Interview: Christina Domecq, CEO, Spinvox (Pt 2): Cashflow-Positive In 90 Days

SpinVox CEO Christina Domecq knows August will be the toughest month, but says upcoming income from recently-inked Latin America contracts will take the UK voice-to-text firm’s books in to positive territory within 90 days.

In the first part of our full interview with the co-founder of one of Britain’s most talked-about tech companies, Domecq answered criticisms of the company, voiced apparently by ex-employees in our comments. In today’s final part, Domecq explains human-helped voicemail transcription, organising for the recession and why the future looks bright…

– What are some of the costs associated with roll-out?: “Mostly infrastructure, but some staff as well; we’ve hired quite a few people in Latin America, we’ve streamlined our North American operation, which I believe is one of the sources of a lot of upset; we’ve recognised that our business has outgrown some of our staff capability in North America and applied more of our resource for Latin America, which is where our growth is coming from this year.”

– How about payments to any of your vendors?: “In the same way our carriers are stretching us for payment terms, we’re attempting to stretch our suppliers, as you can imagine. I think everybody’s in the same boat right now, no-one likes the boat we’re in; it doesn’t make it easy, in particular for small suppliers … A lot of these suppliers (claiming non- or late payment) are suppliers we’ve used in the past and no longer work with who have entered in to this pretty difficult economic time. Generally, everybody’s watching the cash more – SpinVox is a case of a growing technology business, arguably one of the most successful and youngest in the UK.

“I honestly believe this is just another sign of the times. We’re a high-profile business going through that growing up phase. I’m proud of it – we’re almost there. To grow five-fold in revenue this year through this recession is unbelievable. There are some casualties on the way – the team I hired five years ago isn’t the team I’m with today – the business will always outgrow the individuals.”

– I assumed the service worked purely by algorithm, but apparently there’s a lot of human transcription: “The only way to train a speech engine is for humans to train that engine. I’ll give you some really high-level stats – our cost-per-event, as far as human intervention, has dropped over 800 percent in 16 months. We build user profiles between, for instance, you and I – over time, the same way Google (NSDQ: GOOG) indexes the entire web, SpinVox is indexing your voice. It’s based on two users – the more you and I talk, the more robust our profile is, the less human intervention we need.” The algorithm always does the first pass, Domecq said.

“The quality control agent would be asked to confirm whether or not that word is accurate and would update that person’s dictionary – so, “credit crunch” is not a cereal, it’s not “Captain Crunch”. Once that gets updated, the entire corpus learns. What we have right now for 70 million users is under 3,000 agents. That’s with a tremendous amount of growth right now – if we were talking for the first time, we would need more human intervention than long-term because we’d be using words that may be new. When we’re going through massive growth, like we are now, we need more agents. A lot of Latin American dialects are new for us – US English and GB English have really high automation rates … In a mature language, we’re seeing sub 30 agents per one million, in a lot of cases we’re seeing 100 percent automation.

“We’ve designed a different way to work with QC houses. We used to think we wanted small QC houses only; because of the credit crunch, we’ve understood that we don’t want to be with suppliers that can’t carry the same kind of credit – we want bigger, more robust suppliers.”

– Where is transcription outsourced to?: “It depends on the language. It could be Latin America, it could be the Philippines.” I read one QC say she wouldn’t get paid for failing to meet an accuracy threshold. “Every single supplier has different SLAs with us. We had such high human intervention in the early days, that we couldn’t scale – my charging models with the carriers were much higher. So we’ve learned, like any growing business.”

– Are carriers biting in the UK?: “I can’t figure that out either – maybe I need a new sales team in the UK, too! (Ed note: I think she was kidding). It’s been a long haul, we’ll see; but we keep knocking. There’s so much disruption in the UK carrier space as far as competition, and we’re seeing a lot of package changes, but we’re not seeing a lot of product launches coming out of the UK right now; they’re not really putting new products out in to the marketplace unfortunately. But we are seeing quite a bit of success in the rest of Europe.”

– Will the product be used by everybody or just business users? “My dream is that it’s used by everybody, but it becomes a cost issue. When we started, we sold it as a value-add service, you had to make a purchase decision, say £5 a month. Making a purchase decision, we’ll never see a penetration rate in excess, over three years, of about 10 to 15 percent, because carriers are just bad at selling stuff above the line. So we’re moving toward a network feature – in Latin America, for instance, it’s free. My cost per event has gone down because I’ve got less humans in it, and I pass that to carrier partners so they’re able in some cases to make it free. SpinVox launched its first carrier only two years ago, it’s a young business.”

– What will get you to EBITDA- and cashflow-positive?: “We’re going to complete our Latin America deployment in the next 90 days; that alone will take us to EBIDTA-positive” (Ed note: interview conducted July 20). Domecq said recently-signed LatAm carrier contracts will take her from 30 million to 100 million active customers. “It takes us 18 months to sign a contract, then usually six to 12 months to deploy that contract, setup basically; we’ve done all that integration work with 13 carriers in Latin America and slowly turning them on. SpinVox gets paid every time we convert a voice file in to text, they don’t give me the money up front; the more volume they send me, the more money we make. Mexico will turn on later this month, Argentina and Equador are already turned on … we’ve seen 100 percent revenue increase in Latin America from June to July already. As Latin America grows for us, we hit that tipping point, which gives you the ability to start designing and doing new things.”

– Long-term, you still think the business has a lot of potential?: “We’re in a pretty unique place – it’s a shame when people want to be jealous and angry about it. It’s going to be an exciting year, as we hit EBITDA-positive and market share. Moving all the carriers from a value-add service to a network feature is very important for us.”