Monetizing SaaS: Episode 28 with Ryan Johnson, CPO of CallRail

Ryan, thank you so much for being on our podcast. It's great to see you. You've, you've been really influential to Schematic. You've helped us think a lot about our business. You've had an incredible career with a ton of texture. Uh, you're currently the CPO of ColRail, which is one of Atlanta's truly most successful software companies. You started your professional journey in finance as an advisor at Equitable. You've served a number of great companies in between— Kaplan, Vitru, Oracle, Mem— Tell us your journey in your own words.

Yeah, well, first of all, thanks for having me on. I've been looking forward to this. So, you know, I think in product management, especially in, you know, the last 20 years, a lot of us kind of fell into tech. There were no programs and, you know, there were no boot camps 20 years ago like they are today. And so, you know, I think in my journey, starting in finance, having, you know, some close friends that were doing some interesting things in tech, and it just kind of all snowballs. And, you know, here 15, 20 years later, you're, you're running a product organization. Um, but the, the, the background in finance I think was really helpful, right? As you get more ingrained with startups, like, you need to understand all those financial metrics. So being able to come into it and like I know ARR, I know LTV to CAC, I know, you know, all these types of things. I think that was really helpful from the business side of things as I got deeper into product.

Really cool. What happened there? Like, what were the steps that ended up with you being at CallRail?

Yeah, so if I go way back, I started doing SEO and SEM for law firms in the early 2000s. So a good friend of mine whose name is also Ryan, started this in his dorm room and it just got too big for him to handle. And, you know, I actually took a CS class in college and he's like, hey, you know, some basic programming, you know, you know, I can teach you SEO, SEM. And that's how it started. And then from there, I started managing some engineers on the team and, and, you know, expanding more and more. Eventually I went to Kaplan. Where I was in finance, but I was like their very first product owner as they were going through the transformation of waterfall to agile, which was fun to see that. And then Vitru, I was here in Atlanta and I had a recruiter reach out to me. It was actually for a product manager role that got filled. And then I talked with engineering leader and he's like, actually, your background's really good, I want someone that understands a little bit more product to be an EM. And so that's how I landed at Vitru. You know, success story there, you know, got acquired by Oracle for a little over $350 million. Stayed at Oracle for a couple of years, understand that transition of what it's like to go from, you know, a 200-person startup to a, you know, I think at that time there were 110,000 employees.

It's a big jump.

It was a big jump, but it was fun though. Like it's just interesting to see how software is developed at that scale. And certainly going through an acquisition process is exciting. And then I bounced back to OutWest and started with as the first product person for a company called MIM now. It was very early days of machine learning and AI really focused on computer vision. And, you know, the interesting anecdote there is we were 39 people. We raised $100 million from SoftBank. Different times, as we all know, in tech. But nonetheless, you know, interesting to see that aspect, like very pre-revenue focus on tech. So it's kind of amazing to see, you know, how it's all transpired, obviously, with AI in the market. And then finally, CallRail. Um, the opportunity came up about 6 and a half years ago, and, uh, our CTO and a few others, uh, we all worked together at Vitru and Oracle. They knew I wanted to get back to the Atlanta area, and, um, the opportunity seemed very exciting then, and, um, and it all worked out. So, you know, fast forward 7, almost 7 years later this November at CallRail.

That's incredible. Well, we'll talk about CallRail for a little bit. Like, give us a sense of the company's scale at this point. And also I'd love to hear about the company's vision over the next 5 years.

