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Here’s your program.
Andrew: Hey everyone, I’m Andrew Warner. I’m the founder of Mixergy.com. Home of
the ambitious upstart and you know what we do here. I interview
entrepreneurs about how they built their businesses. My goal is to bring to
you some of their best ideas so that you can use to build up your business.
Hopefully when it gets bigger and bigger and bigger you can come back and
do what today’s guest is doing which is tell other people how you built it
and pass that knowledge on to them.
Today’s guest says that he’d rather be customer-funded than investor-
funded. Joining me is Alex Mann founder of ClickTime. ClickTime is software
that makes tracking time and expenses easy.
Andrew Warner: Alex, welcome.
Alex: Thank you.
Andrew: How long have you been running the business?
Alex: This is our 11th year.
Andrew: Eleventh year, there are not a lot of internet companies, not a
lot of software based companies that last nearly that long. Do you feel
comfortable revealing your revenue here?
Alex: We’ll put it around three million a year.
Andrew: Three million a year. Now, you and I talked before the
interview and we agreed that that’s what you felt comfortable with and that
I wouldn’t push beyond that. What I’m curious about is why reveal anything?
You’ve revealed some numbers in the past. You’re revelaing it here to my
audience. Why share your revenue?
Alex: I think it’s important to legitimize this business as
something other than another start-up who can advertise it’s number of
users, number of eyeballs, growth per year . . . the fact is at some point
you need to run a concern. Overtime we felt more comfortable disclosing
revenue because when we think about the reasons not to, we have a hard time
coming up with a lot of reasons not to.
Andrew: I see, what about competition? What about somebody listening to
this program saying, ‘I now know how much money Alex is making. I know how
big ClickTime is. I’m going to go and reproduce this business.’
Alex: They already have. There are many, many competitors in this
space. There are many that won’t be here next year. It’s a big world. You
know, there are roughly a billion people on the planet who track time. Of
those, something like 90 to 150 million track time the way we do it which
is a project oriented time tracking. That’s opposed to flipping burgers and
punching in which is a different part of the market. Even in that hundred
million people, lot’s of room for a lot of distinct products. Are people
going to go after my exact segments? I don’t know but certainly there’s
enough place for all of us to do well giving how early this market still is
and how many people are coming around to software’s and service.
Andrew: What kind of moat do you have around your business, around your
customers. What keeps them connected to you besides the fact that you’ve
got a really easy system for updating time sheets, for tracking expenses.
Besides that, how do you stay connected?
Alex: In terms of the customers we have on board, it’s a pretty
sticky product. You’re going to enroll with ClickTime, it’s a subscription
product, you’re going to feed ClickTime a lot about your business. Your
people, your projects, expense categories, you’re going to type your
accounting system, it’s not the kind of thing you want to be switching out
every few years. We enjoy a very good longevity with customers. We roll-out
new features continuously. We listen to them a lot for feedback. It’s not
the kind of product that’s extraordinary rocket science. Keeping the
customers on board is really a matter of listening to their particular
needs, their use cases, in terms of new customers, you know, getting them
into our product. We present a kind of longevity in the business that
inspires trust. We have a blue-chip customer list. Now, many of our
customers are small enterprises, medium sized enterprises but we have
probably 200 customers that would be household names. General Electric,
GMC, and Johns Hopkins University and a lot of others. That credibility,
again, earned over time can not be replicated and that’s hugely valuable to
us.
Andrew: I’m seeing it actually on the screen right now. I often have my
guest’s website up on my screen as I do the interview and on your site, if
anyone goes to ClickTime.com, they’ll know what I’m talking about. The
logo’s just keep flying in. I see HP, I saw Google, I see Visa, I see
Expedia as customers. So many more than you mentioned before. I’m wondering
how do you get those customers. Is just a fact of life that if you’re
online and you’ve got a good product these businesses or someone within
these businesses will sign-up to try your software and be a customer?
Alex: You got it on the head. You hang up your shingle. We did this
11 years ago, you hang up your shingle and you wait. The internet’s
wonderful because in some ways the better mousetrap gets the business. We
didn’t have a large marketing budget. We stuck to our guns and proved our
product. The fact is everywhere in the world there are shoppers in a
shopping posture in any given day. Many of them care about the quality of
what they’re getting and they’re going to look at four or five products.
They’re going to evaluate them. You’ll win on the merits. Again, if you
have the patience, you will win on the merits and we’ve been doing that
over and over again. These customers are amazing. We tell the enterprises
that we don’t do an enterprise sale and by that I mean we don’t have the
salesmen working the lead for 18 months going in. ClickTime is largely
bought more than it’s sold. So, customers in a buying posture do their
research, find out who the big players are, thankfully, we’re one of them.
They’ll evaluate the product.
Andrew: And come to you and . . . how many people in the company?
Alex: We’re 17.
Andrew: Seventeen people running this company that’s roughly $3 million
in revenue and one more question about finances today and then I’m going to
go back in history and find out how you built this business here and why
you were able to keep on growing. Profits in software’s and service
business seem to me like they’d be high, right? Big margins, big net
margins?
Alex: The margins can be fantastic. Interestingly, this is a business
where keeping the lights turned on is not all that expensive. So, we could
enjoy great, great margins for a reasonable period of time and then it
would kind of trickle off because we would be starving the product. We
elect how much to reinvest of that margin. Which can be quite generous but
we choose to reinvest to improve the product and you mentioned the word
customer-funded. What would you do if you had funding, you’d do some risky
things. You’d try different marketing tactics. You enter different
verticals.
