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LoungeBuddy
Co written by Joseph Zhang and Oscar Hong
For most people, the airport is a dreaded part of travelling. It’s seen as a place of unnecessary stressors, extreme boredom, and overpriced souvenirs. If there were a better alternative, travellers would have pounced on the opportunity in a heartbeat. But up until 2013, airport havens for the weary were limited in access and hard to find.
Not until Tyler Dikman, fellow traveller and entrepreneur, created LoungeBuddy and provided the opportunity to experience the hidden world of airport lounges.
“If you ask most people, they’ll tell you anytime in the airport is usually more time than they want to spend in the airport”
To understand why LoungeBuddy has been so successful, we need to look at its founder. For Tyler, LoungeBuddy was not his first rodeo; it marked the fourth startup of his career. Entrepreneurship had been in his blood since his childhood. He did “lemonade stands, had a lawn mowing business, [and] did babysitting. I was a very amateur magician for young kid’s parties. Then I started a technology consulting business when I was 14.”
It was this technology consulting business, CoolTronics, that gave him his first true taste of the world of startups and laid the foundation for his knowledge of business. After creating it in high school, Tyler brought the business with him into college and grew it to serve “hundreds of small businesses and home clients.” Under his leadership, the business was “generating millions in sales,” not bad for the brainchild of a high schooler. Clearly, Tyler had a knack for entrepreneurship. In fact, the business became so successful that he was able to get his hands on the exclusive American Express (Amex) Centurion Card–his gateway to the world of lounges.
Because he wanted to continue his consulting business in college, he had to make frequent trips between his school, Santa Clara University, in San Jose and his business in Tampa, Florida. Although necessary, these trips were physically taxing. To make matters worse, his flights were unforgiving red eyes that left little time to rest and prepare for the work that awaited him upon arrival. With the constant time zone changes and limited rest, how was he able to function every time he completed a trip?
It was all thanks to the airport lounge during his layovers. He credits the lounge in Houston as the reason he could survive the trips. At the lounge, he could “take a shower, have some breakfast, get some emails out and at least not feel like a zombie by the time [he] got to Tampa.”
Living the startup life certainly has its perks. For Tyler, an avid fan of travelling, it means he can satisfy his love of adventure. Before LoungeBuddy, his other three startups–in combination with some leisure flights–required him to fly over two million miles in just five years. Perhaps even more stunning is the number of lounges he had visited. After numerous trips to the airport, Tyler had been to one-third of the total lounges on Earth, roughly 1000 in total. While impressive, Tyler recognizes that not everyone is as fortunate.
He remembers one time when he was in an airport lounge that overlooked the rest of the terminal. There, he saw a completely different situation beneath him. In contrast to the luxuries and relaxed ambiance of the lounge, the terminal was in disarray. He recalls seeing “people there huddled against the wall or sleeping on a makeshift pillow that they took from their jacket.” It was this realization of the ‘two realities’ that inspired Tyler to create LoungeBuddy.
After this, Tyler and the founding team got to work.
They reasoned that their proposed service should be met with a warm welcome by travellers everywhere. There was a critical mass that shared a common airport hatred and no solution that adequately addressed the problem. With an easily scalable platform, they could impact the traveling experience for people far and wide.
Before they began, they needed to understand the market better. With the help of a well known aviation trends professional and the direct surveying of lounge providers across the globe, they combined their data to finally see what they were dealing with. After all the research was done, they realized, for the first time, that they were dealing with something a lot bigger than they had thought.
After the discovery phase was over, they needed a way to figure out how to mobilize the 93% of travellers that had never been to an airport lounge and appeal to the 6% that had. They segmented their customers into two pools and positioned their service accordingly. For the minority of travellers that already used lounges, LoungeBuddy acted as a “single resource for information.” Anything from “rules, photos, ratings, reviews, [and] amenities” was shared on their platform. They wanted to become the “TripAdvisor, Yelp or Foursquare [of] airport lounges.”
For the large majority of travelers that hadn’t had the ability to visit a lounge, LoungeBuddy acted as an opportunity maker. As Tyler explained, it “is an affordable opportunity to significantly improve your travel experience. Our typical airport lounge is about $35. When you think about what you spend on air travel or your journey in general, it’s a relatively low cost, especially if you say ‘instead of spending money on drinks, food, and Wi-Fi, I can have this all inclusive and exclusive experience, and feel like a VIP.’” While effective at generating revenue, the team wasn’t too focused on revenue growth at the start. Instead, they simply wanted to gain a better understanding of their business so that later on they could build upon a solid foundation. With the help of initial investments from family and friends, they began building their service.
Prior to launch, LoungeBuddy had around 3,000 beta testers providing feedback on how to improve their service and combing for undetected bugs. With the exception of the cohort of testers, the team had no idea how others would react to their service. When it came time to unveil their app, Tyler explained, “we were featured on the front page of the App Store.” With the help of the media, word was spreading fast.
In their first month, they already had over a hundred thousand members and were catching the eyes of reputable publications like CNBC. As membership grew, so did the number of complaints. With limited resources, they had to make sure that they didn’t waste their efforts on the wrong piece of advice, a common trap many startups fall into when trying to please everyone at once.
“They [startups] end up building a lot of cool features that 50 people think are cool, but when you deploy to the masses and you have a hundred thousand people using the product, 50 people out of a hundred thousand is not enough to warrant the work that you spent building that new functionality or feature.”
The most common grievance among customers was the limited number of airports in the program. To the team, they viewed the issue with a different perspective. While a large number of customers were angry, they saw an opportunity to improve their business while providing a simple solution to remedy their anger.
After these initial bumps, LoungeBuddy was off to the races. To attract the millions of users that they have today, they turned to an unconventional approach: storytelling. In business, storytelling works the same as it does in childhood: both convey a message that people want to hear. For LoungeBuddy, their story was simple,“you can turn this terrible [airport] experience into something you look forward to by saying, ‘my flight’s delayed by another hour, no problem, I’ll hang out and relax in a comfortable chair, grab something to drink, grab something to eat, watch my favorite sporting event on TV, hop on my laptop and watch Netflix, [or] whatever it may be. That was a story that really resonated with a lot of people.” And with the help of the media, this story was heard worldwide.
Today, LoungeBuddy is more successful than ever. Recently, they were acquired by American Express as part of their initiative to reward card members. Making airport lounges more accessible for every traveler, Tyler Dikman is aiming to reshape the future of travel.
Entrepreneurship Advice
“Start as early as you can. When you make a mistake and you’re a teenager or a 20-something, you don’t have to raise a family or worry about rent or mortgage payments. It’s a lot easier to make mistakes.
Get mentors. Don’t be afraid to reach out and ask for help. Again, thanks to social media, email, LinkedIn, and everything else, it’s pretty easy to get in front of somebody that you’d like to [get] help from. But you have to be very succinct. And you have to have done your homework. If you ask a silly question to somebody, they’re going to know it’s a silly question, and they’re not going to want to help you.
Start small. The best way to learn is [to] start with something that you’re really familiar with and do it on a local level. Everybody talks about whoever started this big company or that big company, but most of these people started with something very small and very manageable. And that’s where you can really get your general business experience. And then you worry about scaling it. But if you can’t nail it on a local level, you won’t be able to nail it on a global level.”
To learn more about LoungeBuddy, visit them here. To see our interview with Crayon click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
Short Story of the Day: Burt’s Bees
While the Burt’s Bees brand may be a common household name today, the story of how it came to success is certainly not. In the 1970’s, Burt Shavitz was in his early thirties and lived the city lifestyle as a photographer in Manhattan, far removed from the peace of nature. All was going well until one day, he came to a stark realisation. Upon taking a picture of an elderly woman who was bound to her apartment, he understood that he could’ve been staring at a reflection of his older self. Spooked by the fear of being trapped inside an apartment all day, Burt quickly quit his job at Time and Life Magazines and headed to Maine to pursue a more gratifying life.
“I knew that that would be me, 90 years old and unable to go outside, if I didn’t get the hell out.”
When he arrived to his 400 sq. ft. Turkey coup with no running water or power, he turned to the hippie lifestyle. After settling in, Burt decided to sell his bees’ honey to help generate some cash. Eventually, he became famous among the locals for selling honey out of the bed of his pickup truck. To deter theft, he marked each of his bee boxes, “Burt’s Bees.”
Although Burt found success selling honey, he didn’t know what to do with the leftover beeswax. He decided to save it, rather than throw it away, in case he thought of another use.
One day, while Burt was driving, he noticed a hitchhiker on the side of the road and decided to give her a ride. He didn’t know it at the time, but that girl, Roxanne Quimby, would become his future soulmate and business partner. Impressed by her ingenuity and self-sufficiency, Burt thought he could impress her with his old beekeeping book filled his beeswax recipes. Roxanne quickly saw opportunity with his left over beeswax, and together, they began to sell candles in addition to honey.
Shortly after, business skyrocketed. They entered themselves into a junior high crafts fair and made $200; one year later, their sales had grown to over $20,000. Though they were clearly onto something, the two had opposing goals. For Roxanne, she wanted to live the ‘American Dream’ by growing the venture to a large as she could. Unlike Roxanne’s large ambitions, Burt was humbled by their current success. He found the rush of the corporate life to be antithetical to the reason he migrated to Maine-Burt had no intention of living the CEO lifestyle.
As the business grew in size, so did the strain on their relationship. When the company moved south to North Carolina, away from the familiarity of the Maine woods, their relationship was at a weak point. Soon after, Burt was discovered to be having an affair with one of the staff and was divorced by Roxanne. Per the divorce settlements, Burt was left with nothing but some cash and a plot of land in Maine to live out the rest of his days.
Under Quimby’s supervision, the company was able to grow to an impressive size before being acquired by The Clorox Company in 2007 for $925 million. Although Burt left the company before he was able to share in the success of his bees, Quimby decided to give him $4 million. For Burt, however, capital gain was already behind him. “In the long run, I got the land, and land is everything. Land is positively everything, and money is nothing really worth squabbling about. This is what puts people six feet under.”
In retrospect, Burt had no feelings of regret after leaving the company. “I had no desire to be an upward-mobile-rising yuppie with a trophy wife, a trophy house, a trophy car. I wasn’t looking for any of those things. I already had what I wanted… No one has ever accused me of being ambitious.”
Today, Burt’s Bees has expanded their product line beyond mint flavored lip balms to other natural cosmetics. But in all their success, they have never strayed from the ‘down to Earth’ ethos established by Burt back in Maine.
Crayon
Walk into the spacious, open offices of Crayon in Boston and you might never have believed that this was Jonah Lopin’s second startup, but his foray into entrepreneurship actually started at Hubspot. MBA in hand, he had wanted to exit the corporate bureaucracy and work with a small, passionate team to build a brand new product category. Little did he know that this experience would provide the backdrop for his next major venture.
Jonah’s path to entrepreneur wasn’t linear. He started out as a management consultant at Deloitte, but ended up wanting to learn more about startups. One MBA program later, he was hooked.
