Andrew Warner: Three messages before we get started. I have a brand new sponsor, Scott Walker, the entrepreneur’s lawyer. Frankly, I’m not even sure why he’s paying to sponsor Mixergy, since Scott Walker is a pretty well-known lawyer in the start up community.
You probably already know him from his Ask the Attorney posts on VentureBeat or from Venture Hacks or from Quick Sprout. Scott is the guy you turn to when you’re raising money from VCs or selling your business. But if you’re launching, he’ll also help you get your company structured properly. So check out WalkerCorporateLaw.com.
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Here’s the program.
Andrew: Hey everyone. It’s Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious self start. You guys know what we do here. The Internet is full of junk food for the mind. Everybody loves it, gets high click rates. But I believe there’s a small audience of people out there, very small, but they’re still out there and worth fighting for, who are more ambitious, who want to do something with their lives, who want to build businesses, who want to change the world, who want to leave their marks on the world, and that’s why I do these interviews.
Every weekday I bring on a different entrepreneur who built something incredible to come here and talk about how he or she did it. To talk about the struggles along the way, to talk about the frustrations, to talk about the pain points, and to talk about how they overcame it, and most importantly, to teach what they learned along the way so that you can go out there and use those lessons and build your own company.
Today I’ve got with my Roy Rodenstein. In 2006, he quit his job at IBM and gave up a substantial bonus to launch his own company. The company is Going.com, which was built to help users find fun local events. It was sold to AOL three years after Roy launched it. Today, he’s still with AOL, and he advises and mentors entrepreneurs, too. Roy, welcome.
Roy: Thank you Andrew
Andrew: How did I do with your last name? Do you want to give the correct Buenos Aires pronunciation?
Roy: In Buenos Aires, it would be Rodenstein.
Andrew: Roy and I met when I blogged about how hard it was to find . . . actually to go to the grocery store here, you have to buy candy through a security gate. And you said that doesn’t always exist.
Roy: Well, it depends where you are around town. Some areas are more secure than others.
Andrew: Now, let’s get to business. I read that you said that one of your goals with building your business was to make money. And I admire that openness. I think a lot of people pretend that they’re just here to save the world and don’t acknowledge that there’s a personal goal in there, too. So, let me ask you this. How did you imagine money would change your life?
Roy: Well, I think to me there’s a few goals and tiers of money, and I think at that time and even at this time, I’m primarily looking at money as a little bit of more flexibility and opportunities to do probably what I like and probably where I think I can contribute more. So you mentioned I am doing some start up advising, some start up mentoring.
And while I am still working full time with Going and so on, I have a little bit more. . . Because it’s not a start up, it’s not a stand alone start up. We have a parent company now and so on. It’s a little bit more flexible, whereas the last few years, I was completely heads down, just really trying to knock this out of the park. And so I think that’s where a little bit of money can give you more freedom. And later on I would like to have some other goals. Starting a foundation. I’m interest in international education and empowerment of women and all kinds of other stuff. But that’s how I viewed it at the time.
Andrew: All right, so you took a big risk. You didn’t just give up the substantial bonus that I read about. You also gave up a lot of job security at IBM. You gave up the respect that comes from working with a big name company. What’s the best thing to come out of all that?
Roy: It’s interesting, because a lot of the people, even though it’s been five years since the previous company I was acquired by IBM, a lot of the people are actually still there just because the benefits and all the things we talked about are so good. The biggest thing, the reason that I ultimately did it, a good friend of mine who had started a couple companies told me, to learn the most, put yourself in the position of highest risk. And I took that to heart, and I would say that’s the number one thing.
Just the experience of running your own thing and everything that comes with it and the people that you meet that do this with you. It’s huge, but I think there’s a lot of corollaries to that. There’s the opportunities from a networking standpoint, from a career development standpoint, I think are massive. I thought pretty early on that it was going to be either a win-win or a win-win-win-win-win. Those were the scenarios. I didn’t see any kind of win-lose possibility.
Andrew: Do you have an example of something that you learned just because you took the extra risk that you wouldn’t have had access to, that you wouldn’t have learned otherwise?
Roy: A lot of things. I think there’s very little tidbits. Like now, if somebody asks me about health insurance or real estate, I can talk a little more about it, because I researched and I took out our first health insurance for our employees. And then I think larger topics, maybe this is a little bit cliche, but some of it is just about myself. Looking back, it’s sort of easy now, and being an entrepreneur and having that approach to life.