So, we do a lot of increasingly speculative activities that won’t bear
fruit for two, three, five years. That’s completely okay. So the margin
question it’s what we want it to be. I mean, really, you think about what
it costs to keep a rack of machines running. Have a couple of people
working IT, it’s not a lot but what is a lot is keeping developers thinking
about where we’re going to take it from here. Our product will eventually
become more obsolete, there will be more competition. We’re always thinking
out one step ahead and it’s expensive. But, again, if you’re willing to
take the time to reap the benefits. Willing to wait one, two, three, five
years, it’s fantastic.
Andrew: Let’s go back, 11 years ago, what was the original idea that
launched what became ClickTime as we know it today.
Alex: I’m also the founder and remain a partner in a business called
Mann Consulting which is an IT consulting business. At the time, I was
doing a lot of special projects for Mann Consulting. New software projects,
early internet things, corporate multi-media, we’re talking in the ’90s
this was very hip stuff. We had one customer, a sizable advertising agency
in San Francisco that was wondering what they would do about time tracking.
We thought, okay, let’s try interesting things.
First of all, let’s make it internet based. Second of all let’s not do it
as a custom one off, let’s keep ownership and make it our product. Maybe we
can sell it, I don’t know three or four more times, right? So, we built the
first incarnation of this, actually it was ’97 was the very first one. It
was so early in the game there weren’t even browsers on everyone’s desk of
the client. Even though they were internet enabled, they didn’t have
browsers. You might remember there was a time when people thought, why give
everyone a web browser on their desk – that seems preposterous, they would
just fool around all day.
We actually wrote a client application that tracked employee time. It was
installed on the desk tops. It transmitted over HTTP to our servers and
then we literally, what did we do? We mailed or faxed back the reports.
Andrew: Faxed back reports to people?
Alex: Well, because they didn’t have browsers, so they couldn’t . . .
Andrew: I see, so what you did was you created a desktop client that
essentially gave them a web interface. An interface to the web, they typed
in their information, you sent it back to them by fax or mail.
Alex: That’s how they could take it. They didn’t have browsers.
Again, we weren’t building a product. We were helping a client. That’s all
we were doing.
Andrew: This is for one client, okay, who asked for it. Okay.
Alex: But we said, let’s build it multi-tenant, right? Now, this is
’97, this really, really early, I don’t even think that word was invented
yet. We thought about doing that.
Andrew: What’s the word?
Alex: Multi-tenant.
Andrew: What’s multi-tenant?
Alex: So, multi-tenant in the software and the service world means
you build a single software infrastructure. One massive data base, one code
base, one server farm, and multiple independent customers share a single
instance of the application. Security is maintained not by having separate
apps but by having within the application sort of a silo of security where
one company only sees their data.
Andrew: I see so instead of creating this product just for customer you
said let’s find a way to make it available to other customers and see if we
can sell it multiple times.
Alex: Multiple customers on the same infrastructure.
Andrew: On the same infrastructure, right, okay.
Alex: You get to amortize costs across many customers.
Andrew: Gotcha.
Alex: It’s how a product for what was at the time a small fraction of
the competition because we weren’t doing a you have to purchase a database
just for you and a server just for you, right? On the front end, just for
you, it was spread out. So, we . . .
Andrew: Give me an idea of the world at the time. Who are you competing
against? If a customer was going to track time it was going to be you, when
you got into the market, or what? What were you competing against?
Alex: There were a number of premise based applications some of which
don’t exist anymore.
Andrew: Premise based application means what?
Alex: That’s software which is installed at your office.
Andrew: Gotcha.
Alex: Many of your viewers might not even recall those days but you
would run a server and a database and you’d install a CD from the company
that sold it to you. You’d up date once a quarter and you’ve have
maintenance . . .
Andrew: All this just to track time . . .
Alex: Just to track time.
Andrew: Okay.
Alex: So, there were a number of entrenched players, some of who had
graduated from the client server model, the mini-computer model, you know,
came out of the ’80s. They were all quickly to be doomed to either fail or
go web-based. There were a few competitors that started up with us around
the same time doing web-based time tracking. After all, it’s a pretty
natural thing to go after.
Andrew: Right.
Alex: Most people have at one point in their lives filled out a time
sheet. There were some with a lot of funding. We were a little bit
intimated by that. We were starting out with literally nothing, couple of
guys, a server. Here were these other companies, $5 million in the bank,
going very big. Ironically we outlasted just a whole lot of them because it
was little bit early for the mass market to want this. It was more
difficult to show really rapid growth, really quickly to please the people
that were funding them. We didn’t have such constraints and we sort of grew
more organically. The market really hit it’s stride a bit later down the
road, you know, 2002, 2003, ’04, ’05. It really began to pick up steam.
But from that one customer, we decided we needed a name. One of my inspired
employees picked ClickTime. Great name, great domain, can’t get that kind
of thing anymore.
Andrew: Right, it is a great name. It’s not even ClickTime app the way
a lot of web apps now get their domains.
Alex: Yeah, of course, at the time we should’ve bought another 100
domains but that’s another story.
Andrew: Okay, so you get ClickTime dot com.
Alex: And then what happened was we decided this had enough legs to
spin it out as a separate company. From the consulting company we cleaved
off a couple of people and we set up a new company. We thought, maybe we’ll
get funding, let’s see where this thing goes. People began to call us and
say, hey, we want to do business. We built a marketing website to sort of
show off the name. It was, I don’t want to say it was accidental business
but we meandered into it kind of sideways.
Andrew: Alex, how did these people find the marketing webpage that you
had? You had a marketing webpage that said if you buy our system, we’re
going to give you this software that you install on your computer and it’s
going to be an interface into our stuff, this was the product?