Sure. So CallRail originally started as a call tracking and analytics company. It was really focused on tracking that digital journey to when it goes offline, right, to a phone call. So it's very much focused on marketing and attribution and optimizing those things, which we still do a lot today. But I'd say over the past 6 years, it's been really starting to focus on the conversation that happens during the phone call. Like there's a lot of value in there. And then certainly the past couple of years with AI, this really unlocked a lot of things. So, you know, being able to easily summarize a 30-minute phone call into 3 sentences to understand what's happening, to be able to get the sentiment, to be able to auto-generate a follow-up email, you know, post-call. So some really amazing, delightful things. So we're, you know, today we're a lead intelligence company, you know, invested in AI to really help push that. And, you know, kind of two fronts, I would say these days, certainly the, you know, helping our customers market with confidence and still a good focus on marketing and agencies, but then also you know, how can we help better convert these leads? And our primary business is with SMBs and marketing agencies. So it's a lot of these people that, you know, really depend on companies like CallRail to help them, you know, with their, you know, limited budgets and through kind of the sophisticated side of marketing. And so that's where we are today with CallRail. We're a little over 300 employees. I think it started about 12 years ago and yeah, great growth story. And we're close to $100 million of ARR. So that's always an exciting thing is being in tech startups. And I think the next, you know, 5 years, you know, today I feel everything that we're working on with AI is very like time savings, you know, focused. And I think the next evolution of it is really going to be what we call superhuman, right? Where you and I just could not do this, whether it's because of the amount of data or whether it's, you know, through so many different lenses that like maybe we could do it, but it would certainly not be as good as what AI can do. And so, you know, for us, we, we want to be that platform for SMBs in the future, especially ones that rely on inbound leads, whether that's phone calls or SMS or forms or email or whatever it may be. And so I'm really excited over the next 5 years to kind of get that superhuman element of things as the technology gets better.

From an outsider's view, it seems like CallRail was sort of early to recognize the potential with AI. Does that feel true to you?

Yeah, our first AI-powered product was launched in 2016, Conversation Intelligence. And so when, you know, over the past 2 years, it's been kind of nice not to have to rush and say, oh my gosh, we need to get something to market. We had something in market and all we had to do is use the latest and greatest technology out there and it immediately got better overnight. And so I think we are in a fortunate position not to have to rush and say, okay, how do we implement AI into our products? It was already in a product. It had been in market for, you know, like I said, since 2016. So it was just how do we take our learnings and the latest and greatest technology and, you know, update the product to be able to capitalize on it. So that's been really exciting not to be— I feel like a lot of us in product management have been like pressure with AI of like, oh my gosh, you just got to get something out there., but we've, we've really been fortunate enough to have something in, in market that we could build on.

If, as you reflect on it, I mean, could CallRail have missed that? Or what were the conditions in place that allowed you guys to see that and be so proactive?

So I want to say conversation intelligence started when it, when we launched it, it was right around the time that I started. I was excited about it coming on board. I thought it, but it was like one of those things that we just didn't know. It was like, we, we think it's on the horizon somewhere, but is it a year from now, 2 years from now? You know, ended up being 5 years from that point. And so it's interesting because I always thought, wow, this unlocks a lot of value for customers. If you think of customers that have to go through thousands of leads, hundreds of phone calls, all those types of things, like why wouldn't you lean on AI and machine learning to help you parse that information to make decisions faster and cheaper. Um, so I would always say, like, you know, I, I kind of reflect back, we'd always talk about this product that was like, yeah, it was growing, you know, and, and doing fine. And then fast forward to, to what, 2 years ago, kind of when all this AI stuff really took off. And, um, it's been amazing to see how quickly it's growing, um, and just the advancements on things that we had changed even 6 months ago that are better today that we can take advantage of.

Yeah. Where, how, where are you spending your time today? You know, from a CallRail perspective, you're the Chief Product Officer. What does that really mean at this?

I love this question because I feel CPO roles vary differ, like they vary from company to company. You know, some could be focused on, you know, operationally executing with the team, those types of things. Others may be really focused on strategy, on stage all the time. And then I think you have everything in between. You know, at CallRail, one is to spend a lot of time talking about what we're doing and all the exciting things in the market. So things like this. I spend a lot of time thinking about and actually playing with, you know, different systems in AI. So whether it's OpenAI or Anthropic or any of that, I'm always, you know, basically testing ideas out and taking it as far as I can with my limited engineering experience. And so, you know, focusing on what could be on the next horizon and then talking to customers about it. And we launched CallRail Labs about a year ago. And the whole purpose of that was to introduce alphas into market and just be very transparent about it with customers and say, hey, listen, it might work, it might not. It's an alpha. Like the whole point is to get it in your hands It's not productized and it is there to get feedback from you all before we figure out, okay, how do we productize it and get product market fit? And we launched it a year ago. We launched a new product, I would say about 6 months after that kicked off based on the learnings. We're about to launch another product here in July based on those learnings. And so spending a lot of time hearing from customers, understanding what they're going through, And then I think finally is, you know, people talk about first teams, you know, the executive leadership team spending time with them, right? You know, if you think about CX and sales and marketing, like they're going through a lot of this change in their world with AI and the tools they're using. So they're always looking for advice. You know, certainly we have a product that we sell, but it's just like, okay, how can we adopt this technology more? Inside and really supporting that. And I think, you know, one of the great things that I got lucky with with CallRails is, you know, we have shared goals. It's probably the only company I've ever worked with where it's like, I cannot be, there's no way for me to be successful without my partner in marketing, without my partner in sales, without my partner in finance. Like everything is shared goals. And so I spend a lot of time with the rest of the leadership team. Making sure that we're aligned and planning appropriately as well.