But when I left, when I quit my job, that was very, very tough, and it took me literally a couple of months when I was getting ready to get the nerve up to tell my boss that I was leaving, and really decide that I was really, literally going to have no income for an undetermined period of time. So learning that about myself, that it was hard but I was able to do that, and now I try to apply that with other people that I mentor and that I advise. And having gone through that, being in their shoes I think was worth big money.
Andrew: All right. Let’s get back to how it all started. What was the original idea? Where did it come from?
Roy: So, I’m going to give you a little bit of background. Tell me if I’m going too deep. So, I had two cofounders. One I actually knew from middle school in Mexico, so I moved around a lot. The other one I knew from grad school at MIT at the media lab. So both I had known at least 12, 15 plus years. And I’d always been involved in startups, at least for a while since college and grad school. I had a lot of friends that had started them. So I kind of knew that I wanted to do something.
I had been speaking with my cofounder from the media lab, a woman named Rebecca Xiong, about doing an online dating site. We had tried some, we thought we could do better. I had studied a lot of psychology. She was really into personality testing, and we thought we had some better feedback approached to dating and so on. We looked at that for a while. We decided the market was kind of overheated, too big.
So we’re kind of in this limbo state. We wanted to start something. We weren’t quite sold ourselves on what we were going to do. And then what happened is, this was early ’05, I’d been dating this woman for five, six months. And it was fun, but I was looking for good things to do around town on dates. And it was just tough.
And I remember this is kind of one of those frozen in time moments. I picked up one of these local magazines that every city has, kind of their alternative newsweekly, and I was leafing through it, and on page 80 or so in the bottom right corner, there was an ad for an exhibit of photography at a museum called Peabody Essex Museum in Salem, Massachusetts, which is a very nice museum. And it was a photographer that this woman had mentioned by name that she was a fan of. So, what are the chances of that, right? So I thought, this is the absolute perfect thing to do. So I made this whole surprise weekend, and it was great.
And then it was a couple months later when I was meeting with my cofounder and we were talking about these ideas. And I was like, ‘I can’t handle these dating things anymore. We’re just wasting time. It’s giving me a headache. Let’s talk about something else that happened to me. I had this great experience, but what if I hadn’t picked up that magazine? What if I hadn’t just stopped at page 60? What if I saw it and I ripped it out, but it’s a piece of paper so I lost it? What if it was sold out? What if I wanted to invite friends? Why isn’t there a better way to find everything cool and interesting going on, especially in urban cities.’
So that’s kind of the original way that it started. And we very quickly moved into market research and surveys and all that stuff, which we can talk about.
Andrew: What kind of market research and surveys did you do?
Roy: So, we did a number of things. So she actually went out on the Boston Common with a clipboard. She tried to stop people and ask them what they use now, what they needed. We used Survey Monkey, which I think was starting at the time, obviously it’s huge now, in ’05 to get more of an input from different people around the country so that we wouldn’t just be limited with the Boston audiences. That’s a lot of what we did.
And then we just did a lot of market research on social media, which was very early at the time in kind of early ’05 on local newspapers, on these local weeklys to get a broad sense of the market, because when it comes to finding events and stuff to do, there wasn’t one major competitor, but there’s just a lot of different ways that people get at it.
Andrew: All right, so my way might have been to just go and create a site and then figure it out later. You put a little bit more thought and research into it. What did you learn doing the surveys, standing out with the clipboard, and asking people for feedback?
Roy: So, yes. I think doing it now, we might do some of that. We all had day jobs at the time still. So yeah, I think we learned a few things. One thing we asked people about was what categories of events they were more interested in. And we learned there’s some variance across cities. Sports is very big in Boston and recent college grad events, young alumni events, and kind of the gender split also. Things like fashion shows and trunk shows. So that was maybe not shocking information, but it was just good to have a little bit of that.
One of the things we also did was try to do a little bit of, what you would call persona modeling. So how does the market break down in terms of types of users. We had theorized, and we found some validation, there’s some leaders that are kind of the center of the social sphere. They’re the ones who say to their friends, ‘Hey, let’s go do this. I saw this really cool thing. You shouldn’t stay at home. Let’s all go out.’ But is that 2% of people, is that 10% of people, is that 50% of people? That was a pretty important market gauge for us.