Alex: No, we never productized that bit. We graduated fairly quickly
to a pure web app.
Andrew: Okay, so how did people find the market page that you were
using to sell the web app?
Alex: Well, SEO was pretty easy to do in 1999.
Andrew: So, what kind of SEO did you do?
Alex: SEO, the science of SEO was being written on the fly. I
literally had a college intern immerse herself in what it took to get
number one on Google. It wasn’t that hard at the time, trust me.
Andrew: You know, I was actually listening to Matt Cutch talk about the
guy from Google who fights spam talk about what it use to be like. Can you
tell me in your experience what it use to be like? That world doesn’t exist
anymore, we’re not going to give people useful information that they could
go out and use tomorrow but I think it gives us an idea of what
opportunities you seized on. Maybe make us a little more aware of the
opportunities that are in our world today. What was it like, what were some
of the things you could do back then that today you can’t do?
Alex: This wasn’t black hat stuff, Andrew, this was straight out
white hat stuff. Content rich site of numerous pages linked correctly, I
mean, the question almost doesn’t apply to that period in time. If you
built a decent site and got reasonable back links you went straight to the
top. I mean there was no fighting the next guy, there was no next guy. It
was that easy. Ever since then, the game has gotten more sophisticated.
Today we do SEO like everybody else does, with a lot of time, a lot of
attention, and a lot of white hat tricks, some of which we take credit for
kind of inventing which I won’t go into. Some of which failed some which we
crib off the next, but do you have a choice really. I mean you have to play
the game the way it’s played.
When customers shop for software, they’re on Google, bottom line. They key
in their words, they’re looking for the top few names. They’re also looking
at the ads because the ads on Google signal legitimacy of a certain sort.
Andrew: So, did you buy ads in the early days too?
Alex: Yep, we were the first list of customers doing adwords.
Andrew: Back when it was pennies to get a click and a click could
translate into dozens of dollars and then later hundreds of dollars per
user.
Alex: By the time we realized that we should’ve been selling
everything we own to buy adwords, it wasn’t that good anymore. We had a
hard time believing it was that good. It didn’t seem like it could even be
possible. Then it got not so good pretty quick but there was a window of
time where if you mortgaged your house and put everything into adwords, you
could turn $1 into $5 really well. We probably should have seized on that
more quickly. Today in our space, you know, 5, 6, 7 bucks a click for top
spot, it’s expensive and the returns have squeezed to the dubious point.
Andrew: Okay, forgive me, I’ve got to go back and find out what that
first version was like. I got to the customers but I always want to hit on
what did version one look like that you launched. Or beta or alpha version,
the very first thing that customers could interact with, what was that
like?
Alex: Once we graduated from our client installed app, it’s on your
Macintosh or Windows box, our first web app was a very rudimentary web
form. It had today, your time, it’s a series of rows where you have pick-
down lists for what you’re working, how much time you’re spending. That’s
it for the user. For the administrator, five reports, that was it. You want
more than five, call me in six months. That, we were wondering, what was
the minimum level of utility to make customers want to part with money.
That was it, it was remarkable, we were stunned. What we realized was this
software itself wasn’t the benefit. The benefit was the accessibility.
Track time from where you are, no EBM, no complex ID. Do it from your
house, do it from your client location, do it from anywhere and the good
thing is one of our secrets was we kept that client application for people
who were disconnected. Remember early internet days, you weren’t always
online and for our entire history we have sold a cross platform,
installable, off line component for people who aren’t online. That has
raised our value because everyone else was just doing pure web which is
fine. It’s not the whole equation. Simple web interface, simple offline
component installed, modest number of reports on the web, tons of traction
because it was the whole service. It was the software, it was being 24/7,
it was having great security from day one. It was having great up time and
that all wrapped and a voice to talk to on the phone. It was a tremendous
value proposition.
Andrew: Let me ask this, a lot of time people say that they say it with
pride. Our first version was very simple. But when others go through it or
even we ourselves want to launch something new and we think about that very
simple product we could launch, we hesitate because we say, I can’t just
launch this. The product that I need, the product that’s worthy of my
business needs to be great. It has to be fantastic and then we over think
it. You didn’t over think it and what’s surprising to me is not just that
you didn’t over think it, but that you didn’t over think it considering
your background that you knew what software others were using. You saw
competitors get millions of dollars to create this kind of software. That
you had a reputation for creating good products, that’s why people hired
Mann consulting company. How did you get yourself to accept that this very
stripped down version is the right first version?
Alex: The only way I could accept that was that people wrote checks.
Andrew: But in the beginning, in order to get the check from them, you
put something out there. How did you get yourself to say, okay, this is
enough for version one, I’ll come back later.
Alex: Great question, I didn’t have a choice, I already had one
customer, this is what they were using. There’s no penalty for hanging up
your shingle and going public with it.
Andrew: I see.
Alex: It’s not like we had lots of analysts looking over our
shoulders saying, no that’s not the magic quadrant, I mean no one was
looking. So, we had something, let’s put it up for sale. I was incredibly
that it lacked features, lacked polish but in this business I’ve learned
one thing more than anything else the only truth we see is not what we
think it’s what customers are willing to write a check for. Because that’s
the highest honor you get when customers pay you for your product and if
they like it, guess what, version one is good. Like capital g good because
people will pay you for it.
Andrew: How else is that a customer who pays is better than a user who
gets for free? I can see that it’s a clear indication of what you’ve
created is good because they’re paying for it. Versus if a users using it
for free, you don’t know maybe they’re just playing, they’re not as
committed they’re putting as much. How else is it that paid customers
better?