When you zoom out and we've talked about AI, so maybe we look at other things. What are the big trends or inflections in B2B software that attract a lot of your energy and a lot of your curiosity? CallRail or non-CallRail?

Yeah, so I think the thing that has me very curious these days is like what is going to happen with search, right? I think we're all collectively holding our breath. Death because, you know, we've all grown up with Google. There hasn't been anybody to upset the incumbent. And now we're, you know, there's real threats to that for them. You know, whether it's OpenAI or Anthropic or Microsoft or some company that you and I don't even know about yet. I'm really interested to see how that plays out because obviously their engine that they've grown generates so much revenue. And a lot of companies depend on them to generate leads. And so how does that change over time? And, you know, you see it with Google themselves where they're testing things out with summaries and different types of ads. And, you know, I think interesting enough, what's funny is like most of the results are actually worse with AI than they are with their normal algorithms at this point. But it's going to change everything, right? And so if you're a business and you're marketing on these channels, something is going to change. And so that keeps me up at night a little bit of like, okay, great. We could have all the great integrations with Google. We could have recorded all this. Like what happens when OpenAI comes out tomorrow and says, we have this search engine. It's better than anything. Bye. And here's the new way that we want people to advertise on it. So I think there's something that will happen there, but I don't know when. Like, I kind of thought something would happen. Certainly, I believe in the next couple of years, but, you know, is it a couple of months from now or is it truly a few years away before we start to see a change there?

It's fascinating. I mean, I certainly find myself using OpenAI for common searches more and more and probably more than I am using Google Search at this point, which I've noticed. And I do agree with you. It's incredible. Incredibly interesting. I want to shift into monetization and maybe we can start with what is the relationship between product at CallRail to monetization? Monetization is sort of often a very cross-functional practice discipline in SaaS companies. What's been your relationship to monetization from your seat?

So I'll give you a little bit of history as it's you know, through the years at CallRail, you know, when I joined CallRail, all of our billing was homegrown, like 100%. And, you know, I think at that time we were at $15, $18 million of ARR. And, you know, working with our engineering and our EPD teams, it was like, okay, we've blown past the scale of being able to have homegrown things for this type of stuff. And so at that point, we started searching and saying like, okay, we need to get a little bit more mature on this. I think all of us would have wished this happened when we were at like $3 million of revenue instead of $18 million because it's just getting worse every month, right? It's getting more complicated. You have more products in market. And so, you know, you had a, you had, I would say, engineers, the old guard that built this system inside of CallRail. And then now, you know, the next phase of that, we have a cross-functional team. So we have what we call a billing team. They're responsible for anything billing related in the app and also purchasing in the app too. So if you think of, upgrading, downgrading, all those types of things. There's obviously a lot of opportunity there from a product-like growth perspective. And then they partner with our finance team and they work with, you know, the tools that they need to use in finance. And so, you know, whether it's, you know, Zora or, you know, state tax things, those types of things. So we have a cross-functional team. They meet regularly just because, you know, it's so complex the way that our product is from a purchasing perspective. We've had to have a dedicated team for it. And we've had that now for, gosh, like probably 5 years.

So is it fair to say there's a cross-functional team that thinks about pricing and packaging, but also thinks about the systems on top of which pricing and packaging works for the company? Are they two separate teams or is it one team?

