Thursday, May 13, 2004

More time to blog...

After almost 7 months of work and a considerable financial investment, Fred Ball and I along with the founding partners have decided to turn out the lights at CallTrex.

The immediate cause of death was our inability to close follow on financing to help grow the company. A call center model only works at a significant scale of operations. Below a certain threshold, fixed costs represent too large a part of the financial model and it is impossible to make money. We were operating at about one-third of the scale that we needed to be to start generating top line profit. At least another $300,000 was needed to arrive at this first milestone. A number of angel investors moved in the direction of funding the business but pulled back at the last minute. Others simply moved too slowly. In the end, the Board of Directors expressed a lack of confidence that we would close this angel financing round in time and approved a plan to shut down operations.

As in so many cases, there were a set of underlying causes of death that led up to this end point. A large number of people had warned that selling to the small and medium business market was fraught with peril -- this certainly proved to be the case. Customer acquisition was slow and expensive and we never reached a scale where a larger distribution partnership made sense. In addition we suffered from technology problems which could have been solved with more resources, but we found ourselves spending money to fund the call center operations and starving the technical team. Technology problems sometimes meant the loss of customers which further slowed our growth rate.

Despite all of these challenges, CallTrex had a unique value to offer the marketplace, with an innovative system for connecting our customers to their remote staff and allowing that remote staff to provide a great service to our customer's callers. It is sad to see it go. As we have notified our customers that the service will be turned off, we have received some terrific praise on how great our service was.

I will be taking some time off and thinking about what I want to do next. Definitely spending more time with my daughter -- 7 months old and doing great!


3 comments:

Tom said...

Ted,

Sorry to hear about the closing of the company. It sounds like a great concept, but a little too early. I do know for a fact that you have a fantastic understanding of the VOIP market, and I have RSS'ed you as I learn from every post you write. Thank you for the effort! You have made me smarter, and saved me about $100 by introducing me to Skype.

Now go play with that baby!

T

Anonymous said...

It was sad to see it go, yes.

Though a terrific learning experience.
-Kyndra

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