Alex: We tried a premium model, in the beginning. That was one of the
things we started with, so 1999, 2000, if you were one through ten seats
you were free. If you wanted more features and more seats, you pay. That
was a total non-starter for us. We’re going after businesses of, what I’ll
call reasonable size. A customer that can afford to purchase software. The
free never converted. It only cost us. We had dismal conversions to paying.
The notion of what a paying customer means to us is they are our lifeblood.
They mean to support us so that we may exist in the future to support them.
Users come and go. The level of commitment they have for us isn’t that
high. Paying users demonstrate a commitment. It never entered our minds
that it never mattered to have anything else but paying customers.
Andrew: When you did free, those customers didn’t convert well enough
to make up for the cost? Because the cost in software and the service is
pretty small especially when you have a team of paying customers already
and the free customers aren’t using up that much.
Alex: Well, but they were. We’re always committed to any customer at
anytime gets the service they want. We don’t make you pay for support. We
don’t give you a certain number of support minutes to use up. They use
support. Our product, while it’s simple to use, people wind up asking us
questions that are more about business consulting. How ought I track time.
Which is different than how do I use your product? I have all day long to
talk to customers about that question. I will spend as much time as it
takes. I have people whose job it is to wear a headset and talk to
customers about questions that are beyond how do I use ClickTime? Free
customers, they use the same thing. If they’re not going to convert, they
may be better off with a different product. In the small end of the market,
it’s a race a to the bottom. There’s a lot of free out there now. We have
much less interest in competing for the onesy, twosy market. There are many
good products for that. Once you get into 10, 15, 25, 100, people the
demands of the software change completely but that for us the most fertile
ground by far.
Andrew: Were you finding that the free users used up customer service
more or about the same as the paid, who was using more?
Alex: About the same, I would say. By maintaining a free version that
was a little bit crippled, it’s just that much more Q&A you have to deal
with on what are free users are going to see or not see. You make a new
feature, you scratch your head, are we giving it to free, do we not? It
just, we weren’t that big of a company. It made sense for us to get more
focused and it was easier to focus on people that were paying our salaries
instead people who weren’t. I mean it sounds like a simple answer but the
level of distraction was just, it wasn’t worth it. It wasn’t like there was
this mediocre viral growth in the early days of SAS customers were not that
many even in the free space.
Andrew: Okay, so that was the first version. I understand the first
version is what one customer wanted. You could put it out there, luckily
more people wanted it to. They came to your site, they bought from the
sales page you created. After getting feedback from the first customer and
the new customers, what did you slap your head and say, ah, I can’t believe
we didn’t include that. Or of course we have to include that.
Alex: Certainly for us, we started as a pure time tracking product.
Adding expenses was an obvious choice.
Andrew: Quickly? How soon?
Alex: I think it took us a while. We started working on it maybe four
years into the business.
Andrew: So then, what was the first thing that you had to add after you
publically released the software, ClickTime
Alex: Oh, I mean, things that were minut.
Andrew: There wasn’t any one big thing where you said, oh, of course,
people are going to want an Excel spreadsheet because as much as they trust
us they trust Excel more. Or, of course . . . was there anything like that?
Alex: Yeah, we needed customers to get their data out of ClickTime
however they wanted. Building early data feeds and export formats was
really important. We got our hands slapped pretty hard on that for the
enterprise customers. Doing a lot more with keeping our uptime incredibly
high. Once you start working with a single Fortune 500 company like the
whole world changes for and you’ve got a lot more things to worry about in
terms of uptime, security, backups, reliability. We had a few high-profile
failures where we were offline for hours at a time. Our first version
wasn’t co-located, we had servers in our office. Rule number one, get
yourself co-lo space and do it right. But you can’t do right until you have
the revenue to do it right. It’s not like we were spending a pile of money
on IT stuff. As soon as we could afford to we got a great rack, a good co-
lo and got all the trappings you need. You need a certain customer base to
afford those things.
Andrew: What about this, the other big benefit besides launching
quickly, the other big benefit from launching simply is that you can hear
feedback from customers and be surprised by them or be enlightened by them.
Can you give me a story of what someone said to you that surprised you or
helped guide you? Give me a specific if you’ve got it?
Alex: Sure, within six months of going live we began to have overseas
customers. Now mind you our product was in English only. We never
anticipated doing business overseas out of the gate. Suddenly there are
people wondering how do I enter foreign scripts into your fields? How do I
pay you from overseas? I mean sort of knucklehead stuff and if we were a
more established software company. Out of the gate, we’ve been in five
languages. Right away we had to figure out a way, if we weren’t going to
localize the product at least accept input in any script customers wanted.
We straight to Unicode which is the standard for doing multi-lingual
computing online, multi-time zone, multi-currency, these things seem
awfully boneheaded today if you think about it. They came to us. They
forced us to sort of internationalize in a way that we had never thought.
We thought, oh, three years down the road, no, right out of the gate.
Throughout the English speaking and other language speaking worlds, we got
a ton of traction. That surprised us.
Customers had, used cases for us involving the connection between ClickTime
and other software products. Book keeping systems, HR systems, project
management systems, accounting packages, everything, so we had to learn a
lot about the ecosystem that’s surrounds us. Who are the brands, what are
their data formats? Even today we struggle to keep up with the diversity of
stuff that people plug us into, it’s remarkable. But back then, we had to
figure out. We’re going to go broke supporting 100 platforms, what do we
do? Okay, well, let’s just support lowest common denominators. Common
delimited text format, SOAP web services, just intermediate midpoints that
customers could then take the last mile.
We would actually die supporting everything out there.
Andrew: At what point did ClickTime overshadow the consulting company?
Alex: Great question, it depends upon how you define overshadow.
