Gambit Co-Founder Reveals His Biggest Entrepreneurial Mistakes And What He Learned

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Noah Kagan, Gambit, Failure, Hiring, Mental Game, Scaling, System

Even though he worked for some of the most dynamic tech companies — including Microsoft, Intel, Facebook, and Mint — Noah Kagan felt unchallenged. So he went off to launch his own startup.

The company he started is only about 2 years old, but he already made enough mistakes to nearly shut it down. I invited him to Mixergy to talk about those mistakes and what he learned.

Before you hit the play button on this interview, you should know that Gambit more than survived all those mistakes. Noah says Gambit, which offers payments solution for online games and social networks, is set to do 8 figures in sales this year.

Noah Kagan

Noah Kagan

Gambit

Noah Kagan is the co-founder of Gambit which makes payments easy for virtual games.

 

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Full Interview Transcript

Andrew:

Hey everyone, it’s Andrew Warner, Founder of Mixergy.com, home of the ambitious up-start. I forgot to do this– home of the ambitious up-start! And by the way, the reason I say, “home of the ambitious up-start” is because I am targeting a specific kind of person, somebody who has wanted to be in business almost from Day 1.Somebody who’s not just in business to be in business but to leave a legacy, to leave a mark on the world, to build something, to do something that they’re passionate about, not just sit in a cubicle somewhere, but do something in business.

And, man, there is no greater force in the world today, I think, than busine

Alright, so let me get off my soap box and introduce the interview that you’re about to listen to. This is an interview with a guy who has made a ton of mistakes, no different than any businessman, no different than any entrepreneur in the sense that we are all going to make a ton of mistakes, mistakes that would scare the bejeezus out of most people. But because we are in business, because we are entrepreneurs, because we’re ambitious, we’ve got to suck it up and find a way to keep going and then build something great despite those mistakes.

Well, here’s a guy who did it. Many of you, if you are in business in the Internet’s base today, you probably already know this guy, Noah Kagan, personally. He’s one of the most personable, one of the most friendly people in this space. I’ve known him for years and like I say, many of you have known him for a long time and if you’ve heard some of my past interviews, you know that Noah’s name’s been brought up a lot because he’s got a lot of friends in this space. If you don’t him yet, you should find a way to get to know him.

Alright, so, he came here to talk about a lot of the mistakes that he made as he built up Gambit. He is the Co-founder of Gambit. And Gambit is a payment system that makes it easy for people to pay you, for your customers to pay you. So, if you’ve got a virtual game or an online community, you want to get paid for having users, not just have eyeballs, but you want to actually get paid, Gambit is the company that you work with.

Alright, so here’s my interview with my buddy and probably your buddy, as I say, Noah Kagan.

Andrew:

Noah, you and I talked before this interview. You’re going to give us ten ways to fail based on your personal experience. I don’t understand how an entrepreneur who just started a company could be honest and say, “Here are ten ways that I screwed up.” But if you’re willing to do it here on Mixergy, I’m grateful to you and we’re going to go through this list. But – and thanks, by the way, for giving the list before the interview so I could be even more prepared. But before we get into it, I want people to know what Gambit is, what your company does. Can you tell us a little bit about it?

Noah:

Yes. So, we were Facebook developers, so we built basically, you know, a lot of the top Facebook games over a year and we made a lot of money advertising revenue. And then it went away. And so what we ended up doing is building payment tools to sell virtual goods in our games. And we ended up building stuff that other people wanted. And so, today, we work over 40 million users a month. We work with Gaia Online, Xanga, Playdom, Hi5, Tagged, and a lot of major companies, helping them with payments. So with credit cards, offers, PayPal – that’s what gambit.com does.

Andrew:

Okay, can you give me an example of a company that uses you and how they use you guys for payments?

Noah:

Perfect. So, two different scenarios: one is where you just want alternative payments or offers which is a new payment type that’s becoming popular. And so let’s say Gaia Online, which is one of the leading virtual worlds, nine million users a month. So, you have credit cards and you have PayPal, you know, alternative payments which is signing up for Netflix, Discover Card, Blockbuster and other different offers. You can go do that instead of paying, and then we basically pay the users in virtual currency for that, and we pay the developer in cash for getting the user to sign up for it.

So that’s part one. Part two, what we give people is also full payments. So, let’s say on Mixergy.com, you wanted to sell reports or you wanted to sell videos, you could go bill PayPal, bill credit cards, have some customer support. As you get to be as large as you are, fraud, maybe some chargebacks. So you could either spend your time doing that, or, within about 30 minutes, have payment solution set up and running with Gambit.

Andrew:

So, why would I use Gambit and not paypal?

Noah:

No, you could totally do PayPal and I think that, you know, on a smaller scale, that might be more useful. The things that I think we add value are: we’ve done a lot of the optimization, we handle our support, we get the analytics, and we provide other additional payment methods so you can increase your conversion rate.

Andrew:

Okay. Alright, so that’s the business. How long have you guys been around?

Noah:

So, the company’s been around for over two years – June ’07, so a little over two years. And we’ve been working on Gambit for around a year.

Andrew: Alright, and again before we get into the meat of this interview, can you tell people a little bit about your background? I know that you worked at Facebook and you did a bunch of other things before this. Can you just take us through the history?

Noah: Sure. So, I ended up … [laughs] I don’t like saying this on record, but I ended up sleeping at Intel for about a year and three months. That was my first job out of…

Andrew: Wait, hang on a second. This I didn’t know. You mean sleeping in the offices of Intel?

Noah: I really hope there’s no Intel people watching, this is never a great thing to be talking.

Andrew: They can’t come back at this point and do anything to you! Now, they just will laugh it off.

Noah: I know, I know, I know, but I like them as a company, and, frankly, there’s good people there, but it wasn’t a good fit for me. So, actually, the real interesting issue – I think it’s interesting – is that…

Andrew: Oh, you mean sleeping on the job! I thought you meant that you didn’t want to have an apartment and so you’d sleep under your desk ’cause you were so mad about working at Intel. You were so excited. No, you’re saying you sat there, and, basically, you were sleepwalking through your days?

Noah: Literally. Basically, if I could do a diagram, I had like a strategic point in my cubicle blocked off so I could sleep right here with my sleeping bag. But actually, in 2007…

Andrew: Wait a minute, this is honestly true? You had a sleeping bag at Intel?

Noah: I had a pillow, a sleeping bag, I didn’t bring a nightlight. I should have had a lamp with a book, and maybe like a little music there.

Andrew: [laughs] All right.

Noah: I was like no I’ve been goofing off, I was playing online and I was like yeah I think I’ll just go home now. Intel’s a really good company, I think they just have a lot of inefficiencies that will get hopefully worked out but it definitely needs to have a lot more fire and a lot of the fat cut off of it, but basically what were you supposed to be doing there?

So, you want the official title was the Supply Chain Optimization for Mobile Laptop Chips Worldwide. So my official role was those Pentium 4 laptop chips, and so I had to figure out how many to be building everyday, week, month based on supply available, different factories. So I had to coordinate Malaysia, Asia,different other, Ireland and then figure out how much supply of material. see I’m bored talking about this.

Andrew: I’m just imagining you telling a girl at a bar what you do.

Andrew: No, I think OK, hey, I’ll like to say, for all entrepreneurs, that is the ultimate test of how cool your job is. It’s the bottom line pick up, job pick up line, and so its like how does your job title sound at a bar, like how cool does it sound. so it’s like right now i do payments for online games, not very sexy. i could tell you that working at facebook is like a great aphrodisiac. You’re like oh hey, I’m Mark [laughter]. oh i did not use that one. but you tell like college girls that one that you work at facebook and its over at that point. i could say it wasn’t that either. we build personal finance tools, not hot.

Andrew: Yeah it’s probably not going to work

Noah: But I tell you one thing that does work at a bar, you can say “I’m rich” [laughter]. That gets the ladies almost every time.

Andrew: There’s a guy on the radio who says that what you should do is get yourself a receipt from an ATM from somebody who’s richer than you and when you’re looking to give a girl your number just write on the back of this thing, she’ll think that it’s yours.

Noah: Oh that’s a good idea,

Andrew: He actually offered to get a stack of ATM receipts to hand out at one of his events, of his ATM receipts so you can pretend like you got as much money as his does in the bank. alright but…

Andrew: So, at Intel you did that whole long string of responsibilities that really meant you slept? but then after that what did you do?

Noah: Yes, but before that there were some failures. I just don’t want to miss any of the fear that I could fail. I just like to make sure that I’m qualified. so I actually had a job offer from Google pre-IPO, or even before that there was failure. I had a, I worked at an internship at Microsoft I was in the sales and marketing group and what happened was as an intern you almost guaranteed a job, it’s like 99% and guess who didn’t get the job. Why? That’s a really good question. I think what might have been my excuse was and i think most people just make excuses was that the role was kinda experimental to the internship and it didn’t really translate into full time availability within Microsoft but I think probably i didn’t show enough value or there wasn’t, I didn’t create something for me to come back to or continue to do.

Andrew: Let me suggest this by the way, I see now that you are actually officially on skype for this call people are skyping into and trying to chat.

Noah: Yes, how do i block them?

Andrew: There is a little, there’s a status indicator with the drop down that you could allow to say that you’re invisible.

Noah: Invisible.

Andrew: So anyone who’s trying to reach you right now, sorry.

Noah: So yeah basically after I rejected that internship after Microsoft, i had a Google offer pre-IPO, so i was going to be rich.

Andrew: So here’s the thing, here’s what I’m seeing, Intel’s forget it. You’re going to end up with the regular old job at Intel. But Microsoft, you had a great time and you had an opportunity to go for it.

Noah: I loved it.

Andrew: Google, you loved working at Microsoft, Google, Facebook. You were one of the first few people in facebook. When they do the Facebook movie, I hope they get a guy playing you. [inaudible] Then Ming. I remember you at Mint before the company launched, you were here in Los Angeles, in Santa Monica, right by my house doing the unofficial launch before the TechCrunch 50, where you couldn’t show it because you were part of TechCrunch50. that company sold for a hundred and seventy million dollars within a couple of years. You’re like the almost Forest Gump. You’re in the area, in the room but you don’t go. So, but in all seriousness, why is that? Is it that you need to keep trying different things? Is it that? What is it?

Noah: No no no. its good. So what i can tell you is that people are now recruiting me to join their company and then fire me. and that’s the new job position that I’m getting hired for. with [inaudible] which is the company again, yeah I’ve been doing this for over 2years now and i think what it ended up being was that i went from a hundred thousand at Intel to few hundred, it ended up being a hundred and fifty at facebook till it like fired me to kinda start my own thing. i think that’s kinda where i needed to be. its just a natural progression. so

Andrew: Did you just have to be the founder, that if you weren’t the founder, you never felt enough of an ownership stake in the company to stay around?

Noah: Yeah, because if you actually do the math, its horrible for anyone not a founder or a co founder alright. I’ve always wanted, and that’s how this has come to be the place where I’m at.

Andrew: So actually, I felt that same way too. The the shares that employees are given, for the most part, there’s always a few lottery winners out there, but for the most part those shares that employees are given are practically worthless. But you were at Facebook. Wouldn’t it have been practically worthless at Facebook in the early days?

Noah: Yeah …

Andrew: Hard to say.

Noah: Yeah. [laugh] What I can tell you though is like, look, let’s do the math a minute. I’ll just tell you the numbers.

Andrew: Okay.

