He got 100k signups in 30 days. They all churned. 2 years later, he hit $10M ARR. | Rich White, Founder of Fathom

In this episode, Rich breaks down the wild story of Fathom's launch. He reveals how they secured a prime spot on the Zoom Marketplace and generated 100,000 signups in 30 days—only to realize 99.9% of them were useless. 

He discusses the pivot to monetization when the market crashed, how to design a product for viral loops, and why staying in private beta for 10 months was the best decision he ever made.

Why You Should Listen

• Why getting 100,000 signups in a single month nearly killed the company.
• How to use the "Iceberg Strategy" to build a defensible moat.
• Why you should attack the "800-pound gorilla" incumbent.
• How to hit $100k ARR by selling a roadmap that doesn't exist yet.
• The "Visible Feature" mechanic that drives zero-cost viral growth in B2B.

Keywords

startup podcast, startup podcast for founders, viral growth, product market fit, AI startup, freemium strategy, Zoom marketplace, PLG, B2B sales, Fathom

00:00:00 Intro
00:03:14 Why Sales Reps Hated Gong
00:07:54 Betting on Transcription Costs Going to Zero
00:11:52 The 10 Month Private Beta Strategy
00:17:46 The Zoom Marketplace Launch
00:19:52 100k Signups and Zero Growth
00:26:39 Selling a Roadmap to Hit 100k ARR
00:33:53 The Viral Loop of Visible Bots
00:36:12 Why Enterprise Sales Was a Trap
00:39:51 The Moment of True Product Market Fit

Chapters

• 0:00 Intro
• 3:14 Why Sales Reps Hated Gong
• 7:54 Betting on Transcription Costs Going to Zero
• 11:52 The 10 Month Private Beta Strategy
• 17:46 The Zoom Marketplace Launch
• 26:39 100k Signups and Zero Growth
• 33:53 The Viral Loop of Visible Bots
• 36:12 Why Enterprise Sales Was a Trap
• 39:51 The Moment of True Product Market Fit

Transcript

Rich White (00:00:00) :
The same problems they had, oh, it’s stressful to take notes. I’m worried I’m going to miss something. What they had doing sales calls was the exact same problem I had doing user research calls. Which is obviously a very different use case and so it really made me feel emboldened that this isn’t a vertical play. This is something that everyone should have that does any sort of knowledge work that’s on Zoom, Google Meet, you name it. This is way bigger than sales, but we can also sell to sales, and we’ll do it by going after the people that are on the meetings. Not just focused on selling to the executives that are trying to augment those meetings. Because there’s nothing harder for incumbents to deal with than someone coming in massively under your price. It’s really disruptive, what do you do? Give back your revenue. So, for those two reasons, I got really, really excited to compete with that company in a way that I think a lot of other companies I talked to in this space were, that company was an 800 pound gorilla. We don’t want to compete with it at all. I was like, are you kidding me? It’s a juicy steak, let’s go after it. We launched it. It was kind of an amazing launch in that we got one hundred thousand signups in the first month. It’s over, we already won, right? One hundred thousand signups. But as what’s going on, we were looking at our other metrics and they weren’t moving that much. And, you know, after a month and one hundred thousand signups, we only had one hundred DAU. It’s kind of crazy to think about it, but we probably were going to aim for a Series A in 2022 with zero revenue and a couple thousand DAU with a crazy high NPS number, and a really good virality coefficient, right? And then the market shifts right as we gear up to do that. And now it’s like, oh, crap.

Previous Guests (00:01:23) :
That’s product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is Product Market Fit.

Pablo Srugo (00:01:35) :
Do you think the Product Market Fit show, has product market fit? Because if you do, then there’s something you just have to do. You have to take out your phone. You have to leave the show five stars. It lets us reach more founders, and it lets us get better guests. Thank you. Well, Rich, welcome to the show, man.

Rich White (00:01:51) :
Thanks for having me.

Pablo Srugo (00:01:52) :
Well, excited to have you here, man. I mean, your app, Fathom, which is a note taking, note recording app. It’s one of the earliest, maybe the earliest, you’ll tell me. Kind of app that was doing that on Zoom calls and I mean, I must’ve seen it a million times, right? Somebody brings their kind of bot into Zoom, and we still see it obviously these days, but very excited to hear how it actually all happened from the other side. So maybe to start, if you could tell me a bit about your background, especially, you know, the parts leading up to starting this company.

Rich White (00:02:19) :
Yeah, so I’m originally a software engineer by trade. Pretty early in my career, I kind of shifted over to product design. I was pretty fortunate to kind of fall into some of the early YC cohort folks, worked with actually some folks in the first batch of YC. Kind of got me into the startups upstream and then I ran this company, UserVoice, for about ten years before starting Fathom. That was kind of the bridge to Fathom, kind of in 2020, was just spending a bunch of time on Zoom calls. As I think a lot of us were, a lot of them, and I was like, gosh, this taking notes stuff is terrible. So, that’s kind of my background. You can see me as the product founder, CEO sort of thing.

Pablo Srugo (00:02:54) :
Do you leave to start Fathom or you leave to just do something else and then find that idea later?

Rich White (00:02:59) :
No, I actually left to start Fathom.

Pablo Srugo (00:03:01) :
Gotcha, so what’s step one? You leave this business, you’ve got this idea. I mean, what stage is that the idea at that point? Is it just kind of on paper, okay, I want to solve this problem, or had you done a bunch of research already, and where do you go from there?

Rich White (00:03:14) :
I think there are two things we did. One is, you know, just did some rough prototypes of, what happens if I just record a meeting with standard Zoom recording and then I painstakingly afterwards tease through it, and build a highlight reel. And let me show people this highlight reel instead of showing them a bunch of notes, and see if I get a much different reaction. And I did, right? When I showed that to folks instead of showing them, yeah, here’s eight bullet points from fifty calls, here’s a two minute highlight reel. The response from people was so much different, right? It was so much easier to empathize. People get more excited about it.

