the use of 3rd party services for lower value(d) features. Eventually they will replace all 3rd party providers (such as Amazon, Twilio, etc.), so that they own and control our entire technology stack (and IP), top-to bottom.

Valuation Rationale:

Spokes first round was $1.7M on a pre-money of $3.5. Spoke was an idea - no code, no customers. They now have live product, customers, and are seeing increasingly positive trends in the data. The most comparable valuation in a similar space (with similar market and competitive conditions), is Zoom (video conferencing). They raised $5M on a pre of $15M with no code, and no customers. Locally in New Zealand, Xero went public raising $15M on a pre of $40M, when they had around 100 customers and de minimis revenue. Spoke has a similar broad ‘business infrastructure’ appeal as does/did Xero.

Use of Funds:

Getting ready for scale.

  1. Doubling down on business phone features, call experience/quality, and call productivity;
  2. Introducing a business-to-business viral network, and,
  3. Improving internal processes.

COGS 13%; R&D 26%; Sales/Marketing: 27%; G&A 19%; Ops13%.

Shareholder Value:

Spokes focus is to build a good business. “Exits” tend to occur on the back of good businesses. Good businesses in this space traditionally have two exit paths. Strategic investor or IPO. Telco’s (Spark, Telstra); business infrastructure software providers (Oracle, SAP, etc.); and “At scale” SaaS companies (Zoom, Xero) are the strategic buyer set. The most likely of these are the “at scale” SaaS companies like Zoom. These companies already offer SaaS into the enterprise, and are often looking to take more wallet share. Other examples include Instructure, Nitro, and Xero. If our viral business-to-business plans work, there are an entire different set of potential exits.

 

Overview as at May 2018

Website
www.spokephone.com
Industry
Software/Telephony
Founded
2016
Employees
7
Funding Stage
Start Up
Burn Rate
$120K per month
Deal Type
Equity
Contact
Jason Kerr
Board / Management

Jason, CEO
Kieron Lawson, CTO

Advisors

Industry: John Sims, COO Blackberry
Legal: Simmonds Stewart
Finance: PWC Auckland