At MIT Sloan, he met his future co-founder, John Osborne, and discovered the hidden world of starting companies from scratch. No bureaucracy. No politics. Unlimited upside with the right idea. Break the rules without worrying about bosses. What’s more, the premise behind startups matched his values. As a kid, he had been homeschooled and learned to think for himself, operate outside of the conventional school system, and believe in constant improvement.
As graduation approached, Jonah skipped the wave of corporate recruiting in favor of an, at the time, risky proposition: joining Hubspot. Entering as the sixth employee, he got onto the management team to run the customer success division. While working with clients, he identified several issues that would later be addressed by Crayon.
Customers generated a massive amount of leads through Hubspot’s inbound marketing, but they didn’t get the insights to close a competitive sale. Hubspot improved website optimization, but it didn’t help clients with positioning. The team helped people generate content, but they couldn’t help them keep up with what buyers needed in the rapidly changing economy. These challenges were universal. As Jonah put it, “we never helped our customers understand what was happening outside the four walls of their business.”
Working in the Customer Success division, he also picked up valuable soft skills. While dealing with clients and the variety of problems that popped up on a day-to-day basis, Jonah realized the significance of the revenue hockey stick and getting cash flow. Having enough money meant he could run experiments, solve problems, make investments, and attract world class employees. He also had to build a great team; Jonah assembled a cadre of visionaries, problem solvers, and leaders that were “the best people [he’s] ever worked with.”
When Hubspot went public in 2014, Jonah was ready for a fresh start and left to start a company with his MBA classmate John. He had went through a controversial career choice before when he took half the salary of a cushy consulting job to join Hubspot, but it had worked out perfectly. And this time, with a treasure trove of knowledge about marketing and client problems, a playbook to deal with issues at startups, and a roadmap to growth that he had witnessed at Hubspot from zero to IPO, he was more prepared than ever.
He quit his job, assembled a team, and began experimenting. Jonah and John launched a number of products from a location based social network to a GIF style consumer product and even a meal share/meal delivery service before they settled on Crayon Inspire, a Pinterest for marketing.
In the first year of building and scaling the product, they realized they weren’t making money, and worries about generating revenue were creeping up. Luckily, the chance to pivot was right beneath their noses. The Crayon Inspire software was crawling the web at scale, indexing and tracking millions of web pages and data sources across millions of companies, organizing and storing that data.
That mass of outside data could be used to solve the problem Jonah witnessed back at Hubspot: the lack of knowledge about metrics outside the four walls of a business. Sensing an unmet opportunity, Jonah and John figured that they could use the backbone of the Crayon Inspire software to run a new service to collect massive amounts of data about companies in a competitive set and generate insights to use from days to years.
They approached two CMOs with the idea and suggested that Crayon could solve their companies’ marketing intelligence problems. Without having even built a product yet, the two potential customers turned into clients and they closed their first sale. It was convincing enough to the two of them that they were on the right track.
When they had come down from the high of the first sale, Jonah and John knew that they had a unique, unheard of idea in a net new category.
To sell it, they focused on telling a compelling story.
The narrative started with an analysis of the current situation. Businesses were great at understanding what was going on internally: they had CRM, analytics, real time software data, and optimization strategies for their campaigns. But outside of that, there wasn’t a good way to get information on the wild west of their respective industries.
Potential clients loved the ability to wrap their arms around all these data and signals to generate actionable, software-driven market intelligence. They could get ten times better intel at a tenth of the cost.
It also helped that they made it accessible (you could try it for free) and they took a lot of the strategies that Jonah learned at Hubspot like inbound marketing to the next level to attract potential customers. But not every sales pitch went through. As Jonah put it:
“It’s never easy to sell…some meaningful percentage of people that you talk to are still not ready to make that investment. There’s always still going to be reasons why it’s not the right timing, or they don’t have the budget.”
They key was to not get discouraged in the process.
There were also other challenges besides conveying their brand identity when they started such as product development. Because they had to collect a massive amount of big data and use AI to analyze it, they needed to normalize all that unstructured and semistructured information coming through and enrich it so they could drive insights and action for customers. From all this data, they needed to be able to use the intelligence layer of their platform to drive strategic (long term) and tactical (short term) actions. This was very difficult.
All the hard work paid off. With their vision and software driven product in hand, they grew every year while maintaining their beliefs and values that kept them excited when they first started.
Jonah’s not tied to the past. He wants to build a revolution from the ground up, transform the industry with software, and change the conceptions people have about marketing intelligence.
Entrepreneur Advice
“Don’t do it unless you really have to. It’s not a good way to make a buck. It’s not a glamorous job for most of us. And it’s hard work. And if you think you can be happy joining somebody else’s startup or working at a big company or being a consultant or doing something else, you should do those things. And if you can’t, and you need to build a company and you need to be an entrepreneur and you think that this is your calling, then you should do it and you shouldn’t let anyone talk you out of it and you should be stubborn and bold in your pursuit of that. You really have to gut check whether this is what you want to do. And if you’re not sure, then don’t do it because it’s hard. And if you are sure, then just do it. Stop thinking about it; just do it.”
To learn more about Crayon, visit them here. To see our interview with She Geeks Out click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!
She Geeks Out
Click. The lights flashed on. Although seemingly ordinary, the constant darkness of the women’s restroom served as a reminder for Felicia Jadczak that she was only one of two women on her entire floor. In fact, in the whole office of 180+ people, there were twenty to thirty women total.
Wanting to provide a sense of solidarity for the female engineers in the company, her boss, Julia Austin, asked her to start and run an employee resource group. Felicia was perfect for the job. She had worked in tech for five years before starting at VMWare, graduated with an MBA two years prior, and wanted to do something more with her life, so it was perfect that she had the chance to run a group that she would learn to have a lot in common with.
Looking for a partner to work with, Felicia connected with Rachel Murray who was also in the tech industry and ran a group called Boston Girl Geek Dinners. They combined their knowledge and decided to host a sponsored event for women in tech in the Boston area where there would be female panel speakers and networking opportunities.
Despite logistical challenges with hosting similar events in the past, Rachel and Felicia pulled it off. Eighty women attended, mingled together, and shared stories of their lives. Felicia had discovered her community. They were laid-back and talked about everything from hobbies to exciting things they were doing. “From that first event, many women kept on coming up to us and saying ‘this is so great, when is the next one?’” Felicia said, “and it was really clear that there was a need and a desire to have a more formalized community.”
As demand increased, Felicia and Rachel formalized their partnership and began doing more events, and within a year, completely rebranded. They changed the group’s name to She Geeks Out to represent the various career women who attended each get-together and opened a bank account. She Geeks Out had exploded onto the scene, but for Felicia, taking the big step to quit her job hadn’t entered the picture yet. She “hadn’t given [herself] permission to think about doing it,” with the “it” meaning taking a turn into the uncertainty of entrepreneurship.
Soon enough, she had a chance. Two career paths opened up at Felicia’s job. Tasked with making a difficult decision, Felicia called up her previous boss and now mentor, Julia Austin, for advice. Surprisingly, Julia pointed out a third option: quitting and focusing on She Geeks Out, her true passion, full-time. Felicia was taken aback, having never considered leaving the land of stable income and predictability for running a startup, but the idea wasn’t foreign.
As a child, she had been exposed to the benefits of entrepreneurship. Her parents had run several small businesses, and her dad had always remarked that it was “better to be your own boss than to work for anyone else.” Having an entrepreneurial family’s backing and a strong support system made the move much easier.
The process of quitting wasn’t perfect though; she had a well paying job and enjoyed the work. In contrast, pursuing her own company would probably mean less pay, more uncertainty, and significantly harder work. But when she finally did the deed, the transition wasn’t as bad as she had expected.
However, dramatic changes often bring new difficulties. Originally, she had planned on taking a part time job at the gym to get health insurance and a steady income, but things began to pick up fast. “I still remember saying to myself, ‘This week’s pretty busy but next week will be a little calmer'” she said while laughing, but each week was harder than the one before. In the beginning, Rachel had also been splitting attention between She Geeks Out and another startup but joined full time after duties began to pile up. Having both founders at the wheel with a single-minded focus was crucial to driving the company into the future.
She Geeks Out initially focused on expanding the breadth of their community events, staying true to their roots. To be sustainable though, they realized a more consistent income stream would be necessary, so shortly after going full time, they piloted their first diversity and inclusion (D&I) training program. Nevertheless, when they started these training programs, some confusion arose because they were known more for being community/event based rather than corporate.
They used the initial confusion as an opportunity to show why their business model was so unique. She Geeks Out covered all sides of the diversity and inclusion sphere, doing both community work and corporate training. The corporate training aspect didn’t only look at women, but diversity in a broad sense from socioeconomic status to disabilities and veterans. By having a foothold on the two important sides of the industry, She Geeks Out could gain insights into how companies thought about issues and how communities were viewing those efforts. With a voice in both these groups, the company could improve communication and gaining a competitive advantage against competitors.
Advocating for corporate training proved to be harder than they initially thought. People questioned their credibility as they didn’t have a background in the field, and many businesses weren’t initially interested in topics like diversity training and community building. But once they got their first customer, they started building momentum. By working with connections in the community, running popular sessions, and maintaining long term relationships with businesses, She Geeks Out developed one of the most sought after business tools: word of mouth. They would develop relationships with someone at Amazon, and when that person changed companies to somewhere like Facebook, they would bring She Geeks Out there too.
Click here to learn about other ways they marketed
For those who still questioned the company’s credibility, Felicia completed a strategic diversity and inclusion management certification with Georgetown University to strengthen her knowledge. “It’s been very helpful in the sense of giving people that sense of trust,” she said, “and it’s not just that we have experience in this, but we’ve also got some educational work on the topic.”
All of these strategies tie back into the core idea that pushed SGO forward: long-term viability. She explained, “We’re not looking to grow really quickly and make an exit. We’re really looking to grow a solid company that we can be with for a long time and that can do meaningful things.” That’s why developing strong relationships with corporate partners has been crucial; these connections help extend their influence over time and provide continuous value. As they’ve grown, the line between the community and corporate pillars have blurred. Some corporate clients start out as sponsors for events but move to the training side while others start with the training but shift to helping out for sponsorships. Rachel and Felicia had found their prime spot.
Sponsor money from events and training has been important because since the beginning, She Geeks Out has never obtained any outside investor/VC funding. On the other hand, Felicia points out that they’ve never needed it; they’ve been profitable from the start. Because of this, one of their biggest challenges has been to figure out how to support that sustainable growth and make sure events are funded while growing revenue at the same time.
Click here to learn how bootstrapping changed SGO’s approach to expansion
Things like building credibility, running a startup without venture capital, and figuring out how to expand your business can quickly add up to a large list of problems on your plate. “Running a startup is not easy…It’s the work and feeling burnt out and overwhelmed, fearing failure or that people won’t like what we’re doing. When we first launched our training, we weren’t sure how we were going to go and there was a real fear there that it would fail,” Felicia said. It’s stressful.