And then there’s a second group that are a little bit more indifferent. And then there’s a group that we called, we had different terms, but joiners is one. They kind of go with the flow. If their friends are going out to eat, if they’re going out for beers, if there’s a new movie out, they’ll kind of tag along to what the group is doing. And that’s fine, but again, some of those proportions. And then did satisfaction level with some of the different competitors. So those are some of the things that we researched and learned about.
Andrew: You’re Porteno. That means that you were born here in Buenos Aires. I’ve got to ask you a question. Are all Portenos just heavy walkers? Every time somebody walks down the hallway, I not only hear it here, but I imagine that the audience is hearing it on mic. What is it with Portenos and walking so heavily?
Roy: That’s an interesting point. I hadn’t really thought of that. I think maybe related is Buenos Aires is very crowded, which I like [interrupted].
Andrew: I love it.
Roy: So you have to be really good at avoiding people, and it’s almost like you’re a running back.
Andrew: [laughs]
Roy: And you’re kind of bobbing and weaving through people. So maybe that’s a little bit related.
Andrew: I see OK. So there’s not really a big crowd over here, but they’re just used to dealing with the big crowd. And maybe because there’s nobody to get out of the way, all that force is being pounded into the ground instead of into the other people in the street. All right. It makes sense. I might put a survey out there to just make sure that those findings are true. All right, let’s go back to the questions that I have for what you said before.
You said, first of all, it’s not shocking, but we discovered that women like different kinds of events, like fashion shows. To me, that was shocking. I didn’t realize that. For some reason, I would’ve only created the events that I wanted and I imagined other people wanted. And I can see how asking questions would open my eyes up to ideas that I wouldn’t have had otherwise.
You also said that a percentage of the market was market leaders. Did you know that from the surveys that you took, or did you later on say that there must be some market leaders who we have to tap into who are going to spread the word for us? Did you need them to exist, or did you notice that they existed?
Roy: We wanted them to exist. We knew some, we have some individual examples, but we didn’t know a lot about it. We didn’t know what percentage of the market they are. We didn’t know how satisfied they were with these same tools, and I guess the corrolator of that was we tried to really court them, and they became one of our primary segments, because they’re kind of the power users in our space. So they actually were not that satisfied with the existing tools, and we had a big opportunity, and we did get pretty strong loyalty and word of mouth from them of just giving them better stuff, fresher stuff, better tools to spread the word and get their social circles, just do what they already do better.
Andrew: What was the competition at the time?
Roy: So, at that time, smart phones didn’t exist. Twitter basically didn’t exist. Facebook was just opening up outside of college, so it was a very, very different time. Upcoming.org, at the time it was .org, which was acquired by Yahoo, was probably the main one at the time. They were 100% user generated. So they were national. They had a great content model, but they were a little bit more for techies, a little bit less mainstream. From a start up standpoint that was the main one.
There’s a couple of companies that are more B2B oriented. There’s one called Eventful. There’s one called Zvents. And they do have consumer portals, and they’re a little bit bigger now for consumers. But at the time, they were pretty much trying to sell the event list, aggregating and selling them on a B2B basis. So there wasn’t a ton of competition. There were some people trying to go after Evite, which people are still trying to go after Evite. So most of those kind of went away.
But really I think the main competition was just there were so many ways, whether on the radio or TV or newspapers or through friends, people hear about options for things to do. So we knew that that was the biggest mindshare thing that we had to get over.
Andrew: OK. So now you knew the business you were going in. You had the survey information to tell you who was out in the market as competitors and who were going to be your potential users and your super users. What’s the first thing that you did after you knew all that?
Roy: We did start doing some prototyping. So my third cofounder named Geoff Menegay, he was actually in business school at USC at the time, because he got a free ride there, a full scholarship. And he turned down his own internship. So he had one of these business school, highly paid summer internships. He turned that down to come to Boston and start building the prototype with us. So we did move into that fairly quickly.
And then we started getting into the hands of friends and family. 20, 50, 100 users over the next couple of months. We developed a newsletter early on just to keep them appraised. I think we sent it about once every week or couple weeks, just with new developments, making sure that we got feedback from them. And then we started opening up a little bit more broadly. It was still invite only, but one of the main things we started doing, which was pretty characteristic of us over time was we started doing some face to face events.
So part of our goal with Going was not just to tell people or help them know better what going on, but actually get them off the computer and actually being more social, meeting new people, going out with their friends, taking advantage of all the richness the city has to offer. And so we did some in person events, just very informal. Going out for drinks, mixers, what have you. I think the first one was probably a Halloween one I think.
