The Story Behind Launching SkyMall – with Alan Lobock

Posted on Sep 9, 2013 - 9:00 AM PST

When you sit down in an airplane, what do you see in the seat pocket in front of you?

If you’re like over half a billion passengers around the world, chances are it’s a copy of the SkyMall catalog.

Alan Lobock is the co-founder of SkyMall, I invited him to talk about the founding of the company.

Watch the FULL program


About Alan Lobock

Alan Lobock is the co-founder of SkyMall, which produces a quarterly in-flight publication. He is also the co-founder of Worthworm.

Raw transcript


Mixergy’s audio transcription is done by Speechpad

Andrew: This interview is sponsored by Walker Corporate Law. Do you need a lawyer that’s not the local guy who doesn’t really get start-ups, not the real expensive guys who want a piece of your business, one who really understands that start-up community and is there to help you? If you do, go to Scott Edward Walker of Walker Corporate Law.

It’s also sponsored by Grasshopper. Do you need a phone number where your customers can dial in, press one to go to sales, press two to go to customer service, etc.? And maybe even all those numbers actually lead to your cell phone, but it makes you look big. If you need that kind of feature and so many others, go to grasshopper.com. All right. Let’s get started.

Hi, there, freedom fighters. My name is Andrew Warner, and I am the founder of Mixergy, home of the ambitious upstart. And when you, the person who is watching us, sits down at an airplane, what do you see in the seat pocket right in front of you? If you’re like over half a billion passengers around the world, chances are it’s a copy of SkyMall catalog. Alan Lobock is the co-founder of SkyMall. I invited him to talk about the founding of the company. And I also want to find out about Worthworm, a web-based application intended to automate the calculation of pre-money valuation for early stage companies that are seeking angel investment. I want to find out what he’s doing with Worthworm, too. Alan, welcome.

Alan: Thank you for having me.

Andrew: When you left the company, do you remember what the sales were at the time?

Alan: We were north of $20,000,000 in our first year, so when I left the company, we were well above that.

Andrew: I actually got that number about over half a billion passengers around the world have access to SkyMall from an Atlantic Magazine article about SkyMall. And according to that same article, they estimate that SkyMall’s revenues are now about $130,000,000. So, huge company.

Alan: I have heard. I’ve been gone from it for quite some time.

Andrew: Yup.

Alan: But I’ve heard their revenues are indeed above $100,000,000. The company, we took it public in the mid 90s. It was shortly thereafter taken private by Gemstar-TV Guide, and then acquired by a private equity firm and has since been sold twice more.

Andrew: Did you become a millionaire from that company?

Alan: [laughs] I gave all my money away, so millionaire is an interesting question. On paper, certainly. I tend not to discuss the actual dollar figure.

Andrew: You mean from when it was taken public?

Alan: From when it was taken public. Correct.

Andrew: And then you gave away all your money. Do you discuss that?

Alan: Yeah. My grandfather told me that your first fortune is for others, and your second fortune is for yourself. And I was fortunate to make some money fairly early in my life, and so I gave that money away . . .

Andrew: Uh-huh.

Alan: . . . and started again as an entrepreneur.

Andrew: Who’d you give it to? And why didn’t you and I become friends back then?

Alan: [laughs] I actually had foundations. They had to look for me.

Andrew: Okay. The idea for the business came from Robert Worsley, right?

Alan: Correct.

Andrew: Do you remember, what was the original concept that he had?

Alan: Yeah. I can certainly not take credit for the kernel of the idea. Bob and I worked together at Pricewaterhouse in our early careers, so we knew each other. Bob was aboard an Alaskan Airline flight, and at that time, the telephones within aircraft were starting to proliferate. You had them on the bulkheads. They were starting to talk about moving them to the seat backs. And it was an era of convenience.

You remember the early ’90s? Everything was about convenience. You may be too young for that, but I’m not. So he was looking through a catalog that was then carried aboard the Alaska Airlines flight and it had six to eight week delivery. And he said to himself, and wisely so, hey, there’s a phone on board the plane. People can order while they’re flying, and there’s no reason that it should take six to eight weeks in this era of convenience to receive your goods. So the initial idea of SkyMall and what we raised our initial money on was the idea of being able to order within 20 minutes of landing and pick up your goods at the airport when you arrive.

Andrew: And what you’re saying, within 20 minutes of landing, meaning I could also order on the flight.

Alan: Yeah, that was the idea.

Andrew: Just using that phone that’s in the seat back?

Alan: That was the idea. You could either walk up to the bulkhead and use the phone there, or if the aircraft that you were on had a phone in the seat back pocket then you could obviously swipe your credit card and we covered the cost of the phone call by the way, and you could order while you were flying and as long as we had 20 minutes between the time you placed the order and the time you were landing, we would fulfill it at the airport.

Andrew: And as I understand it, that was a great idea but very messy and it didn’t work, and we’ll find out in a moment why it didn’t work, but you mentioned that you met at Pricewaterhouse Coopers, Pricewaterhouse.

Alan: It was just Pricewaterhouse at the time.

Andrew: Before, okay. And so was it hard for you to leave that job and go and work at a startup before startups were all the rage?

Alan: It’s a great question. I never thought that I would stay at Pricewaterhouse for eight years. I never thought I would stay in that industry for eight years. At the time, you picked up your CPA certificate by passing the exam and then you had to work for two years with a firm so that they could sign off on whether you had accomplished certain tasks in order to become certified. And like many in the profession, I ended up staying there for two years. I found that I learned a great deal at Pricewaterhouse and it was very exciting and invigorating to work around bright, ambitious people.

So, it was a difficult decision for me to leave in part because I had a wonderful managing partner who allowed me to become the first person within Pricewaterhouse’s professional staff of, I think at that time, over 10,000 to 12,000 people in the U.S. to both carry on a client load and become the head of marketing for a practice office. Now I say that with a bit of a grin because at least at that time, in the accounting world, having a sense of humor was equated to marketing. So, I was known in part for my sense of humor, so that qualified me as the marketing guy. But, my point is that my managing partner gave me a great opportunity to experience a lot of what Pricewaterhouse had to offer beyond client service.

And when I got the opportunity to cofound SkyMall, we actually went out to the Phoenix Suns game together and he asked me what I wanted to do with my career if I were to stay with Pricewaterhouse. And being ever-ambitious and thinking that I had a lot to provide to Pricewaterhouse, I described it to him and he sort of laughed at me and said, “You’d have to be one of the top 16 or so partners in the entire U.S. firm to be able to weigh in on the range of subjects that I wanted to have influence on.” So he encouraged me to try the startup, but he did tell me that if it didn’t work out I always had a home with Pricewaterhouse as long as he was the managing partner, which was very flattering and I will forever be grateful to him for it.

Andrew: I see. So covered your down side, and by doing that though wasn’t he encouraging other people in the company to go off and do their thing and use his job as a backup instead of a life goal and a place to really fully be invested?

Alan: I don’t think so. First of all, it wasn’t widely known that…

Andrew: He made this deal with you.