So they're cross-functional teams, you know, on the specific pricing and packaging. Our go-to-market team really is in the lead there, but they're working obviously with the, you know, EPD team to determine, hey, we'd love to do this new package or we'd love to do this promotion. Can we do it? And so there's a lot of coordination. You know, we have a calendar of purchasing and packaging things for 6 months out, right? Of things that we need to do. So it's gotten very highly coordinated over the years. And I would say it's wing to wing, right? It's from what the customer sees to how are we architecting this in the background, you know, to make it scalable or, you know, even work.

Well, maybe we can try to paint a picture for those that are listening about why this is so complex. Can you, can you help us break down the complexity?

Yes. So over time, as I said earlier, CallRail started just with call tracking. It had one product. It's pretty straightforward. You had a base fee, you buy phone numbers to track off of, and you have a usage component of minutes as well too. So how many minutes you use. And then over time we've added products, like I said, conversation intelligence, It has a base fee and then basically we have a per-minute charge that's based on transcription, right? Because we have to transcribe this. This is a cost involved. We have a form tracking product. Again, it has a base fee plus a usage fee above a certain threshold for form submissions that come in. And then we've expanded our, our conversation intelligence product last year, Premium Conversation Intelligence. Again, base fee usage. And then we have a new product launching in July, the same thing. And so for us, it's very difficult because we have components in, in, by the way, a 14-day free trial too, right? So you have to accommodate trials.

Okay, let me see that. Let me— so we've got multiple products. Yeah, we've got different billing models. We've got free trials.

Yep.

Do we also have different go-to-market motions?

Yes. So we're running promotions, discounts, extended, you know, 30 days, you know, no charge type thing. So yeah, we, we, we have a playbook of multiple things that the go-to-market team's going to market with, you know, whether it's discounted trials, longer trials, special pricing, those types of things.

Okay. Okay. You're painting the picture. Keep going.

Yeah. So it's difficult because not only that, but then you have tiers of pricing as well too. So it's not like we just have, you know, just even take call tracking. We have a base fee. We have fees for numbers. We have fees for minutes. But if you have higher volume, more of your fee is on the base fee, less on the usage component to make it more predictable, right? So you have multiple plans. And I would say, you know, years ago we cleaned this up because, you know, you can imagine there was every way possible we did it, you know, that you could think of. We probably did it right. Oh, we discounted it this way over here for this one. We did it on minutes instead of the base fee. Oh, on this one we did it over here. So, you know, if you looked at all of the subscriptions, I mean, we had literally 1,000 subscriptions, which is not scalable, right? Like, you're probably about ready to faint because it's like ludicrous. And it is so that anytime you needed to make a change, you had to understand. And then let's not forget all the feature flagging of all these different things because it's one platform, right?

I wanted to ask you, so like, how did entitlements work? Like how did you entitle a feature to a tier? Or how did you map a feature to a tier? How did you entitle a feature to a customer? How did that all happen?

So our feature flags are still internal. So that aspect of it is still internal to the engineering team. And then we're building entitlements and packages based on those features. And there's a couple other areas that are product-specific that over time we had this concept of add-ons versus a new product and those types of things that have really affected that. So we spent, I would say, a good amount of time of understanding like, okay, here are all of our features, they align to, uh, these products, and then these products have these tiers and pricing associated with it. And, and to be honest, we would like to do more if we could. Like, it's just really difficult as far as the different types of things that you could do and try, um, from a usage perspective type business and, um, in, in traditional base fee.

It's so interesting that the 1,000 product, like, that's skew sprawl at a at scale. That's SKU sprawl at scale is what it sounds like.

And I think now we have like 40 or something. It's obviously manageable, but yeah, it was in the thousands. It's wild. Like I said, if you could think of it, we probably did it back then.

So what are the systems that govern all this? I mean, I would imagine, I mean, you've got the application, you've got Zuora. Are there other systems that play an integral role in governing pricing, packaging, monetization?

Yeah, on the Zora side, that's a little bit easier. You know, that's also hooked up to a different finance system that I can't recall offhand.

NetSuite, maybe?