Andrew: At what point did you say, this is going to be my full time
thing now.
Alex: The day we spun out, I was 100% ClickTime.
Andrew: Really, why? Why so soon?
Alex: It became very clear, very early that to be a product business
when you had been only a service business before requires a huge deep
learning curve. If I can immerse myself in product, product management,
product marketing, pricing, all that stuff, we were going to flame out and
quick. You can not do this sort of thing half-assed if you have no
experience in product. I had no experience in product. Fortunately the
world was very kind and educated me with a lot of severe kicks to the
pants. But if I hadn’t given it 100%, that would be it. I’ve always
maintained my partnership in Mann Consulting and my partner Harold is also
my brother. He has been a very vocal and active participant in ClickTime
but from a day-to-day management perspective, I’ve always been 100% this
business because it demands it of me.
Andrew: Okay.
Alex: I learned I was a product guy along the way, you know, a closet
product person and the service business couldn’t compete for me with the
level of business.
Andrew: Yeah, I would rather be products than service because you solve
a problem with a product and it just keeps on solving that problem in the
future for future customers. With consulting. . .
Alex: My wife once told me if you can make money while you sleep,
you’re in the right business.
Andrew: But what about this though, product businesses is also, it’s
riskier. Especially when Mann Consulting was doing well, you had customers,
you had a track record and this software thing, who knew where it was
going? Why were you willing to take that risk?
Alex: It required these moments of early confidence building to say,
you know, go on, you can do this.
Andrew: How do you do it? How do you build up confidence in the
beginning when there’s no real reason around you to have that kind of
confidence?
Alex: Metrics are big part of it, you’re looking at the bottom line,
you’re saying, how many people logged in today, how many people logged in
in the last hour? As long as that number is moving up and again they’re all
paying customers. That’s enormously satisfying. Or you close your first
Fortune 100 customer and you just fall all over yourself saying this can do
it, this can be a business, we can do this. The . . .
Andrew: But before you moved, day one, as soon as you launched
ClickTime you moved into it. There were no metrics at that point, there
were no Fortune 1000 customers but something about you said, I’m going to
do this, I’ll make this work, I’ll take the risk, what was that?
Alex: I think it was just this notion that, this, I knew there would
be an inevitable transition of everything like ClickTime and all related
apps to the web. I knew we were ridiculously early, I knew we could make a
million mistakes, and trust me we made most of them, and still come out
ahead on this. I mean it was just so patently obvious. I didn’t have this
sense of, this is a tremendously risky endeavor. It was success is
inevitable is we don’t give up or screw up so badly. You just have to have
that kind of belief. As long as those reinforcing pieces of customer
feedback come before you start falling into that moment of despair, you
just get pushed on to the next bit.
We were lucky, we sort of could connect the dots of early successful
moments even during the recession of ’01 and ’02 which was not a pretty
time to be in business. We never had an existential crisis. We were
incredibly lucky because you hear about a lot of businesses where they were
down to their last nickel or they were on the airplane to give their final
pitch and that was the moment it was do or die. I don’t know that we had
those do or die moments. Maybe that’s because we didn’t extend ourselves
that much. We didn’t put ourselves out on a limb. Maybe that’s why it took
us ten years to get here instead of three.
The way we did this was, maintain a focus on build a better mousetrap, you
can always improve your product. You can always call another customer.
Again, the costs of running the business are so modest that even modest
successes fuel you to the next level.
Andrew: What about the period when you earned enough money that it
covered your salary, how long did that take? I feel like that’s a, whew, we
made it moment.
Alex: I think the rule of thumb in this business is pay yourself
first. I didn’t do that. My number goal was I want to be able to pay retail
for good talent. I’m in San Francisco and that’s not an easy thing to do.
The heroic moment came probably 2003, 4, where I could begin to hire people
as good as anybody else can hire. Before that we were just getting by on
programmers in their spare time, they weren’t top of their game. They were
all incredibly helpful and I don’t, this is not to begrudge any of them but
they weren’t at the top of their field. We could write software that was
pretty good. We couldn’t do it quite efficiently as we should have. We
weren’t the technical masters of the game. I would say within a couple of
years we could begin to afford great customer service people, product
management people. I would say 2004 or 5, that’s it no excuses, we’re
getting good developers, that’s it. Then I could say, only then I could
say, I’m going to pay myself more than a very modest wage. Because without
really good minds running the software, I have nothing to do that, the rule
of thumb is you write the code, you sell it a thousand times. But if you
have no one to write the code well and quickly, you can’t start selling it
a thousand times. The intellectual property we build is the sole asset.
It’s everything. Hiring great developers was job one.
Andrew: You said earlier, I’m looking at my notes at things I wanted to
come back and talk about. Mistakes, you didn’t have big setbacks or
existential crises, but a mistake, could you give me one big mistake that
you made?
Alex: Having twins.
Andrew: Why, was it the period that you decided to have kids that was
tough? What do you mean by that?
Alex: The concept that mere mortals can build a business and build a
family concurrently, it’s for people with more physical constitution than
I. How little sleep can you get and come to work and run a good business?
Are you a family man, Andrew?
Andrew: I got married about a year ago and I wonder what will happen
when I have kids. I keep hearing people like you say you don’t get any
sleep.
Alex: Some people are remarkable in that they can have three hours of
sleep and come to work and punch it.
Andrew: I’m not like that, I don’t know how people do that on three
hours.
Alex: You hear Jakes and [inaudible] talk about, oh, I had a terrible
night last night, but he’s there everyday doing six businesses and going
crazy.
Andrew: I’m also hearing him say that he’s exhausted too now.