Alan: Yeah. And it was a very informal deal. It wasn’t anything that was in writing. He just said, look, you’ve done a good job for us over eight years and we hate to lose you, but you have this burning desire to go off and try this. If it doesn’t work out, I’d certainly like the opportunity to try and talk you back into Pricewaterhouse.

Andrew: I get it.

Alan: So it was done very informally.

Andrew: I want to continue with the story and find out about SkyMall but you mentioned that you had a sense of humor.

Alan: Yeah.

Andrew: And when you were on the pre-interview conversation with Jeremy, one of the things that you told him was that there was a receptionist who, because of your sense of humor, stopped talking to you. What did you do to this woman?

Alan: Ha ha! Right. You want your audience to really think the worst of me. We had a lovely receptionist named Cindy with whom I got along terrifically. And Cindy was single at the time and was seeking to find someone in her life. And at that time the internet wasn’t around. I’m dating myself here. But personal ads had emerged. And so she came back. And at the time I was very young in my career. I was still in a cubicle as opposed to an office. And she came to me and she read me a personal ad from a gentleman out of Chicago who was seeking a woman to travel the world with him and experience life with him.

And she asked me if I would write a letter to him on her behalf in response to the personal ad, and so I did. And we included a picture of her and I’d like to think I wrote a persuasive letter on her behalf. Well for the next two weeks she was very anxious to see if he would reply, and as the days went by no reply came and I could see that see was getting discouraged. So it suddenly dawned on me, perhaps stupidly, that if I could write a letter in one direction, I could write a letter in another direction. And so I contacted a friend in Chicago and I said, look I don’t know how long this might go on, but I’m going to write letters that are coming from this individual and they need to be postmarked from Chicago.

Andrew: You really thought this through!

Alan: Yeah, and my really dumb thing in this was that we had requested a picture of the individual in his response to the letter we had sent. So at that time Pricewaterhouse had a directory of partners in the library in the office and it had a picture and a short bio of every partner in the U. S. firm. So I picked what I thought was not a particularly attractive guy. I won’t give his name out, because who knows where he is now, and I ran that off the copy machine and I claimed in the letter to her that it was a clipping from a newspaper article and that’s why it wasn’t an actual photograph.

Andrew: You pretended to be him with a photo and a letter and the works to her?

Alan: I’m sorry?

Andrew: You pretended to be him with a photo and a letter and the works including a postmark from a different city. And how did she handle it?

Alan: Correct! And honestly I thought I might be able to keep this going for years. Well, I walked off the elevator one day and everybody was crowding around the reception desk because she had made no secret that she had sent out this letter that I had written, and she had gotten the letter that I had had sent that she at that time didn’t know that I was involved in that. And one of my tax partners came off the elevator and he said, what’s going on? And they said, well Cindy got this letter from this individual. He said, well, let me see his picture.

Now I’m in the background down the hall a little ways and I hear Jim say this and I’m getting scared at this moment because I’m a lowly guy in the firm at this point. I’m a senior. And he looks at it and he says, I know that guy! Well of course he knew that guy because he ended up going to partner meetings with that guy for 20 plus years! So, he said, let me go look, and he started to go back to his office because he had that same directory of the partners in his office and I caught him and I said, Jim! This is what I did, you can’t ruin it. And he looked at me and he said, Alan, the moral of the story is if you want to pull a joke you have to let me in on it. And he went and he showed Cindy that the picture that she had was indeed a picture from the partner directory and everything fell apart at that point. And I copped to what I had done and she didn’t speak to me for about six weeks.

Andrew: This is the kind of stuff that you were doing at work?

Alan: Yeah, which is unusual at Pricewaterhouse and why even 20 years later some of these stories are still told by some of my associates who still remain at Pricewaterhouse.

Andrew: Alright, I’m going to come back later and ask if you were pranking me or if there’s any prank going on here, but let’s continue with this course (?).

Alan: Ha ha! They got me back, just so you know.

Andrew: I hope so! How far along was Bob with the business before he asked you to join in?

Alan: Very early on. Had the renitence if you will, or the outline of a business plan, hadn’t secured the money yet. We had some ideas of where we might be able to go to get some money because obviously Pricewaterhouse works with generally with wealthy individuals. So we thought we had some contacts through that. But he had the general nugget of the idea worked out and the concept, and then of course, when I and two other cofounders joined him it evolved into what we ultimately launched.

Andrew: But it wasn’t on any airplane at the time?

Alan: Yeah.

Andrew: There were no warehouses? None of that.

Alan: No, no, no.

Andrew: You just came on board as the CFO, the chief financial officer.

Alan: I came on board initially as the CFO and then later I also took on the title of Executive VP of Marketing, so I was able to try and get out of that pigeon hole of a financial guy and show that I could extend myself beyond financials.

Andrew: You took a pay cut, obviously. You’re moving from a secure job. You’re also going into a riskier situation.

Alan: Yes.

Andrew: You got equity, right? To make up for the pay cut and the chance that you were taking? What size equity were you getting considering that the idea had already been launched by someone else?

Alan: Probably more than he wanted and less than I wanted.

Andrew: Are we talking about more than 20 percent of the business at the time?

Alan: No. I did not get 20 percent.

Andrew: Okay. And so, clearly there was one person who was still in charge of the idea, who owned a big chunk of the business and who’s saying both because it’s his idea and because of the share in the business, his say is louder than yours or your other cofounders.

Alan: It was, and to speak candidly, that was one of the big mistakes that I made, and not just myself but other cofounders is that it was my first entrepreneurial venture and we referred to each other as partners. And in my naivete, and it sounds very naive speaking about it today, but in my naivete partners to me meant equals, even if we weren’t equal in equity, we were equal in our standing within the company and in our areas of responsibility. And I learned the hard way, as did others, that partner is not synonymous with equality. And it’s a mistake that I made and not that I ever regret my time at Pricewaterhouse but it lead to some painful and difficult conversations not only between myself and Bob, but between others and Bob.

Andrew: What kind of conversations happened?

Alan: Well, when everything was fine when we were all of largely one opinion, Andrew. When serious matters came up and there was a division of opinion, that’s when in certain circumstances one could assert their greater standing in the company, and when those instances occurred, particularly the first time, it was quite a shock to the other cofounders.

Andrew: When was the first time?

Alan: I think the very first time, and you’re taking me back a lot of years so I’m not trying to be coy with my answers, but I think the very first time that really came up was when we got an opportunity to purchase contracts to provide catalogue services to other airlines. But that opportunity was not one that was fashioned where if we signed those contracts the airlines would automatically adopt the SkyMall program. The way that those contracts were written, we would step into the shoes of their existing catalogue providers, and if we were able to persuade them over whatever period of time to adopt the SkyMall program, than that was on us to do.

Andrew: I see.

Alan: And the existing program that those airlines had varied greatly from the SkyMall program and carried with them a lot of implications for the business from a cash flow stand point, from our computer system stand point, from a personnel stand point, and some of us were in favor of pursuing that transaction and some of us were not. And as we took a look at that transaction in detail, the conversations become more and more difficult.

Andrew: I see. I’m guessing that you were not in favor of it.