Click here to learn about self care
Juggling all these different tasks has taught Felicia what to focus on. After going full time, Felicia and Rachel realized that scaling on the community side wouldn’t be as feasible or impactful as building the business on their corporate training. If they built revenue there, they would be able to get brand recognition and expand into other areas, all without losing the essence of their original vision.
Felicia’s not in a rush. She sees She Geeks Out as a long term project of hers. She knows that in five or ten years, the problems in the industry may be different. Diversity may well be redefined by then and the political climate may change. Felicia’s not fazed, putting it simply: “it’s really about creating a solid company with good values and delivering a good service.”
Entrepreneur Advice
“Go for it because I know that was something that I really struggled with where I was really afraid of failure. It wasn’t nearly as scary as I thought it was. Especially for female entrepreneurs and founders, a lot of the times we get really scared of this failure, or we think that we have to have everything set up to go before we quit that job or take that leap, but sometimes it’s just about doing it, trying, and seeing what happens. And if this doesn’t work out for some reason, it will be an amazing experience that [you] can leverage for a million different things elsewhere. So my advice is just go for it. And I touched on this really briefly but I didn’t really believe in self-care before becoming an entrepreneur, but now I’m a huge believer and proponent of it because it is so important to have that balance. So carving out that time to give you some time off to destress is OK.”
Bonus Points
Marketing the Company
She Geeks Out made it their goal to become well known everywhere. In fact, the way I met Felicia was through a D&I panel at Hubspot where she talked about her experiences in the industry and the need for more accepting work cultures. Besides speaking on panels though, Felicia focuses on showcasing her brand’s unique voice through blog posts, podcasts, and traditional social media like Facebook, Twitter, Instagram, and LinkedIn.
Bootstrapping and Expansion
Considering the fact that they don’t receive large cash infusions, there is little room for error. For example, limited resources made expanding to New York difficult. SGO is based in Boston, so when the two founders first looked outwards for strategic growth, they focused on tier 2 cities which weren’t saturated with competition. At the time though, Felicia’s mentor, Julia Austin, had wanted the team to host an event in New York. It went great, but after that, it didn’t pick up. Analyzing the situation, they realized there were some key hurdles. 1. They didn’t have a physical presence in the region to help them run their community events 2. They didn’t have enough connections in New York to build momentum. So although they had a small group of eager supporters, it wasn’t nearly as large as Boston. Fortunately, like most small startups, they hadn’t tied up all their resources in one place and decided to pivot out of the region temporarily while they figured out a solution. After looking around, they found a city organizer who was willing to help them build up the events and grow their base.
Self Care
Out of everything, one of the biggest lessons Felicia has been able to pick up has been self-care. At her previous job, there was a clear delineation in her work-life balance, but when she moved to running a startup, that division wasn’t as clear as before. Knowing how to balance intense workloads with relaxation was crucial to making life more bearable.
Short Story of the Day: Dropbox
It all started with a frustrating bus ride and the reverse engineering challenge of a lifetime. During a trip between Boston and New York, Drew Houston realized that he had forgotten his flash drive and couldn’t do any of his work. The problem was exacerbated by the fact that it wasn’t the first time, so Drew scraped together some code and made a basic file synchronization software, and the first version of Dropbox was born.
Drew’s first product was premised on the idea that file synchronization would be one of the most important aspects of people’s lives, something that they don’t know how much they need until they actually have it. After pitching his revolutionary idea to Y Combinator though, he was hit with a host of challenges.
Paul Graham, the cofounder of influential incubator Y Combinator, had demanded that he find a good cofounder for his company before he submitted his application. With a cofounder, they explained, he would have a better chance of success. Pressed for time, Drew explained that the offer was like “getting an email from the dean of admissions to your favorite college, but the application deadline was in the next couple of weeks, and you need to get married in that time, not just find a date.”
After talking around, he was connected to a friend of a friend, senior Arash Ferdowsi from his alma mater, MIT. With two hours of talking, he had convinced Arash to drop out of college with only six months left until graduation to join him.
With a minimum viable product and a cofounder, he was accepted into the prestigious incubator and handed $15,000. Arash and Drew rented out an apartment, bought a Mac, and got to work building the product. A few months later, they presented at a Y combinator event and secured their first $1.2 million in seed funding from Sequoia Capital.
One of the most important aspects of the platform for Drew would be usability, building something so simple that it would work just like magic.
That’s much easier said than done. If you use the service, you’re probably already familiar with the intuitive nature of dropping your files into the Dropbox folder and having them automatically sync to every device that you use. That extremely powerful feature of integrating Dropbox into the native files on a users computer would be the hallmark of the company, but making that “basic” functionality work was much more complex than it appeared.
That difficulty arose from the various operating systems on every computer. Each one had a completely different code base for the respective file storage processes. For instance, you couldn’t just use the same code to get the Dropbox folder to appear on both Windows XP and Macintosh OS.
Reverse engineering each one of those file storage systems would thus prove to be one of the greatest trials for Dropbox in its early history. Staying lean to save money, Drew and Arash would pull 20 hour days to perfect their product, searching for obscure versions of operating systems or the perfect color for the logo so that it would blend in with the native user interface.
Unlike many startups, Dropbox never had to make any major pivots. Their original idea was so good that all they had to do was figure out how to sell it. If they could just convince people that file synchronization was thing they never knew they needed, then it would all work.
As many founders know though, building a product into a whole new market is a beast in and of itself, and Dropbox initially had a difficult time picking up new users. But by using some subtle niche marketing and a freemium model that could quickly generate money, they built momentum up fast.
Drew first made a seemingly ordinary video demonstrating how Dropbox worked, but that video helped propel them into the stratosphere. Inserting numerous references to cultural elements of the tech community like XKCD, Drew appealed to early adopters and showed off the ease-of-use and flexibility of his platform. Overnight, the waitlist grew from 5,000 people to over 75,000.
Moreover, Drew got his initial loyal customer base to work for him by giving them 250 megabytes of extra storage for each referral. Soon, the company began to attract millions of customers. To further grow the amount of paying users, Dropbox enticed them with 2 gigabytes of free storage, enough to get them to love the platform and pay the extra to upgrade to 3 terabytes for only $12.50 a month.
The success of Dropbox soon began to draw eyes as their valuation exploded into the billions and numerous elite investment firms clamored to get a share at the table. In fact, one of the most famous stories is that Steve Jobs offered to buy the company, but upon rejection, proceeded to launch iCloud as a competitor.
Other large companies began swarming into the industry as well with hopes of capitalizing on the file synchronization craze that Dropbox had started. Google released Drive. Microsoft countered with OneDrive.
Nevertheless, Dropbox survived the wave and even thrived under the circumstances. Even though Drew had stumbled upon gold, he never got complacent. Despite sticking true to their core values, Dropbox had branched out to make new offerings. For instance, in 2016, they released Paper, a solution to note taking which has risen in popularity since that time.
Revolutionizing the file syncing industry and leading the initiative on storage solutions, Dropbox has proven to have not only a great product, but a great story to tell as well.
To learn more about Dropbox, visit them here. To see our interview with Codemoji click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!
Additional Reading Materials/References
- https://www.forbes.com/sites/victoriabarret/2011/10/18/dropbox-the-inside-story-of-techs-hottest-startup/#7c2a7e176437
- https://www.bbc.com/news/business-44766487
- https://techcrunch.com/gallery/a-brief-history-of-dropbox/
- https://techcrunch.com/2011/10/19/dropbox-minimal-viable-product/
- https://www.inc.com/magazine/201107/how-i-did-it-drew-houston-dropbox.html
Codemoji
Emojis and coding aren’t typically used together in the same sentence, but what if I told you to ignore this and think bigger? That’s where we discover the online EdTech platform Codemoji. Cofounded by Livio Bolzon, the company is dedicated to helping the next generation of students learn coding with an unconventional approach: emojis.
Fresh out of school, he was looking for a way to make a difference in the world while helping people in the process. Through his research and personal experiences, he found that the education industry had some holes that needed filling, specifically when it came to CS (HTML and JavaScript in particular). Combining this with his background in programming, the idea of Codemoji was born.
Like many others, Livio understood that diving right into the ‘nitty gritty’ of coding can quickly feel overwhelming to anyone trying to learn the basics, especially young students. By eliminating the finer details, like the syntax, and instead starting with the basics, students would be more willing to give CS a try. To do this, Codemoji replaces various code functions with simple emoji icons that allow students to focus more on the concepts before they are introduced to harder topics. But getting to this place wasn’t easy for Livio.
As a young entrepreneur, Livio admits that he made some mistakes when first starting up his business. The initial “ramp up” was difficult for Codemoji, partially because the primary focus had been on user growth rather than on revenue growth. So later on when they were strapped for cash, they had to seek outside help from accelerators and related programs. As their luck would have it, they were “rejected a million times”. To make matters worse, it certainly didn’t help that he was years younger than many other startup founders at the time. When trying to fund the company, it was extremely hard. “You have no money, [and none of your] friends have money because they’re all in college”.
He would soon find out that the edtech industry that he had just entered was already saturated with “a lot of big people and not a lot of small people. There are a lot of small people trying, [and] there are a lot of small people dying. Your level that the product needs to be at has to be so high to get paid by that school or else your retention rate at that school is going [to suffer]”. Simply put, the conditions were less than optimal for the small startup.
Eventually, however, things began to take a turn for the better. At first, they had been trying to target entire schools and work in a ‘top-down’ approach to get to student. And while that may still be the goal, Livio found it much easier to onboard individual teachers and pitch Codemoji as an add-on to their classroom rather than a curriculum change. After some doubts about going back to finish his education, he made up his mind when outside help finally came. With the assistance of funding, Codemoji was finally able to grow and gain the momentum it desperately needed. They continued to build momentum through mass emailing and with the help of newfound teacher-evangelists that were once early adopters. Ultimately, they discovered that private schools and individual teachers would be the strongest initial supporters of Codemoji due to their curriculum flexibility.
When the ball finally started to get rolling and the first thousand users were onboarded, Livio realized that Codemoji had potential. “Once we hit 1000 or 2000 [users], we were like ‘something’s going on here’… once you start hitting some numbers it gives you more reason to invest time [into it]”. As traction gained, they added more to the service. They first offered web development languages like HTML and JavaScript, but as can be seen, many new languages have been added with more to come in the future. In addition to new languages, students had their own requests for games as well, so the team granted their wish and added games to keep users engaged. This means that there is an endless supply of content, but creating each language’s course is a challenging task. In other words, one pro of the idea behind Codemoji is that the product roadmap is somewhat scalable.
Although Codemoji is yet to be considered a ‘big guy’ in the industry, they have already been able to make a great impact on kids to help them learn and love CS. Said best by Livio, the goal has been and is “[to] get them excited about computer science. [We try] to make it simple and easy enough to build that early confidence [so students can] persevere later”.
Entrepreneur Advice
“Go work on one thing and do as much as you can to make that happen. I think that is something that I didn’t do as much as I should have. I wanted to make the product as good as we could then go sell it. I should’ve focused a little more early on about sales. I think having realistic goals early on whether they are app downloads, paid views, or revenue, you have to be realistic with what those figures look like and how you are going to get there. Make clear plans like ‘how are we going to make our first thousand dollars? Then our second?’”