Pablo Srugo (00:03:44) :
Because before Fathom, like for normal Zoom calls, it wasn't really common. But in the sales world with Gong, people are already doing this.

Rich White (00:03:50) :
In the sales world, it was reasonably common, right? Like Gong, and then Chorus, and then kind of came out in 2015, 2016. You know, I don’t think it was common in the world, but certainly if you’re in a high tech sales environment, you’re pretty familiar with it and so, yeah, I went out and interviewed about one hundred people that use Gong. And I think really importantly, I interviewed about half and half managers and executives versus individual sales reps. And I think if we had just only interviewed the execs, we probably would not have started the business because they were really happy with the current solution. But when we interviewed the ICs, we learned that they didn’t really get any value out of the solution. It was really a tool just for the managers and when I talked to the sales ICs, it also dawned on me that the same problems they had, oh, it’s stressful to take notes, I’m worried I’m going to miss something. That they had been doing sales calls was the exact same problem I had doing user research calls. Which is obviously a very different use case and so it really made me feel emboldened that this isn’t a vertical play. This is something that everyone should have that does any sort of knowledge work that’s on Zoom, Google Meet, you name it. This is way bigger than sales, but we can also sell to sales, and we’ll do it by going. Possibly a plan where we go first and foremost after the people that are on the meetings, not just focused on selling to the executives that are trying to audit those meetings.

Pablo Srugo (00:05:00) :
I'm curious, what did the IC salespeople not like about Gong and the way it worked? Were they still taking manual notes?

Rich White (00:05:06) :
Yes. I mean, one of the big things was speed. So, you know, both Zoom and Gong kind of depended on Zoom recording. So Zoom, even to this day, sometimes takes half an hour to get you the recording and transcript of the meeting. Gong was just taking those transcripts and putting them into their system. So you’d have to wait thirty minutes, sometimes an hour and we realized, oh, if you’re trying to replace notes. There’s a lot of things we don’t like about notes, but one of the things that’s really nice about it is the immediacy. I get off the call, they’re right there, I can fill in my CRM, write my follow up email, do all my work, right? And that was one of the big things we saw. It’s like the reps are like, "I occasionally go look at the recording, but honestly, it takes so long to get to it. I’ve got to do all my post meeting work in the first five to ten minutes."

Pablo Srugo (00:05:48) :
And were they getting notes or just the transcript after waiting?

Rich White (00:05:51) :
They were getting the transcript, and that was also a thing. It’s like no one else waded through a whole transcript and so our initial version of Fathom was very focused on how do we do something within thirty seconds of the meeting ending, and how do we make it really easy for you to find the moments that matter to you, and get back to them.

Pablo Srugo (00:06:07) :
The execs were happy because they had full visibility and presumably some kind of higher level analytics. That they could understand everything and they didn't need that immediacy.

Rich White (00:06:16) :
It’s funny, I think it was also one of those things where if you ask them why they bought that product, they’d be like, oh, I’m really excited about these analytics, right? That we could get and we asked them how they use those analytics, they’d be like, oh, well, we’re gonna use it, right? It was always kind of aspirational. Mostly what I realized they were buying was the security blanket. They felt comfortable knowing that if they did have a question about something, that there was this warehouse, this audit trail, they could go double quick on it themselves, right? So it’s like, oh, Kim says this deal is going to close. I’m so curious about what’s actually happening here. I can go into the recording and look at it. And so that was the other thing that stuck out to me. It’s like, the products that are being sold are pretty high. Gong in this case is being sold at a pretty high price point, about $150 per seat, and not per executive seat, per rep, right? And it was being sold on this promise of all these analytics and AI, and intelligence. But when you peel back the onion, people were using it as a glorified Google Drive and I thought that was also an interesting opportunity. I was like, I don’t think the clearing price for this in the market is $150 a seat. I think it’s $25 a seat, right? And I think there’s not only an opportunity to compete with these folks by coming in at a different user, the IC, than the manager, but when you get to the manager, at a minimum. I think you could sell them something that’s a fifth the price, right? And really undercut that existing incumbent. Because there’s nothing harder for incumbents to deal with than someone coming in massively under your price. It’s really disruptive, what do you do? Give back your revenue. So, for those two reasons, I got really, really excited to compete with that company in a way that I think a lot of other companies I talked to in this space were like, that company was an eight hundred pound gorilla. We didn’t want to compete with it at all. I was like, are you kidding me? It’s a juicy steak, let’s go after it.

Pablo Srugo (00:07:54) :
And after you have those a hundred calls with Gong users, do you do further validation or do you just move more to building the product?

Rich White (00:08:01) :
At that point, I think we felt pretty emboldened that I’d seen how it can work for me. If it’s my theory of mind, where I think the market is going. We had some pretty good theses as we tried to build out kind of an early version. We had a thesis around transcription costs, and we had a thesis around Gen AI. And in 2020, it was like $3 an hour for transcription. And we kind of believed that, we think this is going to zero. We think there’s a commodity, it’s going to zero. This is also why products like Gong were so high price, because $3 an hour for transcription, your average user is doing ten to twenty hours a month. Shit, that’s $30, $60 a month in just transcription costs. No wonder you have to charge $150. If you have to charge $150, no wonder you’re only going after sales, and you’re not making a horizontal solution for everyone. And then we felt a lot of conviction around Gen AI. So it’s one of those things where it’s like, on a personal level, I felt like I understood the problem.

Pablo Srugo (00:08:51) :
Even in 2020? I mean, that's pretty early.