Noah: So Mint sold for one hundred seventy million ($170,000,000). I had 1% equity. Okay so hopefully Mint won’t get to mad about that. After the series B and series C it would probably be about half a percent (0.5%). So if you do the math on that, say .005 times 170 … that’s eight hundred fifty thousand dollars ($850,000). If I’m there four years. So the question that I made, and one of the big deciding points for why I left Mint’s after the time that I did was that, in four years, could I make eight hundred fifty thousand dollars ($850,000) for myself? And the answer was yes.

Andrew: I see. Okay.

Noah: So it was just a financial decision.

Andrew: I love that you put it in those terms, because that makes a lot of sense. Now the second part of this is, the second question that I’ve got to ask is, how do you end up in all these positions? A lot of times, a lot of my interviews here are on mixergy, and come through introductions through you or have been people who you’ve known one way or another. 100% serious! You’re in facebook, not in myspace, but you’re in with a lot of these people. As a friendly guy, how, what’s you’re networking strategy? How are you getting to know all these people?

Noah: So, two things, I’m writing it down so that I can so … reach out, and then, so … I think two things.

One is having an objective. So, with Mint specifically and with facebook, well, at facebook there wasn’t anybody. I sent in a resume because I thought it was interesting. I was going to quit Intel to start my own company and fortunately I had built a lot of college businesses. Like a college book exchange and another student discount card. And so that’s how I ended up at facebook.

With Mint, Dave McClure brought me in. And I was rejected for the job. I came in and I saw Mint and I was like, this is the greatest thing I’ve ever seen. It’s a phenomenal product and it’s helping a lot of people. It’s going to change the world. It was just a no-brainer. The business model was perfect. And so I talked to Aaron, who’s a unique character, and really great in his own way. And he said you know, I’m not going to hire you. And I said, oh no, yes you are! So I can back to him with a whole full marketing proposal and what I’d exactly do over three months. I said give me a contract, as contract labor and if in three months you like what I’ve done produced you’ve got a Director of Marketing, and if not, you didn’t really waste that much money and you potentially got a lot in marketing value. So persistance is something that needs to happen.

I’d say the second thing in terms of networking and connecting is … I hate the word networking, it’s an evil word. And I definitely do it a lot less now. I think I was much more interested in that in the beginning. I think the best way to network is to really build relationships and value. But frankly, if you want to meet the most amount of people, build some cool shit. That’s the bottom line. If you want to meet people, go do cool things.

The challenge is now that anybody who’s a badass, like yourself, or like Guy Kawasaki or Derrick Sivers, who’s my new idol, they frankly go do things. And the challenge is that you have people that come to them and want to learn and want to gain from them and frankly, it’s not about that. You have to give them things. So like Derick Sivers is someone I’m going to be meeting in New York. And Guy Kawasaki, it took me two years to meet Guy Kawasaki. And so I emailed him every few months and said Guy can I help you with this? Can I with filmloop, which is an old old website. And so I was consistently coming back to these people saying I’d love to meet with you, but it’s not about you. They’re busy. I said hey, let me come in and help you out with things. Like with you and what you’re doing, what I did in the beginning was I put on a lot of events. And so fortunately people who are successful or well-known like talking about themselves.

So if you can provide a venue for them to go talk to other people and get their message out or get exposure, they’ll want to meet with you. I know that Ramithe Saythe is going to put a book out on this and I’m excited. It’s how to email someone. And so if you’re connecting with people and building those relationships, you’re not networking. What you’re trying to do is you’re trying to go to them and say, “Hey, I want to help you with something.” And frankly, it’s kind of like in return, maybe someday there will be something you can help me with. There was an investor who contacted us recently, and at Gambit we get an email a week or every other week saying, “Hey, can we give you money?” And frankly it’s amazing, and it’s nice, it’s very thoughtful, but that’s it.

We had a guy email me about three weeks ago who said, “Hey, I’m working with this company who you should guys should be working with – I can put you in touch. And I’ve also thought about your space event, and I wanted to provide some insights to you about wh at you could be doing.” And I’m like, oh yeah I want to meet with you, it’s really interesting. Of course I want to. So I’d encourage anyone at any point. You can meet anyone, but you have to make yourself valuable and interesting enough that they want to meet you. And I don’t think that happens enough. So 1) I think you have to figure out who you want to meet and why, not just because they’re famous – there’s no value in that. Spend time investing ahead of time to meet those people. Like research them, and try and figure out where they need help.

Andrew: You know what? That’s totally true. Email them and ask them or offer to help them. There’s so much more valuable than to email them and say can I pick your brain?

People always think that they’re flattering me by saying, “Can I take you out for coffee and pick your brain?” I don’t have time to have my brain picked! But if you want to help me, then absolutely, I’ll find a way.

Noah: I didn’t mean to cut you off, but even this interview, remember I came to you because obviously I’ll give getgambit.com your shameless plug, and it’ll probably be the last one, but you know, we want our name out there, we want to get the brand out there, we want people to know about us, especially entrepreneurs that are watching these kinds of casts. But you know, initially, someone comes to me and is like, “Andrew, you should interview me because I’m interesting, and I have cool things to say!” Everyone thinks that. And I said, Andrew, you know I think your audience might want to hear about all the ways that I’ve failed, because not as many people are as open or as comfortable talking about that, and I think that might be interesting for your audience. And you said, oh, that’s a great thing. So I didn’t come to you saying what do you want or how can … I came to you with a specific thing that I thought might add value for your audience.

Andrew:

I love when people do that. There are very few people that do that, and I love it when they do it. And for you, I would have interviewed you because I’ve got a million questions anyway. But to help me out like this was just absolutely yes for this interview. It made it a lot easier. What else was I going to say? Oh, Guy Kawasaki and events. You had Guy Kawasaki speak at one of your events. Did you pay him to speak?

Noah: No, I kind of refused to. It’s just kind of a personal thing. I don’t think people should be payed to speak. I think they should be treated well. So Guy Kawasaki, I know he loves hockey, so I bought him a custom hockey jersey. That’s the kind of thing that I prefer to do. I flew people out and put them in hotels. But that was two years of building up that relationship where I felt comfortable enough asking him to come speak.

Andrew: I see.

Noah: I think normally, I mean if he went to Black & Decker or another major company, he charges like five figures to have people come out. He’s a very busy person.

Andrew: I think when I interviewed him he told me that that’s where he brings in the most money, that’s where he earns most of his money.

Noah:

Andrew: Okay, alright, now that we have a really good sense of who you are, well, an okay sense, the best way to get a sense of who Noah Kagan is is to find a way to get together with him in person, don’t offer to pick his brain or get coffee with him. Offer him a burrito — always from chipotle. Right Olivia? Olivia says yes. Okay, so, we’ve got 10 ways that you and your young company have already failed, and you’re willing to talk about it publicly. The first note that I have here is take money. What do you mean by that?

Noah: So, this is encompassing gambit Kickflip is the parent company, Gambit is the product we built. So it kind of goes over our two year history. And so taking money was right at the beginning. We built all these facebook apps and we were a top five developer with seven million users, so we actually started having investors come to us and we had our current investor come to us and we had an indian dinner. He took out his credit card at the dinner table and he kind of like, let me see if I can do this on camera, [whips out a credit card] how much do you want? And that’s one of those things you read about it books and we were kind of like, I was looking at my business partner Chris and I was like, I don’t know, a hundred thousand ($100,000)? And he’s like, “done.” And I was like, “damnit, we should have asked for more.” And so the real learning and failure that we did there was not so much … we did take the money, we ended up taking a hundred fifty thousand ($150,000), but the real learning from that is that you need to figure out what you’re going to do with it and why you’re taking it. You want to have an objective with that. And so the figure was that six months later we were almost broke. So the two big take aways there are 1) you don’t marry the first person you fuck. Can we swear in this thing?

Andrew: Yeah.

Noah: In case my mom watches it, you can bleep that out. You don’t marry the first person you date, right? You’ve got to date around. So, we should’ve talked to multiple investors and really had a bidding process a little bit more and talked to more people. And secondly, we should have had an objective, like we need this money for x and y and z. And third, when you’re fundraising, if you think it’s appropriate, which is a whole other discussion … I’m kind of against fundraising in general, which everyone always says they are. If you’re going to fundraise, whatever you need, times it by two. That’s just because, if we ever fundraise again, because at that point we were making forty thousand dollars ($40,000) a month. We were just like, oh, Ferraris, we’re rich, this is over, we’re so great. And six months later we were down to thirty thousand ($30,000) in the bank and we were about to be out of business.

Andrew: Before you started you were bringing in forty thousand ($40,000), before you got your first investor?

Noah: We were bringing in stupid money. I mean it was great.

Andrew: How?

Noah: That was all advertising revenue. We were seven or eight million users a month and we were bringing in tons of ad revenue. When you add dollar plus cpfs.

Andrew: Because you were creating facebook apps and you developed it yourself, you didn’t have any outside developers, right?

Noah: No, it was just me and … We were just making a lot of cash for just a few guys. And we didn’t really expect that. After that what happened was that a lot more people created those facebook apps, and so the cpms and the overall inventory distribution went up, advertising stayed the same so pricing goes down. So what happened is that we made a lot less money and we couldn’t cover our costs over a period of time.

Andrew: So then why did you need the hundred thousand ($100,000), or any money at all if you were bringing in so much every month?

Noah: That was exactly

Noah: And we didn’t really expect that advert- you know, what happened was that a lot more people created those facebook aps and so the CPMs and overall inventory of distribution went up, advertising went, you know, the same so pricing goes down. So happens with that is that we just made a lot less money and we wouldn’t cover our costs over a period of time.

Andrew: So then why did you need the hundred thousand or any money at all if you were bringing in so much every month?

Noah: That was exactly the point I said is my point number two is that you have to figure out what your objective is and so I think, more than anything, we kind of wanted just the idea that we raised the money, it just sounds so cool, it’s like “yeah, we’ve raised money”. In retrospect actually today when we were working with a lot of our major partners, you know, that is a big question for them, it’s sort of viability so, you know, we do have bank guarantees, we did show our bank accounts to customers and we do, being funded actually provides credibility and trust to a lot of people.

Andrew: I see.

Noah: So the big- those are the [tips] I would say for taking money and raising money in general.

Andrew: Okay and one other thing; do you think that if you didn’t have forty thousand a month, with your experience, and the team that you had in place, that somebody would have tossed a credit card up on the table and said “how much do you want?”.

Noah: We actually had that happen a few times, that happened – I think at that point it was just that facebook aps were such a hot space and a lot of people wanted to be in it. I don’t think it’s normal circumstances because about seven, eight months later, from that moment in time, we tried to raise money, we actually actively went out saying “hey, we’re broke, we’re building a sports game, can we get money from people”, and no one would give us money. Not one person. You know, which was crappy and so we should have gotten enough money to have 2x of what we actually thought we could have needed.

Andrew: I see. Why’d you guys go broke? Because the space was getting so competitive, ad rates were going down?

Noah: Yeah exactly, I mean, I think a number of different things so the amount of applications that came out increased, advertising revenue decreased significantly; from a dollar CPM to ten cents CPM. So we were doing still a hundred million pages a one point, we got down to like twenty million pages. So at that amount, what is that two thousand a month? At ten cents CPM. So-, yeah it’s around that, so that kind of revenue and we, you know, just isn’t sustainable.

Andrew: Can I ask you, at this point, what you guys did to turn it around? Or that working- or should we work through the list first?