Alan: I was one that was not in favor of it for reasons that I felt were substantive and realistic and frankly, in the aftermath of the acquisition of those contracts, I think that my judgments were largely vindicated.

Andrew: So, I can see now, suddenly you’re thinking, you’ve gone from thinking I’m a partner. I have equal say here, to being told no. I understand what your point of view is, but I don’t agree and you’re going to be overruled and that’s the shock.

Alan: It was not just me. You know, if it had been one person having one opinion and one person having another, there were other founders, co- founders there that could weigh in. What was shocking was, to me, was that the majority of the co-founders stood with my opinion, and yet we were overruled.

Andrew: I see.

Alan: And that was quite surprising and candidly hurtful. It was a tough lesson to learn.

Andrew: I’ve seen entrepreneurs make mistakes, but often it’s because they don’t have enough experience. They don’t know about the business side of business. You’re a guy who came from Pricewaterhouse. You understood business, you studied it, and you still made this mistake, which in a way is reassuring because it means the stuff that education doesn’t make you immune to mistakes. I’m curious about why. Why wouldn’t you expect, why didn’t you say I’m going to be a co-founder and I need co-founder equity?

Alan: Well, I wasn’t unhappy with my equity, first of all. I didn’t get 20 percent. It’s rare that equity is divided equally among the co-founders.

Andrew: Makes sense.

Alan: So, I wasn’t troubled by the amount of equity. I agreed to it and I never look back on it. I will say this. Pricewaterhouse while a wonderful place to learn, you are still focusing on narrow aspects of a business, whether you’re in the audit side which I spent some time on, or whether you’re in the tax side, your efforts are focused in a very narrow way particularly when you’re younger on the hierarchy.

Andrew: And you were at the time.

Alan: I left after, immediately after being promoted to senior manager, so the next step was, would have been partner for me if I were lucky enough to have been nominated for partner some years hence. So I knew a fair amount, but at the end of the day, Pricewaterhouse, unless you’re in the consulting side of the business, is concerned with the financial aspects of the business and not so much with the business of the business. And so, from that standpoint, I wouldn’t say that my time at Pricewaterhouse prepared me well to jump into a co-founding position in a large and ambitious entrepreneurial venture.

Andrew: So the idea is there. It’s time to do two things it seems. Three things. Get the products that you’re going to sell. Get the warehouses so that you can, or the space in airport so you can make them available when people land and then get the deals with airlines. Which of the three do you do first?

Alan: Ha ha, well I’m fondly saying and I’m laughing because I think, in my 20 plus years’ experience now in entrepreneurship, I realize that regardless of what particular vertical you operate in, it’s the rare venture that doesn’t share two things in common. One is the chicken and the egg problem, and one is having too much business vested in too few customers. What you’ve just referred to, and quite perceptively so, is that we had three primary things we needed to do, but they were chicken and the egg problems. The airlines wanted to know what cataloguers were going to participate in our first, what we called a book. We didn’t know what would sell in the air. Okay?

Andrew: Right.

Alan: But we know how to read sales history. So, our intent was to set up SkyMall as a mall in the sky comprised of pages and existing cataloguers like Spiegel and Hammacher Schlemmer and folks like that would take a store within the mall in the form of a series of pages, whether it be four pages, eight pages, 16 pages, and we would pick the products together based on sales history and then over time we would see what the correlation was between what sold in the sky and what sold in the mail to the home cataloguers.

Andrew: I see. That way you could figure out what to have scientifically or some basis. I see, and not take a gamble on things that wouldn’t work.

Alan: Exactly. And at the same time, it allowed, it gave the airlines some assurance that we were credible because nobody knew what SkyMall was at the time, but if Spiegel was going to be in the book and if Hammacher Schlemmer was going to be in the book, then we could leverage their credibility not unlike the way companies today leverage channel partners in order to establish credibility and reach the audience. So, we played this two-handed game if you will, where on one hand we were recruiting cataloguers to take pages within the catalogue, and on the other hand we were making presentations to airlines trying to get them to adopt the SkyMall program.

Andrew: Okay.

Alan: And that chicken and the egg problem actually created our first and perhaps largest gut check that we experienced as a group prior to the transaction that I described earlier.

Andrew: So how do you settle that? What do you do?

Alan: It’s an interesting thing! Here’s another piece of naivete that I learned. If you get the chance to be the drafter of contracts, take that chance, okay? If the drafting can rest in your hands, and you can control that process, in my judgment, you should.

Andrew: That’s interesting because I think the instinct would be to say, oh that’s a lot of work. Why don’t you, the other person, write up the contract and I get to sit back and make corrections and ask for things that I want changed. And you don’t recommend that. Why not?

Alan: I don’t, because if you control the drafting, then you have the opportunity to write things from the outset that are favorable to you that frankly might go unnoticed or pass muster with the other party, whereas if they’re controlling the process then you’re forced to make red line changes. And red line changes are always going to get noticed and draw attention.

Andrew: I see. So which way did you guys go?

Alan: Foolishly and naively, we asked the particular airline which was Eastern, that was the one we were furthest along with, to provide us with a draft of a contract because we didn’t know what a contract of this nature would look like or be comprised of, and therefore we figured before we get too far with Eastern we’d better know what we’re getting into. Made sense at the time. The error if you will that we made aside from not taking over the drafting initially, and again that’s my judgment, is that they had a clause in the contract for intellectual property.

Andrew: Mm-hmm.

Alan: And that clause said standard language to be inserted. And we exchanged many, many drafts of this contract with Eastern, and that clause kept sitting in there; “standard language to be inserted”. And frankly we didn’t think much of it because “standard language”; how harmful could that be? Right?

Andrew: Yep.

Alan: And that’s what we thought.

Andrew: It is standard. Everyone else is doing it, right.

Alan: Exactly, standard. How bad can standard be?

Andrew: But it’s something that they wanted. What was that?

Alan: Well. We came upon a point because we were in this chicken and the egg process, where most catalogs do 60% of their business in the fourth quarter. At least that’s what they did pre-internet era. So getting printing time in the fourth quarter was vital, so we had contracted for that with a large printer and at that time the penalty for missing a print- date was $5,000 a day. Which was considerable for us.

Andrew: Yep.

Alan: Furthermore if you missed your print, because so many people printed in the fourth quarter I mean even magazines did their gift editions and things like that, there was no guarantee that we would be able to print in the fourth quarter. So it was very important for us to meet our date, so without telling Eastern we committed a considerable amount of money with Eastern’s name on the front and some pages internally that had Eastern’s name on it. We then went to a trade show where we met our primary Eastern contact and he presented the four of us, the four co-founders, with the latest draft of the contract. And for the first time the standard language had been inserted, and it was anything but standard. What it said was, “Eastern airlines would own the Sky Mall name” and we had all of these ideas of building a brand around Sky Mall which, looking back, has been realized.

Andrew: Yep.

