From Manually Handling 5,000 Messages Daily to Earning $50 Million a Year: How We Built an AI Money-Making Machine in the "Deadly" Chat Arena#
Company: Yellow
Founder: Rashid Khan
Revenue: $4.2 million per month
Hello everyone, I am Indiebaofu.
On the entrepreneurial journey, there comes a moment when you feel the path ahead is completely dark. Once upon a time, with just the meager efforts of two people, we barely managed 5,000 hopeless conversations daily, and the outlook seemed destined for failure. Just when everyone thought this was merely a hopeless nightmare, fate delivered a surprising twist—what seemed like a dead-end became an unexpected starting point, ultimately giving rise to a business miracle with an annual revenue of $50 million. This article will take you through the heartbreaking choices and countless unknown hardships, revealing the harsh truth of breaking free from despair.
Rashid Khan initially developed a simple chat application to validate a hypothesis. As initial market responses emerged, he decisively pivoted to focus on B2B and artificial intelligence. Today, Yellow.ai's annual revenue has reached $50 million. Below are his shared experiences and journey of transformation.
Table of Contents#
- Before the Transformation
- Pivoting to B2B
- Consumption-Based Business Model
- Equity-Free Financing
- Yellow's Tech Stack
- Key to Success: Personnel Decisions
- From Small to Large: The Growth Journey to $50 Million in Annual Revenue
- Riding the Wave of Existing Markets
- Secrets to Revenue Growth
- Final Advice
- Important Resources
- Future Plans
Before the Transformation#
In 2015, as a freshly graduated university student, I discovered an interesting phenomenon in Bangalore: in India and other emerging markets, users not only used WhatsApp but almost relied entirely on chat applications for their digital lives.
This observation raised a question: since consumers spend most of their time on chat tools, do businesses also need to interact with them there?
To validate this hypothesis, we launched a consumer application called Yellow Messenger, allowing users to discover and communicate with local businesses using their geographic location. Within just a few months, downloads exceeded 500,000, with 50,000 monthly active users generating thousands of chat records daily. Most surprisingly—these conversations were manually handled by just two people on our team.
This early success told us that consumers were willing to interact with businesses through chat interfaces, but manually processing this information could not scale. Thus, in 2016, we were the first to develop a production-grade chatbot with natural language processing capabilities, well ahead of WhatsApp's opening of its business platform in 2019.
Pivoting to B2B#
The timing and location for the pivot were extremely favorable. Bangalore is known as India's "Silicon Valley," not only due to its low cost of living but also its strong tech atmosphere. As a recent graduate, I could sustain a long period of hard work at a low salary, laying a solid foundation for building Yellow.ai.
The transition from a consumer application to a comprehensive AI platform validated an entrepreneurial truth: sometimes the best business model is not to create a brand new product from scratch, but to observe and adapt to changes in user behavior, creating tools that support these changes.
Although WhatsApp officially opened its business platform in 2019, we had already established a powerful chat automation system that operated across websites and mobile applications, preparing us for the messaging revolution. Today, the original Yellow Messenger has grown into a company with annual revenue between $40 million and $50 million, leveraging AI voice and chatbots to help global enterprises innovate customer service.
Every day, our AI agents handle countless conversations across multiple languages and channels, continuously learning and improving with each interaction. Watching a small programming project transform into a system that redefines global customer service standards is truly exhilarating.
Consumption-Based Business Model#
At Yellow.ai, we adopt a consumption-based pricing model. Businesses pay for each conversation processed on the platform (whether text chat or voice interaction).
This model is not only highly scalable but also closely tied to customer success—when customers achieve more automated conversations through our platform, we grow alongside them. Customers typically sign annual conversation volume commitment contracts, providing stable expectations for both parties while maintaining the possibility for flexible scaling.
Our revenue journey began in 2016 when we secured our first B2B client. Unlike many startups that delay monetization, we began charging almost immediately after validating market demand. Initially, we adopted a low-price strategy to quickly capture the market, but we always adhered to the strategy of "starting small and scaling through conversation volume and feature expansion."
Equity-Free Financing#
During the early product development phase, funding was a significant challenge. We found innovative solutions by participating in equity-free accelerator programs instead of relying on venture capital from the start.
- Startup Chile provided $50,000 in equity-free funding and valuable mentorship support, giving us ample runway to experiment with our product while avoiding equity dilution.
- Microsoft Accelerator played a crucial role during our pivot to B2B, providing office space in Bangalore and $500,000 in cloud service credits, helping us nearly eliminate cloud infrastructure costs in the first three years, allowing us to invest more resources into product development.