Rich White (00:08:52) :
I think this is where I had the benefit of spending ten years in Silicon Valley, being surrounded by a lot of, well-connected folks from the YC network. I kind of knew how much money was being put into OpenAI and all these sorts of things. And it’s kind of funny because when we put AI in our company name in 2021, I had a bunch of investors reach out to me and be like, what are you doing? No one likes AI, don’t market yourself as AI and it’s funny to think about this now, but yeah. There was that first generation of AI products that were 2015 to 2020.

Pablo Srugo (00:09:20) :
That just like didn't really work, that's right, yeah.

Rich White (00:09:23) :
Didn’t work at all, right? And behind the scenes, there’s a bunch of crappy if-then statements, right? And I remember saying to them, no, no, no, don’t get hung up on where it is today. The promise is coming, right? And so, yeah, we kind of really bet on, look, we think transcription cost is going to zero. We think Gen AI is doing it really well. We think those two things are true. You want to be two to three years ahead of when those two things happen to build our product that’s used by everyone and so I think, between the market research, my own personal experience, and then having a thesis on where the world is going. At that point, I felt emboldened enough to be like, great, let’s go start this company. Let’s go raise the money. Let’s go assemble a small team.

Pablo Srugo (00:09:59) :
Was the first version just transcription or did it have notes as well?

Rich White (00:10:03) :
The first version was just transcription and literally a button you could click that says, flag this part of the meeting. Because one of the things we saw was, you knew in the meeting when you were, oh, that was a really interesting quote, or, hmm, that’s something interesting. We didn’t have the AI to be able to do anything more than that, right? It was just you can find moments of a meeting and so it was literally just glorified recording and transcription with, a little button so you can flag things in real time.

Pablo Srugo (00:10:27) :
Did you do your own transcription or did you just rely on a third party at the beginning?

Rich White (00:10:31) :
In the beginning, we relied on third parties. We never thought we’d build our own models, and we never thought we’d build our own transcription. What we thought we’d do is, we would get really good at building out the entire system, right? Building out this real time system that’s always working, that’s very reliable, and that gets you the recording, the transcript, and whatever AI artifacts come off of that within, thirty seconds of the meeting ending. It was one of those things where the value was in being a really good systems integrator, right? We don’t have to build anything that’s hard tech. Our job is pulling it all together in a way that’s really reliable and really fast.

Pablo Srugo (00:11:01) :
Yeah, maybe just a simple question but how do you speed up the delivery if you don’t manage the transcription? Doesn’t the transcription take a certain amount of time itself? Back then, obviously, today’s different.

Rich White (00:11:10) :
Today’s different, yeah. You do a lot of things where you would chunk up the transcription and so we’d actually be transcribing as the meeting was going. So we didn’t get to the end and serialize the whole thing, right? Have to do it all in serial. That was a big thing we did, but I remember it was kind of fun in the beginning. Our first version of Fathom also took thirty minutes to get me the recording and transcript, just like Gong and Zoom. And I remember telling my team, it needs to be faster. And the engineering team’s like, how fast? And I was like, I don’t know. I was like, just keep going, keep going, I’ll tell you when it’s fast enough and it was like thirty minutes, ten minutes, seven minutes, five minutes, three minutes, got to thirty seconds. I was like, great, takes you thirty seconds to get off the call anyways. That’s almost imperceptibly instant, so that’s good.

Pablo Srugo (00:11:50) :
When do you launch this? The first version?

Rich White (00:11:52) :
So it depends on how you define launch. I think in the fall of 2020, we started working on this. We had pretty quickly a version that I could use at least, but it was really rough around the edges, had a lot of bugs, but you could use it. We didn’t officially launch it till about ten months later, in the summer of 2021, with Zoom. So Zoom launched this big marketplace. We kind of finagled our way into said marketplace and launched with them. And so that was technically our launch. But I would say for this whole nine months, I was constantly harassing people I knew, or who were one degree away from me on LinkedIn. Trying to get them to sign up for my product, finding all the bugs in it, losing the whole cohort of users, rinse, repeat every week sort of thing.

Pablo Srugo (00:12:29) :
After COVID, say the second half of 2020. I mean, Zoom just exploded like crazy. Were you worried in that time that, when you say you hadn’t launched. I guess I’m curious about that, you hadn’t launched on the Zoom marketplace because it didn’t exist. I know that’s a big launch, we’ll get to it, but were you public and you just weren’t pushing ads. I guess, because the other side is, you know, Zoom is now happening, and if we’re going to record stuff, we better be recording today.

Rich White (00:12:51) :
We kind of took the approach of, I’m a big fan of staying in private beta really long. I think in 2025 or just even 2020, the launch early thing didn’t make sense to me. Because we have one chance to make a good first impression and this is a product that if it breaks on you once, you might try it again. If it breaks on you twice, you’re never trying it again, right? We realized early on that one of the key features of this product was reliability, right? If I’m going to hire something to take my notes for me, it can’t work eighty percent of the time or ninety percent of the time. And so we were very intentional about, we’re not going to launch until we think this thing is bulletproof and that took a long time. There are a lot of edge cases to how Zoom might fail or how Google Meet might fail in a meeting and so building out those bots, and making them really reliable, and robust took time.

Pablo Srugo (00:13:41) :
I’m actually curious, not to go too deep on the tech side but because on the face of it, you’re like, well, you don’t do the transcription and you batch it up. It’s pretty simple, you just transcribe the thing, give me the thing. The idea is timely, right? But the product’s not technologically hard, at least it doesn’t seem that way. But what were some of the main bugs that actually made things much more complicated than it might seem?

