How do you come up with an abundant, endless supply of profitable ideas — more than you could ever pursue?
Dane Maxwell is back on Mixergy and he has the answer.
Last time he was here Dane talked about Paperless Pipeline, the profitable transaction management software he bootstrapped for real estate brokers.
I invited him here to talk about his system.
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Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. How do you come up with an abundant, endless supply of profitable ideas, more than you can ever pursue? Dane Maxwell is back on Mixergy and he says he has the answer. Last time he was here, Dane talked about Paperless Pipeline, the profitable transaction management software that he bootstrapped for real estate brokers. Since then, Dane created TheFoundation.io. A program through which he taught entrepreneurs how to create web based companies out of thin air even if they failed in the past. I invited him here to talk about The Foundation and hear how he’s been building these businesses and helping others do the same. Dane, welcome.
Dane: Hey, Andrew.
Andrew: Give my audience an example of what’s possible. If they listen to everything that you share here, if they follow all the stories and all the lessons that you learned along the way, what’s possible?
Dane: Most of the people on Mixergy have already heard my story. If they haven’t, they can go back and watch the Paperless Pipeline one. Then go back and watch the Lifestyle Info [SP], Products one. It’d be more inspiring if we used one of the most [??], outlandish examples in The Foundation. This guy is a 55 year old chemical engineer and he’s been a chemical engineer most of his life. He’s tried and started and failed companies most of his life. He said he’s even spent as much as 100,000 or 200,000 on different failed ventures before. He was about ready to give up and resign to being an employee forever. In fact, this is actually word for word, the email he sent me when he was rejoicing over having a successful business now. What he was able to do with this process is he was able to come to me without any idea of what to build. Without any development, or software experience.
In fact, he can barely even use Facebook. He’s probably watching this. I hope he’s OK that I said that. He’s also fairly awkward to talk to on the phone. He sounds very shy. He doesn’t sound authoritative on the phone, at all. Authority doesn’t come from how you sound, so he was still able to be successful. Despite all these odds, he was able to create a product for private investigators that helps them with their reports that they have to use and submit to court when they’ve done investigation on criminals. He created this product without any market when he came to me. He had no idea what to build. Nothing. He literally had nothing but desire. Just with that desire, he now has a profitable, successful software company called SherlockDocs.com. He’s probably one of the most inspiring examples [??] about being like the 55 year old outcast in the group.
Andrew: He had a little bit more than desire, from what I understand. Maybe, approached the program with just desire, but one of the things we talked about before this interview started is the process that you took him through, and the process that you went through yourself, and the process that you took others who went through your program, The Foundation, and the one that you’re going to teach future entrepreneurs who go through your Foundation. I say that because I want to hear that process in this interview. I don’t just want to hear about his desire, because a lot of people have it. I want to know what you did to take this guy who didn’t succeed before and help him get some traction and help him build a business. First thing you said, what I love about you is you always send me notes in preparation for our interviews, and you said you’ve got to pretend that you put on a pair of green idea glasses. Before we get into the specific steps, tell me what you mean by that.
Dane: I wrote that paragraph, I copy pasted that into the notes. The green glasses are just like the way that guys like me view the world, like, if I’ve got the glasses on, for example, and I’m driving down the street and I use this example with the foundation members before, and I look over at a park bench and the park bench says Advertise Here. If I don’t have the green glasses on, maybe I’m like, “Oh, there’s another silly ad. Those things don’t work.” Or maybe you don’t even think anything of the ad because you just look at it and look away because you’re thinking about what you’re going to have for dinner or something.
But when I’m looking around and I have the green idea glasses on, I look to the left and I see that bench and I see a number and it says Call to reserve and request an ad and I immediately think in my head, how could I make this park bench owner’s life easier faster, more fun and profitable?
And when I’m thinking that, with these glasses on, I think, oh wow, wouldn’t it be great if you never had to talk to anybody, if it was just a web based platform that people could go on and submit their ad and they put a credit card and the ad would run on a bench for them and the average park bench owner has probably 50 park benches so he’d be able to pick the park bench, pick your ad. So just a simple system for park bench owners and I have not pursued that idea. That idea is fair game and it’s fair game because I have an abundant endless supply of ideas. I’m not worried if you take that one. So that’s what the green idea glasses when you have them on and you can have those on when you learn the skill of idea extraction.
Andrew: I see. All right. That is a better way of looking at the world than looking around and saying, “What is that guy have to advertise here?” or “Why do you keep telling me about your problems?” or “Why is this problem getting in my way?” You keep instead saying, “Where is the opportunity? Where is the revenue here? What is the business opportunity?
Dane: I wanted to say, I don’t know if we go to what’s the opportunity but more like what’s, like you like to say Andrew, the words that you want to make famous, find the pain. And those are beautiful words. So what’s the pain in that park bench? It’s the guy that has to answer the phone and go back and forth so it’s like what’s the pain in that process and how can we make that faster and more fun, easier and profitable?
Andrew: I see. So you’re not just even looking for ideas. You’re looking at where is the pain that they have? Why that? I understand why I’ve been saying over and over find the pain. Because I’ve been hearing it in my interviews. Sometimes clearly. Sometimes it’s like dig through the story and read between the lines. I can see that entrepreneur build their businesses by finding their potential customer’s pain. What have you found? How have you discovered that?
Dane: I think most of the people that have internalized this have just failed miserably at one idea that didn’t really solve a painful problem. It’s more like a vitamin. Instead of being insulin to a diabetic, it’s was a sugar cookie. And like I lost $30,000 building clientlunchbox.com and that sounds like a lot but just $3,000 a month and ten months later you’re like ‘Oh, my Gosh. I just spent $30,000′ and you get that education. That’s the best education I ever had.
And so I think it was going through the process of building ClientLunchBox and not really thinking about what it would be cool to build versus finding the pain. And plus when you build stuff that solves pain, the more pain the more money but what also happens is all of your marketing falls into place. So if you’re stop trying to convince people to buy products, it’s likely that you’re not solving a big enough pain. Because if it was a big enough pain, they would be pissed at you if you didn’t try to solve it.
Andrew: I see. What was that idea that you had that didn’t take off?
Dane: That was ClientLunchBox.
Andrew: ClientLunchBox. What was the idea behind it?