Noah: We can through it, I think that, you know, one of the best things about our company and it’s actually a challenge, not a challenge but an opportunity today is that we were extremely frugal. Like, we all got paid $40,000 which is like one third or one fourth of our normal salaries. I think a lot of people have different expectations. We always optimized for expenses, so we like did the server reviews, we’re like “hey, how many servers do we have, do we need all those kind of capacity”. Everything- a lot of decisions and still today is ROI based, it’s like, this conference, we’re going to go to a, like we’re going to conferences in New York, this conference costs us $3000, how much do we need to make out of it? Well, we need two clients that’ll make us x amount of dollars and it’ll pay for itself. So I think, you know, a lot more people need to look at the ROI of the activities that they do. So being frugal and ROI based helped us kind of saves ourselves where we’ve been able to be very successful today and I can get to that more in the end.

Andrew: Yeah, okay, I don’t want to give away any of the story just yet. So let’s move on to the second point, the second point that we talked about is testing.

Noah: Exactly.

Andrew: How’d you guys fail there?

Noah: So we failed there by, you know, my problem with testing is I do too much of it. So I think you know Hiten Shah really well, he’s like the guru of analytics and, you know, there’s a few others like Mixpanel and some other products like KISSmetric and great products out there; Contingent. The challenge though is for my own promos that I want all this analytics. And frank-, it’s like, I want to track, you know, their age, I want to know when they had sex, I want to know their birthdays and all these different things when really you need to compound it to two or three different things that are the key metrics so, so one of the interesting things we did is when we were, so, I’d say the biggest failure is just getting too much. What you really need to do is two or three and I think a lot of people say that so that’s the key thing. I say the second thing on testing is you got to do it. What happens is you get so busy in your day that you don’t really ever think, oh man I needed to go test or measure things, and that’s where you’re going to have success. It’s kind of like running a marathon with no ending. Like how do you know when to stop? How do you know how to compare yourself if you don’t really have anything to base it against?

So, one of the things we did start testing was we reduced things down with a game called Oragon Trail and we were able to compete because our competitor just said “hey, my gut call is we’re going to let you invite friends” and what we did is we actually figured out, we tested if they should invite ten, twelve, thirteen, fourteen, fifteen and magically fourteen, not magically, but statically fourteen seemed to be the amount of friends you needed to invite to go significantly viral. So what I would say to people is the two biggest takeaways is do testing, to make sure you actually do it, and only pick two or three key things and have an objective. So when I worked at facebook, Zuckenburg or Zuck has everyone calls him, he had one priority focus for the longest time. He would say our only priority is growth, nothing else and so you’d be like, and I would come to Zuck, “Zuck you know in events, we should sell tickets in events”, he’s like, “I don’t care”. And so he was very strong about having a one focus and so, then all your objectives and your analytics and the testing should come back exactly to that. So it should be; okay what are the things for growth that we could be measuring? Invites per day, conversion on invite and you know, how many people registered. Whatever it is. So just limiting the amount of data that you actually consume will help you make better decisions because you’re focused on less things.

Andrew: But let me ask you a question about that with facebook, if all you’re trying to do or if all he was trying to do in the early days was go for growth, and you see that MySpace, the top competitor in the space is getting all kinds of growth by allowing people to dress up their sites, by allowing people to put images and colors and everything else, why not chase that? How do you know what to chase to get the growth and what you have to say that’s not us?

Noah: All right, if you look at Facebook, I don’t know if everyone will be able to say what they stand for, but most anything you can say: ‘it’s a phone book.’ You know, it is a way for people to connect and share, and maybe connect with a lot of people you don’t talk to anymore which I always kind of joke about, but I think that’s the way they define themselves and so with Zuck,[sp?] you know, uses much more methodical about what they were representing, which was connecting and sharing data and that’s what he always said.

Andrew: I see, so go for growth but within the confines of connecting and sharing data. We’re going to be the communication tool that gets growth.

Noah: Exactly, I mean think the hard part about being an entrepreneur, and it’s basically an obviously sign for failure is when people start telling me: ‘Oh, we’re doing all these different things’ and blah, blah, blah, blah, blah, blah, blah. And I’m like: ‘You’re going to fail.’ And I think that’s kind of an insult to a lot of people and I’m trying to be more positive lately. But it’s just a red flag that you’re bound for failure.

Andrew: But then aren’t you doing all these things? You’re doing the games. You had a sports site. Now you’re doing payment processing. Isn’t this too many things?

Noah: I think that’s a really good point is that we built a ton of games. I think at one point we had over 300 different games. And we, you know, frankly failed at the games right? You know. But what ended up happening is we built out payments for our games and that’s been kinda our sole focus and we don’t do anything else. Like, if you notice I haven’t updated my blog in like six months. And so pretty much all I do now, and the companies only focus on payments, and I think, you know, that is the way to success is just having a very extreme focus on one purpose.

Andrew: I see. OK. All right. And by the way, before we move on past testing, what are the metrics you look at now? You’re not looking at who they slept with, you’re not looking at everything, what’s the most important part?

Noah: I can’t tell you the ‘secret sauce’. We’ve actually put together a presentation so for our company, just at an overall level, the macro stuff we look at is, you know, ‘How’s revenue per day?’, so ‘How are our clients doing?’, We look at, you know, ‘Are there outliers?’, so one of the things to consider, so that’s number one. Second thing is outliers in that data, so ‘is there anything that’s out here?’ And so identifying that and coming back to it. And then ‘What’s our margin?’ So how is our overall revenue of the business? Cause if we don’t make profit, we don’t stay in business.

Andrew: But to get to that, are there any metrics that you look at? Because those are the goals. Are there are metrics that you look at to tell you how close you are to those goals? Are you looking to see what conversion rates are? Are you looking to see-

Noah: Oh, at a micro level? Yes, I mean we track it per each transaction. Again, maybe a little bit too much data, but every transaction internally, we’re kinda looking at what’s the conversion rate, and that ties back to our overall algorithm[???]. In terms of the payment for offers we have different, you know, offers we show. And so we look at what the conversion on those geographically, how are things doing in different countries. So I can’t talk about too much about that, but yeah, we do cover a pretty granular amount of data within our own metrics.

Andrew: All right, ten years after you see the company I’ll come back, and we’ll ask you this question. We’ll get into detail. For now you’re right, the most important thing is to understand it. You can get tons of data today, but you gotta focus in on a handful of data points.

Noah: Exactly.

Andrew: Those are the metrics. OK. What’s ABL?

Noah: ABL? Oh, ‘Always Be Learning.’ So my girlfriends in the room so I don’t really know if I wanna talk about this. Ear muffs? [says to girlfriend] Oh, she’s doing ear muffs, OK.

Andrew: [laughs]

Noah: So, Always Be Learning is the story of one of our games we built called -so a lot of success I think is kinda mirroring other success and improving on it- so, there is a game called ‘What’s my Stripper Name?’ Do you remember that one?

Andrew: I do. I got flooded with What’s my Stripper Name links at the time.

Noah: I know [xx] a lot with my nickname. So we saw that and it was just an obvious no brainer to me that was like, oh, we should have ‘What’s my Gangster Name?’ and Pimp Name and Porn Star Name. And so we launched those and they blew up very successfully. But what we realized very quickly with Always Be Learning was that hey, like how many stripper names do you need Andrew? You get one. You know, once you get your stripper a porn name, you’re done. And so we ended up, you know, in let’s say Gangster Name, we added an ending Gangster Gear. Cause once you get your gangster name, you need gangster gear. Pimp yourself out. And so we had like, gangster guns and gangster bling and gangster cars.

And so people started sending that to each other right? Cause we wanted to increase the retention. Because there was very good variety[??] once your get your pimp name, whatever, you spread it out. But people were never coming back. So we thought that with the gear we thought people would come back and then spread it. And so it terms of Always Be Learning, part 1 was, OK the viral[??] part was good, and then we realized, OK well retention sucks so maybe the gear will help. And Always Be Learning we kinda looked for the key parts that were really successful. And so, this is the ear muff part, I was in bed with a friend, a lady friend one night and I was going over this stuff, which wasn’t a good pick-up line at the bar. You know, ‘I build Facebook ads.’ It’s not really a good pick-up line.

Andrew: [laugh]

Noah: And she was like ‘Oh, it’s kind of like tattoos or stickers.’ And I was like ‘What do you mean?’ and she was like ‘Those things that you’re giving to people, why don’t you just let people give ’em?’ And so what ended up out of that business was tattoos, which was a natural evolution. So I was saying, this stickers thing is really actually the most interesting thing. And so [end of audio]

Noah: There’s a lot of ways it can be improved today And so the same thing with Facebook is that I came up with the deal oh let’s do Facebook status. And I think a few months later Twitter came out with Twitter updates. And so it was a kind of interesting play where it was like, within Facebook the thought was you know, people aren’t coming back. This is where I was like you know I put up all my information on, I look at photos, and that’s it. But what about right now, and what about what’s going on today? And we said oh, let’s add status updates, which, people didn’t want to do in the company. And, you know, Twitter came out and said “Hey this, this part is the most exciting thing.” I don’t know if that was from Facebook, or just added in with what they were doing themselves, so they came out and built Twitter. At the time we were like “Oh that’s stupid, you know, what about everything else that’s a part of it?” But as it ends up now it’s like you know, people, that alone was the product that was real interesting. So I think people should be looking in terms of the themselves and saying “Of my product, what’s really the most compelling feature.” So I can tell you with Gambit, a lot of people today are saying we want distribution, we want distribution and we deal with over two million people a day. So we have distribution available, and it’s figuring out, okay, how do make that work for our, for our partners and our clients.

Andrew: By distribution they mean they want, they want access to your other clients audience.

Noah: Exactly, and for those clients it makes sense in some ways but it’s working with those part, with our clients and helping each other out. So it’s like driving more business to yours, and back and forth and keep making basically everyone more money.

Andrew: Now this isn’t a failure, this is just something you guy’s have done and done well right?

Noah: Yep, well to be completely frank with you, I kinda looked at it as a failure. I was like people are asking us all the time, like I got a call earlier today, like give us users, give us users. And I was like no this is not who we are. But then it’s also, it’s not like we want to shift our business models away, no we’re doing modernization for games so if we can help them grow their games so we can modernize more then it’s going to make them a lot of more money and to be completely selfish it’s going to make us a lot more money over time. So in the end it’s what’s best for our clients.

Andrew: So by the way, have you and your girlfriend talked about the people you’ve slept with?

Noah: No, we don’t it’s actually a sensitive thing.

Andrew: Is it really?

Noah: Uh, a little bit. I think she’s a lot more comfortable with it, but I’m not sure. I don’t know how much it, frankly, I don’t want to say frankly, I have a friend named Frankly too, so it’s kind of funny to say that around him. But it doesn’t do much for me to know that kind of stuff.

Andrew: It doesn’t?

Noah: No, it doesn’t.

Andrew: But she’s ok with. Can you turn her around? Can we meet her?

Noah: No I don’t mind. Babe do you want to be on camera?

Andrew: Olivia do you want to see Noah Kagan’s girlfriend?

Noah: No? She’s kinda camera shy.

Andrew: She is?

Noah: Yeah she’s too hot though, she’s really hot. Can I see your website?

Andrew: Can’t even see the website? Oh well we’ll have to get a drink soon anyways, so. Then Olivia doesn’t want to come on camera either, she just got back from a run. Or do you want to?

Noah: Yeah Olivia, lets see. How was your run?

Olivia: Hi Noah, it was fast.

Noah: What’s fast? Her fast is probably like 20 miles.

Olivia: Uh, no I did less but..

Andrew: She did less but Olivia is very competitive. It’s hard for me, we can’t run together cause she’s extremely competitive.

Noah:

Do you guys compete a lot?

Olivia: What?

Noah:

Do you guys compete a lot?

