NYA FOUNDER SPOTLIGHT - LARRY KIM, CUSTOMERS.AI FOUNDER & CEO
Larry Kim, founder and CEO of Customers.ai, founded Customers.ai to help businesses extract the full value of their marketing and sales efforts using automated lead qualification and sales outreach automation on the most popular mobile chat applications, used by billions of people every day. Customers.ai provides tools and data to help consumer brands and B2C companies find their customers in the most scalable way possible and reduce the cost of customer acquisitions by 100-1,000x versus using traditional go-to-market tactics like Facebook or Google ads.
Larry has been in tech entrepreneurship for over a decade and founded WordStream, which was the world’s largest pay-per-click software company. Larry started WordStream out of his basement, grew the company to $55m over a 7-year period, and sold to USA Today in 2018. He’s been named Search Marketer of the Year from PPC Hero (2013, 2014, 2015, and 2017), Search Engine Land, and the US Search Awards. He received the Barry M. Portnoy Immigrant Award for high-tech entrepreneurship in 2019 and also won special recognition from the United States Senate and House of Representatives for his work in creating jobs in the Boston economy.
How did you first meet New York Angels?
I found New York Angels initially through my own research on who’s who in the industry. I was looking for a syndicate that had the same level of interest and conviction in investing as I do in my industry. I did some diligence on NYA, and I was convinced they were the right partner to work with in this round of investing. One of the great things about more traditional investing syndicates like NYA versus applying on something like AngelList is that you don’t have to share your confidential data on the internet because you know every VC in the world has their people looking not for investing purposes, but for competitive reasons. Sharing on platforms like that is not the best idea, especially with an early-stage strategy.
What were you looking for in investors when you were fundraising? Why did you choose to work with New York Angels?
We had a term sheet from a lead investor, and there was a small amount reserved for other strategic or syndicate purposes to follow-on. The lead investor asked me to fill in this small amount, or at least a significant percentage of it, prior to closing. I needed to find investment partners who would be able to move quickly. It also was challenging because this amount was significantly below the minimum check size of conventional Series A institutional investors. I also wanted investors with prior experience in my space that were active. I had many connections with active members of New York Angels, so I thought this might be a perfect fit because it would be beneficial for both Customers.ai and NYA. It ended up being roughly 45 days from our initial call to wiring the check to close the rest of the Series A on schedule.
What was the process like for you when you were fundraising?
There are a couple of different ways to fundraise. Some suggest that you should orchestrate an enormous effort to target your top 15 VCs as a way to create a sense of urgency. That seems a little risky to me because if you haven’t perfected your pitch, you can burn through quite a few leads and opportunities all in one swoop.
I am much more of a fan of the “always fundraising” mode but at a lower intensity. This allows me to make course corrections along the journey. I started fundraising more opportunistically with people I knew or had close connections to. Starting in early-February 2022, I had one meeting every two weeks or so. If you start with the long shots or the institutions that you aren’t exactly thrilled to partner with, you can learn with those before you meet with your best potential investors. It’s important to figure out what exactly their objections are in those early meetings, and then work on their feedback by making operational changes in the business to clear those objections, then start fundraising seriously. Don’t lead with the investors that you’re really hoping to do a deal with, because you know they’re going to say no. So by July 2022, we had refined our messaging and data, and we were really ready to fundraise. At that point, we engaged in an enormous fundraising effort where we explored about a dozen companies who wanted to work with us, then moved forward with meetings with about one third of them, and finally, we moved forward with a term sheet with one of them.
What have you enjoyed most about working with New York Angels?
It's great to have 22 additional people in your corner. As a CEO, I used to send out updates via email to only 3 primary investors, but now I have this Cabal of 40 people. It’s fun to have over 40 investors who I can update, and they are sending me referrals and commenting on our product. NYA members help me amplify my message just by hitting the like button on some of my updates which dramatically amplifies the reach of our recruiting efforts, company building efforts and marketing efforts. It makes it easier to have more people at the table.
How would you describe NYA to other founders?
New York Angels is an awesome medium-sized institutional partner. Enormous VCs who can write a full check sometimes can be hard to understand why they do some deals and why they don’t. But the good news is that you know your company, and there are thousands of other institutional investors that understand your space better and may have more conviction and understanding of what you’re trying to do. They may not be able to write $10-20m checks, but they can do the initial diligence and leave 30-40% of the round open for syndication for partners like New York Angels. I think of this type of fundraising like a bundling strategy.
What advice would you give other founders who are looking to fundraise?
For fundraising, 2023 has been harder than in recent years, so you’re going to need to be a little creative. In the past, it seemed like you could just show up, and someone would invest $20m in your Series A. So how can you be creative? Consider how might fill your Series A round using companies that are still active, e.g. earlier stage VCs who typically invest in Series C? Series B investors are not investing much right now, and even Series A are scaling back, so it’s challenging. By bringing along a syndication with you, great names like New York Angels and others, can be an incredible fundraising strategy.
What advice would you give other early-stage investors who are looking to invest in companies?
You don’t want to swing at every pitch, right? So, if you’re going to do angel investing, you really need to be part of one of these medium or large size syndications because they’re going to have significantly more deal flow. Partnering with an organization like New York Angels with their reputation and size of their partnerships, you’re going to see more deals, and that’s 90% of the equation. When you have several members investing moderate check sizes, it can accumulate to be a significant amount. With organizations like NYA, you also will know more CEOs and founders with experience that you can learn from.
What has driven Customer.ai's success?
Our thesis is that customer acquisition for B2C is completely broken. I know this because I built my last business selling Google and Facebook ads, and when I started that business we were getting clicks from Google for $0.05, and by the time I exited that business when I was acquired by USA Today, the cost per click was $40-50 per click. Even a 1% increase in cost-per-click is a 1% decrease in return investment for that channel. The problem here is that there are tens of millions of B2C companies that are still relying on inefficient vehicles like Facebook and Google ads for demand generation.
Customer.ai eliminates the middleman. We are kind of like a Salesforce or Apollo, which provides you with the names and phone numbers and emails of executives. We have the capabilities to help you identify your Ideal Customer Profile (ICP). For example, identifying dog owners who are liberal and like to travel a lot. It is similar to defining your audience in Facebook ads, but we can help you find your ideal customer persona and provide you the ability to reach out to your B2C customer base directly. One of the more exciting data sources and technologies that we’ve pioneered is something called X-Ray, which allows businesses to profile the visitors on their website using this incredible first-party data system which allows the business owner to immediately follow up with people who are visiting their website. Combining the power of that with generative AI, we can customize the sales outreach messaging to the point to create messages that delight the customer. We know these messages are successful because we have seen open rates skyrocket to 50%-70%.
What is next for Customer.ai?
We are revolutionizing customer acquisition by offering unprecedented lead generation and follow-up capabilities for our target market B2C Companies offering unprecedented lead. Our goal is to replace the role of traditional ad networks like Google or Facebook, which generated trillions of dollars in enterprise value. It’s an exciting time for us. We think we can grow more than 2x this year after growing more than 3x in 2022, despite the economic headwinds. We are excited to partner with NYA; it wouldn’t have been possible without their support.
