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This is the story of how Antonio Ferreira, along with friends he met online, hand-assembled a few servers and built a company that helped people in Portugal go online for the first time.

You can tell from the headline that it has a happy ending, but how exactly did they pull it off? How did these guys who couldn’t even afford decent equipment and were frequently close to failure build a multimillion dollar company? That’s what you’ll hear in this interview.

You’ll also find out why Antonio passed up a chance to retire on a beach for the rest of his life and instead launched Lunacloud, a cloud provider, which aims to bring simplicity to the world of cloud services.

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About Antonio Ferreira

Antonio Ferreira is the founder of Lunacloud, a cloud Infrastructure as a Service provider. Lunacloud aims to bring simplicity to the world of cloud services.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

Come back in a few days to get the full transcript of this program.

Sponsors I mentioned

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How does a failed search engine turn into a toolbar company that sells for a reported $45 million?

Dror Ceder is the co-founder of Wibiya, a platform for publishers to integrate applications into their sites, through a web-based toolbar.

In April 2011, he sold his company to Conduit, a company he met in a surprising way, as you’ll hear soon.

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About Dror Ceder

Dror Ceder is the co-founder of Wibiya, a platform for publisher to integrate applications into their site, through a web-based toolbar.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

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All right, let’s get started. Hey there freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com home of the ambitious upstart and the place where over 600 entrepreneurs have come to tell you their stories. Tell you about the highs, tell you about their challenges. How they got from the challenges to those high moments. They did it all so that you can learn from their experiences, build you own success story, and hopefully, I think, you should come back here and tell your story to others and do for them what others have done for you.

The question for this interview is how does a toolbar company sell for a reported $45 million? Dror Ceder is the co-founder of Wibiya, a platform for publishers to integrate applications into their sites through a web based toolbar. In April, 2011 he sold his company to Conduit. That’s a company that he met in a surprising way, as you’ll hear personally.

Dror, welcome!

Dror: Thank you, it’s great to be here.

Andrew: Most people in their lives will not get to sell their businesses, one that they’ve nurtured from nothing and built up. Do you remember the day when you sold your company? What was that like?

Dror: That was a special day. The entire process is a long process but that specific day is something that I really remember good. It was me and the other founder of Wibiya, Daniel, were on a trip to New York. It was seven in the morning, 7 a.m. We were in the hotel. We were staying in the same room, separate beds. The phone rings and on the phone is the VP of Marketing of Conduit. He’s like, did you open your email? I’m like it’s 7 a.m. here, we’re just waking up. No, I haven’t opened my email yet. He’s like open your email, open your email.

I open my email and then there’s a big picture of the Conduit CEO, Ronon Shilo, signing the acquisition documents. It was a lot of documents. Then we hear in the background noise “congratulations” and there were a lot of people there. It was a really happy atmosphere and we’re just waking up. We’re just rubbing our eyes to this amazing feeling. It was such a special feeling.

We straight away did a conference call with all the Wibiya employees. They were sitting in a garage in a house in Israel. We told them the news. It was really exciting to see all the people cheering and being so happy. Then each of us, me and Daniel, we called our wives, each one. It was just one of those moments that you call your wife. I called my wife and she answers and I tell her it’s over, the deal’s over. It was a really tough few months. She was so smiling and happy.

That feeling of excitement and adrenaline and you feel it in your tummy, that it’s burning of really happiness. That’s something that you were able to achieve it. As well as Daniel, it was the exact same thing. I can’t explain in words too much the feeling but it’s just like burning inside of you. You get addicted to that.

Andrew: It’s a good addiction to have. It’s a good thing to keep striving for. The reason I wanted to start off with that is because we often do talk about the challenges and how we overcome them and how figure out solutions to problems as they come up. It’s important, I think, to get in touch with that feeling of what it’s like when you cross a milestone. When you hit that big accomplishment.

At the same time I do want to stress that this wasn’t an easy process. In fact, you called your wife to tell her about the happiness. Your wife was there at the low moment too. Can you tell your audience about it and then we’ll tell your story about the company and how you built it up. People will really learn from your experience. But share that low moment first.

Dror: There was a lot of low moments along the way, for sure. It was a roller coaster, as I’m sure you’re told a lot. My low moment was during university and me and Daniel and Aviv, the first founder, were working on a completely different project called Junga. I was studying and these were really, really tough days. What would happen is I had to take a night shift, night work, so I could sustain myself and eat. I had to study and there was a lot of studying to do. I needed to do the start up as well.

What would happen is I would wake up, go to university, go to school. Study until the evening. Then take the car, I had a ’92 Peugeot. There’s no air conditioning in it whatsoever and it gets in the summer in Israel, I can tell you that. You drive all the way to work and you work from 8:00 in the evening until 5:00 A.M. in the morning. During that time that I worked you also do a lot of stuff regarding the start up. Come back, sleep for two and a half hours, then wake up. Go to university again, study all over again. It goes on and on. I didn’t see my wife, almost. I didn’t see my friends. When I came back on the weekends to my family they said I looked like a ghost. Really, really tough time. Really tough time.

Andrew: Is it a waste of time to have gone through that? I know we’re supposed to say that we learn something from these periods but did you really? Or was it just a waste of time because you went in the wrong direction with Junga?

Dror: It was definitely not. It was definitely the right decision to go with Junga. Because the only way you learn is from your own experience usually.

Andrew: What did you learn from this experience where the site isn’t up, you had to make a drastic change from it? What did you take away from it?

Dror: We did every mistake possible. Anything you can imagine. We did all the wrong things. All the no no’s. We worked on the product for two years without launching it. We were discussing a tremendous amount of features that are not necessary for the product. We always said this feature is important, this feature is important, this feature is important. We didn’t even talk to our customers and we worked on this for two years. We had all kinds of conflict regarding a lot of different features that we needed to do. You see all three of us, all of the three founders, discussing it for an entire week. None of that is important. We just need to launch the product.

I think that was a very big mistake that we didn’t launch. That’s something you learn from that. That’s how you learn. I think you learn also from listening, and I’ll get to that point later. But you learn the most from your own experiences.

Andrew: All right, I’ve written down some of the things that you said you did wrong with Junga so that I can come back and ask you specifically what Junga was and how you learned those lessons. Then I also want to find out how, with the new business, with Wibiya, you did things differently. Let’s first explain to people what is this? What is Wibiya? I introduced it as a platform for publishers to integrate applications into their sites through a web-based tool bar. Can you give me a specific website and just tell me how they would use Wibiya and what the end users of that website would do with Wibiya?

Dror: Sure. Wibiya enables publishers, if you have a website, to integrate all kinds of features into your site. If it’s social tools, like you want to integrate Twitter and Facebook, and many other things, or tools to enrich your content, increase your patronage. Let’s take for an example a website called Social Media Examiner. It’s a well known website. So they integrated the Wibiya bar into their site, and it really helped them to keep users on their site.

So for example, there’s a lot of users that today click on Facebook buttons and Twitter buttons, and get directed to Twitter and Facebook. And then suddenly they’re on facebook.com, somebody is chatting to them, and they leave the website completely. And we give an entire experience of Twitter and Facebook on your website, minimizing that bounce rate. Also, you want to show a YouTube channel, you want to show all your videos without people going to YouTube, so you are able to do that. You want to communicate with them and show them [??] that they’ll be able to see what you want. Maybe you have a promotion, maybe your site’s going to be down. And all kinds of different things.

Andrew: I see. And in fact, I see it here on your website, which is now wibiya.conduit.com. And yeah, there’s a Twitter button on the bottom, share button. There’s also access to your YouTube videos and also I can chat with people who are on the site right now, and apparently there are 46 happy Wibiya users online, according to the bar. All right. And that’s what you’re allowing people to add to their websites, and as you explained, the reason that you want to do this is to keep people on their site and to add more features to their site. There’s also a revenue-generating piece of that, what’s that?

Dror: So, we have all types of applications that you can put on the Wibiya bar itself, and also on your website. So there’s apps that actually generate revenue. So for example, we have an application from a company called InfoLink [sp], which they do in-text advertising. So you don’t need to know any coding. You just go and make a few clicks, click on the save button and that’s it, you have it on your website. So the whole concept of Wibiya is once you add our script, once, that’s it, you never need to touch anything to add all kinds of functionality and apps on your website. So even a mommy blog, somebody that HTML is a curse to her, would be able to easily add all kinds of features.

Andrew: All right, and from what you told Jeremy in the pre-interview, you have 200,000 active publishers. Every day you get 1500 new publishers registering just through word of mouth. You have over 200 million unique users a month, who are using the product. In fact, you were at the DLD Conference and someone asked you a question. Do you remember what that question was and what your answer was to it? Know what I’m talking about?

Dror: So, we went to the DLD Conference in Munich, and somebody came to us. And we told him our numbers and he was really impressed. And he said, ‘So how many unique users are you reaching? How many unique users are using your product?’ And we were like, ‘We don’t really know. We don’t measure that.’ That wasn’t something that was important for us to track at the time. So we said, ‘OK, this is interesting.’ And then another person came and asked. So we came back to [??] and said, ‘Let’s start tracking unique users. This is an important metric. And then later on, we’ll definitely use it.’ So, we used Quantcast, it’s a service that helps you track all kinds of audience segments and also unique users. And then, just after a few days the data started coming in. And we saw that at that time, we were reaching 120 million unique users. And that just blew our minds, that our service is being used by 120 million users globally. It’s a second that you just stop and think, ‘Whoa.’

Andrew: It’s very comfortable to ride on the backs of successful publishers. By giving them something that’s useful to them, they let you reach you all their [??] and growing audiences. All right, let’s go back, as I said earlier and find out how you got here. You mentioned Daniel a couple of times, how did you and Daniel meet?

Dror: So, me and Daniel met at University. The first day of school, he sat down next to me and that was pretty much it. [laughs] And that’s how we met. The second year of University, we decided that we wanted to do something on the Internet. We saw a lot of potential, we had a couple of ideas. And we decided to start with a service called Joongel, which was a vertical search engine. It was a solution for search based on the longtail [sounds like] theory. So for example, if you would want to search for a flight from San Francisco to New York, you would type in all the details, all the information, click search and you would get an upper bar where you had the 10 most visited websites for flight search in the U.S. And then you can easily click on the logos, and on the bottom part, you’d be able to see the search results. You can see where the cheapest flights are, from Orbitz and Kayak and Priceline and all the other websites. So we did that for almost fifty vertical in the U.S.

Andrew: Can you give me another vertical as a description, just so I understand what Joongel’s vision was of the world?

Dror: Our vision was whatever you want to search, we’ll give you the top ten sites in your geographic location and you’ll be able to get that result really fast.

Andrew: And search just within those top sites?

Dror: Just those top sites.

Andrew: I see.

Dror: For example, I’ll give you another example. You want to look for a how-to video. You would search how to tie a tie. Then you would get from (inaudible), from [FiveMen.com], from all kinds of different video sites the results. You can really easily browse it and see. It goes from how-to videos to creative common images to cooking to whatever you want, tons of (inaudible).

Andrew: OK, you said that you spent two years building this. A lot of the long discussions internally, a lot of features. How does this happen? What happens over those two years? Did you plan to spend two years or was it something that just took over your life for two years?

Dror: We definitely didn’t plan for it to take two years. But it just took such a long time because we didn’t have any knowledge whatsoever. We just started. We took [it to] the beginning to do all the technical work. Didn’t work out.

Then we were lucky enough to meet Aviv, who is the first founder of Wibiya and also Junga. We started with Aviv as a freelancer and then he joined us completely onboard. Then it’s tough because we also need to survive so you need to work. Like I worked night shifts. Daniel had another work, Aviv had another job. We all had different jobs to survive and sustain ourselves. We didn’t have any money. It takes much longer.

Add to that all of the amount of mistakes we made. The long discussions, the unnecessary conflict about unnecessary features.

Andrew: Give me a description of a conflict over a feature that in retrospect was unnecessary. Because, you know what, it’s easy from a distance to say two years, what a mistake. But when you’re in those two years you feel like of course, a long period of gestation is wrong for other people for me, in my situation, it makes sense. You’re like a frog in boiling water, as they say. The water just boils slowly and you don’t recognize the temperature getting hot and so you end up getting killed. What was it like, take me through it so that I feel your pain and not look at it and go eh, those guys are crazy.

Dror: There are tons of examples. I’ll give you one. We had a grid of logos on the left side. We were talking for an entire week what is going to be the effect when you mouse over a specific logo? It’s going to be with this amount of shadow, this amount of shadow. It’s going to have this effect of transparency or not. For an entire week we discussed this. I’m talking about a feature that’s not even needed, you don’t need it.

We learned that features eventually are your enemy. That the hardest thing when creating a start up, it’s not to think of extra features you need and what will work for your target audience, but what features you want to kill. That’s the hardest part because you have 20 features but you should kill all the features that are not your core business. That’s the most difficult part, you need to make a guess that starts that the impetus. Features are enemies, that’s what we say today.

Andrew: If the Dror of today were to go back to the Dror that was back in university, starting Junga, and giving him advice would it be list out all of the features that you have in mind and then cross everything out except for one or two? Is that what you’re saying?

Dror: Not in that specific way but I would tell them first find what’s the core solution that you’re offering. You have a pain and there’s a really core solution. That’s core solution you’re now imaging, because you’re an entrepreneur, about the trillion extra features that would work and that would be great. You can’t release that product until you have that packet of features ready. I would tell them leave all those features. Don’t think of them. Do a minimally viable product that’s a solution for the real pain and release that. After that build all the extra features according to what your audience is asking for.

Andrew: What would that MVP, minimal viable product, have been for Junga with 20/20 hindsight, of course?

Dror: The minimally viable product for Junga would have been to choose one vertical in the beginning. To give that solution for one vertical and see how people reacted. Are people liking that? Are they searching that way? Are they not happy? Just to see what’s happening from there. That would have been in three weeks. In a month I reckon.

Andrew: But it would have been in that page that you created for that vertical? Still the ability to search on, let’s say I guess you might pick travel. Actually, which one would you pick? Travel’s great because there’s a lot of money but it’s tough because there’s a lot of competition there. Which one would you have gone for?

Dror: I would have gone for the [vertical] that the pain is most obvious. Travel flights, for example, that could be a really good vertical because people do want to compare prices really quickly. Also shopping, also reviews. I think reviews would be the best one. You’re searching for reviews, you’re doing research about a specific thing you want to buy and you really want to browse it quickly. That would be a really good vertical.

Andrew: OK, I as an end user would have come to Junga, could have only searched for reviews. Would have typed in Android Galaxy and I would have seen, what, ten different sites that have links to the Android Galaxy?

Dror: You actually, you can see the product you’re speaking about. We created specific pages for each vertical. We have Junga shopping, for example. You come, you type in the query. There’s only one search box. You see the logos on the left to [feel] that it’s credible. You click search then you get an upper bar with those ten websites, reviews. Then, at the bottom part, the review for what you’re searching for. That’s it. You can’t search any more vertical, any more functions, nothing. It’s really simple. You click and you need to see what’s happening. That would have been the (inaudible).

Andrew: You talked about the different logos and the arguments that you guys had about which way to go. Can you give me another example? I kind of felt that, that I could see myself in your shoes as you were describing that. Do you have another example of a feature that you guys were arguing about that you really all should have just scraped instead of trying to get it right?

Dror: This is another overkill feature. I have so many of these. It’s unbelievable how much we learned. Really we were, well I explained that, we did too much. Way too much. Another feature was once you opened the bar and you had all the logos for a specific vertical. Say, for example shopping. We had another box where you click on it and you get all the different verticals and you can switch between them. An example, you search for a camera. A Sony camera and suddenly you want to see reviews about it. You can click on more and click on reviews and it refreshes everything for you.

This was a feature we wouldn’t launch until we had it. We said we can’t launch the product until we have it. People won’t use it. They won’t have this and this. That’s another thing that we could have just skipped. Unnecessary. Maybe it’s a great feature but it was really unnecessary for the product.

Andrew: When you invest two years of your life into something how hard is it to say we’ve got to stop. It’s not working.

Dror: It’s a great question. We didn’t reach that point. And, once again, I’m elaborating on mistakes we’ve done. We changed the product along the way. It went through a couple of phases. It was without really talking to the end users. At the beginning we were a destination site where people had to come and search. Then we said, after a year or something we saw the market saturated, so many search engines are popping up, so we said we’re not going to compete with Google.

We had a guy coming to us. This is a brilliant story. Somebody came to us, on the phone, advised us and said can you search really quickly for one thing? Can you search for flipper? We were like what? He said for flipper. We said OK. We searched. Then he said where did you search for it? We said Google. He said why didn’t you search for it at Junga? We started to give excuses for ourselves why we didn’t use our own product that we were building. That hit us, at that moment, OK, we definitely don’t want to compete with Google.

We completely shifted to create Junga as a sort of search plug in for websites. They have all these search providers, tons of verticals, and they’ll choose what they want. To put their search engine first, and then Google, and then Bing, then how-to videos, then, I don’t know, creative content images. We completely shifted to another idea without executing the destination site.

Andrew: You never launched the destination site?

Dror: We did launch the destination website, it is live. Funny enough it’s getting around 1500 people a day still. We haven’t touched it for 3 years and it’s still alive. Completely owned by [Carter] at the moment. So we did launch it eventually but we completely shifted to another idea. That actually brings us to the beginning of the story of how we created Wibiya.

Andrew: OK, and as I understand it, this search bar that Google became, it was a search bar on a site, not just a little widget that they put in there, am I understanding that right?

Dror: We didn’t even have the widget yet. We completely shifted our idea but we didn’t create it again. At this moment, we said let’s see what the people want. The whole idea is to have the search box and after they searched, they get to another page and it refreshes where they have a search bar. It wasn’t like Wibiya where they had a search bar on site.

Andrew: I see. OK, so how long did it take you to build that?

Dror: We just shifted, we did an [MVP] for that, we didn’t do the entire thing. When we were going to build the entire thing that’s when it registered that we’re doing the wrong thing and completely shifted to Wibiya and that’s the story with how we started Wibiya.

Andrew: So what I understand is that you created basically a web page where you collected people’s email addresses but also Tech crunch 50 was somehow involved in this.

Dror: I’ll explain how we started with that. This is actually one of the two points that always when we talk with young entrepreneurs only starting. The two points that we find most important are one, get your product, if it’s a web product, at least in 3 months start testing it and doing MVP. The second is get out there. Go to places, meet people, you never know what will come from it.

Our story starts when we were flying to New York and Chicago from University. We were attending a entrepreneurship program and at the end of the year we were flying to New York and Chicago. We said OK, we’re flying to New York, let’s try maybe to meet the Tech French editor, Eric [??] at the time and maybe something will come out of it, who knows? So we contacted him and he agreed. We scheduled and appointment and we arrived to New York and went to his offices, really small offices. Sat down, waited for him. Waited, waited, waited, didn’t come, waited, waited, 15 minutes passed and he didn’t come and we were already standing up to go away when he arrived.

Then we talked to him and he said I think you guys should try to submit to [??] contents. The idea of doing that. The new idea we pitched to him. We did that and we went through a very difficult process at Tech French with a lot of interviews and to pitch it. Eventually we reached the semifinals there and we were able to pitch Google at the demo pit and not on stage but it’s still really good for us.

So we got accepted and then there is a very big decision to make. We don’t have any funding, are we going to spend now thousands of dollars on a trip to San Francisco, money that we don’t have, without knowing where this is going? We were thinking a lot about this and we said, we never know, we never know what could happen from this journey.

So we took a chance, took our savings, flew to San Francisco, went to Tech French. We pitched for 3 days, 400 people about the new product that we’re talking about here, search product. Each person came to us and said this is a really nice idea, but what would be even cooler would be if I could have a button that shows my users recent posts.

I said that’s cool, it’s not what we do but we appreciate the feedback. Then another person came and said it’s really cool but if I could have a button there just above the logos where my users can play games, that would be really cool. Every person almost, came and said the exact same thing. So we sat down and over there in San Francisco, we were staying in Travelodge, $35/night, at the airport. All kinds of stains on the floor.

Andrew: And on the sheets, I bet.

Dror: Yeah. Quite an experience, eating junk food, sitting down at night and thinking OK. Everybody’s asking for the other thing. We did A, they want B. What’s going on? And then we started to search on the internet, just quickly, to see, you know, why is everybody asking for this? And we found out that there’s no one application marketplace that lets you enter in different kinds of apps into your website. In any type of website you have, they won’t work with plug-ins and the blogger widgets. But if you had a karma site, or if you had a small business site, nothing that you can easily drag and drop without technical knowledge.

And at that point, that night, sitting on the bed in this dodgy hotel [laughs] saying, OK. We’re going to ditch Jungo and start from scratch. We’re not going to build this over Jungo. This is the pain everybody’s talking about, we created a solution for a pain that might not exist. And in that second we shifted to Wibiya.

Andrew: You know, we’re supposed to have a vision for the world and drive at that vision until we get there. Here you were, you already were pivoting, and the world was telling you no. Why don’t you stick with your vision? Why don’t you sharpen the way that you explain your vision? Why don’t you sharpen the way that you create the product that expresses your vision? Why do you say, I’m going to choose to listen to those people? And I’m not saying it as a criticism, it obviously worked. I want to understand why you do that so that I know, if I’m ever faced with a situation where 400 people tell me this isn’t the right thing, I’m not looking for the 401st person to say it is the right thing, or I’m not looking for a way to explain it to all those 400 people again properly.

Dror: So, that’s a great question. That’s a really good question. And the answer, there’s no simple answer, but I’ll tell you what I think, and this is how we acted. So, any advice you get is good advice, always, but not all advice you get is good for you, and that’s always something you need to remember along the way. Because you’re going to get, we got, tons of advice from tons of people, and everybody said a different thing. And it’s really important to understand.

Now, regarding your question, you know, once you have one person telling you something, and then another person telling you something, and then a third person telling you something, and they’re all saying the exact same thing in a way, you need to stop for a second and say, OK. There’s something here. All these people are repeating themselves. And you need to calculate the situation, and once you see such a mass of people that are telling you that they want another thing and not what you created, it’s time to stop and think why and comprehend. And I would say that you make a decision once you keep getting the repeat answer over and over and over again.

Andrew: I see. And really at this point you were getting a lot people saying, I want this widget, I want that widget. And you had a vision for how to do it. What was the product that you took into TechCrunch50? Was it already built? What was it?

Dror: So we launched the destination website of Jungo. That’s what we launched in TechCrunch50. We were there, you know, pitching. Avi was back in Israel, not sleeping, typing, you know, fixing all kinds of bugs. And that was good enough, but we pitched a completely different vision from the product launch.

Andrew: But that vision that you pitched, which was a search that people could integrate into their websites, didn’t exist?

Dror: It didn’t.

Andrew: It didn’t. Oh, OK.

Dror: Yeah.

Andrew: All right, cool. All right. So, now, you told us you’re getting hundreds of people who are sending you in a different direction. No one’s loving your product but they’re all loving this imaginary product that they wish you could build. You think you can build it. How long does it take you now to build this new business?

Dror: So by now we’ve learned, [laughs] we’ve had quite an experience. We were able to come to Israel and raise money from angel investors, and this wasn’t an easy time. We boarded the airplane in San Francisco, opened the newspaper, and we read that Lehman Brothers just went bankrupt. So we said, ‘Oh, this doesn’t look good for us.’ Wasn’t the best time to raise money. But we were still able to do that once we came back to Israel. Really, like, the pre-seed money, just to get us going. So we sat down, started planning, all three of us, this huge platform where you can integrate apps really easily. And then we said, ‘OK. How long will it take to build?’ Me and Daniel, you know, we turned around, looked at Avi and said, ‘Oh, Avi, Avi, [laughs] how long will it take to build?’ So he said, he told us, ‘Six months.’ And we’re like, our jaws [laughs] dropped down. We said, ‘No way we’re waiting now for another six months.’ So what we created, we took the different path of the MVP, the minimum viable product. So, what we first did now, we launched the product without laughing on a specific website and see if users want it, if somebody likes it. Maybe, it’s just in our imagination what we did.

At that time, there was the Facebook Chat Bar. So, we saw this bar and we said, “This is a great way to start, to implement and integrate different kinds of apps without changing the layout of your website which even somebody that’s not a techie can do”.

So, we took a website from a friend that he has a popular blog. We put the bar on his blog, and according to his request. It was easy to build that specific bar because he had weird requests that would take us a lot of time to develop, and we did the minimum we needed. And then, he said, “OK. Let’s put that on the blog and see what happens.”

At the same time, we created a landing page where people can just enter their email and saying we’d be on beta. If you want to be one of the first users to use it, put your email address. And so, we can still gather all these people that are interested in it. They think it’s a really great service and the guys that created LaunchRock [SP]. You can read it easily as a startup landing page where users can just enter emails to know when your product’s out.

It’s really good. I highly recommend it. It didn’t exist at the time, so we created our own.

Andrew: Basically, a page that says, “This is what the product is. When we launch it, if you want to be notified, give us your email address” and that’s how startups collect potential customers and users before they even launch.

Dror: Yeah. And they don’t need any development resources because even that specific page and the mechanisms to collect emails through the database, it’s not a big deal. It’s nothing, but it’s still for the two people that need to develop it. It takes that amount of time. This takes five minutes and a slide.

Andrew: OK. Then, you built it yourself. This tool bar, I remember actually Facebook doesn’t seem to have it anymore, but it was an old tool bar that was persistent on the screen, just on the bottom that allowed you to chat with your friends, and you can see all the open chats. You were recreating just that, not the ability to add widgets. You weren’t adding extra widgets for your friend’s site. You were just giving him a chat bar on the bottom of his site?

Dror: So, it wasn’t a chat bar. We gave him a bar with different types of applications on it.

Andrew: Which applications?

Dror: The application he chose was (?). He chose an application where there’s a tag cloud that people click and they can see all the different tags. He wanted a widget to play a game. He wanted g talk so people can talk to him, just click and talk to him directly when they’re on his website, stuff like that.

So, we just created it. It took us one month to create that bar with a lot of other stuff, but it took one month until we launched it on the site. And then, we said, “OK, let’s see what happens.” Suddenly, we get all these people starting to ask questions. Where did you get this? How can I get this? They had to look in the source code, where is it from. And we started to collect the emails. People started putting emails in the website.

Andrew: Let me hold off for a second there. I want to talk about the marketing because it’s tremendously effective if you’re getting that many people to come into your unlaunched site and ask to get the product that you haven’t even created.

But first, this minimum viable product, this tool bar that you created for your friend seemed to have a lot of features in it. G talk, Google talk service. There’s a tag cloud that allowed people to find blog posts based on the tag that he used when he categorized them. All of those things don’t seem easy. How do you build them quickly for him? What’s the way that you kind of cheated and created it quickly?

Dror: So, our vision was not to develop the apps by ourselves, but to integrate third party apps which means these are apps and functionalities that other people created. So, the G talk was a widget that we just integrated and the tag cloud somebody else created and we built it. There were a few small things that we created, like there was a translation app. So, we quickly created a translation app with a Google API.

Everything else was other people’s, something that people created by themselves, or we integrated into this bar.

Andrew: What about this? You launch it, and here’s one of the concerns that I think a lot of people have when they launch something this simple. They hear you say it’s right, but then they think to themselves, “If it’s so easy for me and I’m revealing this to the world, someone else is going to beat me to it. They’re going to create the exact same product. Google has an infinite number of developers, it feels like.

Y Combinator has hungry startups. Many of them have been funded with one idea that’s clearly not going anywhere and they’re searching for another. They can see my idea and duplicate it with the money and the firepower of Y Combinator. Ditto for TechStars, and ditto for some kid in a garage. So what about the sense that you’re creating something that anyone can just copy and steal your whole idea?

Dror: That is true for everything you do on the web, period. And it’s always like that, always people can come and copy you, but eventually there’s two things that you think about when creating a service or a product. One’s execution and the second is an idea. And the most important part of these two, or I would say the 90% of it, is execution. And it’s all down to how you execute your product. And even if somebody else is copying you, so they copy you, it doesn’t matter. You’re executing it, you have the vision, you know where you’re going with it. And if you talked about all the big companies, Google, and Yahoo and all these different companies that copy you, you can always remember it’s not the entire Google, all these thousands of employees that are going to try to do the same thing as you, or something similar. It’s a small team, most likely three to five to eight people, that are going to do that. So it’s a team versus a team. And, once again, you have your own vision, you know where you’re going. Once people start copying you, that should compliment you. That should mean that you’re on the right track, also.

Andrew: That’s easy to say from a distance, though. But if you have your vision, and you’ve laid out your vision in a bar, anyone can see where that vision is going, can’t they? We can all see, hmm, a toolbar that doesn’t take up a lot of space on a site, easy. A toolbar that gets its marketing by letting publishers integrate it into their site, and then those publishers end up spreading the word about it and feeding more publishers into the toolbar-maker’s system, easy.

A toolbar that allows a few gadgets today is easily going to allow more gadgets in the future, boom, we can copy all that. It took them a few hours to do it, it’ll take us a few hours to do it, and we’ll use Google’s marketing power. I mean, I’m not saying what you’re doing is wrong. I’ve seen often enough here that the direction you took here with Wibiya is the right direction. But I also want to articulate the concerns that people have when it’s their baby, when it’s their product. Did you feel any of those?

Dror: We have the exact same concerns . . .

Andrew: OK.

Dror: . . . completely, like we were . . . [??]

Andrew: Do you guys bat it back and forth internally?

Dror: When do we market it, you know, is this the right time to market it? If we do a lot of buzz around it and it’s not ready yet, what will happen? OK. So we used a couple of tactics. First tactic is perception, which is to create a perception that you have something that’s much bigger in scale, that’s a much bigger platform, even though there’s nothing behind it.

Andrew: I see.

Dror: I’ll just give a small anecdote. When we launched, after we created this and tested on this blog, we said, OK. So let’s build it. What we did, we created this entire website. It looks like a platform and it looks like you can integrate different types of apps, but what it was eventually was a bar, with 12 apps, with on and off mode. So each bar had exactly 12 apps, it was only on and off mode. But it looked, for people that started the product, like they’re integrating different types of tools, and it really looked like this robust platform.

Andrew: I see.

Dror: And it was nothing. It’s a tactic . . .

Andrew: I see.

Dror: . . . behind the scenes, but [??]. So, that was one of our tactics, to, you know. to show other people that are looking to do this that this is a big platform. You know, think before you go into this.

Andrew: Ah.

Dror: That, we did have a concern, and we did have people copy us. But, they copied us, and then they went a different direction a bit, and they didn’t go to what we did. And then we did something really good and they copied us again. But once you are always the innovator, you are always the person that knows where it’s going, I think you have the power of the execution, eventually. It’s definitely something that’s always scary, but it’s a huge market out there. Whatever you do on the internet, it’s massive, and even if you have 10 competitors, it doesn’t mean you can’t succeed, so I wouldn’t be scared of it.

Andrew: Did you come out first or did Meebo come out first?

Dror: So Meebo started to exist, their bar, before us, but it was maybe one website, it wasn’t, like, full-blown. You have to contact them and integrate them. I think it was just one big website, and it was live, and then we launched it.

Andrew: OK. How influenced were you by that one website that ran Meebo?

Dror: So we took a look at it but it was completely not our vision. We saw Meebo as a chat provider. At the time we thought it looked like they wanted to take the chat that Facebook did and do it on websites. We had a completely different vision for integrating apps on websites. The bar was the first solution with a plug and play solution. It didn’t mean that was the vision where we going.

Andrew

One more question about that minimally viable product. You launched on your friends site, then you had a website of your own that collected email addresses. Did that website that collected email addresses also give the impression of a bigger, more robust product that already existed? Were you already starting to puff your chest out and scare away competition?

Dror: I don’t know how one page can make a perception of this massive and robust (inaudible). It wasn’t such a thing. It was just, we had our logo. We had two [sentences there]. We had a field where you can put your email and that’s it. I don’t think it’s even needed. If people are interested in the service they’ll put their email. We had a few people that put their email in where they actually, you know, they were not looking to use the service but more looking to copy it.

Andrew: All right. I promised people that I would get back to how you got users. Part of the marketing was this decision to have what I’m seeing down here in the bottom right of your website of Wibiya.com. It’s a little i. Tell me about the discussion that went back and forth about whether to put that i in there and what is that i? The letter ‘i.’

Dror: I’ll tell you about the i but I’ll just take one step backwards and say that when we started Wibiya we were thinking how can this become viral? And how can this market itself? We chose to target [end] bloggers in the beginning because bloggers like to talk when they have shiny new things on their website. They want to make other people jealous and be proud. That was our strategy. We said we’ll create something that has a few particular features for bloggers in the beginning and then they’ll talk about it. That was our marketing strategy.

Regarding the i that you’re asking. In the beginning when we launched Wibiya there was no branding for the Wibiya brand. You didn’t see that it’s Wibiya. We got emails that people said they need to look for the source code to understand where they can get it from. Then we started having discussions that maybe we should put some a i or something that people understand that it’s from a different provider than the website itself.

We had tons of discussions on this and we had a lot of conflict between the three founders. Some of us said that this will demolish us because website owners don’t want to put any branding on their site that doesn’t belong to them and they’ll stop using us. The others said that nothing will happen. This will only impact our virality. We had a lot of discussions and a lot of conflict and eventually we said let’s put the i and see what happens. We put the small i in there and the world was silent.

Andrew: The world was what?

Dror: The world was silent. Nobody cared. Nothing happened. Everything was business as usual. We wasted a week of discussion about this i again and it was fine. Then we had the exact same discussion about turning that i into a Powered by Wibiya logo. Once again, this was bigger. Once again, this was not a small i. This is our Wibiya branding. People won’t want to use it. Again, over and over again.

Eventually we decided to change that to Powered by Wibiya. Once again, nothing happened. Everything was business as usual. The only thing that happened is that we got a huge boost of people coming from that to the Wibiya website. Suddenly our virality was really much stronger than before. Until we reached the point of (inaudible) 1,500 publishers a day just by seeing it on other websites or word of mouth. That’s the story of that.

The lesson learned is that until you don’t try, you don’t know. You can always roll back if you do things that are not good. Don’t think too much for the user. Let the user think for you.

Andrew: It’s amazing the kinds of debates that we have in the early days of building a product. The i, i for information as in information about this bar, or the logo on your site whether it would be on or off. David Cohen of Tech Stars said the answer is just do it and see if people yell. Or, if you have a feature that’s taking too much of your time and you’re not sure you need to keep it pull it out and see if people complain they want it back. If they do you can put it back with a new appreciation for how important it is. If they don’t you save yourself a lot of trouble.

Dror: Couldn’t agree more.

Andrew: What a great marketing, viral marketing plan that’s built right into the product. I’ve actually seen certain sites do this where they’ll let anyone put the bar up on their site but if you want to remove it you have to pay for the premium version. The premium version comes with extra features including lack of branding. Who is it? Kiss Insights, for example, does that. They have that pop up with the survey. If you pay you get rid of the logo. It doesn’t seem like a lot of people mind it so much so they end up using the free version and giving Kiss Insights a lot of attention, a lot of clicks back.

All right. Things are working out for you. You’ve raised the first round, is it time to raise another round or did you decide that you wanted to bring in revenue?

Dror: We raised the seed round then after that, a few months passed and we had only raised $100,000. We were taking salaries of $1,000 just to survive. To eat our cheese and bread. The months still passed and we needed to raise another round so we started to look for money. Eventually we got an offer from a person in a small VC firm in Israel that came to us, was really excited about the numbers, about what we do, about the vision. We actually left the meeting where he wrote the terms sheet on a piece of paper. Wasn’t a great term sheet, the terms weren’t that fantastic. After that we continued to search and were able to raise another $.5 million eventually.

Andrew: Did you take the money from the first person who sketched out on the piece of paper what the terms would be? Or did you just use that to prod other people?

Dror: We used that to leverage.

Andrew: Leverage to get money from other people?

Dror: Yeah. Because usually investors, a lot of the decisions they make are, I would say, according to their notion. If they feel that somebody wants to invest in this company they already feel more [horny] for that specific company and to try and put the money in. We did try to leverage it and we did leverage that specific offer. Eventually we got another offer.

Andrew: I see.

Dror: I can give you another story now. After we raised this, a few months passed. $.5 million, that’s it. $1,000 salaries, we have money forever. We don’t need to think ever about money. We’ll be able to make this company profitable and big without raising more money. A few months passed and then another investor came and spoke to us. He came from San Francisco to Israel. He wanted to meet up. Daniel came to me and said this person wants to meet up with us. I said we just raised $.5 million. Why do we need to speak to investors? We said OK, let’s talk to him and let’s do it.

We went to a coffee shop. We talked to the person. His name is Owen Dev. He said I’m really interested in what you guys are doing. When you come to San Francisco I want you to meet my partner. We said sounds great. Like two months passed, we came to San Francisco. We’re not looking for money at all. We went into a meeting with Owen and his partner in San Francisco. Downtown San Francisco. Once again took a car, tried to find parking, tried to find cheap parking in downtown San Francisco which does not exist. We were late to the meeting and we talked to them. We were not looking for money. We just told them about what we do and how much we scale.

We finished the meeting and all of them said we definitely want to be part of your success. We want in. We said OK, we’re not really searching at the moment. We were able, eventually, to close another $2 million round on really, really good terms after three weeks. It all started because we met this guy in a coffee shop back in Israel when I didn’t want to go. But Daniel told me let’s meet this guy. It brings us back to get out there. Go talk to people. You never know what will happen from these encounters that you think are not necessary.

Andrew: You know what, I have conversations all the time. Many of them don’t go anywhere. Some of them do. I can’t waste my time kissing lots of frogs hoping that one of them is going to be the prince that rescues my company. Help me understand how you knew that this guy was worth the time. Because you must have known that there was some value there. Also, what was it that you did that drew him over to you? That drew people with money to you to make an offer? Because I’ve got people in my audience who are sitting there on great products, they would meet anyone anytime. They’re not drawing the right people and they might be wasting their time with the wrong people.

Dror: I’m going to say get out there, I’m not saying meet any person that wants to talk to you. That’s a lot of time wasted that you can code and make progress. Still, there’s those special moments that you just can’t be bothered to go. There’s the really special meet ups with really important people. People that you know are important, maybe, for your business somehow but you really can’t be bothered and you need to finish this release or do other things.

With Orin we got a tip from another start up that he invested in. They told him about us. They called us and said we really think you should meet him. We got a really good tip from people we really appreciate. Then I said we don’t need to meet right now. And we really didn’t. We had a big release we needed to do. But still, a tip from somebody that you value his opinion and somebody that you appreciate, leverage that tip and meet that person he’s telling you to go meet.

Andrew: All right, what did you do then to lure the good people to you? It seems like he’s the second person who reached out to you. At least the second person who was pivotal in your career, who reached out to you. What do you do? Do you go and talk to bloggers and get them to write about your story? Are you making phone calls and networking all day? Because you’re in Israel, you’re not in Silicon Valley. You’re a new start up. You’re not a guy who has Kevin Rose type experience and reputation behind you. What do you do to draw those people to you?

Dror: Regarding the product itself, we do. We speak to a lot of bloggers and try to get coverage and try to make it interesting to them. To make something with a twist. It will be a bit different. It won’t be the usual pitch. It would be something a bit more spicy, funnier.

Andrew: Do you have an example of how you spice up a pitch?

Dror: How do you spice up a pitch? We were always saying where we worked. We worked in Daniel’s parents’ backyard in their garden with an open door to the entire house with the dog coming in and out. You start with something funny about we’re this tiny, small company with just a few people in a house with a dog, with a family in it. By the way, we have this amount of publishers and this amount of users.

Suddenly people think hmm, there’s an opportunity here that nobody’s taking. Why are they sitting in this small house and they have [this many] sales? They connect the dots of two things that don’t make sense and sounds like a really great opportunity. All kinds of small stuff like that. That’s one thing.

Networking is important. Networking is also important. Don’t go to every meet up out there. But we, at least, went to a lot of meet ups and that’s how we met people. You meet a few people and when you meet a person we always had a tactic. Not a tactic, it’s a question we ask. We would say at the end so who else do you think we should meet? That question did wonders for us. Anywhere we go, up until today, we still use it.

When we meet somebody, if it’s a big company, if it’s a small company, I always ask them so who else do you think I should meet? Suddenly they tell you a few people that they know that are important and they think are important enough to hear your pitch. Suddenly you get connections to them. That’s how you slowly go from one person to another but with value. Not just hi, I’m John and I have a small company that sells, whatever.

Andrew: One more question about back in the early days. When you’re building something quickly you tend to make mistakes or you tend to not build for scale. I know that, frankly, Mixergy is now growing really fast and it’s built on just Word Press and a couple of plug ins that maybe are starting to tear at the seams. Did you have similar situations where you were just trying to get the product out there? You did. Tell me about that.

Dror: We did. The first thing we did is use a lot of third party services. The best way to scale is to take all kinds of servers, Amazon web services, to feedback or support. They [??] or they get [??]. A lot of companies, you pay this really small amount and you get this amazing service and you have the ability with a couple of people to scale to a big company. With that sometimes there are problems. This was one of our biggest challenges in the beginning when you’re starting. We use Rackspace. The Rackspace, an elastic cloud.

It’s kind of a black hole where you don’t know what you’re paying for, but you have the ability to scale. Whatever happens, your service will be [??]. So we used that, and they said it’s great. We won’t shut down. Suddenly, after two months of service, and we’re still in private beta where it’s invite only, we get a bill for $17,000. I’m reminding you that at that stage we were a company with $100,000 in the bank. Less after that. We said, oh my god. What are we going to do?

So we built an [??]. The [??] worked great. We built a static platform, but our infrastructrue wasn’t built for scaling. We thought it was built for scaling because we had used the server. But it wasn’t. They had charged us for tons of information that we used. At that time, the [??] was 150 kilobytes. That’s the size of it. Today it’s 15 kilobytes. We didn’t use CDNs at the time. Today we use CDNs and it minimizes the cost dramatically. Today, for example, not today, but at least back then when we had 150 million unique users a month it cost $3500. That was the cost eventually that we would reach.

I’m reminding you at just the beginning that it cost $17,000 when we had half a million unique users. So you definitely use all the services out there to build to scale. I think that’s one of the most amazing thing on the Internet today. You have incredible services to put in your website and to look like a really big thing and get a lot of information without a need to build it. So definitely do that, but also keep in mind that you have the strength to scale and you won’t go bankrupt from it.

Andrew: I use Rack Space. In fact as soon as we’re done here I’m going to post your video. I’m going to upload it to a hard drive on the cloud on Rack Space, Joe will download it, put it up on the website, which is now thankfully using Cloud Flare to speed it up. You did things like that on a much bigger scale. You went from $17,000 a month back in the early days to $3500 a month today. Even as you’re bigger, your price is just a fraction of what it was before. Tell me how you met the guys at Conduit. I teased it at the beginning of the interview. These are the guys that ended up buying you for can we say now $45 million is what you sold it anymore?

Dror: Yeah, that’s the correct number.

Andrew: I don’t even have to say a reported anymore.

Dror: It’s a good story how we met. It goes back to [??]. We have a lot of stories where the company…

Andrew: I’m sorry you were starting to tell the story and then the connection froze for a moment.