So we had probably 50 to 100 people that attended, but we found out people really enjoyed meeting friends and friends and people that they had maybe seen online and thought that maybe this person has good taste in events, maybe they contributed some good things. So that actually became pretty important for us, both for getting feedback and for building a community. So those were kind of the next steps.
Andrew: How did you get people to the first events? Most of us have a limited number of friends that we can’t really build a business off of our friends online. To have them come out to an event seems a little tough. How did you do it?
Roy: It was just a lot of bootstrapping. We designed a flier. We printed copies. We went on a bunch of college campuses. I think we did try to get friends to invite others. We partnered with a local restaurant, and I think we gave them little cards and tried to get them to promote it a little bit as well. So it was a combination of things, and after a while, they did kind of start taking on a life of their own. But the beginning was just friends and family basically.
Andrew: Wow. So more going out there and seeing people and handing out papers and fliers. How effective was that? I’ve been seeing that a lot from entrepreneurs. I sometimes wonder if it’s effective in just giving the entrepreneurs something to do, some outlet for their energy, or if it really does bring in users. What was it like for you?
Roy: Yeah, it’s interesting. First of all, it’s just tough. That’s being out in the real world trying to get people to listen to you and to look at what you’re doing. It’s a great sales exercise. We also went out to Boston Common. Sometimes on a Friday, we would hand out printed fliers of the best events of the weekend, kind of a mini printed version of the site. And 90% of people either they ignore you, the yell at you, they’re listening to their iPods. So it’s a good learning experience.
I think the return rate for us early on was very good, because we were really trying to build a community carefully, because we had seen that some other sites, like MySpace and so on, and kind of approached it strategically. And we wanted to have the right folks and a very tight knit community early on. So I think it worked well for us, but one of the questions that I get asked a lot by other entrepreneurs doing things in social media or in local and so on is just around some of the early marketing. And we change the marketing. We kind of scaled up the marketing model a few different times. But for the beginning, I think that worked fairly well for us.
Andrew: So the company at the time was called HeyLet’sGo, and I saw an old interview with you from back at the time. I think it was about four or five months into the launch, and you had 90,000 users. How did you have 90,000 users so quickly?
Roy: Well, what we called the launch was in September of ’06. That was a little bit after, I think, our Fenwayfest event. So we took a pretty deliberate approach with all these friends and family and closed pages and so on. And then at one point we decided that it was kind of time to step on the gas.
So we did a few things. We started out, probably got the first few thousand users. . . So my cofounder Rebecca and I, we just went and hit three to five house parties a night for like three or four months. Just telling people about it, listen to them, and that again led us to find a lot of these social influencers, right, who are kind of the leaders among friend groups. So that was kind of step two or step three, depending on how you look at it.
Then what we did is we tried to get more leverage. So we partnered with some of the local organizations. A variety of them, especially young graduate, young alumni organizations, some existing social activities clubs, doing whatever, hiking, mountain climbing and sports and this and that. So try to apply a little bit of the business development side of things. And that took us probably to tens of thousands.
And then we did our launch event here in Boston, and eventually we did also launch events in New York and San Francisco as well. And what we did was we basically offered free entry or some other benefit
for registering for the site. It’s relatively common now, and I think perhaps at the time as well. But it was kind of a free sample, right. Here’s a cool event that you are finding out about through HeyLet’sGo. And so if you want to find out about more, get our newsletter, check out the site, come to the site and register. So, those were the main ones. And then we moved into the larger marketing networks.
Andrew: You talked about the Fenway event. It was called Fenwayfest. And I know you told me before the interview that you had some last minute trouble. Can you talk about that?
Roy: Yeah. It still seems like a dream now. So we had gotten some seed funding at the time, a few hundred thousand dollars.
Andrew: How much?
Roy: Half a million.
Andrew: Half a million. Wow. OK. We’ll get back to how you got the funding, too. And by the way, while you’re telling this story, I’m going to drink what you know as yerba mate.
Roy: Excellent
Andrew: Mixergy runs on yerba mate my friend. OK. Sorry. So you got some money, and you were talking about Fenwayfest.
Roy: Yes. So we got some money, and we were both being somewhat conservative, but we decided, you know what? We’re local. We’re reaching out to the community. We should do something to bring people together. So we decided to plan this event called Fenwayfest. And as the name implies, we rented out, we booked Fenway Park during the summer. I think it was in September, kind of the end of the summer, right at the beginning of September, to do a community event.