Dane: The pain for realtors was their contact database software was too complicated. So instead of going to the market that actually used the database software, I went to the market that didn’t because it was too complicated. And then I come to find out that those agents don’t even want contact database software in the first place because that holds them accountable and they don’t want to be held accountable. So what I should have been doing is stop solving the pain for agents that actually use a current product as opposed to people that are waiting for product to be better to use it. Does that make sense?
Andrew: You know what? It does but I’ve got to say that if they’re not using it, it does seem they have a problem. It does seem they have a pain. That they still want to keep track of their potential clients but they don’t want to be held accountable. Isn’t that a pain that’s worth solving?
Dane: You know what? I don’t necessarily like to try to help people accountable. I’ve done this with real estate brokers and I could riff on a real good example but I want to touch on lunchbox. At lunchbox I ended up selling it on flip for like $3,000 just to settle off with the investors that had invested in that. And what I did was, you know that’s the first time I have heard cops sirens in Boulder, Colorado? What I did is I didn’t really go into the pain of the agent. I built something that I thought would be cool. Instead of really trying to define the pain clearly, I just started going into the solution and maybe riff on that a little bit later. Is that more clear?
Andrew: A little more clear. Yes.
Dane: Let me make it concrete then. In the real estate brokers’ space, I sell a recruiting system and then a transaction management system. If I don’t touch paperless pipeline, the transaction management system it grows automatically. I can’t stop that from growing. People would be pissed if I took I took it away. OK. The recruiting system, if I stop marketing it, it goes down in business. Ironically, recruiting is the most important part of a business for a broker, but they are not held accountable to make that a priority. Unless they are at the top 5% to 10% of successful brokers. In contrast, every broker has to do transaction management, otherwise they do not make money tomorrow. Otherwise, the rates just do not make money. They have to do transaction management, so they are forced to be accountable there. I do not want to try to create accountability. I want to go into spaces where someone has to use a software everyday. Is that more clear?
Andrew: Yes. All right, let’s get it even clearer by seeing how this process works. Let’s start with the goal of it, and then move on to the skills that people need to have to use your system, and then the process that they will go through to implement it. What is the goal? Let’s start with that.
Dane: The goal with the idea extraction is to be able to be able to define the problem.
Andrew: It is not to come up with a good idea?
Andrew: It is not to come up with a profitable idea?
Dane: No. Well, ultimately that what comes out of it. It is the order that it gets done in that differentiates a wantrepreneur from a true entrepreneur. You want to really dive in, to the defining of the problem. The solution will come later. Just let that happen magically, because it will happen magically if you define the problem clearly.
Dane: The point is to find the problem, better than anyone else. Better than the competitors, better than the customer, and better the developers or experts that you will be hiring. By being able to do idea extraction correctly, you will define the problem better than anyone else, which means that you can then be the leader of the company, because you are the one that understands the problem clearly. That is really the one skill that you need to start a company.
Andrew: Can you give an example of an entrepreneur who has defined the problem well, and as a result was able to build a successful profitable business.
Dane: More than I can count.
Andrew: Give me one then. I just want to see this a little bit more clearly.
Dane: For paperless pipeline, what I asked real estate brokers in order to find the pain were: “What are some software programs you have tried in the past, but you bailed out on, because they were too complicated to use?”, and then they said transaction management software came up over and over again. I had just got done spending $30,000 on a product that was already complicated and uncumbersome to use. Now I actually knew how to build a product, and take it from complicated and uncumbersome to simple because I did it terribly. Once I found transaction manager software over and over again, then I went in and I said, “Well, what is the problem? What happens here? How do agents turn in paperwork? What happens when they turn in this paperwork? Does it get missing here, or does it get missing here?” Then I create an entire flow chart, of how paper flows through a real estate office, and then all the problems that get encountered along the way in this flow chart.
Andrew: I see.
Dane: I could put a link to the flow chart, but I do not know if that would be helpful. As soon as I had the flow chart created, and I define the problem, I show that to a real estate broker, they look at it, and they do like, “Holy shit”. “This is exactly what my problem is”. “Do you have a solution for this?”
Andrew: Got it. That is what we want to get. We want to define it so clearly that they see it and they say, “Solve it. Yes. You just identified what is wrong.”
Andrew: You say, we need a certain number of skills? What are those skills and how do we develop them?
Dane: Let me see over here. With idea extraction, what you’re doing first is…
Andrew: By the way, sending notes over is helpful, because we both know where you are going with this. It also holds you a little hostage, because you feel like, “What did I just promise Andrew I was going to talk about here?” Then you have to go back in and look at the notes. So I always tell guests, even when we go through pre-interview and we give them an outline of where we are going with the interview, I say, “Just acknowledge the stuff on the screen, so that everyone knows what we are up to here.” That you have been prepared to do this interview, and that we are not just winging it. You got yours on the screen, and I thought I saw you go over to them.
Dane: Yes. This is mostly unconscious for me, so that is why I have to look at it. First, with idea extraction is you ask the question. Second, this is where people screw up. They think all they have to do is ask a question, and the answer is going to come. That is not a good way to do it. In fact, you will just be frustrated. Second, is listening without any of the mental chatter that is going on in your mind. If you are sitting across from a business owner, and say you are 20 years old and never started a company, and you are asking them what their pain is. Then they are talking to you, and in your head you are like, “I do not know why they are listening to me? I am just a college kid. I have never started a company. What is my next question going to be, or how can I make this guy like me?” Any of the stuff that goes on in your head is going to prevent you from listening. You need to listen without that mental chatter.
Dane: Third, is most important. After you ask the initial question, “What is the most painful part of your day?” is a great question to ask. When they answer it, the next two questions are super critical. This is something that, this is where the gold lies. These two questions, once you ask these, you will find pure gold everywhere. The next two questions are, “What else?”, “Tell me more?” Then you say, OK great. What else, tell me more? What else, tell me more? Until the person is like, I can’t think of anything more to tell you. And by the time you ask that three or four times, your going to get to stuff that is golden opportunities. Problems that exist on a very deep level that need to be solved in that business.
Andrew: All right, the fourth, is finding the problem better then the customer can define it themselves, as we talked about before. So, let me break this down. The first skill is asking the question, why can’t I just go to a potential customer and say, “What’s bothering you?” Where’s the pain in your business? What’s the frustration?” Wouldn’t they then identify the number one pain, the one that’s so top of mind that they can’t help but shouting it out at you. And then, you go out and you solve it.