To learn more about Codemoji, visit them here. To see our interview with Worksense click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!
Worksense
Timi Dayo-kayode always liked to do things his own way. From a young age, his mom gave him snacks, and he would sell them to his friends at school. This self sufficiency manifested itself as an interest in solving problems as he grew older. Focused on fixing things himself, he quickly became the go-to person to address situations when they arose.
Although he was able to bring this problem solving mentality to all areas of his life from science class and math honors society to debate and student government, he never had one area where this trait would be put fully to the test until senior year came. In his last year of high school, he watched The Internship, a movie about two people who go to work at Google and write code, and he became fascinated with computer science.
Thus began the deep dive into programming. He first went to his school’s guidance counsellor to ask about any CS classes he could enroll in, only to be told that there weren’t any offered. In a majority black school, this was one of the first red flags. Not to be discouraged, he taught himself the ins-and-outs of web development: HTML, CSS, and JavaScript.
With his newfound love of programming, he travelled down to Virginia for his first Hackathon. What he saw there would completely change his outlook on the tech industry. He described the scene,
I got there, and I was the only black person there. It just felt weird. That experience really set the tone for how I interacted with the tech community in general. I just became super aware after that first experience of the composition of demographics within any tech segment.
From his experience back in his school, it also became apparent that certain demographics were less likely to go into the tech sector. In his majority black school, there were no programming classes and only a couple people out of the graduating class of 250 students were majoring in computer science. It was a wake-up call for Timi.
Entering college, he was still enamored with CS. He joked, “I was that guy who was talking about CS all the time in every conversation.” However, university gave him an opportunity to broaden his interests and explore other areas. He began to take classes in areas like psychology, cognitive sciences, and especially economics. The fast paced world of money, trade, and business caught Timi’s attention and in a dramatic turn of events, he found himself in an entrepreneurship class during his freshman year.
One of the projects for the class was to start a company, so he thought he might as well do something that solved one of the issues that he experienced on a day-to-day basis, the lack of diversity in the tech sector. He drew up a plan for a bootcamp for high schoolers to give them the experience to code proficiently before sending them to an internship. There was one cyber security company that had even reserved spots for the kids from the boot camp. He ran with that idea for six months, only to figure out that teaching minority students about coding wasn’t going to solve the pipeline problem.
Then, he pivoted to diversity recruiting. With a comprehensive platform that pulled an applicant’s github information, resumé, LinkedIn, and past experiences, Timi hoped he could create a platform where minority talent would be able to show off their achievements. Alas, even that couldn’t seem to solve the problem. Many times, prospective employees would enter the companies and leave early, revealing the retention problems that plagued the tech sector in underserved groups.
As Timi spoke to more and more people about the issue and delved into the topic, he began to see why retention was the biggest problem. Many of these talented people would enter the workplace, and the culture would be such a poor fit that they would end up leaving. Looking at the data, minorities were 3.5 times more likely to leave than their white counterparts.
There was a clear challenge with employee turnover, so Worksense moved deeper into the pipeline to become a long term solution to fix diversity issues within the company. Timi saw four main solutions that were being levied in the status quo.
The first and biggest was hiring consultants. He observed that it took a long time for them to diagnose the issues, and through talking to these people, he found that they were usually hired for a year, but it took six to nine months for them to finish the discovery phase, leaving them a short amount of time to create and implement a solution. The bigger hole in hiring consultants would be the inherent short term nature of the solution. If the company had hired new workers after the consultant finished or previous workers had left, there would be a shift in the demographics of the workforce and a subsequent slight change in the culture, meaning that the solution wouldn’t be as useful.
The second solution was special minority hiring softwares. Again, this went back to the whole issue surrounding retention. You can hire as much minority talent as you want, but it won’t affect your diversity and inclusion metrics if they leave shortly after being hired. The third solution was diversity officers, which would work well if the company was already somewhat diverse, so they could have something to work on. But if a company had no diversity or was already doing well, than having a diversity officer wouldn’t help much. The final solution was employee annual or quarterly engagement surveys. The problems mainly boiled down to lack of timeliness and specificity, two key factors for diversity.
Looking at these four current solutions and analyzing each of their strengths and weaknesses, Timi used what he knew best, programming, to devise a solution that would aid in diversity and inclusion for the long term.
The first aspect of his service would be the data side. “We’re collecting data from employees on a day-to-day basis and providing companies with actionable plans on a monthly basis,” Timi explained, “so you’re always adjusting the company culture to match the employees you have at a given time because the expectation is that you don’t keep the same employees that you have regularly.” The most important part of Worksense would thus be a survey based system. After a couple iterations and some tough feedback, he perfected it.
Combining aspects of social psychology and low friction methods to guarantee answers, the new surveys would slowly accumulate a plethora of data on different aspects of the minority experience within a company. First, employees put their numbers and departments into the survey software. Then, daily, Worksense sends out 3 to 5 question surveys to 5-10% of the employee population using text message. It’s both easy to see and reply to. Through sending those questions to 5-10% of the workforce at random, a particular employee may only receive a survey every 10-20 days, but because it is cycling through all of the employees, the software can quickly aggregate a lot of data and not tire out people.
At the end of the month, every department’s ranking based on survey completion is made public, thus incentivizing people to complete their surveys so their department doesn’t fall behind and look like it isn’t helping. This process could then be used to analyze topics such as advancement through the workplace. If the data that Worksense collected showed that certain minority groups had doubts about their ability to be promoted, that could pose a problem to retention. Worksense would identify that and offer ways to fix it.
Ultimately, Timi explains that the software is like a doctor. It looks at all the symptoms that the company has that could be pointing towards a particular problem, diagnoses it, and then gives a list of solutions that the company can use to fix it. Because they collect this data on an ongoing basis, the company’s executives can also see if what they are doing is working or not.
Outside of refining the survey process, Timi was also looking for a cofounder and resources to help him learn about the process of building a startup. Even though he was a CS major, he wanted to be more involved in the sales and evangelism aspect of the business, so one of his major goals was finding a CTO. “Finding a CTO was really hard,” Timi said. “I read all these articles and listened to these talks about how important your founding team is so I was very hard headed about finding the perfect person to found the company with. I spent a good amount of time interviewing people and figuring out who I wanted to come on.”
Luckily, he found just the person he needed. With a cofounder, many running the startup became easier. But before he had a chance to relax, the next big opportunity came: Mass Challenge. It was overwhelming, representing the culmination of all his hard work up to that point. There were all kinds of emotions going on: excitement that they had gotten in, confidence that came with being a finalist, but also doubt and fear about making decisions or living up to the high expectations.
Participating in the competition was a roller coaster. When the startup showcase was around the corner, Timi thought that just showing the software would be enough, but the night before, he decided that it would also be useful to have some visuals like flyers. The next morning, when he got to the venue to retrieve them, the flyers wouldn’t print out properly; they would be misaligned or not be the right size. Already stressed out of his mind, he kept trying and a few hours later, he finally got them printed the way he wanted. It was a crazy experience, but it was also like a microcosm of running a startup. Sometimes, it’s like you’re falling fast towards the ground, face first, but right as it seems like the end is nigh, you bounce back up and you’re up and running in no time at all.
Lots of obstacles came with being in Mass Challenge, but the benefits far outweighed the costs. For instance, it helped out was improving Worksense’s credibility. Being a part of the competition gave Timi greater access to strong connections and networking chances. He started going to all kinds of networking events around Boston by perusing Eventbrite; he became a power user on LinkedIn. Connecting with all types of people, poring over articles by thought leaders in the diversity and inclusion space, messaging professionals on Twitter, and finding advisors to fill in his knowledge gaps, he became an expert on the art of networking.
As he grew his network, it also became easier to connect with higher level people. By leveraging existing connections and asking for referrals, he was able to meet so many more professionals in different areas.
Even then, there were still times when luck was not on his side. One time he got a meeting with a prominent CTO, but it was ruined by his computer. Mere minutes before the meeting was to start, his laptop acted up, and it had to restart, a process that would take a while. He frantically tried to get it to start up faster, but it just wouldn’t work. The CTO emailed him and said that she was wondering where he was. Once his computer got up and running, it wouldn’t load the google meeting that he had set up. Frustrated and flustered, he ended up getting on the phone with her for only 10-15 minutes without his materials and questions on him.
That was one of his worst memories, but it was also just part of the process of running a startup. There are incredible highs and lows. “I definitely have my streaks. I have a 3 week streak where I’m getting things done, sending emails, making slide decks, and going to meetings. And then in a week I’m done. I’m not doing anything that week. I’ll have my email so backlogged, and it’ll just be crazy. I’ll just be out of it for a week,” he said.
Dealing with the bipolarity that comes with building a company has been one of the most important things for him. He stressed the need to have breaks and to take care of your mental health. After all, working constantly will only lead to burnout and a long recovery period. Giving structure and a schedule to his days also helps him stay focused on what matters.
Timi outlines his week, “I work from Monday to Friday. And then Saturday I just take the day off. On Sunday I try to climb up again. I do some readings. I do some email. I do my todo notes, and I check the ones I’ve done. I just try to build myself back up.” Being part of his college’s accelerator program has also been incredibly useful, giving him a time and a place to settle down and get his work done, connect with likeminded college students, and get help when needed.
Ultimately, even when things do get tough for him, having coping strategies and the remainder of his personal connection with the problem he’s trying to solve keeps him going. “When you have a personal connection to the problem, no matter how many roadblocks you have or how many times you’re discouraged, you always just get up and keep fighting, “Timi said. Diversity in tech is a “problem I face on a daily basis. I have a little brother who’s coming into the space. Good friends of mine are CS people. It’s very personal to me and so by virtue of that, I’m never really done with the problem. If I stop trying to solve it, I will still wake up the next day and face it again. And so I just always have that motivation to keep going.”
These days, although Worksense has moved deeper into the pipeline of the minority talent experience with the workplace, they see themselves as doing much more in the future. As the world around us shifts to accommodate the exploding tech scene, that also means that there will be more opportunities for minorities to get a job there. Timi sees his company in the long run as an end to end solution for these people. From day one, he hopes he can make the experience better.
Entrepreneur Advice
Just do it. The worst thing that can happen is that you get a bunch of rejections and people say no. But do it, and read a lot. I think reading a lot is not the most popular advice given to young entrepreneurs, but reading about other people’s experiences is valuable, and just personally to me, it’s been so valuable seeing the things that make people fail. And then a lot of the times, when I do something, I’m like, that’s exactly what that person did in the book I read, so I probably shouldn’t do it because if they did it and it turned out to be bad, then I probably shouldn’t do it. I can’t draw from my own experiences, but I can draw from other people’s experiences. And that’s really key as a student entrepreneur, as a young founder. You can’t fast forward your life, but what you can do is incorporate other people’s life experiences into yours.
To see our interview with Strava click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!