Yeah, NetSuite. There you go. Yep. So it's connected to NetSuite. Obviously, there's lots of specifics from accounting and finance rules to make sure that's set up. And then we've had to do a lot of governance, you know, for the application itself, right? I think that's the questions we get you know, ask the most during an audit to say, you know, they're not questioning Zora, they're not questioning NetSuite, they're questioning is your app accurately reporting minutes or numbers or changes and how can you track that? And, and so we've had some, you know, learnings through that through the years too of like, oh, okay, we have to have better auditing capabilities in there too. Which is tough, right? And you're building your app. And, and so certainly not as easy as, you know, being able to utilize other software to help manage that for you.

Yeah. Do you— I want to, I want to say, I want to ask a question, see if you think it's valid. It feels like product and engineering generally have to go build monetization in B2B SaaS. And it feels like they generally don't have a standard or a pattern that they can refer to. And so they just reinvent the wheel over and over again and homegrown systems that kind of have a bunch of different tools and processes associated with the homegrown system. Does that feel valid to you?

I think that's really accurate, especially at tech startups where you, you know, engineering wants to solve a lot of the problems, right? So it's just like inherent awesome problem to solve. You know, I think at that point you also have this consideration that you think it's cheaper or it's going to be cheaper if you do that versus investing in something that's, you know, real specific that can help you through that and standardize it. And so I think we've had a lot of years, I've talked to other people and they're like, oh yeah, it's a mess. Like unless you're selling enterprise on these big annual contracts that don't have any usage in that different ballgame. But if you have usage and base fees and all these types of tiers and layers, we all kind of, we didn't have playbook, right? We all figured it out. And I still think we're not there yet. Like there's lots of different things that we'd love to do and it's been difficult given our scale and size. And it's certainly on the cost side, like we have a full engineering team and product team and designer for for purchasing, for billing, for monetization. And so monetization is a product in our suite that we're not selling to anybody, but we have to manage it like any other product. And in most cases, we have to actually be more transparent and more communicative of the things that we do because we've had learnings in the past, right? Where, you know, years ago, oops, we, you know, forgot to bill these customers because of some edge case. Well, We don't really want to go back to them now. It's too late. Well, okay, great. We lost out on $30K of revenue because of a simple change that we thought wouldn't have any impacts. And it did just because of all these nuances. So I think it's really accurate. I haven't ran into someone out there that's just like, oh yeah, we got billing right out of the gate and we knew what to do and we had this playbook. I feel over the past 10 years, we've all kind of been in this world of figuring it out.

If we had to solve that problem, the world's problems, as it were, right now, as best we could, what do you— based on everything you've learned, are there any kind of obvious components architecturally that you think would go into a monetization sort of system or infrastructure that would create a lot more agility for companies were they to kind of break it down into kind of maybe internal tools or internal services? What comes to mind to you is like the standard that could emerge?

You know, my hope is we get away from any internal development anymore. You know, we lean on companies to really help us standardize it in a way that, you know, if you use Zora or anything else out there, it plays very nicely with it. And you can imagine there's lots of things we've had to do to just accommodate Zora or Zora to accommodate us or any of those types of things. And so for me, it would be great not to have a dedicated team that's just building this stuff and repeating it where most of their time could be actually focused on monetization, right? On these things that we'd love to do, right? Sophisticated ways of extending trials automatically. And, you know, CallRail has been a product-led growth company from day one. And so, you know, I would love that monetization team to be focused more on that. How do you optimize the purchasing flow, the checkout flow, the free trial flow? How do we focus on all that versus, oh, we're having a pricing migration on something. Okay, we got to go and do this and make sure it's all good. But, you know, we've had multiple pricing things over the years, you know, and no one has the appetite to have a massive team, expensive EPD team to manage this stuff because truly their desire is to work on product, right? Yeah. And I can't remember, there's a podcast I listen to, but there's always this company that's advertising and their whole stick is like, focus on what makes your beer better and like taste better and not all the other stuff. And I think this is a perfect one, like focus on making the value of Lead Intelligence better to our customers and not have to try to figure out how we should be billing building a billing and a monetization system.