Dane: They can. It’s very uncommon.
Dane: You get a one in ten chance.
Dane: Well, the what else, and tell me more is super important here because, if you talk to people that are like, the president of the Association of Realtors, and they happen to be a realtor, and you ask them they’re going to be very on point. But if you’re asking just like every average day person, the chances of you getting a really clear answer back are not that high. Now, you can get that back, but what’s more important is saying, what else and tell me more. And you just ask that until you get to a layer three or four idea. The first answer your typically going to get back when you ask that question, Andrew, is like, the all in one, all encompassing software product that does everything on the planet and that doesn’t do you any good because it’s expensive to build and people say they want it, but then when you try to sell it to them it takes them a year to implement because it changes their entire business. The last thing you want to build is a layer one idea. Layer one response is the all in one software. You want to keep digging, what else, tell me more, until you get to layer three or four.
Andrew: I see. So, if you ask me what my big frustration is, or what’s my pain here at Mixergy, actually, I might just tell you what today’s frustration is. I can’t remember what my overall frustration is because today’s frustration is so big. So you wouldn’t start off with that. What would you start? What’s a better question that you might start off with to get at what my real frustration is?
Dane: Well, I’m actually, I might dive into that one with you. If you want to do that one right now.
Andrew: Yeah. Go for it.
Dane: So. Yeah, what’s the most, what’s been the most painful part of your day today?
Andrew: Today was researching a guest.
Dane: What happened?
Andrew: He was a guest who I felt a lot of people in the audience knew his background and even though we had pre-interview notes on him and I knew exactly where we were going in the interview, I was afraid that I would miss something that someone in the audience knew and was important to them or miss a great part of his life or miss something that he was hiding so I spent about an hour researching it.
Dane: OK. How long do you usually spend researching someone?
Andrew: This point the team does the research and I might spent 20 minutes familiarizing myself with the research and just digging in to make sure that they didn’t miss something.
Dane: But you did it this time?
Andrew: Because he’s the founder of Flash, the father of Flash. He and a co- founder created software that became Flash.
Dane: OK. And so how did you know when you had a good enough research done?
Andrew: It was two minutes before the interview. So, I couldn’t go anymore.
Dane: OK. In this case, my mind is already jumping to wanting to provide a solution or a suggestion. Which is, I didn’t even consciously think of this, it came up subconsciously, it was, and this might not necessarily be a software product, but it could just be a systems checklist of all the different places that you had checked for research and all the different facts you want on someone to consider that research to be complete and accurate. Do you have anything like . . .?
Andrew: So now you jumped to the solution instead of identifying the problem.
Dane: Correct. So this is a difficult thing to try and stay at, at the problem. So this is the current solution that I have suggested. We have a problem defined as, when important people are on Mixergy, you want to make sure that you announce them and do the research on them correctly so you can make the best interview possible. Does that sound right or am I missing it?
Andrew: Can you say that again?
Dane: Yeah. I must not have done a very good [??]. Let’s define the problem. Let’s define the pain. You spend more time than you’d like researching an interview guest because you don’t want to miss anything important.
Andrew: That’s it.
Dane: That’s what’s in my head, and with that defined thing, we’ve already come to the solution of one potential solution, but we’re at the problem of research. We can go a bunch of different ways. You could have a crawler built that we put a name in and it spits out all the research and comes back to you from all the sites, but that’s one. We want to stick with the problem because you see how my mind is jumping to solutions. Another way we could solve this is, the simplest way would probably be, ‘Do you have a systems checklist, or a sheet, of the sites people should go to? Or all the facts I should collect about someone for that research to be considered complete?
Dane: Do you feel like if you had that, that would help solve that pain?
Andrew: Yeah. If I had a checklist for the researcher that showed every part of the process that I go through, it would help.
Dane: If you had that process, would you have used it yourself?
Andrew: Ideally I would have given it to the researcher.
Dane: How much time would that have saved you today?
Andrew: That would have saved me a good hour.
Dane: How much energy, or emotion, [??] would have saved you?
Andrew: A whole lot of uncertainty.
Dane: What would your day have been like if that could have been completely removed?
Andrew: Would have had a little more time to respond to some of the messages that I’ve got here in customer support. The stuff that Ari [SP], and Andrea didn’t get to, or needed me to take a look at.
Dane: Do you think with that free time you could grow Mixergy to be even better than it is?
Andrew: I think with that system, the interviews would be better. I see where you’re going with it. I understand.
Dane: You notice I didn’t even use, ‘What else? Tell me more,’ because you were already pretty deep to that. You see how the process is organic, in a way?
Andrew: I got to be honest with you. I saw you jump to the solution and I’m seeing that it doesn’t match up with the process that you’re telling us to go through. I’ve got to follow up and ask you why?
Dane: That’s true. This happens a lot. No matter how skilled you are, you tend to want to jump to solution, but in this case, to make this more accurate and more true would be to say, ‘To define [??] problem, be aware of solutions that come up, but be clear that you’re solving a problem and not coming up with the solutions. Be clear that you’re defining a problem correctly and let the solutions come to mind and maybe even bring them up, but be clear about, ‘We want to define this problem accurately.’
Andrew: Let’s talk a little bit about the chatter in your head. I feel that here. I have conversations with people all the time. If I start to let the chatter intrude then my interviews suck. My conversations with them privately stink. How do you stop it?
Dane: I can tell you how to simply stop it. Most mental chatter comes up when you’re not being fully present and there can be a couple of things that knock you off your rocker from being present. The biggest thing that I’ve seen is a limiting belief that people think that they’re not good enough until _____ (fill in the blank). If they’ve never started a company before, that belief is going to come up. They need to be really anchored and [??] onto their value of why they’re there. When you understand that your value is in listening and asking questions and that so few other people actually do that, just by doing that, that’s valuable enough. Your goal is to just dig deep and ask questions. The mental chatter can shut off, but it’s only when you’re really certain on the value of the reason of why you’re there really. It’s a difficult thing to do and I wasn’t even aware I was doing it until The Foundation members, we hung out at that mansion in Mammoth and they’re like, ‘Dane, it’s incredible how you notice things and ask questions. How is that possible?’ I think it’s the mental chatter. If the mental chatter is there, that’s the first step. If you’re just aware that there’s mental chatter, your mind will auto correct.
Andrew: Do you have any mental chatter here in this interview?
Andrew: What is it? Be honest and open up.