Dror: What I’m saying is it connects back to getting out there. We had a lot of moments in the company’s life where we didn’t want to go somewhere and because we did, something amazing happened. Of course there are a lot of moments where nothing happened. This was a few days before my wedding, I was getting married and TechCrunch [??] in New York. We were deliberating if Daniel should go to New York or not. It’s important. On the other hand you need to get back to my wedding or I would kill him. So in the end, we said we should go. Definitely come back and you’ll make it. So he went to New York, he went to TechCrunch’s [??]…

You went with a couple of friends to a small burger joint in New York in The Meridian Hotel. It’s a small burger joint. You can’t even see it. It’s like next to the toilet. Really tiny. He sat down at the bar, or at one of the tables, and suddenly he sees two Israelis speaking Hebrew next to him. They’re Israeli, he’s Israeli. Start talking, you know, say where are you from? Where are you from? Funny enough, he found that these were the founders of Conduit. We started talking about all the synergies between our companies and what we could do together. We started brainstorming and thinking of a lot things. They said let’s definitely meet up next time we’re in Israel.

We came back to Israel. We went to see the Conduit folks. We thought there’s so much synergy, there’s tons of things we can do together. They started talking about also an option of an acquisition and what do we think about that. At that time we were not looking to get acquired. We were looking to build a much bigger company with our vision. That’s how we met them.

Eventually along the road what happened after a few more months we had another American company interested in us, from the East coast. They started talking to us and saying OK, we’re interested in acquisition. We started to talk about M&A. Then we had another company earlier on that was really interested in us from the West coast. A really, really big company. They joined the party as well for bidding and talking about M&A.

Then we said let’s talk to the Conduit folks. We had the most energy with them. It made the most sense with them. Let’s talk with them and see if they’re interested. We talked to them again and they were interested. They were, I think, the company that had the most not just synergy but vision, combined vision, that we thought is where we should go. A lot of good connections (inaudible). It all started from a burger joint.

Andrew: It’s like a guy from New York who goes backpacking through Europe and finds a girl in France who happens to be from his same neighborhood back in New York. It’s amazing but when you do leave the country people connect you and say oh, you guys are from the same city. You should meet.

Dror: That’s, by the way, how I met my wife.

Andrew: Is it really?

Dror: She’s from England. She’s from London. I met her in Thailand and now we’re living in America.

Andrew: She moved from England to Israel to be with you?

Dror: She moved from England to Israel, you could say to be with me.

Andrew: Was there something else that was bringing her there? Oh, I see. You don’t want to say. Too much pressure. I see. You ended up doing pretty well though.

You got money, you were able to share it with the family, I heard, afterwards? I would be very selfish. I didn’t give anyone a penny of anything that I earned. You did? What did you do?

Dror: When I talked to Jeremy before this interview one of the questions he asked me was what was the thing that brought me the most joy out of this whole story? I think definitely the most important thing for me was to share the wealth with the family. My family is very tight. Whatever’s mine is theirs. Just that feeling, to be able to give them something and know they have no worries, that makes me the happiest person there is. I also bought a new fridge.

Andrew: All right, let me give a quick plug here and then let me ask one final question that I wasn’t sure how to ask you. It might come out awkward but we’ll see.

First of all, what you may have noticed and the audience is now starting to notice, is that there’s a lot of work that goes into putting these interviews together. In addition to now having somebody who does research for me on all guests, except you for some reason. I got to find out what happened that your research is half done. But we have researchers on guests. We have a pre-interviewer. What did you think of the pre-interview process with Jeremy?

Dror: It was great. Really, really good. I really enjoyed it, by the way, and Jeremy’s a great guy. I think it’s also good for me as much as it’s good for you just to prepare yourself. It’s the same as start ups, you know. Before you enter something you don’t go hmm, looks good. I’ll go for that. You need to do some research to understand why you’re entering this field. Is there any gain there? Is there any opportunity there for the long run? These are things that I think you should always do, whatever your interests.

Andrew: I had one guy who went through the pre-interview process and he said oh my goodness, if you guys put this much work into putting together your interviews and this much work into putting together your courses I’ve got to sign up and be a premium member. Because I see now what goes into it and why it works so well. Yeah, it does. Having the pre-interview notes means that I’m hitting on the key ideas in your story and I don’t kick myself a month from now when I read somewhere else that there was some great story that we missed out on because it just didn’t happen to come up in conversation. I want to walk in prepared.

That’s really important to me, that every time that we generate revenue with Mixergy that it goes back out to create a good product. That’s not that important to the audience. What the audience cares about is, it’s great for you Andrew, but what’s in it for them with Mixergy Premium? This program where they get all these courses and all these interviews. What I’m trying to do is bring in some of the emails that I get from Premium members and let you guys know what’s happening with them.

I got an email just yesterday, actually, from Gabriel [Machuret] who is a Premium member. He said in the subject line “Andrew, I made over $100,000 more last year thanks to you.” He starts telling me about how it’s the courses and so on. I right away think great. Then I get curious. I said what happened? Can you tell me what you did? How did Mixergy Premium help you? He specifically told me.

He goes glad you asked, mate. He’s from Australia. I applied mainly the following: I used the techniques from Liam Martin of Time Doctor and I set up my own team in the Philippines. Five people now. Now he has five people in the Philippines who are helping him out with his business. Liam Martin taught how to do outsourcing. He has an outsourcing company so he was able to teach that. He goes I used the tools from Mark Brooks. The tools from Mark Brooks helped a lot, especially combined with Ari Focus System. Mark Brooks talked a lot about how he systemized his business. Then Ari talked about focus tools that will help you focus on your job.

Then he goes, but mainly the money came from Nicholas Holland who taught the closing sales course. That’s a course where we spent over an hour just talking about how to close sales. All right, then he says some things. Actually, I’ll read it. Nah, screw it.

Maybe I’ll show this interview in the future. I don’t know if I should be cursing if the guest hasn’t cursed is what happens. A lot of times guests curse and then they go oh, Andrew, should I do it? Then I go yeah, sure and I’ll curse too to make you feel comfortable. But you weren’t cursing so I figure I should stay clean too.

All right, he goes muy gracias (inaudible) and this is Gabriel [Machuret]. I’m going to give web address out. If you think that I misread this or if you find out more about the program and you want to contact him you’ll know how to find him. He’s at InternetNinja.co.au. As I said, he’s from Australia.

If you’re already a Premium member, take these courses. You can see that Gabriel has taken them, he’s applied them and you see what happened to his business. If you’re not a Premium member yet I hope you join us. Mixergy.com/premium. I know that you’re going to look at the rates and you’re going to say that this is so low that, apparently by charging so little I’m making the product feel less valuable to the audience. I have to raise the price in the future. But if you sign up now you’ll keep that price forever. As you can see, the rewards are there. Thank you Gabriel.

All right, Dror, by the way, I’m going to ask you what your feedback is on the way that I promoted it. But I’m going to tell you why. Every time I ask I get to get a little bit better at promoting my own stuff. Like I asked Tim Sykes recently and he said Andrew, don’t talk about what’s in the product. Talk about what people have gotten from the product. Talk about what people have gotten by signing up to Mixergy Premium. I put myself out there and I asked and I got feedback and it helped me. Hopefully this got a little bit better, the way I promoted it.

You’re a salesman, you’re a business person, you’re an entrepreneur who’s made it. What do you think of the way that I promoted my own product? Then I’ll ask you that secret question that’s not so secret. But what do you think? If you don’t mind giving me feedback.

Dror: First of all, it took me a few seconds to understand that you’re starting to promote it. Which is a good thing.

Andrew: OK.

Dror: It took me a while to put myself in the mode that OK, you’re now promoting something. Then you completely shift your head because you’re already thinking of it as something else. Overall I think the promotion was great. Still I would try to put maybe more narrative story about your Premium. Because it sounds fantastic, and I can tell you that just what Mixergy is doing is amazing. The amount of value that people can take from it is incredible. I think about 10 people now I’m going to send to your website. Maybe more stories, like reading stories that you can attach yourself to the people who are doing the premium. You talked about all these people but tell their stories really more. Just choose one person, or maybe two, or one’s enough maybe, and tell his story about how it helped him. I think that would put you more in touch. But I think it was great overall. It didn’t feel salesy.

Andrew: OK. If I would have, instead of reading his email, maybe told his story myself. Said hey, look, here’s a guy who contacted me maybe about a year ago. He was struggling because of whatever and then I tell the story of how he signed up and he was able to do this thing. Then he signed up and he was able to do that other thing. Now at the end he has $100,000 more last year with his business because he signed up. You’re looking for more of a story? More of an [art]?

Dror: Yes, stories are easier for me to emotionally attach myself to.

Andrew: Did it feel like it went too long?

Dror: A bit. A tiny bit.

Andrew: OK. I was wondering about that.

Dror: It wasn’t like you were a salesman so that was really good. It didn’t feel like you were OK, buy my book.

Andrew: I was wondering if it was going too long but at the same time I feel like I can’t hold back too much because then you sound apologetic. Then all people hear is this insecure person apologizing in between some kind of promotion. That’s way worse than promotion. I’m trying to let myself just go natural at it. This is really useful.

All right, now I’m going to see if I can create a narrative next time and maybe be a little bit clear about the shift in promotion or maybe not make it so promotiony. I’m not sure. I wrote it down. I write notes down all the time.

Here’s the thing, I wasn’t sure how to ask you this because I don’t want it to come across as an insult, and it’s not to you because you’ve said this. Well, here it is. You’ve said that one of the things that you’ve learned from this whole experience is to listen more. It seems, reading between the lines here in the notes, were you stubborn, are you a stubborn person? What’s the challenge there and how did you get over it? You’re smiling as I say the word ‘stubborn,’ did I hit on something?

Dror: Yes. No, I’m joking.

Andrew: Interview [waff], you jerk. Tell me about that. What am I picking up here?

Dror: This is something we didn’t do for two years so it’s a soft spot because we did it. I can definitely say if I would go back to when we started Junga we would listen to people much more. As I said, you know, any advice you get is good advice but you have to find advice that suits you. Once again, it’s very easy to convince yourself that none of these people know what they’re talking about. This advice doesn’t fit me, he doesn’t know. He’s not working on it. He’s not coding it. He’s not looking at the market.

One thing I did learn is to listen. At the beginning when somebody’s coming with feedback a lot of entrepreneurs, me as well, we are defensive. We are cutting people in the middle of their talking, in the middle of the sentence, we cut them off and say no, no, no, no. There’s always that no, no, no. That moment is something that I learned to stop a long time ago.

Once you learn to stop and listen to the other person. Accept that feedback as not somebody criticizing you but somebody trying to help you, to make you understand what they think. They’re telling you this because they don’t think it’s going to be great or they think you’re wasting your time. Which is still a valid point for trying to help you. Always stop, listen to what people say. That’s what we did today.

You can always learn something. I think that’s something that’s really important because if you take us back to the Junga days. When I look back, people told us launch the product already we told them the product can’t be launched until we have these five features ready, we didn’t stop and listen. We said OK, this guy doesn’t know what he’s talking about. We continued, didn’t stop to listen and digest the feedback that he just told us. That’s something that’s really important whatever you do. It doesn’t matter if you’re an employee or an entrepreneur, whatever you do. Listen, digest, then think if it’s good or not good, whatever fits you.

Andrew: It is so hard because we go into entrepreneurship because we have a vision. Because we want to do our thing. Then when someone gives us any other piece of advice, anything that seems contradictory, it’s really hard to listen to them. What do you do in the moment. Here, I’ll give you an example. I’m already taking much more of our time here than we originally agreed to but one last thing. Here’s the thing, because this happens to me.

I remember Erin Dragoshan introduced me to someone. He said look, this woman can do your customer service, she can do all kinds of stuff for you. I hired her to do just about everything. She’s now working with me. And then I say I’m stuck in email all day long answering email. He goes, ‘Well you asked Andrea to answer all you email right?’ and I said, ‘No, you don’t understand. I can’t have her talk to my customers. My customers want to talk to me.’ He goes, ‘She does it for me, she can do it for you.’ You’re different. You’re not public the way that I am. People aren’t trying to reach out to you. And I kept cutting him off. Here’s a friend who helped me out who’s now giving me a little bit of a feedback on a problem that’s really burning me. It wasn’t until a week or so later that I realized I cut him off. In the moment how do you recognize it, how do you stop yourself from cutting people off?

Dror: It’s when you see yourself speak too much. No, it happens to me all the time. You’re talking to somebody and suddenly you’re in a conversation and you’re always the person speaking. And when you understand you don’t, unless this is a person that’s not great in socializing and is not a big talker, which you need to talk for him. But if you speak too much, suddenly you stop and say OK I have to tone it down and more listen. But it’s tough, it’s tough. Because our instinct is always to be the person who knows because this is what we do on a daily basis but I think there’s always a place to stop and learn. As difficult as it is, even if you don’t listen to that person, and I have a lot of people I talk to and they bullshit. They don’t know what they’re talking about, they have no experience whatsoever, they have very strong opinions, about what’s wrong and what’s right, I still stop. I listen in my head. I’m mumbling to myself, bullshit.

I’m still listening. I’m still listening and in the end I say OK that’s an interesting perspective. If I feel like I can be honest with this person, I tell them what I think. But always listen and let them finish.

Andrew: That’s great advice for me too. I appreciate you doing this interview and going through our whole process here to get this done. I know that this is one of my favorite interviews and I know that the interview is much more useful to the audience because you were willing to be as open as you were about the setbacks in the beginning. Because you are willing to be as open about the highs and the successes so that we can live through you and also aspire to have similar highs in our business. And thanks for all the insight along the way about what you did wrong and what worked out well and what you did right. Dror Ceder, thank you for doing the interview.

Dror: It was pleasure. I really, really enjoyed it. If any of the people that are looking at this, if I can help or somebody I know can help, can just tweet me. I’ll be happy to help in anything.

Andrew: What’s your twitter address? That’s the way you prefer to be contacted?

Dror: It’s @DrorCeder, my full name.

Andrew: @DrorCeder. At D-R-O-R-C-E-D-E-R. Thank you for doing the interview and thank you all for watching.

Dror: Right, thank you, Andrew.

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How does an unfunded entrepreneur build a profitable wiki with 30 million unique monthly visitors?

Jack Herrick is the founder of wikiHow, a wiki-based how-to manual that’s written and edited by web users. Previously, he built and sold eHow, a similar site whose content is created by freelancers. I invited him to tell the story of how he built these incredible sites.

Watch the FULL program

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About Jack Herrick

Jack Herrick is the founder of wikiHow, a collaboration to build and share the world’s largest, highest quality how-to manual.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

Andrew: Three messages before I fire you up with another great program. First, what’s the analytics package that will make you more money with your online business? Spring Metrics. Spring Metrics helps me grow my sales by showing me detailed conversions in real time. Spring Metrics motivates me to keep growing my sales with clear comparison charts like this one. And when you use Spring Metrics, you’re going to see every page your prospect visits and which pages make them buy. Want a discount? Go to springmetrics.com/mixergy.

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Hey there freedom fighters, my name is Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart. The place where proven entrepreneurs come to tell you the stories behind how they did it. The big question for this interview is, “How does an unfunded entrepreneur build a profitable site with 30 million unique monthly visitors?” Jack Herrick is the founder of WikiHow, a wiki-based how-to manual that is edited and written by users like you. Previously he built and sold eHow, a similar site whose content is created by freelancers. I invited him here to tell the stories behind those two great companies. Jack, welcome.

Jack: Thanks Andrew, delighted to be here. I love helping out other entrepreneurs.

Andrew: Thanks. So, you’ve done really well with these two sites. You already sold one of them to Demand Media, you sold e-How, you’re living on a successful product right here. You’ve got a successful product in WikiHow. Why not sell at this point, buy yourself a flashy car and live a relaxed, comfortable lifestyle? Why are you coming into the office every day?

Jack: You know, I have the best job in the world. I wake up every day and I look at a site that a community of thousands of volunteers is helping to build, and it touches a million people every day. And I get letters from people whose lives we’ve changed, people I know who are better off because they read WikiHow, and…Why would I change that? Why would I trade that in? I actually had an opportunity a couple years ago.

There was a large, publicly-traded Internet company that wanted to buy us at a very attractive price. I thought about it, my wife and I talked about it a bunch and did some soul-searching, and decided there’s plenty of opportunities to make lots of money in the world, but there’s very few opportunities to make meaning. And I have something that I really enjoy, and I think something that’s more important than just sort-of selling out. So, I’m happy with it.

Andrew: You and I talked before about some of the people whose lives your site has impacted, and I want to ask you about those. But first, I’ve got to ask you about this. My pre-interviewer told me that…you said you lived out of your truck, and did you eat garbage? Or what did you… Tell me about this. Did you really live out of your truck?

Jack: Well, 15 years ago, I did live out of my truck for two-and-a-half years. I was a full-time rock climber. And the pay of being an amateur rock climber is not very good, so I was basically trying to live off savings. Which was… I sort-of budgeted around $10 a day to make it through. So yeah, I was living out of my truck. I wouldn’t necessarily eat out of garbage cans, I had a different technique which I thought was more effective. I’d hang out in pizza restaurants in Yosemite, and I’d wait for people who were sort-of…You know, they’ve eaten a lot of pizza, they’d ordered a really large pizza and they’ve eaten their fill and they’re kind-of about to head to the trash can with it and I’d say, “Hi! I’m a rock climber here. And you know, times are tough in rock climbing and maybe, if you’re just going to put that in the trash, you can just give it to me.” And I made a good living that way, so it worked out just fine.

Andrew: How many years ago was this?

Jack: This was ’95 to ’98.

Andrew: OK, so this is way before you got into the how-to business. This is…

Jack: Oh yeah.

Andrew: All right, this is early on.

Jack: Yeah.

Andrew: All right, I want to find out how you went from there to where you are here, because I have a feeling that most people in my audience aren’t living off $10 a day out of their trucks. And if you were worse than them and you got to here, then whoever they are could lead to at least this kind of success. First, let’s go beyond the money and the clicks and just understand the kind of impact that the site has had. Do you have one story that illustrates the kind of impact that WikiHow has on people?

Jack: Sure. Yeah, I get letters all the time from people we’ve impacted. Two of my favorites; we actually delivered two babies on WikiHow. Now, no one plans to delivery a baby with WikiHow. I wouldn’t recommend it. However, occasionally people get stuck without access to a hospital. The baby comes too quickly, and it happened once during the flights in Minnesota. A guy could not get to the hospital. He opened WikiHow and step one is, ‘Don’t panic.’ And he followed Step Two through ten. And it worked out just fine. Unfortunately he did not name his baby after us, though.

Andrew: I was going to say, who would do such a thing. Then I thought, I would do such a thing. The first place I turn for anything is the Internet. If I go to my parents they’re going to have some kind of whacked out old fashioned idea about how I should solve something. But if I go to the Internet, I feel much more comfortable about it–much more comfortable with the results I get, even though a lot of it is anonymous.

Jack: Right.

Andrew: Let’s go back and figure out where this idea came from. What were you doing just before you had the idea for WikiHow?

Jack: Well, so my entrepreneur career started– multiple starts before WikiHow. Would you prefer I talk about those, or?

Andrew: Yeah, give me a little bit of back story and then we’ll find out where the idea came from and how you built up.

Jack: Sure. My first startup I started in 1999, and that’s a site called BigTray.com. It’s online. We’re Sequoia funded, and we got $6 million from Sequoia and $4 million from [ComDisco], which was a [??] company at that time. And it was one of these ideas that sounded so good that only in retrospect was it clearly a bad idea. Because, selling an ecommerce restaurant supplies, whether it’s pots and pans, refrigerators, everything a restaurant would need, and the idea worked. We had $6 million in revenue right away, in our first year. The problem was we started two years too late. That’s why the idea was bad. By the time we got funded, we were two years too late, and we needed to raise in the .com downturn of 2001, and we couldn’t do it. So we ended up selling the company in 2001, despite the fact that, if you look back, like, companies that stuck with it ended up doing just great. Zappos had similar numbers to us, and Amazon in the first year had similar numbers to us. So, I left the company in 2001. But, man, I got $10 million bucks of executive education, courtesy of Sequoia Capital on that one.

Andrew: You leave. I remember the guys who were living at that point who had a lot of funding had businesses that were growing, were on top of the world. It was like every little dream that you had of yourself as a kid of how great you could be realized. And so you start to think, I am that great. And then it all comes shattering down. How did you feel when that happened to you? Did you have that high? What happened?

Jack: I felt terrible. I felt absolutely terrible. It was really disappointing. First of all, the team I had to let go of, as we started trying to survive as the funding was dwindling, we realized it was going to take us longer to raise money than we thought. We had to shrink the team down and let some really good people go. That was the first disappointment. The second disappointment was realizing that we’re not going to be able to get the investors’ money back, and we ended up selling the assets for a lot less than it was worth. Yeah, it was really hard to take. After that I sort of disappeared and went to a hole for nine months. My wife and I decided to leave the U.S. and we traveled to South East Asia and sort of, didn’t really live in a truck again, but rented a camper van and lived in one of those in New Zealand for a little while. It was a tough time.

Andrew: And so, how do you get yourself back out of that hole? How do you get your confidence back in yourself?

Jack: For me, I thought the best thing I could do was start another company. And if anything, the mistake I made was starting a company too soon after our return from my nine-month sabbatical. The reason why is I ended up starting Semiconductor Lithography Company, which is not anything near my core interests. It’s not something I’m innately passionate about. And it turned out to be the wrong company for me to start.

Now that said, the company I started, Luminescent Technologies has done very well. We raised over $30 million venture capital, and it’s still in business here in Palo Alto and employees around 50 people, and is doing really well. I haven’t been part of it for many years, but when I was working there for four years as a founder, of the four companies I’ve started; it was my least enjoyable one to work at, just because I couldn’t really be an innovator at that company. I’m not a physicist. I’m not a mathematician. To be an innovator in a semiconductor company, you really have to be a scientist and I couldn’t innovate there, which made it a lot less fun for me.

Andrew: So where did you fit in? What was your role?

Jack: I became the business guy. At first it was myself and three scientists and I was a jack-of-all-trades business guy. As the company grew, we hired a CEO from the semiconductor industry. I became CFO and that was my role for several years.

Andrew: The business guy. How did you get involved in this business that you’re now passionate about, that you don’t have the scientific chops for and become the business guy?

Jack: Well, I think the first thing was a desire to get back in the game after selling BigTray for a lot less than I knew it was worth. The way I did it was, this one was kind of a lucky break. A buddy of mine who I went to Stanford with had this idea. He had teamed up with two professors from UCLA who had some really great science to put in the semiconductor industry and he knew I knew nothing about semiconductors. He knew that I probably wasn’t the perfect guy for the job but I think he was smart enough to realize that I’d still be a great guy on that team and it ended up working. We were able to build the company and to do quite well with it. I was able to move on, I think, at the right time for the company.

Andrew: All right. You get in this business. You start building it up and then somehow this new opportunity comes to you.

Jack: Yeah.

Andrew: Can you tell people what that is?

Jack: Sure, yeah. The original idea for a how-to site on-line got going back when I lived in a truck so I’ll start back there, back in the ’95 era. Back when I was living in the truck, my most valuable possession in that truck was something I called, “the knowledge box”, which, basically, was this little box of books that I kept in the front of the truck and all the time I’d be reading these books and trying to teach myself how to climb, learn knots and things and it was so powerful to read these instructional manuals and then go and practice these things around life and, “Wow! This is so great!” Then, the first year in the truck I didn’t have a laptop.

The second year I got a laptop and I figured out [inaudible] plug into the Internet and there was a site this guy built which had some instructions on rock-climbing, basically, instructions on how to climb various large mountains in Yosemite like El Capitan and Half Dome, (?). I’d read these things and it would just give me the recipe to go do these things. I basically became a much better climber after reading that. I was able to get up El Capitan and Half Dome and all these things and I realized, “Wow! When you take this model of instructional information and you put it on-line, you really empower people.”

So that was something I had in the back of my head for years and I really thought that was a powerful thing that the Internet could provide to people. I had been tracking this site that had been started in 1999, called “eHow”, and eHow had raised, not with me being involved at all, eHow had raised $30 million from venture capitalists, hedge fund, bankrupt in 2001, had gotten bought out by another venture-funded company who had $15 million or something and applied the wrong business model in eHow.

They had, sort of, kind of a pay to get information model in it. It wasn’t working at all. I had been tracking it all these years from ’99 through 2003 and I really loved that idea, really loved the idea of the how-to manual. I saw in late 2003 that the site was basically in the process of dying. So I called the guy up. I said, “Hey, your site is circling the bowl right now. Can I rescue it?” And he was like, “Yeah, whatever, I’m dying to get rid of this thing. It’s lost money since I bought it. It has very little traffic. Yeah, sure, take it.”

It was kind of a lucky break that I happened to buy a site that turned out to be a great site. But it was also some luck based on lots of thinking over several years to get there. A buddy and I, Josh Hannah, who also had a full-time job at the time, we bought it. It cost us $100,000. We turned it around the next week and we were both working. We hired an engineer named Travis (?) who worked with me at my first company, BigTray, and slowly we brought the traffic back. When we bought it, it had almost no traffic, 40,000 visitors a month and we brought it up to 5.5 million unique visitors and really started turning the site around. So that’s basically how it got started in how-to.

Andrew: Let me break down what you said. First of all, I’ve got to tell you that I’ve had a similar experience myself as a guy who loves reading. When I first discovered books and I realized that there’s a recipe out there for anything I want to do, whether it’s how to start a conversation with a stranger or how to do my books, it just made me feel a sense of control over my life, in the sense of possibilities that were literally within reach. If I could reach a book, then I could reach the possibility that I had in mind.

Last year, when we were trying to think of what do we do with Mixergy, how do we add another level here beyond the interviews, I said I’m going to experiment with all kinds of ideas, and the one that grabbed me is something similar to what you’re talking about: courses where entrepreneurs teach how they do things. Call it Mixergy Premium, and the idea of just having these entrepreneurs create a recipe to give other entrepreneurs just felt so exciting, so effective that that’s what we focused on.

So, I completely dig it. I get the passion and the impact that it had on you. Let me understand then, these guys who owned eHow before, they must have realized some of this, too, but it didn’t work for them. You said that you saw that they did something wrong. Specifically, the company that owned it before you, the previous owners, what did they do wrong, before we get into what you did right?

Jack: Sure. The main mistake they were making was putting limits on commission. So, their original business plan was to charge people money for the content. That didn’t work. By the time I bought it, they had transitioned from doing that to require you to register to see the company information. So, you’d register, they’d have all of these co-registration offers like, hey, sign up for this weight loss class, or hey, give us your email and get a free mortgage applications, things like that. You didn’t want it all, you just wanted to learn how to boil an egg.

Andrew: In order to get to learn how to boil an egg, you had these co-reg opportunities?

Jack: Right.

Andrew: It wasn’t just: here’s how to boil an egg, and if you want more give us your email address. You’re saying that they put that wall up and in order to . . .

Jack: Oh, yeah.

Andrew: Oh, wow. OK.

Jack: As we talk about this in 2012, it’s obviously a bad idea. But if you go back to where the Internet was, keep in mind Internet advertising went from $12 CPMs in the year 2000 down to $0.12 CPMs in the year 2003. So, publishers were desperate to do anything to pay for their server bills. These guys were trying anything to make it work.

Andrew: I made a similar mistake back then. We had these co-reg boxes that were bringing in $1.50 per email. So, if someone hit that box, we’d earn $1.50. And then, suddenly the revenue we were getting from them went down to pennies, I mean, under $0.10. And we had to still maintain some of our revenue, so what did I do? I made a big mistake. Sounds like the same mistake they did. So, let’s add more co-regs because it’s not reducing our conversion, and it is increasing our revenue. And I didn’t have the foresight to think long term and say, “Wait. This is ruining our credibility, and it’s ruining our product.’

So, I can’t judge. I can see from the outside how they got here, but I can also learn from your perspective. Clearly, it’s the wrong thing to do. What else did they do that you saw that was wrong?

Jack: They weren’t growing the site. They weren’t investing in it. The site was running an old Oracle database. They hadn’t updated it in years. They just hadn’t put a lot of love into the site. These guys were really smart in that in 2001 they bought a lot of these properties that were going bankrupt, and they had the vision to see, hey, the Internet’s not dead. It’s going to take a nap for a couple years, but they just didn’t have the ability to execute and wait through the nap and when the Internet woke up again, be ready for it. They gave up hope a little too early.

Andrew: All right. Then, you also said that you got up to 5.5 million uniques a month within months, right?

Jack: Oh, no. That took a couple of years.

Andrew: Oh.

Jack: It took us a few years to get there.

Andrew: All right. I’ll ask you how you got there, but first how much did you buy the business for?

Jack: We bought it for 100 grand, which at the time seemed like a lot of money for us. Obviously, it was the best deal I’ve ever made. It’s one of the more talked about stores in Silicon Valley. That said, at the time it wasn’t an obvious deal. I remember having a conversation with my wife. We had been saving money for a down payment for a house here in Palo Alto, and I said, “Hey, honey, I’m going to take that down payment money, and we’re going to do something else with it. It wasn’t like, “Oh, yeah, that sounds great. Let’s do that.” It was a long conversation. “Well, should we take less? Should we let Josh buy 75% and we only get 25%? Should we do all of these other things? Maybe, should we not do it at all?” It was a tough decision.

I also remember talking to venture capitalists at the time, a venture capital buddy of mind, and he was saying, “C’mon, what are you smoking? This idea is not going to work. Content websites are not coming back. You’re going to be stuck with this white elephant that didn’t work for the last two owners. Why is it going to work for you?

Andrew: Right.

Jack: Obviously, now at Hunter Granford you have a screaming hot deal but not at the time.

Andrew: OK. And one of the reasons why it’s a hot deal is because you added so much value to it. What was the first thing that you did to improve the site and how did you get it to 5.5?

Jack: Well the first thing we did was get the technical house in order. We got it off of Oracle. We got it off of all these ancient, ancient servers. We moved it to a really simple LAMP setup. Then we started focusing, once we had servers that could handle what we thought was going to be a big load, we started improving the user experience. We got rid of the (?), which was hard to say goodbye to. It was earning great money, as you point out, but we knew that wasn’t the direction that we wanted to go so got rid of that. We exchanged it with very simple Google Ads Sense ads and we started investing in content again, producing small amounts of content with [inaudible] can pay themselves back. It worked and the site came back.

Andrew: You had a theory when you bought the company, hypothesis, as you told our pre-interviewer, what was it? What did you tell Jeremy?

Jack: Well, I thought the Internet had changed. Josh and I had been playing around with lots of different, before we bought eHow we were playing around, sort of building little websites for fun to see what would happen and we noticed between . . . In 2003 the Internet really started to change. The invention of Ad Sense really made it possible for a website like eHow or wikiHow or one of these other sites that basically covers tons and tons of different types of content to have an advertising model that worked and actually be able to fund the site with advertising if you keep your costs low enough. Ad Sense was only made public in 2003, so that was basically new technology which (?). Content sites like we had were being reborn. We thought that the old owners weren’t aware of that and hadn’t given it a try and we would be the first to give it a try.

Andrew: How did you know it? This is about a year after Ad Sense was made available. How did you know that it was going to work?

Jack: Oh, because we were experimenting with it on our own. We’ve always had little websites we ran and we found that you could put up ads and earn enough money to run a site like eHow.

Andrew: Oh, OK. So you already backed into an understanding that you can generate revenue. How did you do that math? What websites did you have and what did the spreadsheet look like?

Jack: Geez, the websites are so bad I’m embarrassed to talk about it.

Andrew: Oh, good. Then do it.

Jack: They were really experimental little websites that we made.

Andrew: It’s OK. I think that gives us an insight into, you know, sometimes when we create these little experiments that we’re wasting our time, that we’re not doing anything serious, that we should be focusing on the one big idea and what I’m finding in these interviews is that those sites give us an understanding that leads to the big ideas. That even those blog posts that some entrepreneurs who have done interviews here have told me about, that seemed at the time that like they were just tiny blog posts without much significance, gave them an understanding of how to write and how to communicate on-line, which helped them market when they did have their big idea. So, what was it?

Jack: I think that’s right. I mean, in general, I’m always experimenting with different stuff, either on WikiHow or other ideas. We’re trying to learn about new technologies because that’s what the web is all about. It’s seeing what’s new and seeing what you can apply to your idea.

Andrew: So what was it? Can you tell us about one of them at least, Jack? Open up. I can’t be just another Internet interviewer. I’ve got to be . . .

Jack: I don’t think any of them are on-line anymore.

Andrew: Good.

Jack: There were some various ones. The whole time I was buying eHow, I was also in the process of my wife and I were having a baby so I was researching cord blood banking and there’s a ton of misinformation on-line about cord blood banking. It turns out I made a stupid little site about cord blood banking and it turns out that that’s a very high CPM term and I was about buy traffic at cord blood banking website and so I put Ad Sense on top of it and I was like, “Wow! It’s working pretty well.” What I was essentially doing when I would buy traffic, give it to my cord blood site is I was basically arbitraging traffic, right?

Andrew: Yep.

Jack: And there was a period in the Internet where traffic arbitrage was really profitable. Josh and I talked about that. We’re like, “Geez, any arbitrage goes away. We could just build arbitrage sites all day long, making sick money,” and there were some people who did. But, you know, there were several reasons why we didn’t stick with that idea. One was the arbitrage go away. Two is building stupid little websites and basically just arbitraging traffic isn’t something that’s very interesting long term to us. We wanted to build something bigger; something more meaningful, which is why we decided, hey, instead of building these arbitrage sites let’s go buy something that we can build content over long periods of time, and sort of be on the left side of Google instead of on the right side of Google.

Andrew: I see. That makes sense. And so, I’ve got a sense now of how you could put together a spreadsheet that’ll tell you how profitable the business could be. When did you estimate that you would make a profit with the business, based on your understanding of ads and what it costs to get traffic?

Jack: You know, we didn’t have an exact model on how we back that $100,000. We thought we were pretty sure we’d get it back over a period of years. We didn’t know that it was going to grow much faster than that. And it turned out that it worked better than we thought, and we were making it back much faster. But at the time we bought it, it really wasn’t a sure-fire hit that we were going to have.

Andrew: OK. So can you tell me beyond what you removed, what did you do to get more traffic back? I understand that getting rid of checkboxes is going to bring more people. What else did you do to get more people to come over?

Jack: Well, the beauty of eHow was that it was the site that had in one of the top sites on the Internet from 1999 to 2000. The idea of a big how-to manual is one of the best ideas on the Internet. And it wasn’t my idea. It was the original founders. That site had links from all over the web. And eHow had been on Oprah. It had been in the top fifty sites of the web. It had all sorts of great [??] links that were basically hidden, because the previous owners had blocked spiders from viewing traffic. So one of the main things of value that we did was basically just turn on, release the latent value of the links that were already there.

Andrew: Why did they turn off spiders?

Jack: They didn’t know how it worked, because [??] now search engine optimization is an important thing. But in 2003 it wasn’t. The insight of, hey, we should try and get some traffic from search engines that want to send us traffic was one of the main value adds we had.

Andrew: I see. Maybe what they thought was, why do we allow Google and other search engines to crawl our site and just play our results if it means that people are going to go to Google whenever they want answers instead of coming to our site. And maybe sometimes when they go to Google they’ll get answers that lead to our site, but maybe they sometimes won’t. We don’t want to take that risk.

Jack: I think it was a little bit of that. But I think also the pages would show up on Google, but they’d be shortened with the, hey, come register. So people were dropping off immediately. And Google would see on there, and hey, we’re sending users who say they’re having a lousy experience, because they’re back on Google in half a second. Let’s not send users there anymore. Once we stopped treating users like that Google started treating us much more nicely.

Andrew: And then you had somewhere around 2005 the idea to create WikiHow. Right? So you were running eHow that you bought, and you cleaned it up and you grew it. Where did the idea for WikiHow, the company that you’re currently running, come from?

Jack: Yeah, the idea came out of the frustration with what I was doing with eHow. So as I mentioned earlier, my goals was to build the world greatest how-to manual, every topic, highest quality page on the web to get started on that topic, and in multiple languages. [??] The way we were producing content on eHow, we’re not getting there. So the way we use content on eHow is we paid people $15 to write an article, freelance writers. And for $15 it was surprising, you got a $15 article. And it can be pretty good. It’s not always terrible, but it certainly not the best-on-the-web sort of quality.

And we realized it’s not what’s going to win long term. The best-on-the-web is going to win long term; the high quality stuff is going to win. So, how do I build that? And I looked around and if we’d had tons of money we probably would have figured out a way, like pay people more money. We didn’t have tons of money. The reason we were paying people $15 is ‘cuz that’s what would pay back. So, like, geez, what else can we do, here? And I found Wikipedia; and Wikipedia in 2004, when I was looking, I was like certainly the best, if not already the best encyclopedia was on the path to being the best encyclopedia. And I was like, geez, they have figured out the quality model that covers multiple languages, multiple topics, and something that maybe might work in [??].

So, the idea really came from inspiration from Wikipedia, and born out of the frustration of what eHow was doing. And so, starting late 2004 we started building it behind the scenes, launched it, and as soon as I launched it I realized that’s the product I was in love with. I really fell out of love with eHow and my heart went into WikiHow from then on.

Andrew: How did you get people, and by the way, you were trying to launch it, I think, on Wikipedia’s birthday. Do I have that right?

Jack: That’s right. Yeah, we had been sort of building the thing starting in the fall of 2004. I worked my tail off over Christmas holiday while I was on vacation with my wife in Hawaii. She was very understanding about the whole thing. And our goal was to launch it on Wikipedia’s birthday, 2005. We wanted to do that to honor that site as being the inspiration for our site.

Andrew: Also it’s a good way to tie your story to a fast-moving, growing story.

Jack: Sure.

Andrew: What did that first version look like? What did you build it on?

Jack: Oh, it was pretty bad. It was very simple. We built it on Media [??], which is the same [??] that Wikipedia uses as its token source. We made it specifically [??]

Andrew: Sorry. Specifically what?

Jack: We made it look very different from Wikipedia. We didn’t want to you sort of land and okay, I’m in Wikipedia. So it had its own UI. It was not very pretty UI. We had it look like the eHow UI at the time, which was really ugly. It was very simple. There was almost nothing to it. It had this ugly drop-down menu where you press a button and you could sort of do various actions on the page–hard to use. It’s amazing that it worked at all.

Andrew: So, how did you get people to, the site wasn’t beautiful yet? It didn’t work perfectly. How did you get people to come in and create your articles? I remember asking Jimmy Wales about this, and he said that people entered information into Wikipedia because he tied it into the open source community. And because he and his team were part of that community, people just got it, and they wanted to be a part of this open source encyclopedia. You didn’t have that same kind of connection. How did you get people to come and write the how-to manual?

Jack: It took us much longer to [??] what Wikipedia did. The Wikipedia product had hundreds of people entering in the first month, because they had been building open source encyclopedia for a while with the failed [??] project. We had probably five people a day in the first month, and I was one of them, and Josh was another, Travis was a third, so, maybe two people who weren’t one of us. It just took us a lot longer.

The one gift we had is that we did have [eHave], which had significant traffic. And so we put up a tab or notices on eHow, ‘Hey, come visit WikiHow.’ It didn’t draw much traffic; the first month we had it up we only got 2,000 visitors to WikiHow. And very few of them, as I mentioned, actually converted to writing [??]. Unfortunately, a month after that it was maybe 5,000, and maybe ten editors. It didn’t grow and [??] great content. That brings more traffic; that brings more editors, which then improved the content, which brings in more readers, and it brings in more editors. So there was a virtual cycle that worked, and it just took a really long time to have it work. We’ve been going now for seven years.

Andrew: Why didn’t you convert eHow into a Wiki?

Jack: That was my actual plan. There were a couple of things I wanted to have done before I flipped the switch on. One is when I still controlled both, I ended up selling eHow in May of 2006, and WikiHow wasn’t ready yet. WikiHow was still too immature. We didn’t have enough editors to maintain that much content that eHow had. You really need a lot of volunteer editors to maintain a high-traffic site. We didn’t have that at the time when I sold eHow. But if I’d kept eHow, my plan was to sort of flip that content over to Wiki content and have it expand from there.

Andrew: Why not copy all the content that on eHow and launch WikiHow with all the existing content already, plus an edit meet button or add-your-own how-to article button?

Jack: I think that wouldn’t have worked. How do I put this; there’s a natural sort of scale of things that have to do that. You have to learn a lot before you can run. You have to learn to crawl before you can walk. WikiHow as a community had to learn how to crawl. We had to sort of get out of the mud before we could handle controlling that much content. It would have swamped the community. We needed a long time to sort out what our [processes] were going to be, how we were going to edit pages, how we were going to control vandalism, things like that. It took us years to develop.

Andrew: Wikis seem great; they seem like great models, because everyone looks at Jimmy Wales [sp] model and your model and says, ‘Boy, they have the world creating articles for them. They don’t have to hire any writers. They just slap some ads on there,’ in your case, ‘life is golden. We should do it, too.’ And you see people create these wikis and they go nowhere. In your experience, what are they doing wrong that you discovered and did right?

Jack: I think there’s probably a list of ten things you have to do right on Wiki; and probably a million things you can do wrong. One of the most common mistakes I see, and the reason there has been very few venture funded wiki companies that have succeeded, is because you really need to be patient. Wikis take time to develop. In my previous venture companies they were all about let’s get big fast. How can we scale this? And when you’re running a wiki, you can’t do that. You have to be patient. You have to wait before you have a community of people who are ready to sort of move to the next level with you. And I think it’s difficult to build that.

The other reason I think you don’t see a lot of wikis succeeding is there’s a huge element of luck here. I think, listing the things you can do right, and listing the things you can do wrong, that list is well known at this point. What you have to get right is the first ten people you get on your site editing have to be magical. We just got lucky that the first ten people who started writing on WikiHow just turned out to be great people. And they attracted more great volunteers, who attracted more great volunteers.

Andrew: Couldn’t you just hire ten great writers and say, you’re going to write and connect with audience here every day. You’re going to be our employees and we’re going to build this thing out together. But we’re going to hire you to make sure that we have the ten great people.

Jack: I don’t think you can do it, because I think people will sort sniff out that–it’s inauthentic. Those people won’t be there for the same reasons that the volunteers are there. They won’t share motivations; they won’t have the same [??]. And people understand that. People feel that on the site. So, I don’t think it works.

Andrew: How long did it take for it . . . sorry. What else? What else goes into making a good wiki?

Jack: Well, one of the things I did in the very beginning, which I think was crucial to our success, was the very first year I looked at every single edit. I welcomed every contributor who made anything helpful at all. I welcomed them and got to know them. It was a very high-touch experience. Now we’ve grown to the size I can’t do that anymore. I still know a lot of the contributors very well, but not all of them anymore. I wish I could know more of them. But I think there’s not any entrepreneur, especially a venture-funded sort of world that would be willing to spend so much of their time getting to know their contributors, because it has to be that high-touch experience, especially in the beginning to make the thing work. People don’t trust the person running the wiki is a person they want to be investing their spare time with, and so why should they be contributing.