Andrew:

Not with each other. We have done races but not since we started planning the wedding.

Noah:

Nice.

Andrew:

Yeah.

Olivia: It’s almost over. See ya Noah.

Noah:

Alright. Are you guys going to video Skype the wedding?

Andrew:

I’m going to be tweeting as I say I do. I’ve got the hash tag, we’ll share it with you later.

Noah:

Olivia, I do! That would be tight you should do that.

Andrew:

He was just saying we should do tweet I do to each other Olivia.

Noah:

No please don’t do that.

Andrew:

Oh he says no, alright. Okay, that’ll be on my ten lists of mistakes I’ve made in my marriage with Olivia which I’ll do an interview with you within a year and I’ll tell you what I learned.

Noah:

Exactly. I think your whole one percent female audience is now complaining. They’re like “Oh Andrew’s a meanie, how romantic”.

Andrew:

One percent, I got ten! No I don’t know exactly how many…

Noah:

Who’s your audience, who watches these?

Andrew:

Uh, it’s people like you who are kind of watching their friends or listening to their friends while you’re driving or flying, and it’s also people who are starting companies.

Noah:

Gotcha.

Andrew:

Yeah, and every once in a while I’ll hear from a college student, and by the way if you guys are watching us and I didn’t include you in this and you’re doing something different let me know, I’m always curious about who’s watching and who’s listening. Alright, um, next validate immediately. What does that mean?

Noah:

So, I think it’s… So the problem with businesses, and this is my favorite line, people come up to me and I’m sure they do to you, and they say, “Oh I’ve got the greatest, next best thing it’s going to change the world, it’s going to do all this stuff”. And maybe it will, I don’t mean to knock ’em, but a lot of people are like, “Oh it’s coming out 2/2/2010”. And that to me is like, alright you’re going to fail. You should just call me and I’ll yell at you all day, no you’re going to fail. That, that, that is my job. But the problem with that is I think there’s lighter and faster and cheaper ways to go and validate immediately, and so some of the stories that we’ve done is that, we’ve built a destination website that’s called Bet Arcade, and we spent eight months building it. And the question I always like to ask people is, how many users, so we had 15 thousand users, how many do you think we got to pay after eight months? It was a $20 a month subscription.

Andrew:

15 thousand, how many could we get after paying users. So, it took you eight months to launch it, and then eight months afterwards, only 150 people paid. So, it was eight months, and then it was finally, like, live, and official. And at that point, we had only had 15,000 users.

Andrew:

I see.

Noah:

And at that point, we only had 150 paying users. It was like, “Wow, we’ve just spent almost a year, and we’ve got a business that’s not doing anything.” And so, that doesn’t mean give up on it. I think if we were more passionate about sports and gambling, which no one on the team really was, it could have been a lot more successful.

But I think the point that I’m trying to take away is that we spent eight months building a site that did nothing. Like, completely nothing. It’s not to knock us, but at the same time, we could have spent a weekend building something a lot lighter weight and figured out if this is something that’s going to work or not.

Like, the current Gambit product was done in a weekend. Sports Bets, the Facebook app that had a million users, that’s still going on today. We don’t touch it. We built it in a weekend. You know, Andrew built it, both of them, in weekends. Of course, we developed them out over time, but the idea there is that you can call people, you can post on Craig’s List, you can put up a Google ad, and have a landing page, and you can test things much quicker than the six months it’s going to take you to realize then maybe, hey, this isn’t the right idea, or the market has shifted.

Andrew:

Isn’t it harder to do than it sounds, because you have this big vision of what you want to create. The reason that you’re starting your own business is that you do have this vision, and you’re passionate about it. You’re saying, “Chop it off,” and only come out with 10 percent of the vision and toss the other 90 percent into…well, not into the garbage, but toss it aside. Harder?

Noah:

I think, fundamentally, you have to have a problem that you are interested in, a challenge, right? It has to be something that you want to do. So, frankly, at that point, regardless of the time, you’ll do it, because it’s something that you want solved. But anybody who tells me it’s going to take that long, I can go figure out if that business is going to work in a very short period of time, and I can have a prototype or something lightweight up within a month at the most.

And so, eight months later, at that point, you’re already going to be that much further behind me, and I’ll have that much more success and knowledge that you won’t have. The problem is, people are always saying, “I need this feature, and I need this feature, and I need this thing and that thing.” At that point, it’s already too late.

You know, I don’t think you need a…it’s not saying not to invest in what you’re building, but go and do things at a much more micro and more incremental build out schedule then just, like, wait for the big chunk to be done.

Andrew:

Does it help that you have cofounders, and that one of you can say to the other, “No, let’s scale it back. I love your vision. I love what you want to do, but that’s,” as our friend Derek Sivers[sp] would say, “that’s version infinity. Let’s come back to what we can launch.” Does it help to have that back and forth? Do you guys do that?

Noah:

So, now it does. I think two things to think about with cofounders are – they need to be very complementary, and you need to date them a lot longer period of time than we did. A lot of our cofounder relationships were shotgun marriages. So, I think cofounders are really helpful. I think at the same time, you know, for me, because I’m much more action-oriented, one of my partners is very much more technical and much more detail-oriented, and so it’s a good balance at that point.

I’d say in the beginning, it’s much more about just creation, because you can theorize things forever. And I have a friend who I like, and I think you know him as well, but he talks himself out of every single idea he ever comes up with lately. And I think that’s very easy to go do. So, what you really need to go…you need to do first, think later. And after about a month, you know if it’s going to work or not, and then you can come back to it.

So, a lot of people are like, “Well, that’s not for my business. We’re a big business, and we’re funded, and all these things.” And I’m not saying not to plan things out and have some details, but I think in terms of any business, you can figure out very quickly through quick tests, whether it’s going to be…whether it has a leg to stand on, or whether you should be going in different directions.

Andrew:

Did you say you lost some cofounders in this business?

Interview: I did, actually. So, I’ll come to that in two more slides.

Andrew:

OK. So, let’s go on to “Exit.”

Interview: So, I think “Exit” should be at a later point in the presentation, but, you know, we raised the money out of…this was before we even raised money. When I initially built a lot of the Facebook apps, we didn’t offer on the table for $100,000. And so, frankly, I worked on this stuff for two months. I started it with an Indian outsourcer, who I’ll talk about later, as well…or Filipino.

After two months of work, a $100,000 return for basically $500 and maybe a 100 hours? That’s a pretty good return if you look at your time. And so, greedy Noah here, was one, I didn’t know what I really I wanted out of my business, and I didn’t know, frankly, what that objective was. And so, what that means is, that $100,000…I should have either said, “This is what I’m taking,” or not.

And I flip-flopped, and so the company came back…and, you know, we have a bad relationship now, and I ended up not taking it, and our games business which was worth a $100,000 is now…back then, let’s say a few months ago, was probably worth like $1,000, if that.

And so, I think the things to consider are, “What are you really want to be doing with your business. Like, what is a great outcome for you? How do you get there?” And thinking about that a little bit before you start. So, with Mixergy, I kind of asked you earlier, “What do you want out of Mixergy?” And you kind of really didn’t know, which is an OK thing.

Noah:

So the marathoner, the football examples that you don’t know where the end is, how do you know when to stop? Or how do you know when to evaluate yourself to see how close you are.

Andrew:

I see. Should you have taken the one-hundred-thousand? I mean, the business had a lot more potential than one-hundred-thousand. You were bringing in around 40,000 a month for a while there.

Noah:

Yeah, I mean, I’m going back and forth on it because the forty thousand came after this offer, we didn’t even monotize at this point. This is just really in the early stages. So, in the beginning, I was like,’no, we’re gonna make millions and I’m fine’ and then after a few monthes after that I was like,’huh, I could’ve been a millionaire in Thailand.’

Andrew:

You would have had to split the 100,000 with the co-founder

Noah:

No this is just when I was building it myself.

Andrew:

Oh! This is just you building it.

Noah:

Yeah, I brought in cofounders at a later point. It’s hard to say, at this point I do think that people have regrets. I think people that are like,’No regrets’ I think that’s full of shit. At this point, I think I got a lot more out of the experience then I got through learning. It was just a 100,000 dollars mistake. But ya know, you can’t go back in time, which is what it is, which is something to at least be prepared for. Like with Gambitt, if we get an offer, it’s like saying, ‘yes, that’s over the line of what our threshold is or not.’

Andrew:

And I’ve actually talked to you about this privately, I’ve overheard conversations with friends while you talked about this. That you. Do you guys have a set number that you are willing to accept and is there a difference between your set number and their set number? No, no comment.

Noah:

No comment. No, I mean there are differences in the founders, and I think that if the founders are all on the same page, there’s probably issues. But I think there’s a certain threshold as a company that I think is yeah, I mean, In everything there’s an outcome. If you go public there’s an exit, if you get bought there’s an exit, or if you go out of business there’s an exit. So yeah we do have a threshold. If someone came to us at 2am and just said ‘Andrew here’s twenty dollars.’ I’d say ‘yeah, you can take us to get some Chipotle.’

Andrew:

We love Chipotle here too. By the way, for anyone that’s listening to this, I said the same thing when I was interviewing Matt Mullanway that sometimes I back away from questions and sometimes I’ll push ahead. It’s not because I’m afraid of the person I’m interviewing and it’s not because I want to give people just a safe interview, I want to give you a comfortable place where you can feel open, where you can feel like,’Andrew, I’m going to come on here and I’m going to spill may guts and talk about all my failures knowing that if there’s something that’s going to damage to my business, we can pull back but if it doesn’t damage my business and helps your listeners then we’ll go all out for it and I need you to trust that I can do that and the only way I can do it is by sometimes stepping away from certain questions and sometimes stepping away from things I know a little more about beyond this interview

Noah:

No, I mean, Andrew, I’ll give you an exclusive on this interview. If you offer me a billion dollars today Andrew, then we will sell.

Andrew:

A billion dollars! We got it right there. If that does not make it into techcrunch, I don’t know what will.

Noah:

Exactly

Andrew:

Thank you

Noah:

This is a Mixergy only!

Andrew:

We need a sound effect or we need some kind of music for a Mixergy only.

Noah:

Buwoom, buwoom

Andrew:

Alright, I hope I’m reading my handwriting right on these notes. Number six is gut.

Noah:

Yes, so, I wish you guys could all see the picture or see this on video, it’s like a big fat dude with big fat man tits. So what gut is, is that when we were first building apsci, we brought on our first founder as a partner with me. And so, he was a college kid in Canada and he coded like Mozart, made music, it was magical, the code would just fly out. He would have features out left and right. So it seemed like a really good partnership and. Are you coming on film?

Andrew:

Nope,eh close, to get him on camera that’s what I was hoping for.

Noah:

oh, no So next time. So what happened is that it was very appealing in the beginning and I like him. So very quickly, that my gut was telling me, thats why the picture of the fat guy with the gut, was telling me something was wrong because he was disappearing for a day or two. So, I think that in business, and you know I talked about this in the beginning slide too, is that you have to trust an analytic to measurement and sometimes a fair amount of trust in your gut. And so, Gary is his name, Gary disappeared too. So,on the first day it’s okay. Second day, second time he did it, it was kind of nerve wracking. Third time, Gary left for three days and the whole thing was down, and so the moral of the story is because I didn’t trust my gut and let Gary go the, you know, the first three times he disappeared. When Gary went away, I locked him out of all of our stuff because I’m like,’you’re unreliable.’and what happened is that he ended up having the master unix and group access. So he locked us back out of everything and at that point, Gary basically took us out of everything and the whole site was down. Unfortunately, Gary showed us,’oh, I have control’, he gave us access back for a day, we downloaded all the sourcecode and locked him out and moved all the servers and all our stuff. But it became a big ordeal

If you work for a big company, you can wait for someone. Or you’re like, “Oh, Mom will fix that.” “Dad will help us with that.” No, it’s you. Right? And that’s the greatest thing is that if there is a problem or there’s something that sucks, you can change it. You have partners, you talk with them about it as well but you have control in your own company. So you can control your own destiny. I think you have to make the decisions and be comfortable with that.