Alan: But at that time nobody knew Sky Mall. So we were taken aback by that language and we pushed back and the answers we got were, “You know if somebody buys a coffee pot from the Sky Mall catalog aboard an Eastern aircraft and there’s something wrong with the coffee pot, they’re not going to remember that they bought it from Sky Mall they’re going to remember that they bought it from Eastern so we want to own your name.” And we pushed back some more and finally he said what I think many entrepreneurs hear, and that’s, “We’re big, you’re small, you need us more than we need you, live with it.” And the four of us-

Andrew: And then, he didn’t even know that you guys spent all this money printing out the catalogs, so you really-

Alan: No. He had no idea because that would have killed our leverage. So-

Andrew: Right. So you guys really were on the hook here. Did you also put Eastern on the Sky Mall catalog? Their company name?

Alan: Yes.

Andrew: You did.

Alan: It had to have Eastern on it-

Andrew: So you couldn’t even re-purpose it and say we’re going to take this to another airline, and so you were really on the hook and with all of that leverage against you, what did you say?

Alan: We asked for an hour, we went into our room at the hotel as I remember sweating bullets, and the four of us were of one mind at the end and we walked out, went up to him, and we said, “No.” With our hearts in our stomachs. And he said okay. And believe it or not he didn’t put up much of a fight at all, which was surprising to us, I don’t know if it was a test – still all these years later I don’t know why he agreed to abandon that clause but we ended up being able to rewrite the contract where we got to retain ownership of the Sky Mall name; we didn’t have to give up by my recollection anything in exchange for making that change; we were able to execute the contract; and we were able to watch Eastern Airlines with Eastern catalogs that we had devoted a great deal of money to printing in the hopes that we would indeed sign a contract with Eastern

Andrew: Let me understand the decision making process. It was “no” because once you gave up the name you were essentially giving up the company, is that right?

Alan: It was “no” because in our minds, if we gave up the name we gave up the opportunity to establish a brand and build a value and wealth in that brand.

Andrew: Couldn’t you have then created Sky Mall for Eastern, and then Flight Catalog for someone else, and then another name for someone else, and then had a different name that was your company name that maybe the consumer didn’t know? And maybe by-

Alan: We-

Andrew: Giving Sky Mall to Eastern you would, or it would have felt safer for Eastern Airline buyers to buy from Eastern as opposed to a third party. I want to understand that decision making process so that I don’t walk away thinking, “Sometimes you just have to say no because you won’t be bullied by the tough guy who’s bigger.” There’s a bigger business decision there that I need to understand.

Alan: Yea, great question and you’re obviously showing your knowledge of business which I’m not familiar with but clearly you’ve had your time in the trenches. This was not a case of us letting our egos get in the way and just say, “No, we’re not going to give in to the big guy.” I won’t lie to you, we were frustrated that somebody would say, “We’re big and you’re small and you need us a whole lot more than we need you.”

There’s no question that we were frustrated, but we felt that if we branded each catalog for each airline differently, then we would not have any cohesiveness to the Sky Mall program which at that time was revolutionary. The idea of being able to order while aboard an aircraft and pick it up when you land was something that nobody had ever conceived of before, or if they had they certainly hadn’t rushed in to making a business out of it. And we felt very strongly that Sky Mall, the Sky Mall name, needed to represent that business and if we deviated from the Sky Mall name then the cohesiveness of that business concept and the way of doing business would have been diluted to such an extent that we would have become just another catalog company delivering catalog services to an airline as had been done for years before us.

Andrew: I see. And then Eastern filed for bankruptcy. Your first partner, what happened to you guys as a result of that?

Alan: You know timing can be everything or so they say, and entrepreneurship fascinates me because of all of the things that are unpredictable. And because you start with a blank canvas and you build your idea from it. At the same time, because of those uncertainties is why the lows are very low and the highs are very high in entrepreneurship and not everybody is prepared to endure those. We signed with Eastern Airlines knowing that they were already in receivership.

We launched at a poor time because while we conceived of the idea before the following occurred, when we launched the invasion of Kuwait had already occurred and the airline industry was suffering mightily at that point. Now we had already, we were too far into it to pull back and I’m not sure our investors would have permitted us to do that even if we were inclined to do it. So what we did was we obviously had ongoing conversations with other airlines, and during the time that no Sky Mall catalogs were carried among Eastern’s aircraft we were still taking orders which was very encouraging to us. A day did not go by, if memory serves me correctly, that we did not take at least one order from the Sky Mall catalog even though they weren’t being carried aboard Eastern’s aircraft at the time. People were taking it off of the aircraft.

Andrew: So what was happening- I see, and keeping it in their living room. I see. And then they though, “You know what I’ve been wanting to buy this beeper for my beer-can…” or whatever those products were, “I’m going to go buy it right now.”

Alan: Exactly which was very telling to us.

Andrew: Yep.

Alan: It said for one thing that we had put together something that people liked. Secondly it played into our brand strategy because our planning at that time was not to just have SkyMall in the sky, but have SkyMall in hotel rooms where travelers would be and have SkyMall in other places where the common thread would be travel. But we could anticipate that travelers would be interacting with, so it could be a shuttle bus…

Andrew: Right.

Alan: To the airport, or something like that. So the fact that people were willing to take it off the aircraft with enough regularity that we received at least one order a day for, I don’t know, 60 or 90 days before we signed our next airline was a very, very encouraging sign. It certainly didn’t cover our expenses by any means. It was a very scary time, but it was encouraging nonetheless. And it helped us, frankly, sell the next airline.

Andrew: According to, actually, what year did you leave SkyMall?

Alan: I left SkyMall in officially, in 1992.

Andrew: ’92. Okay.

Alan: So I was early in it.

Andrew: And you started in ’91. So you were there about 10 years.

Alan: In ’90. Yeah, I left in ’90. Yeah.

Andrew: Sorry, I mean the launch happened in Christmas of ’91 right?

Alan: Yeah, October ’91.

Andrew: According to my research, my research is this article from The Atlantic Magazine.

Alan: Sure.

Andrew: By 1993, the company was losing six million dollars a year, and so this model, even though it had a good idea behind it, it was struggling because of this thing that I mentioned which is there were, it was the expectation that when a traveler landed at an airport within minutes that thing that he ordered while he was on the flight, that thing that she wanted when she landed was going to be there to be handed to her. How core was that to the idea at the time that you were there?

Alan: Well, I have two comments. First of all, your supposition that that’s why the company was hemorrhaging money is incorrect.

Andrew: Okay.

Alan: And it comes back to our decision to acquire contracts and why I said that my judgment in my opinion was ultimately vindicated. I argued against acquiring those contracts and one of the reasons that I argued against acquiring those contracts was because it, in my judgment, would severely hamper our cash flow. The SkyMall program of order in flight, get it when you arrive, is why we received our initial investment.

Andrew: Mm-hmm.

Alan: That’s the program that the investor invested in, and that’s what we were committed to. Okay? We never got a chance to see whether that would work profitably because as soon as we knocked off the first few airlines, Eastern and I think either TWA or Continental was the second one. I’m sorry I can’t recall at this point. We got this call asking whether we wanted to acquire market shares. In fact I fielded that call. And it was from a very large, in fact at that time, the largest privately owned company in America that had been doing onboard cataloguing for ages. In fact, they did the catalogue with Bob initially saw six to eight week delivery. The SkyMall program was, I was able along with my colleagues to negotiate and sign inventory in exchange for putting those cataloguers in front of a vast number of people.

