Association News
Private Equity Profile Q&A: Ifbyphone CEO Irv Shapiro
January 27, 2009 0:00 AM - IVCA
CHICAGO – The IVCA profiled Skokie, Ill.-based Ifbyphone in 2008 after it raised $3.5 million from IVCA members Origin Ventures and Apex Venture Partners. We recently caught up with Ifbyphone CEO Irv Shapiro to get his company’s progress report since the deal.
Illinois Venture Capital Association: Ifbyphone raised $3.5 million last summer in its second institutional round of venture capital financing. Please tell us how the company has invested those proceeds and how things have progressed since that transaction.
Irv Shapiro: The Ifbyphone financing activities in the second half of 2008 consisted of a rolling round that closed in Oct. 2008 and raised a total of $4.6 million of equity and debt.
These funds have been targeted to support marketing and sales activities that allow us to continue to grow rapidly, expand our telecom infrastructure in support of higher telephone call volumes and support general corporate working-capital needs.
IVCA: How has the company navigated through these rocky economic times?
IS: While no one is happy about a recession, we have discovered that our services are in high demand because of the cost savings they generate. Companies using our automated telephone applications are often able to reduce call-processing costs and increase customer satisfaction since their customers ultimately spend less time on hold.
Let’s look at a simple example. Assume your company has an in-house or outsourced call center and that you currently route 100 percent of your incoming calls to the call center. While reviewing your call traffic, you determine that 15 percent of your calls are for basic information such as when an order will ship, what hours you’re open or the closest store to your location.
Instead of spending $25 to $30 per hour for call center personnel to handle these requests, an Ifbyphone automated telephone application can handle them for as little as 3.5 cents per minute. That’s quite a savings.
IVCA: New investors include Indianapolis-based Spring Mill Venture Partners and the east coast firm Village Ventures. How did you initially connect with those firms?
IS: Our new investors resulted from an introduction made by our partners at Apex. In addition to our new investors (Spring Mill, Village Ventures and Blue Crest), all of our existing investors participated in this most recent round of financing.
IVCA: Ifbyphone in 2007 raised $2.25 million in a round co-led by Northbrook, Ill.-based Origin Ventures and Chicago-based Apex Venture Partners. In addition to capital, what were the strategic advantages of partnering with those firms?
IS: Both Apex and Origin deliver Midwest values and top-tier networks to Ifbyphone. For example, when Apple first announced the iTunes Application Store, it was very difficult to gain access to the program. An introduction from Steve Miller of Origin helped us to launch an iPhone application into the iTunes store.
As a CEO, I am a strong believer in what I call the “Socratic method of management”. I am fortunate to have highly insightful board members who ask probing questions. These allow us to explore the implications of each major decision.
While ultimately it’s my responsibility as CEO to make the call, my board members' inquiries often illuminate new areas of innovation for our company. This works extremely well since our board members combine solid Midwest values with their keen intellects.
IVCA: What motivated you to include a commitment from the i2A investment fund in that round?
IS: It is very simple. Ifbyphone might not have been funded without i2A. They provided the introductions to Apex and Origin that led to the first round of funding.
IVCA: Before raising venture dollars, you self-funded the company to the tune of $1.5 million for its first two years. At what point did you realize that you wanted to partner with VC investors to take Ifbyphone to the next level?
IS: Unlike my experience at Metamor Technologies, which as a consulting firm had modest capital needs, I realized from the onset that Ifbyphone would require outside capital to build our telephone infrastructure.
Our infrastructure is very similar to a VoIP telephone company and requires extensive redundancy and sophisticated systems. As it took shape, I realized it had the potential to be a very high-growth business. I knew this would require later investments in sales and marketing.
IVCA: Did you raise venture dollars for either of your previous two ventures?
IS: Metamor Technologies was self-funded. Outside funds were used at Edventions.
IVCA: Do you anticipate raising more venture capital for Ifbyphone? If so, when and how much?
IS: Based on current projections, we will reach a positive cash flow with current funding. That said, we are evaluating the possibility of accelerating our growth further through an additional expansion of our sales team or outside acquisitions. These activities may require an additional influx of funds.
IVCA: When do you anticipate reaching profitability?