Rich White (00:13:58) :
I mean, this is the reason I love building this product. Because it's one of those, I call it, an iceberg product. Where it looks really simple on the surface and when you go to build it, you realize, one, it's real time, two, it's a distributed system, three, it's reliant on a bunch of third party dependencies, right? It's trying to figure out what's happening on Zoom. Zoom doesn't have an API for this. You are building a client that kind of fakes being a person on a meeting and that client is a shifting sand. Whenever Zoom would change their UI, you'd have to very quickly adapt your bot to match that. The number of different ways people could use Zoom, the number of, there's waiting rooms and all these messages you have to support. You know, I always told our teams, look, this stuff doesn't seem fun. We don't think the future of this is people sending bots to meetings. But this is one of those classic things where it's like, to be on the bleeding edge means you're bleeding, you're cutting your hands on all these sharp edges, right? That are happening, and that was our sharp edge. Making this work seamlessly inside of these video conferencing platforms that had no real good APIs for doing this. So orchestrating all that in real time, a lot of it was also the capacity constraints, right? So, that bot we have to spin up. It takes two minutes to spin up that bot, right? In the cloud, to be able to join your meeting. If you ask for the bot to join your meeting, you're not going to wait two minutes for it to show up. It needs to show up within ten seconds, which means I need a predictive algorithm on how many bots I need to have on hand at every half hour increment, right? Which means I need to look at people's calendars and make some estimations. So there's a lot of stuff around that. Yeah, if you want to do a naive version that shows up two minutes away, it takes thirty minutes to get you the transcription. We could have done that in a weekend. To get the version where it does it at scale, feels instant, and works ninety nine percent of the time. That's why I was like the last mile was ninety percent of the work.

Pablo Srugo (00:15:42) :
How many people on team until that Zoom marketplace launch in like mid-21?

Rich White (00:15:46) :
Five engineers.

Pablo Srugo (00:15:47) :
And had you raised money at that point?

Rich White (00:15:49) :
We'd raised money almost every three months since we got started. We had a, we started, I raised money from friends and family. We got into YC, I raised money, and when we got into YC. We got the demo day, I raised money there and so I was just very much a, just constantly raising small bits of money to keep pushing at our own level.

Pablo Srugo (00:16:05) :
How much had you raised in total, more or less, by the time you launched? Like truly launched?

Rich White (00:16:09) :
By the time we launched, I don't think we'd raised that much. I think we'd probably raised about four.

Pablo Srugo (00:16:13) :
Was there any worry during that time? You know, because that's, on the flip side, it's a pretty long time to see true inflection. Was there worry that maybe there's something here that's just not going to happen? Or was there reason to believe that that was just going to come?

Rich White (00:16:28) :
That market was very conducive to the kind of business plan we had, right? If you remember the kind of heavy COVID times market, part of our game plan was we're going to defer monetization very far out a couple of years. We're going to get this thing out for free. We're going to build a user base. We're going to build a single player version that's fantastic and just scales virally. That'd be tough to pitch in 2022 or 2023, right? But in 2020 and 2021, it was very on brand and, candidly, capital was a lot more affordable then. And so, in some ways, a business plan matched the capital environment that we were in. I had a lot of capital concerns when we got to 2022, and that whole market shifted. And we were very much a business built on growth, and not on revenue. And now the market shifted, and wanted revenue. But no, in 2021, for the most part, I felt like, especially as someone who is a second time founder, and I could point to, hey, I built a company ten million before, that gave me a little bit longer of a leash, I think, with investors. Where they're like, yeah, you don't need to show that you can sell a customer in the first sixty days like a lot of the YC Demo Day startups. It's like, no, we'll take a bet, a little bit longer bet on this thesis of where the market is going.

Pablo Srugo (00:17:35) :
You love this show. You don't want to miss the next episode. Why would you? So hit that follow button. Trust me, it's in your own best interest. So tell me what happens when Zoom decides to launch its app marketplace.

Rich White (00:17:46) :
Yeah, I mean, that was kind of a coup for us. They announced this marketplace, we were like, oh my gosh, we have to be involved in this, right? It's such a natural fit for us. I actually hustled my butt off to try to get in. I raised money from people that knew Zoom. I was just like, anyone connected to Zoom? I was like, let me raise money from you. Can you get me this program? Tried all these ways to get in, and eventually someone just, like, you know this person here runs the program, here's their email, you should just email them and see if you can join the program. And I just kind of cold emailed them, and I think at this time we were eight weeks into the product. We had no real data I could show, I think we were a perfect fit for this program, and they're like, yeah, come on in. So I think we really benefited from the fact that Zoom was a really big company at that point, but acted like a smaller company.

Pablo Srugo (00:18:25) :
Were you eight weeks or wasn't this ten months in?

Rich White (00:18:28) :
Well, sir, we got into the program eight weeks in and then they launched. So we were actually like we were building Fathom along with them building out this marketplace.

Pablo Srugo (00:18:37) :
So you knew it was coming. You knew that big moment was coming for a long time.

Rich White (00:18:41) :
We started the company, and a month later they announced this marketplace. Which was kind of an oh shit moment for me. I was like, this is either really good for us or really bad for us, right? If we're not in this, it's probably really bad. If we are in this, it's really good. But oh my gosh, this just got announced and at that time, they announced it, and it was supposed to come out in ninety days. And I was like, we will never make this ninety day deadline. Thankfully, it got delayed six more months after that. So the timing worked out perfectly but yeah, we kind of worked our way into that Zoom program. We were there at launch. We kind of finagled our way in, and then we very quickly became one of the top apps on that marketplace.

Pablo Srugo (00:19:15) :
How did that work, by the way? Where was the app store? How did people find you?

Rich White (00:19:18) :
Yeah, I mean, at that point, Zoom was, I think, just popping up things in their client. Being like, hey, now we just have Marketplace, check out some of our top apps, right? And we happened to be named AI Notetaker by Fathom. Which, you know, turns out the Marketplace was alphabetically sorted. Who could have guessed that? And, yeah, one of the first things you tried, right? Obviously, Notetaker is a very natural, obvious add on to something like Zoom. So yeah, we launched it, it was kind of an amazing launch, and we got one hundred thousand signups in the first month. And at first I was like, oh my gosh, we've done it, right?

Pablo Srugo (00:19:52) :
Yeah, you struggled. It's over.