Alex: Perhaps, and maybe there’s, he’s being fueled by God knows
what. I am not that guy. It was very challenging for me to be in the moment
where the business was just getting it’s real legs. Three, four, five years
into the business and here I’ve got this family obligation. I’m the kind of
guy who wants to come home and see my kids. Mixing those two is hard.
There’s a reason that 25 year olds start companies, I didn’t fully
appreciate that. Can you call it a mistake? Not really, but I put demands
on myself that might be unrealistic to meet. I don’t think I was as present
a leader as I had to be for a period of time.
Andrew: How did that impact the business?
Alex: I think all good businesses need strong drive from the top,
imperatives must be created. We have to do our Quickbooks interface and
ship it by this date. We have to be adding this feature. We have to be in
this trade show. We have to be doing this, if I’m not out there setting the
mandates my team is very good. They’ve all got independent priorities.
Product people want to do product things. Developers want their things.
There’s kind of a Darwinian action here where people tend to fight out
their agendas. If I’m not setting the agenda, people are doing well meaning
things but possibly in separate directions. There has always been a certain
amount of competition here for what do we do with the next dollar? Product,
marketing, web site, . . .
Andrew: How about one example of going in the wrong direction? Did you
add something to the product that you shouldn’t have? Go in a direction
where it confused the customer?
Alex: We tried some sort of random weird distribution deals. We were
approached a division of O2 in the UK. They wanted to do a business suite
running on the Blackberry for customers in the O2 network and they wanted
our piece to be the time and expense tracking piece of that network. It
seemed really interesting and exciting, that’s certainly a big name that
came knocking.
Andrew: Sounds like it right now, what happened?
Alex: It was a total non-starter. We invested a fair amount in
building this interface out, customizing the app, doing the contract and
the deal. You don’t do a deal with a big outfit like that without a lot of
lawyers. It was a real non-starter. We should’ve probably looked and seen
that this was really good on paper but the product would really not be that
useful to people. Was one of those suites where they put a little of this
and a little of that, call it a single brand and expect it to be fabulous.
It goes against everything we knew but we were a little bit seduced by
that.
I’ll tell you another big mistake we made. We overestimated the early
competition. Those early funded start-ups I was telling you about that were
in our space. I thought for sure they were going to crush us. I was running
scared. We held back on some of the more aggressive things we could’ve done
because we didn’t want to get drowned out by louder voices. In hindsight,
these guys were going to perish. It was hard to know that at the time but
we could’ve come out a lot stronger at a time when there was a lot less
competition. We would’ve gotten a two, three year head start. That taught
me, I don’t care how big the other guy looks, how much money the other guy
has, if you have confidence that you built something good, just go with it.
At the time I didn’t know that.
Andrew: I’m trying to think about where I want to take this next. This
is a little bit of a side track but I’m curious about it. Web apps are like
annuities, they just keep paying. Can you talk about that? Because we talk
a lot about companies like Twitter that have massive audience size and the
benefits that come to that we’re all very aware of. The benefits of
charging and the idea of annuity that you get when you create a product
like yours isn’t something we hear enough about. Tell me.
Alex: The annuity business, the biggest advantage is you’re not
limited by what you sell this month or this quarter. What you sell is
merely atop what you already sold. If you can increase customer longevity
with you, if your expected revenue per customer will go up, you can pay
more to acquire and service that customer. Our average customer longevity
is well over two years now. That number increases because we have customers
who have been us for ten years. The longer we exist the longer our average
goes up because some of the customers remain with us. Our average churn is
something less than 5% per year. We sit atop a pretty big pyramid of
revenue generating activity. We commit ourselves to keep those people
incredibly happy and if they leave us we sure as heck want to know why.
Andrew: How do you find out why, that’s a tough one.
Alex: We ask them every time we get. If a customer were to cancel, we
don’t let them get off the phone unless they explain why. The form they
fill out makes them explain why. If they fail to fill it out to our
satisfaction, I will call them personally until I find out why.
Andrew: What have you learned from doing it that way?
Alex: We learn all the reasons customers leave our product, of
course.
Andrew: Can you give me an example of one idea, one reason that you
didn’t know of before this.
Alex: It’s more the proportions I guess than the reasons. Customers
leave for a number of reasons. A good example customers are acquired. Their
businesses are acquired by a larger business. That larger business has in
place a standard application for doing time and expense tracking. The
management of the acquired firm often leaves and the people who are left
just go with that. We started to think about how do we fight that? How do
we try to get in with the acquiring entity? We now have a slightly more
evolved process of quickly finding out who do we talk to? We read the
trades now to find out who’s getting acquired. So, before they even call
us, we built the flagpole and find out who to deal with. That’s one thing.
Customers sometimes out grow us. They need more capabilities than we have.
There we’re learning well what we ought to be adding to our products to
avoid the customers out growing us. We love growing businesses. Think about
it, you sell a customer 15 seats, they’re going to grow to be 200 seats.
You get all that growth without selling them again. That’s like selling a
bunch more of 15 seat customers for nothing. You have to make sure they can
stay with you in that growth. That means you have to find out why did they
out grow you. Specifically what part of your act cracked when they hit 50
people, 100 people and that’s what you fix. Then the next customer that
goes from 15 to 200 grows right through with you. That’s fantastic.
Customers leave for reasons of business failure. This is one that we didn’t
fully expect. In the recession of 2001, 2 and then in the most recent
downturn we wind up with customers who evaporate. One day they’re 80 seats,
next day they’re chapter 11. You’re caught kind of holding the bag. We’ve
learned how to have much greater insight into learning about, again by
reading the press, who’s in trouble, who’s about to go under. Can we
foresee that? Can we then ring in on collections to make sure we’re not
stuck holding a three month debt on that. Can we get in touch with them and
maybe lower the price? Do something to make sure we don’t lose this account
and if we do lose to not have a huge debt go with it.