Yeah. I mean, one of the frustrations I so often hear is from engineering leaders especially is, okay, I could go build the next feature or I could go have a small team support the latest monetization or pricing and packaging initiative. And that's a pretty unfortunate trade-off.

It is. And I think, you know, the, where you'll get to at some point as well is You know, one of the things I think we matured nicely into is just the, you know, I would say, you know, 6 years ago, we probably didn't think a lot about like, oh, billing and coordination and coordinating with the go-to-market team and all that. Like we can't launch anything without being lockstep in there. And, and, you know, I think that's where a lot of companies struggle as well too, because you know, again, your product team, you're just focusing on delivering product. You may not be thinking about the checkout flow, um, or, ooh, they introduced some new thing. Oh, I gotta like make sure it actually works, or, you know, test it in different ways because it's something new. It happens all the time, right? We're always testing things in market from a monetization perspective.

And it seems like that's Well, tell me if you think this is valid. It seems like that is potentially one of the reasons why CallRail has been so successful and competitive in a very competitive market.

Yeah, absolutely. I mean, the things that we've been able to do there are, I think, have really supported our product-led growth side of the business. And we've seen the dividends of it. Perfect example is doing annual plans with a discount. And it took us a long time to get to annual plans, right? So talk about adding more complexity of your monthly base fee and all that. Now you can do annual plans that also get charged monthly based on usage if they have usage too, right? That's new. So yeah, those are big levers. They're not, you know, they're not just some administrative or architectural work. They can have a real big impact on the business that, you know, I think as in product and engineering, sometimes we don't think about it that way, but I've seen it time and time again of like, oh my gosh, like, yeah, this is as important as this feature to get this out there because we see the impact on the business. And certainly when you're bigger, that's where you really see it, right? You know, whether it's promotions or pricing migrations or those types of things, your scale is so big. That you see some pretty immediate impacts.

Um, given the complexity associated with CallRail's pricing model, I'm just interested to know, and I'm sure this has changed and evolved and improved a lot over the years, but how would you grade CallRail's transparency to the end customer, clarity to the end customer around pricing and packaging?

So I think we've done a good job there because we've had to because we have a usage component, you know, we really have to be transparent to the end user. But just because we're transparent doesn't mean that they understand it though either. And so there's interesting things that you see where, and this still happens to this day, where if you looked at our checkout process, you'd be like, okay, I have a base fee, I have this included minutes and that. And literally the next month, someone may call our support team and say, hey, I thought I was on a $45 plan. I just got charged $48.75 and there's this usage thing. Like, what is this? And so you're like, we, you know, it's, it's on, it's, it's split out in your, your invoice. It's, you know, clearly articulated in the checkout flow. But I think if, if you think of most consumers, we're probably not used to a lot of usage. We're used to monthly. We're used to a base fee. But, you know, you and I don't worry about what is our Netflix bill going to be this month because we just binge-watched some documentary on tech, right? That's kind of what they're going through, right? And so what we've heard is, is even though you can be transparent, there's work to be done to make people understand it and simplify it. And, you know, that's one of those, I think, levers that we have in the future is like, how do we simplify it to make it better on the customer. Um, and, you know, the things that we hear certainly with our bigger customers are predictability, right? Um, where they would rather pay more just to know, okay, that's what it's going to be. Um, and it's, you know, we're in an interesting time right now, and I think for most of us that are building AI products, we're all building on top of some LLM. Um, it all has cost, right? Tokens, transcription, whatever it is. And so you have this cost. And so when you're building products, you're like, okay, how do I make sure I don't lose my margin? You know, this expense is properly understood. And I think that's what, for me, this is kind of nice because I feel this is like, will make things easier for us that have been doing usage-based models in the future. Because if you're doing anything AI, you're not going to get away from this, at least not yet. I mean, maybe there's some things that become more flat fee, but, you know, at least for the next handful of years, I think we'll be in the same situation. Although the cost may come down, I think it's still going to be usage-based levers that we all have to deal with on the products that we build on top of these different things.

On that note, how important is sort of this second-order effect of AI on COGS and how aware are companies and founders of that second order effect based on everything that you have so far seen?