Andrew: What else? How about one more thing. I think this is really useful.

Jack: Let’s see.

Andrew: If I ever create a wiki I want to know I can come back to this section of the transcript of our interview and pull out some things that will get me there.

Jack: Sure. Well, how about this. There’s a common misunderstanding that you shouldn’t have ads or you shouldn’t have a business model that makes money that wiki volunteers are going to run. The only reason Wikipedia worked is because it’s a non-profit. And I think there are elements of truth in it. Wikipedia would probably not be as successful if it was a for-profit ad-driven site like WikiHow.

However, I think if you’re honest with your contributors and you tell them, ‘Hey, we’re a business. We need to make money. We’re not going to try to make it off donations.’ The quid pro quos were never asking you to send money into WikiHow. People will accept that. Some people may not work on this wiki, but that’s a small minority. I think most people would say, hey, these guys goals is to build a free how-to manual. I share that goal. I’m willing to work on a site, even if they have a business that makes money if the site’s successful.

Andrew: I was wondering how long it took? You launched the site 2005. How long did it take for you to feel like this is really working?

Jack: Oh, geez. I mean, there was…the first couple of years, I would say, the first year especially, was depressing. The content was poor, there was often people vandalizing the home page, you know, putting pictures of their junk on the home page, you know, stuff that wasn’t acceptable and not a large enough community to revert quickly. It was tough. The thing that gave me hope is I could see the numbers were getting better, like, if I dug under the skin I could see, “Hey, we we’re getting more [??] every month” or “Hey, like the content, look at this page, it was really lousy six months ago but now it’s pretty good.”

And I remember one page that I read called, “How to Survive in Federal Prison?” written by collaboration of former federal prisoners. And it was amazing, you know, I have [??] reading a page,” [??] you’re going to spend time in the joint.” It’s got great tips and the sort of thing about it, you can only build on a wiki. I couldn’t have paid a freelance writer to write that. No one could have written in a voice that authentic, with that much insight and it’s the sort of thing that can only happen on wiki. When I saw things like that, I’m like, “Wow, the site’s going to work.”

Andrew: You could have sold it early on. To who and why didn’t you do it?

Jack: I think on the “who,” I’m still blocked by NDA[SP].

Andrew: I’m sorry?

Jack: On the “who” I could have sold it to, I’m still blocked by NDA [SP].

Andrew: OK.

Jack: There’s been multiple people who [??] purchased over the years. And, you know, some I mentioned there was one time who went as far as getting the written offer. I enjoy what I do. It’s…, and I think, there’s a lot of work left to be done on wikiHow. Our mission is to build the world’s greatest how-to manual[??]. Having every topic and having every page being the single best place to go to learn how to do something. We are laughably far from [??]. You know, I look at wikiHow and there’s some stuff that’s great. And there’s stuff that, I’m like, “You know, it’s just got to get better.”

And I think everyone on wiki [??] thinks the same thing. They look at wikiHow and they’re really proud of some things and less proud of others, and they know we’ve got a lot of work to do. I just want to make sure that, you know, I’m helping toward[??] our mission and that’s going to be years to come. And if I sold…if I ended up selling it, particularly to this one company that I was in discussions with, I’m pretty sure we wouldn’t have gotten there. We wouldn’t be where we are today, and we’re certainly not going to be where we’re going to be in five years if I had sold it. So it was probably the wrong acquirer[SP] and it was wrong for the community at the time, and I think it was wrong for me personally, in terms of, taking me out of a job that I think I still have a lot to contribute to.

Andrew: Why did you sell eHow to Demand Media?

Jack: eHow was a different thing. I was delighted to sell eHow.

Andrew: Wow.

Jack: It was…that deal worked for all the right reasons. Selling…as I mentioned earlier, once wikiHow started working, I fell in love with wikiHow and sort of lost my love for eHow. And I thought wikiHow was the future of the how-to manual[??] I want to build and eHow was the [??] so I was delighted to find someone who thought eHow was the winning asset and wikiHow was the loser asset. So the reason I sold it was a couple of reasons. One, it was a great deal. It gave us…it gave my family the financial security to do a lot of things with. Two, it funded wikiHow. You know, wikiHow was always sort of living off the profits from eHow.

Now we have a much bigger bankroll to fund wikiHow for the years it was going to take to get profitable on its own. Three, like, you know, I found a deal that allowed me to keep wikiHow and spin-off eHow which was exactly what I wanted to do and start to focus on the thing that mattered [??]. And let someone else run eHow and, you know, it’s turned out and it’s a great deal for Josh and I.

And it’s turned out to be a great deal for the acquirer. Demand Media has done obviously very well with eHow. They’ve…Demand Media has raised a half a billion dollars and equity and debt and they put it to work. You know, spent a lot of money on eHow building it up. I’ve never would have done that. It’s not the same sort of thing I would have done. So, you know, Dave pushed it, you know, and expanded what we took, 100 fold. And, you know, it’s been a great business for them too. So it’s one of these rare deals that was great for the acquirer and great for the seller.

Andrew: Is wikiHow not profitable yet?

Jack: No, wikiHow’s profitable.

Andrew: But at the time it wasn’t?

Jack: At the time it was not.

Andrew: So you were, again, taking a risk on a asset that wasn’t proven, and you were giving up an asset that was, well, for money obviously, but you were taking a risk still.

Jack: Yes. Oh, yeah it was definitely a risk. At the time wikiHow had, I think, a little less than a million visitors. The content was not very good. It was sufficiently poor and non-promising and unprofitable and money losing, that Demand Media when they bought eHow, was able to look at wikiHow and say, “Hey, this is not a threat. We can let this wacky entrepreneur, who lives in a truck and likes this weird open source thing, keep this business because it’s not going to be a threat to us,” and so far they’ve been right, so far.

Andrew: It’s totally a different model. They’re still on…in fact, their whole model for content creation is just freelancers. They’ve got, from what I understand talking to some of their employees, they have this whole system of farming out work, of getting writing in, and putting it on a site and evaluating the value of it. What else do I want to know? Focus — focus has been an issue for you.

Jack: Yes.

Andrew: How? You seem very focused. Always on the how-to business, very clear about the kind of content that you want, how?

Jack: Well, I think there’s, you know, I’m here in downtown Palo Alto, which is the center of Silicon Valley and part of my job is to sort of look at emerging technologies and see which of them can be useful to wikiHow and expand [SP] our mission. On the other hand, like, there are so many shiny, new nifty things happening in Silicon Valley all the time that you can…somebody who loves technology like me, can kind of get sucked into the wrong…get sucked into a technology just for technology sake.

Andrew: For example.

Jack: Oh, geez. OK, well, we could have gone very deep into social. We could have gone very deep into video. Video is actually a case where we really wish we could go deep. And video is a great use for how-to, right? Sometimes you really just need to see…and if someone is describing a magic trick, reading some text and some images about it, like you might find on wikiHow, isn’t as good as watching a video. So one of the things we did early on is when You Tube launched their API, we’re actually their launch partner, if you go back to their blog, their we are on there. And our idea was, “Hey, like, our contributors are going to upload videos and it’s going to be great.”

It turns out that the video didn’t work so well for the wiki. And what would happened is, you know, I should describe it going first to the text realm [SP]. WikiHow works because…only because of the wiki method. Ninety percent of the content we get on our front door, sucks. Either it’s grammatically poor or it doesn’t make any sense or it’s written by somebody that doesn’t know what they’re talking about. There’s all sort of problems with our new articles.

And it’s only through the process of wiki editing, that this trash gets turned into treasure. So a lot of people upload videos. We got the same [??] ratio but you couldn’t edit them so instead of being able to edit them we were left with this kind of dig-like[SP] [??] like, “Hey, thumbs up, that was a good video, we’re going to keep it” or “Thumbs down, your video sucked, it’s out of wikiHow,” which is very counter to the wiki culture. The wiki culture is, “Hey, we’re all in this together, you know, this very lousy article you wrote is a good start and we’re going to all make it better.” When we had this video it’s kind of more of this binary system of either it is in or it’s out. It was kind of counter cultural to what we had built so we had to get rid of that.

Now that said, video is so important for how-to that we ended up keeping it. We built a totally different model, and it’s called video curation. And now what we do is, instead of encouraging contributors to create videos, we encourage them to go all around the Web, find the single best video on that topic. For a new magic trick there’s 50 videos on it, find the single best one, and put that in the article. And that way our readers get the best text, the best step-by-step images, and the best video all in one place.

Andrew: And you don’t have to create it? You don’t have to…

Jack: Don’t have to create it, right.

Andrew: At what point did you leave your job at Luminescent Technologies?

Jack: So over time as eHow started ranking up, I started ramping down my time at Luminescent. I know I was originally, you know, doing entrepreneur 100-hour weeks, you know, and I’m actually messing with that number [??]. [??] doing sort of entrepreneur weeks down to a 40 hour week, down to the 20-hour week, down to the 10. You know, I think, finally when I…it took me four years to leave, I think, I was down to, like, the five-hour week. We get the business; we run the business very conservatively. Our goal is to invest as much as we can in the How-to Manual, and as we grow, we’ll add more hardware folks to like build more stuff, always building more features, doing cool stuff for our volunteers. But we always want to maintain a healthy margin.

This business is cyclical, things go up and down in the ad market, things go up and down in our traffic. We have to be ready for downtimes. So we put a healthy margin in there and keep that money in the bank. That’s for lean times. And that’s really come out to help us. A couple of months ago there were some big changes in Google, and all these how-to sites had dramatic changes in their traffic. All of my competitors started basically quitting. eHow laid off tens of thousands of freelancers, [??]. We did the opposite. We hired people, and we’re doubling down. We think when other people are sort of leaving this industry; it’s a great time for us to push our mission harder. Always having gas in the tank has been a really important strategy for us, and we’ve been willing to do that with basically [??], not with any venture financing. I look at venture financing as [??]

Andrew: Basically for what; I’m sorry?

Jack: It’s a recipe for 18 months of cash.

Andrew: Yes. So, one of the unique things of WikiHow is we haven’t taken any venture money. And it’s not because we haven’t been offered it. We have been offered venture money. I just don’t think it’s the right thing for us. We’re in this for the long haul and venture money is about 5 or 7 year returns. We’ve already been around for 7 years. I would have had to sell the business already if I’d taken venture money at this point. We think there’s a better way. Having some margins which keep you going in good times and when good times are lean, and sort of always running your business model in a way that you can do your missions sustainably.

Google isn’t sending you as much traffic as it did before the [penned] update. What do you do now to recover traffic?

Jack: You know, we think doing the same game plan all along, and we think in time Google will be sending us more traffic than they did before the [penned] update. We have changed a little bit, our tactics a little bit after [??]. The reason we think, if you look at the average WikiHow page there are always better than our competitors. If you look at it, we’re just WAY better than our competitors. That said, our [stub] pages are pages, like I mentioned earlier, 90% of the stuff on WikiHow starts trashy and turns into treasure. That junk is probably something Google doesn’t like. So we are doing things to hide that junk from the search engine.

Andrew: I see.

Jack: And I guess over time it’ll eventually work for us.

Andrew: I see. Being a contrarian, and doubling down when everyone else is leaving. There’s one last question that I had here about Wikipedia. Do you think they should take ads? I had a sense that you were feeling that instead of asking their users for payment if they ran ads they might have a better life.

Jack: You know, I’ve been in favor of Wikipedia taking ads for a long time, and I’ve been public about it. It would be better for them. I think also they are such a huge site they would make money to fund a lot of other non-profits, which would be fantastic if they could remain non-profit and use that money like Mozilla does. It could create a ton of good. That said, I’ve been advocating that for several years and now I don’t think Wikipedia would be as successful as they have been with their fundraiser.

Over several years, year over year, they’ve increased their fundraiser. I thought at some point people would tire of giving Wikipedia $20; but people aren’t. I’m probably wrong. Wikipedia’s doing very well with that fundraiser. They’re building a great team at the Wikipedia foundation. They have maybe close to 100 employees at this point. They’re building a team. They are actually being able to build an engineering team, as well. And if there’s anything I wish they would do is build like a 200-person engineering team and really innovate on Wiki software. I think that’s what the world needs.

Andrew: Are you still using the same Wiki software they are?

Jack: We are; but we’ve modified it so deeply, it’s almost not recognizable in many respects at this point.

Andrew: Why do you think, as long as we’re talking about big topics, why do you Jason [??] his Mahalo when it went Wiki and opened it up to anyone, it didn’t workout . Why do you think it didn’t work out for him?

Jack: I think it didn’t strike users or contributors as authentic, maybe? Jason is very well known for his sort of occasionally abrasive…

Andrew: I think he owns that.

Jack: Yeah, yeah. I think he would be right on that and that’s kind of not the Wiki style. The Wiki style is a little more collaborative. I think it would be tough, the personality there would have been a tough one to make Wiki work, and maybe it would have worked. I think Jason is brilliant and [??] very quickly technologies that are always coming up, and he loves them. He really wants to adopt them [??].

Andrew: And what, I’m sorry.

Jack: [??]

Andrew: Oh, you’re saying he would have stuck with it over time?

Jack: Yeah.

Andrew: It would have done what it did [??].

Jack: [??] I can’t rule that out [??], because he kept [??] new technology, he hasn’t had the time to actually find out what might actually succeed.

Andrew: I see. OK. Right. He has moved a lot. This is Mahalo. I should actually say Mahalo, the Wiki-based search engine that he was creating for awhile there. It’s no longer that. It’s a professionally created how to site with professional videos. I see, so you’re saying a little more collaborative personality would have helped him. Waiting some time and letting it develop might have helped him. Not shifting from technology to technology might have helped him, and also maybe the issue that you brought up before is relevant which is, he had a very ‘I’m raising a bunch of money and I’m going big. This is not going to be a small site. It’s not going to grow slowly, it’s going to go huge,’ and maybe that’s not the way to work it with Wiki’s.

Jack: Yeah. I think that’s right. He had $20, $30 million bucks so, you know, when you have a hammer, everything looks like a nail.

Andrew: I see.

Jack: And when you have $100 grand, nothing looks like you’re going to solve it with money, right. I’m never trying to solve anything with money. I’m like ‘hey, we have a problem here,’ like this contents not what we wanted to have it be. How to we invent a solution to make this content better? In fact, that’s always been our approach and that’s served us really well. If I $20 to $30 million bucks like Mahalo, I don’t think we would have had the same innovations here. We would have very different innovations, which might be better works.

Andrew: Just different. I think the guy’s really hungry and I’m looking forward to seeing what he’s doing with it. I’ve had him on in the past. I’m going to go, actually do interviews like this at his launch conference in San Francisco, and I hope to find out a little bit more about what he is up to when I’m there.

Jack: Yeah. He’s a very smart guy. I have no doubt that he’s going to find success.

Andrew: But I like this evaluation. I like to hear your feedback on what he did and I should do more of these in the future, have entrepreneurs on to talk about similar sites and get their feedback, but only do it in retrospect because if you do it at the time that their competitors, it can’t be open.

Jack: Right.

Andrew: All right. How can people connect with you if they want to find out about a little bit more about you? I know they know how to go to Wiki How and by now, I’m sure they’ve been on Wiki How many, many times in their lives, but if they want to get to know Jack a little better, where’s a good website to send them?

Jack: Oh jeez, I’m on Twitter, I’m on Google Plus [??].

Andrew: Yeah, if they do a search for your name, they might find what we did which is all the edits you’ve made on Wiki How, which is kind of interesting. All right, well, Jack, thank you for doing this interview. I really appreciate hearing your story. I’ve admired it from a distance and I’m glad I got to learn it directly from you.

Jack: Great, and [??]. I hope I helped with their [??] current entrepreneurs out there listening and I wish the best [??] success out there.

Andrew: Thank you, and thank you all for watching.

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How does a site that was built in 50 hours become a $10 million per year business?

John Rydell is the founder of Networx Online, a company that makes it easy for home-based salespeople to create web sites that collect leads and generate business.

I invited him to tell us the story behind that company’s success. I also want to find out about this other businesses, especially MeetingBurner, a fast, free way to hold online meetings and webinars.

Watch the FULL program

Prefer audio? Great! “Right click” here for the MP3 format.

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About John Rydell

John Rydell is the cofounder of MeetingBurner, a fast, free way to hold online meetings and webinars.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

Andrew: Hey, before we get started, these three messages. First, when you’re facing a tough business problem like, how do I get customers? Where do you go? Have you noticed that when you do a Google search for those kind of issues you end up with a poorly written link bait article? Well, with Mixergy’s premium membership, proven entrepreneurs turn on their computers and teach you their techniques for getting customers, or press, or new employees or anything else you need to be an incredible entrepreneur who leaves a mark on the world. Mixergy.com/premium, check it out.

Next, when we needed to learn how to build Mixergy’s membership site, do you know who we trusted? This dude, Noah Fleming. If you want to learn how to create a compelling membership site, I recommend doing to MembershipBlackBox.com. I’m a member of it and I recommend it to you. MembershipBlackBox.com.

Finally, after he sponsored hundreds of Mixergy interviews, if I ask you who is Scott Edward Walker, what would you say? The answer, of course, he’s the lawyer that specialized in helping the start-up founders. I’ve known Scott for years and I have privately recommended him whenever a founder asked me for a lawyer. Scott Edward Walker of Walker Corporate Law. Here’s your program.

Hey there Freedom Fighters, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. It’s a place where entrepreneurs come to tell you how they built their businesses. The question for this interview, and you know I like to focus in on one big question, is this, how does a site that was built in 50 hours become a ten million dollar per year business?

Well, John Rydell is the founder of Networks Online, the company that makes it easy for home-based sales people to create websites that collect leads and generate business. I invited him here to tell the story behind that company’s success and I also want to find out about his other, newer business, MeetingBurner, which is a fast, free way to hold online meeting and webinars. John, we got a lot to pack into this interview and I appreciate you talking about all of this.

John: Thanks, Andrew. Happy to be here today.

Andrew: Well, let’s start with the end first. About what happens when you build this great big company. Can you tell me the story, well, tell me the story about your daughter that you and I talked about before the interview started.

John: I’d love to. One of the benefits that I’ve had in building the business for the last ten years is that although I work way too hard, it gives me the flexibility with money and time to go and do cool things and so my 13 year old daughter, well my daughter who just turned 13, had the opportunity, I had the opportunity to go to her and say, hey, on your 13th birthday, anywhere in the world, where would you want to go?

And we’re here in sunny southern California but she said, Dad, I want you to bring me to New York City. So, just a father/daughter trip to New York City and we listed out all these things we wanted to do, you know, go stay in Times Square. go see a couple of plays and the final thing on our list was, we want to talk to Al Roker and be one of those people holding up the Happy Birthday sign on the Today Show and so that final morning, this just happened I think last weekend or the weekend before, we woke up 7 a.m., bright and early on the East Coast on a rainy morning and got our picture there with Al on the Today Show wishing my daughter a Happy Birthday. So, cool benefit for me, great opportunities. Something neither of us will ever forget.

Andrew: Yeah, the freedom to be able to do whatever you want and in this case, whatever you’re daughter wants. So, 50 hours, did I get that number right or did we in our research and in our previous conversations exaggerate. 50 hours?

John: It might have been less.

Andrew: Less than 50 hours. All right.

John: One weekend.

Andrew: One weekend. All right, so you build it in a weekend. How long does it take for you to realize, hey, this thing is working out, or is the 50 hour website something you trash and then build the real thing afterwards?

John: yeah, we, I think we mentioned it before but the great part of the story even starts a little bit before that which is, I was working with my business partner, Paul Rydell. He’s my brother and my business partner and we were trying all sorts of different technology ideas, this was ten years ago.

And literally, the genesis for the one that built Networks Online, I was sitting in my spa one day after working at my day job, reading a magazine and found and article, an interview, sort of an interview infomercial with a guy named Cory Citron, who was doing this weird nutritional vitamin thing. We didn’t even understand it but I got in touch with (?) and sort of explained to him hey, what if we can bridge the best of your nutritional vitamin work with a cool online system? And he said if you guys build that, I bet you like 25 or 50 of my reps would pay you $25 a month to use that technology to help them sell more nutritional vitamins.

So I go to my brother and I say look, we’ve got to do this this weekend. We’ve got two days. We have to build this system that will help these guys and our vision was, it’s sort of pathetic, but our vision was put on 50 people who’d pay us $25 a month and have $1,250 a month of recurring revenue. That was our, I’m not saying we didn’t have bigger dreams, but that was the initial why we were working that weekend and I guess I want to say the rest is history.

We put that thing together, hacked it. No writers, no designers, just my brother, a coder, me sort of doing the business side and we woke up a couple of months later with 2,000 people paying us $25 a month for this online system to help them sell. So $50,000 a month coming in and we had our total expense was one $99 a month server.

Andrew: One server for $99 a month was your expense. $50,000 comes in in revenue. And when you say a couple of months, I know some people mean a few months when they say a couple. How much for you?

John: I think it was like two.

Andrew: Two? So within two months, you’re doing this?

John: Yes.

Andrew: All right. Now I know that it’s not all that easy and you’ve had your ups and downs and in this interview, I want to dive into the ups and downs and that’s the reason you’re here and that’s the reason we’re going to spend an hour, not just 15 minutes. If this was a more shallow interview, we’d have done this, we’d have excited people, and we’d have sent them off to go click to your website or go buy my something that’s going to tell them how to do the exact same thing.

John: Go tell them to win the lottery like I did.

Andrew: I’m sorry?

John: Go tell them to win the lottery like I did.

Andrew: It’s not a lottery in. I see the ups and downs and I want to dig into it. Actually, you know what, if it is a lottery, be open with me and we’ll talk about that in this show.

John: It’s not, I was joking.

Andrew: If it was just luck, I want to hear that too. But hey, before we go into that story, I do online meetings all the time. When my team and I do online meetings, we as often as possible try to broadcast someone’s computer screen. We try to do video because if we do video, then we’re kind of forced to pay attention and I can’t go and look at my iPhone. If we broadcast screens, then it means that the team in here has something to look at. They understand what I’m talking about and so they’re deeply engaged and they deeply understand. So all that’s to say I’m really passionate about the online meeting software business.

I can’t stand with a passion WebeX because their software stinks on ice. They charge me thousands of bucks for this garbage and in order to cancel, I think I had to sign a fax and go find a fax machine to cancel. WebeX is the worst. I never rag on anyone but I’ve got to rag on them.

So, Meeting Burner, you built this software. What does it cost for me to use it? How are you different from Go To Meeting, which I have had good results with? What’s the deal with that?

John: The genesis for Meeting Burner was a little more than a year ago now, and again, we haven’t got into it yet, but networks had evolved. We were working with independent sales people all over the globe and we were buying on their behalf. We were buying online meeting software from a lot of the giants, a couple of which you just mentioned, other big players as well. And so my brother and I would write a check each year for $100,000 and the feedback we were getting back was what you just said, Andrew.

People were unhappy. It was clunky. It didn’t work well. It was too expensive. We were hearing all this and spending $100,000.

Andrew: By the way, if I wasn’t in the space and you told me $100,000, I would think, if I hadn’t used it, I would think he’s exaggerating or he has special needs. I ended up paying, I don’t know what it was, but it’s thousands of dollars for a few months worth of service. It is very expensive. Because I was paying thousands instead of using some free software, I thought I’m getting the best product out there. I’m paying the most. I don’t mind paying money. I want quality and I expected this is the best quality that exists and I was wrong.

Sorry, I’m going on my little tear here because this is really important. You get the right software, the meeting goes well. You get the wrong software, and then people have to deal with slowness. People have to deal with lack of video that works properly. You call the company up and they tell you not my department. Then you get to the right department that is supposed to talk to you and they tell you it’s your computer that maybe is slow. Maybe it’s bandwidth. They have you chasing your tail all day long.

This is really good software when it’s done right and a headache when it’s done wrong. And it costs a lot of money. I better step away from this whole Meeting Burner conversation. Look at how passionate I am. I don’t get this passionate about politics.

John: So with Meeting Burner, our goal was to create something that was simple, easy, and for most of our users, completely free. And so one of the things we wanted to start with is, we’d watch people over and over try to set up a meeting. And first of all, people don’t even like to go to a meeting to begin with, so a lot of them are waste of times anyway. But if it takes 15 minutes at the beginning of your meeting just to have everyone install some software on their desktop and try to get it through the corporate firewall, and get the IT department. It’s just a pain in the neck.

So our first vision was, whatever we do, we want there to be no installation for the participants. So at Meeting Burner, as long as you’ve got a computer that has Flash on it, which is like 99.9%, you click one button, and 7 seconds later, the participant is in the meeting with nothing to download. So we get all that junk and waste of time out of the way.

Andrew: All right, free for most people, get to share video, get to share a desktop, easy to use, you even have a cool URL that I get to give people. In my case, it’s andrewwarner dot, what was the URL for meetings?

John: Enterthemeeting.com.

Andrew: So if I want someone to enter my meeting, it’s andrewwarner.enterthemeeting.com, super duper easy. If I want to use Skype, which I love, I have one button that I can use to fire off Skype. And then I use, I guess, your Skype account to connect me to my guests or something. That freaking easy, I love that. I’m not here to sell. I refuse to accept any percentage of sales that you make or anything like that. Whenever I get this hot, people say, “Andrew you should take a percentage and keep running my interview!” I go, “no”. I want people to know this is real passion here. All right. John, I promise I’ll let you talk so much more in this interview. I get really passionate about meeting software.

John: Hey, you’re helping me.

Andrew: I got to back up. All right. So the original idea was, you had this conversation with Corey. Corey is, if I’m understanding you right, a guy who runs a multilevel marketing business, right?

John: Yes.

Andrew: How does that work?

John: Corey at the time… don’t want to make this too complicated, but at the time, Corey was a distributor in a network marketing business. So he didn’t own the company. He just had a group of people, his own team, I dare call it a “pyramid,” that’s sort of the evil word. But Corey had a whole large network of sales guys who were underneath him, who were all working to sell this sort of cutting edge liquid vitamin. And Corey’s been in the business a long time, he’s still in the business. He is actually now an owner of his own network marketing business.

So he became, no longer a distributor, he actually owns one himself. But what we wanted to do is, we wanted to leverage… because historically, all of network marketing was, go to your friends and family and harass them and try to get them to sign up at a hotel meeting. And so we said, if we could build some great online technology, ’cause that was certainly the wave of the future 10 years ago, still an important part of our lives today.

But if we can build online tools to help those guys promote their business and expose other people to the business without dragging them down to some crazy hotel meeting, that that would be sort of the marriage made in heaven. And back in the day, what we actually came up with was… there used to be brick and mortar, right? Everything was done face to face, belly to belly.

And then during the dot com boom, everything was going to be on the internet, you were never going to meet with a person, you know, too extreme the other way. And so what we came up with was “click and mortar.” We wanted to take the best of the internet and combine it with face to face relationships, and help those network marketers to sell more of the liquid vitamins or whatever else they were doing and selling in their business.

Andrew: Can you tell me about your background? What were you doing that allowed you to say, hey I can build this website… my team and I, my brother and I could build this website in a weekend and we can keep building it and improving it over time? Where were you just before?

John: I have a computer science degree. From the third grade, I’ve wanted to combine business and technology. Worked for Eccenter for a while, out of UCLA. But the truth is, right before we created this, I was the Chief Operating Officer of an investment management company. And people were like, well what does that have to do with technology at all? And I was lucky enough, blessed enough, fortunate enough… I walked into a company in the mid-90s as their IT manager, and I love business so much and I love technology that I used that IT manager to go out and learn everything about finance at the company, human resources, sales, operations. And from there actually leveraged and became the Chief Operating Officer of a company that we took from about 50 million in assets under management to 2 billion when I left around 2001.

Andrew: Can you give me an example of how you go in as an IT guy and end up learning about the business? What did you do? Give me one small example of how you got to learn from the business.

John: I sort of had that interesting combination of skills that I hope more people would have, which is I like to ask a lot of questions. And so as the IT guy, I would sit down with someone, you know, say in our client relations department, the people who were meeting with the clients and we’d really look and say, what is it that you do on a daily basis to serve these clients and to help them with their investments and how can I make that more efficient and easier for you?

Andrew: And so what did you do? Give me an example of something that you did based on a conversation like that.

John: One of the things, that, I mean, it sounds crazy because technology has changed so much in ten years, but we had these regional branch offices and back then we had a centralized database in Santa Barbara, where headquarters was, and literally the people out in the branches would only get updates once a day from corporate. I know that sounds crazy but that was just ten years, but that was the world we lived in.

And so, in meeting with those branch offices, they were like, look, it just kills us out here, outside of Santa Barbara because we can’t service our clients right because we have to wait until the next day to know what their account balance is and to get updates. And so we put in a wider EN network actually based on sort of using the internet infrastructure, back then ten years ago which was leading edge, that made it so that those guys out in the region had the access to the information they needed in real time, rather than waiting for a nightly update.

Andrew: All right, so this is 2002 that you launch your business, that you launch networks. And in 2002, anyone could set up a website by at that point, the whole, the software was available, WYSIWIG was widely distributed. Why did people need your site? Why did Cory and his team need your software instead of just building their own?

John: I think we brought a couple interesting ideas and concepts to the thing. To that initial service, even though we just built it on a weekend. One of the things my brother and I had seen in the technology world was the use of subscribing to mailing lists and auto responders, something that became relatively prevalent but back ten years ago, that was only for computer geeks who were doing that type of thing. And so, one of the concepts that we built into the system was the ability to put a prospect or lead into our marketing system and it would send a series of automated emails as if it was coming like from Andrew or from Cory off to one of his friends.

And ten years ago, there wasn’t nearly as much spam, people actually read their email, they responded to it, they’d take action on it. And so that was one of the critical things that we sort of brought from the geeky tech world to the sales world who hadn’t thought about it before. And it was, boom, I mean it worked, it was viral, people responded to it and it was a hit.

Andrew: I see. All right, so you build this. What is that first 50 hour version, what does that look like, what’s in it, what’s left out?

John: I mean, 50 hours, it was the simplest little website. I was actually in preparing for this I was going to go on, what is it archive.org and actually go try to look at it and see what it looked like back then but I couldn’t find an old enough version. I mean, basically a couple little links like, you know, here’s a list of your contacts, here’s the auto responder that’s going to send out, here’s how you cancel your account. Even from then we didn’t go for the whole like WebEx, you didn’t have to fact in your cancellation, you know, a cancellation button. But one of the funny stories is, remember, we thought we’d have 50 people maybe.

We didn’t have a merchant account, we didn’t have a banking relationship. So we just worked with PayPal and we just put up a simple little PayPal link, probably again ten years ago, not that common and we created the biggest mess you have ever seen in your entire life. Because it’s one thing to keep track of 50 people with PayPal and put them on a recurring monthly charge, but when you have 2,000 people on PayPal, we had no idea who our customers were, who was paying, whose credit card was declining. It was a complete disaster. I remember looking at this print outs and these spread sheets a couple of months later trying to figure out even who our customers actually were and who wasn’t a customer at that point.

Andrew: So, first of all, did PayPal even have a recurring billing system back then? I didn’t know they introduced it in 2002.

John: I actually don’t remember whether we were pushing the monthly charge to them or whether they were handling, my guess is actually, even ten years ago PayPal had a recurring system but they didn’t have good API’s so you’d sort of put someone on the recurring billing and have to manually go in there and click to cancel them. It was a mess.

Andrew: So, John, I hear a lot about entrepreneurs like you who launch within 50 hours and the show off within 50 hours isn’t that you can build a good site within 50 hours. What we’re saying is, when we’re saying it took us a very short amount of time, is we allowed ourselves to have an imperfect product in the marketplace. And that really takes a lot of gut. A lot of entrepreneurship is putting yourself out there.

And the first product is putting yourself out there as it is, but the first product that wasn’t polished, that isn’t perfect, is just putting yourself out there even more. So I often hear this. What I’m wondering in this case, especially since I wrote down the word ‘mess’ as you were talking, is what’s the advantage of having something that ends up being a mess? What’s the advantage in your specific case of launching so quickly?

John: Obviously, the first thing that comes to mind is being quick to market. Right? We wanted to be in there. I don’t know if someone else was about to invent this. But I didn’t want to take the risk. I thought I had something good. I wanted to be the first one out there. But more importantly for me, my brother and I have had a hundred ideas. Maybe we’ve even had a hundred ideas before we came up with this one.

And so, we had learned that you want to fail fast. You want to put something out there and either learn whether you’re on to something, like does the market value what you’re doing, are they willing to give you their money? Or do they go, ‘Ah, I don’t understand it. I don’t want it. I’m not interested.’ So for me, as quick as you can, get customers to use your service and more importantly, to actually pay you to use the service. Because then you know whether there’s a market there with a demand for something people are willing to pay for.

Andrew: I see. So because people were paying you, you knew you were onto something. And you want to know that quickly. And if they hadn’t paid you, you would have known this didn’t work. What did you build in the past that you had to scrap quickly because you saw that people weren’t paying or not interested?

John: Like everyone in the world, we’re probably not fast enough at scrapping things. But one example is, we built this first system and we knew in our minds, hey, we had 2,000 paying subscribers. Two big things that were standing out for us. First of all, if we can build it in 50 hours, there’s going to be competition and somebody else is going to build it.

Andrew: I’m sorry. I want to get into that, too.

John: Oh, sorry.

Andrew: But take me back to a previous business that you launched with your brother that you put out there and the market said, uh-uh, this is not the right one.

John: Oh. One of the things we built around the time that we started networks was a website called searchshot.com. And it was actually a search engine like Google.

Andrew: Mm-hmm.

John: But instead of displaying text, we displayed little icons showing you the pictures of each website that you were about to go visit.

Andrew: I see.

John: And we were like, ‘That will be way more useful.’ And it turned out that Google now does that, ten years later. But ten years ago, we couldn’t find a single person in the entire world who had any interest. They didn’t want to use it, we had no revenue model, and it was cool technology but we quickly abandoned it because it just wasn’t going anywhere.

Andrew: How long did it take you to abandon it.

John: Well, we probably held on too long and kept dabbling for months and months and months and hoping for a breakthrough. But eventually just said, ‘Look, forget it, it’s just not going to work.’

Andrew: Yeah. I sometimes hang on way too long, too. It’s hard to say no.

John: It’s hard.

Andrew: OK. So you launch it, you get your feedback, and people are buying. In some ways it’s more of a headache that so many people are buying, because you have to fix it, you have to make sure they all are serviced properly. Or else I imagine Cory would go find another solution. So what did you do after you ended up with so many customers and so much revenue?

John: As I started to say before, there were two things we realized. One is there’s going to be competition. Because if you build in 50 hours someone is going to come do it. And number two, no offense to Cory and his group, but we were concerned about the long term viability of the specific product that they were selling.

Andrew: Of the liquid vitamins that he was selling.

John: Of the liquid vitamins.

Andrew: Why were you concerned?

John: What’s that?

Andrew: What got you so concerned?

John: I would say my gut business sense said that their product was a little over priced. I don’t want to say anything bad about them. But I was concerned about the long term viability of the business they were selling.

Andrew: OK.

John: Of the product they were selling.

Andrew: All right. Fair enough. So then . . .

John: So on step one, in terms of (?), we said we need to make a better service. Not just one that we built in 50 hours, but we have to add a lot of bells and whistles and things that make it more…better programming, better ingenuity, better writing, better copywriting. We have to build this out, so that the next two kids can’t come in and build this one weekend themselves in 25 hours. So, we spend a bunch of time working on those things.

Andrew: What are those things that you needed to build out? What did you have to change from version 1 to version 2?

John: Let’s see. Back then I think everything was just making it more robust, and making it more professional. For example, we had a contact list that would basically just list out your contacts. We said, we have to turn that into a real contact manager where someone can go in, read the notes about someone, understand where they live. We added a little section that shows the weather of where they live, so if you’re calling someone long distance you can have an engaging conversation with them because you knew right then and there, hey it’s raining, so I can tell Andrew “what’s it like? It’s raining where you are”.

So making the contact manager truly more robust, and then on the professional side, bringing in real designers, real copywriters. You know, a lot of the power back then were these emails going out, and so we wanted to have not just something that Paul and I wrote one weekend but to have something that was written in a compelling way by, and tested by, a copywriter.

Andrew: I see. How do you confine the right copywriter?

John: We’ve built the entire company virtually, so over the years we’ve used eLance and Odesk now working with people…I don’t remember 10 years ago exactly what was there. One of our greatest sources over the years of finding new staff has been from our own existing user base. We either work with a client who loves us or an end customer who, maybe they’re selling liquid vitamins but they fall in love with our service and want to do customer service with us. So about half of our team has come from people who were actually users to begin with, who we then got to know and made part of our team.

Andrew: All right. Then you did have a big obstacle. I said at the beginning that things weren’t always rosy, that there were some down periods…do you know the down period that I’m talking about?

John: About six months after we launched, that initial liquid vitamin system? And we were working hard to go find new customers and make it better. They went to basically zero users. I’m not sure they actually got to zero, but nowhere near 2,000 any more. My brother and I at this point were spending every waking second of our lives trying to build up the service, make it better and find some new, additional clients. My wife’s a CPA, so from the beginning, she was our accountant as well. She was with us, we’re making $50,000 a month, it’s all good, we’re going to take on the world and all this, and there was one month, sitting on our own house. I still remember how it felt – she walked in the door, she’d done the books that month, and she said “Guys, great job this month. You’ve worked every second of your entire lives, and we’ve lost $6,000″

Andrew: Wow.

John: We were net negative $6,000 that month. Obviously, we’d stored some away, but when you bet everything and you quit your job and you’ve got little babies that you’re supporting, it doesn’t feel good on any month where you go negative. You know, we weren’t using venture capital, we’re using our money, and there’s something about when you work 18 hour days and you lose money…you remember that moment!

Andrew: Yeah, that’s what stinks about entrepreneurship – that there is no guarantee. Not just long term, but you can work, as you say, long, long hours and still end up losing money. There’s no base. There’s no minimum wage for yourself.

John: People will probably laugh and say 2well, what’s $6,000?”, but it was that emotional element. That we’d put everything we had in and that trend was negative. The good news is we started going in the right direction after that.

Andrew: Why 6,000 negative? I’m looking at your expenses, at least the ones that I know up until now, roughly a hundred bucks, right, a month? That’s where you started. Where did the extra thousands of dollars come from as you were building up? What else did you have to spend money on?

John: As we built out the service and were planning for the future, we were taking that money and basically reinvesting in it.

Andrew: In what?

John: We started to do, for example, we had to hire a couple of people to do customer service, because literally in the beginning, we were making all that money, but every single time someone wanted to cancel an account or had a question or anything, they just emailed my brother directly. And if they called, he answered the phone. And so we had to bulk up our customer service. We had, at that point we’d started building some new systems to work with other companies. So we were building out those websites, paying copywriters, designers. We were really investing in the future, but still the net of it all was negative that one month.

Andrew: I see. I’m still at that point here with Mixer G. Whenever someone calls that customer service number that we have on the web, they end up on my cell phone and they’re more shocked than I am. I’m shocked my cell phone rings, and they’re shocked that it went to my cell phone and I’m the one who’s picking up the phone. Did you end up hiring people? Who’d you hire to answer your phone for you?

John: The first person that we hired to do customer service was actually one of our users. I don’t know if we… I sort of used that usual approach where you don’t want to ask your users, “Do you want a job doing customer service?” So we always phrase it, “Do you know someone who might be interested in doing customer service?”

Andrew: I see. That’s a good way of saying it, of asking someone without having them feel hurt if they’re not the right fit.

John: Right. Like, I don’t want to offend you, Andrew, and ask if you want to do our customer service ’cause you like answering your cell phone. But if I say, “do know anyone who’s interested?”

Andrew: Isn’t it amazing what we get hurt by? It’s like, I remember even in high school I’d walk through, I don’t know, Toys R Us or something… maybe not Toys R Us in high school. I’d walk through some grocery store, and someone would say, “Do you work here?” And I’d go, “No! I don’t!” like so insulted that they would say I work… meanwhile, I was working at a basement in one of my dad’s customers’ stores untangling hangers. That’s way worse than working in a supermarket, but if I’m there shopping at the supermarket and someone says, “Do you work here?” I get really upset. So that’s a good way to put it. Do you know someone who’s interested who’s interested in whatever?

John: So that was a good trick, and then another one of our first hires. I can’t even remember the exact order anymore, was a gentleman named David Roth, who today is our VP of business development. And David was one of the first users of the liquid vitamin service, and he was so in love with the idea that he could put people into that autoresponder and they would respond and sign up and get started with the business. David was like, “This is the greatest thing in the world. I don’t want to sell liquid vitamins. I want to take this technology and bring it to like every other sales guy on the planet.” And for 10 years, I mean… David loves my business more than I even love my business, ’cause on Day One, he was using the tools to sell as a sales guy rather than an outsider like me selling the service into the sales guys.

Andrew: But you know what? There’s a challenge in that because, if he’s someone who loves that product so passionately that he’s entrepreneurial and he wants that upside, especially if he’s selling liquid vitamins in a multilevel marketing format. He wants a huge upside and here he is coming to work for you where you can’t get the promises of instant riches and all that. How do you compensate someone like that?

John: We compensate… my view from Day 1 was, everyone that I can possibly compensate on a performance basis, that’s what I do. So for David, and I don’t know how public I want to get, we won’t disclose his actual income, but he gets a percentage of all of the accounts… if he sells an account and brings it in, or if he’s the account manager on the account, he gets paid per user per month just like I do.

And we actually invented this thing for our company called Networks Points where we measure on a monthly basis, not the net revenue to the company, but it’s almost a model of the net revenue, so that you can see for any particular account or system or line of business that we’re doing, exactly how many points it’s worth on a monthly basis. And then I can reward my team either directly or indirectly. You know, “Hey, maybe you, Andrew, you’re a great promoter, you get two cents per Networks point per month.”

And the great thing for me is, A) people are incented. I mean, David wants to grow his revenue, and if he brings in great big accounts, great, he can make a lot of money. There was some other point to that. But not only can he do that, but also on the rare terms when we do go down, I don’t have to have some sort of hard conversation with David about how he’s going to make less money. He just literally looks at the sales points, and when we’re doing good and growing, he makes more, and unfortunately when things go down he makes less, and all my costs go like that rather than having a whole lot of fixed costs with a bunch of employees in cubicles who aren’t incented and trying to reach the same goal.

Andrew: All right, speaking of highs and lows, you had that low, you lost $6000. What do you do to come out from that?

John: As I said, we were reinvesting at that moment, trying to get ready to build other systems. And we built two out of the gate. The first one was with a company called Tahitian Noni International. They were, they still are a relatively large network marketing company. And at that point our benchmark was, like, we’re going to get 2000 users on anything. And Tahitian Noni was way bigger than the liquid nutritional vitamin company. So we poured all this effort into making their system great, didn’t launch it real quick.

And I think they put on a couple hundred users, which is a nice account, but we were completely dejected because we thought 2000 was the baseline, and so everything would be bigger than that from that point forward. And when they put on a couple hundred, it was pretty eye opening for us. But still, our goal was let’s diversify, let’s go get accounts, the more 500, 1000, 2000, even 100 user accounts that we can put on the books, the more users we’ll have and the business will grow. One other…

Andrew: What did you have to change in your software or business model to go from creating sites for one company’s sales people to creating sites for multiple companies’ sales people?