Andrew: When you mentioned earlier that when a company gets acquired,
you want to be on top of that, is that so you can sell to the acquiring
company? That’s so you can say you might have different. . .
Alex: Absolutely.
Andrew: I see, okay. So, that’s a great opportunity to go to a bigger
customer and say sign up with us or at least consider us.
Alex: If I have an 80 person customer, all 80 of those people might
get flung to different divisions in that larger company. All 80 of them
might have our brand at their fingertips when they want to know, hey how
are we tracking time over there. We have to make sure that each one of
those 80 are out there selling for us. Which means if they hadn’t had a
good experience with us they’re not going to, end user experience is really
important, even if they’re not the decision maker.
Also, that acquiring company has different divisions doing interesting
things. Can we identify which of those divisions or teams resemble a
typical ClickTime customer. We don’t necessarily work with manufacturing
but we do work with engineering. Who’s doing engineering there, how can we
get through those people. It is challenging but we find ourselves at this
moment in time where we’re still being used. We have an x number of weeks
or months until they re-evaluate what they want to do. In that golden
opportunity window, we have to figure out who’s running the show, who are
the decision makers in this new entity, can we reach out to them? Can we
identify who resembles a good ClickTime fit.
Andrew: Privately you and I talked about you have some friends who have
taken on venture funding. How did they compare their situation to yours,
what do they make of your situation?
Alex: It’s funny, I am fortunate that I have a lot of friends who do
other internet start-ups and other tech start-ups and a lot of them are
serial entrepreneurs who had great exits. Some of them are kind of waiting
for their first exits. I think they all share a certain envy of what we do,
not so much because of the margins or anything about the possibility of
exit but it’s the self determination. I don’t know a single entrepreneur
who’s taken funding who hasn’t moments of either being incredibly
frustrated with their funders pressures and imperatives on them or had a
firm disagreement where they want to take the business and where the money
wants to take the business.
For example, when is it a good time to exit and for how much? That’s not a
decision entrepreneurs get to make solo. I have a huge amount of
flexibility in how I want to do recruiting. How we want to do all kinds of
decisions here. I’m not on the road constantly dealing with the next round
and board meetings and that kind of thing. Now I’m equally envious of their
9, 10 figure exits, so it goes both directions. This is a equally viable
but different way of doing the tech business. A lot of them never have the
opportunity or maybe the courage, I don’t know, to do a business like this.
I would say it takes a lot of courage to go and ask for 10 million bucks
from somebody, different kind of courage. It helps me get a great deal of
perspective always associating with people in funded start-ups help me
understand what we either want to emulate or avoid from that model.
Andrew: Is there one thing that you want to emulate that you have? One
big thing that you can talk about?
Alex: I’m sorry, I want to emulate a venture funded person.
Andrew: Yeah, You said there’s certain things you want to emulate and
certain things you want to avoid.
Alex: When you have a funder, someone’s keeping you honest all the
time. Every, we’re holding a dollar, there was a period of our business
where we had surplus cash. We literally couldn’t articulate how to put it
to good immediate use. When you go out shopping for funding, you sure as
heck better have any amount of money you get to immediate good use.
Otherwise, why do you need it? That kind of imperative is actually healthy.
You train yourself to say, if you’re holding a dollar, quick what do you do
with it? How do you spend it? Turn it into two. Let’s face it we’re not an
investment company. We’re not a real estate company. Our job is not to
invest our money in the stock market. Our goal is to invest it in this
business and put it to effective use. If you can’t say how you do that, you
have to go back in your office and close the door and come up with a good
answer. That kind of reflexive, know how to testify to your VC what you’re
going to do is a great skill. Even if you just say it to yourself because
it forces you to be decisive and on point all the time about what you’re
doing with your money.
Andrew: Even having a co-founder helps that way, a business partner. Do
you have someone who’s a co-founder of ClickTime is that your brother?
Alex: Yeah, it’s Harold. He keeps me incredibly honest. He calls me
on all my BS. If you don’t have someone like that in your life, you better
have a board who’s going to call it like it is. Fortunately a blood
relative doesn’t hold back.
Andrew: Does he own a piece of ClickTime or is it 100% you but you co-
own then?
Alex: This is a family operation, so he and I are.
Andrew: So, it’s the two of you, both of them are together. Why is he
the one that emailed me about you? Why didn’t he email me about himself or
why didn’t you email me about you?
Alex: I think Harold is, what we say, the Aaron to the Moses? He’s
the good spokes guy.
Andrew: So, why didn’t he want to come here and do the interview
himself why did he suggest you?
Alex: Because I think your listeners and you are interested in some
of the day to day nitty-gritty details of the business. While Harold is
incredibly involved, it’s more at a board level. The mechanics of running
the operation, nobody sees it like I see it. I want to be able to furnish
you with whatever the details or the anecdotes are to show other founders
how to do it or how I did it. It has to be incredibly authentic.
Andrew: You nailed it with what I look for, I look for those details, I
look for specific examples of what you launch, what feedback you got, and
how you call up customers. What you learn when they exit, yeah, I love
that.
Alex: Where were you ten years ago when I needed you?
Andrew: What would you have done with me ten years ago?
Alex: Listen to the . . .
Andrew: Oh, when you were building the business. I would’ve killed for
this, when I was ten years ago building my business to have somebody go
through these kinds of details. Even it’s not directly related, it’s so
interesting to hear and so motivating to hear how someone else runs their
business and you would just naturally start to do it.