Strava
For Mark Gainey, founding companies was nothing new by the time he created Strava with his co-founder and best friend, Michael Horvath. Strava was founded as a platform for cyclists to track and share their activities. Today, it is one of the largest in its category, covering thirty-one activities, from running to cycling to surfing. However, it wasn’t all smooth sailing that got them to their current position.
Mark grew up in Reno, Nevada, and used his location to his advantage. His location allowed him to bike, run, and ski as a kid, sparking his lifelong passion for sports. After high school, he earned a place at Harvard, where he rowed on the crew team. Mark said that even though he didn’t pick a business or technology major (he ended up majoring in art history), his time at Harvard was a crucial moment of his business life. Through the crew team there, he met his business partner of the last thirty years, Michael Horvath, who also shared the same competitive and intense spirit of the sport. It was an experience that they had always imagined rebuilding and recreating.
After graduating, they took different paths. Mark spent four years at a venture capital firm in Silicon Valley, where he would call up entrepreneurs and learn more about their businesses and to determine if there was any opportunity that the firm could invest in. From there, he began to think about becoming an entrepreneur himself. On the other hand, his future partner Michael got his PhD in economics, and was teaching macroeconomics at Stanford when they got back together in 1996.
They decided to start their own company, Kana, which became a large and successful software company that focused on managing customer emails. Kana took off quickly, earning hundreds of millions in revenue each year and employing twelve hundred people after only about five years. Although he learned how to start a successful business, he also experienced the downsides of scaling too fast after the dot-com bubble burst in 2000. Mark decided to take a break after his twin sons were born in 2001 and a cycling accident that cost him 11 surgeries and many hospital visits.
Eventually, he and Mike “got the band back together” and started Strava in 2009. Mark said that after serving on the boards of other companies for about seven years, he felt entrepreneurship calling his name once again. He had missed the feeling of “rolling up his sleeves” and building something.
When they first started, there was an obvious problem. You may have already noticed that both co-founders had no background in tech. An economics major and an art history major creating not one, but two tech companies? Mark even admitted that he wouldn’t trust himself to touch any code. They pulled it off because they were located in the right place at the right time. Their past connections and their location in the center of Silicon Valley meant that they had easy access to top engineering and software talent. In fact, the first two engineers that signed on to Strava were the same people that helped get Kana up and running almost fifteen years prior.
In addition, when Mark and Mike founded the company ten years ago, there wasn’t much of a precedent to follow. They had both spent much of their lives in the world of sport and wanted to make athletics easier and more enjoyable. They wanted to create an authentic experience that would cater to and provide specific features for each activity. The two co-founders initially only wanted to track cycling, and then go one by one so they could get each one right. When they decided to launch running, they saw that their cycling features didn’t always translate well to running. They were then forced to hire new people that actually were runners to ensure that their product could fit them well.
Mark also realized that to stand out, the company needed to create features that were new and unique. His first priority was to make features that professional athletes would use. His logic was essentially: “If it has the features that the pros want, then it should be able to service everyone else”. Some people criticized their approach for being almost “elitist” and focusing on the top level of the pyramid, but it worked. They built a strong brand and credibility among pro athletes that helped them to break into other skill levels.
However, to become a well-known brand, they first needed to get the word out there. Mark attributed much of Strava’s success to the intrinsically social nature of the sport of cycling. They did sponsorships and advertising, but realized that the best way to promote the product was simply through word of mouth. They believed that if they could show that other people were using Strava, more people would begin to sign up. They then realized that they needed to focus on ways to invite their friends to do well. To solve this problem, they tried to make it effortless for users to invite their friends. They allowed people to add their friends to their tracked rides, and even gave their early members “ride cards”, which were essentially waterproof business cards that they could use to convince their friends to join the service. Unlike other startups that often spend huge sums on expensive ad campaigns, Mark believed that the best approach was to be patient. He and Mike saw how scaling too fast could be dangerous through their prior experience with Kana, so they focused on a growth pattern that could successfully sustain the community that he was trying to build.
One of their most important tasks for them was to get the hardware to support the software. They first turned to existing sports hardware manufacturers: companies like Garmin, Suunto and Polar. However, some of these companies began to treat them more as foes rather than friends. Strava wanted to be resellers of Garmin devices and integrate their services into the hardware. Even though they promised to maintain their neutrality between device manufacturers and to stay as a software business, they still faced an uphill battle. Many saw Strava as a competitor for a while, before turning around. They later realized that Strava provided features that helped improve the marketability of their products. However, if they really wanted to become a mainstream brand, they had to break out from the niche market of expensive standalone devices.
When the company launched in 2009, the now ubiquitous smartphone was still a new invention, and was only used by a very small percent of the population. They also did not have the complex sensors that were necessary to track exercise. However, by 2011, their battery life and capabilities had improved enough to be expanded on. After this, the company began to take off with the average consumer.
Even after the company had took off, they still had times that tested the stability of the company. In early 2012, when the company was in the middle of fast growth, a wrongful death lawsuit rocked their world. Strava fought back, and won the lawsuit, but it did create some negative publicity for the young company. Mark said that their mission was always to promote an active lifestyle, and it was hard to be accused of the opposite. More recently, there was a period of public scrutiny of the service’s “heat map” feature that threatened to damage the public’s view of the app. Some of the public and media became concerned, but Mark credits the current CEO, James Quarles, for doing a good job educating them about the service and addressing their concerns. Fortunately, the company hasn’t faced any obstacles that have threatened to completely derail the company, but it also hasn’t been easy.
Mark said that through his ten years of experience at Strava, he has learned a lot about how to successfully start and manage a company. He says one of the biggest things that he learned was how to balance data and intuition. Although they have accumulated a lot of data through Strava, he said that the best approach is to just trust your gut. There is a lot of data that can convince a person to do this and that, but he said that the best way is to follow your instincts.
He also learned how crucial the brand image is for a company and how important it is to stay true to your vision. Mark and Mike had set out from the beginning to build a trustworthy and authentic brand. They had determined that to successfully build the confidence of their existing base and stay true to their vision, they couldn’t cater to everyone. He doesn’t lose sleep over not serving everyone, because having too broad of a reach could compromise your core principles.
Today, Strava is nothing less than a success. With over 2 billion activities logged and over 80% of users coming from outside of the United States at the time of publication, it can be safely said that it has grown from its initially small company. The wealth of information that they have gathered has allowed them to include innovative new features. For example, there is currently a beta feature that allows users to have a custom route created for them based on heat map data from its users. Strava only has the power to do this through the impressive amount of data that they gather from their users.
Mark is optimistic for the future, and is encouraged by the number of users and companies that are encouraging others to try athletics. He mentioned a partnership last month with New Balance, that allowed Strava users to try shoes and “cash in” their mileage in exchange for a pint of beer. He sees huge future opportunities for Strava to collaborate with companies like New Balance, Garmin and Suunto.
He advises that aspiring entrepreneurs should not sweat too much whether their idea is good or bad, because chances are the result won’t be the same as what you intended. When he founded Kana back in the 90’s, he initially wanted to create a company that would serve as a virtual locker room for athletes. But when he reached out to companies like Mizuno Shoes and Trek Bicycles, they were reluctant, but informed him of the opportunities in email management. His original vision that was way ahead of its time created important connections that led to a completely different company.
One thing he said about entrepreneurship stood out. He said: “Look. You want to be an explorer. Jump in with an idea, get going, and start talking to people about it because the more you do that and your objective. There’s a high likelihood if you’re persistent, that you’ll get to a really interesting business.” His first try didn’t match his initial vision, but his second surely did.
Strava is a prime example of what can happen when you follow your passion. Mark’s lifelong passion for sports brought him to create a company where he lives and breathes it every day. It’s not just him either, as Strava’s 2 billion activities clearly show. His work clearly demonstrates how following your passion can help others follow theirs’ as well.
A special thank you to Mark Gainey for taking time out of his busy life to talk to me about Strava and his story.
If you want to learn more about Strava, you can find their website here. You can find our last interview with Airbnb here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!
Airbnb
Shortly after graduating from the Rhode Island School of Design (RISD) in 2005, Joe Gebbia and Brian Chesky moved to San Francisco to pursue their careers in design. Like most recent graduates, they were on a tight budget and had to meet each month’s rent. To meet these payments, Joe and Brian were constantly looking for creative ways to pay the rent. They knew that a design conference that was taking place in October had left all the hotels fully booked, leaving some attendees with no place to stay. And soon enough, an idea arose: home-sharing. Unlike traditional hotels, the concept of home-sharing involved offering what you have (the fundamental principle of the “gig-economy”). Joe and Brian decided to offer 3 attendees to the conference air mattresses in their apartment. And thus Airbnb was born.
During their stay, Joe and Brian had a great experience getting to know each of their 3 guests on a personal level. This experience was so amazing, not just because they were able to make money, but because they were able to build invaluable connections and share new experiences with new faces. Both Joe and Brian did not want the fun to end there, so they decided to do it again. Only this time, they would do it full time. Soon after this decision, Nathan Blecharczyk was added to the team, bringing the tech skills that Joe and Brian lacked. However, starting starting Airbnb was going to be more difficult that anyone of them had originally thought.
“I think what’s interesting about airbnb that people don’t realize is that it was not this huge success from the beginning. It actually had a very long path becoming that huge success”
-Liz DeBold Fusco
As they were starting up, they ran into the problem of gaining momentum. AirBed and Breakfast, as it was once called, did not get a strong response from the public. In fact, it was quite the opposite. People were doubting the level of safety that comes with sharing their homes with a stranger. Aside from this, the company only had two bookings on its website after a year of operation. People were not willing to use the platform because no homes were being offered, and homeowners were not willing to use the platform because no guests were booking nights, creating a “chicken or egg” scenario. This new venture landed the founders in debt, so they were strapped for cash. Their future could not have looked worse.
However, instead of giving up, the founders pressed on. They completely redesigned the website to attract more attention and increase bookings. They ignored the doubters and addressed the issue of financing which was needed to keep the company afloat. The problem with funding was the timing of it. The company had just so happened to be starting at the same time as the 2008 financial crisis.
“2008 was really the first year when they were fully up and running, but you know, [in] some of their soft launches earlier on, it wasn’t immediately clear that it was going to be successful”
-Liz DeBold Fusco
Because of the onset of the Great Recession, not many people were willing to invest in “riskier” tech startups. This forced Joe, Brian, and Nate to look for other avenues of financing to allow Airbnb to scale and operate. Since their name was AirBed and Breakfast, the founders wanted to live up to the “breakfast” part of their name. They knew that the Democratic National Convention was being hosted in Denver, and wanted to provide attendees with breakfast during their stays. But instead of perishable foods like eggs, they came up with cereal.
The founders came up with two cereals, Obama O’s and Cap’n McCains. They tried to sell the idea through big names like General Mills and Kellogg’s. They said no. So then they tried their luck with local cereal, also to no avail. Eventually, they found someone who was willing to print out cereal boxes, but the founders would have to perform the assembling themselves. After lots of hard work, the group was able to sell enough cereal boxes to bring in $30,000, becoming true cereal entrepreneurs.