Andrew:

Well said, well said. It’s very easy to get trapped in thinking that you’ve got to just continue doing what you’ve been doing. You’ve got to keep your Gary on board because you hired him, because it’s the right thing to do but one reason, or one excuse or another.

Noah:

Do you ever feel like…did you feel when you were running your company it was more like a roller coaster of emotions? And that’s part of going back to your gut. Because I know with our company, and I think I’ve talked to a few other entrepreneurs and they all secretly say, “Some days I have really good days and some days I have really bad days.”

Andrew:

You know what, I was going to ask this and and bring it up but then I said maybe we’re going to get too philosophical But here’s the thing about gut: sometimes it’s hard to trust your gut because you’re freaking out! Because you have all your money on the line. Because you somehow saw some article in the Wall Street Journal about someone who had a great idea, who put all his money on the line and went out of business and in the back of your head, as an entrepreneur, you’re thinking, “Is that me? Am I the same fool who thinks that he’s got a winner here?” And he’s going to take every dollar out of his pocket and every dollar out of his credit card to do it? And your gut is just in pain, but you can’t trust that. You’ve got to shut that out and say, “No. You’ve got a vision here, you have to pursue it.” I mean, what I’m trying to say is sometimes your gut is going nuts and I don’t know when you have to say, “No, shut up gut just keep going.” And I don’t know when you have to say, “No. You’ve got a Gary on your hands get rid of him.”

Noah:

That’s a really good question about when to use your gut versus using outside things. I think for advice, in general, the problem with advice is all you’re actually looking to do is validate yourself. And so I think, you know, I would say about 99% of the time you should know what to do. And what you think you should do is probably the right answer. And I don’t think it’s wrong to get opinions and outside things but if your gut is telling you something there’s a reason for that. I think it’s kind of hard to say your gut was ever wrong. It’s like math class in 6th grade. You’re like, “Is it A or B? A or B? A or B?” And you’re 50% right so you should probably go with what you first thought.

Andrew:

Here’s my feeling on this: that we’re giving people your advice and your experience based on your experience. But there are no hard and fast rules. Somebody’s going to hear you say “Go with your gut,” but it won’t…what am I trying to say? I’m trying to say that it’s the stories I think that become more meaningful than the advice that you give. Whether or not you have to trust your gut 100% or maybe we don’t have a clearer answer for when your gut is lying to you and it’s —

Noah:

42%.

Andrew:

— but we do know that at some point the person who’s listening to us right now is going to have someone like Gary on their hands. Someone who they know doesn’t need to be there with certainty, but they have some resistance to letting them go and they’re going to remember, “Well, I did hear Noah and Andy talking about this. This is the same situation. I need to accept it, deal with it and move on.” And that’s why I always want an example. And I know that at some point we’ll all relate to those examples in business.

Noah:

I think if they get to that point they should just leave a comment on Mixergy.com and we’ll answer it for them.

Andrew:

If you have…if you need any advice…email me and I’ll forward it on to Noah for you.

Noah:

I’ll forward it back to Andrew to answer.

Andrew:

So no that is important to say. There are no hard and fast rules in business. Anyone who pretends that they’ve got it is probably trying to sell you on a seminar that’s going to solve everything and take away all your money. But these examples, these stories we can all learn from and we can find ways to apply them in our lives. And that’s why whenever I ask…whenever I interview someone I want concrete examples so that we can all learn from them. Next up, flat.

Noah:

So the problem with doing business, and I think in America…I think Americans are lazy and they are greedy and they have too much entitlement. So I think Americans are going to get screwed over the next 10 to 20 years. And it’s kind of a weird thing to say because I am an American. Or I “Uh-meric-uh,” as I like to call where I live. The challenge with the world being flat is that Americans need to take advantage of it more often. So the story is an experience that failure or success was that in the beginning of building the FaceBook apps, in our business is that I needed all these logos for the sports teams. We were building sports application. So in the first few days I was going to Wikipedia and one by one, click, find image, save, click, find image, save. And I was talking to my buddy, my buddy Joe from MyChurch.org, who’s a great guy, really interesting stories as well, and Joe’s like, “Oh! You should outsource that.” I was like, “Outsource? That’s what we do to car manufacturers and fabric workers and things like that. I don’t outsource. That’s what you read in the books.” And so Joe was like, “No, no, no man, it’s great. Anything that you have a process for or that’s redundant, should be outsourced.”

You have fabric workers and things like that. I don’t know, there’s such a read in the books. So Joe was like, ‘No, no, no, man. It’s great.’ Anything that you have a process for, or that’s redundant, it should be outsourced. And what I mean by outsourced is that it’s not about putting it in India or putting them in the Philippines or any of these countries that are third world, not third world, but any of these outsourced typical countries, it’s more about your time is worth something, and someone can be doing it for cheaper, you put it on that person. You put it on your cousin, you put it on Craigslist in Texas, you put it on anything other than yourself if your time is more valuable. That’s the bottom line.

So with Joe, he said people in India for five bucks an hour, I can do all this work for you. I was like, ‘Let me try it out.’ So, the site that I use is getafreelancer.com, so you can also use Craigslist India or Craigslist Philippines or Craigslist Texas, and those are great resources. I said, ‘I need someone to go to these websites. I’ll pay ten dollars.’ When you do outsourcing, you should only pay on delivery. And I said, ‘When I get all these logos, and I verify it, then you’ll get ten bucks. It’s five dollars an hour for two hours, and that’s it.’ And so, Neshant Netta [?], is one of the guys that I worked with, and I still work with him today on different, random tasks. Other things I did was I needed people to go grab data’”what are the other things, man, jeez’”people to advertise with. When I was working at Entz [?], I needed all the different personal finance blogs. So, my favorite guy is Nicholas Sikolov. Sorry, Nicholas. He was sixteen at the time, and I found him on getafreelancer, and the guy ended up working with me at Kick Flip, and he ended up making more money than his parents. We had him do just anything. ‘Hey, go find people that talk about personal finances.’ So we found all the press blogs. ‘Go look up all th is kind of data.’ It’s just different processing and tasks. You guys should be outsourcing, thinking about, ‘What is the best use of my time?’ Right, so the greatest thing about Gambit, that our company is doing, is hiring people. So I think what people have a problem with is’”and this is my new philosophy’”is value versus cost. If I’m babbling, you can shut me up, Andrew, but’”

Andrew:

No, this is very useful.

Noah:

I think that is a challenge for us in value versus cost. Our companies come from poverty to some success. We’re still nothing. We’re a good company, we’ve got a good brand, we’re stable and all these good things, but we’re still, you know.

Andrew:

How much revenue do you guys do in a month?

Noah:

We can’t talk about revenue, but we’re on track in the eight figures by the end of the year, so’”

Andrew:

Revenue of eight figures by the end of the year.

Noah:

Yes. Good eight figures. So, in value versus cost, we come from a place of poverty, so we’re so frugal and so tight with the money to a place where we have money and what people need to really do with this place is value versus cost. If I can cost-if something costs me a hundred thousand, but there’re going to make me a million, that’s value. That’s not a cost; that’s an investment. So, I really think what people should be taking away is How am I going to be spending my time on things and how can I invest that money to make more of it? How can I hire someone to make more value for my equity, more money for the company, or expand more things? So, it’s like a sales guy. We’re evaluating certain people; he’s going to cost me a hundred thousand, but he’s going to make me a million, of course you should do it. All that that is, is just a mind set. Once you take away what I want people to do is go outsource things. And outsourcing is really finding someone else whose time is less valuable than yours. The second thing with that is go look at things as an investment and not cost. You know if you can take those two things away from that kind of interview, I would love that.

Andrew:

I’m always surprised by what you can outsource. I never would have thought that you could outsource something as small as finding logos. It seemed like too small a project.

Noah:

Anything? I wouldn’t outsource my girlfriend, but you can even do that.

Andrew:

Didn’t you outsource once that you had somebody that you found online find an apartment for you?

Noah:

Yeah, I outsourced my craigslist apartment hunt. ‘I want these locations, I want you to call, I want you to schedule meetings, and it has to meet this criteria.’ It was Nicolov [unintelligible] who came back and put it in an Excel spreadsheet for me.

Andrew:

This is from getafreelancer.com, you can hire someone to come do that for you?

Noah:

Exactly. You can hire them to do anything. You pay them on their performance. It’s like, ‘I’ll give you ten bucks once this is complete.’ If you don’t like it, you don’t pay, and they go over and do it.

Andrew:

It’s so cool. I can now think of so many times that I would have needed that for moving to Argentina. Let somebody else go figure out where I can get office space. Why should I keep calling around?

Noah:

The thing is that people talk. I don’t think people want to talk about it enough to think Tim Ferris got the fire started, but I think more live examples like me will really show that. I think that’s where Americans should be worried. I’m paying people five dollars for basic tasks or even more complex tasks in India, and they come back for more. ‘Sir Noah, please may I have more work?’

Andrew:

I don’t think that we should be worried about that. I think that’s a great thing because we’re giving them money, and they’re going to keep rising up, earning more money than their parents, every generation’s going to do better, and I don’t think it means that we’re lazy because look at what you did with that time. You built a company that’s now bringing in eight figures in revenue in that time, and potentially will sell for a billion dollars. If you build that’”

Noah:

I want more people to do it, and I want more people to at least be aware of it.

Andrew:

I can think of another example of what people can outsource.

Noah:

Tell me, even, let’s say Mixergy.

Andrew:

I outsourced the video editing. It’s incredible.

Noah:

Do you?

Andrew:

Yeah.

Noah:

It’s kind of like coming back and like the basic.

We use outsources. They put them in spreadsheets. They optimize them. They categorize them based on certain criteria, and then we go do the sales on that, because my time searching websites for that stuff is not that useful.

Andrew:

Wow.

Noah:

So, hopefully, I didn’t give my competitors too much advantage on us, but it’s just a much more effective way of [xx]. You know, our clients appreciate that because, the more we can make for them and not waste our time on things and create more value for them, the more money they’re going to make.

Andrew:

See, and that’s what a scrappy company would do. A scrappy, ambitious company would go and look for cheap, ten-dollar outsourcers. The companies that are well funded, that are super well funded, I’ve seen. They will have people who they’ve hired full time, where they’ve got a recruiter to help them find, just so those people can go look around the Internet for potential customers.

Noah:

I think that’s an exact good point. I don’t really want to say that I’m cheap. I think they’re affordable, and I think that’s just to be nice to those guys, broad as well as locally. In terms of recruiting, like right now, we’re looking for engineers and we’re looking for salespeople and so forth.

We could spend our time doing it, but I have so many things to do. So, we’re going to probably hire a recruiter to go do that, because that’s probably a better use of our time. So, we can keep building the business, and they can go help us find employees, because that’s what they specialize in.

Andrew:

I see, and you know what? All right, let’s leave it there. So, by “flat,” we mean the world is flat. Take advantage of it, people. If anyone wants my outsourcing company, shoot me an email, and I’ll send you an introduction to them.

Noah:

Nick Love [sp?], as well. He’s available, so let me know.