Alex: But then again, if I’d known too much I would have never done
this. Like you said this concept of the risks, the obstacles that lay
before you, if I knew all that stuff, I never would have done this.
Thankfully we were naïve. How many people tell you that being naïve is the
best thing for starting out. We were somewhat naïve in this and it was
useful. I meet some early people like Joe [Slosky’s] blog, I wish it were
still being written. Just incredibly helpful stuff, great motivation, I’m a
100% disciple of his. Of all the thinkers in business he is the absolutely
closest to the way we think.
Andrew: Yeah, I admire so much of what he’s written I wish he could
continue to write. But you know what, I’m watching what he’s doing with
stack overflow and I appreciate that he needs to focus on that.
Alex: He’s had a great second chapter, act two. I think at some point
we need to decide when it’s time for our act two. I intend to take a lot of
that as inspiration. He’s not like an incredibly charismatic guy, he’s not
going to run for president. But to see him build such a great organization
just on smart, common sense, and he’s very revealing about what he’s done.
I probably should have done more blogging in my early days when people
cared more about how you do this kind of thing.
Andrew: Well, it’s not too late, people do still care about this. I
know you’ve got experience and the credibility and the right to be able to
talk about this where there are a lot of people who start day one and they
say I’m an entrepreneur, now let me teach everyone else how to be an
entrepreneur. They’re out there and it’s frustrating when they are and
you’re not. I hope you do more of it. Let me ask you this. First of all do
you have blog where people can go and follow up with you and then I’ve got
an experiment you and I are going to try. Is there a blog?
Alex: There’s a company blog at blog.clicktime.com there’s not a
whole lot of meat in it. It’s more product, more for our customers and
perspective customers. I think I’ll put more of me in it. I think you’ve
inspired me.
Andrew: I hope you do and I hope people see it. As a bootstrapped
entrepreneur what I like about you, as I said at the beginning of the
interview in fact before we started, I said, what can I include in this
interview to make this valuable for you? I ask this of a lot of
entrepreneurs. You said, you know what Andrew, I’d like to try to give
people a discount code or something to see if we can get customers. I said
I respect that, let’s give it a shot. Now, I don’t know how many people are
even listening to us at the end of this interview. Maybe some people said,
I’m going to read it, I don’t like Andrew’s voice. Maybe some people have a
problem with the video, I don’t but we’re going to experiment. I don’t know
how many of them are going to go over to it.
Is there a page on ClickTime that we can send people to that you give
people some, what kind of discount can you give them first of all?
Alex: All right, so we’ll spin up a page at ClickTime.com/Mixergy. On
that page we’ll do a couple of things. A comment box for people who have
questions about me or the company or this interview and that would be a
great place to collect it.
Andrew: That’s very good, yes, so a way for people to say hello and to
follow up with and ask questions or who knows what kind of feedback they’ll
give you. I love for that because a lot times people email me and ask me to
contact the interviewee now they’ve got a direct channel to you. What else?
Alex: Then for people who want to use our product to track time and
expenses online we’ll put up a discount code. We will, we’ll do 50% off
accounts, we’ll do that for the life of the account.
Andrew: Fifty percent off for the life of the account. Your annuities
going to get chopped in half for my audience.
Alex: We’ll limit it to 20 seats or fewer, more than 20 seats . . .
Andrew: I don’t want you to take to big of a hit on this. Why don’t we
limit the number of days you put this after the interview or the number of
people. Maybe that creates some urgency and get people rushing to the site.
You want to say no more than 20 takers or something like that?
Alex: First 100 takers.
Andrew: First 100 takers, awesome.
Alex: For the life of their account, I have no problem with that. We
do discounts in a lot of ways, we do promotions. We also give non-profits
that discount any day of the year, we’re big proponents of that. I hope
your listeners will take advantage of our product, say good things about
it, give us great feedback which is the most important thing. I think the
people that listen to this show are savvy and are going to have great ways
to give us feedback that we might not get from other customers.
Andrew: I’m anxious to see how this works out. I appreciate you doing
that. I appreciate the audience listening and following through with this
interview. Talking to Alex Mann, founder of ClickTime.com. Alex, thanks for
doing the interview.
Alex: My pleasure, Andrew, thank you.
Andrew: Cool, thank you all for watching, bye.
Andrew: All right, I’ll send this to editing right now, we’ll get it up
on the website next week.
Alex: How many days do I have to get this page up.
Andrew: You have a few days, I think we have Monday and Tuesday
covered, so Wednesday, probably.
Alex: All right, we’ll be ready.
Andrew: All right, cool.
Alex: Quick question to you, you do a lot of this, what feedback do
you have from it?
Andrew: I thought you were very good, I would have steered you if you
weren’t. Let me see, the only — I like that you had a lot of specifics, I
like that you were open, the audience relates to it. The only thing that I
wonder if you could add is more stories. Like specific examples because
you’re good at giving specific examples and if you were to tell a story I
know that people would remember them more.
Like if you can take, I’m looking at my notes here, any of these broad
ideas will work. For example, the annuity, you could say that I had this
guy who, year two, when we started the company, he came in, he found the
website. He called me, I talked to him for five minutes on the phone, I
walked him through the process, the guy didn’t understand even what a web
app was, he signed. I looked earlier this month, he’s still a customer. You
want to understand annuity, this is what annuity is like in a business.
Sometimes attaching it to a story makes people remember it.
Alex: All right. Can we do the whole hour again, can we start over?
Andrew: I’d love to have you on again in the future.
Alex: I’d love that too. I really appreciate it.
Andrew: Thank you for doing it. Bye.