As successful as their cereal boxes were, Airbnb looked to other sources of funding. After a handful of rejections and misfortune, they tried their luck with the accelerator, Y-Combinator. Throughout the entire pitch, Y-Combinator was “not so impressed, but then when they heard about the cereal boxes, they were like, ‘Oh, all right, actually, nevermind. We are very interested in you guys.’ They were interested in the cereal boxes” (Liz DeBold Fusco). As the pitch was coming to a close, one of the founders showed the group of investors their cereal boxes, and that was the main selling point that got Y-Combinator on board. If the founders were able to think outside the box like this, then Y-Combinator believed they were more than capable of leading Airbnb to success. In the end, they ended up with $20,000 in funding.
As word spread about Airbnb after the convention and with the aid of their new partner, Y-Combinator, the group wanted to get feedback directly from their users as well as meet the community that made them successful. They flew to New York to meet their largest market. There, they noticed that many of the hosts were not getting many bookings because they did not have “professional pictures” taken of their homes. So the founders bought a camera and went host to host offering to retake pictures of their homes to increase their bookings. While there, the founders and hosts built a close relationship with each other, which is something that still continues into today. From there on, Airbnb scaled and scaled, eventually transforming into how we know it today.
Today, the Airbnb that we know still has the same ethos of creativity and determination that could be seen 10 years ago. In fact, many hosts will continue sharing their homes to get that same experience that Joe and Brian shared with their first 3 guests in their San Francisco apartment. Hosts may initially accomodate guests for economic opportunity, but many will continue to remain a part of the community due to the experiences that can’t be found anywhere else. This sense of initiative and empowerment that today’s users feel can be traced back to the origin story of Airbnb.
Many community members also share the same sense of determination and entrepreneurship. If you look at those who decide to become hosts on Airbnb, you will realize that they are also entrepreneurs in some way. They be small business owners, tech startup founders, or just regular people looking to make a difference in our world. The primary reason that so many hosts become/are entrepreneurs is due to the economic empowerment and ethos of determination and creativity ingrained in the Airbnb story. Also, entrepreneurs love to interact and network with people, and there is no better way to experience such a thing than by becoming involved in Airbnb.
Whether or not Joe, Brian, and Nate had planned on Airbnb being as big as it is today, the results speak for itself. Now, the company has become a cultural phenomenon to the point where it is ingrained in the vernacular to the likes of Google or Uber. As of now, the company offers locations in thousands of cities all across the globe and has a valuation in the billions. Without a doubt, Airbnb has come a long way from the apartment in San Francisco.
If you want to learn more about Airbnb, see their website here. To see our interview with FutureFuel click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!
FutureFuel
Laurel Taylor left college with an undergraduate degree with the distinction of summa cum laude in one hand and $150,000 student loan debt in the other. From that moment, the next fifteen years of her life would be guided by decisions made to meet monthly student loan payments. She got her first job doing cold calls and sales for a base salary of $24,000 a year instead of starting a company like she wanted to, put off her 401k contributions, and delayed her decision to buy her first house and get married.
Everything was pushed back several years just so she could focus on paying for her four years of college education. Laurel Taylor had finally come upon the grim reality of a life with hundreds of thousands of dollars in debt, something that had become an integral part of American higher education that’s not even questioned anymore.
Laurel grew up in a small town. Her mom was a highly educated woman, so she always knew that she wanted to go to school, and she knew that student loans were just a part of the process. After graduating though, all the owed money and interest payments began to weigh down on her, and she figured that there must be a better way to deal with the problem. Just because something was accepted as normal didn’t make it good.
Laurel explained the obstacle she faced in her early days; “in the first five years of your career, you have the lowest earning potential, and your student loan payment is the same day one to year 17. You’re paying the same amount every month, but that’s disproportionately expensive to you when you’re starting your career.” That problem became apparent when she moved to San Francisco and got her first job. Because the expenses of living in the city were high and she had to make payments towards her student loans every month, she ended up with a boatload of credit card debt.
A few years later, when she turned 25, she went to a Consumer Credit Counseling service and consolidated everything, paying off her debt in one year. During that time, she moved to a house with many roommates, didn’t go out, and lived off of almost nothing; it was a wake-up call. It was becoming apparent that the struggles that she faced as a young professional would only be compounded by the race to pay off her student loans.
A few years later, she was at Google, leading a global sales team, and pursuing an MBA at MIT. During those years, inspiration struck in two different areas, making Laurel reconsider her career path and take a leap of faith.
The first event that happened was the passing of her sister. Laurel talked about the situation at the time,
My sister was diagnosed with brain cancer and during that process of losing her, one of the biggest regrets that she had was she always wanted to go back to school, but she didn’t pursue a graduate degree because she didn’t want to have student loan debt.
That experience was incredibly profound for Laurel. She realized that her sister was still lucky that she could go to an undergraduate school, but there were probably tens of thousands of people out there who were reluctant about getting an education because they didn’t want to graduate holding a package of an unfathomable amount of student loans with predatory interest rates on top.
The next event that happened was the second wave of student loans that came with her MBA program at MIT. Despite having a credit score over 800, a substantial income, and a high potential job at Google, she was still being charged a ridiculous amount of interest on her student loans even though she was low risk. Seeing that there was a huge overcharge, she started to think about ways to solve it.
At that point, even with everything in her life going in the right direction, the problem surrounding student loans was too big to ignore. In 2015, she quit her job, pouring all of her savings into her company.
It turned out to be a lot tougher than she expected. Many of the hurdles she encountered involved being a sole female founder. With a co-founder, there’s someone to go into board meetings with, to meet clients with, and most importantly, to have by your side through thick and thin. Being a sole founder was a lonely journey.
Six months into starting her business, she pivoted. Her original business model was a business to consumer (B2C) marketplace connecting graduates to employers offering student loan benefits, but she learned out that she could achieve her goal better if she switched to a B2B2C model. By focusing on helping employers pay off part of the student loans as a work benefit, they would facilitate the front and back end to make that transaction process incredibly easy.
With that shift, she had to create almost 100% turnover on the team as the people who were building the B2C platform weren’t suited for the new business model. Because of that, another change she had to make was dramatically reducing the company cash burn and redirecting the cash flow to the new product.
“There’s the reality of an existential threat along the timeline based on just how much money you have in the bank; here are my monthly cash burns so I can live for “X” number of months, so I got to hit my milestones along those months. You’re constantly in what they call the valley of death from startup to series A to series B and beyond. You have different moments where you have a threat of a valiant death where you’ve got to hit your milestones or you die because don’t get funding” she explained.
So Laurel had to get on the road to funding, a path that would take her through the struggles of getting money as a sole female founder and as a financial tech startup. When looking for investors for her pre-seed and seed rounds, one of the first problems she encountered was the lack of money going around. As she searched, she noticed an ongoing trend of money being invested into startups in later rounds like series A and series B, meaning that she would have to work harder to get cash for the company.
The second problem she encountered was getting this funding as a female sole founder. In the world of startups, only 2% of VC funding went to female-led companies, and investors also often looked for the magic “three co-founders” as a sign of a stable business, so she had to work strategically to get where she wanted.
After a particularly strong presentation, she was approached by her friend, an esteemed serial entrepreneur, who advised her, “Laurel you have to be better, smarter, more buttoned-up, more prepared, more articulate, more credentialed, and have more Awards. That’s what you have to do. You have to do more all the time.”
That was one of the most important tactics. By showing that as a person she was much more reliable, credible, and stronger than her competitors, she was much more likely to get funding. It was all about the self-discipline.
Even with all the preparation and good habits built, things can still go awry. One time, while she was pitching to an investor, he got angry and started screaming and throwing things at her. Another time, she pitched to a tier one investor even though she wasn’t ready for it. The experience was marred by a lack of preparation, and their story had holes in it. In the end, the investor just didn’t support their mission and they left the pitch feeling horrible.
For each of those bad experiences though, there have been numerous good ones, and Laurel acknowledges that’s just part of the experience of being an entrepreneur. There are enormous highs and enormous lows. Many times, she feels like she’s just one step away from giving up. Running a startup has meant forgoing a steady income and taking on a ton of stress. Fortunately, she loves what she’s doing. The problem that she’s trying to solve is close to heart and the fast pace means she’s always on her toes.
It’s crazy to think that from a small start they’ve grown to partnerships with companies such as Credit Union Student Choice and Ultimate Software among others to make student loan payments a benefit for as many people as they can.
Beyond these tactical victories, the vision that FutureFuel could put a dent in the $1.67 trillion of student debt is extremely motivating. Laurel sees “FutureFuel as a platform strategy that enables a radical change in the distribution of financial services and products.” In the future, they want to be able to take in all sorts of data about a student, where they went to school, their GPA, their company role, their salaries, and more to calculate a more accurate interest rate, potentially saving thousands. Right now, they save users on average $19,000 just by lowering the interest rate by 1.7%, and that’s just the beginning.
Creating a better system for student loans, FutureFuel is aiming to shape the future.
Entrepreneur Advice
“Do it. Do it as early as you can. Become an entrepreneur on the side. You can become an entrepreneur part-time. I think that the tragedy is that student loan debt makes it very difficult for most people to become an entrepreneur because they have that monthly liability. But you can become an entrepreneur in your spare time. And it is a much smarter way of becoming an entrepreneur than the path that I took which was going all-in. You really want to have some data that the market is willing to pay. Just move into it and have a heavy bias to action. You got to get out in the market and start talking to people and start experimenting.”
If you want to learn more about FutureFuel, see their website here. To see our interview with TidyChoice click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page.
TidyChoice
By Joseph Zhang and Andrew Yang
When most people think of groundbreaking startups, they think of revolutionary companies like Amazon and Google that have created massive new industries, changing the world. However, Colin Weston took a different approach with TidyChoice, a company that matches domestic service providers like housekeepers to customers, to try to see what he could do with traditional institutions like domestic services, bringing them to the digital age.
Colin spent much of his early working life around commerce, starting out as a Chartered Accountant at PricewaterhouseCoopers, then moving into banking at large firms like JP Morgan and BNP Paribas. He later moved into corporate finance advisory, focusing on mergers and acquisitions at Duff and Phelps. Even though he had worked many different jobs at many different companies, the common denominator was always numbers and finance, not building a business, which both hurt him and helped him in the long run.
He was first brought into the industry after his friend Ana Andres had tried and failed to create a solution. Ana would later become the co-founder of TidyChoice, which proved to be a godsend for the company. He and Ana both benefitted from their relationship, where he provided the business know-how and she brought the technical background. Ana had a Ph.D. in software engineering and had done product development at companies such as Accenture for 10 years, so she had experience in the tech field while he had built his strengths from his finance background.
They began to wonder if they could take the same problem and solve it properly and successfully. They had closely studied big-names that were already in the industry, like Homejoy and Helpling and tried to identify and learn from their successes and mistakes. From this, they decided to go after a pure marketplace approach, which had seen great success in other fields. Like Amazon and Airbnb, TidyChoice was designed as a middleman that would connect the product to the customer, making it easier for the customer to find the goods they wanted.
