Our story last week, that much-talked-about voice-to-text firm SpinVox, which got $100 million funding last year, was having to offer staff equity instead of salary, drew heated allegations from ex-staff about missing salaries, unpaid expenses and lavish company spending.
We asked CEO Christina Domecq to set the record straight. In a frank interview, which we are running in full in two parts, she says flying staff to a team party is important for morale, admits the US team had to go and blames the need for funds on the twin demands of expansion and the same credit crunch that’s hitting everyone else. But SpinVox may again have to draw on funds from backers including Goldman Sachs…
– On the share-for-salary offer: “It is normal for us to make offers of shares for salary, it’s not the first time it’s happened. Taking a business to cash-flow positive is a point of triumph and pride, especially in a market that requires as much investment as this one has – our ability to do this on our own, almost indignantly, is very important. The take-up was in excess of 50 percent – it should be; the employees that work here are very excited … employees of SpinVox today own in excess of 40 percent of the business … we have some very rich equity schemes for employees and this was just another. I’m assuming it was leaked by someone who doesn’t have equity, is angry and was terminated – one of the problems with letting people go is, they lose their equity, so it can create quite a few angry people out there and it’s part of the pains of growth and building a business.”
– Why is money tight right now?: Funding expansion and late payments from carriers: “We’ve got increased supplier demand globally. We grew five-fold in revenue last year and we’re growing another five-fold this year. To go from 30 million users to over 75, 100 million customers, that’s huge growth – we’re talking about doing that within 90 days. I’m not going to say the wireless carriers are the best payers on time – they’ll say they like to pay me within 30 to 45 days; they don’t. Across the board, we’ve seen carriers change their payment terms with us. We’re doing our best to manage day-to-day through this credit crunch like everybody else.”
– Has last year’s $100 million VC round been used up?: “We still have access, through our investors, to capital. Our investors will continue to fund the growth of this business – with this kind of growth, it means continued investment. It’s a point of pride for an entrepreneur and management team like ours to move in to EBITDA-positive and cashflow-positive and to get off the investors’ blood – it’s a really important transition point. There’s availability of growth capital from our investor base.”
– Does that mean new investment?: “Yes, it does mean additional investment, and also additional working capital facilities and additional debt facilities, because we need to continue expanding our infrastructure. I can’t say the banks are extremely helpful these days with facilities, so we are working with our current investor base and current hedge funds and anybody that works with us on extending facilities and creating the right environment for a growing business.” Does that go for Goldman Sachs as well? “Yes, it does.”
– Some people are claiming unpaid salaries and expenses: “We’ve never missed a payroll date in all of our history here; I can’t imagine that there are unpaid salaries. If there’s an unpaid expense, I can only assume the expense hasn’t been signed off or it’s a potential leaver. These may be cases of people who have been exited and believe that they’re due more than they are.”
– Do you still have the New York office?: “No, we don’t have the US office because we don’t need it. In New York, I only really have two employees based there now, and on the west coast I have several more. One of the worst decisions that I ever made was opening an office in Atlanta. We temporarily took some office in New York to be closer to our investor base, it had nothing to do with our employee base. Because of our success with some of our strategic partners on the west coast, I’m on the west coast a lot. We’re undecided on office in the US and not sure we need one. The ones who are still with me there seem generally very happy.” In the US, SpinVox has two carrier partners: “Alltel (NYSE: AT) and Cincinnati Bell, that’s really it.”
– So do you see emerging nations as more important than developed territories?: “No, I just think I need a better team in the US. The Canadian team has done really well, we’ve done deals with Rogers and Telus and SaskTel and we’re announcing another one shortly; you’ll find us owning all of the carriers in Canada, that’s a real testament to my team up there. In Latin America, we’ve got 13 deals. You begin to question one or two things – either our business model isn’t right in the US, or the team wasn’t right. We’ve taken the approach of, replace the team, we let about eight people go. It’s not easy to make those decisions – we build companies with people, letting people go is the worst part of my job.”
– Can you clarify the recent headcount issues?: “We’ve hired in Latin America, in India, Canada is doing very well for us. Our US strategic partnerships are working well, whether it be with voicemail vendors or others; we continue to invest in the team there. When it comes to our wireless carrier team, we’ve seen some turnover and we are currently recruiting, so it’s not a matter of downsizing, it’s a matter of rightsizing or finding the right people for that challenge. When you look at, we have over 30 carrier contracts worldwide and only two of them are in the US, it kind of questions the ability of that team and whether or not I made the right hiring decisions in the past; we have positions available in the United States right now. Back here at base (Marlow, England), we continue to invest in development and operational skills. In the US, in the last 60 days we had several layoffs; in the UK, we generally see an attrition rate of about 15 percent annually, usually through performance management; we do strive to keep the best of the best here. Headcount now is just under 300.”
– Some ex-employees have blamed the financial position on lavish spending: Claims sports cars were bought for senior staff, the Race Across America charity bike ride was a waste of money, flying every employee to London for a party and a private cruise down the Thames. “About 20 percent of employees do have a car as part of their package; these are all leased cars from our existing budget, it’s an agreed-upon budget that we’ve always had. We do believe in getting our team together on an annual basis for a summer party, it’s an important part of the culture, we happened to do it on a river boat last year which was very unique and good for people and also their families. I think there are some jealous and angry people who were no longer part of that and who were upset.
“The business didn’t pay for the Race Across America – the business got all the benefit of the branding, but actually we had tons of sponsorship for it. For me, it was a personal goal – I can’t tell you how many meetings I have with strategic partners, where the first thing they say to me is ‘I can’t believe you rode across America, how’s your bottom?’
“Leadership is about taking the good with the bad. It’s all within budget; building a global business is not cheap at all. I don’t think our business would continue growing – we’ve got 30 carrier contracts and are growing year after year as it is – if management were so poor. I don’t think we’d have such a great product or go from 30 million to nearly 100 million customers this year or have such a great technology team delivering such high rates of automation.”
In part two on Wednesday, Domecq explains human-helped voicemail transcription, organising for the recession and why the future looks bright