And just like our previous ones, it was no major agenda, just fun. I think we had some bands. We had a hot dog stand, popcorn, and karaoke. And we had the World Series trophy lined up for people to come. This was right after the Red Sox won for the first time. So it was set up as a very fun community event. And we got over 5,000 people RSVPing to it. So not views, not invitations, but actual registrants saying they were going to show up.
We kind of went all out with that. So we put out some ads on the subway. We did get some people to see it. A few of these offline techniques like radio and subway are fairly inexpensive, and depending on the opportunity, can actually have fairly high bang for the buck.
And then the other major thing that we did is going back to that business development aspect. We did a lot of cross promotion with these local organizations. What we did is we traded them a booth or some level of sponsorship in the event for a dedicated email blast to their audience. And these all had between 10,000 and 100,000 plus members. And there’s huge difference. . . Probably a lot of your audience is somewhat familiar with email marketing. But having an ad or a banner ad or being link number seven on the page versus, this was a full email saying. . . We wanted them to cobrand it. We wanted it to say, the Boston Young Alumni group together with HeyLet’sGo brings you this event, right. So it was more appealing to their members.
We had huge, huge response rates on that. 50% clicked through, 30% conversion rates. Because obviously, it’s a very, very unique event. So that was definitely a very big success for us. And then at the actual event, they had the booths and they were all kind of pitching their message and handing out freebies. So that all worked out very well.
The problem was, the night before the event, the even was at 6:00 or 7:00 p.m. on I think a Friday. So on Thursday at around 4:00 p.m. we got a call from the Boston Red Sox. And apparently there was some paperwork, because it’s such a big event, the city had to approve it. And let’s just say it was not fully approved. I think some people had concerns that it was going to be too, kind of a drunken revelry, which was not really the theme of it at all. But regardless.
So imagine you have 5,000 people showing up at this event called Fenwayfest and you can’t use Fenway. So we were completely freaking out. We immediately got on call with our board members to ask them for advice and just kind of discuss our approaches. And fortunately, we had some contacts that we’d been building through the restaurant and night life industry. And there’s a few venues that are actually across the street from Fenway. There’s four or five which have now been changed.
And they were all too small. You’re not going to fit 5,000 people into any one. So we literally used four venues that were connected or somewhat connected. And we had to overnight send out emails. I was on the phone with all these partners that had done these dedicated email blasts for us, and as you can imagine, they were not happy. They thought we had bait and switched them. It was not a fun day.
I really did not think that it was going to be any way that we were going to pull it off. Somehow we did. The Red Sox did send the trophy. They did some backstage tours even though we weren’t in the park. We had some groups that actually could go into the locker rooms and the stadium and so on. We had the mascot from the Red Sox. So we still had a lot of fun elements. And everybody was thrilled. It was incredibly nerve wracking, but it worked out.
Andrew: That’s incredible, because there’s so many set backs that I can see myself at the time thinking, we’re never going to figure this one out. We’re screwed. We’ll have to change our names and change our identity and go start over. And I guess if you’re not the guy in charge, you have the luxury of feeling that way. But when you are the guy that everyone counts on, you’ve got to find a way to pull through, and that’s an interesting way to do it. You found venues near Fenway so you could technically still make it the Fenway event but not hold it in Fenway.
I see Jiang [SP] says that your mate is Andrew’s drug. Todd P and a bunch of other people are really excited about the fact that you went to so many house parties to build up your mailing list and to build up your reputation in the early days. Lenny in the audience is recommending that I get a yerba mate sponsor. Maybe, I don’t think so. Todd says, some businesses run on Red Bull, Mixergy runs on yerba.
Roy: You say, Jcherba.
Andrew: How much of your money. . . sorry?
Roy: You say Jcherba.
Andrew: Yeah. Here they pronouce Y as Jche. So it’s like Jcherba mate, and also the New York Yankees would be the New York Jchankees. I ordinarily would go for that, but I think that would be twice confusing for the audience. Most people don’t even know what yerba mate is, and now I’m going to mis-American pronounce it. Pronounce it like locals. How much of the 100,000 that you raised went into this one event?
Roy: It was a few tens of thousands. It was, like, 30 or 50 or something like that. We did get some help. We got an events firm to help with booking some of the bands and stuff like that. But it was still our major focus for that period.