Dane: The mental chatter is with the defining the goal to define the problem clearly and how I fell into the trap of the solution. Then how I was, “How can we actually make this and have 100 percent integrity?”
Andrew: Talk a little bit more about that. What do you mean by 100 percent integrity? What was the worry that you had there?
Dane: The worry is that I want to be accurate and be in integrity with everything and have it all line so that people can actually go out and use this stuff. There is a though that comes up with Oh, Dane doesn’t know this stuff and he’s not a credible teacher and that comes up but I know this is not true because we have the track record and this stuff works. So I don’t really pay much attention to that. So I have two streams of mental chatter going on right now and I feel an interesting sense of a sensation of nervousness in my stomach at the moment to and so I just acknowledge that and be aware of it and move as well so I can be with you on the interview. But that’s the mental chatter going on right now.
Andrew: Why is there a pain in the stomach?
Dane: No pain, no pain. There’s a slight anxiety.
Dane: Slight anxiety because I want to make sure we do the best job possible so that people that are stuck without ideas can go out and start companies.
Andrew: I’m a little concerned to because so first of all, when you jump to the response, when I asked you to give me an example of how to define the problem and you jumped to the answer. I said oh, are people now going to think that Danes a sham because he just said something and then he went in a different direction. The other thing that went through my head was our last interviews killed, they were some of the best interviews on the site. I don’t think that you were well known before you got the first interview here on Mixergy and then people started to discover you and then after the second interview people actually paid you money to work with them and I thought great, the guy’s becoming huge.
Now other people are going to interview him, what happens if this interview now sucks in comparison to all the other interviews that other people do. Now, people are going to think Andrew doesn’t’ have it anymore. This interview isn’t good anymore or his interview skills don’t match up to other people. Yeah, it was great before other’s talked to Dane but now that you see what other people can do with him you realize Andrew’s not such a good interviewer. So all those things happen, what the hell do you do to stop them?
Dane: You don’t.
Andrew: You just let them happen?
Dane: Yeah, you let it happen, you roll with it, you understand that it’s uncertain that shit happens and you adjust along the way. This is what I do. If you were coached by me for the last six months you know how much I bounce around from being wrong to being right to not even knowing what I’m talking about to finally arriving at the solution and if we were to go back and listen when I said I’m jumping to the solution now but I wanted to find the problem, I was aware of what I was doing. I just didn’t automatically do it. It was a process that I jumped to the solution because it’s tempting but I want to go back to find the problem.
Andrew: You said shit happens, I found to that by making people and making the situation less special, it’s easier to let it go. Like, frankly, when I was trying to learn how to talk to women, if I was in the stage where I though oh, I’ve got to have this work out or my friends will laugh at me or I’ve got to have this work out or this girl’s going to think that I’m a nerd or whatever it was that would go through my head, I would screw up the conversation. If I said screw it, she’s not that great, there’s tons of other people, it’s not the greatest thing on the planet, there’s tons of other women, then I was able to be much more present. To make it less special, in fact a therapist told me make women less special and that made it easier to have conversations.
The same thing at Mixergy, when it was the most special thing I could ever do where I was really having a big impact on the world, I was afraid of screwing up. I was afraid of selling something that wouldn’t work for 100% of the people 100% of the time. I had to make them just a little less special in my life for me to be able to fully be there without worrying too much. What do you think of that as a tactic?
Andrew: All right, can you give me an example of another bit of chatter that goes through people’s heads as they have conversations with their potential customers looking for and digging for the root of the problem that they’re going to solve with their business.
Dane: Yeah, and one of the things that we’re doing in the next group of the foundation and I haven’t really announced this yet, I might as well say it here, I’m going to be building a software product from scratch in a market that I have no expertise or credibility in.
Andrew: So they’re going to be building in the group and you’re going to be building in the group.
Dane: Yup, and I’m going to be a month ahead of them so they can see what I’m doing, follow the reports, follow everything and see what I’m doing a month ahead of them so they can really kind of follow along here better and it’s just for fun because I love building software from scratch. So we’re already doing idea extraction on one of the partners that’s going to promote the foundation and we found a specific paying around retention in their community with members and so I don’t want to jump into the solution but what we did on that call was we had it recorded so that people in the foundation would be able to listen to me do idea extraction live for like an hour.
What happens is we keep jumping to solution and I keep reminding people Ok, I know it’s fun to go to solution but we want to really stick clearly on defining the problem. Because all four of us were doing it, my partner, I and the two guys from internet business master, we kept jumping to solution but I made sure we always aligned it. Let’s make sure we define the problem, let the solution things come up but really define the problem. And I think that’s probably the best way I can explain how it happened here and how it will always happen for you because we didn’t come up with the idea.
Andrew: Let me see if I understand this, your promoting the foundation with a series of partners and instead of saying to these promoters, promote me and I will give you a cut, you’re saying to yourself lets take a step back and figure out what their problem is and then my work with them is going to address their problem, I’m not going to throw more money at them to get them, or throw more emails at them. I’m going to understand their problem and I’m going to have this product that I have them sell solve some of those problems for them..
Andrew: …is that right? OK, an to help them understand those problems you had a couple of other people on the phone with you and you were all jumping towards solutions as to were you had to say lets focus on defining their problem. So tell me about the chatter. What chatter do you have in your head as your going through this?
Dane: Are they going to be clear with their answer? And what do I do if they answer correctly, what do I do if there is dead end, a lot of what if’s. A lot of times what I will do is address the chatter or awkwardness on the phone. So if we are doing an extraction process and the person on the phone is kind of pushed for time and rushing through their answers, the mental chatter in my mind is that I’m being annoying. So I say, I’m not trying to annoy you, we are just trying to understand your problems and make your life better, but if we’re annoying you I definitely don’t want that to happen. And then all of a sudden the whole tone will shift and it will be, “No you’re not annoying me “.
Andrew: I see, so that’s another tactic they use to quiet the chatter, you call out what you’re feeling?
Dane: Yeah, yeah, that’s a good one.
Andrew: I did that with you earlier to. All right call out what your feeling come back to believe in the process that you are doing, anything else that you can use to quiet the chatter?
Dane: [pause] I really haven’t thought through quieting the chatter like I would like.