Andrew:

So, email you, or in the comments, if you want any of Noah’s…if you want Nick Love, or any of the other people who he mentioned.

Noah:

Right.

Andrew:

He’d love to make introductions for you. OK. Momentum, number eight. How did you make a mistake there?

Noah:

I just shook my hair.

Andrew:

[laughs]

Noah:

[laughs] The greatest thing about video chats. So, momentum, what I think is a challenge, and this kind of comes back to the “validate immediately” is, you got to get the balls rolling. Like, if you…a few of the things I want you to take away is, do something now. Now. That’s it. Because you can go…the thing is, after work you come home, you have a burger, you watch TV, you chat, you check Facebook, and then you go to sleep, and you kind of go back to your same thing.

I can’t tell you how many people I’ve talked to that are unhappy with their work. I’d say 80 percent of America hates their work, or would want to be doing something else. And so, in terms of momentum, do anything now, right?

And so, what ended up with me, in my own story in Kickflip, is that when we were…when I was…it’s not so much a failure thing, but it’s…when I was at Mint, at night I said, “Hey, you know, my goal is to build my own company and to take it abroad to Argentina,” which we ended up doing as a company.

And what we ended up doing was at night, at Mint, I said, “Hey, I’m not working at Mint, I’m going to build this Facebook apps.” And then, at the time when the Facebook app thing was rolling, I said, “Hey, I’m going to go move this full time,” because the ROI for me at that point was a better decision.

I think for a lot of people, and I think there’s…everybody always says, “Should you have a…should you moonlight, or should you do full-time?” I’m a somewhat high-risk averse person. I don’t like to quit and do something brand new like that. So, if you can talk about momentum, just get something going. You can do very small steps to get the ball rolling, and then make it a full time thing.

Andrew:

I see. You’re a developer. Isn’t it easier for a developer because you can build something? You can build almost a fully working company on your own, but someone who can’t develop is kind of screwed, no?

Noah:

So, I’m not a hardcore [?] or a good developer. If you ask my partners, they would say, like I can barely do the help pages, which is questionable. I think I could do that.

Andrew:

You developed a Facebook app, so you’re way beyond most people.

Noah:

But, speaking of that…so, I did CS for two years at Berkeley, so I did learn a fair amount about CS, but for developing the Facebook apps, I actually outsourced them to start.

Andrew:

Get out of here! Really?

Noah:

Yes. Twenty buck an hour. So, it was value. It was like OK, well, you’re going to cost 20 dollars an hour, which out there was a lot more than normal, but he was able to develop things I asked him to in a very short amount of time. So, I was sleeping; he was working. I was sleeping; he was working. It was a 24-hour process that got…always development…ended up building out the applications, and that’s perfect.

I don’t think you need…everyone always makes an excuse of, “I need a CTO. I don’t know development. I don’t have enough money. I have a job. I have a family.” You know, frankly, everyone’s got their own story and their own problems, so I can’t speak for everyone. I just know, for myself, is that if you want to get things done, there’s always a way to do it.

Andrew:

All right. I love that. I love that. And that’s the kind of stuff that I get a lot of positive emails about. We were talking about that before.

Interviewer: Wahoo!

Andrew:

Yes.

Noah:

I need to come up with more clichéd lines. That’s my goal.

Andrew:

You know what? There’s some clichés that are actually true. There are some lines that we’ve said over and over again throughout our lives because they’re true. All right. Next: prediction.

Noah:

So, prediction for me is kind of like how Gambit was built.

Andrew:

Actually, I’m sorry, let me go back a second just for my own notes. Momentum – it sounds like you did that OK. Did you not have momentum at any point? Was there a period where you wish you would have started, but you didn’t?

Noah:

Ooh, that’s a really good question. Is there a period that I wish I…what are you…is there a period that I wish I would…

Andrew:

I mean, if we’re listing here your mistakes, then momentum doesn’t seem to be a mistake. Momentum seems to be something [cuts off]

Noah:

But with us, the failure was basing it on BitTorrent versus Flash or Quicktime or something more web based. So, I think your predictions can be right, and they can be wrong, but that’s the challenge in success. If everyone knew what was going on, you know, everyone would be successful. There would be no competition.

Andrew:

Tell me a little bit more about Andrew Chen. I don’t want to get too diverted here, but his name keeps coming up. I was watching Charlie Rose with Mark Andreisen [sp], who used Andrew Chen as an example of how businesses should be run. So, you know him pretty well, I think you introduced me to him years ago because you guys did a conference together?

Noah:

Yes, so Andrew Chen I’ve known since I was at Microsoft. I met him at a barbecue, and during the barbecue, I said, he’s actually a child prodigy, which he won’t admit. But I wanted to write a book on how to make a child prodigy, and I was going to put it in Chinese and sell it to Chinese parents [laughs]. Seventy percent of my high school is Asian, so I’m definitely from the Asian community. And I thought it would be a hit, you know. A lot of Asian parents want to make a prodigy. So I started interviewing Andrew, and that’s how we became friends. Because he graduated college at like 17 or 18. So Andrew is very methodical, very strategic, and just good at predicting the future. He’s also very secretive, which, frankly, is the right way to do it. Because his whole point is… In the valley at least, in the Bay Area where I’m from, everyone is like “”Oh, what are you doing? What are you doing?”” I think he’s got a bad rap for no one knows what he’s doing, plus he has a blog that’s very well read, and very smart. I think the smart thing about Andrew is that he doesn’t get much value out of exposing what he’s working on.

Andrew:

What’s his biggest success? Yes, it’s true, what is his biggest success?

Noah:

He sold a company for a lot of money that he won’t tell you about.

Andrew:

He won’t tell you even what the company is?

Noah:

He doesn’t even mention it. I don’t think he’ll get mad at me for saying that, but I don’t think Andrew needs that validation. He gets a lot of it himself. He does get it through his blog readers, too, I’m guessing, but yeah, Andrew’s had already success that, I don’t know why he doesn’t mention.

Andrew:

Do you know what his company was? And how it did?

Noah:

The one he sold?

Andrew:

Yeah.

Noah:

Yeah, I don’t know if he wants… Andrew’s secretive.

Andrew:

He’s secretive, but at least he shares it with you, a good friend of his.

Noah:

Yeah, I mean, Andrew, about the thing he’s working on now, I wouldn’t even mention it on my death bed, I wouldn’t even mention it.

Andrew:

And you know what he’s working on now?

Noah:

No comment.

Andrew:

I see.

Noah:

Andrew doesn’t even like the thought of people knowing. He’s very, very secretive about that, and rightfully so.

Andrew:

He’s an incredibly nice guy, but you’re right, very secretive. He returned my email requests for interviews very nicely, not like we were buddies, but very secretive.

Noah:

Well, unlike your business or my business, my business is getting our name out there and talking and exposure. There’s no value for him. And I don’t think it’s a bad thing, like what does he get out of that?

Andrew:

Yeah.

Noah:

Nothing. So why would he do it?

Andrew:

Mark Andreisen [sp] knows what he’s doing, so that’s the most important thing, more important than anything here.

Noah:

Andrew is a General, he’s got the chessboard planned out months ahead of everyone else. Secretive just sounds like such a bad word, and it’s not. Andrew’s just, it’s a value based decision that he doesn’t get much out of.

Andrew:

Alright, what’s his liquor in case I see him in person?

Noah:

I don’t think Andrew drinks, either.

Andrew:

He doesn’t drink anything?

Noah:

Nothing.

Andrew:

Alright, alright.

Noah:

Andrew doesn’t even eat, all he does is work! [laughs] Andrew’s a machine, he’s actually from Terminator, he’s like a cyborg or something.

Andrew:

Alright, Rahmen Profitable, for all my friends from Hacker News that are watching this. How did you make a mistake on Rahmen Profitable? And then we’ll talk about how to get them there.

Noah:

I think with Rahmen Profitable, I want to just clear up something against P.G., Paul Graham, I like rahmen, and I like profit, so I just have an issue with people being Rahmen Profitable, because I think you can eat rahmen and be profitable at the same time. And I think it’s got a connotation of you’ve got to only eat rahmen and be super cheap until you are profitable. And so I think the things to be considerate of is that I guess it’s not all failures. Sorry, Andrew, I hope you’re not mad at me for this. I think you just need to be a lot more conservative in watching your money. And I think we didn’t do a great job of that at the beginning of the company where the basics you need to do is: What is the input? What is the output? And what does that number look like. We didn’t track it as best we could. Everyone should manage their books and should know what their revenues and profits are, at least every other week, if they’re making any revenue. And so I think what I really want to get out of Rahmen Profitable, when talking about that, is that it’s not about being Rahmen Profitable, it’s about being smart with your money, right? Kind of going back to that value versus cost. And so, at our company, one of the things I loved, some of my favorite stories are, I went back to the team and I said “”Guys, you know, we’re making money, we’re profitable, everything’s good. We treat out clients well. I need a new laptop, my computer’s too slow. And at any company, if you’re a funded company, or public, or anything, what do they generally do? Talk to the IT guy or go buy a new laptop. One of my guys was like “”Buy more RAM. Clean up your hard drive space. Do a defragmentation.”” And I was like, “”Nice!”” And guess what, I’m still on the same laptop

But with us, the failure was basing it on BitTorrent versus Flash or Quicktime or something more web based. So, I think your predictions can be right, and they can be wrong, but that’s the challenge in success. If everyone knew what was going on, you know, everyone would be successful. There would be no competition.

Andrew:

Tell me a little bit more about Andrew Chen. I don’t want to get too diverted here, but his name keeps coming up. I was watching Charlie Rose with Mark Andreisen [sp], who used Andrew Chen as an example of how businesses should be run. So, you know him pretty well, I think you introduced me to him years ago because you guys did a conference together?

Noah:

Yes, so Andrew Chen I’ve known since I was at Microsoft. I met him at a barbecue, and during the barbecue, I said, he’s actually a child prodigy, which he won’t admit. But I wanted to write a book on how to make a child prodigy, and I was going to put it in Chinese and sell it to Chinese parents [laughs]. Seventy percent of my high school is Asian, so I’m definitely from the Asian community. And I thought it would be a hit, you know. A lot of Asian parents want to make a prodigy. So I started interviewing Andrew, and that’s how we became friends. Because he graduated college at like 17 or 18. So Andrew is very methodical, very strategic, and just good at predicting the future. He’s also very secretive, which, frankly, is the right way to do it. Because his whole point is… In the valley at least, in the Bay Area where I’m from, everyone is like “Oh, what are you doing? What are you doing?” I think he’s got a bad rap for no one knows what he’s doing, plus he has a blog that’s very well read, and very smart. I think the smart thing about Andrew is that he doesn’t get much value out of exposing what he’s working on.

Andrew:

What’s his biggest success? Yes, it’s true, what is his biggest success?

Noah:

He sold a company for a lot of money that he won’t tell you about.

Andrew:

He won’t tell you even what the company is?

Noah:

He doesn’t even mention it. I don’t think he’ll get mad at me for saying that, but I don’t think Andrew needs that validation. He gets a lot of it himself. He does get it through his blog readers, too, I’m guessing, but yeah, Andrew’s had already success that, I don’t know why he doesn’t mention.

Andrew:

Do you know what his company was? And how it did?

Noah:

The one he sold?

Andrew:

Yeah.

Noah:

Yeah, I don’t know if he wants… Andrew’s secretive.

Andrew:

He’s secretive, but at least he shares it with you, a good friend of his.

Noah:

Yeah, I mean, Andrew, about the thing he’s working on now, I wouldn’t even mention it on my death bed, I wouldn’t even mention it.