Rich White (00:19:54) :
We struggled, it's over, we already won, right? One hundred thousand signups, but as the month was going on, we were looking at our other metrics and they weren't moving that much. And you know, after a month and one hundred thousand signups. We only had one hundred DAU and we started the month with like fifty. I had fifty out of my beta period of hustling to get users. I had fifty kind of consistent users, and we had one hundred thousand signups. I don't think it doubled our DAU. So that was kind of a point of crisis for us. That was part of the point we were most worried about what we were doing.

Pablo Srugo (00:20:23) :
How do you explain that, ninety-nine point nine, nine percent or whatever it is?

Rich White (00:20:28) :
It was really jarring because at the time I had such high conviction. I always used Project every day, I knew how good it was. I'd seen in my small cohorts, you know, we burned through a lot of cohorts with bugs, right? But we eventually got to a cohort where I put fifty new users in, and I got thirty-five users out a month later, and they stuck with it. So, I was like, okay, I validated retention. It's not a leaky bucket. I don't think so and really, we spent a lot of time worrying about this. But I don't know, about six weeks into the Zoom launch, we eventually looked at an analysis of who these users were. Remember, it's COVID, and Zoom is now being used by everyone from your grandmother to your kid's kindergarten class, right? And Zoom made some last minute decisions to walk down the marketplace to their best users and really expose it to their free users. So we did this analysis, and we found out that ninety nine point nine percent of people that were signing up for our product had no meetings on their calendars. I mean, there's one thing we need for Fathom to be useful. It's like, if you don't have a meeting, this is a meeting note taker. We don't really have a value prop. So it was kind of a crazy scenario where it's like, oh, we just got the most adverse selection of user signups possible ever and so at least we felt better now that, okay, we're not doing something wrong. It's just a really bad funnel, if you will.

Pablo Srugo (00:21:49) :
So, I mean, there are pluses and minuses. I mean, the plus is at least the churn is kind of not your fault. The downside is you actually only acquire about one hundred or so DAUs out of this supposedly massive launch.

Rich White (00:22:00) :
Yeah. I mean, that was pretty disheartening when we realized that. I think in retrospect, you know, I'm a big, everything happens for a reason kind of guy and when we look back at it, we kind of reflect that, if we had actually got one hundred thousand good users, we would have just died. There's no way we could have gone from servicing fifty people to one hundred thousand people, right? If they were truly using this to the same level as fifty people work, right? Transcription costs were so expensive, all that stuff was true, right? We would have gone out of business.

Pablo Srugo (00:22:27) :
Because you were paying the transcription yourself and it was a free product.

Rich White (00:22:29) :
Yeah, you were paying for the transcription. At this point, it was still, I don't think it was $3 an hour but it was still, I think, $1.52 an hour. We were just betting that cost would go down as our usage went up, right? And that was the big gambit we were making. The one silver lining of this era was, even though they were sending us a bunch of low quality users. They still had to go through our sign up process and we thought our sign up process was decent. We launched, I think we got about a thirty percent success rate, people getting through our onboarding process. Which involved answering some questions, connecting us to their Zoom account, downloading a desktop app. Turns out, it wasn't that good and so, one of the silver linings was we had enough users coming in every day signing up. Even though they wouldn't end up becoming real users, they would still go through the sign up process. I mean, most startups don't get that kind of volume and so we could make a change in the sign up process, and the next day it'd be statistically significant whether it was an improvement to the onboarding process. So we kind of used all those really non ICP users to really hone our onboarding process and we got it to about a mid seventy percent onboarding rate. Basically more than two times our onboarding rate over the course of three months. I just put one of my engineers and me every day, we just looked at it real quick at what's the next biggest roadblock, let's knock that down. I think when, finally, a little bit later in the story, we got the right users. All those bad users always helped us hone the machinery so that we got a much higher yield for every sign up going forward.

Pablo Srugo (00:23:48) :
So, I mean, you've got kind of onboarding fixed, you've got retention at least for your ICP solved. Where does top of funnel come from?

Rich White (00:23:56) :
Top of the funnel basically always just came from users bringing it into their meetings and telling other people, like, hey, do you mind? There's this thing I got to set up for this company, I haven't heard of a more naturally viral product. Because you've got to bring it to your meeting. It's visible in the meeting. You're going to have to explain why it's there and, you know, oh, it takes notes for me or gives me a transcript. Oh, do you want this or dah, dah, dah, and so we just saw in the data a lot of what we call kind of indirect referrals. It wasn't someone sending a referral link after the meeting. It was just, oh, so and so meets with us, meets with a valid user, and then they sign up later on that day. And so that was kind of cool. And that was kind of our thesis, we built a really killer single player experience. We give away for free and that was really key. We didn't try to charge anything for it. We want to give away for free because when you give something away for free, I saw this at UserVoice. There is a desire for humans to kind of balance out the transaction. If I give you a lot of value for free, you kind of more naturally want to do something for me and so it's like, yeah, of course I want to tell people about this. Like, oh, I feel I kept giving this gift and so that was a big part of why we focused so much on building our own infrastructure to keep those costs low so that we could be a really, really good product that's completely free.

Pablo Srugo (00:25:03) :
So it turns out the Zoom marketplace, which was supposed to be a massive top of funnel initiative. Actually just helped you solve onboarding, and the underlying true kind of growth engine was just word of mouth.

Rich White (00:25:14) :
Correct. It kind of, it did give us, I think it also helped. I mean, that and we had a product launch early that year that I think gave us a small kernel, like a small starting pool, right? The hard part with viral products is, how do you get the first thousand users, sort of thing, right? It gets the flywheel going. Even though it was a terrible conversion rate, it got us the seed of a user base that could grow from there.

Pablo Srugo (00:25:37) :
Do you remember the numbers? If you maybe had one hundred DAUs or so by, let's say, mid-'21, when did you hit one thousand? When did you hit ten thousand? How fast was that ramp?