Andrew: In talking to other people that have gone through your program, it seems to me like just hearing them all talk through their own internal insecurities help them overcome it that if they hear someone else say I just was afraid that this man wouldn’t think I was a real business man because I don’t have real business cards and I don’t have an LLC yet and my web site isn’t up yet, that he’s not going to trust me enough to talk to me. When you hear someone else say that you think why is this guy obsessing over it and you are les likely to obsess over that thought in your head.
Dane: Yeah. That happens naturally in TheFoundation. What happens if a guy hangs up on you, you feel like you’re annoying or I think what happens is members, we give members about 15 questions to ask for idea extraction, we can go through all 15 here. Actually, I want to give away as much idea extraction as possible. They would rush through all 15 questions and as soon as all 15 questions were over they were done. I was like I did a terrible job on teaching on what’s the clear idea extraction process. So I would say being clear on your outcome, which is to extract an idea and define that pain clearly. Clear on your outcome is definitely when people started to take off. For about three months people were really struggling with idea extraction and the foundation.
So what I did is I started doubting the process myself, I was like crap, maybe this doesn’t work. What I did is I went and did an extraction phone call with a pool company. They come out and clean my swimming pool, so I called and you know how I did the extraction with a partner? You can do an extraction anywhere, so we were talking about[inaudible] I know you’re going to be promoting us but can I ask you a question, we do software do you have any ideas for software, what’s some of the pain in your business. Boom, we started doing idea extraction there. I called to pay my pool guy and I told him would like to build him software to make his life easier do you have any pain in your business, and I actually asked him what problems cost him the most money in your business and we did a 40 minute phone call and I extracted validated price anchored and the closed them on the idea all in one 40 minute phone call.
Andrew: I see. So you recorded that and played it for the people in your group?
Dane: Yep. Forty minute phone call, I played it for the people, it totally ripped the foundation wide open. People transcribed it and documented it, find out all the stuff I’m doing unconsciously that I’m not even aware of. I did that call because I really wanted the members to be successful and was thinking of anything that I could do. As an example for that once they watched that their mental chatter, that’s when TheFoundation became a rocket ship.
Andrew: OK. All right. Can I get the list of questions that you ask people? And that recording of the call that you made available to the foundation members?
Dane: To the pool guy? That’s a pretty valuable thing . OK.
Dane: So the questions are.. Well before we get into the questions do you want to talk about how to reach out to the person and get them on the phone?
Andrew: Yes. So now we got the skills right? Asking questions, listening to the answers, digging in deeper and defining the problem. Those are the skills that we’re going to use throughout this process. Now the next thing we should talk about is the process. What are the steps in the process that you use now that we understand the skills the people need to walk into?
Dane: You know what? I want to say something else about this defining the problem. Once you get really good at this, you can actually do it all in one [??]. You can go to define the problem and start coming up with solutions and provide [??] and sell them all on one phone call. So I think when I do this define problem I was trying to give small chunk in steps and if you start with that is a good first step. If you want to go ahead and try and suggest solutions, go ahead and email me and let’s see how it goes.
Anyway, the email you want to send out is a subject line that says strange question? These emails get open at least we find 20% open rates in cold markets that have no idea what we want.
Andrew: Actually, you know what? Let’s take the process step by step. The first thing I imagine is who am I going after? Who am I going to send this email to? How do I find the right group of people to do it?
Dane: You want a green light niche market. Green light.
Andrew: OK. What does that mean?
Dane: There are 5 areas. The reachable by phone, email or fax, ideally fax.
Andrew: Meaning if they don’t meet all these 5 criteria they’re not the right market for you. If you can’t reach them by phone or email, they’re not the right market for you to go after. Do I understand this right?
Dane: I believe so.
Andrew: OK. So that’s one area. Need to be reachable. What are the other areas?
Dane: You can do some paper [??] in the survey if you get their phone number but the idea of extraction is not about surveys. It’s not about creating a survey, hiding behind it and magically awaiting a product idea. That stuff is done at home.
So reachable by phone and email or fax. You can get the decision maker on the phone. This was not as important. You can talk sometimes to executive’s personal assistants that are actually using the software or using their business all day and they’re good to talk to. And sometimes they are the decision makers as well. So as long as they [??] decision maker-ish.
Three. That they’re a profit motivated industry. You know, they have to innovate, grow and succeed to live. You wouldn’t necessarily want to do this with a small time piano teacher who has 50 or 60 students and she’s happy with that. She doesn’t really have to innovate, grow and succeed to live.
Andrew: Let me stop right there and ask you this. It seems then that this process is not going to help us create a consumer based, fun type social network because we’re not reaching out to people who need to make a living off of that network.
Andrew: And that’s OK. Why?
Dane: Well, that’s OK because I’m not quite sure. I would say I want to create, the most stable business I found is Business to Business software service. I’ve not been able to find a more stable steady reliable business that continues to grow on [??]. So I really recommend people target business that do their ideal extraction life. For a stay at home mom [??] but in this case we like them to be profit motivated. We find that the people that aren’t profit motivated, they just don’t care. One guy tried to do idea extraction with theater improv companies. Just bombed because they had like 10 students that they cared. They weren’t really motivated to innovate and grow.
Andrew: OK. Those are much easier to work with companies that are in it for profit you know their motivation is. You know that if you can show them how to cut a significant amount of money or generate significantly more money they’re more likely to work with you as opposed to consumer who may like your photo app or may not like your photo app and may be monetizable or not.
Andrew: OK. So we’re intentionally then limiting the scope of the kind of product that we can create. What else? What are the two criteria, I think, we have left?
Dane: The average successful business earns at least $50,000 a year. This is kind of just guesstimate if you would. And we find that most profitable ideas that come out of the foundation, they have clients paying for the software that earn at least $50,000 a year. Now this is not a set in stone thing. This is just kind of a guideline. It’s not like if you grade this you don’t become successful but this just really helps reduce the risk.
Andrew: $53,000 is what I should expect to make from the client or what my business should be expected to make or did you say that’s how much the client should be earning in profit a year for me to target them?
Dane: In revenue. $50,000 a year.
Andrew: I see. So you’re saying don’t go after clients who generate less than $50,00 year because they’re not going to be valuable enough for you to work with.
Dane: It’s not they may not be valuable enough and there are some people below $50,000 that might. It’s just that the people below $50,000, they have the mindset of they’re not really business owners. They’re like kind of just like making, the fact that they’re less than $50,000 usually makes them less business-runny. Like they don’t run like a business. Like if you take a real estate agents that make less than $50,000 a year and real estate agents that make more than $100,000 to $150,000 a year, they have systems, they have processes. They want to plug in software. They won’t leave your business. They’re more long-term, they pay you longer, things like that.
