James Siminoff

Taking it to the next level

Today we, SimulScribe/PhoneTag, announced a very big partnership with Ditech Networks (nasdaq:DITC).  In fact, it is the single largest deal in my business career. Post from TechCrunch here.

This post is going to be a bit long as I really want everyone to understand why we/I did this deal and the market forces that drove us to look for a partner.

Why did we(SimulScribe) do this deal with Ditech?

In order to understand why we did this, it is important to understand a little bit about Ditech.  Ditech has been building and selling infrastructure to carriers for the past 15 years. Their specialty is around a process called VQA (voice quality assurance).  Basically they scrub all the background crap out of calls, making for a very clean connection in noisy environments. Check out a video demo of it here. SimulScribe’s automated conversion of voicemails is highly affected by background noise. Even when we have human intervention on a message, background noise is one of the leading factors of lower quality. Ditech’s VQA can positively effect both sides of our process, giving us a significant technological edge over our main competitor, Nuance.

For Mark and I, seeing the demo’s of VQA and what it could do was enough to do any deal. I wish I had a picture of our faces as we dug through the technology, I think we might have actually giggled a few times about how cool it is. However, technology alone did not make the decision, the pot was a lot sweeter than that.

Ditech currently has a global carrier sales force and equipment in over 50 carriers around the world. Our (SimulScribe’s) growth has definitely been limited by internal resources. We simply did not have the bandwidth to handle all of the inbound requests on the wholesale side of the business. At this point you might say, “you are profitable, just hire a few more people”. Technically we could have done that, however building the sales force that we needed and the infrastructure around that was going to be very expensive and there is a lot of risk in getting it done properly. By entering into an exclusive partnership with Ditech for the wholesale market, it allows us to leverage Ditech’s sales infrastructure, which is already in place; they in turn are able to leverage our proven carrier grade service.

The last factor comes down to specialization. SimulScribe simply has too many moving pieces for our small team. We found that our devotion to providing the best voicemail transcription service to our customers distracted us from aggressively pursuing carrier sales and vice versa. The Ditech partnership allows SimulScribe to focus on what it does best: take in inbound audio, transcribe it and send it out for delivery. I truly believe there is no one better at doing this than SimulScribe, we have the highest-accuracy automated voicemail transcription API and the most proven hybrid transcription API amongst our competition. In fact, SimulScribe, being the industry pioneer was the first company to power a carrier with voicemail-to-text (VTT), way back in March of 2007.

Why did I (James Siminoff) do this deal with Ditech?

Well of course it includes all of the above, but there are some personal issues that also positively influenced me to go to work on getting this deal done.  When I look back through my business career, the thing that I have been best at is thinking up innovative products and successfully launching them into the market. When I look back at all of the things I have developed the ones that have done best have always been the ideas that I handed off once the product was working and the initial trial customer base was beginning to settle. At that point in the product’s life cycle, which I call “Block and Tackle”, the product or company really needs to execute and operate as a structured organization and not a start-up. This is not to say that there is not still a place for innovation in these companies, but in my experience that innovation needs to have specific separation from the “locked down” products.

Also since January 1st, 2009, I have flown over 150,000 miles, which is about 300 hours or 12.5 days on a plane. The reason I point this out is that it is just one example of the over-clocking that has been going on at SimulScribe to keep up with demand. Even with all of the travel and hard work from myself and the team it is still not enough as we continue to follow up late on things and not take advantage of all of the opportunities we have. I strive for 100%+ when it comes to everything around our business and not being able to achieve that has been frustrating.

Before I talk about retail, I just want to point something out, we never slipped on customer support to our retail (PhoneTag) customers, I am a little crazy when it comes to that side of the business.  And luckily for me having someone like Tom Lesnick running that side of the operations has allowed us to maintain the highest level of support and satisfaction of any service. In fact, we get 100% of our business today by word-of-mouth, which is the biggest testament to our incredible dedication to our customers.

However, with that said about retail, I have not been able to put the focus into innovation that I am so passionate about doing. This is something that the Ditech partnership allows me to go back to, innovation and invention. Both are in my blood and I am very excited to again have the time to create products and prototypes that will enhance the way that we do things. To be clear, it is not just the actual features, but also creative methods in the back end of the operations that make products great.

-Market forces

The voicemail-to-text market has been a little insane when you compare it to other similar markets. When we came up with the product, there was no voicemail-to-text market, we had to build and invent every part of the business to make the product work.  Then we saw Spinvox, a “little” start up out of the UK.  Initially I remember my business partner saying, maybe we should see about buying them or something, lets check them out. Well, when I did a little checking I realized that this little start up had already raised $10+ million, that was in 2005 or 2006. They quickly began raising more money and growing their staff exponentially. To date they have raised and spent over $230 million.

Then Nuance (nasdaq:NUAN) entered the field. The global giant in speech decided to quietly enter the market. With their $3+ billion market cap and team of global scientists and sales people they have become more and more aggressive in my side of the business. 

But wait there is more, Google, decided to launch its own voicemail-to-text product on GoogleVoice. My response to Google’s launch is here, and while I still am not worried about being successful in a market that Google is playing in, you have to be smart about your decisions when the big players come into your sandbox.

And even more, Microsoft is launching a voicemail preview product in exchange server 2010.  Again, not worried about being successful but being realistic is necessary.

-The Summary

As a profitable, seven person company, which has raised just over $5 million from angel investors, you can start to see the difficulties we face in the market. The good news is so far we have been able to maintain a leadership position in the market with a fraction of the capital. Our products are constantly rated as the highest quality over our competitors in reviews by 3rd parties. In fact many industry experts believe that our fully automated product is at least 12 months ahead of the competition.

The partnership involves a few moving parts, the main one is that Ditech will take the exclusive rights to market our products to the wholesale market. Additionally, Mark and I will join Ditech full time. I am now their CSO, Chief Strategy Officer, which will allow me to work on creating exciting reference and prototype products, like we did with PhoneTag, that can be turned into platforms and private label services which are in turn sold to the carriers. The deal involves an amount of upfront cash and earn-out to SimulScribe, which if you need to know the numbers feel free to Google it. The total payday to SimulScribe investors, my team and Ditech will really come from what we can do with the combined services and offerings, building a very profitable partnership for years to come.

*A special note to our PhoneTag customers

First of all I personally want to thank you for giving us the opportunity to service you. It is because of you that we have been able to continue to innovate and grow. This partnership will in no way affect your service. SimulScribe, the company that has always owned PhoneTag has had no change in ownership and this deal will only make us better. Better quality service, better pricing, better features. This partnership allows us to focus more on you. If you have any concerns, questions or suggestions please contact me directly at jsiminoff@phonetag.com or my cell 917-412-4747.