Andrew:

And you know what he’s working on now?

Noah:

No comment.

Andrew:

I see.

Noah:

Andrew doesn’t even like the thought of people knowing. He’s very, very secretive about that, and rightfully so.

Andrew:

He’s an incredibly nice guy, but you’re right, very secretive. He returned my email requests for interviews very nicely, not like we were buddies, but very secretive.

Noah:

Well, unlike your business or my business, my business is getting our name out there and talking and exposure. There’s no value for him. And I don’t think it’s a bad thing, like what does he get out of that?

Andrew:

Yeah.

Noah:

Nothing. So why would he do it?

Andrew:

Mark Andreisen [sp] knows what he’s doing, so that’s the most important thing, more important than anything here.

Noah:

Andrew is a General, he’s got the chessboard planned out months ahead of everyone else. Secretive just sounds like such a bad word, and it’s not. Andrew’s just, it’s a value based decision that he doesn’t get much out of.

Andrew:

Alright, what’s his liquor in case I see him in person?

Noah:

I don’t think Andrew drinks, either.

Andrew:

He doesn’t drink anything?

Noah:

Nothing.

Andrew:

Alright, alright.

Noah:

Andrew doesn’t even eat, all he does is work! [laughs] Andrew’s a machine, he’s actually from Terminator, he’s like a cyborg or something.

Andrew:

Alright, Rahmen Profitable, for all my friends from Hacker News that are watching this. How did you make a mistake on Rahmen Profitable? And then we’ll talk about how to get them there.

Noah:

I think with Rahmen Profitable, I want to just clear up something against P.G., Paul Graham, I like rahmen, and I like profit, so I just have an issue with people being Rahmen Profitable, because I think you can eat rahmen and be profitable at the same time. And I think it’s got a connotation of you’ve got to only eat rahmen and be super cheap until you are profitable. And so I think the things to be considerate of is that I guess it’s not all failures. Sorry, Andrew, I hope you’re not mad at me for this. I think you just need to be a lot more conservative in watching your money. And I think we didn’t do a great job of that at the beginning of the company where the basics you need to do is: What is the input? What is the output? And what does that number look like. We didn’t track it as best we could. Everyone should manage their books and should know what their revenues and profits are, at least every other week, if they’re making any revenue. And so I think what I really want to get out of Rahmen Profitable, when talking about that, is that it’s not about being Rahmen Profitable, it’s about being smart with your money, right? Kind of going back to that value versus cost. And so, at our company, one of the things I loved, some of my favorite stories are, I went back to the team and I said “Guys, you know, we’re making money, we’re profitable, everything’s good. We treat out clients well. I need a new laptop, my computer’s too slow. And at any company, if you’re a funded company, or public, or anything, what do they generally do? Talk to the IT guy or go buy a new laptop. One of my guys was like “Buy more RAM. Clean up your hard drive space. Do a defragmentation.” And I was like, “Nice!” And guess what, I’m still on the same laptop.

Noah:

Point four miles — we’re walking!

Andrew:

[laughs]

Noah:

And salaries. We didn’t pay ourselves good salaries until we actually made money, and now we still don’t pay ourselves market salaries. And so, it’s not about being too cheap or too thrifty. I think it’s about the right balance of value and being careful with your money until you’re at different levels.

Andrew:

You may not be Ramen profitable, but you’re Chinese food profitable. No, actually, Ramen profitable, you guys are way beyond. We’re talking about Ramen profitable…we’re saying in the early days, so that you don’t have this sink of desperation and gut-wrenching desperation of building a business, keep your costs down so that you’re only eating Ramen.

And “Ramen” means that you’re using the cheapest supplies possible, and make just enough money to cover it, and then that’ll free your mind up so that you can build a business. It sounds like you guys never got to that, because you had a huge hit or a bad failure, but you never evened out at Ramen.

Noah:

Well, I can actually give a story now that I recall. We were like this, and then it went down big time to where we almost went out of business, and then now it’s kind of on a slow, gradual uplift, right? So that, you know, incline, which is a great thing.

One of the mistakes we made in terms of Ramen profitable was that we came back — and this is totally my mistake — I bought $15,000 worth of Dell servers. And this was when we were doing 100 million pages, I think, in a month, right? So, 100 million pages in a month was a good month for us, and I said, “Oh, buy Dell servers, $15,000, yes, of course, we’re going to be much bigger than that.”

And then, I wish I could share the Google analytics – if I can pull it up, I’ll show it to you. Let’s say a few months later, we were down to less than 10 million pages a month. So, how good were those $15,000 in Dell servers? [descending sound effect].

Andrew:

Well, what should you have done instead?

Noah:

Bail out.

Andrew:

Because you’ve got to start preparing for the future.

Noah:

No, and the thing is, now we’re using those Dell servers again. So, it’s not too bad a…luckily there’s still some use in that now. But what I would suggest is that…using a scalable solution, which was Amazon S3. Right? So, as you grow the company, OK, cool, we pay more. As it declines, we pay less.

Andrew:

We have a mutual friend in Chad, right? Chad…what’s his company now? It’s not launched yet.

Noah:

Player Access.

Andrew:

What’s it called?

Noah:

Player Access.

Andrew:

Player Access. So, Chad, co-founder of Player Access, he was relying on Amazon, and he said that it’s great for scaling, but for speed and reliability…not reliability, but for speed, he was having issues with it.

Noah:

So, I don’t think there’s ever going to be a perfect solution. I think the great thing about Amazon is that, at least while you’re unstable…you know, you’re doing hyper-growth or hyper-“degrowth”, it’s a great solution until you’ve leveled off a bit. I don’t think it solves all the things. There’s also other solutions like Joyen, Mobissimo [sp]. I think Rackspace has some type of solution, and other ones that you could use.

The thing that I really want to highlight that I learned was that, when you’re spending, you’ve got to have…you don’t think about the worst case scenario, so of course, we’re never going to lose traffic. And even now, we have a little bit of a mindset where, of course, we’re going to kept growing, which you’re not guaranteed anything.

And so, I think you just need to have that consideration when you are spending money, or you are buying things. Can you buy them at a more flexible level, where as it goes up it comes with you, as it comes down it goes with you.

Andrew:

OK. What about office space?

Noah:

Can I thank you, too?

Andrew:

For what?

Noah:

Chad…oh, sorry.

Andrew:

No, no, go ahead.

Noah:

I was going to say, “Thank you, Andrew Warner.” Chad was our…I think our first real Gambit customer. This was almost a year ago, a little less than a year ago. That was Chad, with you introducing him to us.

Andrew:

My little way of paying you back, I swear, over the years, me and a ton of other people — you’ve been incredibly helpful. Before you and I even met. So, I’m happy to do it. Thanks for the Kindle that you sent over as a gift. I appreciate it. And if anyone else can work with Gambit, please email me before you email him so that maybe I can get another Kindle or some other…

Noah:

Does Olivia need one?

Andrew:

Olivia, do you need a Kindle or anything? No, we’re going to Argentina. We don’t have any space to carry that.

Interviewee. Are you using the Kindle? I was actually considering buying one.

Andrew:

Can I be honest with you here? We’re buddies? I returned it right away.

Noah:

Yeah! What did you do with the money?

Andrew:

I forget. I think it ended up…there was some kind of equipment that I bought right afterwards, and so Amazon used the money from that. I feel guilty saying it, but I do read on the Kindle a lot, but I read on my iPhone version of the Kindle.

Noah:

Dude, no worries. That’s the thing. I’d rather buy you something you want than something you don’t want.

Andrew:

Sorry? Oh, thanks. Well, it was…

Interview: Well, I didn’t want…sorry.

Andrew:

No, I’ll say…we keep talking over each other. That’s the weird thing about Skype. I’ll say this. You really didn’t need to give me anything. I feel like there’s this back and forth in this little community. I never trusted it either, at first, but I feel like there’s this back and forth where we all help each other out, and we don’t need to even things out directly right away. In the end, they all work out.

Interview: Yes, I think it’s giving it, paying for it and giving it to people, and like also… frankly, like, for me, there’s more enjoyment about giving people things that I do it. I have a good time. Like, for me to give you the Kindle, even if you returned it [laughs]. You’ve been awesome. It’s not even about the money.

Noah:

For me there’s more enjoyment about giving people things and I do it, I had a good time. Like for me to give you the kindle [inaudible] it like, you’ve been awesome. It’s not even like, I mean it’s not even about the money it’s like, cool this guy has been awesome for us and I want to thank him for everything he’s done.

Andrew:

Please anyone here who’s listening who could in any way work with Gambit, go to gambit.com see if you could work with them. Email me mail@awarner.com or Google me, my information is up there. Let me make the introduction to Noah.

Noah:

Give it to Andrew, it’s getgambit.com, G-E-T-G-A-M-B-I-T

Andrew:

Oh it’s getgambit I had it wrong, G-E-T-

Noah:

I wish we got gambit.com

Andrew:

G-E-T gambit.com, please check it out and see if there’s any, in fact see if you can go get an outsourcer to build you a company that could potentially work with getgambit.com, email me to introduce you to Noah. Even if it doesn’t pay off now this guy is, he’s potentially going to sell his business for a billion dollars or I don’t know what’s going to happen with this business but it’s going somewhere. He’s got a lot of great friends; one of them is going to buy his company. At least let me make the introduction so one day you guys might be bought out by whoever buys him out.

Noah:

Perfect.

Andrew:

Alright so losing co-founders, we didn’t get to that, I’ve got a note here to come back and talk to you about that.

Noah:

Sure, choosing?

Andrew:

Losing, you said in the early days you lost a co-founder.

Noah:

Well that was Gary the cheater.

Andrew:

I see, okay.

Noah:

Kind of like- I think the thing with co-founders is that I think it’s a trade-off and I think what you really need to do, it’s like a marriage. You really just need to spend a lot more time dating, talking, you know, like fooling around, foreplay, all that stuff, before you really make a decision. And have someone, kind of, contrasting to you. So contrasting in a sense of if I’m the business person, the business person is the hard-core technical person, which is kind of an obvious thing to say.

Andrew:

Okay, since we keep calling Gary a cheater, let’s make sure that we say that we didn’t give out his last, we’re kind of exaggerating because we’re having a fun time here. We don’t know what the situation is with Gary, talk to Noah personally one on one to really find out. Here we’re just being playful about it. I hope that gets me out of any legal issues.

Noah:

I’ll take the legal issues, don’t worry.

Andrew:

Alright, so all the lawyers send your paperwork over to Noah Kagan. Noah, what about office space? What kind of space do you guys have?

Noah:

That’s a really good question. So we were virtual for the first year of the business. I think being virtual challenges you a lot. As we’ve grown the thing is that a lot of our clients need stability and trust, hence being funded an office space is pretty critical. So we worked out of a friend’s office space in Mission, and so now we got our own office on New Montgomery and Mission Street. We have a direct line of sight to Chipotle.

Andrew:

I love Chipotle too.

Noah:

It’s awesome.

Andrew:

Did you guys get funding afterwards?

Noah:

We have been profitable- so we raised 150 two years ago and then since December we’ve been profitable so we haven’t really needed it.

Andrew:

Never more than 150 you said?

Noah:

No.

Andrew:

Wow, I didn’t realize that.

Noah:

Yeah we have 18 employees now so-

Andrew:

Wow, wow, okay Offerpal this is completely away from everything else we’ve talked about. You can’t say anything about Offerpal?

Noah:

I can say a lot of positive things.

Andrew:

Tell me, what are the positive things that you can say about Offerpal?