Andrew: That makes sense.
Dane: And again, this isn’t like set in stone. I’m sure [??] that there’s plenty of people and non-profits that pay for Project Management software that make less than $50,000 a year. It just helps kind of reduce risk for us. And five, that’s it, actually. That’s the fourth. The fifth one is I will add more to this list as we think. We always want to challenge this thing and make sure that they’re accurate as possible so it’s fun to get to go through this with you.
Andrew: OK. All right. So first thing is we want to pick a market that meets this criteria. How do I find that?
Dane: Once you start, I can give some examples and it may jog memory. You can go to Google Search business industry ideas. Martial arts school businesses, day care businesses, DJ business, the bail bond business, property management, photographers, event planners, graphic designers, home inspectors, real estate brokers. Actually one of the guys in TheFoundation was driving down the street. He’s like ‘I need to figure out guys to idea extract with’. I said alright. We drove down the street. I said ‘There’s a laundromat. There’s a dry cleaner. There’s the bridal shop’. As you’re driving down the street you can see these different industries.
Andrew: Sam [??] went to your program, came here to do an interview. It was fantastic. And I asked how he found the customers that he was going to talk to and extract ideas through those conversations and he said ‘Easy. I went to the Help wanted section and I saw who was buying the most ads and I figured if they were buying a lot of ads, it meant that they have money to buy ads, of course, but also that their business was growing. Otherwise they wouldn’t be hiring so much’. And then from there he said what businesses do I know or care about and he then start to whittle it down base on his own personal interest. But that’s how he figured that he could find a big market. All right. So there’s no one proven way to do it. You’re saying here’s a criteria you’re looking for. Be creative about the process.
Dane: Yes. And we have members in The Foundation that go about it in some pretty ingenious ways. You can go to 37signals.com and look at the customer’s page and see different examples. I love the yellow pages idea. It’s wonderful.
Andrew: What is the yellow pages idea? Just seeing who’s on the yellow pages under a specific category?
Dane: Yes. Just open the yellow pages and see who’s advertising. That’s right. Wonderful
Andrew: Finally, a use for the yellow pages. So that’s number one. Pick that green light niche market. Number two is? Next step in the process?
Dane: Get in contact with them and set up a phone call. You can cold call but it’s just a bitch and it’s kind of a pain in the ass. You’re going to get hung up on about 10 times to get one good phone call when you could just send out a hundred emails and get 2 or 3 phone appointments set up. So the email that goes out, and you can, we have people that kind of reword this to match more the personality but the emails subject line Strange Question had a 20% open rate. We use [??] to template this and it’s actually funny. The CEO of [??] reached out to me and email me and said ‘Hey, I see all these people signing up saying that they’re in your Foundation program. Thanks for all’ and we started talking back and forth because he’s interested in what we’re doing.
Andrew: Before you get to the email, why [??]? I’ve heard this in past interviews here. What is it about [??]. com. What does it do? Why can’t I just use Gmail?
Dane: It’ll track open rates.
Andrew: OK. I see. So I’m sending all these emails that you’re going to give me the template for to people who I am going to extract ideas from and I want to make sure that they’re opening it so I have a sense of whether I’m reaching the right person or whether the way I’m writing it is getting people getting them interested. Maybe the way I’m writing it is turning them off so they’re opening the email but not responding. OK. All right. We use [??]. What’s the email?
Dane: The email is Strange Question. And it says, “Hey. I’m doing a research project on how to make the insert industry easier, faster and more profitable. Industry and projects, right? I had a strange question you might not get asked often. How is business going for you? Is it up? Down? Sideways? Has your business been affected at all by the recession? If time permits me, I may reach out and call you later this week. Thank you. Dane Maxwell.” Link to your Facebook profile. And anything else that makes you look like you’re not a spammer.
Andrew: OK. How did you guys come up with that template? I think I’ve talked to you as you guys were experimenting with emails, right? Or did you just happen to hit on this one?
Dane: Well, this is the first initial one that I wrote. And then there are some different variations that you can take with this. I have one other example. There are things you can do to increase the open rate and reply rate of these emails. We’ve had people split test things like using a female’s name, like Jessica or Lindsey. He had a seven percent reply rate when he used a female’s name versus a three percent reply rate when he used a male name. Then when they replied and said, “Yes, I want to talk to you,” Lindsey’s like, “Great, let me connect you to my boss,” like they’re the assistant. Then there’s even more authority in the idea extraction call itself.
Andrew: I see.
Dane: We recommend doing the female name to increase the open rate.
Andrew: I think Sam was a student at the time. What he did was play up the fact that he was a student?
Andrew: So, basically what we’re trying to do is get them on the phone. We don’t want to ask them questions via email. We don’t want to send them a survey. We want them on the phone so we can go through the process of asking them questions and finding the problem.
Dane: Yeah. When they reply, “Has your business been affected by the recession?” and I say yes or no, that’s when you reply back and be like, “I’d love to talk with you for 5-10 minutes and hear the inner workings of your business.”
Dane: “Does this time or this time work?”
Dane: Then we get them on the phone.
Andrew: Then you get them on the phone.
Dane: Yep, and that’s where things get messy, aka what happened earlier with us, what happened when we were doing an extraction with our partners. This is actually the most fun for me.
What do we have next in the notes, so we can make sure to move it along here?
Andrew: That’s pretty much all I’ve got here that I was thinking of talking to you about.
Dane: Should we do the 15 questions, I suppose?
Andrew: Give me a couple of them. I think it’s better if we gave people a link to those questions or found another way to give them than just to read them out here, but give me a few that give me an understanding of what your process is.
Dane: Yeah. Three questions are typically enough. I did the pool extraction phone call. The idea that he gave me was. . . He actually defined the problem and then I asked, if he could wave a magic wand, how would he solve that problem? Basically, he said people were disputing his billable hours. This is an idea any of you could take, it’s a brilliant idea. He would pay $500 a month for this app that would take less than six weeks to build. What the idea is is GPS checkin/checkout for pool companies so they can checkin when they’ve got to the property, and then checkout when they’ve left. Then, when they send the bill, they have the GPS coordinates of when they checkin and checkout so the client cannot dispute their billable hours. The guy loses about $20,000 a year on clients disputing his billable hours.