Andrew: Meaning you didn’t have to pay for it until you sell it, which is a great place to be in.

Alan: Exactly. It preserves your cash flow. It allows you to manage your cash flow very carefully. As I mentioned earlier, if we were to buy these contracts, the agreement was that they didn’t adopt the SkyMall program from day one. We stepped into the shoes of the existing catalogue. Well the existing cataloguer had 300 plus vendors. We had ten…

Andrew: I see.

Alan: That had taken pages. And they were on 30-day terms, payment terms, with the vendors. They weren’t on consignment. So from my perspective, and for many other reasons that I thought it was the incorrect decision at that time to acquire those contracts, one of my arguments was it’s going to kill our cash flow, because we have to step into those shoes, we have to deal with 300 plus vendors on 30 day terms.

Andrew: So now you suddenly have to buy a lot of inventory from multiple suppliers and, if you maintain your current model you have to have all those product available for people to receive when they land. And so the combination of your model, receive when you land, plus this huge list of products that you have to sell, meant the losses for years.

Alan: And we were on, the Sky Mall program at that time was operating on 1 perhaps 2 airlines. We acquired contracts to, I believe, 5 airlines among them American which at the time was the largest airline in the country. So, which program do you think is going to get the greatest attention, the squeaky wheel right?

Andrew: Yeah.

Alan: So now 99 percent of our time, and I’m using that as a general number, 99 percent of our time we were focused on servicing a program that wasn’t the Sky Mall program which was another argument of mine against acquiring those contracts was because our focus would shift from proving the Sky Mall model, and I felt very strongly that if we proved it we wouldn’t have to buy contracts, the airlines would come to us because we would have a more successful, exciting program for their passengers, we lost their focus.

Andrew: You had much more coverage, were on many more airlines but you also essentially took on the model that was already in place before you existed, why didn’t that model work for them, and Sky Mall over the years ended up making it work for itself. The model being, see a catalogue on the flight, the catalogue has products from lots of different companies that you like, order it and they’ll be in the mail to you. That was the model in place before Sky Mall, that’s the model that Sky Mall started to rebel against and then eventually it seem to have acquired and done well with. Why did it work for Sky Mall but not the existing players?

Alan: It actually did work for the existing players and that’s why they were in the business for 20 plus years.

Andrew: But then why did they give you guys, or why did they sell to you guys, that model if it worked so well for them?

Alan: It was off strategy for the businesses they were pursuing. This was a very large company and this was the only business that they had dealing with airlines where it was direct to the consumer. They had other programs that they dealt with airlines but it was business to business. This was the only one where they were business to consumer and it was off strategy and so they were willing to sell us those contracts.

Andrew: I’ve got the S1 filing from when Sky Mall went public. There are these names that I don’t know in here, who is Allen {sp} and Karen Ashton and Burt G. Kurtz {sp}

Alan: Allen {sp} Ashton and Karen Ashton were our initial investors.

Andrew: I see.

Alan: Allen {sp} Ashton was the primary founder of WordPerfect if you can remember that long ago, the forerunner to Word, and once the most popular word processing software in the world. At the time he was a Price Waterhouse client and a member of the Forbes 400.

Andrew: I see, so you got him as an investor in the company and as a result when the company went public he had 2.5 million shares of the business.

Alan: Because I left at a certain time I can’t speak to how many shares he had.

Andrew: But he did have a share of the business when you were there because you got him as an investor?

Alan: He absolutely did.

Andrew: And Burt Gurtz {sp} another investor.

Alan: It’s actually Burt Gatz {sp}

Andrew: Gatz {sp}, excuse me I don’t know why I stuck an r in there. Burt Gatz.

Alan: Burt Gatz {sp}is a gentleman that I’ve not personally met, Burt Gatz {sp} and this is memory serves, a very successful entrepreneur in Arizona, and we had gone for a loan from a bank that no longer exists, Valley {sp} National Bank was acquired by I think by Chase, but don’t quote me on that. I believe as I understand that Burt Gatz {sp} guaranteed that loan on our behalf and if we were to default on that loan, he would be paid shares of SkyMall. This is my understanding.

Andrew: Okay.

Alan: After I left, and again for reasons that I think my judgment was vindicated, the cash flow problems arose. My understanding is that SkyMall did indeed default on that debt to the bank, and Bert Getz became a significant shareholder in SkyMall.

Andrew: I see. So here’s the part where I said earlier, are you pranking me on? Because here’s what I see. I’m looking over your shoulder and the office looks immaculate, like you’re renting it for the day.

Alan: I’m looking at the S-1 filing. There are all these people who have shares including Thomas Little. Let’s see, John Hurley has 2,000 shares.

Alan: Don’t know who that was.

Andrew: All these people, I don’t see you on the list. Then I go back and I go back and I do a contemporary search within Google for articles about SkyMall from the time you were there. I don’t see your name. Are you really the co-founder?

Alan: [laughs] I am absolutely the co-founder. The folks at Pricewaterhouse would be happy to acknowledge that. The other co-founders would be happy to acknowledge that. One, unfortunately, has passed away. I did interviews with Business Week and a number of other publications. So it is well-known that am co-founder of SkyMall. It is not as well-known because I’ve never gone into the degree of detail that I have with you today of my tenure there. And you won’t find me as a shareholder in the S-1 filing, because I negotiated to sell my shares back to SkyMall after I left the company.

Andrew: I see.

Alan: Because, frankly, I said to myself, I feel that I’m right in the judgment that I put forth. I’m not comfortable with the way that, and still twenty years later, am not comfortable with the way events unfolded. And I said, you know, if I’m going to make a lot of money, I’d just as soon bet on myself than bet on this going forward. Because I don’t agree with the direction that it’s going in. And some might call me a fool for that, and some might admire the principle behind it. I don’t know.

Andrew: But you ended up with a million dollars from the, no, you couldn’t have, because you sold back when they were still trying to figure things out.

Alan: Yeah. I sold back, and then once the company went public, I sold in and out of it a bit.

Andrew: I see.

Alan: And so, no, I didn’t get a million dollars in payment for my stock.

Andrew: I want to see what you ended up doing afterwards, but let’s close this out with how you left. You told Jeremy in the pre-interview, you weren’t just a guy who worked at SkyMall. You weren’t just a co-founder of SkyMall. SkyMall was your identity.

Alan: Yes.

Andrew: And now you leave it. Talk about the decision to walk out. That couldn’t have been easy.

Alan: [laughs] I didn’t have a decision. I don’t share this story with many, but I’ll share it. The company started to divide between myself and Bob Worsley. Bob was number one. I was number two, if you will. The company started to divide between us because, once we acquired those contracts, the company knew that that was not something that I had endorsed. Okay. So I’m a fairly vocal guy, outspoken guy, and so many of our key staff knew that I was not in favor of acquiring those contracts.

Andrew: Mm-hmm.