Rich White (00:25:45) :
Yeah, we hit one thousand about a little under a year later. So it was about, we went from one hundred at the end of the first launch month to, I think, we had about four hundred by the end of the year, and then we got to one thousand. But still, again, still pretty well and swell.

Pablo Srugo (00:26:01) :
Like mid-'22, you're talking about a thousand?

Rich White (00:26:03) :
Mid-'22, we're talking about like a thousand.

Pablo Srugo (00:26:06) :
Free users?

Rich White (00:26:07) :
Free users, right? DAU.

Pablo Srugo (00:26:08) :
Yeah, so it's a top game.

Rich White (00:26:10) :
Yeah but we saw it consistently growing. It was consistently growing five to ten percent a week, sort of thing, right? Probably five to eight percent and so we're like, okay, the graph looks good. It's a good curve. It's very consistent but yeah, it's starting from a small number, sort of thing. It's not starting from the one hundred thousand we were hoping to get from the Zoom marketplace.

Pablo Srugo (00:26:27) :
Well, I mean, the main thing is, and you mentioned this. You alluded to it, in the second half of '22, the market shifts. So all of a sudden, the free is not as cool anymore. The revenue is the thing, but you only got one thousand users. What's the move?

Rich White (00:26:39) :
Yeah, I mean, I think that was the, every year there's like one crisis point, right? 2022, it was like, we were going to, you know, it's kind of crazy to think about it. But we probably were going to aim for a Series A in 2022 with zero revenue and a couple thousand DAUs, with a crazy high NPS number and a really good virality coefficient, right? And then the market shifts right as we gear up to do that. And now it's like, oh crap. And we were so bullish on this prospect that actually I was raising money every three to six months, but I never raised us more than twelve months of runway. I was always raising just enough runway and that was kind of a personal decision. Because I like the pressure of short runways, right? I just, you know, it keeps me sharp. But now the market shifted, and it's like, oh, where are we going to go get some money from? And we always had plans to first build a single player experience, give away for free, and then eventually that would be a kind of a lead gen tool that gets us into selling a team experience to a founder, a sales leader, a CS leader, that sort of thing. We hadn't planned to do that for another year. We were like, oh, we still have a lot more we want to do on the single player experience. There's a lot more we can improve in our viral loops and stuff like that. And the market shifted. We're like, okay, well, we're never going to raise again if we don't have revenue.

Pablo Srugo (00:27:49) :
And you had what? Maybe nine months to run away at this point?

Rich White (00:27:51) :
I think at that point we probably had twelve, just under twelve, right? Nine and twelve. So yeah, we quickly shifted gears. One of the things we did early on is I brought in three of my best salespeople from UserVoice before we had any sales and I said, I have nothing for you to sell. I want you just to come here and be like a CSN. I want you to really get to know the product, really get to know our users, become an expert. Become a product expert and at some point, I'm going to come to you and say, great, we have something for you to sell, and you'll already be fully ramped and ready to go. And I brought them in, I think, six to twelve months before this shift. And I remember signing them, like, summer of 2022. I'm like, great, it's time to sell and they're like, what are we selling? And I was like, well, here's a list of ten features we're going to build over the next year. We've got one of them built. Good luck, you've got to go now. You've got to sell the roadmap to all these folks and they did a great job, frankly. First month we sold, you know, we got to $100K, in ARR recurring. And candidly, I think that was more on the back of people just love the product and they want to see it succeed. And so they're like, sure, we'll throw some money out where you're going, right? We'll invest, it almost felt like investment and honestly, at the same time, we did a crowdfund.

Pablo Srugo (00:28:59) :
What was, by the way, the pitch? What was the premium product that you were offering then?

Rich White (00:29:03) :
The premium product were a lot of these team and collaboration features that we always had sketched out we wanted to build. We just weren't ready to build them yet. So it's like, you know, you want to have a team workspace where you can put all your meetings into. You want to get alerts when certain keywords pop up. You want to be able to build a playlist. You want to have access controls. You want to, you know, on and on and on. You want integration with your CRM. So, you know, all this stuff in a lot of ways, it was kind of Gong light and so we already kind of knew what they wanted to buy. Because I already did a bunch of research with what they were already buying, and we were just offering that or we were going to build this but at twenty percent the price, right? And most folks are like, well, we love using you on meetings or we love the single player experience. Fine, we'll throw you, you know, twenty, thirty bucks a month per seat to see where you go and so that's what we did. It was a really rapid shift to great, we thought when we were doing now we got to change all of our plans to react to the market.

Pablo Srugo (00:29:55) :
So I get to $100K in a month. Which is an exciting start, but where are you maybe six months later?

Rich White (00:30:00) :
I think it took us about twelve months to get to a million. It's kind of funny, the first year was when we launched. The first year was all building the product. The second year was all free, we launched and then we were just a free product. The third year is us getting to a million and then it kind of kept growing from there pretty progressively. And I think the watershed moment for us really was probably year three. Where we probably, that's probably where we really hit product market fit.

Pablo Srugo (00:30:23) :
Year three would be from a million to ten sort of thing? Like that final part?

Rich White (00:30:26) :
Yeah, exactly. That's where we really hit our inflection point. And again, I think I told you, we were always building for transcription becomes free, gen AI becomes really good. Transcription became free somewhere around late2023. Sorry, late 2022, so that also helped. The other problem we had in 2022 is it's now hard to raise money, and we're growing but transcription cost wasn't coming down as fast as we had hoped.

Pablo Srugo (00:30:48) :
Just so I understand, how do you make it to a million ARR time-wise? Do you end up raising a bridge or how do you get there?