Dane: In that process, I really only asked, “What problems cost you the most money?” He said opening and reopening pools and people disputing my billable hours. I was like, “OK. If you can only solve one of those, what would it be?” He was like, “People disputing my billable hours.” So we dug deep into that one.
Andrew: Not everyone who went through the Foundation actually came up with an idea.
Andrew: Be open about if some. . . I talked to one person who went through it. I think he said he made 100 calls and didn’t end up with a product. If someone makes 100 calls, and it still doesn’t work out, why? What happens?
Dane: This was a very frustrating thing for me because I couldn’t sit behind them and watch them do the phone call so I couldn’t really pick apart what they were doing. We’ve started having people record their phone calls. Then I would actually dissect the call live, in front of everyone, but that wasn’t until three or four months in. I think it was just I was not doing as good of a job as I could as a teacher at the beginning at finding what the real stumbling block was.
Andrew: OK, and when you did, what. . . You found it by listening to their calls with the group and pointing out the issues with the group. What are some of the stumbling blocks that you discovered?
Dane: They’re very nervous on the phone.
Dane: They like, the guy will ask the classic question, and then the business owner will answer it. Then the student, the person at The Foundation doing idea extraction, just jumps to the next question without even digging any deeper into the first answer.
Dane: Because they just want to get through the list of questions so they can get off the phone.
Andrew: I see. OK.
Dane: This next Foundation time around, we’re creating some intense accountability measures. In the first month, if you’re not uploading idea extraction phone calls that you have recorded — now I know this is not necessarily legal, or whatever, but we’re not publishing these recordings to the world, it’s just for our own education — so you use Skype call recorder, record it, upload to drop box, and then we’re going to pick apart idea extraction calls. At the end of the first month, you haven’t been doing your idea extraction calls, not only are you booted because we can’t help you, but you’re just not going to be any value to the group if you’re not actually taking action. In the first month, the whole month is dedicated to me picking apart people that are struggling at idea extraction because it was so painful to watch people drop off last time.
Andrew: Every single person’s going to have to make a call and record and upload it?
Dane: Oh, yeah.
Dane: Yeah, if they’re not taking action, get out.
Andrew: OK. What else?
Dane: What else with.
Andrew: What else did you do? You know what…
Andrew: … is not that I swear to say it. But what else did you do wrong?
Dane: Yeah. Oh my goodness, so many things. I think that the biggest thing that I did, well I feel like we cracked the code on creating entrepreneurs. And I feel like we cracked the code on creating entrepreneurs because for three months I taught nothing but tactics. OK. Here’s how you do this, here’s how you do that. The numbers kept coming back to me for more and more tactics. And I was like ha, what’s going on here. And then I found this one guy that was Google searching for a month on different tactics to solve this problem. What happened is I got on a one on one call with him and we dug in deep and we found he had a severe (?) belief. He got a really tight lump in his throat. He drinks tequila shots before he does his phone calls. He got into that belief and we found out that his mom told him to be quite when he was a kid and that brought him back to being quiet when he was on the phone with business owners. We anchored in the feeling. We talked about the thought that produce that. That he doesn’t have enough volume to be on the phone. And I asked him what would the reverse thought would be. He said actually I have value because that’s something that very few people do. Which is ask questions and listen and that gives me value. And we reversed that the belief that was holding him back and then he was able to start a successful doing a …[??]
Andrew: How do you get someone to admit that? To go through that process with a group of other entrepreneurs whose respect they want. Especially if they’re entrepreneurs themselves who a lot of the times there’s entrepreneurs is just the confidence that you project to the world. Is pretty much all you have. How do you get them to open up that way?
Dane: I think by my example of being vulnerable open, and broken, and flawed, and like we’ve seen on this (?) here. But by me setting up an example people are more open to, we’re not afraid to say what we’re afraid of in the foundation.
Andrew: You think it was a good thing, that a couple of times in this interview things didn’t go well. That I called you out on how some people went through the program and did the work and still didn’t get the results that they signed up for. How is that it benefits to be that opened? Wouldn’t it be better if you said hey I make this stuff work and if they didn’t do it is their fault? Wouldn’t that give people more confidence in you?
Dane: I don’t know. Like I don’t necessarily think about what would give people confidence. I just want to be truth and live in truth. I think that if we’re always just talking about what’s true, then people aren’t ever like misled. We’re committed to living in truth over anything else in the foundation. Yes, it’s not that it’s a good thing is just a human thing.
Andrew: OK. Is it the truth then that the reason why you want people to sign up for TheFoundation.io is that you want to make money? Right? You want to sell a program to other entrepreneurs. They’re going to pay you to sign up, they’re going to pay you to be a part of it. You’re going to be apart of the rich internet entrepreneurs. By giving other people hope, by selling them the dream that they can do it too.
Dane: I love that question. Absolutely not. It’s for more lucrative than building on software companies then it is to teach. And I’ve worked more in my life in the last few months then I have last year working 8 to 10 hours a day right now. Preparing for the next foundation. I brought on a partner. I brought on a customer support guy who’s going to be working intensely with people setting up accountability groups. We’re doing so many things right based on this. The reason why I’m doing this is because I love to teach. Yes there will be money from it but that’s not the reason. The reason is because I love to teach and I want to see people take action with their stuff. Money, and we want to set a high price because the higher the price goes like you said he said the last complainers will get in group.
While our price was $500 a month last time and I feel like that was too low, the members in the group thought that we should actually triple the price. The ones that were successful that action with it. There are guys that did 100 calls and give up. But there are people that did 500 calls. Like Paul and he had a successful company. I did point to the fact that there was a brokenness in the way that I was teaching it. But I didn’t touch over the fact that that person that made 100 calls might not necessarily have had the unbending burning desire that was really needed to create this. We did have five or ten new companies come out of it. And those people got the same thing that everyone else has failed in. I think the thing that really differentiated people was that lack of desire.
Andrew: Well I’ve got to say that one of the things that I have to ask that question because just because your a friend doesn’t mean that I should go soft on you. But in my experience having work with you through these interviews and having you as a course leader on (?). I have never seen anyone be more generous. If anyone watches the first interview that you did here, I think they might catch my suspicion which was genuine. It wasn’t just me try to ask the tough question cause that’s my job. But you offer the Rockefeller sum report and I think I said why so you want my audiences email address. You want them to go your website and give you their email address and you didn’t have a system for collecting their email address in exchange for giving them the report. You just had a link to the report, and it might have even been a link on Dropbox.