Yeah, I think it's something that we talk about all the time. You know, how do we account for that? How do we, you know, make sure that we're getting the best pricing because it's changing so much, right? You know, people talk about, oh, well, this will be a commodity. So you have that pressure of like, well, it's not quite a commodity yet, but it has to, if you're developing AI products, you have to understand this impact of COGS from these various different systems. Certainly as you do things internally more, you know, you could be having your own GPUs, you know, different AWS instances and those costs, you know, can accelerate very, very quickly. And, you know, it was interesting. I was at a conference, gosh, almost a year ago, and it was a CPO of a big publicly traded company in our space. And he said, he pulled me aside and he goes, how the hell are you guys charging for conversations? Like, how are you doing it with, you know, a base fee and usage and all this? Because you have COGS, right? Like you're built on something. And I think they were built on Microsoft or Google or something. And I was like, yeah, like we have that. And I told him and he's like, we haven't figured it out. Like I think he said, yeah, we hired some McKinsey consultants to come and tell us how we should price and package AI things because of this concern of COGS on these systems that we use.

At a company like CallRail at your scale, how important is it to understand the cost to deliver a feature or to support an individual? Customer? Is that a conversation that begins to happen at your stage or now?

Yeah, we have to, you know, whether it's the team to support it in the long term, so it could just be a certain feature, could be an integration, you know, as we all know, integrations, I mean, they're always changing, right? APIs are getting updated. So you have to factor, you know, whether it's maintenance costs or COGS into that. But you know, for all, for those of us that are developing AI-powered products, at least right now, you have to, like out of the gate before we launch any new product, we're having to calculate that to make sure that we, you know, protect our margins because it can quickly add up, especially if you get a lot of adoption and traction, which that is obviously a good thing. But if you haven't properly planned for that, you know, you're going to have some challenges to the business. And I think, you know, luckily we've had great partners to work with in the AI space. And it's been, you know, really good experience for us. But I think over time, it's even going to get more complicated than it is today, because I think we're all going to use this ecosystem of different models and things out there. And it's going to be a big menu. So how do you articulate, you know, today we may use, you know, GPT-4.0, but, you know, OpenAI said, yeah, we could have all different types of levels of models that are going to have different pricing. So that, you know, that's going to be even a more complicated thing to manage to, you know, in EPD to say, hey, oh, I know I'm using this model and, you know, input token cost is this and output token cost is this. Oh, here's the data that we think we're sending. You know, what happens if you add another feature? That's the other thing too. So you could, you could have your initial COGS that you've estimated out and it's really good. But what happens when you're like, oh no, we, we want to do a different feature. Maybe it's just another prompt that happens. Well, that other prompt generates costs. So, so you can't just, you know, in those products, you can't just go like, oh yeah, we asked the, you know, LLM another question and, and customers love it. Yes, we want to do that, but we have to be careful to understand, is it just going to be small incremental hit to the margin there, or is it going to be of significance that we have to understand?

Yeah, that's fascinating. I mean, that is, that's a hard problem. I mean, especially in a company that's trying to move really quick. Last question on monetization. I believe you advise earlier stage companies, correct?

Yep.

What would you say to those that are listening today around how they can preserve agility and flexibility around monetization as they grow and maybe avoid some of what you ran into that you had to kind of refactor and build large teams around?