Rich White (00:30:54) :
We did actually a crowdfund with our users. Which is something we had planned to do for marketing reasons and then it turned out to be both good for marketing, and for runway extension. I was also aggressively, you know, I raised another round, raised another million dollars just from people, you know, more angels and things like that. And that most folks had been using the product and believed in it. While my engineering team is hustling to build the team features and my sales team is hustling to sell the roadmap. I was hustling to raise more money, you know, I was like, if we can just get past this gap. I'm confident on the other side of this, we'll have a very sustainable business that won't be subject to market cycles anymore.

Pablo Srugo (00:31:29) :
And then as you're growing to that million, which I guess hits like mid-2023. ChatGPT launches end of '22. What was that like at Fathom?

Rich White (00:31:38) :
That was pretty exciting, right? Because, I mean, Gen AI came a little faster than we thought. I actually thought we were still another year or two away from actually being able to use Gen AI on the product. Because up until that point, like I said, the product was really transcription. There wasn't really much AI. We were building a sports car and we were waiting for someone else to build the engine. We built out everything else, right? We put like maybe a lawnmower engine in it to keep it warm and the real watershed moment for us was GPT-4. GPT-3 was decent, we were able to make some automated meeting notes. They were okay, but when you get to GPT-4, in our case. We actually used Claud-2, and that was like fall of 2023. That's when it's like, oh, okay, our thesis on Gen AI is finally going to pay off and now we drop that into the existing infrastructure, our existing distribution channels, our existing recording infrastructure. And we just got to drop in this new engine, which is called GPT-4 Call 2. And now this thing goes from being a really great free recording, and transcription tool to a really great, and free AI note taker. Which we always kind of positioned it as and now if I was paying off that positioning. That's where we see every one of our graphs just kind of bend up and to the right.

Pablo Srugo (00:32:46) :
How fast did you grow the year after? After a million, and then you do this GPT-4 Call 2 stuff a year later? What happens to revenue? What happens to users?

Rich White (00:32:54) :
Yeah, I think, you know, on both dimensions. I think we went, first year we went zero point one, second year we went one to ten.

Pablo Srugo (00:33:02) :
And users probably went to like ten thousand or more?

Rich White (00:33:04) :
Yeah, we were, I think it was generally like 7x-ing. 7 to 10x-ing on both those metrics.

Pablo Srugo (00:33:09) :
Crazy.

Rich White (00:33:10) :
You know, it's like, we took something that already kind of worked, and now it's like, okay, now this really works. And because finally all the pieces fell into place, right? Transcription costs had dropped, and so we could give stuff away for free, et cetera, et cetera.

Pablo Srugo (00:33:22) :
When did you raise the Series A?

Rich White (00:33:24) :
We raised the Series A literally three months after that point, right? So we kind of like dropped in GPT-4 in like fall of 2023 and then spring of '24, we raised our Series A. 

Pablo Srugo (00:33:33) :
How much and from who?

Rich White (00:33:35) :
We raised $17 million from a boutique VC firm called Telescope Partners here in San Francisco.

Pablo Srugo (00:33:41) :
And on that one to ten path, tell me a little bit more about go to market. I mean, you've got the viral growth engine, the word of mouth piece is just working in the background. Do you add a lot of fuel to that, or do you just let that take care of growth?

Rich White (00:33:53) :
I mean, it takes care of a lot of the top of the funnel and then, you know, I think I'm a big fan of doing one thing at a time, and doing things very manually first. And so I think we benefited a lot from the fact that. As much as we're a PLG company, the first year of monetization was all sales led. You had to talk to our sales team before you could buy anything and that started. Frankly, because we didn't have the features to sell it self service, right? We had to have you talk to sales, we had to have sales sell you on the roadmap. But the other reason we did that is it was such a great way for us to learn which of these features that were on the roadmap are really resonating with people. Let's say we've got all the data in Valium, right? We're capturing all those meetings and so, you know, I think where it really took off from one to ten is we really operationalized that sales process a lot better. We opened up self service, we took all of our learnings from being one hundred percent sales led, and then we opened up self service. And now sales went from being one hundred percent of our new business to being forty percent of our new business. And so that really helped us scale beyond our headcount. So it wasn't as much scaling. The viral stuff just kind of, that's what I love about viral products, right? They tend to scale really well. Which is funny, most investors didn't like the fact that we grew virally. When I say this product grows virally, a lot of people think back to the Facebook app days, or like when it was, you know, oh, we trick you into spamming your contact list, right? And those tend to have this growth pattern where it's like this big spike and then this big drop off, right? And so investors would look at us and be like, well, surely it's going to drop off. They couldn't wrap their head around it. No, no, this spreads virally, but it's much more like an annuity. Every month our users throw off another point one new user, right? 

Pablo Srugo (00:35:23) :
I mean, this is classic word of mouth. It's even, it's not like viral in the sense of you need to refer friends or even that it's a social network where it's better if your friends use it. It's really just you're constantly telling people because it's right there. It just sparks conversation. You tell people about it. That's just classic word of mouth, and that, you know, yeah, that's all. I mean, always a great thing, always.

Rich White (00:35:43) :
Yeah, it's such a nuts up. So yeah, I think what really took us from one to ten was obviously getting the product to the right place. It really got to that kind of, this is the product people really wanted to use, and we just got a lot better operationalizing the on-ramps from that product into our paid product.

Pablo Srugo (00:35:59) :
What about enterprise sales? Was that, I mean, that's obviously a big part of Gong and a lot of these products. The difference between a few seats at twenty, thirty bucks and really taking over an entire massive enterprise. Where everybody gets an account. Was that a big part of that growth?