Alan: And they also knew my reasons for it, like cash flow, and like our computer systems weren’t ready to take on a drop ship approach to cataloging. Because the SkyMall version never had drop ship in mind. We were going to inventory product at airports around the country. Now we buy these contracts, we got 350, or 300 vendors that we have to drop shift with, and we have to develop a software system to accommodate that. Which was another of my arguments against acquiring these contracts. And I had many others.

And some of them may have been wrong, but some of them were clearly right. And as we bought those contracts, in the aftermath of that, a lot of the things that I and others had anticipated would happen on the negative side, started to happen. Like cash flow. Like working people 18 hours a day to overcome the issues with the software system.

Andrew: I see.

Alan: Those sorts of things. And the company started to divide between Bob and myself.

Andrew: I see.

Alan: And that was a very troublesome time for me. I was very close to Bob. I was very close to his family. And I was working very, very hard doing what I thought was right for the company. You can differ, but I felt that I was acting in the best interests of the company. And the division between us became, in Bob’s mind, untenable. Now I didn’t know that until he called me into his office, and shared that with me, and shared that his family had cried over the decision that he was going to announce to me, and all of those things.

But to make a long story short, he said, we’re going to have a workforce reduction, because there’s no issues with your performance. But we’re going to have a workforce reduction, and you’re on that list. That also happened to another co-founder sometime later. And it happened to the Director of Operations and many other people along the way. So my parting with SkyMall, well, I will never regret being there. And I learned a great deal, both positively and negatively. And you learn more from negatives oftentimes than from positives. That was a devastating event for me that plagues me to this day. Bob and I have not spoken in 20 years . . .

Andrew: Wow.

Alan: . . . whereas we had known each other at Pricewaterhouse, and were in lockstep for most of my time at SkyMall. And the way it was done was hurtful to me. The premise on which it was done was hurtful, because I believed, okay, we disagree. But you acknowledge that I’m a good businessperson, and that you don’t have any basis on performance to dismiss me. So why not let me be part of the solution, and to try and overcome the challenges that we’re having in the wake of having acquired those contracts? But that was not to be. And it was not to be for many others who differed with him, and I’m not trying to disparage Bob in any way.

Andrew: Would you talk to him now, or is it too painful?

Alan: You know, I’ve wondered that. And I guess this makes me a small person, and I don’t say that easily. I would find it very difficult to speak with him. There’s a part of me that wants to. There’s a part of me that feels the hurt of that day as deeply today as I did 20-plus years ago. And that’s just me. And again, I’m not trying to disparage Bob in any way. People can differ in their strategies and people can carry them out in different ways. I foolishly thought that partner meant partner. And it never occurred to me, again foolishly, that one partner would ever dismiss another partner. Just didn’t.

Andrew: I get how you’re feeling, and I actually don’t feel that you’re disparaging him at all. I do, though, see the openness in the way that you’re talking about it, and I appreciate it. They way you’re talking about how you felt. How long did it take you to move past it?

Alan: I’m not sure I have moved past it, to be honest with you. That’s why I say that some may look at me and say I’m a small person in that regard. Not to get overly dramatic . . .

Andrew: Mm-hmm.

Alan: . . . but SkyMall was my identity at that time. People knew me from SkyMall. I had suffered a divorce previous too. That was very painful to me. And so I looked to my work to sort of help me through that period. And I poured everything that I had into SkyMall. I used to sleep in the office. Not the only one, but I used to sleep in the office. I used to run around screaming, you know, this is the best job I could ever have. Not thinking of it as a job, but thinking of it as something that I owned and that I was creating.

Andrew: At 1:00 a.m., I understand you used to do that, run through and say, this is it.

Alan: This is it.

Andrew: Yeah.

Alan: Yeah. It was 2:00 in the morning. I was working on my 18th hour, and I was as excited as could be. And it was my identity. And what happened . . . [SS] . . .

Andrew: I can imagine if someone suddenly took Mixergy from me. This work is not just work. It is my identity. And if someone who’s listening to us is hearing this and saying, you know what, I want to learn from Alan’s experience. I’ve got a co-founder. I’m going to have other partners in my life. I want to do something to protect myself. Is there something you can do, or are we looking at a situation where Steve Jobs ran the company, was identified with the company, and even he was on the outs?

Alan: Exactly. I never had the privilege of speaking with Steve Jobs or meeting him. I’m sure he was hurt greatly when he was ousted, and I’m sure that he took great pleasure in being brought back.

Andrew: So is there something to do to protect against that?

Alan: You know, there are. There is some contractual language that you could put in if you were able to negotiate it that would make it expensive or painful for the company to dismiss you without cause.

Andrew: Mm-hmm.

Alan: But as any lawyer knows, there’s ways to build a file for cause. So is there a foolproof way? I don’t think so. And I appreciate you saying what you said about Mixergy, because I think there are a lot of us out there who love what we do and attach our identify to it.

Andrew: Yeah.

Alan: But the problem with it is, and the thing that I told Jeremy, and I tell entrepreneurs when I speak to them is, that the only way that I’ve been able to deal with it, if you will, and I readily admit that I’m not wholly past it. And it’s still uncomfortable for me to talk about, so uncomfortable that I would find it difficult to speak with Bob. But what I can tell folks like yourself and other entrepreneurs is, don’t make the mistake that I did and identify yourself with your venture. What you are, and what I was and am, is a businessperson with a set of skills. And those skills get used in whatever project or venture that you’re applying yourself to at the time.

And sometimes those ventures will play to your strengths, and sometimes they won’t. But, in either case, you will come out a better businessperson than you went in, because you will learn something. So think of yourself, and all of your viewers I would encourage, think or yourself as businesspeople with a set of skills. And every venture you’re applying those skills to is making you a better businessperson. Whether it’s a financial success or not. And if it does fail, however you may define that, is I think we tend to define it too narrowly.

As it’s a success if it’s financially sound, and a failure if it’s not. Well, I would say there’s a lot of aspects to success and failure beyond simply the financial. But if it fails, by whatever definition you have, you don’t lose your identity. You simply say, I’m a businessperson and that venture did not bring out the best in me. It did not play to my strengths, but I’m a better businessperson today because of it. Much like an actor is always an actor whether he or she’s movie performs well at the box office. I mean Tom Cruise made “Cocktail”. It’s not going to make the top 200 best films in the world

Andrew: Yeah, I don’t think I’ve even heard of it.

Alan: Yeah, well go back and look, he got panned in it, but he still gets paid $20 million dollars a movie, to do the “Mission Impossible” franchise.

Andrew: Yeah.

Alan: He’s an actor. Some of the projects he works on are going to play to his strengths as an actor, and he’s going to be more believable and more comfortable. The audience is going to be more accepting of it, his customers. Other ones, like, “Cocktail” it got panned. It got panned by critics . . .

Andrew: Oh, “Cocktail”, yeah, I remember that. I have to say that one actually liked. That’s the one where he wanted to get rich, but he was a bartender. Where he wanted to figure out, how is someone making a fortune from those things on the edge of shoelaces, and he can’t come up with his idea that nobody even knows exists, but will be a fortune for him, so I guess maybe there aren’t a lot of people like me.