Great question. So I think, you know, again, if I could turn back the clocks, you know, work with companies like yourselves, like with Schematic, like do it earlier than you think. Because, you know, even at— again, you, as, as people in tech, we have this natural thing to go and solve challenges internally, and we think we can do it better and cheaper. Um, and sure, you may need that to bootstrap the company and get it off the ground, but, you know, I think HaulRail would have been in a different position if we would have implemented some things when we were a $3 million company versus an $18 million company. Because when you get to a certain scale, it gets worse every single month, right? If you're growing the way that they want you to grow, you know, we were 60, 70% growth on 18 million. So literally the problems or the challenges would exasperate every single month. Yeah. And then you have all the other pressures of keeping growth up and delivering new products and all that. And then you have this whole monetization and billing side of things that now you're like, okay, I have to pay attention to. So, you know, my advice is start earlier and work with companies that like understand and can, you know, not make everything so homegrown for your team because it's going to be a cost. You know, at some point you got to pay, right? And I think, right, it's like a type of technical debt. Yeah, it's kind of like, like if you talk to our engineers, they will talk about it like technical debt. You got to pay that off at some point. And so I think, you know, that, and certainly I think if you, if you're a product or engineering or anybody in EPD leader, investing in this early is going to just make so much stuff down the road easier for you, right? To where, you know, your, your go-to-market partners, you know, yeah, they want to do this thing. Great. Like maybe they have an interface, they can go and do it. We don't care because everything is in a system that makes sense. Or hey, our UX designers want to try a new checkout flow process to optimize, you know, attach rates or something. Great. Like they can focus on that versus like, oh gosh, if we do this, how does this, you know, downstream effect through the billing system affect everything? So I think I would certainly rather be in a position focusing on product, as the person said, focusing on what makes your beer taste better versus all these other things out here, like work with experts, no different than our customers that use CallRail. You could go to Twilio and get phone numbers and develop APIs and do that type of stuff. Do you want to run your business as a home services or a law firm or something like that? Or do you want to try to do what CallRail's done that's been 12 years in the making? I think it's no different with this stuff nowadays.

Yeah. And I'm just thinking now, maybe we could call this episode How to Make Your Beer Better. There you go.

We might get a copyright letter or something because I'm not— we'll just keep it generic right now. But yeah, I love that analogy. It makes sense. There's just so many things that I think we, you know, that we think about that isn't our core business and it's other people's core business that we can really lean on.

Yeah, it's really good. Ryan, one of the closing questions I like to ask is, is there a specific moment that was just like particularly formative or influential for you in your career? Like if you could nail it down to a moment.

That's a hard question. I think the biggest moment that changed the trajectory of my career was when I was at Vitru. I was again, product finance, and now I was inside of the engineering organization. And when I started, the leader that hired me said, hey, I hired you for a reason because I have this engineering manager. They used to be an engineer. So, you know, they're going to be more technical. This one is really good at this. You know, product, you can help the whole organization. I purposely designed the org to have different people, this diverse set of people, even though we are all in the same role. And I had my times of, oh my gosh, I got to like, you know, I'm sitting in a sprint planning meeting. I literally have no idea what these people are talking about. Right? Like I came from like a .NET shop. This is all Ruby and they're using all this terminology and I'm like, I gotta go learn how to do Ruby on Rails. I gotta go learn this other thing. And no kidding, I like broke a virtual tutorial terminal. I was that bad at programming and like froze my computer. And I went to my leader and he's like, listen, first of all, you're never going to be a good engineer where you're at. You know, this is 12 years ago. But he's like, I didn't hire you for that. I hired you for your unique perspective. And so, you know, it was very interesting because I thought, gosh, like if all these engineers quit today, I can't go and code. Like, and how do I groom engineers in their career when I've never been an engineer? And that was like just a defining moment of, oh, this is how you can build teams with diverse backgrounds. And be successful. And, you know, the other piece of that was the guiding light was, you know, our goal was to deliver software. He said, you know what, we don't want, you cannot come in here and say, you know, you have a, you know, a junior engineering team or a weak product manager or whatever it is, you need to deliver software. And so if you have to go and help the product manager be a product manager, that's what you're going to do. And that was also very enlightening to me because it just took away, it was fun, right? I was working with product managers. I was doing more of my product stuff now. I got different exposure and it completely changed my career. I knew I wouldn't stay in that technical side to be a CTO, but the roundness of that, of getting that exposure led to, you know, there were 2 years at CallRail where I ran engineering, product, and design. The organization was 120 people. And I did that for about 2 and a half years. And so I would've never been able to do those things without that exposure, you know, almost, I think I said 12 years ago, it's probably longer than that.

It's an amazing story. Thank you for sharing it. Where can people learn more about CallRail and reach out to you if they wanna learn more about CallRail or monetization?

Yeah, go to callrail.com and find us on LinkedIn, you know, whether it's myself or CallRail. Happy to chat, happy to share stories of what we went through. Always love when people contact us.

Awesome. Ryan, such a blast. Thank you so much.

Yeah, thank you.