Rich White (00:36:12) :
What we consistently see, and we started with very small companies. And I think part of this was an outgrowth of where, you know, our first users were. Zoom opened up its marketplace first to its smallest customers, and throughout, you know, we actually had the most Zoom signups three years into being on the Zoom marketplace as they kept opening this marketplace to their larger and larger customers. But I think it also mirrored the adoption curve regime behind the scenes, where it's like, who's trying the AI tools first? It's not the enterprise companies, it's the SMB, smaller companies, right? And so, you know, we saw it start with micro-companies. I think in the first year we were selling to companies that were under twenty people, under fifty people. Okay, year two of monetization, great, now we're getting companies that are one hundred people. Year three, now we're getting companies one hundred, one hundred fifty people. We had a handful of folks that came to us and tried to do enterprise deals. And we actually did a pilot for a really big wall to wall enterprise deployment. And it was one of the biggest mistakes I made. Because we thought, oh, you can just build these two features and we can close this customer. No, no, no, you build those two features and the other twenty that come after those two to close that company, right? And I knew this lesson because we ran the same problem at UserVoice. We did eventually become an enterprise product at UserVoice. But it took us like easily five to six years and the better way to get there is like, you just kind of melt up to larger and larger orgs. You pick off one thing at a time. If you try to jump from selling to fifty person companies to five thousand person companies. There's just so much you have to do from the sales process, but also from a product to close them. So I think we've learned our lesson, and now we consistently are, I would say, trying to drive up market. But we see more of that market come to us, and we just try to keep incrementally improving the product. So it's easier for them to buy it. It has the skim features, the SSO features, the security features, but we don't try to jump to what IBM would want to use.

Pablo Srugo (00:37:54) :
And then on this kind of key feature you have. Which is that the bot joins your screen and then that drives word of mouth, and you pioneered that category. And then there were a bunch of others that kind of did something similar. And now there's this new wave of, you know, recording products, whether it's Granola, we have a company called Blocks, right? Where they're just doing it in the background. You don't even know that they're recording, but they're recording, transcribing everything across every single tool. How do you position against that? Do you change and become that and give up the word of mouth, or do you keep doing what you're doing? What's your thinking?

Rich White (00:38:21) :
And this has been one of those interesting things. Because, we built Fathom as a desktop app, as well as having it run in the cloud and part of the reason we built it as a desktop app is twofold. One is the activation rate of living on your desktop, knowing when you're actually on a meeting, was so much better, right? You almost needed it as a bootloader into that meeting experience. Because when you're on a meeting, you're not like, oh, let me go open up this app, right? But the other reason we built it is because we always knew this was an interesting prospect. Client side capture is always an interesting prospect. One, it saves you a ton of money. You don't have to have all these bots in the cloud that are actually pretty expensive doing this for you. But it was more of like a, we always saw it as a, we didn't think the world was ready for that, right? And I think in 2020, 2021, recording was normalized in sales, but it wasn't yet recording normalized everywhere. And people wanted to know, and we wanted them to know what was happening. But again, we always thought bots were not the long term game. They're just the short term wedge to get you over this hump and so we're actually now beta testing our own version where we've got a bot if you want the audio and video of the meeting. If you just want the notes and just a summary, you don't have to bring a bot into the meeting. I'm kind of excited for that feature where we give people the option to do it because I think it's a compelling thing to have. Especially in a world where now there's too many bots at meetings, right? And you have this tragedy of the commons where if everyone brought a bot, there's more bots than people in meetings, right? The bot, we had that problem two years ago, right? But now you do and so we're very much excited about a world where people have more local control of the stuff, and you're not throwing things in the cloud.

Pablo Srugo (00:39:51) :
Perfect. Well, let's end it there, and I'll ask the last three questions we always end on. The first one is, when did you feel like you'd found true product market fit?

Rich White (00:39:59) :
I think when we saw the unfortunate point of I guess that would have been 2023. So about three years to get there. When we saw, once we finally achieved our goal of getting you know AI notes into the product and we saw activation rates tip up, monetization rates tip up, sign up rates all tip up. That felt like the point of great, we are now in product market fit land.

Pablo Srugo (00:40:19) :
Was there ever a time, where you thought things just wouldn't work out and that the whole company might fail?

Rich White (00:40:25) :
There were times I was worried, and I think we covered some of them, right? We were like, I don't know if the lab's told it's a runaway and got no revenue and we're in a bad funding environment. But I don't think those eras ever lasted more than a few weeks. I'm someone where sometimes you get hit with a left hook by, you know, the startup world. But once I feel like I can gather myself and come up with a plan. I can generally feel pretty good, like, well, we've got a plan for this. So thankfully, they were always pretty short lived. I always had such strong convictions in the product. Because I used it myself and I saw what it did for my work life. That it gave me this kind of backstop so that if I ever felt myself spiraling, I was like, no, no, no, we know the ground truth here is that this is valuable.

Pablo Srugo (00:41:05) :
And what would be your number one piece of advice for an early stage founder looking for product market fit?

Rich White (00:41:11) :
Oh man, don't delude yourself. I think the number one thing I see people do is they have a much lower bar for product quality of their own products than they do for other people's products. When we go use products, I always tell my team is why we waited a long time to launch. We need to launch the first experience you need to have with Fathom. It needs to be amazing. It can't be good or ten percent better than something else you've tried. It needs to be the best thing you've done that day or that week and I think too often I see founders be like they built something that technically works. It's like, functionally does the job, but it's not delightful, doesn't hit on any sort of emotional need sort of thing and then they have self delusions that that's going to win a market for them. And so I think that's the biggest thing I say is build something where you're like, no, no, this is as good as any other product I've used this month that I love.

Pablo Srugo (00:42:03) :
Perfect. Well, Rich, thanks so much for sharing your story, man. It's been great having you on the show.

Rich White (00:42:06) :
Thanks for having me. This is fun.

Pablo Srugo (00:42:08) :
Wow, what an episode. You're probably in awe. You're in absolute shock. You're like, that helped me so much. So guess what? Now it's your turn to help someone else. Share the episode in the WhatsApp group you have with founders. Share it on that Slack channel. Send it to your founder friends and help them out. Trust me, they will love you for it.