Dane: It was.
Andrew: I came into our relationship with healthy skepticism. I think that comes from being an interviewer, but over the years I saw that, for the interview, you prepped and you gave my audience a lot. For the course you prepped even more. You sweated and your work took a back seat to teach a course on Mixergy on copywriting. The course did well. It helped me start courses on Mixergy, and you didn’t take a penny for it. You just said, “Andrew, you’re going in the right direction. Do you need any help to think through your business?” I got a ton out of those phone calls. I even asked Andy, a friend of ours who, before I had you on Mixergy, I checked in with Andy and I said, ‘Is he the real deal, or am I about to ask someone to do an interview who doesn’t belong on here?’ I always try to check out [??]. I said, “What do I give him, because he’s about to teach?” He said, “Just give him an opportunity to help people.” That’s what I’ve noticed, that as long as I give you an opportunity to help people that you’re happy.
Dane: In the next foundation, I probably won’t have nearly as much [??] for the next six months when we watch that as I do before. We’re doing two one hour Q&A calls a day. More one on one call than I did last time. It is definitely a lot easier and more lucrative to run your own software business than it is to teach because you got to deal with clients.
Andrew: Internally, what is it about teaching? I understand you do it because you want to teach. What I don’t understand is, why do you want to teach?
Dane: You interviewed Sam Ovins. That kid’s life is completely changed.
Andrew: Did I mispronounce his name in the interview? It’s Sam Ovins, not Sam Ovens?
Dane: Maybe, I’m mispronouncing it. I always hear him say Ovins.
Andrew: He does have an accent, too, so I might have it wrong.
Dane: Sam now, like Ralph Waldo Emerson said [??], “If one person can breathe easier, by the time that you’re dead, because you lived, you’ve lived a great life.” I want to help as many people breathe easier as possible. It might sound altruistic. No, it’s not. I’m going to make money, but it just feels better. We have Sam, and Paul, and Ramu, and Saba and Dan. All these guys that now have software companies that wouldn’t have existed without that teaching, and when I wake up in the morning and my feet hit the floor, that’s my purpose. I was watching the Olympics and I saw the 30 greatest moments of these Olympians all just winning gold. I was starting to tear up and I was like, “What do I want to be the best in the world at?”
For the first time in my life, it instantly came to me. “I want to be the best teacher in the world.” I have the emotion come up now when I say it, but I think that’s just because my heart finally feels like its home. That’s the reason why I teach. That’s why I want to do this. My most exciting thing is, I want to build this list of friends that will be to the foundation so that anywhere I travel in the world, I can blast out to people, “I’m in San Fran. Who wants to kick it?” There are so many benefits to the teaching, and it’s the community and the support and I’ve never felt more on point, or on purpose in my life.
Andrew: I hate to ask another question after that, but I have to. We now talked about how to come up with the idea. We keep hearing, in the tech world especially, ‘Ideas are worthless. It’s execution. That’s all that matters.’ [??] it’s worthless. If you come up with an idea that solves somebody’s incredible pain, then you’re way further along than just having an idea. What about executing on it, though? How does someone who’s never created software end up building a software company? How does someone who’s not a developer end up building a software company?
Dane: You have another hour?
Andrew: I’ve got two minutes.
Dane: The first month is all idea extraction. The other five months are how to build the software business. We have [??] stuff that they need on how to hire A player developers, how to negotiate with them, how to create the first minimum viable product. How to cut features away. We’ve got the whole six month process all mapped out, so at the end of the six months, they ideally have their first software company with at least ten paying customers. The first month’s idea extraction, the other five months answers that question. Software’s one of the riskiest things in the world to build. You can lose your ass on it. The average software project gets extended by about 200 to 300 percent in time and budget. We built Pipeline in eight weeks. [??] eight weeks because we follow this process and we teach that and we talk about how to communicate with developers and how to hire them and how to be a business owner. I wish people understood the ideas [??] the implementation, but one of the things that people encounter is they find competition for their idea and they immediately get freaked out and they bail. I have to do some mindset reprogramming on why competition’s good and work with them.
Andrew: Why is competition good?
Dane: Because it validates that money’s being made in the market. And 90 percent of the competitors are typically misunderstanding the problem because they didn’t define the problem clearly. Really. I just want the solution.
Andrew: OK. I could spend another hour with you just talking about how to launch software application if you are not a developer, but we will have to save that for another interview. Actually, we talked a little bit about it in the interview that we did about pipeline, where you gave away the tactic that you used to get top developers who had never applied for jobs on help wanted sites, and you talked about some of the other steps that you took to build software. I think I got everything in here. The website, of course, is TheFoundation.io. Anything else that we missed?
Dane: Do you think that people watching this will be able to start coming up with their own ideas? Have you covered that, because I did not get to go through any of the idea extraction questions.
Dane: I can give three right now.
Andrew: Yes. Give me three.
Dane: What manual tasks in your daily routine would you like to automate? What piece of software that you use makes you want to punch your computer? What software do you wish existed but you can not seem to find? Of all the things you have done today, which one of those things has been the biggest nuisance to you? Are you currently looking at any software to purchase in your business? Have you been looking for a piece of software but you just can not find it? What do you spend the most time on day-to-day, but enjoy the least? Think about the last couple of days at work. What have been your biggest struggles lately? Do you have any ideas of what would make your industry easier? Things that weigh you down that you wish would go away.
If you had unlimited resources, what would you develop to make your day more productive? You can typically maybe pick one thing out of that. The important thing is not the question, it is the following up, doing the what- else, telling more if you can and really digging deep into that. First answer to get to the third layer, or fourth layer idea. If people watch Sam [??] that is kind of a case study for everything, and if they need more on this, just reach out to me through the foundation. I am here to serve.
Andrew: OK. Thank you for doing this interview. If someone goes to TheFoundation.org, how do they reach out to you?
Andrew: Excuse me. The Foundation.io
Dane: We are not a non-profit. There is a link to add me on Facebook, they can private message me there. There is a phone number that they can call, and if they request the case study and put their email address in for that, they can reply then to the email that I send them when that happens.
Andrew: OK. Thank you for doing this interview, and thank you all for watching. Bye.