Alan: Well, it got panned. I happen to like the movie because I had a crush on the female lead.

Andrew: Right.

Alan: Which I’m not ashamed to say.

Andrew: I liked her too.

Alan: I’ll watch it just for her and her acting, but it did get panned, and it didn’t do well at the box office.

Andrew: What is “Worthworm?” I said at the top of the interview that’s it’s a web-based application intended to automate the calculation of a pre-money valuation for early staged companies seeking Angel Investment.

Alan: Yes.

Andrew: Put a little more flesh on that if you could.

Alan: You said it wonderfully though. I appreciate that.

Andrew: Thank you. Actually it’s strange, when things are written down for me, I often have a hard time reading them word for word, as you noticed with the word Getz, Bert Getz, I added an R. If I just have an outline, I can often fill in the gaps pretty comfortably, but I did. . . [SS] . . .

Alan: If I got my accounting of Bert Getz’s tailing correctly, he may prefer that you left the R in there, but it’s the best my memory can do me at this stage.

Andrew: And you’ve got Worthworm.com, which I’m going to as we’re talking. What is it?

Alan: “Worthworm” grew out of my dual roles as an entrepreneur and Angel Investor. I’ve been on both sides of that table and continue to be. One of the things that I noted is that among the most contentious aspects of striking an investment transaction with an Angel Investor is defending the evaluation that you’ve put on your early stage company.

In many instances the way that an entrepreneur establishes the value of their company is they stood around their table with perhaps their other co- founders or others, and they say, “Gee, we need a $1,000,000. How much are we willing to give up of the company for that?” They say, “20 percent.” They don’t even realize that by providing those two elements, the amount that they’re going to raise, and the amount that they’re going to give up. They’ve placed a valuation on the company.

Andrew: Mm-hmm.

Alan: That valuation in this case would have been $4,000,000. Okay, because then you add the million raised, it’s five million and the one over the five gets you the 20 percent. I learned that the entrepreneurs were capable of talking about their ideas, but then when the Angel Investor looked them in the eyes and said, “Hey Andrew, what makes you think you’re business is worth $10,000,000 when you don’t even have your first customer?” That the entrepreneur had no answer to that, they were literally a deer in headlights. That got confirmed for me in February when I went to the Angel Capital Conference in San Francisco.

There is a very widely respected Angel Investor, who has won Angel Investor of the year in the U.S. and in New Zealand, named Bill Cain, led a valuation discussion for about 300 Angel Investors, and I was in the audience. He said in his early comments, “Let’s face it, most entrepreneurs don’t know how to calculate a pre-money valuation and neither do most Angel Investors. It’s the blind leading the deaf.” Yet it becomes one of the most contentious aspects in a transaction.

Andrew: How are you going to fix that with “Worthworm?”

Alan: What we’ve done is, [??] October, we have built a web-based application that automates the pre-money valuation calculation and then goes a step beyond. Let me explain how it works. We have a questionnaire that we ask people to fill out, the entrepreneur. That questionnaire is molded around key valuation drivers – product or service maturation, size of the market, completeness and relevant experience of the management team, future financing rounds that are going to be required – aspects that directly affect the valuation of a company, OK?

And we have developed nearly 1100 analytic parameters around those questions, and we take those analytic parameters – which we developed in concert with a faculty member at Stanford University – and we apply a blend of the most widely-used and accepted early-stage venture methods, like the scorecard method, the VC method, the [??] method. And then on top of that, we contracted with a third-party research firm to get comparable valuations of companies within verticals, separated by verticals, at the stages that a company raises money from angel investors. So, much like you have comparables in…

Andrew: I think I just lost you.

Alan: Frozen?

Andrew: There we go. Sorry, we just lost the connection there for a moment. So, in order to be a part of this, we need to just go to worthworm.com, we fill out our information to get a copy of the Angel Investment in America Report, and then after the launch, we can get our valuation done by you?

Alan: Yeah, actually it’s on a subscription basis.

Andrew: OK.

Alan: Either monthly or annually, you can cancel at any time. Our argument would be that if you’re an entrepreneur, you should not only use this when you’re raising funds, because now instead of walking into a negotiation with an angel investor, and saying “I think my company is worth $8 million dollars” and the angel investor says “I think it’s worth one”, and you may not have a deal to be had, you can start the conversation knowing that you have a credible and defensible number on which you both can agree has been rigorously computed…

Andrew: By a third party. What is it going to cost monthly to do this?

Alan: The bronze membership is $59.95 a month.

Andrew: OK.

Alan: So it’s inexpensive. The average angel round usually takes about 120 days to complete, so you’re talking – if you just wanted to use it for that – $240 dollars, which is about one hour of your accountant’s time trying to explain to you how to value your company, and more than likely he or she is going to be wrong, because most accountants have no clue how to value an early-stage company. And then, we look at risks and opportunities. This is something else that we’ve built into the tool using real options. Algorithms. And so we identify the areas of the company where the greatest risk exists, because there’s so much uncertainty surrounding it, and where the greatest opportunities exist, and we suggest that you look at those areas, and perhaps think about taking actions on those areas, because when you reduce uncertainty, the cost of your capital should go down. It should be less expensive.

In other words, your valuation should go up. Similarly, when you take advantage of certain market opportunities that prove your product in the marketplace, or add to the maturity of your product, then you should be able to demand a higher pre-money valuation.

Andrew: That’s why you want an ongoing relationship with them, because things keep changing.

Alan: Exactly.

Andrew: I know we’re running a little over time here, but there’s a question that’s on my mind that I’ve got to ask you.

Alan: Sure.

Andrew: How did you feel when I asked you earlier, or when I pointed out earlier that the office is empty? That there’s nothing on there?

Alan: I laugh at it because most people that know me will tell you that I’m pretty idiosyncratic, and so they would just chalk up the empty office to the fact that I’m idiosyncratic.

Andrew: And so if you open one of the drawers, would there be something in the drawer?

Alan: Sure.

Andrew: I see.

Alan: Worthworm business cards.

Andrew: Oh, okay, alright. So there is something in those drawers. You just like to keep the desk empty. Are you using…

Alan: …But not much else, not much else. I try to run a fairly paperless office.

Andrew: I remember reading the biography of Lew Wasserman.

Alan: Yeah.

Andrew: He would walk around at the end of the day. He’s the guy who founded MCA. He would walk around at the end of the day, and if he saw anything on one of his employees’ desks he would just take it and throw it in the garbage. Because desks have to be clean, otherwise you’re projecting the wrong image. Desks have to be clean, because otherwise you’re going to be confused in your head. I’m looking around at your desk and I feel like you’re not as maniacal, but you are more organized…

Alan: …No, my desk isn’t clean because I attach any importance to having a clean desk.

Andrew: I see. It’s just the way you are.

Alan: My desk is relatively clean because I’m trying to be paperless as best that I can.

Andrew: I am too. Here’s my answer to that. This is not so much a plug as a recommendation – SnapScan. Everything that I have, if you give me a piece of paper, it goes right into SnapScan. It gets digitized and then right into the garbage.