Andrew: How did you sell that to your investors, that 30,000 would go to putting together an event?
Roy: It was something that we debated a lot, and I think there were some pretty mixed opinions. I think everybody, the investors with their portfolio companies, they had tried different things. And so some board members, Juan had been the CEO of Likos, right. So he sold his company for like five or six billion dollars. The other was the CEO of Excite.
Andrew: You’re talking about Bob Davis and George Bell.
Roy: Correct. At Highland Capital and General Catalyst. So they were both very, very accomplished and very smart. Bob is really strong on sales. George is a little bit more on marketing. So they all had said and on events and on cross promotion and all these things. We’ll get into a little bit more of the funding later. But we had already discussed doing a larger round.
And so I think within that context, it’s a lot of money, but it wasn’t crazy 1999 money. And I think they all felt like this made sense for this company, because it wasn’t like eBay or some completely online virtual business just blowing money on a party. This was actually building and getting a community off the ground in our anchor city. So, I think ultimately they felt it was a good investment. Everybody was very happy afterwards.
Andrew: It leads us to funding. Why did you decide to go for funding in the first place?
Roy: We had been bootstrapping the company for almost a year and a half from when we started and prototyped and all that. We all kind of still had other things going on. And it was a big debate, because we all had friends that had started companies, and we knew all about the ups and downs from especially taking VC money. So we debated amongst ourselves, bootstrapping for a while. We talked about, can we do friends and family. Didn’t really want to do that.
Can we do Angel? We talked to a number of Angels. I think things are a little different now in the world of Angel Investing, but by that time, we were able to explore some options. And we decided, you know what? We think that this is a real opportunity. We really want to, yes, have success and hopefully make money and all that.
But frankly from a financial standpoint, we were probably just about better off doing a smaller thing on the side as you’ve seem from a lot of your guests. But we decided we want to touch as many people and let them use the product and help a number of cities become more vibrant and get people to become more social as broadly as possible. And so to do that we wanted to have the right backing.
Andrew: I’ve got to stop and ask about something you just said. Do you think that if you hadn’t gotten funding and kept it smaller that you’d end up financially further ahead than getting funding the way that you did?
Roy: In this particular case, it might be about the same. I think you’ve had folks on like Gabe Weinberg and a number of others that have done a great job with that approach. The way that we looked at it was. . . I think at the time, Flickr had been bought a year or so ago. I think Upcoming had just been bought. There were a few of those. And so we thought one option is let’s keep doing this on our own.
Obviously, chances are maybe 10%, 20%, 5%, whatever you actually do get, that kind of outcome. But if you do, you get to keep all the money, right. But one reason we decided as a group that we didn’t want to do that is, if you look at what happened to Dodgeball or even Flickr or Upcoming or most of those, they kind of get shoved in a corner a little bit. And I think it’s been very interesting watching FourSquare now with Dennis having this second take of that and being more in control.
We didn’t want to. . . I know it sounds really stupid, but we didn’t want to make half a million bucks or two million bucks, but then be like a division of a division of a division and be doing the same thing for five years or have to leave like everybody else did. We wanted to just have a broader spectrum.
Andrew: What did you guys sell for?
Roy: That’s one number that I probably can’t share yet. Maybe in 10, 10 years.
Andrew: [laughs] OK. What I read was single digit millions. Can you confirm that?
Roy: I can confirm that. I can say it was under a billion, and I think it was. . . Let’s just say our investors were pretty happy. We were able to take care of our employees.
Andrew: You alluded to something that. . . In one of your blog posts, you said that it may not have made more money for you than if you just took a salary for all the years that you worked on Going.com. Did I understand that right?
Roy: I think I know what you’re talking about. I did some weighted kind of analysis. So the time, the previous company I was at had just been acquired. So I already had, not the same level, but I already had a pretty substantial retention bonus on the table and then an opportunity for fairly fast advancement. This was IBM, so I think if you look at multiplying whatever that was at for five years, it can get to be a pretty substantial number. Depending where you are in your career, that’s going to vary.
And also, we didn’t take a salary for quite a while. And even after we got the seed funding, we were paying ourselves ramen or rent money. And we never took bonuses. We just had kind of a flat salary. And we were fairly flexible if we needed to give somebody a raise and we were in between funding rounds, just as an example, we were not shy about saying, you know what, let’s cut our own salary back a little bit here and there to make sure we were rewarding the right people.