First, they conducted market research to see how people would react to their product, and from that, gained a clear idea of how they were going to approach the market and how the product would work. It was clear that a large number of competitors, many of which had received over $100 million in funding, would be a significant obstacle that they would need to overcome, but they believed that they could provide something new with their unique approach.
Unlike most other startups, TidyChoice was completely self-funded, and still to this day has not taken in any external funding. Colin attributes his company’s healthy growth to this, as he has noticed many VC funded startups aggressively advertising and giving away their service in a desire to rapidly expand and satisfy their investors, which had led to the death of Homejoy. (Learn more about the downsides of scaling too fast here) He compared his company’s growth to that of the tortoise in the famous story of the tortoise and hare: a slower approach that he hopes will eventually prevail. They did not intend to grow slowly– it was more of a consequence of his goal to stay cash flow neutral/positive at all times. He did not want to take out loans and introduce risk when what he was already doing was working.
After starting, Colin began to quickly learn a lot of different parts about running a startup. Building a new company was a new experience for him, so he was doing many things for the first time. He recalled that he used to be shocked by the difference in attitude, as he was sometimes yelled at for things going wrong, which was much different from the more professional business relationship with his clients that he was used to.
Their new life was also rather unglamorous when compared to their past, where they were surrounded by large organizations and had a support network built around them. Now, they were working at their kitchen tables, learning things that they never had much experience with like marketing and worrying about if their vision would take off. For most people, that would be a huge downgrade, but Colin was driven to see his company succeed.
He attributes much of their success to his co-founder, who could code entire platforms from scratch because of her tech background. Ana, who had worked at Accenture for over 10 years, was busy building the platform, which she programmed about 98% of. The rest of their software work was done in-house by their team of 5 developers, unlike many companies, who outsourced their work. (Learn more about outsourcing your work in our interview with Gigster here)
Because the technical side was taken care of, Colin could focus on the business side. His prior experience and understanding of the business world was unusual in an industry dominated by tech graduates fresh out of college. His expertise in the field allowed him to cruise through the financial parts with ease and use his time to focus on other important areas like marketing.
As the first few months came and went, growth proved to be slower than they hoped and he began to wonder if the product was good enough. Soon though, things turned around. As customer inflow increased, everything began to click into place, and they could finally say that their approach worked. It was more difficult than they had hoped because as an online website, some form of advertising is necessary, but their limited budget meant they had to wait a long time to gain momentum. Once momentum picked up, they were then able to collect feedback and improve the service.
The unique nature of the industry also requires a sense of trust, as people tend to be much more protective of who comes into their house, especially if they aren’t present. This has made it especially difficult for his company to scale, since they have to spend lots of effort in vetting the services listed on his website to ensure customer satisfaction and reduce risks.
Despite this, he believes that his company has been popular with service providers because of the way they approach the business. Unlike many of their competitors, TidyChoice allows cleaners to pick their own rates, times and areas, without taking a percentage of their earnings or requiring a sign-up fee. TidyChoice makes money by charging a small commission that they add to the cost of the service, and a “finders fee” that cleaners pay once per regular customer to offset the cost of marketing their service. In addition, they have focused on a balanced approach to complaints, understanding that their service providers are professionals that do their work for a living, which he believes benefits both the worker and customer.
One of the largest problems with many companies in their sector is the leakage from people leaving the network and going directly to the consumer, damaging the company that helped cultivate the relationship. Colin believes that the flexibility in pricing that TidyChoice gives to both sides prevents unnecessary losses and helps keep retention rates high. Customer retention is crucial to his business, since they make money from people who come back to purchase services from their website, an example of the 80/20 rule – a few people contribute to the vast majority of the market.
Efficiency has been a key theme throughout the business. They have a small number of employees behind the scenes relative to their size, allowing them to keep costs low. Their relatively small budget for marketing meant that they had to be creative and efficient with their approach. They focused on individual postcodes in London, and would match their weekly marketing spending with the hours available they had in that area. They didn’t see a need to market in places where they didn’t have a presence, so they simply didn’t.
Looking back, he believes that the hardest thing that he had to deal with was the anxiety that came with leaving a well-paying stable job for a much more unstable one which may not have even worked. Even though both founders were familiar with stress from their work in the corporate world, creating a business from scratch and waiting to see if the business model was going to work proved to be a huge emotional obstacle.
To cope with all the stress, Colin said that he would always try to stay optimistic, and to try new things, not getting caught up on the failures. Even then, there were times where he considered quitting and going back to a “normal” job if they didn’t make it to a certain goal, but he didn’t let that stop him. Instead, he used his fear of not having a job as a motivation to move forward.
Colin sees a bright future for TidyChoice. He currently has a target to double the cleaning and housekeeping traffic within 12 months and also expand into the childcare sector. He also wants to look outward to other European cities within the next few years, where he sees a huge opportunity. He has even been approached by tutoring services and people in other nations that have seen the potential and want to use the platform.
Entrepreneur Advice
“I think you need to do something you enjoy and are good at, to do well at, and not everyone is cut out for it. I think if you’re starting out, then you have to accept that you’re going to have to get your hands dirty and learn lots of things and what really separates people is how quickly you can do that and how effectively you can learn those things.”
If you want to learn more about TidyChoice, see their website here. To see our interview with Parsec click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page.
Interview With Parsec
Recently, we were able to interview Parsec Gaming, a key player in the gaming industry.
Cloud gaming is a revolutionary concept. What made you decide to create Parsec? In other words, what’s the story behind Parsec?
We started Parsec because we believed that game streaming has the potential to unlock entertainment from expensive hardware. Consoles and gaming PCs are expensive and at times prohibitive to gamers having the opportunity to play their games. With game streaming technology, games can be played anywhere, on any screen. We believe that the time for game streaming has come with the increasing availability of high bandwidth connections and hardware geared toward low latency streaming. We also think that there is more to game streaming than “cloud gaming.” Our approach is a bit different. We’re focused on enabling friends to play games together and unique experiences that are only possible through game streaming. One day, game developers will create games for cloud gaming, but today, cloud gaming is all about distributing the same games in a different way. At Parsec, we’re building unique experiences, like Party Finder and online multiplayer games via game streaming.
Since cloud gaming is still relatively young, where do you see cloud based gaming in 10 years from now?
All data and content wants to be streamed. Gaming is no different. I believe there will be new experiences that the creative minds behind games will deliver through game streaming technology. I can’t pretend to have the ideas for the games, but I do think we’ll see more tie-ins with movies and TV as well as access to new experiences powered by game streaming technology. Imagine watching Rogue One and finishing the movie in a game rather than watching the final scene – this is possible through game streaming because you could just click a button and start playing the end of the movie. We don’t think you’ll see a huge content bundle, like you see in Netflix, because people consume games differently, but the original content creators (EA, Ubisoft, Blizzard/Activision, Microsoft, etc…) will have a leg up because you’ll subscribe to access their content directly through streaming.
Compared to a gaming computer or console, how do you think cloud gaming stacks up against them? Like in terms of price, lag, experience, quality, etc?
Gaming is definitely better on local hardware – it always will be. That’s why you need unique experiences powered by the new technology rather than just some different distribution method for your current games.
From browsing your website, it seems like cloud gaming is a user friendly process. Is it really that easy to use?
Streaming games from the cloud has the potential to make gaming a very easy and friendly process. I don’t think it’s there yet, however. When you think about the steps included in playing a game on a PC, there’s a lot to jump through.
- You have to buy or build a gaming PC.
- You have to download a store like Steam or Blizzard.
- You have to download a huge file to your computer, which can take hours.
- Then you get to play.
With cloud gaming, the potential is there to just jump to step 4 if the cloud gaming companies provides direct access to games.
And lastly, what has been the biggest hurdle that you had to get through while starting/running Parsec? What advice do you have for others with ideas that are far ahead of their time, and can revolutionize an industry?
The biggest hurdle is just getting started. As long as you move one step at a time and prioritize the experiences that will delight users, you’ll build something. The building something day in and day out for months without much feedback from users at the start is really difficult and can challenge your mental state a lot. You have to just keep pushing forward. The most important thing as an entrepreneur, in my opinion, is persistence. We’re nowhere near achieving our goals or reaching any level of success, so I wouldn’t dare offer advice to others. The only thing I can suggest is to keep pushing forward no matter how discouraging things can be.
If you want to learn more about Parsec, you can find their website here. To read our last article with Gigster founder, Roger Dickey, go to this link. If you’re interested in the most recent business secrets, check out our latest Business Knowledge page.
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Gigster
More than a decade ago, before everything got crazy for Roger Dickey, before the billion-dollar game, before the angel investing, and before the startup that would be the darling of Silicon Valley, there was Curiosoft. In 2007, Facebook had released their application platform. Many companies were jumping on the opportunity to build something that would go viral. Microsoft, Amazon, Red Bull, The Washington Post, and the like all flocked to the platform in hopes of releasing the next big thing.
Roger had just left a conference that Facebook had hosted. He was talking with a friend who had built a zoo game using basic HTML that ran on the platform, and he was making around $1000 a day. Thinking about the potential opportunities there, he quit his job in Texas and with that friend, started his first company Curiosoft, a testing bed for all of his new ideas that he would build and release. It turned out that games and dating apps would eventually become the most popular uses of the platform, but at the time, it was a period of mass experimentation. Roger’s own process boiled down to two areas.
First, he had a personal promise to not copy any of his competitors and make something wholly original; it was against his ethical code to steal others’ work. With that philosophy, he had to do a lot more experimentation to see what would work.
Because of that, he started a process called rapid prototyping where he built and delivered a functional prototype/minimum viable product every three days to test out the market. Curiosoft ended up building nineteen apps over the course of three-and-a-half months.
One of the games they created, Mafia Wars, turned out to be a smashing success, bringing in one billion dollars in revenue and enjoying 100 million active users at its peak. It was so successful that Roger was able to sell it to Zynga for all equity and become an executive. While he worked there, he learned a lot of lessons that would prove useful later in his career as an entrepreneur once again. He observed that the people there “were very user-experience minded, and they understood user behavior very well.”
Even though Zynga had all these great things going for them, something about their business model rubbed him the wrong way: the games were free to play. The problem there was that 98% of the customers didn’t pay any money, and the model was only able to work because of the massive scale. If there had been less users, it would have been less sustainable. In contrast to that, Roger wanted to start a business where every customer paid for the service that he provided.
After around three years, Zynga’s stock had grown substantially and they went public. Roger used the equity that he had received when he sold his game and became an angel investor so he could learn about other industries outside of gaming. He made over eighty angel investments and learned a lot through the process; the way some founders ran their companies and the ideas that they were chasing gave him examples of what did and didn’t work. Crucially, he found out that many of the companies were having trouble getting great engineering talent, and by working with them, he got a feel for how his future customers would think.
Eventually, Roger started Liquid Labs LLC, parent company that was similar in structure to Curiosoft, where the aggregate of his past experiences and lessons would come together to help him build Gigster. Rapid prototyping came into use again, and this time the idea was to build and deliver products that would explore ways to use technology and disrupt lucrative industries like marketplaces and artificial intelligence.