Alan: Same thing. I have a Fujitsu…

Andrew: …That’s it…

Alan: …scanner and I do the same thing.

Andrew: It really works. I only got it because Merlin Mann, a guy who’s very particular about the technology that he has, recommended it and said this really works. I bought it, and he was right on.

Alan: Yeah.

Andrew: Actually, he said it and I still didn’t believe it. Then, a friend of mine had it. I said, really, you and I are offline, does it really work. It did. Then I bought one. Let me do this quick plug…

Alan: …I take pictures of business cards with my smartphone, then the business cards go in the garbage…

Andrew: …Right in the garbage. I hate paper.

Alan: Yeah.

Andrew: Here’s what I want to say to the audience before I say goodbye and tell people how they could followup with you. I want to just quickly tell them the story of a guy named Geordie Wardman. Geordie had this issue where he started a company, Alan. He said, you know what, these online deal sites work. I’m going to get in the deal business, too. I’m going to make money just like Groupon but maybe on a smaller basis.

He launched it. It didn’t work out. He gave up money, time, a little bit of reputation, hurt feelings, and the idea didn’t work out. So, I met him in Las Vegas at a friend’s event – Dane Maxwell’s event, and he was happy. I said, what did you do now that made you so happy. He said, Andrew, I didn’t want to take that kind of risk any more. I had a new idea for a new approach.

What he said he did was he talked to customers before he built his business. He asked them about their problems before he created a solution. I see you’re nodding, so you agree with this approach. He was talking to hoteliers, and what they told him was people keep leaving us negative reviews when they’re happy, and nobody who’s happy goes home and says I better go home and leave a positive review. As a result, we only get the angry people who are online. By the time they’re home and angry and writing about this we can’t do anything to make it better or solve this.

So, he said to them, what if I build something for you that would allow happy people to give you good reviews and upset people to give you some time to correct it before they go home and complain online and to their friends. He said, would you like that. They said yes. The next thing, Alan, that he said was, if I charge you would you pay me. Which is a key question. They said yes. Then he said, okay, now pay me.

That’s the process that he went through to build his new company. It’s called Guest Retain. He had people actually pay him money up front. Then he went and built the technology. Then he told me in private that not all of the technology worked. Some of it looked like it worked, but he really had a virtual assistant behind the scenes doing it.

Alan: Right.

Andrew: This is the way he built his business. I found him because I took that trip. I paid with my own money to fly to Las Vegas to this conference. I asked the organizer, Dane Maxwell, who do I need to know. Dane told me Geordie’s the guy who’s one of the best, most successful people in the room. You should talk to him.

I talked to him. Then, my team talked to him. Then, we had him come on and do a course for Mixergy.

So, if you want to learn how he did it and how you in the audience can do it, too, the best way to do it is to fly to Vegas or wherever Geordie is in the world and talk to him one on one. Frankly, better than anything I could give you, sit down with him for an hour. Find a way to do it. Buy him coffee. Buy him lunch. Buy him a plane ticket. Buy him whatever. Talk to him for an hour and he’ll walk you through it.

If you can’t do that, and you’re a Mixergy Premium member, go to mixergypremium.com and watch as I grill him about his process. Frankly, if you talk to him in person, you’ll see. I’m a little aggressive about the kind of details that I need. It’s not just for show. I need that detail. And, if you’re a Premium member and you watch that, you’ll see that the detail really pays off. Because he walks you through step by step. He doesn’t just tell you that he built a mock up where you can click and things looked like they worked but they didn’t. He shows it to you in that program.

It’s available at mixergypremium.com. If you’re a Premium member please go and take that course. Listen to Geordie do it. If you’re not a Premium member, fly out to wherever Geordie is in the world and sit down with him. Or, for goodness’ sake, go to mixergypremium.com and sign up right now. Because that is the kind of person and that is the kind of conversation, the kind of how to, that we have at Mixergy Premium. I guarantee it. I would be a schmuck if you were not happy and I didn’t give you your money back. Guys like Alan would never trust me to do an interview with me. They’d say this is a sham and I don’t want to be a part of it. If you’re unhappy of course you’ll get your money back. My reputation and your happiness are more important than the couple of bucks that you pay me.

But, I want you to go and sign up, because I know that if you do you’re going to be better as an entrepreneur, you’re going to learn, and you’re going to, hopefully, build a really successful company that will give my life meaning. Because then I could point to you and say, there, that is what I was able to do with my life. mixergypremium.com.

Alan, thank you for letting me do that plug. You’re nodding. I think I’m getting better as a pitch man for my own stuff. I can usually talk about my guests’ stuff. My own stuff I shied away from. I’ve been working on it. What do you think?

Alan: You did a wonderful job. I think customers are the final arbiter of your value proposition, the quality of your service, how you’ve priced it. There’s no substitute for reaching out to the customers and getting their input and feedback. To the extent that you’ve found someone that has some magic words about that your audience would be well served to take advantage of the offer.

Andrew: Thank you. Yes, they will. He’s terrific. Alan, the best way for people to reach you if they want to say thank you for doing this, is it to just go to worthworm.com?

Alan: alobock@worthworm.com. That’s my direct e-mail. alobock@worthworm.com. One of the things, if I may, if you’re an entrepreneur…

Andrew: …By the way, it’s your own company, why not get alan@worthworm.com?

Alan: alobock@worthworm.com.

Andrew: I guess you were setting up a format for when you have a bigger team and they’re all going to be first initial last name at. Is that what it is?

Alan: Yeah, probably so. I don’t know…

Andrew: …Okay, that’s alright. I cut you off. You were going to say something.

Alan: Yeah, I would like to ask this if I may. We are in the process of backtesting our analytic engine. If you’re an entrepreneur that’s listening to this and you’ve closed an angel round within the last 90 days, and you’d be willing to fill out our questionnaire so that we can use your information to backtest, we will keep it very secure. We’ve got bank level security seriously attached to the Worthworm product. It would be great help to me as an entrepreneur if you as an entrepreneur would help me. Just get in touch with me. We’ll send out the questionnaire in Excel format. You can help us backtest this.

Andrew: What if you’re not an entrepreneur who has angel funding and you’d like to build a relationship with Alan. I always think of how can you build relationships. So, here’s my suggestion. Find someone who is. Introduce them to Alan. They’ll get value out of seeing some of the reports and the feedback that Alan gives them, and you will get to help that entrepreneur out and get to get in good with Alan. I always like to get in good with people.

Alan: I couldn’t say it better myself. You know, you’re better than Barbara Walters. You got me to say more than anybody that’s interviewed me over 20 plus years.

Andrew: I appreciate that. Thank you.

Alan: You’re very good.

Andrew: I really take this stuff seriously. We have a team here. We do our research. We understand what S1 stands for, what it means. And there’s a reason – because I want to get really useful interviews, stuff that’s meaningful, out of the guests. I appreciate your openness here. I appreciate you trusting me.

Alan: Sure.

Andrew: Thank you for doing this interview. Thank you all for being a part of it and a part of Mixergy. Bye, guys.

Alan: Bye, thank you.

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