John: The first time we built it, obviously all the code was just all around the liquid nutritional vitamin company. And part of what we did is built this platform that we actually called Leap Box, still around today. It was sort of this idea that the leap box would sit in the center, and we could build individual modules or systems for each different company we were working with. But 80% or 90% of the code would remain exactly the same. So they’d be using the same contact manager, the same customer service buttons, the things that can remain the same from group to group. But we could skin it as we go with all these little enhancements.

Andrew: You and I met through Zack of Conversion Voodoo, conversionvoodoo.com. Phenomenal company, and they know all about increasing conversions obviously. Back then, you were still trying to figure out conversions, that if you can get more conversions for your clients’ clients, then you can win over more of their business. What did you learn in the early days? Teach us what you, when you were just getting started, learned, so that some of us in the audience who are just getting started can learn too.

John: I think at the very beginning, one of the things we measured the most was all around the email.

Andrew: Like, whether you collect email or not, or how effective email was?

John: More about how effective the emails were. And so looking at emails and even subject lines 10 years ago and really trying to look at, when this email goes out and promotes something, what is the response that we get to that specific one? And what can we do with email headlines and what impact do they have? And nowadays should it be an HTML email versus a text based email? We dug into that stuff at the beginning. And the tools weren’t all that sophisticated. We would just…

Andrew: The ideas were. Do you remember what you changed about the headline? Do you remember what worked for you about the body? Was it a specific call to action that shocked you that it worked? Was it placement of different elements that worked?

John: One big thing I learned early on was that you need to be a scientist and not an artist, because we’d have no idea when we did a head to head test. I literally to this day still have no idea what’s necessarily going to work or not work. I mean, I can rely on my experience a little more than I could then. But we’d try good head to head headlines, and the one that seemed pathetic would be the one that outpolled. And so you try to get your ego out of it and really just scientifically measure A versus B.

Andrew: So how do you do that, without… Do you take a small portion of your customer’s audience and you test on them? What’s your system?

John: Yeah, I mean, today we use a system called Blocks. It’s become a little bit more sophisticated. But basically, we can take any two A B tests, real simple. I mean, there’s people that do all this multivariable testing and do a thousand different things at once. And we’ve always tried to keep things pretty simple, which is here’s the baseline. Now let’s throw 10% of the traffic at, you know, this is A, this is B, let’s peel off 10%, make one little change, see whether it’s better or worse, and then just keep doing all those different changes till you optimize it.

And that’s what Zack and Conversion Voodoo, they’re absolute masters at that stuff. But part of it was Zack starting with us years ago just doing real simple little, you know, is it better to say “Merry Christmas” or “Happy holidays”? And he runs that blog post every year. He’s been doing it for like 6 years all based on this one little test. Is it better to say “Happy New Year,” “Merry Christmas,” “Happy holidays.” And there’s like a triple difference in those different headlines with the content the same. And how would you ever guess that?

Andrew: What else do I want to know? Other tactics that you use to help your people sell more. Drip marketing was working for you guys. Today, frankly I don’t even think I have a drip… I know I don’t have a drip marketing campaign on Mixergy. Shame on me, I should. But you had it even back then 10 years ago. What else did you have that were key marketing elements that we can learn from?

John: I think… I mentioned this before, but strategically was this idea of “click and mortar,” so that we were trying to find concepts where we’d leverage the technology with the human relationships. And so, it sounds sort of silly, but over time, you know, you were bagging on fax machines. We built up a service called Fax Burner which allows people to get a fax and turn it into a PDF instead of going to their home and buying a fax machine. There’s actually, I think, sadly one over there still. But just these tools and concepts. And one of my mentors has always said, “You got to be doing something that’s either going to help people save money or make money.” And so almost everything that we try to add to the system is either, instantly, how does this save me money so I want to use it? Or, how does it help me build my business, like the Autoresponder campaigns, like online movies.

One of the other creative things we did just came to my mind, is early on, we wanted to create really compelling websites that would sell the concept of you know, joining a network marketing company or buying a specific product. And text was out there, but text was getting old, and people didn’t have high enough quality video yet so they could do a good streaming experience, so we started building these little cartoon movies, where we’d have an animator draw a really nice cartoon with a beautiful voiceover that would promote something.

And the results were shocking for a while, because it sort of bridged between when text worked and now when video works, but we had these little, you know like the mini little John Rydell that would run out under the screen. And he’d have a pretend little PowerPoint there and he’d talk people through it. And it was wonderful fun, and we could compress them down so they worked with people who were still using a dialup modem at the time, which not that long ago is what people were using. It was a cool concept.

Andrew: Right. I could never go back to those days. How did you get other network marketing companies as clients? How did you get them on board? What was your process?

John: Our main… it’s not that hard to find lists of network marketing companies. One of the things we’ve always done is have a network of people that tell us what companies are doing well right now, what leaders are having success, and so building up direct relationships with them. But our sales pitch, if you will, to a leader is, we can come in and we can build a tool that’ll help your entire sales team be more effective, right? So we’ll customize it for your team, we’ll help them be more successful at whatever they want to sell. And quite honestly, we will revenue share back to the company that we’re working with, so they get a set of distributors that are more effective, and we’re doing all the work and putting some money back in their pocket at the same time. So our best clients are more like partnerships where we’re working together to generate revenue and to help their sales guys succeed.

Andrew: So at the top of the interview, I introduced you as the guy who built the 10 million dollar business. And I know it’s 10 million because Zack told me via email when he introduced me to you. I get a lot of my guests through past guests like Zack, that’s why I keep mentioning Zack. Ten million I feel is such a big number that a lot of people in the audience there, just it goes in their heads and they don’t really process it. Can you take us to a more emotionally connected number? The first million. Do you remember, what was it like to earn that first million?

John: Hmm. A more emotionally connected number.

Andrew: It wasn’t a million?

John: Yeah.

Andrew: I have a good story. I live here in a town called LaDera Ranch. I’m working from my home office right now. When we moved to La Dera Ranch initially, when we started the business, we downsized into a smaller home, I worked in a little bedroom, it didn’t look pretty like that behind me, and one night, they were building these sort of this plain community so they’re always building these new bottle homes and stuff.

And one night right at the beginning they opened this new street called Foliate [sp] in Sedona and my wife and I went there sort of in this visioning, dreaming experience, maybe we just wanted to see the new homes. I walked in this model home, walked in the front door and down the hallway and looked in this actual office that I’m sitting in today and I was like “I have to.” “I have to have the success so that instead of working out of this little bedroom I can walk down the hallway into this big, beautiful, giant big windows.” I’m like ” I’ve got to live there.”

Years went by and they sort of built those models and built some other ones and we actually ended up coming back and I don’t live in that exact house, but I live in a replica of it that’s 200 yards away, literally, from the very first home that I went in. So perhaps that makes it more real. It’s not a billion dollar mansion, but my vision was to sit in this seat, in this desk, in this office and look out that window and I made it come true.

Andrew: Wow. Did you have a picture of it around the office to keep yourself going or just have it in your mind?

John: I actually had an electronic version. I didn’t use it as my screensaver but I admit that I looked at it periodically…

Andrew: Uh huh.

John: …and I said I’ve got to go sit in that office. I’ve got to go work there.

Andrew: So you launched Networks in 2002. 2007 you launched Phone Burner. I think it was soon after you launched Fax Burner and now Meeting Burner. Tell me about Phone Burner. Why did you decide to launch a new product and why Phone Burner?

John: Phone Burner, the concept basically is if you are a independent sales person, small business owner, you need to make a lot of outbound calls. That tends to be a tedious process, the phone is scary to people, they don’t want to do it, so we wanted to bridge the best of telecom with the best of internet, and give people a simple easy way for them to put on a headset and not do the auto-dialing where you get a call at home at night and you get that two second pause and you know there’s going to be a foreign telemarketer on the phone.

Andrew: Right.

John: We wanted to give people real power and that’s what Phone Burner was all about and still is today, is connecting sort of a list of contacts with a list of phone calls you need to make and make it fun and easy rather than the burden of picking up a phone over and over again.

Andrew: And selling essentially to the same clients they were using networks. Is that right?

John: Yes. Again it started with our existing user base and knowing, hey we understand this market. This is something that we know they do a lot of. Remember that David Roth talked about how many people used to call and how could we build something that a more enjoyable experience? The cool thing about Phone Burner is because it’s viral, I get stories all the time from dry cleaners and lawyers and different sort of small business owners who have heard about Phone Burner even though they aren’t in our target market and they love it and they use it and are excited to use it every day.

Andrew: How is it viral? How do you promote yourself in a system that makes phone calls on your customer’s behalf? It’s interesting now that I mention that it was viral but I think what it is is that launching out of network marketing, that business, those people tended to tell other people about the tools they’re in, the business they’re in they’re always promoting it and so we always sort of get these shoots breaking out of network marketing where you know where maybe someone’s spouse is working an herbal life business but the husband is an attorney and so they get exposed to the service that way.

John: Fax burner. By the way, Phone Burner is that profitable yet?

Andrew: Phone Burner has been around for years and yes it’s profitable.

John: Fax Burner next. Why did you decide to take on the fax machine?

Andrew: Same old thing, this was more in the genre of not helping people make money but helping them save money and axing sucks. No one wants to send a fax. I swear it’s even gotten worse in reliability than it was years ago with all the digital phone lines and it started with our own users. They did not want to go get one more phone line and pay AT&T or their local provider. In view of all that I wish I didn’t have a fax machine. But basically, they wanted us to manage the number, and if a fax came in we grabbed it, we turned it into a PDF, sent it off to them via email. That’s how people like to work today. And so we actually turned Fax Burner into a mobile app. So it’s available. That’s actually where most people get it, is off of the Apple store. It’s completely free. We give it away.

Andrew: If I understand you right, I can take this document here, I just take a picture of it with my iPhone, and then fax it out and pay paper fax. If I’m right?

John: With Fax Burner, I think we let you send a couple completely free. Most people use it predominantly for inbound faxing. Because . . .

Andrew: If they need a number to get a fax.

John: If they actually send it. Go ahead.

Andrew: Sorry, you go ahead.

John: No, I was just going to say most of it is for inbound faxing. But yeah, absolutely, you take a picture of a couple different things, pick who you want to send it to, and off it goes.

Andrew: How can you tell which businesses to launch? I understand Phone Burner looks like a great idea, especially now that it’s profitable. Fax Burner does. How do you figure out which new product to launch and which one is going to fit well with your business?

John: Part of it is gut, but part of it is asking and surveying existing customers, something that we try to do before we ever launch anything. Which is, ‘Hey, we’re thinking about building x, y or z.’ Whether it’s a new function, whether it’s an addition to an existing service, whether it’s a whole new paid model. Asking them which ones they like the most and then, more importantly, which one would they actually be willing to pay something for. Because there’s often different answers, right? Sure, I’d love to have Meeting Burner if it was completely free. You know? But what are you willing to pay for. So surveying people.

And part of it is just hearing our customers. I mean, with Meeting Burner, I don’t read a lot of the customer service questions, but things get escalated up to me. And I was just hearing over and over and over how bad people’s experience was with the online meeting services that we were bundling. And it’s almost insulting to spend 100 grand and have people be unhappy. That doesn’t feel good.

Andrew: Noah Kagan, when he heard about your business here with Meeting Burner, apparently he said it was boring.

John: Yes.

Andrew: When did he say it was boring? Why would you and Noah talk?

John: Zack was out to lunch with him, is where that actual initial discussion came from.

Andrew: I see.

John: And Zack was down there trying to promote and get Noah excited and this and that. And Noah was like, ‘Online meetings? No one wants to go to a meeting. No one wants to do an online meeting. Why don’t you do something cool and sexy and fun?’ And we’re like, part of it is business. We had an existing user group of business owners who don’t necessarily want some new toy to play with on their iPhone. They want something that practically helps them in their daily life to either save money or make money. And so people can call it boring, but it’s $5 billion a year already being spent on online meetings. And so call it what you want. I call it opportunity.

Andrew: When you guys blogged about it, I think Zack told me you got tens of thousands, 20,000 unique hits to that post. I remember looking at it, because I saw it on Hacker news. Did Noah ever reach out to you afterwards after he said that? Was he upset, was he excited that you guys pointed out the value of the business?

John: [laughs] He was excited and we’ve done some work together now. I’m not sure he wants to admit it but he’s promoted Meeting Burner [laughs].

Andrew: He has it on the site. Right, he did. He had you guys as an (?) deal, right?

John: We haven’t done it as a deal because we don’t actually have any paid model today.

Andrew: Oh, is that right? OK.

John: So today we’re still in beta testing and we’re not launching publicly until February 7th. So Noah’s revenue model is predicated upon us having revenue.

Andrew: Right. He wants you to sell something and then . . .

John: Unlike you, he wants money [laughs].

Andrew: [laughs] That’s right. I do get a lot of emails from people who say, ‘You should interview me, I’ll give you a good cut of the sales I’ll make because I’m a good salesman. I can tell good stories.’ What else? What else do I want to know? Here’s one issue that I know that other companies who have done meetings using Flash have had. Right now you and I don’t have earphones. If you use Flash, Flash doesn’t have the noise canceling ability that Skype, which we’re using right now, has. Which means that the person either has to wear earphones or get a special mic. What do you feel about that, what have you noticed?

John: So far, with our meeting platform we use, we allow people to dial into a conference bridge, which is still how the majority of people do it, or use Skype to get in, or the host can simply use an experience like we have going here and everyone can listen. We’re working on technology right now, because everything we built is modern and it’s sort of cool (?) technology that lives in the cloud, we’re going to be able to use that same phone bridge technology that will take a Skype caller, a flash based user, as well as a conference call person, and that core technology there on the server side is what does all that noise canceling and echo management and all of that. It’s not easy to do, but it’s the same technology today that lets us do the phone bridging, putting it all together. So it’s good stuff and we got real smart telecom people figuring it out right now.

Andrew: All right. I’m kicking myself for not trying this. I’m clearly very passionate. I have tried it, but not tried it enough and you’re right. Actually, as long as you give people the ability to use Skype, then the noise canceling thing isn’t an issue. Then if they’re happy using their computers to talk instead of using phones then that works for them too. All right.

But I created an account but I haven’t dug in deep enough and I’m surprised because I’m so into it. You know why I don’t? Because I always need to have somebody else that will be on the other end of the experiment with me and will be very patient because I love playing around. Like look at this. Apparently Apple has some kind of sharpening tool that I’m using right now. Look, this is what my web cam would ordinarily look like. Like that.

John: Huh.

Andrew: This is what it’s always looked like. I could add a sharpening tool to it and look at that. That’s pretty freaking good, right?

John: I like it.

Andrew: Play with it. Oh this just looks weird.

John: That looks like instagrams.

Andrew: Yeah, I have an instagram feature on here too. Let’s take it back to .4. So yeah, I do obviously love playing with this stuff. It works well, right?

John: Yeah, it looks great.

Andrew: You could almost read the text on the back here. Let’s do this for people who are reading or doing something else in the background while watching, if they want to jump in. This is what it’s like with zero, and this is what it’s like with the level that I’ve picked here. And I’ll keep testing different software because we do courses now with video and I want to make sure that everyone looks good, that we can share screens.

All right, let me do a quick plug here and show another tool that we’ve been using for courses and then I want to ask you one big, very important question that anyone who’s watched past interviews will be happy that I asked you.

John: OK.

Andrew: All right, here’s what I want to try to do. This is a first here on Mixergy. Let’s see if we can make it work. Oh, OK. Great. Now, come on. Almost. Hang on. OK, wait. It launched. Let’s get rid of this. Oh, here we go. This is it. This is my spare monitor. So now on my second monitor, I can bring up. This is how Ian and his friends down under are watching Mixergy. Can you even hear it?

John: I can’t hear it.

Andrew: Oh, there. Like watching it. I dig that they’re watching. There he is. They’re watching on the computer screen. That’s, by the way, why I decided that. Let’s bring it back to zero. Got to learn here. There we go. I’ve got to now sharpen my video because I see that they’re watching on this big computer screen. I want to make sure I look good. Otherwise, I start to get really self-conscious.

One of the reasons why I did that is because I wanted to test the new technology for courses. The other reason is that I wanted to say what Ian told me when he sent me that video. He said ‘I’m a premium member and my friends and I were able to go back and listen to past interviews and programs with people like Kevin Hale, whose interview is one of my favorites in terms of building company culture and how to do it when you’re working remotely.’ So what he’s saying is, he’s getting to put the courses and the interviews up on a big screen and he and his co-founders and friends get to watch it and they get to learn from successful entrepreneurs how they built their businesses.

So in addition to interviews like this, anyone who signs up for Mixergy Premium gets access to courses where past guests come on, they turn on their computer screens using meeting software, that’s why I’m so excited about it, and they say this is how you build up traffic to your site. Or they turn on their computer screen and they say look, I’m going to show you how I take these users and turn them into customers.

We had the guy from (?), Nathan turn on his computer and say this is how you get customers from Facebook and he just walked everyone through the process and then he put his Excel spreadsheet on the screen and he said this is what people’s reactions were. He had to hide the email addressed within the thing but it was an original Excel spreadsheet. He says look, this is how I sell.

This is how I get these guys to go from enthusiasm to customers to etc. And all that’s available if you’re a premium member. You just go to Mixergy.com/premium. And if you’re not I hope you join us and become a member so you can get access to all these courses. All right. So here’s the thing that I’m wondering, Zack’s been on here. He had these great, great ideas for increasing conversions. What has Zack done for you? Tell me one of the most powerful conversion tactics that Zack implemented on one of your businesses.

John: The number one thing Zack has done.

Andrew: Yeah, let’s blow people’s mind. I think he’s the one who said that, he recognized that if you have a cup of coffee on an envelope it looks authentic. You know, like if you have that little ring. So he found a way to get every, or maybe someone else found a way, to get every letter that went out and every direct mail piece that went out to have that brown ring that looks like it’s a coffee stain so that people would be more likely to open the envelope. That’s the way that he thinks. How has he used that thought process to help your businesses get more conversions?

John: Wow. You’d think I’d have the perfect one thing and so I’m going to dodge the question for a minute and hope that I come up with.

Andrew: OK. I’m putting you on the spot.

John: But part of it is this thing that Zack and I always talk about, which is our “Find 7 Things That You Can Do 10% Better” and you double your business. So, it sounds corny at first, but if you think about it, you take, like, so there’s less magic and more of the grunt work of like, OK, move the coffee cup, use a blonde woman instead of a dark hair woman, say Merry Christmas instead of Happy New Year. Like, take all those little tiny things, you find 7 of them and geometrically progress it and literally makes your business double. So that’s one of the things that Zack and I talk about all the time and so maybe that’s why I’m not as excited as, like, there’s not the magic doubler. At this point, maybe we’ve been doing it so long like I just got to keep inching our way through this thing and just gutting our way through it. And I wish I could come up with just that magic, magic doubler but the truth is in our business and maybe this is what the people, maybe they don’t want to hear it but it’s the truth, is find 7 things and do them 10% better and that’s as good as one giant killer [??] and all of us can find 7 little things to do a little bit better.

Andrew: That is inspiring. Ian Dooley of Workingsoftware.com.au, the guy who was on the screen there. Let me know how helpful that is. Everyone else, give me feedback on this interview. And if you want to try, if they want to try MeetingBurner how do they do it. If they want to try this software that I’ve been talking about.

John: Up until February 7th we’re still in Beta so it’s completely free. We just comp you an account. So just go to MeetingBurner.com, you don’t have to put Andrew’s special link because he’s not getting paid. Just go to MeetingBurner.com and if anyone who signs up before February 7th, we’re sort of, we want to be good to all of our Beta testers who have been with us for the last year, so you can still sneak your way in and we’ll grandfather you into an account. We’ll grandfather you into an account that’s better than what other people have ongoing even after February 7th. Love to have you as one of our users.

Andrew: Oh, wow, so there really is an advantage to joining and trying it out early, in addition to getting it free they’ll also have better pricing and better relationship with the company going forward.

John: Absolutely.

Andrew: In the comments, if anyone’s listening all this way and wants to experiment with me with MeetingBurner, can you please just say yes in the comments, I’ll see your email address and it won’t be public. I want to try this with someone in the audience. Someone who will let me play with all the different levers and see what works. Alright, so, John, thank you for doing this interview with me. It’s great to hear your story. Congratulations on all the success with networks online and all the Burner companies including and especially the new one, MeetingBurner. And Zack, thank you for making this introduction, this great interview.

John: Thanks Andrew, do we have 30 more seconds to make fun of Zack real quick?

Andrew: Yeah.

John: Because this will be good.

Andrew: I actually have a lot of respect for Zack. I don’t have the kind of relationship that you do. I’m not sure that I’m in a position to make fun of the guy.

John: No, well, you can always cut this out at the end, right?

Andrew: No, we can’t cut it out. But go ahead, it seems like he has a good sense of humor.

John: No, you’ll like this. You’ll like it and Zack will harass me for the rest of my life and there’s probably actually some business in here, but the way I met Zack, I was living in Santa Barbara, he was a student at UCSB. I needed an assistant to help me way at the beginning, answer some emails and things before we even started networks. I put an ad out in the Daily Nexus, the Santa Barbara paper, the UCSB paper looking for basically a secretary and Zack applied. And so two rules there, Zack didn’t want to be my secretary, he was just looking for cool entrepreneurs to meet and I, as the person looking for someone, was like, whose this kid, this guys amazing and so ten years later, we’ve done tens of millions of dollars of business together because Zack answered an ad to be my secretary when he was still at UCSB.

Andrew: And he wasn’t looking to be a secretary, that’s just his way of meeting entrepreneurs?

John: He was like, this sounds interesting. I wonder what this guy’s doing. Applied for the job, put this whole entrepreneurial resume together, and basically said call me. Let’s get together. And then we did, and the rest is history.

Andrew: What do you do with him, to stay in touch with this guy who’s obviously not going to fill the role of a secretary?

John: I was so confused looking at his resume. I was like, wow, he’s like 20 years old or 22 years old. I don’t remember how old he was at the time. But I was like, I got to meet this guy. And so, I said let’s go out and meet at UCSB, we’ll have a burrito together. Ten years later, when we’re together for lunch we go have a burrito together.

Andrew: That’s awesome. I’m glad you told that story. I didn’t realize that.

John: That’s how it all started and it’s been a great relationship for both of us. I’m glad he introduced us to one another.

John: And you know what, I’ve got to tell you, I think Zack in his interview here on Mixergy made a mistake. The mistake is this, I think he said that he works on commission, that he doesn’t take a price that he just takes a percentage of the lift that he gets you. Which in many people’s minds, even people I believe, I don’t know the specific reaction he got, I believe based on the feedback I heard, a lot of people said, I have a hundred orders a year, if he can get me to a thousand, and my business deserves to be a thousand, then I’ll give him share of it.

He must have gotten pelted with a lot of those offers instead of the high quality guys like you who have high revenue, want to increase a little bit and share the results with him. That’s my sense when I think about the way he told his business and when I think about the way other people talk about it, I say, oh I shouldn’t have let him just leave that out there.

John: Zack’s doing just fine in his business, but if you want to take a business lesson out of that, I think that Zack and a lot of us say no to a lot of potential clients. Where it’s true, Zack could make a lot of money helping someone go from tens of units to a thousand units, and make that margin, but the reality is, Zack can make more money helping someone go from a million units to 1.1.

Andrew: Right.

John: Million units. So, you know, all of us in life, it’s real hard as an entrepreneur because I get people all the time that are like, John, build me a system. I need it for my business, I need one for this. And, I’m like, as much as you want to take that business in, because you built it, and you want to take those customers, you still have to be smart and profitable, and find the right ones.

Andrew: Yeah. Speaking of being smart, I should say, anything that I’ve said earlier about other online webinar and software, my own personal experience, I don’t know if that’s universally true, they all might be great angels. I don’t know. I was ranting there for a moment, I don’t want any hassles from them. I hope I get to interview them in the future.

John: You do, too. We’ll take them.

Andrew: It’s great meeting you. Thank you all for watching. Bye.

John: Thanks, Andrew.

Sponsors I mentioned

Membership Blackbox – When we needed to learn how to build Mixergy’s membership site, do you know who we trusted? This dude: Noah Fleming. If you want to learn how to create a compelling membership site, I recommend going to membershipblackbox.com. I’m a member of it, and I’m recommending it to you.

Mixergy Premium Membership – When you’re facing a tough business problem, like, “How do I get customers?” Where do you go? If you do a Google search for those kind of issues, you end up with a poorly-written, link-bait article. With Mixergy’s premium membership, proven entrepreneurs turn on their computers and teach you their techniques for getting customers, or press, or new employees, or anything else that you need to be an incredible entrepreneur who leaves a mark on the world. Mixergy.com/premium, check it out.

Walker Corporate Law – Scott Edward Walker is the lawyer entrepreneurs turn to when they want to raise money or sell their companies, but if you’re just getting started, his firm will help you launch properly. Watch this video to learn about him.

How do you sell to businesses and grow monthly recurring revenue?

We talk a lot about selling to consumers, but I want to do this interview on selling to businesses. So I invited Chris Savage to teach how he did it at Wistia, which provides video marketing tools for businesses. You might have seen Wistia on Mixergy. I think we use it for every single video we have here on the site.

Watch the FULL program

Prefer audio? Great! “Right click” here for the MP3 format.

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I use my sponsor Wistia‘s video hosting because of Wistia’s stats.

 

About Chris Savage

Chris Savage is the co-founder of Wistia, a video marketing application for easily sharing and tracking your video for businesses.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

Hey, before we get started, three messages. First, when you’re facing tough business problem like how do I get customers? Where do you go? Have you noticed when you do a Google search for those kinds of issues you end up with a poorly written link (?) article? Well, with Mixergy premium membership, proven entrepreneurs turn on their computers and teach you their techniques for getting customers, or press, or new employees, or anything else that you need to be an incredible entrepreneur who leaves a mark on the world. Mixergy.com/premium, check it out.

Next, when we needed to learn how to build Mixergy’s membership site, do you know who we trusted? This dude, Noah Fleming. If you want to learn how to create a compelling membership site, I recommend going to membershipblackbox.com. I’m a member of it and I recommend it to you, membershipblackbox.com.

Finally, after he sponsored hundreds of Mixergy interviews, if I ask you who is Scott Edward Walker what would you say? The answer of course is, he’s the lawyer that specializes in helping start-up founders. I’ve known Scott for years and I have privately recommended him whenever a founder asked me for a lawyer. Scott Edward Walker of Walker Corporate Law. Here’s your program.

Hey everyone, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious up-start and the place where proven entrepreneurs come to teach you how they did it. The question for this interview is: how do you sell to businesses and grow monthly recurring revenue? Chris Savage is the founder of Wistia, which provides video marketing tools for businesses. You might have seen Wistia on Mixergy. I think we use it for every single video we have here on the site, so I invited Chris to teach how he did it, what he learned as he built Wistia’s customer base of businesses. We talk a lot about selling to consumers, I want to do this interview about how do you sell to businesses and that’s why I invited Chris here. Chris, welcome.

Chris: Thanks. Thanks for having me.

Andrew: Chris, we agreed that we’re not going to give away secret information like how much revenue Wistia has and how many customers Wistia has, even though you and I talked about it privately and I congratulated you privately.

Chris: Thank you.

Andrew: Let’s go back to when you were just starting out. When you had about a dozen customers and you set a goal for yourself. Do you remember what that goal was?

Chris: I remember when the big goal was how will we get to 100 customers. For me it always felt like 100 customers was a big deal. For some reason just hitting the three digits meant a lot and I remember how it was to be at, I remember vividly being at 15 customers being like, oh my god, if we’re not going to get anybody next month then we’re in trouble. Yeah, I remember those days.

Andrew: You hit a goal. The goal was getting 100 people. Do you remember the day when you hit that goal?

Chris: I don’t remember the date. I remember the day vividly. We actually popped a really nice bottle of Champagne that I think our competitor had given us because we had sent them a deal that was not a good fit for Wistia and they sent us this really nice Champagne and we’re like, all right this is the time to do this. Yeah. Then I remember also pretty soon after that we hit another milestone, which is huge for us, I remember waking up and there being three deals that closed in the middle of the night. That was like insane because when we first started trying to sell, we couldn’t take credit cards, every contract was signed and faxed back and forth. People would drop papers on the floor. It was a long way from where we had begun so, that felt really good.

Andrew: There was a time when you didn’t have it all together. Do you remember what you did about an artist’s job board that you guys did? I didn’t even know this before we did the pre-interview.

Chris: Yeah. When we first got started, the first year of Wistia was a lot of things, but the biggest thing that it was, was we were trying to make a portfolio website for artists and for film makers specifically. This was a place where we tried to help film makers get their videos online.

Andrew: This was the original idea? It wasn’t to help businesses create videos themselves?

Chris: The original idea was to help film makers take advantage of online video. We’d seen a big shift happen with you could encode video online and just open the doors to — and open the barriers — to people getting more out of video so we wanted to make something for that. We did a lot of things wrong. One of the things we did was, before we launched it we decided oh, the right way to make money on this is going to be to build a job board that we can sell jobs against. We made a super advanced job board. Super advanced.

You could search in multiple cities, multiple locations, different distances by city, different discipline, designers and all this stuff. Then we realized that we had built a complete piece of shit that nobody wanted. We didn’t even have a launched product. Yes, I remember vividly having nothing.

Andrew: Why was that a bad move? How did you get stuck, I mean, in that bad move? We’ll find out, I know you and Jeremy Dupree interviewer went through a list of specific tactics of what you did right. You’re going to teach people how you did it so if they’re selling to businesses they can follow the successful moves that you’ve made. I want to spend a moment about what was wrong about that? In retrospect how could you have avoided that move?

Chris: I mean, we built things in a silo. We saw a macro-level change, which I still think was the right macro-level change. Online video was different after YouTube. We saw YouTube super early and they kind of changed the game in terms of expectations because they would do all of the encoding for you. We thought that was big and important. We were able to go and do that ourselves.

But we just ran in a lot of different directions. We tried to resolve every problem. We tried to, I remember vividly thinking, having conversations like we can’t just have a drop down menu because we have to do better than a drop down menu. This kind of natural languages that people were used to interacting with on the web we threw out and tried to reinvent every one of them as we were making a portfolio website for (inaudible).

I would say paying attention to conventions was something that we could have used more of. I don’t think we even realized how unique our original vision was. Also, we were in complete control so it felt like we can just screw around. We can do this and this is what a business is, is making up everything. Things have changed a lot since then for us, just in terms of how we build products. How we think about testing things.

The lean movement didn’t exist, or it existed but it wasn’t publicized. We were doing this stuff so we had to figure it out ourselves. Now I would say, I’ve read all the Eric Reese stuff and all the other things there, and it’s like OK, yeah. That’s what we eventually kind of got to but that would have been really helpful to have from the beginning.

Andrew: All right, one more question before we get right into the tactics and that’s this. People already know about YouTube. What they often ask me when they hear about Wistia is why would anyone use Wistia? Can you answer that question while explaining who your customer is and how your customer uses Wistia?

Chris: Yeah. YouTube, first of all, is great. I use YouTube all the time. It’s the second biggest search engine. There’s a lot of good things you can do with YouTube. The customers that we have want to have more control over their experience. We predominantly sell to marketers. What that means is they want the video on their site if someone comes to their website they don’t want them to be able to click away to YouTube and see comments and related videos and ads and all that other stuff.

I can’t remember who said this at one point but if the product is free often it’s the case, I think, that you are the product. Right? You’re part of the product. In YouTube you’re putting up your content so that they can sell ads against it. They can make all the search engine revenue on all the other stuff. There’s a whole group of people who don’t want that. Who just want something that is completely tailored to them with much more customization around the experience of the video?

Another big difference is our analytics are built for an entirely different audience. Instead of trying to look at analytics to figure out what kind of ads to put on your video or how your video is doing in the YouTube search or something like. Our analytics are all about how well you’re telling your story. How well you’re getting people to sign up for your product after they watch your video. Which people in your audience are most interested? How do you integrate video better with email. How do you drive more traffic to your site and not YouTube? All that mix of stuff.

Andrew: Here’s a cool user example. You send out to your email list a video, excuse me, a landing page that has a video on it. You see that one person watched the video on the landing page all the way to the end but didn’t buy. You call him up or email him and you either ask why didn’t you buy or you close the sale on the phone. You can’t do that kind of thing with YouTube because YouTube gives you data in the aggregate. You can do it with Wistia because Wistia’s videos are like your sales people and they bring back information just as they’re sending out information to the world.

Chris: That’s a perfect example.

Andrew: I know that you’ve done that, and I’ve seen other people do it too with Wistia. It’s really impressive to be able to interact with customers that way. The first big tactic you’re saying is, figure out your target audience. We already saw that in action with you, because you went after artists first, then you went after businesses. Tell me a little bit about the importance of that and how you figure out what your target audience is.

Chris: Sure. For us, obviously, we started trying to sell to artists. We had been going for 10 months or so. I talked to a buddy of mine, Cheri[SP], who I had worked with on a previous project. I said, ‘Hey, we’re going to introduce premium portfolios at some point.’ I think we had just launched that site. ‘We’re probably going to charge $10 a month.’ She was like, ‘Whoa. That is super expensive. I can’t believe that $10 a month for a portfolio online?’ It was a complete wake up call. Wait a second. This is not the right target audience for us.

Even if we get all the film makers in the world, we’re still not going to have that big of a business. That was one thing we were concerned with, was trying to have a big business. So, we’d been going to lots of startup meetings during the whole first year of the life of Wistia. All these people kept coming up to us and saying, ‘Hey, you guys are the video guys. Can you help me with my video?’ We were like, ‘No. We’re trying to help artists. That’s our thing.’ At some point, I was like, ‘Oh wow. We should be talking to businesses who don’t use a lot of video.’ We would have a completely different set of problems.

That was the first step for us toward starting to target our audience of businesses versus consumers. Then over time that evolved from businesses to companies that use a lot of visually rich data, and eventually to marketing. People really pulled us there. Finding that target made it possible. It’s kind of the decision maker when we’re writing copy, when we’re deciding what videos to make, all the other stuff.

Andrew: I could see someone in the audience who has a B to B business thinking to themselves, ‘I can make the leap from moving away from people who don’t have money to finding an audience of business, because businesses in the aggregate do have money and are willing to spend it for products to help them make more money.’ To zoom in on that niche which you found, which is marketers, the people who are most eager to buy. You have the money and the clear willingness to spend money. That’s a tougher leap, to find that micro-target. How did you do that without going through years of agony as you look and talk to seemingly everyone?

Chris: That’s a great question. For us, we didn’t go straight there. Our first customer was using us to privately share video, so we thought that training and collaboration around video would be the first place we’d go. Once we picked a target, we could focus on whether or not that target was any good. Pretty quickly, when we started calling into companies that do lots of video training, and they’re asking for these wild things that don’t make sense for us or the sales cycle is really long or whatever, it was clear that that wasn’t what our target was. I would say, find little targets to focus on and make sure that they’re focused enough so you can know whether or not your tactic is working. For us, we tried training. We tried just medical devices. We tried telecom companies. We went and found these different areas to target. The marketing was probably the fifth one that we found. It was clear very quickly. ‘Wow, we focused enough on the same type of customer. This is a good place to be.’

Andrew: Is it a little bit like dating, in a sense, in that early on you want to go on as many dates as possible and talk to as many people as possible until you find that one right one. Is that what you were doing?

Chris: Totally. To take that analogy further, I would say it’s a little bit like dating, but don’t try a really long distance one, someone who’s thirty years older than you, someone who is of a different sex. You probably try to keep it focused, and say, ‘I’m going to date people in my city and see if it works.’

Andrew: I see. You don’t want to try every single business out there to find your niche. You want to be intelligent about it. Here’s another thing too. If I understand your story right, you weren’t just buying Google ads and see which got you the best conversions. It seems to me that you were talking to people one on one. Am I understanding the story right?

Chris: Yes.

Andrew: So, what’s the value of doing that? It’s clearly less efficient. It doesn’t scale.

Chris: I know. It doesn’t scale. People can tell you things in person that you just can’t find out through conversion testing. Conversion testing can help you optimize something but if your entire message on your landing page is wrong, it’s never going to convert. I found that we would learn faster. The other thing is by being upfront and honest to people as we went through trying to figure out how to use, like where the right fit was, people wanted to help.

People would try to point us — we talked to a trainer and they would get really excited because we talked to them in person. Then he would say, “Hey, talk to my five buddies.” We’d go talk to his buddies and none of them would convert and we’re like, oh. Maybe with an intro from this other guy who likes us and it’s not working, maybe this isn’t as good as we thought it was.

Andrew: Right. Even with an intro, if personal trainers are saying no to you then it means it’s probably not the right market. Or it’s less desirable. Do you remember what it was about marketers that made you say, “Oh yeah, Wistia and marketers that’s a nice marriage.”

Chris: Yep. It was our Analytics. Because we had this other focus on trying to figure out essentially the engagement of the video, so how are people watching throughout and where are you losing them and where is your story getting screwed up. That’s what online video is for, for marketers is a way to scale that communication. For them it really resonated quickly. I didn’t expect that because we made the initial Analytics for training because we thought that people, people had told us that they wanted to do compliance training so they could see if specific employees watch things. Then we aggregate it and suddenly we had this thing that was completely different and completely valuable.

Andrew: I see. All right. So, picture a person in the audience wants to sell to businesses, you’ve told them how they can find the right niche to focus on, they’ve done that, now it’s time to find more people in that niche’. How do you do it? You say the next tactic is to find where you’re customers spend their time.

Chris: Yep. So this is actually really good advice, it’s from our first customer. Our first customer was named Ron. Well, there was three people there and one of them now works here at Wistia, but I remember Ron vividly saying, “You have to figure out where you’re customers spend their time and you have to figure out what books they’re reading, what magazines they’re reading, what blogs they’re checking out, what movies they go to. You have to build a profile of your customer because only then can you go to where they are.”

So I said well, these are all the things that we’re thinking about, we’re thinking about writing blog posts. We’re thinking about Hacker News. We’re thinking about — well actually I think it was (?) at the time — like all these things. He’s like, “I’ve never heard of any of those things.” I was like, “What do you read?” He’s like, “I read industry stuff. I read major newspapers. I go on the “T” which is the metro system in Boston.” I was like okay. That for us helped us realize that we were focused completely in the wrong area of where to speak to people like him. As we found different targets, we changed our approach every time of how we were trying to get to those people.

Andrew: I see. So, as I get new customers I should spend time with some of them and say, what are you reading? What websites are you on? What do you subscribe too? Where are you spending your time hanging out in person? What conferences are you going to and figure that out. All right. Do you remember one place that you did find a lot of your customers? One specific place? I know you said, according to notes here, Boston Globe is what he reads not Hacker News for example.

Chris: Yeah. One specific place, that is a good question. There were definitely lots of pockets of people in certain areas. We found that we could go to, eventually to a specific marketing blog and I can’t say all of them but we’d go to specific blogs and build relationships with them and write guest posts for them and that would bring influxes of people to us but it wouldn’t — that wasn’t one place that had all the customers. It was one type of place that was a consistent way for us to move around.

Actually, I think another addendum to this point is probably like be the place where your customers want to spend time. Give them the content, give them in the information that they want to watch or that they want to learn about or they want to read about so that they can spend their time learning with you. I think that’s particularly helpful if you’re dealing with something that’s new and isn’t as well defined. If you’re selling to coaches of college sports teams, it’s pretty easy to find them. There are a limited number of conferences where they go. Walk through and sell everybody. For us it was not like that.

Andrew: I think our friend, Rand from SEOMA is really good at that. His site is where people who care about SEO go to. Of course, if they need the software, he’s got it to sell them.

Chris: It’s an amazing thing.

Andrew: What’s the next tactic? What else do we do now that we’ve found those pockets where our people are?

Chris: I would say really looking at complementary products and looking at your competition. Trying to understand what are the other products that your potential customers are buying? If you think you know the right target, if you think you have an idea where they are, you have to figure out how much value do you drive relative to everything else that they use. An example I can give is I remember really vividly the first time we started to pay for Constant Contact. Constant Contact is a marketing application. We don’t use it anymore, but that was the first thing we used. We had 100 people on our list. I remember thinking that Constant Contact was so expensive. I can’t believe how expensive it is. Why would I ever need to pay to send an email, is what I thought.

Then, at some point, when I became the target customer, I realized, ‘Wow. I want to know what the open rate is of these emails. I want to know who’s clicking through so I can call them up. I want to know who the individuals are and how the aggregate’s doing. This is really valuable to me.’ The epiphany was, ‘Holy shit. Wistia could be like that for video. We could give people the play rates and engagement rates and all this other stuff, so we probably should have Wistia aligned with Constant Contact pricing more than anything else.’ If you have 5,000 people on your Constant Contact list, and that costs $100 a month, I have no idea is because I don’t use it anymore. MailChimp AWeber, Campaign Monitor, any of those things, how big should the audience be with Wistia, because we don’t want our value to be completely out of line with the value that someone’s getting from another product.

A perfect example is that if you’re trying to sell to sales people, you should probably not charge $10,000 a month for a sales person, because the sales force is between $10 and $200 a month. People live in that. Someone’s going to look at your product and think it’s way too expensive. If you charge $1, then it’s way to cheap. You have to position against the complementary product. It’s a lot easier to figure out what your price should be.

Andrew: I remember Noah from Clicky, the analytics company, said that he did the same thing. He found out what those complimentary products were and then he tried to get partnerships with them. Since is Clicky is analytics, he said, ‘Well, who needs analytics? People who have websites. Who has a lot of websites? The guys over at Webs, so he partnered up with them, I think, to create a white label version of Clicky. I think that was the company. Do you guys do any of that? Any ad buys or partnerships with these people who are . . .

Chris: Sometimes, yes. We’ve done partnerships with people. We’ve done ad buys. For us, more than anything, we build relationships. Building relationships with the right companies and knitting the companies’ products together has been very valuable.

Andrew: How do you do that? You’re a guy running an analytics based video publishing platform. You want to get to know the guys at Clicky. You want to get to know the people at Constant Contact. You want to get to know the people at MailChimp. You want to get to know others. Can you just cold call them? Do you reach out to all of them and say, ‘Hey, just we happen to be in the same space, we should get to know each other?’ or do you need to have a specific goal for meeting them? How do you get the connections?

Chris: The first thing I’ll say is that I have not done a ton of these. What I found is that sometimes cold calling works. It’s pretty tough though. You have to really sell a strong vision. The reality is that if you’re a much smaller player, you’re going to have to really get people’s attention. What I found to be better is trying to figure out how can we drive value for their customers. What can we do on our side, that doesn’t even require them to do a thing, that will give their customers more value.

Then, when you reach out and say, ‘Hey, we have this thing that should make your product more valuable.’ Most people are like, ‘Oh my gosh. You think our product’s valuable? That’s great. You’ve done something to make it more valuable and we don’t have to do anything?’ That’s like a gift. In one sense it is. In another sense it’s just better for all the customers involved. I would say pick your battles carefully. Find things where you can actually add more value. If you can do that without having an existing relationship, and it’s something that can stand on its own, then that’s a pretty amazing win [??].