Noah:

You know, we’re in a lawsuit so we’re very restricted about what we can and cannot say.

Andrew:

They sued you because, they sued you because they said that you used Offerpal in your games, you realized how great Offerpal’s model was and you copied their model. That’s essentially the lawsuit.

Noah:

Yeah so the trade secrets lawsuit that, that Offerpal is saying that we’ve built games to, we’ve build games to figure out their service to build our own service. You know the things that we can talk about publicly are that it’s unfortunate that they’re suing former clients. We don’t think that’s the right way to be handling things. That’s unfortunate and the way that our business came about was that we were game developers, just like a lot of the people probably watching your show who are just in you know small, medium, entrepreneurs or small businesses and we wanted something to be better. And so we went back to our partners and we were using other people besides them and said, “Hey, can you build this feature or this request?”, or “can you do this level of service?” And we didn’t get it and so asked and waited and waited and, you know, out of frustration we kind of built that for ourselves. It wasn’t, it was never intended to be built as, we never intended to really compete, it wasn’t like, “oh let’s, this is great, let’s go do it”. We said “hey, this is a problem we have for ourselves, let’s build it for our own games”, and when we realized that “wow, this is actually something that other people would want”, we exposed it to other people and that’s where we realized that, like that’s the real opportunity.

Andrew:

What’s the feature that they couldn’t build for you that you guys had to go and build the whole thing from scratch about?

Noah:

Yeah perfectly, so I mean, the things that we requested and what we built that were very important for us were transparency. So we could actually see what our data looked like and make decisions on our data. We never had access to that and this was not just one of them, there’s multiple competitors that we asked this for. So transparency in the data level, customization of the products so we didn’t want a Christmas tree kind of look and feel to our payments system, we wanted it to blend in really nicely to our site so we made it fully customizable and then thirdly we also had some customer service issues where there are some discrepancies about, you know, how much money we are actually getting paid and we weren’t really satisfied with that. With how are, how our users were being treated.

Andrew:

Let’s- what this part of the business is, you can pay online using a credit card, you can pay online using PayPal or if you work with Noah’s company or Offerpal or any number of other companies. I don’t know how many there are out there.

If you work with them, you don’t have to shell out money, you can go and sign up for an offer and that’s your way of paying for the service. So you can sign up for Netflix instead of paying for a service, or you can sign up for a credit card, and if you do that then you get the service for essentially free without having to pay.

Noah:

Exactly.

Andrew:

So Offerpal, were they the first ones to do this?

Noah:

No, I mean this has been done years before them. So our service is one form of payment. We look at ourselves as a payment company so that we manage your whole entire system. Charge back, support, analytics, fraud, credit cards, Pay Pal; the whole buffet of payment options so, Child Pay has been doing it years before them. This model is not brand new, it’s been around for many years. And even if you look at it you can see television, you know, what is watching a commercial? It’s a form of payment with your time right? So it’s not something that has been invented. Or there’s something called Trial Pay that has it patented, that they haven’t really done much with, and hopefully they won’t. No ones patented or turned in[??] on virtual currency, but the model and the system has been around for years. It’s kinda like you going to McDonalds’ and then suing you for opening your own restaurant. You know, it’s food. It’s not anything that they’ve invented.

Andrew:

Here are the rumors that I’m hearing about this. You guys are an unfunded company. You’re a competitor that’s easy to sue out of business. Beyond this issue, when you’re an unfunded company, can’t a bigger company scare you by threatening a law suit, by suing you? Where-

Noah:

We’ve allocated significant resources for ourselves so the money is not an issue for us. I think it’s unfortunate that in business that the legal system can be taken advantage of to stop competition. And this is more of a generality where it’s unfortunate and it’s very annoying, that the legal system can be, frankly, abused and taken advantage of verses, frankly, business and competition and that’s what it, you know, it really should be about. It’s not about-, and this is besides-, in a lot of these games now people are suing each other saying ‘oh, I created this game, I created that game’. It’s like, build a better game! You know, it’s like saying, you know, someone suing, like Starbucks suing everyone else over coffee. You know, build a better coffee place. Build something more unique or do something that really helps you stand out.

Andrew:

You know what though, if you’re a bigger company and you’ve got a threat from the smaller company and you know that you can’t do anything about it, that’s one option. You go and you get- I don’t know the situation with Offerpal. They’re welcome to come on here even though they know that Noah and I are good friends, and I should say Noah, you and I are good friends so maybe that’s skewing my vision of this, but I see it a lot in business that a bigger company will say ‘these guys aren’t funded, they’re easy to knock out, let’s get some lawyers to threaten them.’

Noah:

I don’t think it-, you know, just to be straightforward, I don’t think it’s a bad strategy.

Andrew:

Yeah, I agree.

Noah:

I just think it’s unfortunate. No, I don’t think it’s a bad strategy. I just think it’s unfortunate that our system and our society allows that kind of stuff to occur, but, you know, frankly, it could be- I’ve said ‘frankly’ some ten thousand times. I think as much as it could be taken advantage of, it can also be to protect people. From, you know, from the other sides point of view, they could say ‘well, these guys really copied us’ or ‘these guys did XMY and we wanna protect ourselves and we have the legal right to.’ So you know, with the bad comes the good.

Andrew:

All right. Fair enough. Fair enough. That’s a great way to look at it. I think that’s everything that I’ve got here in my notes! That’s great! So where are we seeing this company go in the future?

Noah:

That’s a really great point. Right now our strategy is a lot more payment options available for our customers, deeper integration, international. And our whole business is basically going to our customers: “What do you want?’ It’s like a waiter coming and taking orders. It’s really about where do we see our customers going and how do we make the best payment solution for the virtual games, for all my communities and knowing other verticals[??] that we’ll be spending into.

Andrew:

All right. And you’re in New York right now for a conference. You’re at somebody’s office just so we could do this interview.

Noah:

Yeah, so we’re based out in San Francisco, but we’re at Snap Interactives. It’s a great Facebook game called ‘Are you Interested?’, so it’s an online dating game that we work with them, and so he let us come by and I crash his office for the week that we’re out here.

Andrew:

Do Facebook games still do well?

Noah:

I wanted to-, for this interview and on the record, no. There’s no money to be made.

Andrew:

[laughs]

Noah:

For your listeners only, yes, tons of money. Still I think the challenges is the production costs are going up significantly so to make a good game it’s gonna cost you a lot more. But the viral channels and the opportunity is still there for a small 1-2 man teams. You know, you can create a great college business, a great side business, great, you know, individual small time business. To create the massive 100 million, 2 billion dollar, big billion dollar wins, I think there’s a few players and it’s already starting to be established. I think it’s a little late for people in that, but if, you know, if you’re bored after work and you want to get momentum, and something started, go hire some outsourcers out in the Philippines, you know, 20 bucks an hour, you know, and start playing around.

Andrew:

All right. Well, that’s great advice. Thank you for doing this interview with me. Thanks for going through this list and even for talking about the lawsuit.

Noah:

Thanks for your time.

Andrew:

And there it is. All right, before I tell you what I usually tell you at the end of this program, I gotta say something else. This is maybe my last, and definitely one of my last interviews, one of my last programs from this office here in Santa Monica. I got married about two weeks ago, and I recorded the interview for you before the wedding, and now I’m posting it and editing it after the wedding. So we just got married, and Olivia and I are going to Buenos Aires for a few months. Now, I’m going to be setting up an office in Buenos Aires, and I’m going to be traveling through South America and working out of that office. It’ll be a great office, but I can’t imagine it’ll be like this one.

This one was perfect for me. It’s exactly what I always wanted since I was a kid”to have all my books right there accessible to me, to have an office space where I can actually work, but also have”like I say”have my books here. I always wanted this because I thought of books as play, and I thought of work as work. To be able to combine the two, to be able to have work that I do here for you somehow tie in with my curiosity and what I’m learning in the books that I have behind me, it’s been spectacular. So I’m going to miss these books. I’m going to miss this office space which has been terrific for me, and I’m going to start a new journey here in Buenos Aires.

If you’re in Buenos Aires, send me and email; I’d love to meet up with you. I’d love to find out what’s going on in the tech scene down there and in the entrepreneurship scene down there.”I’m going to miss this space a lot.

All right, next, I always tell you at the end of my interviews that you should find a way to reach out to the person who I’ve interviewed. You’ve got to get to know them. You cannot just be a passive person and expect to leave your mark on the world. Well, I’m going to tell you that twice over, three times over, a billion times over with Noah Kagan. This is a guy who, if you’ve listened to my cast programs, you’ve heard me talk to some of the top entrepreneurs in our space. You’ve probably heard me mention Noah Kagan a few times because he’s just so close with so many people in our space. For you to get to know him, I think, is going to be one of those experiences where you’ll feel really comfortable with someone in your space where you can exchange ideas and connect on an intellectual and friendly level with someone in our space. Also, a great person to hit up for introductions. I know I have. So many of my interviews here have come through Noah Kagan.

What else do I want to tell you about him? An easier way to do it is if you’re on Twitter. I’m sure he’s on Twitter or Facebook, whatever we happen to be using at the time that you watch this recording. Find one of those online methods and connect with him. If you’re at a conference, and he happens to be there, walk over, tell him that you saw him here on Mixergy, and find an excuse to get to know him. Not just him, but every single person who you relate to in my work here, find a way to connect with them, but especially him.

All right, next, if you want to work with Gambit, I’ll have a link over to Gambit. If you’re creating games, there are online communities and you want to get paid in Gambit, it’s a good site for you to use. What else do I usually tell you to do? Click around Mixergy, we’ve got tons of other interviews.

No, no, no, wait. There’s one other thing. Feedback. I always ask for feedback. It’s my way of connecting with you. Come back to Mixergy.com tell me what you thought of this interview. What did you think of the audio, what did you think of the ideas here, what did you think of Noah, whatever it is that you want to say, I want your feedback, I keep asking for it, so I’ll see you in the comments.

Oh, and goodbye, office. [whispers] Bye.

Edited Excerpts: 2 of the mistakes we discussed

They didn’t take enough money from investors

They started out developing Facebook apps. Noah said they “were a top five developer with seven million users, so we actually started having investors come to us. We had our current investor come to us at an indian dinner.  He took out his credit card at the dinner table and he kind of like, let me see if I can do this on camera, [whips out a credit card] ‘How much do you want?’

“And that’s one of those things you read about it books. I was looking at my business partner Chris and I was like, ‘I don’t know, a hundred thousand ($100,000)?’  And he’s like, ‘Done.’

“And I said, ‘Damnit, we should have asked for more.’  We ended up taking a hundred fifty thousand ($150,000), but the real learning from that is that you need to figure out what you’re going to do with it and why you’re taking it.  You want to have an objective with that.  And so six months later we were almost broke.”

They tested too much

“My problem with testing is I do too much of it,” he said. “I want to track their age. I want to know when they had sex. I want to know their birthdays. And all these different things. But you need to reduce it to two or three different things that are the key metrics.”

“When I worked at facebook, Zuckenburg, or ‘Zuck’ has everyone calls him, he had one priority for the longest time.  He would say our only priority is growth, nothing else. And so I would come to Zuck and say,  ‘Zuck you know in events, we should sell tickets in events,’ He’d say, ‘I don’t care.’  He was very strong about having one focus.”

“And so all your objectives and your analytics and the testing should come back exactly to that.  So you should say, ‘Okay what are the things for growth that we could be measuring?  Invites per day? Conversion on invite? How many people registered?’  Whatever it is. Just limiting the amount of data that you actually consume will help you make better decisions because you’re focused on less things.’

Published: Oct 30, 2009

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