- SAP Accelerator connected us with more enterprise clients through its marketing team, helping us gain deeper insights into enterprise needs and continuously improve our product.
This strategic equity-free financing approach allowed us to operate without establishing a fixed office for nearly four years (until the end of 2019) while leveraging the sales channels of larger platforms to rapidly open up the market.
Yellow's Tech Stack#
We are committed to using cutting-edge technology to build our products:
- Frontend: Primarily using React, with significant use of NextJS in internal tools recently.
- Backend:
- A self-built and hosted messaging system that supports interactions between consumers and AI or human customer service. This system is based on the XMPP protocol and runs on Ejabberd (Erlang).
- The core workflow engine handles the business logic for each client, running in a NodeJS-based virtual environment with our own executor.
- Core microservices (including authentication, session management, business logic, and agent management) are developed using a mix of Java and Go.
- Database: Initially using MongoDB, we later shifted to Postgres for some internal needs.
- Artificial Intelligence: AI agents and related tech stack are built on Python.
- Data Analysis: We built an analytics engine based on the time-series database Druid.
- Architecture: The platform is cloud-agnostic, with seven availability sites deployed globally (across different cloud service providers), and continuous integration and delivery are implemented based on Kubernetes.
Key to Success: Personnel Decisions#
In building Yellow.ai, I deeply realized that the key to a company's success lies in "personnel decisions"—that is, recruiting, nurturing talent, and integrating new leadership.
One of the biggest challenges is making the right hiring decisions at different stages of growth. During rapid expansion, we faced setbacks due to hiring unsuitable executives. Once, a senior manager we hired drastically adjusted the sales strategy within the first month of joining, resulting in a year-long struggle to get back on track because this executive's decisions contradicted the company's deep understanding of the market and customer needs.
This experience taught us two important lessons:
- The immense value of internal talent: Early team members have a deep understanding of the product, market, and company culture, and they often grow into the best leaders, while external executives require a longer adaptation period, usually needing 6 to 9 months to fully integrate.
- Structured onboarding training: For externally hired executives, we now implement a 90-day integration period, during which new leaders primarily focus on understanding the company situation, avoiding hasty major decisions, significantly improving the success rate.
From Small to Large: The Growth Journey to $50 Million in Annual Revenue#
Our growth is inseparable from strong partnerships and a product-driven growth strategy.
Partnerships#
Early on, we established a deep partnership with Microsoft Azure. This was not only reflected in using their cloud services but also in deeply integrating into their ecosystem. By actively participating in and testing experimental features, we gained a technological edge and the trust of enterprise clients, significantly shortening the sales cycle and establishing a high reputation in the enterprise market.
Product-Driven Growth#
As a consumer-facing product, we intentionally integrated our brand identity into the chat interface, creating a powerful network effect. More enterprises adopting our technology led to more end-users encountering our products, resulting in natural inquiries from other businesses. Consequently, we rapidly grew from processing 100,000 conversations per month in 2017 to over 150 million in 2019, and now the platform processes over 1.5 billion conversations monthly.
Sales Strategy#
Our sales model has evolved continuously with regions and time. In the early days in India and Southeast Asia, we primarily relied on cold calls and face-to-face meetings for direct sales. We adopted a non-traditional yet highly effective strategy—hiring enthusiastic junior salespeople and pairing them with technical solution consultants. This combination significantly improved conversion rates for complex enterprise transactions. Our number of enterprise clients surged from 50 in 2018 to over 1,000 by 2024, with the average contract value increasing from $15,000 to $150,000.
Thought Leadership#
When technological changes occur in the industry (such as voice assistants or generative AI), we shape our executives as industry experts through media appearances and content output. This not only helped us gain exposure in major tech media and business publications but also led to a 300% increase in potential clients during the pandemic.
Focus on Distribution#
My advice to entrepreneurs is: build a distribution advantage early on. Whether through strategic partnerships, product-driven natural growth, or establishing thought leadership, strong distribution channels often determine a company's success more than a perfect product. Always align growth strategies with market trends, as our greatest growth came from accurately anticipating and seizing technological changes.
Riding the Wave of Existing Markets#
In the entrepreneurial process, ignoring market trends can lead you swiftly to failure. Creating new markets is extremely difficult; leveraging existing large market waves is more feasible. For us, the following market trends brought exponential growth to the company:
- Social platforms opening messaging interfaces
- The release of voice assistants (such as Amazon Alexa, Microsoft Cortana, and Google Assistant)
- The launch of chat platform interfaces
- The popularization of generative AI technology
As a great entrepreneur once said, "You can't connect the dots looking forward; you can only connect them looking backward." The key is to always pay attention to changes, continuously experiment, and when the dots finally connect, every attempt you made will become significant.