Andrew: I know, for example, that you’ve done that with Mail Chimp, because every time I grab the embed code to play a Wistia video on my site. I see a tab that also lets me integrate with MailChimp and send out, right?

Chris: Yes, and we did that with all the other major ESP’s, so you can grab an embed code for MailChimp, for Campaign Monitor, and for all those guys. That’s been really good. It’s one of those funny things. Not a lot of people asked for it, and then once we did it was used a top[SP]. It’s pretty cool.

Andrew: I see. The guys from Snap On Gauge[SP], Gerome[SP], he told me what they did was, they integrated with as many different partners as possible, just so they could get on those ‘integrate with us’ lists on those sites, and he got a lot of customers that way. So, they integrate with Highrise, that means that Highrise sends them a bunch of customers. That’s one thing that they did well. So, we see that in play at Wistia, we see it at play in other places. What’s next?

Chris: Really, I would say using analytics as much as possible to know when you’re selling – what’s working and what isn’t. So many businesses on line, a big part is marketing, getting people to pay attention, learning about you, and running the ball across the finish line and actually calling people up and sending them emails and all that stuff. An example from us is I remember when we actually launched the analytics. We made a video. I made Screencast to launch it. It was about a minute and a half long to 60 different people in the press. I launched the analytics, but I wanted to give them context so I was like, ‘Well, you can do all this magical stuff with Wistia. And, introducing analytics, they’re the best.’

When we looked at our data, we found that only 20% of people watched the part of the video that included analytics. It was a wake up call, that while we thought we had done this great job of getting this out, people did click play. They opened the email. They clicked the link. They clicked play. But, we lost them because we weren’t punchy enough. We didn’t get to the point. So, I sent individual emails back to the people who I knew had not seen that, explaining it. A bunch of people wrote stuff about us. That was huge at the time because they wrote stuff about us. That drove traffic. That drove trials. People signed up for the product. It was a pretty amazing way to go through and close deals.

Andrew: I should do that more with Wistia. I know I use Wistia for videos that sell to the premium membership on Mixergy. I forget to go back into the analytics and see. In the video explanation of what premium is, what are people stopping to look at, and maybe rewinding? What are they ignoring and fast forwarding through? Where do they drop off completely? Then based on that, I should either explain that feature better or I should just stop explaining because nobody cares about it. Maybe even drop the feature in general.

Chris: I’ve seen many times, people have videos that are two minutes, but they’ve sold everybody by 30 seconds. You’re just giving them a chance not to go to the next page and sign up. So, cut that minute and a half off. Done. I think all that stuff is super valuable.

Andrew: For web pages, as opposed to video, if you want to look at the analytics of a page that you’re sending out to media or that you’re sending out to clients, what’s good software for that? Is it Crazy Egg? Is that the best one to look at to see where people are spending the most time?

Chris: We have a used a lot here. We have used Crazy Egg in the past. We have used Performable, KISSmetrics, Google Analytics, Clicky. I find that there are often very interesting things we learn that are different about all of those things. I would say Google Analytics is a good start. Making custom segments in Google Analytics gets you a really long way. I didn’t appreciate how powerful that was. You can say, I want a segment of only people who touch these certain product pages, and I want to see how they interact. That’s the kind of thing that you probably already have the data, and you have no idea that you’re not pulling it out.

For real time stuff, Clicky is great, because you can see the spy of everybody who’s on your site. You can even tag people. If you see someone who’s on your site and they have 20 views, we’ll bounce on and chat with somebody on Olark or we’ll send them an email if we know who they are. Essentially just grab those super engaged people by looking at who’s on the site on spy. So, I would say all of those things are good. I love analytics.

Andrew: I want to spend a little more time on Analytics then because you are so good at it. So what you will do, one of the things that stinks about B-to-B is that you don’t have high numbers. That you’re not looking at your website everyday and going, wow we now have 30,000 people that are hitting our home page. How do we convert those 30,000 better. It doesn’t often happen. You end up with dozens at first and hundreds later on and that’s a lot of people who are coming to your site.

So what you do is, since you don’t have that many people on the site, you can watch them individually on Clicky and if you see someone hit a certain page and then spend a certain amount of time on your site, where you personally are spotting that this person is really digging in, you’ll pop up a live chat box from OLARC and you’ll say, “Can I help you with something?” You’ll just interact with them?

Chris: Yeah. We’ll do that. I mean we’ll also use (?) animation stuff. So we’ve used HUB Spot and Pardot.

Andrew: Tell me about Olark for a moment and I’m going to write a note here about Hub Spot and find out how you’re using them.

Chris: Yeah. So . . .

Andrew: Are you trying to close the deal with Olark?

Chris: The thing that I found, so with Olark we do a bunch of different things. We have an Olark on the website. We have an Olark in trials and then Olark for customers. So we use it for support. We use it for trial management. We use it for onsite traffic. We’ve broken those into different buckets so that we can monitor the types of questions that come up in each area. Sometimes that means reaching out to someone directly because they’re a particularly hot person, but often it means, actually where we get a lot of value is just understanding what the needs are, at people at each different stage.

There’s all this stuff that people are never going to tell you. They come to your site and like, oh I hate that graphic or I don’t get that you guys do video hosting, which is something we used to hear, which was crazy for us but we did hear that. That’s not the kind of thing that we could ever see through conversion traffic. We’d have to have the idea, oh let’s test something that says, we do video hosting and then, you know what I’m saying?

Andrew: Yeah.

Chris: Then (?) would ask us in Olark do you guys also host the video? Do you guys also do this stuff? Especially like the biggest questions that don’t have a place for people to go and they often won’t even leave feedback because it’s like, what’s the point? Like, I have a question about this, it’s like if they can’t explain it to me I might as well bounce. That’s actually where we’ve seen an enormous amount of value out of Olark.

Then the same thing by segmenting the different groups you can see what issues are coming up with customers that are consistent issues that we can fix. What issues are coming up with trailers, what’s confusing about the products when you’re trialing it and what’s confusing on the website. I would say those things are really powerful and then of course if we see someone we know is like particularly engaged, we’ll reach out to them directly.

Andrew: How do you know who they are?

Chris: Most of the time you don’t. You can get an idea. With Clicky you can see the IP address and network name and you can also tag people. If you someone and you talk to them you can be like, oh that’s Andrew and then when you’re looking at your sites, it’s like Andrew is on the site. If you got religious about it, which we’re not, I mean we used to be religious about it but we’re not really anymore, but you can have lots of people tagged. You can tag all your trials. You can see what every trial is on the website if you want.

Andrew: So you have your system. When someone tries the software they give you their name. You then tag them with their name so that every time they’re on the site in the future you can say, that’s Andrew, the guy who registered anyways, Andrew interacting with my software he hasn’t bought yet maybe I can chat and find out why?

Chris: Yeah.

Andrew: I didn’t know you could do that.

Chris: That’s something we used to do a ton of because we had to. We had to know what wasn’t working and what is. As our volume has gone up, we don’t do that as much and we rely more on other tools, but that’s an incredibly valuable thing to and if you’re numbers are low, it’s easy to do and it’s easy to see when people are on there. It also helps you build intuition about what pages work, which ones don’t, which flows work. All that stuff that’s really hard to see and you definitely can’t get statistical significance with A-B testing because you’re numbers aren’t there.

Andrew: That’s amazing. I’ve used Clicky forever. I’ve interviewed the founder. I’ve heard people including Gary Vaynerchuk rave about the spy feature and I just didn’t understand why would I care about the spy feature and if it’s just a bunch of numbers, IP numbers on your screen there is no reason to care about it, but if you tag them now I get the reason. All right, especially if you’re B-B and you’re trying to close each sale and each sale is much more valuable than it is in the business-to-consumer world when it’s in the business-to-business world. What about Hub Spot? How do you use them?

Chris: So, we don’t really use them. We used to use Performable, which is a company that they bought like a year ago . . .

Andrew: They do landing page conversions at Pro Forma.

Chris: Yeah, landing page and they do Life Cycle Analytics, like how are people performing in Life Cycle.

Andrew: OK.

Chris: So right now we’ve been playing around with a tool called Par Doc which does a very similar thing and essentially lets us build profiles of people on site so we can see ‘oh, you’ve touched this many pages. Fire off an alert to us,’ or essentially the trends that we used to get by looking at the individuals, we’re trying to get that across a larger audience so that we can understand that certain pages are more important than others and certain funnels are better than others, and we’ve actually used KISSmetrics as well for us in the past. They’re all kind of different sizes at the same point and I found value out of all of them and honestly, we tried their products to see how much we could learn from that and [?] around.

Andrew: All right, let’s go on to the next big tactic. What’s the next big idea?

Chris: The next big thing is try to figure out how much time and money you’re saving your customer. For us, this is a very hard task at first because most of our customers have never paid for video distribution before, or ever really thought about paying for it. Most of them had used some of their free products before but sometimes that free product is like a home-brewed thing, and so we struggled for a long time to figure out exactly – people are going to come to [?] and say ‘OK, I have 3 videos. The R.O. [SP] on this video is, I have 4 hours of time that I didn’t spend talking and that means that I can save this much time, blah, blah, blah, blah, blah.’

As much as I would love for people to do that, it didn’t happen, but I do remember very vividly, one story in particular actually was my friend Christopher from Perform Ball [SP], which is now Hostbot, and they were a Wistia customer and they had been a Wistia customer for like 3 months, and we’ve changed our pricing for contacts [?] 35 times since the inception of the business and always trying to figure out how to price it to get the value right for people, and to create as little friction as possible for people signing up, so someone else had bought Wistia already, like Christopher was using it, and he said to me ‘you know, I used to get called to go into these sales demos like every day, 2 or 3 hours a day, and it was destroying me.

I couldn’t work on the product, so I made video walk-throughs of the product and I put them on Wistia and then the sales guys wouldn’t [?] on the video. They would send the videos out before the call,’ and ‘I don’t have to get on the phone now, and those guys are closing stuff and I can see what parts of the demos, like we’re working, which parts work.’ So it’s like he gets to make a superhuman version of himself to automate away all this time and I heard that kind of thing from other people before but when we heard that from him in that way, it was definitely ‘wow, this is about the way that we’re saving people time and money is by automating themselves and giving them the chance to be the best version of themselves, like on their website.’

While there isn’t a very easy mathematical calculation to do for that, it was enough that people now get it. So we can say ‘yeah, video marketing is all about automating and scaling communications.’ I’m like ‘you’re right, it is.’ You’re like ‘oh, well,’ and now you can see how things are performing and what’s working and what isn’t so you can make your message perfect, like on point to exactly what your audience wants.

Andrew: Why is that so important in business? Why is that one of the big ideas here that we’re figuring out how much money we’re saving people?

Chris: It’s a big idea because nobody’s got enough money and nobody’s got enough time. If you can give people time or money, you win.

Andrew: So for businesses, can you save them time, excuse me, can you save them money or make them money, or save them time?

Chris: Most people think about using us, the more people that they tell their story to, the more money they’re going to make because they’re telling their best story to them, and we’re saving them time because they’re not on the phone, they’re not in person, they’re not doing a presentation at a conference, whatever, and doing both of those things.

Andrew: I see, so if I’m selling Mixergy, for example, I should keep thinking ‘how much time is the premium membership saving people? Are they having to hunt down the key ideas, are they having to go figure things out for themselves?

Chris: Exactly. You’ve done the value, doing tons of hard interviews with amazing mentors, with amazing leaders. I put them all in one spot. So you’re saving people time from looking for other things. You’re putting it in a particular order of learning, which is also helpful for them, because they don’t have to figure out which way to look for things. And you’ve sorted it, which is also helpful, and it’s a resource that you can come back to. “If I can learn something from Mixergy that’s going to help my business, it’s crazy not to sign up because there’s so much stuff to learn.”

Andrew: And you’ve got to quantify it. How have you quantified it, or have you been able to quantify it yet for people?

Chris: I think for some people, yes, and for a lot of people we haven’t. The big message that I found was: If you could have two thousand people come through your office today, and you could tell exactly why Mixer G Premium is amazing in two minutes, and you knew it was going to be perfect, would you spend eighty bucks to do that? Of course you would. And so that’s the closest analogy I can give you. You can see that people are accepting your message the real way.

There are other things that people do that are closer to other forms of value that they get. Lots of people use us for video SEO, and they can see the traffic they’re driving with video SEO and they can see how the traffic converts and that turns into deals. Or they can see that they put a video in an email and it improves the click-though, or they can see it improves the conversion on their site. But in general, I still think it’s about knowing that you’re telling an amazing story and knowing that people have seen it. Or figuring out how to tell your amazing story is often much more valuable.

You can have twenty people watch a video, learn the right way to pitch your product, and now run around telling everybody. And if you have the right way to pitch your product, and your company is thriving, how much was that worth? I’m not going to give you a hard number, and you won’t have one either. It’s somewhere above the value that you’d pay for it, hopefully.

Andrew: I wish every business were as easy to do that in as, say Visual Website Optimizer, who’s founder I interviewed recently, where, at the end of an AB test on Visual Website Optimizer, if you’ve tagged your pages right, he’ll tell you how much money he’s made you based on picking the right variant. It’s not always that easy. But we should, though, always strive to show our customers in business how much money we’re making them, how much money we’re saving them, and how much time that we’ve gotten them.

Chris: If you can show them exactly how much money they’re making, show them. That’s great. That is welcome to the rocket ship. But I think that for most people, it’s pretty hard to show the exact ROI of anything. And it’s just about getting the closest analogies, the best way to describe your product or service, that makes it clear to somebody else. “Oh yeah, I guess you’re right. If I watch Mixer G Premium, I get to market a month faster. Or I find one other product that helps me not have to hire a designer.” How much is that worth? It’s worth a ton.

Andrew: It’s so different from business- to consumer-based businesses. Facebook isn’t sitting there saying, “How can we save our users more money?” Maybe now as they’re getting to business customers they’re starting to think of that in the business space. But when they’re marketing to consumers, they don’t have to think about how much money we’re making our users, or how much time are we saving them. In fact, if we waste more of their time, it means we have an even better product in the business to consumer space.

Chris: The funny thing is, of course, if you can get just good at describing the thing, which is not the exact ROI, but the analogy of ROI ,if you will, to somebody, businesses pay for that.

Andrew: “It’s as if you had another salesperson on staff.” That’s what you mean. Create the analogy that puts that money in their mind, the value in their mind.

Chris: That’s what businesses do. They pay to save time, and they pay to make money. So if you can give them and ROI where they’re saving time or making money, you can sell a ton. That’s the amazing part about it. You don’t even have to say I’m going to make you $500 for every day you use my product. You can just say, this is to replace a salesperson or this is to make your salesperson more efficient or you’ll double the efficiency of your salesperson. “Wait, double the efficiency of my salesperson? That’s going to double my sales. Of course I’ll pay $500 a month for that.” But if you just say this is a bland, shitty CRM, that sucks, and it’s harder to sell.

Andrew: We have so many more to get through. Because you and I have been friends for so long, I was especially eager to get as much meat into this interview as possible so the audience doesn’t think, “Andrew’s just chatting with his friend and posting it online. I wanted them to know that Andrew’s going to deliver value. Andrew’s going to make sure that this is the useful business to business how-to seminar possible. This is not like an interview. This is not like Barbara Walters sitting around and asking you how you’re so wonderful. I want to know how my audience can be so wonderful. It’s the exact opposite. What’s the next big idea?

Chris: I would say start selling when the product’s been finished.

Andrew: Even when you’re selling to businesses, you want to sell an unfinished product? Don’t you want to look polished? Don’t you want to look like you can solve all their business needs and never make a mistake?

Chris: Of course, in a perfect world. You want polish. You want a flawless experience. You want all that stuff. The reality is you can sell your product when it’s unfinished to the right customers. Those customers are the people who take bets on early products. They want to get an advantage over their competition or they just believe in the concept of what you’re doing. You can get people to sign up to things. It’s shocking what we had when we had our first . . .

Andrew: What did you have when you started selling? Eric Ries of the Learn Startup movement told me this was true. I think he said, ‘Most businesses think it’s not true.’ They always think it’s not true of themselves. that they’re the special case. Not everyone can be a special case.

Chris: If you had asked me when we were doing this if we should do it this way, I would have said, ‘No’. But, we had to make money. We had people who wanted it, and so we sold it. When we first started we had no sign ups. You couldn’t sign yourself up. You could upload a video into a list of videos. You could not embed it. There was no account administration. There was no logo change. There was no play list. There was no analytics. There was no sharing.

Literally, all you could do was invite someone by email to watch a video, and that was it. How did the interface look when we started? It looked like shit. It looked like crap. At time we were [??], an it was amazing at the time. In hindsight, of course, there were so many rough edges that we wanted to fix. The reality was our first customer really needed this product.

Andrew: What did the first customer need that you said yourself was crappy?

Chris: The first customer was a company called [??], a medical device startup. At the time, I think there were 30 employees. Maybe 80 or 90 employees now. They were doing clinical trials around the world, testing their device. They needed a way to share video of this device in action. The video was really important because they could see how to improve the device, how to improve the procedure, essentially the way they were going to iterate on their product was with video. Also, because it was of surgeries, they couldn’t put this stuff on YouTube. They didn’t want to deal with hosting it themselves. They needed it to work around the world. They needed a private way to share this video around the world.

For them this worked well. Even crazier than that is when we first went in and met with them, we didn’t even have the product. They knew that we were the video guys who had done this portfolio thing for artists, but we didn’t really have a product. We just said, ‘What’s your problem?’ They told us the problem, and they said, ‘I think so.’ And they’re like, ‘Alright, we’ll pay you to build this thing.’ We were like, ‘How about instead of you paying us to build it, you just pay us a fee to use it, month by month?’ They were like, ‘Are you serious? It’s going to take you a while to build this thing.’ We’re lie, ‘Nah. Just pay us a monthly fee.’ So we made up a number because we had nothing. We made up $400 a month. They were like, ‘That sounds fair.’ They went for it, and we built a product in a week and a half. It had to be crappy because it was so fast.

Andrew: What did you learn by publishing before the product was finished instead of waiting until it was perfect?

Chris: We learned what things were important that we didn’t realize. These guys, their expertise was not video, but they had to use a lot of video. For us to help them, they got a lot more value than my film maker buddies who thought $10 was expensive. We learned really quickly, in terms of refining our target market, dear lord, we should be focusing on this market because they have a lot of money and they need us. Too, I think how much value can be delivered with something so simple. We’d spent the first year making all that crazy stuff. We made that job board. We made really bizarre ways to manage media. We made our own scrolling bars. We made everything. Here we were with this really simple thing, and these guys were like, this is . . . $400 a month is a great price for this.

They were so enamored that when we raised our first angel round, the CEO was one of the first people to line up like, I’m putting up this capital.

Andrew: Wow.

Chris: So, it was pretty cool.

Andrew: Wow. Smart people can get themselves into a lot of trouble because you’re capable of building so much, You’re building scroll bars and changing the drop down menu system. It’s good to discover that we don’t really need that, the ones that pay don’t need something so elaborate.

Chris: That’s the thing. It’s just like, if you can make the simple thing that is easy to sell or just easy to use or easy to get value from it for the right person, you’re on the right track. We didn’t need credit card payments. We didn’t need overages. We didn’t need any of that stuff which I think if we started today and the market was more mature, we’d look at it and go, man, we could probably nail that stuff. So, I think it depends a little bit on the market, but absolutely your right customers will pay when the product is finished.

Andrew: All right. What’s next?

Chris: So, really gaining credibility by acting your size, I think, is really important. When I say that, I mean like, if you’re small admit that you’re small. So, to go back to the (?) example, they knew exactly how they grew up. There were two of us sitting in a room with three people from that 30 person company. They knew what they were getting into. They knew the risks that they were taking, and they were willing to take them because the problem we were solving was important enough.

Now, we didn’t really listen to that. I didn’t understand this at the time, and when Brendan and I were building our website and then later when we had four people on the website. We’d raised an angel round. It was Brendan and I, and Ben and Adam who did the engineering. Of course, we put on the site a management team, and we put four people as the management team to imply we were a bigger company. And we tried to make our text on the site make us seem like we were just this huge business that dealt with lots of other businesses and we should be trusted.

The thing that we didn’t realize at the time was that people can just see right through that stuff. As much as you think you look big by acting big, you look small by acting big if you’re not big. Actually, just being honest with how big the company is and what people are getting into is really good.

An example now is the company today, we’re still small. We’re 12 full-time employees. Over the last year we’ve gone from five people to 12. That’s great. It’s really, really awesome for us. But you can see on the website when you talk to us, you know that we’re a small company. People will call up, and we strive, for example, to have amazing customer support. We work really, really hard on that.

People will call up and be like, I know you’re a small company. That’s OK. Thanks so much for getting back to me and so forth. When we pretended to be the big company, they’d be like, why haven’t you gotten back to me yet? Oh my God. Just people complaining about all this stuff, and we would be swamped. And it would be like the best time ever for the business, like oh my God, we closed so many deals. But we were getting berated and people were super mad at us because we were pretending to be big. The second we acted our size, we got a ton of respect. So, if I could do it over, I would have stuck with our original unintended strategy which was just being honest with how big we were and that the right people are really adopters and want to take the bet on you. And they know they’re going to get a good deal on the other stuff we do.

Andrew: All right. You also say that in order to get customers, you need to do crazy things, like what?

Chris: Yeah. So, we had three customers, I think. It was a month and a half after we switched to Wistia from the Portfolio website, and we amazingly had gotten an intro to HBO. This talent agent had heard about us and talked on the phone, I’ve got all these ins. You’ve got to come to HBO. I’ve got a huge deal for you. We said OK.

And then, he said, “All right. I’m meeting with HBO tomorrow.” This was on Monday. It’s actually my birthday. It was my birthday in 2007, and he said we’re going to meet with HBO tomorrow. Brendan and I, at this point, were living in a ten person house, living on $15 a week for food per person because we were sharing with ten people, like commune style. And we were the only people home for lunch. We decided that even though it was the next day and even though we had like little money it was too important to pass up going (?) with HBO.

And so we bought flights for that night and we got on flights and we flew to LA, and barged into the meeting with HBO. Because we felt we had to be there. And we got there and the HBO guy is like, ‘Oh, hi, nice to meet you. Have you seen (?). It’s really cool.’ And he had all these type of comments, all this stuff. And we’re like, ‘Yeah, we actually built that.’ He’s like, ‘What.’ And that was an enormous amount of the money that we had saved. It cut our time to live down pretty dramatically.

But it was the kind of thing that made an enormous difference for us. And even in that case, we didn’t end up getting the HBO deal and we ended up kind of backing away from it, because it wasn’t the right fit for a number of reasons. But when other people saw that we had flown to go see HBO, they were willing to take us seriously. Because HBO . . .

Andrew: It seems we lost the connection.

Chris: [inaudible]

Andrew: Because you said, ‘They saw that we flew to HBO, and even . . . ‘ And then I lost you, because the connection.

Chris: So people knew that we had ongoing relationship that we were trying to build with HBO. But even though we didn’t close the deal, it gave us an enormous amount of credibility that got other customers to sign on.

Andrew: Just saying you were in the room with HBO.

Chris: Yeah. I worked with head of production in HBO, and there’s Donald Lobe [SP] from the (?) walking around, and the frosted glass offices, and all that crap. And this was a month and a half after we switched to (?). Which was insane, and it was a huge amount of the money we had in the bank. But it was crazy. I would do it again in a heartbeat and it was (?).

Andrew: We have two other tactics that you’re going to be teaching people. But I think it’s important at this point to talk about how long this took. Because these tactics all seem so easy, and they are, they make sense, and they’ve helped you. And I can see people in the audience going out and using some of them and not getting results quickly. And saying, ‘Maybe Chris either didn’t tell us the truth or he missed the secret extra tactic that really did it for him’ or something else. But the real secret tactic here, that we’re not going to go into detail on, is patience and time. How long have you been running what a lot of people call a start-up at Wistia? How long have you been running Wistia?

Chris: It’s been over five years.

Andrew: Five years.

Chris: Yeah.

Andrew: And, by the way, over five years, many of those days living on $15 of food, many of those days trying to figure out whether the whole thing is going to work out, changes and pivots and doubts. How long from the day you launched to the day you got the hundred customers that you talked about at the top of the interview? Roughly.

Chris: I would say a year and a half, two years.

Andrew: A year and a half, two years, in order to get there.

Chris: I think so. Yeah. Probably a year and a half.

Andrew: OK. You applied for Y Combinator. Can we talk about the results of what happened there?

Chris: Yeah. We did not get in [laughs]. And it was really early. I think it was the year after Reddick [SP]. Because I had met the Reddick guys, I had met Alexis and he was trying to help us get in and stuff. And actually, it was right before we made the transition to Wistia. So we had this video encoding, transcoding idea, we had the portfolio website for artists, and then we had the kind of application level thing that we were doing for a medical device company. And we tried to include all those three things within our occupation. And it’s funny. I think if someone gave me that application today, I would say, don’t let them in. Because we weren’t focused enough and we weren’t ready. And also my co-founder Brendan is really technical and I’m somewhat technical but I’m not a developer. So we were just not the right fit, I don’t think. So it’s been a long road, but it’s been a really, really fun road.

Andrew: Andrea, in her notes to me, said that you were picked by Business Week to be top 25 entrepreneur under 25. Is that right?

Chris: Mm-hmm.

Andrew: So that’s a high. Talk about the low, when you were rejected from Y Combinator and they didn’t want to fund you. What’s one of the big lows? There are certainly a lot of highs. You even included here a chart of your traffic, even though you’re not a website that depends on traffic. You want your users to use your software. So you’re showing me how even your traffic has increased over the last year. You and I privately talked about how business has increased at Wistia over the last year with more and more customers. But show a little bit of the vulnerable low, if you don’t mind.

Chris: Sure. So yeah. The (inaudible) but honestly, didn’t understand how big a deal it was back then because there had only been (inaudible). That was OK. One of the biggest [blows], by far, was we raised an angel round almost two years to the day from when we started. A little under that. Brendan and I hustled really hard to get this deal together. We brought the money and we got it in the bank. We brought on two more awesome people and we got an office. We’d made projections with help from investors and other people and our projections had us being cash flow positive in four months.

Andrew: In four months?

Chris: Yes. We actually had just gotten, I would say now, a false positive of [Salt Line] Enterprise businesses that would pay us up front for the year. We had just sold like three of those in a row. It was like wow, we are just going to sell these. This is going to be so easy. We did not close a single sale for like four months, I would say, right after we closed the round. Literally we closed two deals right before the round closed. Closed the round. Nothing.

That was devastating. Yeah. That was devastating. That was just like this is the worst thing that could have possibly happened, essentially. At the time we had enough customers to barely sustain Brendan and I in our meek apartment. Now we had taken on all this risk, we’d raised all this money, and gotten all these new people involved. Now we couldn’t do shit. I was cold calling every day with Adam. He and I would cold call in the morning and then we’d do our California cold calls in the afternoon. Getting nowhere. That was a serious blow.

Andrew: Why did you keep going then?

Chris: I don’t know. I felt a responsibility to everyone around me. I felt a responsibility to myself. I felt like we had done something and it would be crazy to stop. There was a shred of evidence that things could work. I remember vividly, I’ve said vividly probably like six times so far.

Andrew: I didn’t notice.

Chris: Yeah, I remember giving a proposal to a customer in July. It was like what’s the price? We said $50,000. We needed that money bad. They were like OK and then they never spoke to us again. We had been talking to them and up to that point it seemed like Wistia’s the perfect thing for them. Then it’s like OK, this is not going to work.

Actually, what turned things around was we started to do a little bit of advertising on ad boards. Just playing around with things. We still continued to go to these start-up meetings. Essentially just commiserating with other people who were not doing well. This is in the summer of 2008, this is right before the big financial crash when all that stuff was happening. In August, I believe, is when it really got really bad. We were (inaudible) closing our deals and August is getting really bad.

We’re going to these meet-ups and people started to talk to us about being interested in what we were doing but at about a tenth of the price that we were putting out there. At the time we were trying to get people to pay $800 a month. Where we ended up four months later, and what allowed us to start closing deals, was bringing that price down to $80 a month. I remember in October of that year, two months after this, Cirque de Soleil signed up as a customer.

They came to us through an ad board for something that we thought was how we should describe ourselves. They loved it but they were not paying us a ton of money. That’s when we realized that we had to kind of change just the focus of even the pricing and packaging, that kind of thing. We had to focus on that and dug our way out of that low.

Andrew: Because of those conversations with people, who, as you said, you were commiserating with for much of the time, you went from $800 a month to $8 a month?

Chris: No, to $80.

Andrew: OK, to $80 a month. You really did take it down to a tenth because that was the feedback you were getting.

Chris: Yeah, we also at the time were charging for users. Because it was private sharing. It was unlimited viewing for 50 people. We didn’t have bandwidth or anything else in the mix. Now if you went and looked at those people using it, the people who paid $800 I’m sorry. I feel bad because of the deal that we got but it helped sustain us and was the right thing to do. It was just so funny because for us it was like we took this departure going enterprise, hit this horrible low, clawed our way out of it by reducing our price, changing our focus for what we were going after, figuring out how to target users, all that. That’s when I really started to learn all these things, and then everything just grew.

Andrew: All right. Next big idea you say, “Remove all friction from process of using the product.”

Chris: Yes.

Andrew: How do you do that and why?

Chris: So the reason to do it is that, if people can’t figure things out, they often assume that your product sucks or that it doesn’t have the [???]. So that’s why you do this. We were introducing a new version of Wistia , a new version of the user interface. And we were real excited about it. It looked really amazing. I remember, at the time, we still do this, we go around to our friends, and ask them to do certain tasks with the product, so we could watch them and say, “Can you invite someone to this? Can you embed a video?” And I remember once showing my girlfriend, and she had seen Wistia many times and obviously was a fan of Wistia. And I asked, “Hey, can you upload a video?”

And she started a trial, which we had at that point, and she looked in the account and she said, “Well, I don’t see an upload button.” And I said, “Ok. Well, you need to create a project, because all videos go in projects.” And she asked, “Well, how do I create a project?” And I say, “It’s under this menu. Click the side.” So I go and I show her, drop the menu down and she goes in there. And then, again, she says, “I don’t see an upload button.” And, of course, we’d hidden the upload button in the menu. We got lots of similar feedback from people with similar issues like that.

We had to build all of this advanced functionality into Wistia because the project had grown and matured, and we wanted a way to have it grow and mature further. And so we built these drop-down menus as a way to do that. But people were missing that they were drop-down menus. So we did little things like added shadowing, popped them open the first time that you landed to a project, added instructibles saying “upload here” and pointing to that specific area. And the result was, as we went around and showed our friends this product, people went from asking questions to saying, “What’s next?”

And magnified by hundreds of thousands of people trying your product on a monthly basis, that stuff makes an enormous impact, especially in the beginning. I can remember a deal we did not get at the beginning was when we tried to get PBS. We’d given too high of a price, and they thought the product was too hard to use. Now they are our customer, and it just took them three years and it took us three years for us to meet at place where it was easy enough for them to use it, the price was right, and all that other stuff. So I would just say, removing the friction and just a fear of the back button is what drove us, and it has been amazing to really focus on that.

Andrew: You have PBS as a customer?

Chris: Yes.

Andrew: And what do you mean by, “fear of back button?”

Chris: If I try a product, and I don’t think it’s working, or I think it’s crappy, and it’s a waste of my time, I’ll just hit the back button to get out of it.

Andrew: It was Paul Graham here on Mixergy who said your biggest competition is that back button. People are always watching your site with their finger poised on the back button. If it’s not easy enough to understand, if they don’t know what to do next, they’re going to hit the back button and go away.

Chris: Yep.

Andrew: And I remember, actually, the early days of Wistia, where I didn’t understand exactly about projects, and where do I upload. And in time, like you said, I just kept seeing it get easier and easier. The drop-menu was already popped by then. Today if I go on, there’s what looks like hand-drawn instructions that says, “Do this.” And now that I’m a long-term user of Wistia, I understand the purpose of projects. If we do a course and we have multiple videos, I don’t want those all over the place. I want them in one project. If I’m creating a how-to guide for people here internally at Mixergy to do certain things around email or around posting our videos or whatever it is, I want them all contained within a project.

Chris: Yep.

Andrew: So now I get it and I see the product as it evolves. It’s so frustrating though. I don’t even know how to communicate in an interview how frustrating it is to know that it’s all about uploading, and even have your own girlfriend not know how to use the product. There have been times when I’ve gotten feedback like that where I would say, “I hate my life. I hate the world. If I can’t even get this basic thing right, I’m done. Everyone else seems to have it right. And here I am. I can’t even get the basic stuff working.”

Chris: Yeah.

Andrew: All right. Final big tactic. What’s that?

Chris: Remove as much risk as possible for your potential customers as they’re trying to figure out whether your product is the right thing. A simple thing as having a free trial versus not. Forcing people to pay, that will remove some risk. But there’s one thing that we did that was amazing for us that was all about [removing rust]. Where we noticed that sometimes people would try Wistia and they would figure out how to upload a video and embed it and then they wouldn’t buy. Or other people would embed one of our sample videos and go put it on their site. See the stats on themselves and then they would buy. We were trying to figure out why can some people do so little in their account and buy an account and other people can do so much and not buy an account?

We found some work flows that at every stage of the process involved another risk that someone is going to have to take. An example is you’re going to sign up for a trial means you’re going to give your email address which means I might spam you. Then you upload your video. Can you delete it? Is it just out onto the public interwebs? Can anyone see this thing? If you embed it am I putting crappy code on your site that’s going to break other things? These are actually pretty big hurdles for lots of people to get over. I like to think of those hurdles as risks.

When we found that there were people who were doing very little but getting a lot of value. We tried to take that work flow and remove as much risk as possible by making a demo on the site. We made a video heat map demo where you can watch a video that directs you to rewind the video, skip ahead, and you actually build your own heat map, video heat map, in real time. A heat map is just an example of how one person watches a video.

The crazy thing was previously you had to start an account, upload a video, embed it, put it on your site, watch it, see the stats of yourself to have this experience. Now you can be a first time visitor to Wistia.com, have never given us an email address, and just instantly do a demo and figure out what it is that we do. The result is that way more people are going to get to that final stage because you removed all the risk.

We recently launched another feature called Super Embeds where you can put videos on a pop over and (inaudible) [actions] and all this other stuff. We did the same thing. We made it a live, interactive demo where you can play around with a Super Embed of one video. The result was huge. Tons of people gravitated to that and customized the video and put it all over the place. If we had made you sign up for an account to do that it never would have happened.

Andrew: All right. I want to do a quick plug here and mention someone in the audience. Then I want to ask you something that I haven’t known how to talk about Wistia because this comes across as sneaky but it’s so powerful that it’s important to tell people.

Let me say a quick thank you to Ryan Arp. He’s taken the Mixergy courses, he’s watched the interviews and he’s internalized them. He actually gave me specifics of what he did with it. For people who wonder what exactly is a Mixergy Premium. You get interviews and courses that do this kind of thing to you.

Ryan Arp watched Eric Reese on Mixergy talk about how to keep things simple and build that product and launch the minimal viable product. He, instead of building a full out product, kind of like the same experience you had, Chris, he just created a simple landing page. He said if I get 100 people to sign up then we’ll build the full out product. Before he listened to Eric Reese it might have seemed weird to do that. But after hearing Eric Reese, and so many other entrepreneurs on Mixergy, say just launch something he was able to do it.

Then he took a course. He took the Lewis House course, I’m looking at his emails here, on how to leverage LinkedIn. He created a LinkedIn group the way that Lewis taught. He got dozens of members in it. Within two days he got 87 leads. Then, I guess, he took the Guest Blogging course and he used that to get a steady guest blogging spot to 30,000 people in this perfect target market.

He sent me an email to say that he was on his way. This is Ryan Arp. You can reach out to him at RyanArp.com. It’s important for me that everyone knows that these are real people and how to connect with them and ask them questions like is what Andrew saying about you true? You can have that private conversation with Ryan.

More importantly, I want you to see the value of taking Mixergy premium. Of taking those courses. Of actually not just listening to those interviews that are in there, and there’s 100′s of them, but using them. Ryan’s a great example of what happens. He’s getting leads, he’s launching his product, and he’s getting the word out for his product all using what he’s learning from Mixergy Premium. Not from me but from these experts who have done interviews here and done courses and turned on their computer screens and walked him, on their computer screens, step by step through what they need to do. All that’s on Mixergy.com. You’ll see a big premium button. Or go to Mixergy.com/premium.

Chris, here’s the thing. Some of the best features on Wistia feel sneaky to non-customers of Wistia.

Chris: Yeah.

Andrew: I don’t even know how to explain them. I wanted to talk about, how do I do this? I’ll use myself. I used Wistia just to get a sense of what it was. Like that, I got a phone call from you. You knew I was on the site. We never talked about this, but you must have known I was on the site. Now that I’ve used Wistia for a while I know how. You saw the video I was looking at. I was living in Argentina. At Regis [SP] in Argentina. You saw Regis in Argentina come through as a viewer and you said now’s the perfect time to talk to Andrew. To me it was like, boy, this guy’s phenomenal. Now I understand it.

How do you explain features like this so that people understand Wistia is not just YouTube in a way that doesn’t come across as sneaky?

Chris: Yeah. Good question. The first thing I would say is that I think it’s really analogous to all of email market. How can you look at what an open rate is of an email? That means you know what percentage of your audience is opening it, loading the images, and who in the audience is loading it. Lots of people will use that as a way to calibrate and figure out how to reach out with, right?

Video is similar, and with us the only way you’re going to really know who somebody is if you have some way of tagging them, which means you have some way to interact with them already and you have existing . . . maybe they’re on your newsletter or they sign up for your trial or whatever it is. But ultimately the thing I love about it is it’s really about helping people make better content and then finding people who are most interested in the content. And better content’s better for everybody.

If I make videos that are more engaging and more informative and more useful on Wistia because I’m learning about what people are interested in, then people are wasting their time less, hopefully, by watching them. And so I think it’s kind of like one of those . . . it’s a little bit analogous to Nielson ratings on TV, but if you can just understand what kinds of episodes work well of a show, or what kind of show is good, and then with us you do that to an extreme level, you can just make better content and you can better engage people.

There are tons of products that do this. It’s just a lot of them are marketing automation tools or website analytics tools that are often a little bit . . . like, marketing automation is all about individuals, right, but just a little bit farther removed. I think the only way you can do that part of [??] individual person is spending the time to do it. If I wasn’t doing that I would be cold calling you or something else, so maybe it’s a little better to get you when you’re interested.

Andrew: It is so freaking powerful. You’re right to say it’s similar to email. I’ve done this big email, I guess I do this on a regular basis, send an email to my full list and if I watched it certain people click a link, what I might do is, I might do one of two things. Here’s something that’s worked really well for me. I’ll email people within hours of them clicking a link to come to my site and say in the headline, you were just on my site. And then I respond. That gets incredible open rates. Incredible interaction. It gets incredible click through rates and buys. And what you’re doing is taking that kind of intelligence and bringing it to online video.

There’s so much that I don’t even know how to talk about it. What you told me about connecting email, and I’m not even sure that I can reveal this because you haven’t launched public, but about using video and email in . . . do you know what I’m talking about?

Chris: Yeah.

Andrew: Can you say this? Don’t say anything that you’re going to get in trouble for, right? I can’t edit it out, even though you and I are friends.

Chris: Yeah, no, you can see it on the site, so it’s there. But yeah, you can essentially take a video and generate an embed that’s specific for an email, so for any email service provider. And when you put the embed in there, when people click the link it’s going to pass through who the recipients were that clicked the link and watched the video, so you can see other lists, like who are the people that are watching this interview or another interview or if you want to segment your list into people who care about [??] businesses or consumers or whatever, you could use that as a way to figure that stuff out.

And then on our side, because of the integration we’ll just pull through who they are. You can go to Wistia and see the lists of all the emails that you sent to.

Andrew: It’s so much. I hope people go and check out Wistia.com. I don’t usually do product plugs. I don’t want people to go check out every single product, but there’s so much that we can’t really explain here that I think if you’re a marketer online you’re really going to appreciate and start to see a vision for how to use it.

And also thank you for spending, what was it, an hour or so with Jeremy going through and pulling out tactics that were specific to our audience. I get a lot of requests from people for business-to-business sales and business-to-business interviews because it’s not covered much. Everyone seems to want to be the next Twitter. Nobody seems to talk about wanting to be the next Sales Force, and so I really appreciate this interview.

Beyond that, thank you too for being such a supporter of Mixergy. Back when I was in Argentina, back when I was just trying to figure out where Mixergy was going, you saw it, you talked to me about it. You supported me. You helped Mixergy grow. You sponsored me. You sponsored the event that we did at South by Southwest, and helped us get Gary Vaynerchuk and Frank and get Tim Ferriss to come out in person and to put that event together, and I really appreciate you helping me get that going. So I always say this, thank you so much, Chris.

Chris: Yeah. Thank you, man. I love Mixergy. I think it’s been a really valuable resource for us too, so it made perfect sense to give back.

Andrew: I always say this to everyone in the audience and I see people take me up on this. If you get anything valuable out of an interview, even if it’s not on Mixergy, this isn’t me trying to promote Mixergy to you or try to get you to talk about Mixergy, but when you get anything valuable out of another entrepreneur, drop them a note. Send them an email saying thank you.
Just connect with them at an event and say hey, you know what? I saw you on — you don’t even have to say Mixergy — on that website. Thank me for showing me how to do business sales. Thank you for helping me think through my product. When you do that, when you start a connection with that kind of gratitude, the relationship has so much more meaning.

And then later on, maybe a year or two, five years down the road when you need help, when you need to collaborate. To have that relationship start off with you just saying thank you makes for a much warmer connection. So I always risk drowning my guests in email or drowning my guests in people who come to them at conferences, but it’s important for you, the listener, to do this. Anytime say thank you. If you got anything out of this conversation with Chris, I hope you reach out to him and do what I just did. Say Chris of Wistia, thank you for doing this interview.

Chris: Thank you, man. It was awesome.

Andrew: Thank you all for watching.

Sponsors I mentioned

Membership Blackbox – When we needed to learn how to build Mixergy’s membership site, do you know who we trusted? This dude: Noah Fleming. If you want to learn how to create a compelling membership site, I recommend going to membershipblackbox.com. I’m a member of it, and I’m recommending it to you.

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How does a bootstrapper who creates online repair manuals generate over $4 million in annual sales?

Kyle Wiens is the cofounder of iFixit. You probably know iFixit as the guys who take apart every new iPhone and other shiny gadget to show you what’s inside. iFixit is a collaborative wiki with the goal of crowdsourcing gadget-repair manuals for every type of device imaginable and generates millions by selling spare parts.

I want to find out how he did that and about Dozuki.com, a site that lets companies create vibrant product manuals that their customers will actually enjoy reading.