IS: We anticipate reaching profitability at the beginning of 2010.
IVCA: What are the advantages of raising capital from investors in your own backyard?
IS: There are many advantages that include shared values, accessibility and networking.
Illinois Venture Capital Association: Ifbyphone raised $3.5 million last summer in its second institutional round of venture capital financing. Please tell us how the company has invested those proceeds and how things have progressed since that transaction.
Irv Shapiro: The Ifbyphone financing activities in the second half of 2008 consisted of a rolling round that closed in Oct. 2008 and raised a total of $4.6 million of equity and debt.
These funds have been targeted to support marketing and sales activities that allow us to continue to grow rapidly, expand our telecom infrastructure in support of higher telephone call volumes and support general corporate working-capital needs.
IVCA: How has the company navigated through these rocky economic times?
IS: While no one is happy about a recession, we have discovered that our services are in high demand because of the cost savings they generate. Companies using our automated telephone applications are often able to reduce call-processing costs and increase customer satisfaction since their customers ultimately spend less time on hold.
Let’s look at a simple example. Assume your company has an in-house or outsourced call center and that you currently route 100 percent of your incoming calls to the call center. While reviewing your call traffic, you determine that 15 percent of your calls are for basic information such as when an order will ship, what hours you’re open or the closest store to your location.
Instead of spending $25 to $30 per hour for call center personnel to handle these requests, an Ifbyphone automated telephone application can handle them for as little as 3.5 cents per minute. That’s quite a savings.
IVCA: New investors include Indianapolis-based Spring Mill Venture Partners and the east coast firm Village Ventures. How did you initially connect with those firms?
IS: Our new investors resulted from an introduction made by our partners at Apex. In addition to our new investors (Spring Mill, Village Ventures and Blue Crest), all of our existing investors participated in this most recent round of financing.
IVCA: Ifbyphone in 2007 raised $2.25 million in a round co-led by Northbrook, Ill.-based Origin Ventures and Chicago-based Apex Venture Partners. In addition to capital, what were the strategic advantages of partnering with those firms?
IS: Both Apex and Origin deliver Midwest values and top-tier networks to Ifbyphone. For example, when Apple first announced the iTunes Application Store, it was very difficult to gain access to the program. An introduction from Steve Miller of Origin helped us to launch an iPhone application into the iTunes store.
As a CEO, I am a strong believer in what I call the “Socratic method of management”. I am fortunate to have highly insightful board members who ask probing questions. These allow us to explore the implications of each major decision.
While ultimately it’s my responsibility as CEO to make the call, my board members' inquiries often illuminate new areas of innovation for our company. This works extremely well since our board members combine solid Midwest values with their keen intellects.
IVCA: What motivated you to include a commitment from the i2A investment fund in that round?
IS: It is very simple. Ifbyphone might not have been funded without i2A. They provided the introductions to Apex and Origin that led to the first round of funding.
IVCA: Before raising venture dollars, you self-funded the company to the tune of $1.5 million for its first two years. At what point did you realize that you wanted to partner with VC investors to take Ifbyphone to the next level?
IS: Unlike my experience at Metamor Technologies, which as a consulting firm had modest capital needs, I realized from the onset that Ifbyphone would require outside capital to build our telephone infrastructure.
Our infrastructure is very similar to a VoIP telephone company and requires extensive redundancy and sophisticated systems. As it took shape, I realized it had the potential to be a very high-growth business. I knew this would require later investments in sales and marketing.
IVCA: Did you raise venture dollars for either of your previous two ventures?
IS: Metamor Technologies was self-funded. Outside funds were used at Edventions.
IVCA: Do you anticipate raising more venture capital for Ifbyphone? If so, when and how much?
IS: Based on current projections, we will reach a positive cash flow with current funding. That said, we are evaluating the possibility of accelerating our growth further through an additional expansion of our sales team or outside acquisitions. These activities may require an additional influx of funds.
IVCA: When do you anticipate reaching profitability?
IS: We anticipate reaching profitability at the beginning of 2010.
IVCA: What are the advantages of raising capital from investors in your own backyard?
IS: There are many advantages that include shared values, accessibility and networking.
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