Secrets to Revenue Growth#
Our continuous revenue growth is primarily attributed to the following points:
- Strategic Shift to Enterprise Clients: Significantly increased average contract value.
- Generative AI: After launching more advanced features, we adjusted pricing to reflect added value services.
- Results-Based Pricing Model: New products and pricing strategies directly link the company's success to customer outcomes, enhancing revenue, strengthening customer relationships, and reducing churn.
We also found that maintaining a simple and clear pricing structure and focusing on sales metrics is crucial, as complex pricing often hinders customer decision-making. For entrepreneurs, having a clear monetization strategy from the start is essential; early revenue feedback can help you validate product-market fit and build a sustainable business model. Additionally, understanding individual economic benefits and customer lifetime value early on is vital for subsequent product iterations and market expansion.
Final Advice#
Trust Your Instincts#
When evaluating opportunities or making key decisions, it is crucial to trust your instincts. Throughout the entrepreneurial journey, you will encounter many seemingly "too good to be true" opportunities—whether potential partnerships, investment opportunities, or talent recruitment. Years of experience have taught me that instincts often help you avoid hasty decisions, thereby mitigating many potential risks.
There Is No Magic Bullet#
Success does not come with a universal key. Many entrepreneurs are always searching for that perfect solution or candidate to tackle all challenges, but the reality is that sustained success relies on the founder's significant investment of time and energy to deeply understand and solve core business problems. No one or technology can replace the founder's role in driving vision and execution.
Financial Discipline#
Regardless of how well a business performs or how much funding it raises, maintaining low costs and pursuing profitability is essential. This financial discipline helps us maintain the ability to make independent decisions across various market cycles.
Important Resources#
As the old saying goes, "Those who do not learn from history are doomed to repeat it."
I read extensively across various long-form content, from new programming concepts to company management methods, all of which have greatly influenced my way of thinking. Here are a few books and thought resources that have been immensely helpful to me:
- The Hard Things About Hard Things
- The Great Mental Models
- Rework
- Paul Graham’s Essays
- Masters of Scale
Future Plans#
Looking ahead, I am filled with anticipation for both Yellow.ai and personal development.
For the company, our focus is on continuously pushing the boundaries of generative AI, developing more specialized products for vertical fields. Our goal is not only to provide a general AI platform but also to build specialized tools that can deeply integrate and solve unique challenges in industries such as healthcare, banking, and retail, thereby maintaining a competitive edge in a fiercely competitive market.
At the same time, we plan to invest significantly in content and community building, especially in video content, as we believe this medium has yet to be fully explored in the enterprise service sector.
On a personal level, I am also striving to find a balance between life and work. After years of dedicating myself to building Yellow.ai, I am consciously adjusting my life focus, prioritizing health and quality of life, such as scheduling regular motorcycle rides and planning to visit more countries to gain insights and experiences from different markets.
Key Success Factors and Insights#
The following points are particularly worth deep reflection:
-
Adapt to Changes in User Behavior
There is no need to always try to create entirely new markets; focusing on changes in user behavior within existing markets and building products that adapt to these changes often leads to greater success. -
Quickly Validate Hypotheses and Early Monetization
Launch the minimum viable product as soon as possible, validate market demand, and start charging early; this not only provides valuable feedback but also helps you establish a sustainable business model. -
Leverage Equity-Free Financing and Non-Traditional Resources
In the early startup phase, utilizing accelerators, technical partnerships, and other non-traditional financing methods can reduce costs, avoid equity dilution, and gain valuable resources and market entry. -
Emphasize Internal Talent Development
Early team members often have the best understanding of company culture and product essence; they may lead the company further than external hires; for external executives, establishing a structured onboarding integration period is crucial. -
Product-Driven Natural Growth and Distribution Advantage
Build network effects through embedded branding and excellent user experience, leveraging strategic partners and ecosystems to accelerate market expansion, often achieving scalable growth more effectively than relying solely on sales. -
Maintain Simple and Transparent Pricing and Rigorous Finances
Complex pricing can hinder customer decision-making; keeping pricing simple and clear, focusing on key sales metrics, and strictly controlling costs are essential for maintaining competitiveness in any market environment. -
Stay Alert to Market Trends and Be Willing to Experiment with New Technologies
Whether it's the opening of social platforms, the popularization of voice assistants, or the wave of generative AI, only by continuously paying attention to and experimenting with new technologies can you seize opportunities and navigate future trends.
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