Watch the FULL program

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About Kyle Wiens

Kyle Wiens is the cofounder of iFixit, a collaborative wiki with the goal of crowdsourcing gadget-repair manuals for every type of device imaginable.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

Andrew: Hey before we get started, these three messages. First, when you’re facing a tough business problem like, “How do I get customers?” Were do you go? Have you noticed that when you do a Google search for those kind of issues, you end up with a poorly-written, link bait article? Well, with Mixergy’s premium membership, proven entrepreneurs turn on their computers and teach you their techniques for getting customers, or press, or new employees, or anything else that you need to be an incredible entrepreneur who leaves a mark on the world. Mixergy.com/premium, check it out.

Next, when we needed to learn how to build Mixergy’s membership site, do you know who we trusted? This dude, Noah Fleming. If you want to learn how to create a compelling membership site, I recommend going to membershipblackbox.com. I’m a member of it, and I recommend it to you. Membershipblackbox.com.

Finally, after he sponsored hundreds of Mixergy interviews, if I ask you, “Who is Scott Edward Walker?”, what would you say? The answer, of course, is he’s the lawyer that specializes in helping startup founders. I’ve known Scott for years, and I have privately recommended him whenever a founder asked me for a lawyer. Scott Edward Walker of Walker Corporate Law. Here’s your program.

Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. The place where proven entrepreneurs come to tell you how they did it. How does a bootstrapper, an entrepreneur with no outside funding, create an online repair manual business that generates over $4 million dollars in annual sales? Kyle Wiens is the co-founder of iFixit. You probably know that company as the guys that take apart every new iPhone and every new product that comes out there that’s shiny, and they tell you what’s inside it. What their business is they have a collaborative wiki with a goal of crowd sourcing gadget repair manuals for every type of device imaginable. We’ll find out how he built that business. I also want to find out about his new product, his new site dozuki.com. It’s a site that lets companies create vibrant product manuals that their customers will actually enjoy reading. Kyle, welcome to Mixergy.

Kyle: Thanks for having me on.

Andrew: Hey, the $4 million number that I got came from Inc. Magazine. I think it was sales for 2010. Can you update us? What were the revenues for 2011?

Kyle: North of that, I’m not going to give a specific figure, but we’ve been on the Ink 5000 list the last three years in a row. 5000 fastest growing company list. We were actually probably I think the only retail e-commerce company to ever get on the Ink 5000 list running out of the garage.

Andrew: Really?

Kyle: We started actually in the dorms and then sort of kept moving from garage to bigger garage to bigger garage.

Andrew: And the difference is of course, if you’re selling bits or advertising, it’s much easier to grow and to get those triple digit growth rates that Inc. Magazine likes to feature at the top of their list, but if you’re selling stuff then it’s a lot harder. Every time you double sales it means you’re kind of roughly doubling the products that you’re sending out.

Kyle: Right, it’s not just what you’re sending out. You have to double the amount of physical inventory that you have. And the problem is that if I increase my inventory by $100,000 in a year, so at the end of the year I have $100,000 more in inventory than I did at the beginning of the year, I have to pay the IRS 40% taxes on that $100,000 inventory that’s sitting on my shelf and I haven’t made any money off of. So it’s incredibly difficult to grow an e-commerce company bootstrapped fast. You can get venture capital and use that money to buy inventory and grow fast, but doing it bootstrapping is much more difficult.

Andrew: All right, I’m going to come back and ask you about the model and why you didn’t do what everyone else online seems to do, which is run an ad only business and make everything else for free. First, I’ve got to ask you this. I get a lot of entrepreneurs to tell me how much revenue they’re making. It feels to me like Ink does an even better job. Inc. Magazine gets even more entrepreneurs to do it. Why do you tell Ink Magazine what your revenues are? Seriously, let me take the tone out of my voice and just really understand. Why do so many entrepreneurs who run privately held companies do that?

Kyle: It’s a good question. For us, it was sort of a prestige thing. Honestly, we’re still calibrating what our 2011 revenues were. So I don’t have an exact number myself because returns still come in and they change the number around.

Andrew: Because if you say we’re an Inc. 5000 company or an Inc. 500 company, there’s a lot of credibility that comes with that, right? That means you’re a fast growing company and you’re real and it sends a message that it’s harder to send if you’re a bootstrapped company. Is that it?

Kyle: Yeah, that’s fair. There’s some credibility there. It’s helped us with getting employees to let people know that we’re legit and we’re not just some fly by night company, but there is an argument for not disclosing revenue at all. 37Signals doesn’t disclose their revenue to the INC. 5000 list and you know they would be near the top every year. So companies find different ways. We’ve debated it internally whether we want to do it or not and we decided that we were willing to let slip a few numbers just to let people know what was out there. The flip side is, and I guess the thing for entrepreneurs to know, is if you’re on the list you’re going to get calls from VCs on a regular basis.

Andrew: Really?

Kyle: What we have found is that the VCs that call us off of the list are pretty low quality. So I would much rather be at a networking event and meet a VC and get funding from them than get funding from the folks who are cold calling me because I was on some top 5000 revenue list.

Andrew: Interesting actually. You really have to be a bottom of the barrel VC if you have to cold call people to get them to take your money.

Kyle: I get cold calls a couple of times a month and I have for three or four years.

Andrew: Well congratulations on the success. Let’s make sure the people understand the product and then I want to go back in time and figure out how you did this because really this is a company that in so many ways you wouldn’t expect to succeed – not a lot of funding, interesting/different business model, you’re in gadgets, you’re deep into gadgets. In researching you I saw more pictures of chips than I think I’ve seen in my whole life. But take me through a typical user who ends up on iFixit.com. What’s his motivation? What’s he getting out of the site?

Kyle: We found when we started that the big issue out there was that people had broken electronics and they had no idea how to get them fixed. You know, you can go and get a VCR fixed anymore. It’s just not worth the repair guys time to know how to fix it much less your money to pay him to fix it. So we realized that there were three barriers to people fixing things. One was they didn’t know how to fix it. Two was there wasn’t a source for parts for them to fix it and then three was it was either going to be too expensive or too much time.

We designed iFixit to solve all three problems by making the parts available, writing free open-sourced service manuals that reduce the amount of time it takes people to do a repair. So if you look at people saying I’ve got an iPod that’s broken that’s worth $40 to me. My time’s worth $40 an hour and the part costs $20. So if I can get them to fix it in less than an hour then it’s worth their time. If it takes them more than an hour then it’s not worth their time and they’re just going to go and buy a new one. So for us the higher quality the manual was the faster we could make an individual at fixing something, the more likely they were to buy a part from us.

Andrew: I see. And the revenue comes from selling parts?

Kyle: Right.

Andrew: Okay. Got it.

Kyle: We got our start, I was in the dorms at (??) and I had an iBook clam shell, like the one with the handle which is like the greatest computer Apple ever made. I dropped it off the bed onto the power plug and it was one of those things where if you held the power plug just write you could get it to work. I knew there was just a cracked soldered joint in there so I figured I could take it apart and fix it myself.

So I disassembled it and I had a soldering iron that I had brought with me to college because I’m a geek. I added a drop of solder, let it cool, was tired because it was like 3 a.m. I figured I’d put it back together the next morning. Went back to put it back together the next morning and I couldn’t figure out how to get the computer back together. So I’m Googling for Apple service manuals to see if I can find something and there was nothing available. It turns out Apple has written service manuals for every product they make but they don’t allow you to post them online. So if you post Apple’s service manual to your site, you’ll get a cease and desist letter from Apple’s lawyers within 24 hours.

Andrew: So if people want it, how do they get one of these things? If they’re not posting it online, how are you supposed to get it? Are you supposed to call them up and they’ll mail it to you?

Kyle: No, they do not want you to have it.

Andrew: Oh! Not at all?

Kyle: There’s no way for a consumer to get the manual.

Andrew: Okay.

Kyle: This is the case with a lot of electronic companies. They don’t want consumers to know how to fix their stuff because if you fix it you’re not buying a new one.

Andrew: I see.

Kyle: So we came along and said that’s fine, Apple doesn’t want to write a service manual so I’ll write my own. So we buy Apple products and we take them apart and we write better service manuals than Apple’s ever written and we post them online. They’re open source and they’re collaborative. It’s a Wiki so if you see an error in our manual or you got confused at one point and you can just add a one line correction or clarification, our manuals are constantly getting better. So let’s say Apple and us release a service mail at the same time for the same product. Maybe Apple’s is better than us initially. Two years later ours is going to be better because we have thousands of people all over the world that are working to make it better.

Andrew Warner: Okay. The very first time that you did this, you just posted a repair manual on your. We’re talking about 2003. You’re just posting a repair manual on your site? For what?

Kyle: Well, so we weren’t sure. Our initial thought was, and this is iterating on the start up. We thought that, your computer is broken, your computer is broken. So you’re not going to be able to look up a manual on the internet. So we actually laid out an end design our first six repair manuals, and figured we’d sell them.

We figured we’d find a way to get the printing cost down later. So they cost us like $13 each to print, we were selling them for $15. Just to try to get (?). And we sold like 45 of them. And we said, this is not working. People don’t want to pay money for a manual. And so then I just exported from end design and their crappy HTML and posted online. And like the first day I posted it we had 10,000 hits. We were like, wow, this is something people want.

And so after that we never looked back. With our first print run was our only print run, and we’ve been giving the documentation away ever since.

Andrew: You know, how do you even, as a new startup, get 45 sales? I know that that’s not much and you didn’t bank your business on it because you saw that that was small. But for a lot of new entrepreneurs 45 sales of the first product is very good. How’d you do that?

Kyle: You know we experimented with, cuz we were selling parts, it was a physical thing. So we experimented with selling on E-bay just to see you know what the market and pricing was. And once you get outside of E-bay you can generally get better pricing for things. But I was sort of surprised. I mean, we set up the very first version of our web store. I mean, I was a freshman in college. I set up the store and then I went home for a week. And my business partner was here. And he called me up like three or four days later and said, hey we had a sale.

We were like, what, we put an e-commerce shopping cart online, we didn’t submit it to Google or anywhere else, and we have a sale in the shopping cart three days later. I have no idea who was on the 150th page of the Google results and decided to buy something. But we were shocked. And so that was, you know, (?) from there. And we did some things with ad words initially to get sales, but.

Andrew: And so to get the 45 sales you did a little bit of ad words, a little bit of luck from people who found you on what felt like the last page of a Google search result, and some e-bay. That’s what got you to 45?

Kyle: Yeah.

Andrew: Okay. And you said that even back then you were selling parts. Was this on your website?

Kyle: Yeah, so we started out. I mean, we sold parts experimenting on E-bay at first and then set up an e-Commerce store and sold parts. And it was for like, initially, 3-6 Apple laptops. This was like in the Powerbook G3 Era. So the G3 Wall Street and (?) Laptops were sort of our bread and butter initially. And it’s easier to get going almost with a parts business because people are out there buying parts anyway. Even like, not the hard core do it yourselfers, but like just these service techs are looking for parts. And if they can’t find a PM new board. So it was relatively easy to get going with that initial batch of sales. Where like a software startup, like Tazooki, it’s harder to get your first 40 clients.

Andrew: I’m sorry for tearing down your story so in such depth. I do it for two reasons. First, I love to study entrepreneurs the way you guys love to study gadgets. I want to take the whole thing apart and understand what makes it work. And the second part is, as we’ll get to later, you’re a celebrity in our space. When a new product comes out people want to see what it looks like first, and then they want to see what the inside looks like. And we always know that you are going to do that for us. So I’m especially eager to learn about every bit about what you did.

So the first business was selling parts and you said, we’ll also create manuals? Or selling manuals and then parts?

Kyle: We started initially selling parts and then. We would actually, we would complain about our customers. The customers kept saying you sent me the parts but you didn’t send me instructions on how to fix it. And so it was like the customers were telling us like, we need this documentation. And it was interesting because this is like, we weren’t by any means the first to sell parts for Apple computers on the internet. And nobody was doing this sort of documentation. But our customers kept asking us for it. And so that was the beginning of, okay, well we’ll, that’s was what gave us the idea. So I think it was like 6 months between when we started selling parts to when we wrote our first printed manuals. And then maybe a month after that that we realized this isn’t working and I put them all online for free. And we’ve gone open source completely, socialist, you have all the information (?). Ever since.

Andrew: You and your co-founder Luke were still students at Cal Poly. What was the vision for this business? Was it to earn some side money while you were in school or did you say, there’s a future here in selling parts and we’re going to do it and be around the bits of the tech industry that we love.

Kyle: The very beginning of this, we were in the dorm. This was the beginning of our freshman year. And we wanted to meet girls. We were just brainstorming ways that we could do it. We said, “It would really cool if we had a projector because there’s a central area in the dorm so if we could host movies then girls would come to the movies then we could” . . . right? And we’re like, “OK, we need $900 to buy a projector,” and so we had this crazy idea that maybe we could sell enough computer parts to make the $900 to buy the projector. So that was how it got going. We made the $900 and then we never really stopped selling parts.

Andrew: And did you get girls from it?

Kyle: Initially, there was no vision. It was just like, let’s make some money to buy a projector. I was doing freelance web design for some folks and I was building like e-commerce websites for wineries just to pay for school and this was sort of a side thing, like, “Let’s make this much money and we’ll stop,” and we never really stopped.

Andrew: Why didn’t you?

Kyle: Because we were making so much money!

Andrew: I see. You know what? So here’s the thing that gets me. Help me understand this. It seems like your business just took off. Sometimes I talk to entrepreneurs and they say, “You know, Andrew, it just took off. I didn’t even plan for it. It just took off.” Other times I talk to entrepreneurs and they spent three years and nothing happened to them and then bam it goes. Am I understanding your story right? That it was just one of those things that the market was just ready for it? You had the product and it took off and brought in money?

Kyle: Yeah, and we were actually struggling. There are so many things that are easier to start a business now than it was back then. Our biggest challenge was getting merchant processing up and running. So we started in the middle of August and, I don’t know, we did something like $10,000 in sales that month. And then the next month, we had a merchant processing deal and they way that before the days of Square and PayPal being nice, things worked that the credit card companies treat you being able to process x dollar amounts as a loan for that dollar amount. So if I want to be able to process $30,000 in credit cards for the month, they know they’re going to give me the money ahead of time so I can charge a bunch of bogus credit cards for $30,000, take the money and run to Mexico. So they were really, really paranoid about giving us credit card processors.

So I think our first month in, like, September, we had a $30,000 limit and we hit that limit on, like, September 20th and we’re like, “Crap. We can’t accept credit cards anymore,” so we switched to PayPal and that cut our sales by, like, two-thirds because nobody wants to buy from an e-commerce site on the net that only takes PayPal. Then October 1st we’d get our $30,000 back and so we’d flip it and sales would go back up. I swear the first four months of our business all I was doing was trying to get our merchant processing limit up to a point where we could handle the sales.

Andrew: That’s so painful when you know that you’ve got something that’s grown quickly and you have to hold it back because you’re not being trusted.

Kyle: Eventually, the only way that we were able to get our processing limit up high enough was to get my Dad to cosign on the credit card payment form. It was horrible.

Andrew: How hard was it to get your dad to do it?

Kyle: He had always said, “I will never cosign on anything for you ever, because you’re going to get your own car, you’re going to buy your own house,” and this was the sort of situation where, like, I was being totally financially responsible. We were trying to get the credit (?), we were like, “Can we put up a $30,000 bond just so you let us process the $30,000 in credit cards?” And, you know, that was hard to pull off and so, eventually, he was willing to do it just because he knew there wasn’t really much risk.

Andrew: It’s shocking that they wouldn’t do it. You know, my friend Ben of Dwolla talks about all the time how irrational the credit card industry is and he’s trying to do something different with Dwolla but they’re irrational but they still have such a hold on the market that you have to dance to their crazy tune.

Kyle: Fortunately, I don’t think the problem we had exists anymore. You can go out and, like PayPal has streamlined the process for getting merchant processing seamlessly set up with them so it’s now a PayPal button. So I’m thrilled for the current generation of e-commerce providers because we’ve mostly dealt with it. Oh, the other tip is with Costco you can get like a premium Costco membership and then you can do credit card processing with that.

Andrew: Oh, they give you credit card processing at Costco now?

Kyle: They have a deal with Nova, one of the big credit card processors, and so for whatever the couple hundred dollar premium Costco membership you get pretty dang good negotiated rates for doing credit cards. It’s way better than what Square will give you because Square has to make money somehow.

Andrew: I love tips like that. All right. So then you put the manual up on-line. You get, did you say 10,000 hits, within how long?

Kyle: Yeah. Ten thousand hits, I don’t remember, it was in the first couple days.

Andrew: How? How do you get that? I still, this interview will not get 10,000 hits I worry. I don’t know.

Kyle: You know, we just we e-mailed it out to a bunch of the Mac sites and I can find the initial press release where we e-mailed it out but, I don’t know, we probably sent it to 20 Mac sites and everybody’s like, “Wow. These are great manuals. Nobody has done anything like this before.” This is like the classic start-up, like, we had no idea that you couldn’t write service manuals and publish them for free on-line, that that wasn’t an economically sustainable model, which is what everyone else had concluded in the industry, and so we just did it. And it worked and to this day, nobody else is doing this sort of thing in any other industry.

Andrew: What other industries could they do it in?

Kyle: Automotive, vacuums, toasters; you name it. Anything out there that consumers have and break. The manufacturers should be putting the service documentation out there. The parts company could be making money by putting the service documentation out. The appliance parts companies that have made any traction online are the ones with the most information.

Andrew: We’re going to come back to the narrative in a moment, but I have to ask you about Dozuki. Is the idea behind dozuki.com that if a car company decides that they’re going to try doing what you did at iFixit for cars, or a parts company in the car business wants to do it, that they can go to dozuki.com and set up this online manual that anyone can edit and contribute to and talk about?

Kyle: Yes. What Dozuki is, is a way for any company to have their own iFixit.

Andrew: Their own what? I’m sorry. Their own iFixit.

Kyle: We spent [??] building the software that runs iFixit. Our step-by-step documentation format is awesome. There’s an API that you can pull onto the iPhone or iPad. People can comment, and collaboratively work together to make manuals better. We also have a Q and A support part of it. We’ve been able to keep our support costs really low. I haven’t hired a new support person. Our sales have been hugely the last couple of years, and we’ve been able to keep our support costs flat by putting that onto the community.

We have a really compelling case for a way that we can have a huge scalable business, where we’re teaching people how to do tremendously complex troubleshooting and technical tasks. We have moms fixing iPods for their kids. Moms diassembling MacBooks, and upgrading hard drives. This is very complex [??]. We built software that allowed us to automate all of that.

What Dozuki is, is taking the software that allowed iFixit to grow so quickly and saying we’re going to make that available to everybody out there. Whether you’re a set up manufacturer, or a software company and you want to reduce support costs, there’s huge opportunities for it.

Andrew: All right. So, as we go through the story of iFixit…this is the kind of story that anyone who’s online now that says I want to do this for my industry can go to dozuki.com, sign up, and set up this kind of model for themselves.

Kyle: Right. [??]

Andrew: Any iFixit for their space.

Kyle: Yeah. Exactly.

Andrew: It wasn’t always a Wiki. Let’s go through and see how the idea and the business evolved. You put up these manuals. Before I ask you what the next step is, I’m wondering what the next step could have been, and why you didn’t take that direction. You see that there’s a lot of hits to be had for manuals. Why didn’t you say, we will hire writers, they’re going to create manuals, or we’ll do it internally, and we’ll sell ads against it. If you have a lot of hits, it usually means that you have an ads-based business. Why didn’t you go down that path?

Kyle: Because I wanted real money.

Andrew: What do you mean?

Kyle: I spend a lot of time with [??] founders, and I hear a lot of pitches, and I’m just really shy of ad-based business models. Part of it is that I completely agree with Wikipedia; that the moment you start taking ads, you lose editorial trust. We see TechCrunch, and we love TechCrunch, but can we trust TechCrunch’s editorial integrity? I don’t think so. I wish I could. I read everything on there, and they post a lot of great stuff, but I have to take all of it with a grain of salt because I know that AOL is beholden to larger forces than them. Wikipedia refuses to run any advertising. Wikipedia could probably be making, like what? Something like a half a billion dollars a year if they ran Google ads. But they’re not going to.

For us, it was really important that if you’re disassembling something, you have a huge amount of trust in us. You’re taking your laptop apart, you’ve never done this before, you’re following every instruction very literally, and if we tell you something wrong, that’s a huge issue. We find that the trust that people have to have in us is so extreme to be willing to take something apart, that we didn’t want to betray that by running ads.

Andrew: But if they’re selling the parts, couldn’t there also be a trust issue in people thinking, is he telling me to get this screwdriver and that screwdriver because he sells them both, or because I really need two instead of just the one?

Kyle: Yeah, and that’s fair. That’s where we back it up. The nice thing is that we show you the photos so you kind of know ahead of time. Absolutely. Over the years, we’ve earned that trust from people, but there certainly is a little bit of a conflict with us selling the parts and stuff.

Andrew: I have to tell you, I’ve been thinking the same thing about advertising. I run ads here at Mixergy, and I think, ‘When I talk about a lawyer, does the audience know that I really do know Scott Edward Walker’? Are they thinking that I’ve been friends with him, and I trust him because I referred him? Or are they thinking it’s because of an ad?

Ever since the premium membership on Mixergy has been taken off, I think maybe if I get rid of the ads and just let the audience pay, and if the audience believes in the trust that I’ve got and if they believe in the products then they’ll just keep buying and buying these memberships and we’ll do well; and if they don’t then we’ve got an issue. But there’s no conflict of interest potentially in the interviews. And I have been thinking about it, which is why I specifically wanted to ask you.

Kyle: I think it’s really important and a question you have to go through and what sort of business model are you going to build. There’s something very noble about not having to constantly go out and get advertising. As you’ve probably found, the deeper you get into the advertising space the [??] it gets. You can always [??] once the [??] adds up and make more money. And so that even within that ad space there’s a spectrum, and if you can get away from that entirely and find a way to be sustainable without taking ads I think that’s awesome. There are certain businesses where you just screen. You can’t run Twitter without ads. You can’t run Facebook without ads’ so, fine.

Andrew: I don’t know. I’ve heard some people make some really compelling cases that Twitter could have a business version that would bring in more money than advertising. I don’t know, but I get your point.

Kyle: I think that’s called [??].

Andrew: Called what?

Kyle: Yammer.

Andrew: Oh, Yammer, right, right. There are other business tools, but I see, I get your point. First of all let me also say to the premium members, thank you all for joining and giving me this opportunity to think maybe I shouldn’t even run ads since premium memberships are going so well. All right, so you get 10,000 hits from these manuals. It’s time to create more manuals, right? How do you do it?

Kyle: I had never done anything with photography, and you know, particularly this [??] is so easy, but going through all of high school, college, I’d never done photography. So we bought a Nikon D70, which was like $1,000, and that was a pretty big investment for us. We just started taking pictures. And the first, I don’t know, three dozen manuals were all written by Luke and myself.

So, we were the ones writing the manuals, wrapping the packages, writing the product descriptions; we just did everything. And we still do write some of the manuals. And there’s a technical communication class here at Cal Poly and I went to the professor and said, “Hey, I’m supposed to take this class next quarter. It’s required to graduate. I’ve already been writing these product manuals. Would you be willing to let me challenge the class and write the manuals instead?” He said, “Sure.”

Andrew: Challenge the class to write the manuals for you?

Kyle: What’s that?

Andrew: The challenge to him was, would you be willing to let me challenge the class and have them write my manuals for me; and he said yes.

Kyle: I just said, “Can I use the project that I’m doing to challenge the class so I don’t have to take it?”

Andrew: Okay.

Kyle: So I just used it to get out of the class.

Andrew: I see. So you the work you are doing in your business counts as class credit? I see.

Kyle: Yes.

Andrew: Okay.

Kyle: And I did that again later. Everybody at Cal Poly has to do a senior project that’s a, you know, a big multi-semester project that’s supposed to be sort of a capstone of everything you’ve learned. And I used that to write the Inventory System. [??] So I wrote the Inventory System on the back end of shopping cart. That was pretty cool. I went to the professor at the end of it and said, “Hey, you want to see the code that I wrote?” And he said, “Well, have you deployed it already?” I said, “Yeah.” He said, “So it’s being used by thousands of people everyday to buy stuff from you?” I said, “Yeah.” He says, “I don’t need to see it.”

Andrew: If only every professor was that smart, and every class assignment was that applicable and that practical.

Kyle: So, this is my chance to pimp Cal Poly. I’m here in San Luis Obispo. Cal Poly is an awesome school if you want to learn the sciences. It’s one of the top schools in the country. And it’s very hands-on and lots of the professors here are like that.

Andrew: I’ve got to say, too, San Luis Obispo slow, as we called it in Southern California when I lived there. It’s such a beautiful place to visit. I’m thinking we should live there, Livey [SP] and I. We used to go there for a weekend and just have such a good time that I thought it’s close enough to L.A. but far enough that I have my space. I’d love to live there. And that’s where you’re living and doing your business right now.

Kyle: Halfway between San Francisco and L.A., and close enough that we can get up and talk with the VCs and the mayor if we want to; far enough away that I don’t have traffic and I don’t have to deal with a lot of the chaos. So I really like it. I figure if I run my own business I should be able to locate it where I want, and I don’t have to live in the echo chamber that is Silicon Valley. The thing is, I love Silicon Valley; I love San Francisco, but I don’t have to live there, and so I didn’t.

Andrew: What are the benefits of being there? Do you get to tap into the school in any way?

Kyle: Yeah, absolutely. We work really close with the school. As a matter of fact, I’m going tonight; we’re doing a startup weekend at the campus.

Andrew: I see.

Kyle: So we’re helping sponsor and judge, and Cal Poly’s giving Startup Weekend free space to run the event. And there’s a really vibrant startup community here in San Luis Obispo that nobody knows about. Just six months ago a company that started here called Punchd got bought by Google, as Google is trying to take on Square. So there are a lot of exciting things happening.

Andrew: All right, at some point you must have said, I’m doing too much. I’m creating these manuals. I’m also handing customer orders. I’m also programming the shopping cart and making sure that it handles inventory properly. And I also have a life. What’s the first person or what’s the first job that you hire for?

Kyle: The first guy we hired was my roommate from freshman year, to pack packages for us. So he would come in. It was a huge challenge running the business and doing school particularly in the e-Commerce thing. So we would be racing home from class at like 3 o’clock, trying to get all the packages packed for the 4 – 4:30 UPS deadline. And so we hired him to come in and do that. And he’s sort of a hacker kind of guy.

And one day we forgot to leave him a key to get into the apartment to pack the packages. And so he’s sitting outside and he’s looking at his watch and he’s saying like, if I don’t get into the apartment I’m not, you know we’re not going to get the packages out for the day. He happened to have his lock pick set in his backpack so he just picked the lock to our apartment and went in and packed the packages.

Andrew: You know, I’m looking at your smile and it just reminds me how great it is to be able to invent the life that you love. I mean, you’re talking about people who you love to hang our with who’s ingenuity you’ve love to just watch even if you weren’t doing business with them. You’re building a site that I’m sensing everything that I understand about you in my research and my short conversation with you now says, Kyle would be on that website and iFixit himself if he weren’t running the site. It’s that fascinating to you. It’s just, it’s incredible to build the life that you want like this. Does that just happen because you’re drawn to the stuff that you love, or did you set out intentionally to build a business that embodied everything that you care about?

Kyle: That’s a great question. When we started it was just a business, it was just a way to make money. And during the course of the couple of years when we were running it during school, Luke and I were very frustrated at the process of running a business during school. Because it was always, do I do homework or do I make the business make more money? And that tension was a lot of stress. So when we got to graduating a couple of years later, we spent a lot of times soul searching and saying, what do we want to do with the rest of our life? Do we want to go and work for a big company? None of us really wanted to do that.

And so then it was like, OK we’re going to run our own company, what kind of company do we want to run? And we sort of had this feeling that we were running a niche parts business. There’s thousands of niche service parts businesses over the world. Do we want to be just doing that or do, we knew we wanted to do something bigger. So we spent a lot of time looking around. Do we want to create our own product? We were both engineers and we felt kind of silly selling other people’s products when we knew we could be making our own. Where do we want to live?

At that point we only had a few employees so it would have been easy to locate out of San Luis. And it always came back to, what’s the kind of life I want to lead, and what’s the kind of company that I want to run. And, see if I have it here. Oh, no. I’ve got on my desk, I must have given it to somebody. There’s a book called Small Giants, that’s about companies that chose to be great instead of being big. And that’s sort of our (?) here. Like we want to be a smaller company that where it’s a joy to come to work. Where everybody here is a family.

And so that was, when I graduated that was sort of the vision is we want to build a company that’s the kind of company that I would want to work at for the rest of my life. And just as important the kind of company that’s going to make a huge impact on the global scale.

And so for me entrepreneurship is kind of a means to an end. Like, I like running my own company but I like making the world better much more. And so the question for us is, we’re just trying this niche (?) parts company. Does I fix It have the potential to be the sort of organization where we can change the material economy of the world on a significant scale? Or are we just going to make a few million dollars and drive a nice car? And so that was when we decided to take I Fix It beyond the max sector and expand it to everything. And that’s what we’ve been doing for the last five years.

Andrew: How do you find that thing that is you? Do you sit and journal? Do you go to therapy? Do you read books and then fill out the, you know, the end of the chapter when they have those blank sections where you’re supposed to answer questions? What do you do? How do you make sure? Because if it’s left to change you’re going to deal with the everyday problems of how do I keep my site up? How do I get more hits? Did I buy more inventory? Did I do my taxes properly? And you’re never going to get around to those bigger questions that really have the biggest impact on your life. So how deliberate, how, what was your process for doing that?

Kyle: Luke and I bailed on the U.S. and went to Russia for two weeks.

Andrew: For how long?

Kyle: We were there I think two or three weeks. We went to Norway, Russia and Ukraine. And we were just looking and saying, we want. We had an idea that we wanted to help people start small businesses doing product engineering and so we spent a lot of time chasing around and looking at ideas and saying, how can we have the biggest impact? And so it was sort of like two, three weeks away from the business doing nothing but talking to each other and sort of thinking about what sort of world we wanted to leave. And at the end of that we realized that what we were doing far more potential than we had previously thought so we decided to go all in. That was a few months before we graduated so that was the spiritual journey that said all right this is the trajectory we’re going to go on for the next ten years.

Andrew: I’ll get back to the narrative in a moment but I have to stay a little bit off course here just to make sure that people in the audience understand that this isn’t just about selling screwdrivers and tools. I saw this video as I was researching you that had a real impact on me that showed what iFixit is doing in the world.

When someone uses iFixit to repair, say an old iPhone instead of chucking it and getting the new version, can you talk about what they’re saving that iPhone from and the people who interact with that iPhone. This is the kind of impact that you have. I sometimes feel like if I’m not a Warren Buffet or a Bill Gates I can’t have any impact on the world because look at how much bigger their reach is. Then I see your video and the impact you’re having and I want the audience to see that they could do this too.

Kyle: We are on a danger course toward a society where everything that we buy we consume briefly and then throw away and it sits in a landfill. In the process of manufacturing it we’re polluting the environment, we’re taking advantage of labor that isn’t necessarily treated well in Asia and then we’re just using something very briefly that was a tremendous amount of work to manufacture and then tossing it aside.

If you think of your parents or their parents, when your parents were growing up if they had a Red Ryder wagon they were playing with and the wheel fell off grandpa put the wheel back on and fixed it. Now if you have a wagon or a bike and it breaks you just throw it away and you got to Walmart and you buy a new one. That’s not the kind of world that I want to live. I think that if we can’t fix our things we don’t really own them and we’re almost selling our soul to all of the things that are around us and spending so much time consuming them that we never actually get to think about who we are and what they say about us.

Andrew: Talk about too, when we talk it out it doesn’t just go and sit in a garbage can for the rest of our lives. It goes somewhere. In the video I saw there were people standing in front of what looked like almost an ocean of electronic goods, not water but you see electronic goods everywhere – computers, keyboards, phones, and then you see these people who are supposed to do what? What are they supposed to do with them and what’s the impact on their lives that they have to take this junk that we didn’t know to use screwdrivers and fix? I promise the audience of entrepreneurs we’ll get back to the business in a moment but go ahead.

Kyle: Your iPhone has 17x as much gold in it by weight as that much gold ore if you mined it out of the ground. There’s a lot of copper. There are a lot of very valuable materials in it. So what ends up happening is there aren’t really regulations on what happens to electronic waste. So the folks in Africa and Asia buy the electronic waste, they buy the non-functional electronics from us and then they mine them for raw materials. So they’re ripping apart computers to get the copper inside. There’s an ancient process called [??] that’s how we used to mine for gold where you take sulfuric acid and cyanide and then you grind up the gold ore and the gold binds with the cyanide and precipitates out and then you throw the solution away. So they’re using this.

They’re grinding up electronics, mixing it with sulfuric acid and cyanide, getting the gold out of it and then dumping the sulfuric cyanide mixture into their water table. We did Ph tests on the water at the site that you saw that was in Ghana, the capital of Ghana, not very far from the capital building at all. The Ph of their water table was zero. So they’ve completely polluted the environment. They don’t understand necessarily what they’re doing. They’re just in a situation where they found a way to make a living. They don’t have any idea of all the toxic chemicals that go in because our manufacturing and dis-assembly processes are continents apart.

So what we have found is that responsible electronics recycling is a big part of the solution but the thing that is driving it is our never ceasing consumption. What we found was that [??] could be a strategic lever by increasing the amount of time that we use things for. So if we use everything that we have for twice as long we’re going to consume half as much stuff. It’s a conservation strategy to get all of us thinking about the things that we have, using them longer, consuming less and also teaching the folks in Africa.

I was talking to these kids that are in this scrap yard and they’re burning electronics. I’m like do you realize that the computer that you just burned could have been fixed fairly easily? He’s like oh no I didn’t know that. I just wanted to get the copper out. So I want to give those guys better jobs by teaching them a sustainable way of life which is repair, which is taking something that is nonfunctional and learning how to fix it and doing something more. If you mine a computer for raw materials maybe you’re going to get $.50 to a $1 from it. If you fix it and resell it, maybe you can get $5 or $10.

So this is a way for these guys to have a much better way of life, a more sustainable life style. It’s also when, at this scrap yard these guys are burning these electronics to get the copper off. You have a pile of wire you want to burn the plastic off to get the copper. Every single one of the have breathing problems from the toxic fumes in the plastic. So this is a way…

Andrew: So burning all these electronic, of course you burn all these electronics and bad things are going to happen. OK, so let me see if, let’s go back to the story here. I just wanted people to understand the kind of impact that an entrepreneur like you could have. You decide you’re going to go beyond Apple products to the rest of the world. At what point do you say we need to go to Wiki. We can’t keep creating this all ourselves. We can’t keep hiring people. We need to create a Wiki where the world engages in this.

Kyle: That was on that soul searching trip when we went to Russia. We realized that, I think it has a scale. What we’d done works really well. We nailed a niche. So, we had done something in the Apple [??] that nobody else has done. We have support forums and we have step-by-step procedures on how to deal, we’ve got the parts and the tools. He had the entire ecosystem for this one very vertical niche. So how do we scale what we did for Apple products to every other product out there? And it was a [??] like how do we impact the world. And so that was like “hey let’s put an edit button on every step”. It’s funny, if you look at the site now and you look at it five years ago before we brought out the Wiki it wasn’t that different. We just added another button.

Now on the back end it was 100,000 lines of coding to do, make a collaborative image editor and a step-by-step Wiki. We had to build it all from scratch. We weren’t able to build on top of MediaWiki or anything like that because it was just such a unique challenge. But that was the moment when we said, in order for this to work we have to allow everybody to share their expertise because we had some electronics repair experience but I don’t really know how to fix cars, I’m trying to learn, and so we built a place where the people who know how to fix cars can teach us.

Andrew: Why didn’t you say “we’ll hire people to do this online. We’ll get writers. Writers aren’t really expensive. Maybe some of them will be hobbyists”?

Kyle: Because there’s just know way to scale that effort. I mean, if you look at, probably the biggest service manual company is [??], there owned by the same British company, and they have manuals for a couple hundred cars. I want a manual for every car. I want a manual for every appliance. So this scale, we knew that there was just no possible way to hit that scale with paying contributors. Nobody is ever, I mean, and there wasn’t the business [??] to make that work. Because I want to have a service manual for a 50 year old calculator where there’s never going to be any model, any financial model for paying somebody to write that.

Andrew: A couple of days ago I talked to Jack Herrick of wikiHow about how he grew his Wiki and got people to contribute and he said that it was very lean days in the beginning. It felt like nobody was participating and the participation was pretty junky and it got a little bit better and a little bit better. It’s one of those things about Wiki, you have to wait a long time. What was that period like for you in the early days?

Kyle: I wouldn’t say that we’re out of the woods by any stretch of the imagination. Wiki has a great site they’re much bigger than we are. They are much shallower than we are. So we will go very deep on the topic and write a complete service manual for something. We’re still to figure that out, how we can incentives and get people to add more manuals. We’ve got about 5,000 manuals now. People are adding more all the time but we’re still trying to figure that out.

Fortunately, where wikiHow is an ad-supporting business model, we have a profitable [??] business that was able to fund, so it took us along time. Like wikiHow they’re great. They built theirs on top of MediaWiki. We had more rigid requirements than what they needed and so it took us four years to write the software to make a Wiki. So in the meantime we were continuing to grow the [??] business to pay for my small team of software guys to build the software. That’s a really long time if you think about pivoting a start up to take four years to pivot but that was how long it took us to build the software.

Andrew: Four years and then when you launched it what happened? I feel like we’re all learning to put out a minimum viable product, get into customer feedback then improve and adjust and all that in public because we’re warned that if you wait four years you’re going to have a disaster on your hands because the product will be incompatible with the customer base. That didn’t seem to happen to you or did it?

Kyle: Well if you’re profitable you can sort of skip some of those roles. So that’s a great guideline but if you’re profitable already then it’s OK to take your time and do it right. So I’m a perfectionist and I knew what we wanted. And the other thing was in the process it took us four years to flip the switch and make them available publicly but we were using the software internally to (inaudible) within six months.

Andrew: I see.

Kyle: It was a product that had customers that were using it. They were just customers internal within I Fix It. We just kept making it better and we knew when it would be good enough. We weren’t going to release it until it was good enough.

Andrew: You’re still learning how to improve the product and get more people, I should say, to participate. What have you learned over the last few years about getting people to participate in a Wiki environment where they have to create content, where they have to edit content, where they have to accept that some people will delete their content. What have you learned about getting those participants in there?

Kyle: We came up with a permission system that is different, I haven’t seen anybody else do this but it’s simple enough that I hope everybody does. We have a stack overflow type system where people earn reputation over time the more they contribute. If people successfully complete a repair you get 30 points or we distribute the 30 points between the authors of the document.

The challenge that we had was we had really professional quality content that was our stuff initially. Then users are contributing content and we know that their content isn’t going to be nearly that good. With the new content you need a complete laissez-faire, Wikipedia style system where anybody can make an edit and it shows up immediately. Because that’s how you encourage people to make contributions. It’s important for them to see the edit appear immediately.

At the same time we need to protect the quality of the existing documents. Wikipedia solved this problem by locking things down and having armies of people. We didn’t have near as many people so we did is set on every document is what we call a reputation threshold. Let’s say your reputation is 10,000 points and the document’s reputation threshold is 15,000. Your edit would go into a queue and have to be approved by somebody with more than 15,000 points.

We took Stack Overflow’s closed rep system and said all right, that’s great. Let’s just use that as the permission system for the Wiki. Anybody with a rep that’s higher than that can approve a change. Anybody with less goes into a queue and waits for somebody with enough rep to approve it.

Andrew: I’m really glad that’s true and that’s in place because in researching you I went in and I tried to edit. I said what if I screw this up? I, of course, went directly to a MacBook manual which would have been a popular one and I didn’t want to screw it up. I saw that I couldn’t. I have to get permission.

Kyle: Actually it looks to you as if you made the edit and it’s successful and then there’s just a pop-up at the top of the page that says there’s the current version of the document that’s been approved and then there’s sort of the head of the (inaudible).

Andrew: Did you really learn that from learning Stack Overflow and seeing how their Stack Exchange product was using reputation?

Kyle: Yeah. We’ve worked with those guys. I know Jeff Atwood. We’d been talking with them back and forth for a long time. We were developing something sort of similar and then they came out with theirs and we said wow, what they just did was way better than what we were doing. I went to Jeff and said hey, what you’re doing is awesome. Can we copy it? He said sure. He said hey, your badge names are awesome. Can we copy those too? I said sure.

Andrew: What was yours that wasn’t so good?

Kyle: It was just more complicated. That was years ago so I don’t remember off the top of my head. We had a lot of ideas and we were starting to implement something. Sort of the kernel of simplicity of what he did was phenomenal.

Andrew: Tell me a little bit more about the motivation. I’ve got to tell you I was looking at Dozuki. Beautiful product. I can see your attention to detail in it. I can see that the price is right for anyone who wants to add manuals and let their users edit them. There’s so much more than manuals. There’s a question and answer, there’s a community.

What I was thinking was if I put this thing up and nobody contributes to it I’ll look like a fool. Not only do I not want to look like a fool. I want to take that energy that I have when I launch a new product on the Dozuki platform or anywhere else, I want to take all this energy and direct it to something meaningful. I want to know what do I do to motivate people to contribute? What do I do to motivate people to add content to the manuals that they create if I’m running a Wiki on your platform or, frankly, any other platform?

Kyle: It is really hard to start a Wiki and be successful. There’s a reason that Wikipedia is the only really massively successful Wiki out there. There aren’t very many other examples. My suggestion to people that want to start a small site is to not bank on the success of a Wiki. Instead put out amazing content. Have a path, maybe, for users to help you improve the content. Fix typos, that kind of thing. It was sort of embarrassing when we put out our Wiki.

The first batch of changes for the first few months was people fixing typos that had been on our site for five years and we had just never caught. Focus on creating really compelling, useful content that people like, and over time build a community around the content. And I wouldn’t even flip the Wiki switch on for a while. I would leave it as a stand-alone content site. Get people interested and engaged and make it a Wiki link.

Andrew: That makes sense. So just use it’s as an easy platform for your people in-house to create the content, to create the manuals. Because, frankly, manual creation products think out there. You have to do a lot of photo editing before you upload. You have to do a lot of adjusting for each individual manual. So you’re saying, “Make this easy and then open it up to the rest of the world if time comes.”

Kyle: Yeah, and think about. Let’s say, you know, you’re a small startup, Y Combinator, hardware startup or, you know, you got your own software and stuff. You’re going to set up your support set. You’ve got to write your initial documentation. You want to crowd source support so you can lower support costs over time, but, you know, initially you know you’re the one going to be the one doing support. So just do the support.

Set up an interactive Q&A site that, you know is… we let you set up [??] Q&A site for product support. But understand that your customers aren’t going to be answering questions for the first six months. You’re going to be the one on there posting really good answers. But the cool thing about that is because you’re the one there, like, you know that the [??] quality that starts off the site is going to be really good.