His experience working with the small businesses that he had invested in came back again in the form of an opportunity. It was echoed by many others around him as well at the time. He observed, “everybody in Silicon Valley and outside of Silicon Valley talks about how hard it is to hire engineers. This is a pretty common refrain. There are supposedly around six job opening for engineers to every one engineer that exists. So the demand is six times the supply.” He pointed out that despite the ineffectiveness of existing “solutions” within the marketplace, they were all generating millions in revenue: another sign that there was incredible demand.
He also observed several key problems with those other services. First, they were open marketplaces, so it would be hard to distinguish between a good or bad engineer. What made that problem worse was that some companies like Odesk had reverse bidding, meaning that the user would have to decide who was best as freelancers aimed to undercut each other by lowering their prices. Some developers would even give customers discounts for a five-star rating, so it became impossible to trust the system.
Because there wasn’t a central oversight, all these hired engineers were independent actors, free to develop the software in their own ways. Sometimes a customer would hire what they thought was a great engineer, only to have that person give it to their B team or subcontract out the project. Other times, they might even hold the code hostage until the user paid more money for all the “extra time” they put into developing the software.
The market was ripe for change. All Roger needed to do was figure out how.
The team at Liquid Labs turned the problem over in their heads and came up with what they called at the time “a button that you could push to hire a great engineering team.” It would be incredibly simple to use. You drag the slider for how many people you need, submit your project, press the button, and get a quality hand-vetted team at the other end who would build and deliver your project like magic. They knew at that point that the idea was gold: anyone who had an idea worth chasing would want to use it. Now the goal was to make the button work.
They first fleshed out the idea so it would fix many of the aforementioned problems. They set the price to get rid of bidding, hand picked high-quality engineers to do the job in order to maintain quality, sat in the middle of transactions to oversee that the project was being done as specified, and guaranteed anonymity for some of the freelance engineers who might also be working at another company like Google or Microsoft.
A year and a half after starting Liquid Labs, they launched the first version of Gigster and went live on Hacker News and Product Times. Within two days, they had three million dollars worth of business submitted to the website, so they dropped all the other prototypes and went into full scaling mode for Gigster.
One of the first things they had to do was learn to position the company and sell the idea to potential investors and customers. For investors, the opportunity was in taking control of a market with a tremendous amount of demand. Custom software created by outsourcing firms was a $132 billion market and the amount that companies spent on engineering talent was over two trillion dollars globally. If they could come in, aggregate a lot of supply, take demand from competitors, and eat up a portion of that market share, they would be an extremely profitable venture. The icing on top of the cake would be that as they managed more projects, they would be able to find commonalities between different areas of work and become more efficient.
For customers, it was easy to see the differences. They saw that a Silicon Valley-based firm was going to manage their project. Gigster would take full responsibility for the finished project. They were guaranteeing the price, the quality, the top tier talent, and a team of engineers, not just an individual. To top it all off, they were backed by sound investors.
The first step was scaling and getting engineers so that when the customer clicked the button to get their team, there would be people on the other end. Roger outlined the process,
We started with 100 people we knew well and expanded out from there through referrals and some nice supply-side PR. My co-founder was doing about 40 interviews a day to build the early supply network and controlling quality very carefully to make sure we had the right foundation of people to build on.
They had a successful launch, but then things slowed down a little bit, and revenue growth eventually stalled. Roger then turned to hire salespeople. He explained, “we came up with a structure where we wanted to have contract salespeople. We built this whole system where the contract salespeople could take chats with customers, they could close deals online, and there was a certain commission that we gave them for that.” It was interesting for Roger to finally learn about sales, and he and his cofounder gradually worked their way around to a model that worked.
By late 2015, they had figured it out and growth exploded. Over the course of the next year, Gigster went from $90,000 to $600,000 to one million and finally to 1.2 million dollars a month. Every month was at least double the previous month before slowly tapering off and growing at more regular speeds.
Although growth was fast, one problem area was that many of the early customers were small businesses, and that posed a challenge for the Gigster team. “We had a tendency to promise a lot because we really wanted to take care of our customers and not charge a lot,” Roger remarked, “and this was pretty bad for us because we lost money on most of our early projects.”
The issue was, by signing a services contract, they were making a commitment, and they were signing a lot of contracts. This overload became apparent when they were preparing for their presentation for Y Combinator demo day.
They had made a commitment to closing 100 projects in five weeks to make for a compelling presentation. That amounted to roughly four projects a day. Renting out a house in Sunnyvale, California, the whole company moved down there, and every day that they closed four projects, everyone would jump into the pool at the back of the house to celebrate. They ended up closing 120 projects in the five-week period, but the consequence to that was that now they had to deliver on all those contracts. Roger explained the situation, “my co-founder was flipping out because he was happy, but he was also scared. So he kind of went off into a cave and figured out how to deliver all those projects.” In the meantime, many of the small businesses came back and threatened to sue them if they didn’t deliver exactly what they promised, which was often more than they could have possibly done. From that experience, Roger decided to pivot towards enterprise where the customers were much more predictable and realistic with both the project and the pay.
As Gigster’s growth exploded through their enhanced sales strategy and pivot to enterprise, they quickly became one of the best spots for turning one’s dreams into software. Roger quickly learned a lesson though. He said, “We should have hired executives earlier. We scaled too fast and didn’t always have enough senior talent to help us maintain that growth rate at the delivery quality bar we needed to be at.”
Most importantly, as Gigster has grown, the company atmosphere has changed. In the early days, they were working with many entrepreneurial people, testing out their concepts, and moving fast. Once they became a mid-sized company, they had to start thinking about things like management, culture, values, hiring, and communicating the same vision and goals to everyone. At 100 employees, the focus turned to customers, growth, senior leadership, company financials, and investor relations.
These days, Gigster is rapidly expanding their client portfolio and distinguishing itself from the gig economy. A year ago, they helped finish a Christmas project for IBM to publicize Watson’s artificial intelligence tools. They’ve also set up a Gigster fund which is almost like a savings account for freelancers on Gigster.
At the end of the day, Roger is confident in the model that he has built. With a laser focus on software, they’re slowly changing the norms of hiring engineers.
If you want to learn more about Gigster, you can find their website here. To read our last article with Ring click this link. If you’re interested in the most recent business secrets, check out our Business Knowledge page.
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Ring
After graduating from Babson in 1999, Jamie Siminoff established Edison Jr., the nickname for his garage where he worked on his inventions. Jamie started several businesses during and after his time in college, including Unsubscribe.com which allowed users to stop spam emails and PhoneTag which transcribed voicemails. However, none turned out to be long-term ventures.
One time, while tinkering with ideas inside Edison Jr., Jamie was unable to hear the doorbell. He searched for a product that would send the video of who was at the door to his phone, but he couldn’t find one. Jamie remembers saying, “screw it, I’ll just build my own [doorbell] that goes to my phone”, and his company DoorBot, the name prior to Ring, was conceived. At first, Jamie couldn’t see the value of his product. In fact, it was his wife who told Jamie she felt safer in the home which made Jamie decide to take it on as a “fun little side project”, but it quickly became much more than that.
Many founders have an “Aha” moments when they realize they have created a product that fits perfectly into an untapped market, but it turns out that Siminoff didn’t originally design the doorbell for a consumer, but rather a simple fix to an issue in his life. Jamie spent “over a year” playing around with the design of the doorbell for him to even consider it worth pursuing independently. He made an important point: it takes time for even someone sitting right in front of a product to see if it could be successful, and you have to “allow things to naturally happen instead of forcing them”.
It seems as if Jamie stumbled upon gold with his idea of the video doorbell, but rather his whole life had been building up to that moment. The founder of Ring created many companies before his doorbell invention, which was “equally as important [to Ring] becoming a successful and impactful business” since each failure taught him a different lesson. Jamie also mentioned it actually took “20 years” of being an inventor and entrepreneur that culminated to Ring becoming successful.
In 2013, Jamie Siminoff took his video doorbell company, known as DoorBot at the time, to the investors on Shark Tank. Siminoff rejected an offer from Kevin O’Leary, one of the Sharks on the show, and walked away without an investment. Although no capital was gained from his pitch, DoorBot experienced mass media coverage after the airing of the episode, and after rebranding the company as Ring, sales exploded. It was possible that Ring could have gone under if not for the help of Shark Tank, but Siminoff noted that he didn’t build his company knowing he would air on the show. Instead, he simply put himself in the best position to someday get lucky, and that’s all that entrepreneurs and inventors can do, he says. Siminoff compared his company to the lottery: “the more you work the more lottery tickets you accumulate, and at some point, the chance of you hitting the lottery is higher if you buy more tickets”. Most aren’t as lucky as Siminoff and his team with their opportunity to be on a national television show. Often, companies with great a great product, ideas, and business model fail. Siminoff’s experience shows that the best way to craft a successful business is to simply increase your chances of getting lucky because “lucky breaks are critical”.
However, luck was certainly not the only driving factor with Ring’s eventual success, but it was also Jamie’s perception of competition. Jamie emphasized that an entrepreneur shouldn’t get bogged down with certain features of a competitor’s product, but rather what the customer is trying to tell you. As Jamie explains, at the end of the day, a customer will choose the product that reliably offers them the best experience. Siminoff says if you fail to build a satisfactory product for the customer, they’ll simply return it. That’s why he strives to “have [his] team say that the competition is the consumer and what they think of the product” instead of trying to one-up a competitor. Ring works backward from the customer and always has a central focus on two things: their mission and the customer. This is how you’ll put yourself in the best position to win the market.
Just another part of Jamie Siminoff’s business is the core mission that he’s had from the beginning of Ring, which is to reduce crime in neighborhoods. He strongly believes that if a company has a mission that the founders believe can positively impact the world, everything else about the business will fall into place. He summarizes the success during the early stages of Ring by saying that a powerful mission will be “better at getting employees to come work for you because people want to work for a thing that makes people’s lives better. Your customers are going to be more inspired by a product that is better for the world than one that is not. Your marketing is going to have more impact because your marketing something that is not just saying, ‘hey buy this product’”. His mission of making everyday people feel more safe is what helped him persevere through difficult times during the integration of Ring into the market, and his mission has helped him plan the next 20 years of his company. If there was one common thread between how Jamie Siminoff was able to take a Wi-Fi doorbell from Edison Jr. to finally selling his vision to Amazon, it was his main goal of preventing crime in his customers’ homes.
In the end, Siminoff and his team were indeed able to win the market. He was able to beat the competition at every stage of his company that attempted to copy his video doorbell idea. In recent year, he returned to Shark Tank, not as someone seeking an investment, but actually as a Shark himself. Eventually, Ring was sold to Amazon for over $1 billion, Amazon’s second-largest acquisition. However, this feat wasn’t made possible by just a great product, but rather by a mission that is making a difference in our world and by a strong leader that has guided the company through thick and thin.
If you want to learn more about Ring, you can find their website here. To read our last article with 23andMe click this link. If you’re interested in the most recent business secrets, check out our Business Knowledge page.
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