Andrew: That’s a good point. The teardown. I heard about you…

Kyle: One of the things I mentioned is that I don’t know very many Wikis out there that actually let you start out in non-Wiki mode and then switch it to a Wiki later. That’s something that’s kind of cool about Dozuki is the whole thing is a Wiki. You get the tools of a Wiki for your team but you can leave it as a non-public…so the public can’t edit things until maybe at some point [??] decide to do that.

Andrew: The teardowns. Going back to that. I keep reading about you every time there’s a new phone that comes out. Where did this idea come from?

Kyle: That’s a good question so I don’t ever…we rarely come up with our own unique ideas. There was this awesome guy in Japan named the Kodawarisan, his site is the Kodawarisan. Every time new products came out, at least, Apple products came out, he would take it apart. I visited him a while ago just to say, “Hi, and thanks for the idea.” And he told me Kodawarisan means fanatic in Japanese. And he was just this Apple gadget freak. He loved this stuff. He’s actually a doctor, so he’s not trying to make any money off this. He just does it for fun. So he would take this stuff and post the photos and it got a lot of traffic but it was all in Japanese.

And so we started doing the same thing in English and, you know, we took it much to the extreme. He would post six photos, and we would post fifty. And we, you know, really dialed in the photography and spent a lot of time investigating the electrical engineering and identifying all the circuits inside. And eventually he got to the point where he’s, like, he didn’t care about doing it himself, he just wanted to see inside and so he would email me [??] the products and say, “Hey, are you going to take this apart, if so, then I won’t bother.” So he’s a great guy, we’re still really good friends, but he was totally the source for the idea [??].

Andrew: So when you saw it and wanted to use the idea, did you feel like he was going to think that you were copying him, that there would be any kind of hassle in the industry because of it?

Kyle: No, I mean there was a lot of demand for this sort of thing in English, we’re not doing it in Japanese. So he still does disassemblies every once in a while and post them in Japanese or he’ll take our photos. We’ve always given him permission to republish our photos. So I think that’s’ a way that we’ve been able to garner a lot of goodwill is, we never restrict our photos.

We put them out there and tell everybody they can use them. They’re all Creative Commons licensed and we give them away to the press. The New York Times and the Wall Street Journal [??] our photos on a regular basis because they’re free and they’re trying to keep their budgets down. So that’s the way that we have been able to get exposure by giving the product away.

Andrew: Yeah, phenomenal exposure. Can you tell my audience about what you did when the first iPhone came out?

Kyle: So when the iPhone 3G came out we realized that the…we were competing…there was some other parts companies that had got the idea that, “Hey, this is a pretty cool teardown thing, like, anybody can take something apart and take pictures”. So you think about, like, “How do you keep new entrants out of your market?” And so it ended up turning into a race where every new gadget that would come out Engadget would link to the first one, whatever the first teardown was. And we might have gotten beat once and that sort of made us realize we need to get faster.

And so the iPhone 3G came out on, I think it was June 11 of 2008 and it was a day and date release, so the same date, worldwide release. The iPhone initially was U.S. only and then 3G went worldwide. And so it turned out that New Zealand was going to be the first place where the iPhone went on sale clockwise. It was something like 21 hours before here in California. So Luke and I decided that we needed to send somebody to New Zealand to take the iPhone apart.

And we’re looking at each other, like, “Shucks, who has to go to New Zealand to take this phone apart?” And we ended up flipping a coin and I lost so Luke got to go to New Zealand, waited in line for a day, bought the [?] at midnight New Zealand time. We found somebody that had a coffee shop, let us use their office in downtown Auckland, New Zealand, got the disassembly done by 4:00 a.m. Auckland time. We published it, and Gadget was running the story of our tear down, while they were running the story, said ‘hey look, everybody’s waiting in line outside the Apple store in San Francisco.’

Andrew: Wow.

Kyle: So that was pretty fun.

Andrew: When you get a hit from in Gadget, when they write about you, how many hits do you get to your site?

Kyle: I don’t know specifically. I [?] Gadget lately, but our iPhone tear down did over, our [?] tear down did over a million views, our [?] tear down did over a million and a half views. It’s pretty much every single text site on the net links to us at once, and for a long time, that was a huge server scaling challenge. We started out at [?] Networks with a little shared server and every time we would have one of these tear down events, I would be like screaming for the servers, ‘give me another server, give me another server,’ we can’t handle this traffic, and they would always say ‘oh, you can have another server in 24 to 48 hours.’ That was never good enough. We never licked it. We kept having performance issues.

At one point, Yahoo.com linked to us off of a story on their home page, and I thought we were getting DOS. I had no clue, I couldn’t even SSH into the server there was so much traffic, and eventually I started tailing logs I found to be Yahoo and from our referral logs is how I found out that they were taking us down. Eventually we switched to Amazon and that fixed all of our problems, so we automatically scale servers dynamically when we have these traffic spikes with us, just add more servers. Until we did that, and we were, I think, fairly early on easy, we had been there for several years. We were, I think, one of the first e-commerce companies on ec2 [SP].

Andrew: All right. I’ve got to do a quick plug and thank someone in the audience, and then I want to come back and ask you one important question I’m writing down here that several people in the audience have asked me to talk about, but I don’t get enough entrepreneurs like you to ask this question of. The email I’m talking about is one that I got from a premium member who took the PR course and he got written up in Fortune magazine. Gaurav Sharma of Right Buy. He took the PR course, he learned how to pitch an angle instead of pitching his own start-up, and if you read Fortune magazine’s article titled, When You Work for Yourself, Can You Take Time Off.

You’ll see him talk about how he handled his client obligations when he took time off. Not only did he get that PR, he had even emailed it, looks like he emailed Stella to thank her for leading that course, and of course, Stella’s the right person to teach that course because she and her company, Fee Fighters, have been getting phenomenal press for years, even though they don’t have a PR company working for them. They do it all themselves and so what they learned is what they taught in the Mixergy premium course and what Gaurav and others studied in that course.

That’s basically the way premium courses work. I find an entrepreneur in a business, a start-up that does it themselves, does something phenomenal like PR, and I have them come on and teach other entrepreneurs. If you’re a premium member, you have access to all of those courses. You don’t have to pay for any one of them individually. You just get access to them all. You just go to mixergy.com/premium and just start with any one of those courses instantly.

If you’re not a premium member, I hope you do sign up and join us, and get the kind of results that Gaurav has been telling me, and other people have been telling me via email. mixergy.com/premium, and if you are a member by the way, thank you for doing this. As I’ve been talking to Kyle, it’s helping grow the business, helping me get researchers like Ari [SP] who did all this great research on Kyle, and I just had to sit here and go through in preparation for this interview, and it’s helping us improve the site all the way around. Thank you for being a premium member.

So here’s the thing. I don’t get a lot of bootstrap e-commerce entrepreneurs here, Kyle, who’ve succeeded to the extent that you have, and I get a lot of requests for this kind of interview. Unfortunately, guys like you don’t grow on trees, so for the people who are out there in my audience who are bootstrapping e-commerce sites, what big advice do you give them for making this work instead of going over to advertising the way most other people seem to be?

Kyle: Well, cash flow is everything. When you’re running an e-commerce set, it’s very easy to be profitable and go bankrupt, so understanding the tax implications of increasing your inventory, managing your inventory, [?]. These are the things you’ve got to focus on every day. Sales are one thing, but managing inventory is really, really critical. The other thing is to realize that Ad Words, there’s a lot of people probably smarter than you and better at Ad Words than you on there, and we have never really found that Ad Words – when we get sales from Ad Words, we’re basically buying market share. We found that we can break even on Ad Words, but it’s somewhat rare to find Ad Words, Key Words and Buys where you can actually make money off them.

Andrew: So the best way to get customers then is what, if not ad words?

Kyle: Some other way. Don’t pay for advertising, find some other way. You know be creative. My favorite example with creative marketing is the Run Keeper guys. When he first starting out, he dressed up in an iPhone suit and then ran the Boston marathon. I can’t imagine running the Boston marathon, much less in a [??]. So kudos to him, and I think that was the thing that put them on the map, and now they’re awesome. So do something crazy to get your name out there.

Andrew: And if you can’t come up with it yourself, do what I Fix It did. Look around the world and see who else is doing something creative that you can borrow or bring back to your industry. Everyone in the audience has already been on I Fix It. If tell them to go check out I Fix It, I think I’ll just go tell them to check out a site that they’ve already experienced. What I’m going to recommend instead is that they check out Dozuki. Where’d you get this name, by the way? Because I’ve got to spell this to people to make sure they go to the right place. Where’d you get the name Dozuki?

Kyle: Dozuki is very precise Japanese saw for doing the rib cuts. So if you talk to any Japanese, or any fine wood worker, and they have a Dozuki. And I was looking for a precise tool that did the job well. But there’s one thing you have to know about a Dozuki before you get to use it. If you use it like a normal American saw and you’re pushing back and forth, you’ll break the teeth off the saw immediately. You have to pull back, [??]. You pull back. You cannot push forward, it’ll break the teeth off. So that’s just a tool that you have to know one thing about before you can use it. And that’s what Dozuki is. It’s a way of teaching people how to do awesome things in the real world.

Andrew: And the product is just beautiful. I recommend not just checking out the website to get a sense of where Kyle is going in the future and what key ideas worked for him at I Fix It, and now he’s productizing them. I think the product video, Kyle, that you have on the site, low engagement. I only had to spend about a minute and a half, and I totally got the product overview, and I understood it. It’s one of the best videos that I’ve seen for new products. It just helped me understand everything.

Kyle: Thank you. Well, our inspiration for that video was Adam Lisagor [SP] and Sandwich Media. They do awesome product videos, and we saw what he did. And yeah, I met him a few times, and he’s a great guy. So we said, well maybe we can do something that is partially towards what he has done, because I think his product videos are phenomenal. And I think we managed to do something that was good enough for us.

Andrew: I like how, not only do you get your ideas from other places, but you’re willing to talk about it and not pretend that you invented everything. I think it gives us a good perspective on where ideas come from. All right, Kyle Wiens of Dozuki and iFixit, thank you for doing this interview. It’s great to hear your story.

Kyle: Absolutely. Great to be on. Thanks for having me.

Andrew: You know what, thank you really for just appreciating the vision here of learning about entrepreneurship. By just tearing apart your story and picking out the key ideas and seeing how you did it, and then going out and experimenting in our own lives and using some of these ideas. I couldn’t do this without guys like you saying, I’m going to go… Because frankly, you get like that when you do a teardown, more traffic then you’re going to get for this whole interview. I hate to say it.

I love the audience here, but you’re clearly not doing it because you’re hungry for traffic. You’re clearly not doing it because you’re hungry for sales. You told Ink Magazine that your sales are good. Even though you didn’t tell me, I still understand you’re not doing it for that. I’m seeing, and I see in this conversation this vision of really wanting to help people, and I appreciate you joining me in that.

Kyle: Well, the world needs more entrepreneurs.

Andrew: Thank you, and guys like you who are willing to talk about it. I actually can talk about so many things except the things I’m really passionate about; that’s when I start to trip over my words. So I’ll just leave it with this, with two short words. Thank you. Bye, everyone.

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How does a solo entrepreneur in India bootstrap a profitable company with about 1,000 paying customers?

I’ve been waiting to do this interview for a long time, but when first talked to this guest I urged him not to do the interview and we both agreed. Now I think it’s time to do it. Today’s guest is Paras Chopra, the founder of Wingify, which makes Visual Website Optimizer, a dead-simple A/B testing and split testing software for marketers.

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About Paras Chopra

Paras Chopra is the founder of Wingify, which makes Visual Website Optimizer, a dead-simple A/B testing and split testing software for marketers.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

Andrew: Three messages before we get started. If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you read his articles on Venture Beat, you know he can help you with issues like raising money, issuing stock options, or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at walkercorporatelaw.com.

Do you remember when I interviewed Sarah Sutton Fell about how thousands of people pay for her job site? Look at the biggest point that she made. She said she has the phone number on every page of her site, because, and here’s a stat, 95% of the people who call end up buying. Most people don’t call her, but seeing a real number increases their confidence in her and they buy. So try this. Go to grasshopper.com and get a phone number that will make your company sound professional. Add it to your site and see what happens. Grasshopper.com.

Remember Patrick Buckley, who I interviewed? He came up with an idea for an iPad case. He built a store to sell it and in a few months, he generated about $1,000,000 in sales. The platform he worked is Shopify. If you have an idea to sell anything, sell up your store on shopify.com, because Shopify stores are designed to increase sales. Plus, Shopify makes it easy to set up a beautiful store and manage it. Shopify.com. Here’s the program.

Andrew: Hey there Freedom Fighters. My name is Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart. This is a place where I bring you entrepreneurs who’ve built incredibly successful companies so they can tell you their story. The idea is for you to pick up as many lessons from them as possible, so that you can go out there and build your own success story and come back here and do your own interview.

Big question for this interview, and this is an interview I’ve been waiting to do a long time. I talked to this guest. We both agreed, and I urged him not to do an interview. Now I think it’s time to do it. Here’s a big question for the interview. How does a solo entrepreneur in India bootstrap a profitable company with about 1,000 paying business customers. Paras Chopra is the founder of Wingify, which makes Visual Website Optimizer. A dead simple A/B testing and split testing software for marketers. Paras, welcome.

Paras: Hi, Andrew. Thanks for having me here. It’s a real pleasure.

Andrew: Do you remember why I urged last time that you shouldn’t do the interview?

Paras: I do remember. When we interacted last time, I think we were too small back then. I had some reservations about talking freely about business when it was still in an infant state.

Andrew: When you say small though, the revenue was good. You had big customers like Microsoft, right? The business part of the business was doing well, but it was still essentially you, a one man operation. I remember I reached you at night because you were in India, and I think you even had a cover on as we were talking on video Skype. We said, ‘Why let the world know that this is a solo entrepreneur who’s building it. Who doesn’t really have a huge team, but he has a phenomenal product with great customers. Let’s wait a little bit and then tell it, so that your customers don’t worry that you’re going to go away. So we can tell the story in retrospect instead of revealing secrets that were still important to the business.’

Paras: Right. That’s precisely the reason. I was pretty much working alone, although I was working hard. Still, there’s a perception that if the company is just one man . . . I didn’t really want to talk about that because the business was in the growing stage, so why risk this startup just for an interview? Now, I’m pretty confident because we have grown, as you know.

Andrew: How many people are in the company now?

Paras: We are about nine people now. All of them are in India.

Andrew: I’m a customer, and when you say that you have about 1,000 paying customers, I’m a customer, and I don’t even know what I pay. What’s the lowest price that a customer would pay per month?

Paras: Our pricing plan starts from $49 per month and they go anywhere up to thousands of dollars depending on how much traffic your site has.

Andrew: OK. So, a minimum of $50,000 a month in revenue. Am I OK to say over a million dollars in business and profitable? Will you reveal anything like that about your revenues?

Paras: I won’t talk openly our revenues right now but you can make really educated guesses from the number of customers that we have and the (inaudible) pricing plans we have.

Andrew: All right. Let’s let people understand the product and then we’ll go back in time and find out how you built this business, as I said earlier, in India where the time is kind of lopsided with the U.S. with no huge team, with no huge funding. Just one man with the determination to build something out of nothing. The product, give me a typical use case so that the audience, if they’ve never heard of visual website optimizing, will understand what it does and why it’s so helpful.

Paras: All right. Visual Website Optimizer is an AB testing tool. By A/B testing I mean if you have a website, or a landing page, or a homepage, any page at all that you want to optimize we call the original page version A. Now you want to change that version A with some of your ideas. Those ideas may revolve around changing colors of your site, changing headlines or even changing products. You make certain changes to that version A and create a version called version B. Now the traffic that is coming onto your page, 50% of the visitors get to see version A while 50% of visitors get to see version B.

Then you measure the difference in sales generator or conversion rate or any other goal that you’re measuring between version A and version B. In simple terms it’s just like doing a scientific experiment on your page. You have a control and then you have a treatment and you see the difference in behavior of your visitors across these two versions. That’s what A/B testing is.

Now where the Visual Website Optimizer comes into the picture is that it allows a marketer, who does not know any kind of HTML or who does not know any kind of Java script, to easily create different versions of their pages. Traditionally if you were going to do an AB test you would need to know all sorts of IT things like HTML or to upload new pages to your servers and go through a lot of IT hoops just to get the simple AB test done. With Visual Website Optimizer it’s very easy. It’s a point and click design where you can load your site and, with a Microsoft Word-like interface, make the changes you want then simply go live without involving an IT department or (inaudible). It’s a taxing proposition.

Andrew: Here’s one way that I have used it. We have a website that first time users see when they come to Mixergy. We basically ask them for their e-mail address before letting them onto the rest of the site. I think a line above the box where people are supposed to enter their e-mail address said ‘confirm your e-mail to listen in.’ When we made that twice as big I got 30% more people filling out the form and giving me their e-mail address.

The way that I did that was I went to Visual Website Optimizer. I said take this page, create a copy of it, bump up the text just a little bit. Like you said, it’s just like using Microsoft Word, you can easily bump up the text. Then I said run a test and whichever version works best I want you to keep that and show that to everyone. When 30% more people gave me their e-mail address with the text being bigger that’s the text that everyone else saw. Today it’s the main text on the site.

Paras: Yeah, a lot of people underestimate the kind of changes that can increase sales or conversions. Even a simple change like changing a color from blue to red can dramatically increase conversion rate. That’s why it is critical to just keep testing your pages.

Andrew: All right, let’s find out where the idea came from and how you built it up. This isn’t the first business that you started, is it?

Paras: No, not technically. In my college I was always enthusiastic about doing a start up. I did a lot of small start up projects. Some worked, some didn’t work. I always wanted to do a serious start up of my own. After graduating from college in 2008 I worked for about two years then finally decided to pursue a full time start up. I wanted to explore my interests in marketing, in analytics, and in technology. I made a list of ideas that I would want to pursue. Marketing optimization was on the top of that list.

It wasn’t an accident that I entered into this industry. I made a very conscious decision of going into marketing optimization. Then developed a prototype of a tool with all sorts of functions. Earlier I called that prototype as Vindify [SP] and it had all the functions of analytics, testing, targeting, segmentation, and what not. That was the first attempt of coming up with a tool. I posted that on Hacker News and the kind of feedback I got was, even though this tool has a lot of features, I’m confused what to do. I did not focus on usability aspect at all. And the tool was confusing and the tool was, it was a little complex for its target user which was a marketer. So, I focused on features, not on the end user and that was a great learning point for me.

Andrew: It’s great to hear that putting your first version up on Hacker News and asking people for feedback actually generated useful feedback like this. I think that’s how you found my interviews and how you and I then got to connect. That’s how, as we’ll find out later in the story, you connected with one person, Patrick McKenzie, who helped you think through the strategy. But what was in this first version that you put up on Hacker News? What was it able to do?

Paras: The first version, actually, I had this crazy idea of coming up with a tool with all possible marketing functions. When I say marketing functions I mean what, I thought what would a typical marketer want to do with his website, so I listed all the functionalities he’d want to see analytics of; which visitors are coming, what they are doing. Then he will want to do A/B testing and finally he would also want to do behavioral targeting. Showing different content to different visitors. So there are a lot of features that a marketer would want to do. So I just basically created all these features and threw it on a dashboard without any guidance of any sort to first time user, what is he expected to do.

If you see the dashboard of the first version I came out with, it was OK for me because I made it but for a neutral third, for a neutral user, it was too intimidating. There was testing, targeting, analytics, tools, all sorts of things just thrown out and with no clue what to do next. So, on Hacker News and particularly Patrick McKenzie on Hacker News, he gave very constructive feedback that although this is good this is very complex, this won’t work, and all sorts of interesting feedback. So I decided…

Andrew: Before you tell me what you decided to do, I’m curious about what you didn’t do, which is to say these guys are just trolls, these people don’t know what, they’re not buyers, they’re not my market, I’ll go find a market that’s smarter than these idiots and I’ll sell to them. Why didn’t you go in that direction which is very tempting for entrepreneurs?

Paras: It’s a good question actually. When I think about it I realize their comments made a lot of sense. When you’re making a product, when you’re making a prototype, you get too enamored with it. So when I was making Wingify I was very excited about it. It’ll be a game changer; there is no other product like this in the world. It is the most beautiful thing ever. When you get feedback you are really jolted to see how the person who is not actually making the software would look at it.

For them, it was just a screen with a bunch of text and nothing more than that. Behind the scenes there may be thousands and thousands of lines of code, but for them interface was what mattered a lot and if they couldn’t figure out what to do I would just lose them as a user. So their feedback made a lot of sense when I thought it from a neutral perspective. Not from a very programmer perspective or not from a very fatherly perspective, just like it’s my baby. So I put myself in the users shoe and saw that the feedback made sense.

Andrew: All right, so you didn’t go in that direction, that as I said, many entrepreneurs would go in. Instead, you were about to tell us what you did do. What was that?

Paras: So I decided to focus on just one feature, which was A/B testing. So it was really hard for me because I had to throw all the code that I had written. So I had been writing code for maybe three or four month’s non-stop, during weekends and during me evenings after office. It was lots and lots of code that I had to throw out. But this wasn’t a hard decision to make because Wingify as a product, I could clearly see it wasn’t going anywhere. Even if I had made a lot of modifications, the fundamentals were wrong. So I had not focused on usability. I had not focused on users.

I had to start from scratch and I decided to experiment with just one feature at a time and the first feature I tried my hands on was A/B testing. And I imagined what I can do to make it really, really simple and easy to use. The usability part I am stressing again and again. The point was really driven hard into me from the feedback that I got from Hacker News, is that usability is what matters to a user and that was the basis for my next product.

Andrew: How did you know that A/B testing would be the one feature to focus on, not any number of other features that you had in that dashboard?

Paras: Again, a very good question. This was also a conscious choice. I did not just go ahead with A/B testing at random. I studied the landscape, and I realized that in A/B testing, there were essentially two kinds of tools available at that point of time. One was Google Website Optimizer, which was free, but was also incredibly hard to use in terms of requiring a lot of IT resources, and it required a lot of cold changes every time you do a test. In fact, I tried setting up an A/B test using that tool, and found myself not being able to set up a test. That was one tool.

On the other end of the spectrum there were Enterprise Tools that were good but really, really expensive for a small business or a medium sized business to afford. So, I saw a very sweet spot within Google Website Optimizer and Enterprise Tools for a tool to be inexpensive, yet feature full and easy. That’s how Visual Website Optimizer came into being.

Andrew: What about this. A lot of entrepreneurs who build a product, and then watch a giant like Google get into this space, freak out. They lose heart, and they either cut out of the business completely or they stop giving it 100% because they keep waiting to get squashed by the giant. Here you are walking into the arena with the giant already entrenched, already in the space, and others around too. Why didn’t you say, ‘They would crush me. I’ll go find another business that they don’t care about.’ Why walk directly into their space?

Paras: Some markets are very multidimensional when you think about it. Google may or may not get things right. There is always a certain segment of users in the market that may find that particular competitor who is already entrenched is not serving their needs. This is exactly what I realized. Even though the Google tool was free, a lot of companies were using it. But, the usability part was not really addressed by them. Similarly a lot of other parts which Google may not serve. For example, support levels. You as a paid tool, can provide fantastic support to your users that Google may not be able to afford that. Similarly there are a lot of other factors which Google or any other competitor may not be able to serve, and your customers are really wanting that, or at least a small segment of customers.

At that point, when you’re just starting up, all you need to do is grab that small segment first, and then be ready to start capturing more and more portions of your market. At the start, you need a small segment of customers whose needs you are serving really, really well. That’s what I tried to do.

Andrew: All right. Now I understand why you’re picking A/B testing. I understand why you’re not afraid of going in against Google. I understand that the vision that you have is really, really, simple. As I said in the intro, dead simple A/B testing was your goal. When you have that in mind, what do you do? Do you start to sketch out with a pencil on paper? Do you get Balsamiq and use that? How do you think through this process?

Paras: I start with a simple pencil and paper. I’ll grab paper, and I’ll start thinking from a user perspective. I think if you start thinking from the first interaction point of view. After a person signs up and logs in to your app, what is he expected to do? That is really important. Is he expected to go figure out what to do by himself or is there a kind of wizard or tutorial out there helping him, guiding him. So, your users have a certain life cycle. They’ll sign up for your app. They’ll try it first to get comfortable with it. If they like it, then they’ll come back again one week later. If they still like it, they’ll probably sign up as a paid user.

When I was designing Wingify first, the first prototype, I started from the perspective of the user already knowing what to do. With visual method optimizer, I started with the perspective of the user completely not aware of what this application is about and guiding him through various steps of what A/B testing is, how it is done, and what he is basically expected to do. That guides the interfaces that you come up with.

Andrew: What did you lay out as the interface? I’m spending a lot of time on this because I know that you’ve done this really well on your site. This is one of the key reasons why companies like mine use your software instead of using Google’s. I want to understand how you created this flow. What was the first step you were going to take a new user through? What was the second step? How would you take someone who is clueless and get them to be a customer, a paying customer?

Paras: Right. So you, when you’re designing user interface, you really start with the basics and what is…you really want to take minimal amount of information first and then expand on gathering more information as the user has… as the user is developing more commitment in the application. To give you a simple example, the first, after the… after a user signs up for Visual Website Optimizer, the first step we require him to do is just enter [??] office page. We’re not gathering any more information than he’s comfortable with right now. Because what he just did is to provide his e-mail ID and password, nothing else. His commitment level is minimal right now. So you cannot expect him to go through pages of documentation or watch 5 minute video or fill in tens of different options in your forms.

What you really want to do is gather small amount of information and as more and more steps come forward you add more and more information and slowly and steadily, as the user sees that something is happening in this application, and he’s understanding what is happening, his comfort level starts growing.

Andrew: But…So, the first step was a landing page, second step was, “Give me your name and e-mail address.” Third step was, “Give me your URL.” Fourth step was, “Here’s your page on my site, now start playing around with it the way you might edit a Word document, and I’ll show you the next process.”

Paras: Right. Exactly.

Andrew: So, you’re the founder of, sorry to interrupt, but the founder of Optimizely was on here, and Dan told me that the first thing that he did was ask people for the URL of the site they want to test. His thinking was, get their URL, show the page on Optimizely, and then have people quickly edit, and only after they’ve edited and played with it, does he ask for their e-mail address. Why did you decide to do it the other way?

Paras: So, we also did an A/B test with not requiring a user name and password, and it didn’t work really well for us. So we’re a very testing-driven company and we, of course, test a lot of ideas, lot of time. So one of my hypotheses of having user name and password earlier, is because it creates some sort of commitment. At least a minimum commitment that I am creating an account with Visual Website Optimizer, and I need to at least spend 5 to 10 minutes figuring out what exactly it is. Without commitment, we found out that if you’re just taking it to the demo level or allowing a user to play around with it, too, he may not really figure out what’s happening. So you want to hand-hold a user through different steps, and slowly and steadily make him more confident if this is the right tool for him or not. We just don’t want to throw him right at the page, and just figure out if it is right for him or not.

Andrew: Yeah, before we continue with the narrative, I’ve got to tell you, you taught me this too, that sometimes what seems obvious is completely wrong. You taught one of the first courses on Mixergy Premium, and what you taught was how to increase conversions. I took the checklist that you gave people within the session, and I applied it to our site in so many different ways, including the header on Mixergy’s…on every page on Mixergy, just about. And I saw my sales go from “flat, flat, flat, flat, flat” to “you can actually see an inflection point on the day that we made the changes that you suggested in that course”. And it’s just, it’s amazing to see how this way of thinking, if you apply it, impacts your business.

And then, of course, you want to keep A/B testing ‘cuz then it becomes a little bit more fun and you see, “What can I do to increase that line and get it to go up even further?” And it’s phenomenal. So one of the things that you told me was, “Andrew, change your button from blue to red.”, which I did, I used Visual Website Optimizer to test it. Red button got us something like, 50% more clicks, or something like that, and then it reverted back to the mean, and so, we dropped it. It went right back to the same as the blue.

Anyway, what I’m saying is, this philosophy is just such a deep part of your company and I felt the impact of it as you shared it with me. So, you did it, now I understand why this process works well for you, you take it out to users first, do you take it out to guys like, people who complained on Hacker News first, do you take it to Patrick McKenzie and, who you met on Hacker News, and say, “Does this work?” Would you start releasing it to the world, right away?

Paras: So feedback is very important. I learned lot from Hacker News and I learned lot from Patrick. The kind of comments he give…Actually, I used to really, if I recall correctly, I used to really bother him with lots of e-mails, and all the time asking, what can I do to make the application better? What did you found frustrating? So I would really, really want to genuinely understand. What does that my application can improve on? And the feedback… you get feedback from a lot of users. If it makes logical sense and a lot of times it made that. You really ought to change your application to reflect that. So I wouldn’t never release an application just in the while [SP]. Taking feedback from smart people on Hacker New or similar forums, makes a lot of difference into the usability of application, in general, how people perceive your application.

Andrew: Did you pay Patrick to give you feedback along the way?

Paras: No, no. Not at all. I think he really enjoys mentoring people. He really enjoys giving feedback to people. He’s a marketing lover, himself. So when he saw the application, I think he saw potential in it. And he generally wanted to help me build an application that he would love to recommend to his clients or love to use, himself. So he took personal interest into helping me, and I’m very glad he did that.

Andrew: How do you get…You see, I sometimes feel guilty asking people for help. I mean, you and I have known each other. You did the course. I used what you did in the course, and I still felt guilty saying to you, “Hey, Paras, look at it this. This is what I did with it. What else do you think I can do? Where else should I change? There are some many times in the last few months that I’ve wanted to come to you and say, “What do you think we should be doing here? What else should we be testing?” How do you get over that feeling of, “This person has his own business to run, he’s busy. I’m going to keep pounding him with e-mail asking him for help?” How did you get yourself to a place where you can go to Patrick, a guy who lots of people want attention from, and just keep asking him for help and help?

Paras: It generally comes naturally to me. I’ll simply, if I have a problem or if I want to connect to someone, I will simply shoot an e-mail and ask, “What is your opinion on this?” or “What do you really think about this?” It’s my hypothesis that people are generally nice and people want to help other people. And, yeah, I’ve found it true. If I read somebody with a relevant question, the person generally responds well. And even, myself, when I get questions I feel a lot of pleasure answering questions because it gives you a certain confidence that people value your time and people value your expertise. So it’s beneficial for both parties, not just the person who’s asking the question.

Andrew: All right. So you get all this feedback, it’s time to release it. What happens after you release it? What’s the reaction?

Paras: I was really nervous, to be frank, because I had left my job. The product was still in beta. It was not making me money. And I had left my job and for two months I was without any kind of inflow of revenue and we did a lot of [??] into what pricing could be. I was thinking well it should be $29, $49, $99. Pricing was one of the big mysteries I [??] on and on and on. Because there was no real answer to it, what it should be. So I decided it should be $49 per month, the lowest plan, and simply see what the market’s reaction is. My initial goal was to make at least the same amount of money I was making while I had a job. That would prove that what I was doing was not really worthless [??].

Andrew: How much were you earning as an engineer in India?

Paras: I think it was, about, maybe, $1200 per month or so.

Andrew: $1200 per month.

Paras: Yeah, yeah.

Andrew: OK. So you need to sell about 25 in order to make…in order to break even. Twenty-five memberships.

Paras: Yes.

Andrew: OK.

Paras: Yes. And I was nervous, frankly. If we didn’t get a single paying customer then, I don’t know how things would have turned, but, luckily, we got that many customers in single week. And I was really happy and free after that. Was anything that would come over the amount of money I was making at job would be a bonus for me.

Andrew: I’ll ask you in a moment how you got those customers and how you got customers in the future, but first I’m curious, you just talked about the upside of living in India, and that is, that you’re not getting paid that much anyway at work, you can probably hire other people with similar, past salaries, excuse me.

What about the distance? Here you are reading these guys on Hacker News, many of them are in Silicon Valley, they’re almost all, it feels to me sometimes, in the U.S., and they’re having these conversations, and they’re talking about people who they had dinner with who are investors, who are advisers and you’re left out of all of it. All you can do is e-mail Patrick McKenzie during his day, your night. Actually he’s in Japan so the hours are a little different. But all you can do is e-mail a few people. Tell me how you felt about being left out and how it impacted the way that you proceeded?

Paras: I don’t think I felt left out at all because my focus really was to make an application that made money. It was a very simple [XXX]. To be honest, I didn’t start out with a proposition to make a huge, huge business. I wanted to make enough money to support myself and to support a small team and that was what I was after. So the VCs, the angels and the other financial parts of it was not really relevant because I knew in order to support myself my requirements were not that huge. As I just said, I was making about $1200 and if I had made $1200 from the application I made which was Visual Website Optimizer I was really happy because I was producing something of economic value to other people. And that was my very simple goal. So it wasn’t a distraction at all. I didn’t find myself left out because my goals were very simple back then.

Andrew: Okay. So how did you get the first 25 customers?

Paras: The product was in beta for long. It was in beta for about six months. And in beta it was free and I had built a waiting list, also. It was an invite kind of sign up that people had to use. The beta users were using the tool, they were giving feedback and when we launched we had enough beta users that some of them converted.

Andrew: You launch, you have beta users, you didn’t get any complaints from people who said, ‘I used this for free, you should grandfather me in. I used this for free, I was on your list, you should let me use it for free.’

Paras: In fact, I did get that. I got a couple of angry e-mails, ‘I thought this will be free forever. You are a cheat.’ Something like that. I felt really shocked. Clearly I had always mentioned this was in beta, this won’t be free forever. I have to support myself only unlike other companies which can afford. People naturally compared it with Google Website Optimizer which was free. So they said, ‘While Google Website Optimizer is free why are you charging for this?’ Yeah, there were certain users who said that. It was shocking but when I got paying customer too I realized that people do realize the value this tool is providing.

Andrew: Before your product came along, I don’t want to come across like I’m too fawning but clearly I think you’ve got a great product because I’m a customer but the whole idea of simplifying A/B testing is exciting to me. Before I used to talk with guys like Neil Patel and they’d say, ‘Andrew, you’ve got to use Google Website Optimizer; here’s how I’m testing a button color in Google Website Optimizer.’ They’d walk me through the process. I’d go, ‘This is so much work for such a little bit of lift I don’t want to get carried away. I’ve got another whole business to run, another passion to spend time on. I can’t figure out Google Website Optimizer.’ When you came out not only did you make it easier for me but you made it easy for me to realize, ‘I’m not an idiot. It’s not me. It’s them. It’s Google’s product that’s too difficult. It’s Google product that requires people to spend way too much time on it. I’m not looking to be an employee of Google and figure out their software. I’m looking to run my own life.’

Paras: Right. Most businesses are too distracted to understand a tool, to spend maybe hours and hours figuring out how a tools works. If you simplify that so instead of hours it requires just five or ten minutes you’re providing a lot of value. And it’s not just about small businesses. When you think about large enterprises as well if you as a marketer require involvement of your IT team every time you need to do an A/B test this means it’s weeks, if not months, of time that will be sunk in order to get a simple A/B test done. When Visual Website Optimizer comes, a marketer in large companies is very happy. All he needs to do is log in to our application and make a quick A/B test and it goes [XXX] without asking their IT department to do code changes which could take weeks and months depending on how [XXX] large enterprise is laid out.

Andrew: You quit your job though before you got your customers, right?

Paras: Yes, that’s right.

Andrew: Why take such a risk?

Paras: The beta list was growing. The numbers of users who were using tool [??] was also growing. When I think about it, I think I quit because there was simply too much support to do, during evenings or during weekends. A lot of people were asking questions. A lot of people were asking for new features for their reporting [??]. There was simply too much to do while continuing my job. [??]

Andrew: How did your family feel when you quit your job to start your own company? And you didn’t even have any money, you weren’t making money with the business when you quit your job.

Paras: They were very okay with this. They also knew that I was not a kind of guy who would want to live a very traditional life, so as to say. So I’ll give you a simple example. During my college days I had a great internship opportunity from a lab in Cambridge University. They also offered me an internship, a paid internship of 1700 pounds. But I rejected that, because I wanted to do a startup. So the startups were a very…startups were a passion for me. And when I told them I’ll be leaving a job, they said, “It’s okay. It’s your decision to do.” So, they were cool, thankfully.

Andrew: By the way, you told Inc. Magazine, I’m looking here at my research from Ari, that you had 900 paying customers. This is in January 2012, so you’ve grown since even then, and 13,000 users. What’s a user as opposed to a paying customer? You have a free version?

Paras: So, yeah, we have a free trial version that people can sign up for. And once the free trial is over, they’re registered with a mailing list where we keep e-mailing case studies. We keep e-mailing interesting articles on the EP testing. So these are the users who have a least one touch point with us. [??] trying out the software.

Andrew: So they don’t get to keep using the software after the free trial period expires, but you get to stay in touch with them and tell them about AB testing and teach them what you’ve learned.

Paras: Right. We keep in tracking[??] with them. A lot of free trial users are too busy to evaluate software in 30 days. So they’ll come back, maybe three months later. They say, “I signed up back then. Can you please extend my trial?” So we call them users because anytime they can get their trial extended again. And we, anyway, keep sending them informative case studies and articles on AB testing.

Andrew: OK. All right, so, I see where you are. You’re finally making a…not finally charged [??], and almost instantly within a week, you make as much money with your new company as you did working at a salary job. Now it’s time for you to grow this thing. Where do you go next? Do you improve the product? Do you start looking for new users?

Paras: So, I focused on improving the product. There were a lot of interesting features [??] in the product and the key focus back then was to make the existing user base satisfied, and that was the key feature that helped our user base grow. So most of our user base comes from word-of-mouth. People like our software, people like our approach with AB testing. And the marketing community is very close-knit. They’ll tell each other what new and interesting tools are coming in the market. So I just focused on the product for a while, and that helped grab us new users.

Andrew: What did you learn now that you had real customers with real opinions and, you know, real sense of entitlement for the product to improve because they’re paying you? What did you learn at that point?

Paras: Can you reframe your question? What are you really asking?

Andrew: After you came out from beta and starting charging, what did you learn?

Paras: OK, so the biggest lesson I learned, was that there are certain kinds of users who would simply use the tool because it is new. But, a small segment of them really care about your tool, and they’ll go at great lengths to provide feedback to you. They’ll go great lengths at recommending your tool. Some users have genuine interest in making you succeed, while the other ones are simply there because they find something novel and interesting. And you ought to focus on the users that really care about your tool. So I found that segment of users, I interacted with them, and that really helped the tool grow and evolve, in terms of, number of features, in terms of, what we should be focusing next, and in all sorts of aspects. Right, some marketing too, product development…

Andrew: How did you talk with them? Guy Kawasaki told me that he calls those guys his thunder lizards. These are people who are just really passionate about the product and want to help improve it almost like, in fact more than, the founder at some times. How do you nurture them? How do you stay in touch with them and get their feedback and show them appreciation and build the product with them?

Paras: So you are to give something to them. You are to give some exclusivity so the V-Dub [SP] features that were coming in visual optimizer, they are first shown to such an exclusive list of users. So they’ll be the first ones to see those features, give feedback on them and after we take the feedback into consideration and improve the feature, only then will we release it in the public. So they get a kind of a sneak peek into the product.

Also, we have a lot of channels in terms of communicating with users. So when we send our support replies, every support reply goes with a link that says ‘Rate this support reply from 1 to 5.’ So at any point of time any user has an opportunity to interact with our team to show what they want us to improve on and what they love about the product. So there’s a lot of opportunity for users to give us feedback, to tell us how we are doing.

Andrew: So you make it easy for them to give you feedback and interact with you and you also give them, or at least in the early days, you gave them something that you didn’t give to other people which was inside access to features that the rest of the community didn’t get. Do you still do that? Do you still give people who are your thunder lizards access? Do you still give them features? Do you still give them something that you don’t give the rest of us?

Paras: So we eventually give access to all features to everybody. It’s just about when are you giving that. So, in fact, providing early access to a small segment of users is really important because if that new feature is way off the target you better make that feature better before releasing it for all the users. So it helps you improve that feature before you release it. And, again, it’s a win-win for both, for us and for them, they get to use those features early on.

Andrew: Right. OK. Let’s talk about how you got new users in. What did you do? Did you start buying ads or did you do something else to get them?

Paras: We do not buy ads. We do not do paid advertising. I think what I did was to write to a lot of blogs and I asked them to review the tool. I also gave them exclusive subscriptions to award to their users and to award to their readers so they’ll see this new tool, they’ll like it and then they’ll do a review of it and also provide a few free licenses for their own readers to sign up a free account with and that really helped. And the second aspect is we focus on SEO, Search Engine Optimization. Early on I figured that this is a very important part of marketing strategy because with paid advertising you need to pay again and again and again, for everything. But if you get your SEO right, it’s a good one time investment that can pay huge dividends for the future.

But I would say the only, the most important activity that helped us get new users was to focus on product. We did not do a lot of active marketing we just focused on making product better and better every time and that helped drive word of mouth and that helped grab new customers.

Andrew: All right, I want to dig into what you did do to get customers and to get the word out to blogs. A lot of entrepreneurs reach out to bloggers and they ask to get write-ups and they just get ignored. What did you do to ensure that you got the word out? I understand you gave out freebies, but what else did you do?

Paras: I think I kept reminding them about the tool. So even if they don’t reply the first time, they’re too busy, they get lots and lots of e-mails every day so even if your e-mail goes off the inbox one day you can always follow up the second or third day and then after a week, and then after a month. So the key idea is to not to really give up until the blogger tells you that ‘I am not interested.’ So I think I did a lot of diligent follow-up with the bloggers and that helped us get a review in a lot of blogs.

Andrew: OK. And what did you say? Did you say anything that got them to say yes? I know you were testing a lot, right? I imagine you were testing a lot. What worked?

Paras: Of course I tested a lot of different kinds of e-mails. What I found out was to start out with a very short e-mail, just telling what Visual Website Optimizer is one or two lines and asking whether or not you are interested in reviewing such a tool. We can also give you a couple of free accounts to your readers. If you provide a link to a blogger and your initial one or two sentence pitch makes it interesting, he’ll eventually go to your site, and if your site impresses him, he will follow up with you. Keeping e-mail short was a key to getting replies, to at least start the conversation going. Earlier I used to write very long e-mails, five or six paragraphs. I imagine a blogger would simply freak out looking at that e-mail. If you and me get long e-mails, the natural instinct is to simply postpone it for the future.

Andrew: I hate long e-mails, and you’re right. That’s what we do. We just postpone them for the future, and then we never get to read them. So, you also said SEO and Patrick McKenzie is huge in SEO. I imagine he must have urged you to do it and given you some insight into what you should do. What did you do for search engine optimization?

Paras: What I did was really simple. There a lot of good SEO articles on the internet. My source of all those articles is Hacker News. There is a lot good wisdom flowing there. All I did was to focus on getting the titles right, getting the URLs right, getting the content structure right. It was just the basics that I did. Even that proved to be really helpful as far as SEO is concerned. So, what I focused on was just the basics. When I see a lot of startups now, I see that they’re not even focusing on basics, let alone very advanced topics on SEO. If they just do the basics right, it would help them to be ranking good on Google.

Andrew: You did find specific keywords first that you wanted to target, right? Like A/B testing was one of them. What else did you decide you were going to go after?

Paras: A/B testing, a lot of people also call it split testing. Then there’s multivariate testing, so I focused on these keywords like A/B tool, A/B testing software testing tool. There is a great tool by Google, called Google keyword search, and it will throw up all suggestions. If you simply enter A/B testing, that my site is about A/B testing, it will tell you what other people are searching on for keywords related to A/B testing. I found out that people search not for A/B testing per se, but they will search for A/B testing tool or A/B testing software. The keyword of choice should not be A/B testing, it should A/B testing tool.

Andrew: Interesting. That is one of the basics.

Paras: The keyword is [??] and broad. A/B testing could mean anything. Someone wants to search for A/B testing case studies or A/B testing guide. The A/B testing tool is very focused, and if you are ranking well on A/B testing tool, it means the person is actually looking for an A/B testing tool.

Andrew: On the title tag of your site of visualwebsiteoptimizer.com, you’ve got that?

Paras: Yes. If you search for A/B testing tool, we should be in the top three positions right now.

Andrew: The title tag is A/B testing tool, split testing and multivariate testing software, Visual Website Optimizer.

Paras: Right. I tried to incorporate both keywords, tool and software.

Andrew: Here’s another thing that I notice you do really well. You blog. In fact, you’re phenomenal. Do you write your own blog posts? Honestly, just you and me now talking.

Paras: Yes, I do.

Andrew: You’re a phenomenal writer. The case studies, which we’ll get to in a moment, are just written like you hired a professional case study writer to create. How are you, a guy in India, writing better articles than people who are native born English speakers in American schools where they’re it’s just pounded into their heads how to write to get attention and how to write in a way that’s interesting? How do you do it?

Paras: I love writing. I’ve been writing since I remember. I’ve been writing my blog for a long, long time. I was writing articles before that. I think it’s a kind of skill that develops with time. I did not just decide that I’ll be a better writer. It happened with my personal blog and personal website. Then when I transformed into writing blogs for Visual Website Optimizer. It showed. The key thing is that I enjoy writing, so when I write case studies, I write my blog articles, I really enjoy the process. I enjoy imagine what the output will be like, and how the readers would appreciate whatever I’m writing. That helps.

Andrew: On your blog, what kinds of things did you write about to get yourself trained to write? Because writing is one thing, but writing on the internet where it’s permanent, where anyone can see it, where you don’t even know who’s reading your stuff, and who’s judging you, is a whole other way of writing. Where people can be trolls, and people can take things the wrong way. It does take a lot of practice, I think. I know it does for me. That’s why I created my own personal blog so that I could practice writing in public this way. What did you write about to practice?

Paras: I think I started way back in 2002. I don’t remember. It was a long, long time ago. Back then I was very passionate about arcane topics like artificial intelligence or immortality or machine learning or biotechnology or bio-hacking. All these topics are very science focused, very technology focused. I would simply report the news and latest that was happening. I would also propose my wild theories. Back then it was just free flow of ideas. I didn’t care about readership. I didn’t care about who was reading. I would simply write for its own sake. Eventually that grew into reporting events that were happening. Finally when I got into the startup scene, I started writing about startups. It’s a skill that you have to develop, I guess.

Andrew: When I discovered you first was through the case studies. Can you tell people what these case studies are like so they get an understanding of them? Then I’d like to find out how you used case studies to get new customers for Visual Website Optimizer. What are your case studies like?

Paras: Our case studies are usually success stories of our customers. We provide histories on how a customer of ours did a change in their website landing page or home page and gained x person increase on conversions and sales. To give you a simple example, a customer like Hyundai. They will simply enlarge a photograph of a car on the landing page, and their requests for test drives would go up by 72%. Then I’ll blog it, having a title like, ‘How Hyundai increased S Drive leads by 72% just by doing this simple change.’ It’s a kind of title that generates interest in the reader’s mind. What could they have changed in order to see such a dramatic increase.

Then I would just follow up with a hypothesis that what Hyundai wanted to do, what they did, and what results they got. Finally, what they think about the tool they used, which was Visual Website Optimizer. So, it follows a very simple framework which is effective in telling people that doing simple changes, doing AB testing can have dramatic impacts on businesses bottom line.

Andrew: I’ve also found that if you have an outline for writing things and you’re not just trying to riff and create a brand new approach every time you blog, then it becomes a lot easier. That’s why I start all my interviews with a question. That’s why I have a specific way that I say what the company name is. So what’s your outline for the case studies? I want other people who are considering using this for marketing to use your outline if they can.

Paras: Our outline goes something like this. I spent a lot of time making sure headlines are good. Headlines can make or break a case study. If your headline is very boring, nobody would even bother clicking onto it or clicking on Facebook to get to your case study in the first place. I’ll ask our teammates, ‘What do you think about this headline.’ It gets revised again and again and again. I think I’m spending as much time on headline as I would be spending on the whole case study in the first place.

Andrew: Let me give you a little feedback on what I’m noticing about your headlines. Almost always, there’s a specific percentage increase that happened. There’s almost always a company name, and some times there’s, ‘by doing something’. For example, 50% increase in signups by using pop up forms. 47% increase in click throughs by A/B testing call to action buttons. Live call widget increases signups by 31%. It’s like, to do this and get this specific result. In fact, I don’t see the company names in there often enough. I guess if they’re big, they’re in the headline. Hyundai increases conversion rate by 62%. That’s the headline. Big impact because of doing one specific thing and sometimes a company name if it draws attention. What about the body?

Paras: The body starts with having a little background. If the history is about changing color, it will be about how colors impact psychology, how colors impact customer decisions in the real world, how color is relevant. It will be about what the case history is going to be about. If the case history is about call to action buttons, it will be about examples of call to action buttons, how they matter, why they matter. So, a little background is built on what is coming next in the case study. Then we profile the company in question. We’ll tell about the company. What it does.

Then we start with the A/B testing in question. In the A/B testing part, we’ll first tell about what the original page looked like. Then we’ll talk about what the problem was that the company was trying to solve, whether they were trying to increase their signups, whether they were trying to increase their conversion rate, or whether they were trying to reduce their abandonment rate.

Every AB test has an objective that you’re trying to optimize. You present their original page, then you tell what the company was trying to do with that page. Then you show the variation and what exactly they changed with the variation. You’ll tell about the reason for doing that change. If the company changed the color of a button, you’ll tell that the company had a hypothesis that a red color catches more attention, or that the red color was popping out from the page. Or they’ll contrast bigger calls to action with other small elements. You’ll tell the reason behind doing that change.

Finally, you’ll have another section on what dramatic increase the simple change had. Then we follow up with what lessons a company drew from this test. They’ll say that we realized that the color of a button makes a lot of difference in the conversion rate, and other companies should do the same test just because this is so easy to set up. Then, we’ll finally ask them to give us a testimonial about Visual Website Optimizer. Last, but not least, we’ll encourage our readers to do such an AB test using Visual Website Optimizer. It follows a very defined structure. Every case study.

Andrew: It’s much shorter than it seems in the way that you described it. In your outline it feels like there are so many sections and so much text. It’s really short. I’m looking GetResponse. Here’s a headline, ‘Whoa. Free trial button did not increase paid signups, but increased trial signups by 158%.’ You actually have a shorter headline for that somewhere else, but that’s the one I’m looking at. It’s really short. At the bottom you say, ‘She further added, “Visual Website Optimizer (VWO) is a great tool that lets us test different variations of the homepage on a small sample of visitors. Thanks to VWO, we managed to find out the perfect combination of CTAs on GetResponse homepage and increase the overall conversion”.’ So there’s the quote. And you do something clever too, where if I run a test on Visual Website Optimizer, and I end up with a clear winner, I get an alert that says, ‘We’d potentially like to write a case study on you. Please click here to e-mail us.’ And the e-mail goes to you and you consider whether to write about them or not.

Paras: Yes, that’s right. We encourage our users to share their success stories with us. It is not required for them to share, but a lot of them are very happy to tell the world the kind of gains they have got. It has worked really well for us.

Andrew: On the course that you did on Mixergy, you said, ‘If you don’t yet have case studies of people who are using your software, your product, look for case studies of people who are using the tactics and techniques that your product employs.’ So, for example, if you didn’t have any users who used Visual Website Optimizer, and you wanted to still do case studies, you would do case studies of companies that were using A/B testing and saw increases.

It wouldn’t be how GetResponse got 158% trial signups by using Visual Website Optimizer, it would be how A/B testing increased their trial signups. I love that course, by the way. The audio was still a little bit shaky because it was one of our first ones but the content was rock-frickin-solid. All right, so that’s how you create the case studies. How do you get anyone to read them?

Paras: With the case studies we started just simply blogging about it. When you think about case studies by their inherent nature they’re very attractive. People want to understand what is working in the world, marketers want to know what is working for other companies. When you throw the case study right there on your blog, you tweet about it, you put it on your Facebook, you put it on one or two forums, it will automatically gather a lot of interest. Just because you have a case study that clearly tells this is what they did and these are the kind of results they got. It’s a very practical kind of document. Unlike a blog post that goes into theory about what could happen this tells you what actually happened.

Case studies attracted interest slowly and steadily. We make sure we are very regular in publishing studies. Our goal is to publish one case study every week. By now we have about 35 or 40 case studies. When you’re publishing case studies week after week your readers (inaudible) and they await your new case study every week. It informs them on something, it educates them. That is how readership built on Twitter, built on our Word Press blog. Yes, this kind of creates a feedback loop. With more readers you get more exposure, you get more tweets, you get more Facebook likes and it keeps on growing.

Andrew: OK. How did you get, I mentioned at the top of the interview that you had customers like Microsoft and I forget which other ones, I saw back at the time. Let’s see what’s on there right now. Microsoft, GE Money, AMD, Groupon, AWeber, LoveFilm.com. I don’t know LoveFilm but I know the other ones really well. How did you get these big companies to sign up for your product?

Paras: They’ll come to our site and they’ll sign up for it. This is as simple as that. When I started the objective was simply to cater to small and medium businesses. But what I did not realize that this is also a huge time saver for big enterprises. When they discovered my tool from blogs and other places they tried it. They found that when they are paying thousands of dollars for enterprise tool they could be using Visual Website Optimizer for $50 per month, for example.

Andrew: I’m just looking at your customer list and seeing Groupon.com and think oh, Groupon’s a customer. I should reach out to them and make sure it’s not someone who’s using his work e-mail address to sign up for this but Groupon that’s really interested and find out why and so on. They just found you like that? And you found them by going through your customer list?

Paras: Yes, they’ll sign up from an e-mail address like Groupon.com, JB or AMD.com and then we’ll know that they have signed up from a corporate ID so they must be the real company. That how we import it. A lot of times they will also e-mail us that we are interested in your tool, why don’t you arrange for a demo? Then we’ll arrange for a demo. Most of the enterprise customers that you see there, they have signed up directly and upgraded to become a paid customer.

Andrew: All right. Let’s see, we talked about how you came up with the product. We talked about how the product evolved. We talked about how you got customers. We talked about how you figured out pricing. We talked about, what else? Here’s one thing that we didn’t talk about yet. How did you hire? You’re a single entrepreneur. You hire the wrong guy and he brings down the company. You hire eight wrong guys and the company is over. I know you haven’t had that much experience hiring people but you’ve had enough to tell us what you’ve learned so far and how you put together a solid team.

Paras: The kind of people we have hired, we have stressed on cultural match much more than the technical skills. When a new person comes in for an interview we really want to make sure that he fits into the kind of culture we want to build and we genuinely like him. It’s more on a personal level, that like. Once we feel that this person is good on a personal level the second thing is to, of course, see that the person is right for this job. We really do not do a lot of [puzzle] kind of things. We do not do live coding or traditional methods of hiring. What we want to see if whether this person has written code in the past. If the person has written code in the past.

So if a person has written a code in the past, and that too, without any external pressure. If the person has contributed something to open source community, he has returned code just for its own pleasure, then I think that person is a very good programmer. And he will contribute a lot. And we’ll do a basic technical interview and just hire him, because he has written code in the past and we have seen the code and it’s okay.

Andrew: You said cultural fit. What is the culture of the company?

Paras: Our culture is a typical college project, off a typical college project. So we all are in our 20s. So nobody’s in 30s yet, luckily. So we have a very college kind of atmosphere, where we’ll work together, we’ll joke at each other. And it’s a very laid-back kind of atmosphere. There is no hierarchy, and of course, there couldn’t be, we’re a small team. But even in the future, I don’t see any hierarchy coming up. Because we love working together as you would do in a college project, and that’s what we want to make sure.

If a person wants to go with a typical corporate job, he has typical expectations. He has expectations of having processes. He has expectations of working in a very typical 9 to 5 kind of job, and having clearly well-defined work to do. But here, we have, it’s kind of work that we’re all doing together. We’re all here doing work, having fun, and, yeah, that is what we really look for. If a person enjoys our company, we enjoy his company. Then he’ll be a good fit.

Andrew: You’re in your home right now because we started out this interview at 9 p.m. It’s now, I’m sure your time, what 10:15?

Paras: Yeah, it’s actually 10:45.

Andrew: Right. It’s weird, by the way, I thought the time zones all over the world were the same, you know, except, how do I even express this? I thought everyone was roughly the same minutes, but different hours. India is different. What about hiring beyond…Oh, wait, I was asking about you’re home. I can’t forget that. You’re in your home. Where do you work? You get an office yet?

Paras: Yes, we have an office. And we have an office very close by. I just walk to my office everyday and that’s one of the biggest benefits of having a startup. Earlier I had to commute about two hours everyday just to get to my workplace. But now when I’m working for myself, I can have an office that’s close by. So, that’s the biggest benefit for me, not having to commute.

Andrew: What city are you in?

Paras: Sorry?

Andrew: What city are you in?

Paras: Delhi, New Delhi.

Andrew: So if we have entrepreneurs who are listening to us, who are in the area, is there a way for them to connect with you?

Paras: Yeah, sure, our office is in Rohini part of New Delhi. And if they want, they can always come to our office, have a chat, have a coffee. We always love the company of other entrepreneurs, and we would love to host lunch or coffee for them.

Andrew: Beyond developers, who else did you hire?

Paras: We recently made an offer to the first sales and development guy. And recently we were eight people, all of us engineers. We stressed a lot on product development, on features, but I realize we need to, at least, start growing our sales NPD team also. So we’ve extended one offer to a sales and marketing guy. And we hope in one year we’ll have a decent team of sales and marketing, as well, that can focus on doing outbound marketing. Until now everything was inbound, everything was organically generated, but in order to grow, we certainly need to have a team that does active marketing and sales. That’s the focus.

Andrew: Who’s answering customer service? When I e-mail that I have a problem, who’s responding to me?

Paras: The engineers.

Andrew: OK.

Paras: So we make sure every engineer does support. And that will be our focus, even when we grow. Engineers know the product closely, and with typical support stuff, they’ll give you very generic replies. And it’s usually a huge source of frustration with a lot of users. And support is one of the aspects that defines a company. And we want to make sure our priorities are right as far as support is concerned. That is why we require every engineer to do the support. In fact, the way we train when a new person, new engineer joins us, is to have him do support for at least a month or so. He gets to understand the product. You get to understand the limitations of the product and it gives him a really good base for him to then start contributing to product.

Andrew: All right, by the way, a moment ago, someone came in with a box, with a package, there it is, let’s open it in the interview. I don’t know if I should be doing this, but I did it once and it’s kind of fun. Let’s see. You tell me, Paras. You’re a serious entrepreneur, you listen to mix, is this a distraction for me to open up packages as they come in?

Paras: No. Not at all.

Andrew: So, I get a lot of books here, as you can see, it looks like the author of Taking People with you, has sent me his book for a potential upcoming interview. David Novack, thank you. Oh. chairman and CEO of Young Brand. Young Brands huge food outlet here. KFC, Pizza Hut, Taco Bell is owned by this guy. Let’s see if we can have him on to do an interview. Let me do a quick plug and then I’ll ask you one final question. And the plug is for Mixergy Premium. As you’ve hear in this interview, Paras did a course on Mixergy Premium and the idea behind Mixergy Premium is to have guys like Paras, guys who really know their stuff, come on and teach entrepreneurs like you. I saw significant results by following what Paras taught. I had my notes, I followed them step by step and I experiment with every one of them and saw that my orders jumped up. I’ve seen the same thing happen from others who have taken his courses.

So if you’re a premium member, at the end of this interview and go and watch the Paras course. If you not a Mixergy Premium member go sign up at mixergy.com/premium. You’re going to see the same results or I promise I will give your money back. I’m so confident that I want you to sign up and see these results and if doesn’t work out for you, if you not 100% satisfied I want you to pay nothing. So Mixergy.com/premium.

All right, final question, Paras, which is this: you’re a solo entrepreneur, you are, now you’ve got a whole team behind you, but you didn’t have the funding, you didn’t have the investors, you did have the support, you did have the location. You didn’t have all those things going for you and you still made it. For someone out there, who’s in a similar situation, who’s not backed by the big name, who’s not going to the top conferences every week, who’s where you were. What piece of advice do you have for him or for her as they listen to you right now?

Paras: I think the advice I would give is to really focus on creating values for others. That has worked for me. Nothing else really matters. The kind of conferences you go, if you have investors or not or better life’s really working out for you or now. If you want to do a start up, the sole focus should be creating value for others, finding out what is currently lacking in the market, what your customers are frustrated about and delivering that value.

So, with software companies right now, the cost of starting a software company has come down so it’s all about finding the right problem and solving it, at least for a small segment of users. You, of course, cannot satisfy the whole market at once. When you’re starting you just want to grab that little share of market. And once you grab that little share of market, you’ll always have opportunities to expand your product line, to introduce new product. But to grab that small piece, you need to find the problem, or what your customer wants.

Andrew: And you’ve done it and I really appreciate you coming out here and doing this interview and telling us about your story. I know that there are other people out in the audience to who have similar stories who’ve I told to hold off until the time is right. If we haven’t talked and you are aware of where Paras was about a year ago when he and I talked, shoot me an e-mail, I want to find out about you, I want to get to know you, I want to help you along the way and hopefully at some point, if it makes sense for you, I want you to come on here and do an interview.

And if you got anything out of this interview I hope you reach out to Paras. Paras, how can people say thank you? How can they connect with you, of course if there in New Delhi they can reach out and hopefully see you in person, but if there not, what’s a good way for them to say “Dude I got so much out of this interview. Thank you.”?

Paras: They can simply e-mail me. I’m available at Paras@wingify.com. P-A-R-A-S@wingify.com. They can also just simply go to my site it will have my contact details. I’d be really glad to help anyone who wants my feedback on maybe the landing pages, home page or even general solid advice. I love helping people.

Andrew: All right, I’m going to call myself out on something here, did I just misplace the emphasis on you name? I keep saying Paras and you said Paras?

Paras: No, you said Paras. I say Paras.

Andrew: Paras. So I’ve been emphasizing the wrong syllable.

Paras: [laughs] It’s a non-traditional name, so that’s OK.

Andrew: Now that I know your name, I’ll feel a little more comfortable e-mailing you and asking for more feedback on my stuff. And if there’s anything I can do to help you and show my appreciation, let me know. I’m glad you and I have got this relationship. We’ve been friends on Skype now and on e-mail and I’m really glad.

Paras: I’m really glad to know you. You’ve really help out a lot connecting with people. It’s really amazing how large your network is. So any entrepreneur out there, I really recommend you get in touch with you. You can be helpful in a lot of different ways.

Andrew: I appreciate you saying that. Thank you and I’m glad to do it. The website is Visualwebsiteoptimizer.com. I’m a customer. I urge you guys to check it out and I get no percentage. I don’t want any percentage, I don’t want anything ruining the fact that when I have someone on here, I do it because I really appreciate their story and I think you guys can learn from them and if I tell you to go check out Visual Website Optimizer I just want you to know that it’s coming from a pure place. Thank you for doing the interview and thank you for watching.

Sponsors I mentioned

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Ramit put all the material he refers to in this interview on this page.

A few months ago, I noticed that a well-known tech entrepreneur was quickly removing a doc off his computer screen. I guess I have sharp eyes because I saw what it was and quickly asked him, “Why do you have Ramit Sethi’s sales letter on your computer?” He flashed me a smile and said, “That guy knows how to sell!”

Seems he was doing what a lot of other entrepreneurs have done, deconstructing Ramit’s sales letters to figure out how to use Ramit’s tactics in his business. But you won’t have to do that, because you have this interview. In this interview, I asked Ramit to break down his sales tactics and help us understand the psychology of selling online.

Ramit is the best selling author of I Will Teach You to Be Rich and a master of behavioral change.

Watch the FULL program

Prefer audio? Great! “Right click” here for the MP3 format.

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About Ramit Sethi

Ramit Sethi is the best selling author of I Will Teach You to Be Rich. His latest product is Dream Job, a comprehensive course about everything from how to find what your dream job is, to how to answer those tricky interview questions, to how to carry yourself.

Raw transcript

Mixergy’s audio transcription is done by Speechpad

Andrew: Three messages before we get started. If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you read his articles on Venture Beat, you know that he can help you with issues like raising money, or issuing stock options, or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at walkercorporatelaw.com.

And do you remember when I interviewed Sarah Sutton Fell about how thousands of people pay for her job site? Look at the biggest point that she made. She said that she has a phone number on every page of her site because, and here’s a stat, 95% of the people who call end up buying. Most people, though, don’t call her. But seeing a real number increases their confidence in her and they buy. So, try this, go to grasshopper.com, and get a phone number that will make your company sound professional. Add it to your site and see what happens. Grasshopper.com.

And remember Patrick Buckley who I interviewed? He came up with an idea for an iPad case. He built a store to sell it, and in a few months he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store on shopify.com, because Shopify stores are designed to increase sales. Plus, Shopify makes it easy to set up a beautiful store and manage it. Shopify.com. Here’s the program.

Everyone, my name is Andrew Warner. I’m the founder of mixergy.com, home of the ambitious upstart. And you guys know the goal here, the goal here is to bring on successful entrepreneurs, who are going to tell you how they did it, so that you can just steal as many of their ideas as possible, go use them to build your own company, and come back and share what you’ve learned, too, the way today’s guest is doing.

Now, if you know that, you also know that I like to keep things really, really focused because I’m obsessed with making sure that I get what I want. And so, I start off the interview by saying, this is what I want for my guest, and then like a bulldog I go after it. Today, though, I want to go a little bit off of that. I want to riff a little bit with my buddy, Ramit Sethi, and the reason I want to do it is this.

Ramit, I was doing a screen cast with a friend of ours, Hiten Shah, the founder of KISSmetrics, and, as he was setting up his computer screen, he goes, “Oh, you shouldn’t have seen that.” And then he showed me and then I pushed him a little bit and we talked about it. He had your sales letter up on his screen, and he was studying the way that you sell.

Now, I’ve noticed, Ramit, that a lot of people in tech do that. A lot of us who followed Noah Kagan on Twitter, I’ve seen him say thank you to you a few times for stuff that you taught him about marketing. Anyway, you’re the guy that a lot of people go to. I want to, instead of finding out how you built your business today, just, like, step-by-step, I want to go back and ask you questions like, what is it that these guys like Hiten Shaw are trying to pick up on your sales copy? Why does it work? How is it that people, you know, who are trained online to take everything for free, end up buying your stuff for thousands of dollars?

I want to know how you pick the right price. I want to know how you get inside your customer’s minds, and use the language that they are most receptive to, and, more than anything else, I want to come back to how my audience can do it. So, I’m going to riff, and . . . we also did this, because we still are both a little bit anal, we’ve put together this list of topics, that if we go too far off-topic, or if we’re not useful enough, I could say, hey, let’s go and pick a more useful topic. You know, let’s go to the board and pick something to make sure that we’re giving value. So, we want to riff, but we want to give people value.

All right. So, Ramit. First of all, let me make sure that I give you a proper introduction. You’re the best-selling author of the book, ‘I Will Teach You to be Rich.’ A lot of people think of you as a financial adviser, but, as I’ve said here in the beginning, our friends in the tech world, entrepreneurs that I’ve been friends with, consider you a master of behavioral change. And what I want to learn from you is how you do it. Oh, and, you’re not going to ask for this, but I’m going to give you a quick plug. You are the founder and the creator of the upcoming product, ‘Dream Job,’ a comprehensive course about everything from finding out what your dream job is, to how to answer interview questions. All right. With that big intro, welcome.

Ramit: Thank you very much. Good to be here.

Andrew: All right. Copywriting. We are all trying to deconstruct your copy . . . In fact, let me take a step back a second. Let’s do quick numbers. Give people a sense of how much you’ve sold, maybe the first week of sales of one of your previous products. What did you do? Or first hour, even, whatever you feel comfortable with.

Ramit: OK, so, one of my flagship courses is called “Earn 1K on the Side”.

Andrew: Mm-hmm.

Ramit: It’s an 8-week video course. And it’s a fairly mature product, it’s been around for two years. We’ve put a lot of people through the course, a lot of graduates. The first time we ever opened it up, which was in January of 2010, we sold over $100,000 in one hour.

Andrew: $100,000 within the first hour of launching?

Ramit: Yeah.

Andrew: All right. Good. I like numbers. The reasons I like numbers is because I want to prove to the audience that the person who I have on has done something. And the only way I can prove it is to show measurable results.

Ramit: Right.

Andrew: All right. Copy writing. We’re trying to figure out your copy writing from a distance. Some of it goes really long and it’s a lot of work. You help me figure out, what should we understand about the way you do copy writing. What are we missing when we’re looking at it from the outside and how can we do it to?

Ramit: Well, I used to think that copy writing was basically what happens when you go to one of these web 2.0 pages and you see three main things. It says ‘Easy to use. Fast. Secure.’ . And I thought that was copy writing and it took me years to realize that that is not copy writing, that’s just a writer. A copy writer, in particular a direct response copy writer, which means you can directly track how effective my copy is, by conversion testing and things like that. They have to go far deeper.

A direct response copy writer would never just simply say ‘Easy. Fast. Secure.’, because those words don’t mean anything. Especially they don’t mean anything to me, they especially don’t mean anything to the mind of your prospect, or the person that’s reading your stuff.

So what I’ll talk about with copy is that my copy is exhausting, it’s exhaustive. Writing a sales letter will often take several months. My sales letter for earn $1k is 47 pages long, but it converts very well. And when people read it, they will do things like this, they will nod their heads as they are reading the entire thing. We’ll see them stopping and we’ll see them resuming again. They’re really thinking about it.

Andrew: How do you see that they’re stopping and resuming if it’s all online?

Ramit: Because we can do a couple of things. One, we can measure it online, you can see where people are stopping, where they’re going online. Then we also watch people read it. Right?

We’ve done this before. I did this as early as college. I used to write a comedy column, which was modestly called ‘Two guys who are better than you’. And we would actually write our comedy column for the week, and we would actually take it around to people in our dorm and we would watch them read it. Because that’s the only way you can test comedy writing.

And what we would do is if they laughed at the right places, and not just one person, but five or ten, we’d know we nailed it. If they didn’t laugh, the first person we would just be like ‘You’re not funny.’, but if five people didn’t laugh, then we knew we had a problem. So you can measure it qualitatively and quantitatively if this stuff works.

Andrew: So you’re saying that maybe the next time that I’m at a conference and I have a sales letter. I just pull up my computer next to someone else’s at the conference. Chances are he’s a potential customer because he’s at the conference, and I just watch him read it. And the point where it feels a little bit awkward, because he’s doing me a favor, that’s where I need to beef up the copy.

Ramit: Yeah. That’s a good way of putting it. So, let’s deconstruct that. He has to be a prospect. If I showed earn $1K to a senior executive who’s 65 years old, making $200,000 a year, it’s irrelevant to him. And that’s good.

You know I have a friend of mine, her name is Reef Orlio [sp] and she teaches women how to grow their businesses and make money. Actually, I got introduced to here, somehow, years ago, and I saw her videos. She does a lot of videos and she like dances and stuff. I was just like ‘What is this? I totally don’t get this.’ And I closed the window. And I heard about her again and again and what happened was that I showed it to a couple of women, so some female friends I had, and they were like ‘Oh my god! What is the URL for this site?’ . And that’s when I realized that she nailed it. She has the perfect congruency with her audience, and with guys like me, dudes, there just like ‘What is this?’ That is great.

However, what happens is that copy writers, they want to use words like ‘Easy, Secure, and Fast’, because they think it appeals to everyone which is wrong. I want to be able to get into the heart and mind of the people that are reading my stuff, so that they are nodding and they are actually saying ‘Wow! He knew the words I was about to say but I hadn’t even said them.

Andrew: All right. Let’s assume someone in my audience right now has a long form sales letter, because they heard that it works, and it’s not working that well for them.

Ramit: Yeah.

Andrew: What’s the first thing they should do to make it work, to make it convert better?

Ramit: Study the greats.

Andrew: Tell me how you did that? You told me before the interview started, now tell the audience how you did it.

Ramit: Well, I decided about three or four years ago, that I wanted to become world-class at writing copy. I really wanted to be great. And so I started just studying copy. How did I do that? I started buying books. I started studying online copy, and I started studying offline copy. Now there are great, great places to do this. For headlines, Cosmo. OK. Readers Digest, classic, classic magazines. They have some of the best copywriter in the world.

Online there are great, great examples. You know some of the best copywriting happens in the relationship market and in the health market. The financial market as well. So you have to pick apart these things. So for example, in the financial market you’re going to find a lot of doom and gloom. Oh, the sky’s falling, protect yourself with gold. Now I find that relatively unethical since I know that a lot of that is BS. But I want to understand it. Right, I want to….

Andrew: So let me ask you how. I sometimes look at the Huffington Post and they catch me with the headline, with that top big headline, and I click on it. And then I look on the side and even though I have no interest in Brad Pitt, something about the headline and the photo catches me and I click on a Brad Pitt article. And then from there I click and I click and I click. But I still don’t understand why it works. How do we as outsiders deconstruct what’s working online at sites, like The Huffington Post, or financial sites or even offline at Cosmo Magazine. How do we deconstruct it and get value out of it?

Ramit: So if you started hearing a knocking sound in your car, and you heard it from five different cars, do you think you’d be able to diagnose it?

Andrew: No.

Ramit: Of course not. So why would you be able to expect to diagnose copy just by seeing it? That’s not how it works. To become masterful at something usually you need to have guides, teachers, right? And I think both of us honor this because we are both teachers. So here’s what you do. You don’t just look at copy. You want to study the greats because they deconstruct how copy works. I’m actually going to tell you a couple of books that I recommend that are sitting on my table right now.

Andrew: Yup.

Ramit: One is called “Tested Advertising Methods”. Another one is called “My Life in Scientific Advertising”. These two books are old school books and they will teach you a lot about how to understand what it is that you’re reading. So for example, I’ll give you an example right, from my own sales pitch, okay. I’m going to give you a headline. By the way, headlines are some of the most valuable things in copyright. In general we would spend something like, if we’re doing just let’s say, you’ve seen their squeeze pages. If you’re doing just one of those we would spend probably 50% on our time just on the headline. Don’t care about the design as much as the headline. Don’t care about the picture. Don’t care about the rounded corners. Listen up. Everyone’s….

Andrew: You know what, I hear a lot about. I’m sorry, I’ve interrupted you just as you were flowing. But I hear a lot about the need to spend hours and weeks on headlines. When I do that I just stare at the screen for hours going, what am I going to write? And then I go, well let me go to Ramit’s site and I’ll see if I can copy his and then change it to mine. And I go that just doesn’t feel like me at all. And now I’ve gotten something that’s completely disconnected from what I’m creating. What do I do in that time when I’m spending 50% of my time creating that headline?

Ramit: You have two problems. One is that you’ve gotten to this point, if you’re stuck what you should be able to do is go back to your research document. Which we can talk about, so, when we started off, when I created my first mini product I had no research document. Now we’ve gotten much more sophisticated I’ve got a 40 page research document. And that’s collated and cut down from even more.

Andrew: Research on who? Your users, your customers?

Ramit: People who are going to buy or have already bought. I know their age, I know how much they make, I know their hopes, fears and dreams. I know as much as I can possibly know. So I go there and I put myself in their head. I say, what is it that they want, what do they not want. And if I get stuck I’m closing eyes. I’m doing what we call the five minute strait jacket technique. I’m closing eyes, I’m turning off my computer, I’m turning off my phone. I’m saying, all right, I’m a 27 year old guy, I make 50,000 a year. I have tried a couple of online course on earning money, I read a couple of blogs every day, but it’s just not working, and I bought this one course and I felt ripped off. It didn’t work. So what do I respond to?

So let me read you my headline, okay? Finally a proven legitimate program to identify a profitable idea and turn it into a reliable site income of a thousand dollars a month with just five hours a week. Okay. By the way there’s a subhead, let me read that to you too. Use these tested step by step techniques to find a profitable idea and turn your existing skills into direct side income. So, why. Why did I say this? Should I diagnose this?

Andrew: Yes, please.

Ramit: OK. A proven legitimate program. The first thing people think about when they hear about earning money is, what?

Andrew: The first thing they think about when they earn money.

Ramit: Program to earn money.

Andrew: Oh, that it’s going to be a fraud.

Ramit: Exactly. That they think it’s going to be a scam. So let’s address that head on. Head on, okay? Now this is very important. When people think about your product, okay, if you’re building a product. What’s the first thing they think about? If it’s not emotionally impactful that’s a big problem, okay?

Like for example, if you’re building a photo site, I hate photo sites, if you’re building a photo site, guess what, it’s not, I really want a secure way of uploading my photos.
That’s not even in the top ten. Here’s what they say: ‘Sh**, I just ran out of space on my SD card,’ or, ‘Grandma wants these photo, how am I supposed to get them to her?’ That’s what they say. They do not say, ‘I want a secure easy, fast way to do it.’ The rest of the headline,
‘To identify a profitable idea,’ why did I say that? Because, in our research we found that the number one barrier, number one, to earning money on the side, is that people believe that they don’t have a profitable idea.

That’s pretty interesting, don’t you think? If you were going to create a course on earning money, most people only think about the positive, they think about, ‘What can I get there?’ ‘Oh, I’ll promise you ten million dollars a month.’ Whatever, they never think about, ‘Why haven’t these folks already done it?’ So, if you’re building a product, ask yourself, ‘Why haven’t they already done this before?’ Then address that head on in the copy. On and on, that is, you write copy.

Andrew: So, this big research document that you have on your customers, I’m thinking about someone in my audience who has software based website, web app, and they want to create a similar research document on their customers, how would they do that?

Ramit: OK. The good thing, I call this the Craigslist penis effect.
Have you heard this Andrew? Have I told you this . . .?

Andrew: Craigslist penis effect.

Ramit: Yes, I’m glad I got you to say it, because, now we have that audio. We’re going to cut that video and remake them. This is a fascinating phenomenon that most women know. What happens is, they go on Craigslist, not on the adult section, they just go on a normal part of Craigslist, like ‘Hey, I’m looking for a bike, please e-mail Beth1234@gmail.com,’ and within hours they have fifty pictures of penises in their inbox. It’s inexplicable, yet hilarious. Why does this happen? Nobody knows.

However; let’s say they’re on the dating section, forget the bike section. So, they’re like, ‘Hi, I’m new in town. I’m looking to meet some friends, maybe go to a museum,’ fifty penises, OK. However, one guy who writes, even a decent e-mail, he goes, ‘Hey, I’m also new to town. I like the beach. Love to hang out some time. Talk to you soon.’ He wins.

The Craigslist penis effect says, ‘You don’t even have to be the best, often, you just have to be better than most people, because most people, in certain areas, are terrible.’ Like planning events, most people are terrible, so if you’re just a little bit better, you win. Same thing is true in doing your research. Most people were building software, they’re terrible at this. How do you do it, is that the question?

Andrew: Yeah. You’re saying, first of all, you don’t have to do it as well Ramit Sethi does, because most people aren’t doing it anywhere near that well. Your competitors are basically flinging penises out to the internet, if you just do it a little bit better; you’re going to improve your sales. So what’s a little bit better? Frankly, I want to do a lot better, actually. I want to be the handsome guy who comes on the horse and does the whole romantic bit.

Ramit: It’s getting a little hot in here. Hang on everybody. I need a couple minutes to pause here.

Andrew: Yeah, what do we do?

Ramit: First of all, when I say, ‘Who are your users?’ I want you to be able to answer me in this level of detail. I want you to be able to say, ”Ramit, my users are 27 to 34 years old, they tend to be male.’ How much male? ’75 percent male.’ Where do they live? ‘They tend to be on the coast.’ Why is that important? Because people on the coast will probably have a higher income. What do they want? Can you answer this crisply?

If you had asked me about earning more money, what do they want? Yeah, they want to earn more money, but they also want to have, freedom, they want to dominate their friends. By the way, guess what? You don’t find that with women. That’s pretty interesting, right? Why do I use the word ‘dominate’ a lot? Because that’s how guys talk, women don’t talk like that. The language in that, the messaging, it’s all congruent. What do they fear? They fear being ordinary, they fear being in the same job for the next 30 years, and being like that 50 year-old guy sitting next to them.

Andrew: How do I know this stuff? I’m just building my web app; I’m trying to write a good copy. How do I know it? How do I know that my costumers are on the coast? How do I know that my customers want to dominate and not just collaborate?

Ramit: First of all, we talked about what we want to get to, now let’s talk about how to get there. The simple answer is to ask them. Most people don’t ask them. If you say, ‘Hey, why don’t you ask them?’ People have 50 reasons why not. ‘Oh, Ramit, you say you should survey them. Well, I don’t have the incentives to offer.’ Why do you need an incentive? What we do is, at a high level, we basically ask them. We get to know them. We’ll ask them in a variety of ways. We’ll ask them in a variety of channels.

I’ll send out lots of surveys. I just use Survey Monkey. I’ll also email them and ask them a question and I’ll ask them to respond directly to me. I’ll tell them I read every email. Sometimes I’ll do live chats. I’ll ask a question and have people write it there and have someone recording it. Sometimes when I’m hanging out with friends I’ll just ask them.

All these ways, we combine them and that’s what allows us to get this research document together. Which allows us to write our copy. Which allows us to, for example, charge 100 times what our competitors charge. But that’s not even the point. It actually allows us to get better results because we deeply, truly understand the people that we’re writing for.

Andrew: All right. You say ask them in person, ask them in surveys, ask them in conversations. Let’s start with in person and conversations online. Because those are the places where I get my most useless answers when I ask people.

Ramit: What do you ask them?

Andrew: What do I ask them? That’s good question. I would say, you know, I’d say what course should I create on Mixergy? What interviews should I do?

Ramit: No, you already lost. Interviews is a good question but that has nothing to do with products. What course should I create, that’s all about you. Who cares about you? You’re nobody to the average person. Right? I’m nobody. Nobody is nobody. I want to ask them about them.

Let’s say that you have a person who’s in your audience. He’s an entrepreneur. He’s started one company. He’s trying to grow it, whatever. I would start by saying tell me about your business. He’s going to tell you something. What keeps you up at night? He’s going to give you some BS answer. Then you’re going to drill. You’re going say what does that mean? If you sit around, do you look at your bank account? Is that what worries you? Or is it, it must be hard to manage so much staff. You’re kind of probing, right? You’re literally and legitimately interested in what he has to say.

He’s going to be like eh, I don’t really look at my bank account. I’m fine on that. But oh my God, managing a team. I’ve hired three of the wrong people this year and it’s cost me like you would not believe. You’re like really, tell me about that. He’s telling you.

Notice that it’s nothing about you and your courses. Nobody cares. Him. Then, so now you’re getting ideas, right? You talk to ten people maybe you hear some patterns. Maybe you heard four people say oh my God, I can’t manage a staff. It’s my first time. Then you might go out to your lists, or your blog, or whatever and you might say hey, curious for those of who have a staff. I wonder if you might be willing to take a five minute survey. Then you start asking really broad questions. Tell me about your staff. How has your experience been managing a staff? Et cetera.

You start to hear words like it’s the hardest thing I do in my business. I spend way too much time and I wish I had a process. Et cetera, et cetera, et cetera. Then you go deeper. That’s how you’re getting these insights. Right? It’s not about you. It’s about them.

Andrew: OK. In the surveys, though, I end up getting, we all do, and I’m going to bring this back to the guy who has a web app in a moment. I want to understand how he can do the same thing. In the surveys that we get back we end up with such diverse responses. It feels like if we were going to create a spreadsheet with all the answers and a column with all the answers we get and a column with the number of responses we get, each answer would just get a one mark next to it. Which is useless. How do you combine it all into something that tells you 80% of my audience is feeling this way? 80% is bothered by lack of process around staffing.

Ramit: If it were as easy as sending out a few surveys everybody would do it. But they don’t. You have to bring your expertise to bear as well. You have to often read between the lines. What are they really saying?

I’ll give you an example. When I had been writing about money for years, and I wrote a book and it included a couple of parts about earning money, but for years people had been sending me emails like hey, can you talk about earning more money? I was like no, I don’t want to. That’s scammy and I don’t want to do that. Then I went out on book tour and every city I went to I said what do you wish I wrote more about? They’re like love your automation stuff, used your scripts. I want to know how to earn more money. I was like really? That’s kind of weird, isn’t it? They were like I don’t know, I just want to know how to earn more money.

That’s when I went home and started doing this research. What is going on there? Yes, I listened to them and that’s part of it. But also, Andrew, what are you good at, passionate about, and where do you feel you can make a disproportionate impact on the market? You have to combine these things. Not just what do people want. Because people are going to tell you they want anything.

In fact, I guarantee you if you wrote a blog post or an email tomorrow saying hey guys, anyone want to know a new course on how I cut my email down from 150 a day to 146? I would love that Andrew. Please tell me what to do. How did you solve that optimization problem? Well, I’m not going to solve your stupid optimization problem. Find something that they want but also something that you can add immense value to. And then go back out to them and ask them if they’re interested in it.

Andrew: I do see by the way. I think there was a shift in your business around the time that you were getting those responses. It seems like before then you were telling people how to stop being monkey’s with their money. And after that you were telling them how to start earning more money. You went from how to stop wasting your money to how to start earning more money. Did I pick up on that shift properly?

Ramit: It was a shift. It wasn’t exactly that but there was a shift. Until that point a lot of it was building systems to automate your money. And what’s interesting is, you know sometimes, very rarely now, but sometimes in the past in the murky period between right when that shift was happening people would say, where’s the personal finance content. And my answer to that is, I’ve done it. I’ve written it for years and here’s my book. It has the best of the best in it for ten bucks.

So I will always want to grow my audience, right? We can’t just sit around talking about interest rates or automation for years. Let’s apply it to other parts of life. Those principles apply to everything. That’s why the shift was made to earning money. That’s why we’re now shifting to careers, and that’s why we’ll shift to other places as we grow.

Andrew: Let’s talk about Ruben of Bidsketch. Ruben has a website that helps designers create and send out proposals. He wants to use what you’re talking about. So he has a conversation with some designers and he says, what are you guys worried about? Or specifically to each one at a time. What are you worried about, what keeps you up at night? And instead of saying, hey, I don’t, if you ask that kind of question the response won’t be related to sending out proposals. It will be related to anything, you know, it’s a little too broad. How do you narrow it down so it relat