So there were a lot of those wrinkles. It was definitely good financially overall. But I think if you really just do the straight up math, you may be just as well from a risk reward if you can get a high paying job.
Andrew: OK. And you were doing pretty well. I think a lot of people who are watching the video might think you’re a 22-year-old guy. So your not a 22-year-old guy, and you weren’t making even back then 22-year-old guy salary. You had a good track record. How old a guy are you by the well?
Roy: Well I just shaved a couple days ago. I think it makes a big difference for me. I’m 34 actually.
Andrew: OK. It does for me, too. Except for me, it doesn’t make me look younger. It makes me look less suspicious, less like a Taliban member. Speaking of funding and ramen profitable, that’s a phrase that Paul Graham I think made up. You told me that you applied for Y Combinator. What was that like?
Roy: Yeah. We actually were in the very first Y Combinator group. And that was actually a pretty good experience for us even though it didn’t work out, because my cofounder said, let’s use this as a deadline for us. Let’s use it as a way to get our thoughts together. And so I think we did a pretty good job with that. So this was sometime I think in ’05. And I think the application process and all that, I don’t think it’s changed that much.
I don’t think it was that different from a lot of other programs and incubators. But it was a good experience. They asked good questions, and ultimately we didn’t make it in. Now, we weren’t sure where we were going to take the money anyway, because from an evaluation standpoint, it’s very rough. You really have to value that. Now it’s a little different as well, but at the time, they were completely new and improving, too. So what are you getting in return?
But we did meet with Paul Graham afterwards, a couple months after we showed him our prototype. I think we were in their kitchen at the Y Combinator when they were still here around Harvard Square. And he looked at our prototype and he said, ‘Oh, we turned you guys down? That looks very impressive. We’ve got to figure out what happened with our process.’ So, it was a good experience, and I remain close with a number of the Y Combinator company.
Andrew: I see. You debuted a demo. You have to pay $18,000 I think to debut a demo, right? Somewhere around there.
Roy: Yeah, I don’t remember what it was at the time, maybe a little bit less, but it’s definitely a few thousand.
Andrew: Was it worth it?
Roy: That’s a good question. I think it’s worth it. So, I think part of it for us, I think was demo fall, which is not the primary one. So I think it was just a little bit less attention there at the time. I think there were a lot of benefits. Again, we met some partners that we still know, we still work with. I think it was good exposure for the company. We did get some press and so on. I think maybe doing both, that launch and a local event, it might have been a little bit much.
But I think it really depends on your company. The fact that we’re local, the model for getting that to spread is very different. And I think if you’re a pure online company, especially now with all the social media, I think you’d probably get a lot more bang for the buck. But I think at the time, being local and kind of before most of this online low hanging marketing fruit, I think it was a reasonable investment for us.
Andrew: Where did you get the most users?
Roy: So after I talked about two or three or four of the marketing approaches that we took. Eventually, we kind of packaged or professionalize that partnership approach that we had been doing with the local community, right. So we started out with small groups, like young alumni groups, and we sponsored a harbor cruise for young alumni and so on.
And then what we did is we hired, usually part-time, occasionally full-time local representatives that had some existing connections. So sometimes they had been event promoters. Sometimes they had been band managers. Sometimes they run their own restaurant or their own club. So there were people with an existing audience and with the ability to get the word out. So we did that in a few cities, not all of them. But especially in New York, that had huge success.
I think we pretty quickly got to a quarter million plus registered users there. In LA it’s interesting. We only had a couple of part-time folks doing that, but the community there was so strong, and I guess it’s what MySpace found as well, but we had a lot of music promoters that started using our tools to manage the door list, the RSVPs, do ticketing, and so it just grew through the actual promoter community. But I would say that having people on the ground that were entrenched in the community was definitely our biggest source over time.
Andrew: Was that expensive? It seems like it would be.
Roy: Yeah. It’s more expensive than kind of a pure marketing model. But at the same time, these are not like $200,000 executives. They’re people that. . . Event promoters typically have a very flexible schedule anyway. They could use a few more hours. So I would say we did have a number of people on the ground, which I think it adds up. But it’s not a super. . . I think we got a pretty good bang for the buck on that.
Andrew: I want to go back to funding, but before I get to the meat of funding, I’ve got to ask you about the lifestyle around funding. George Bell, Bob Davis. Those two guys did really well for themselves. My friends who have gotten funding have been whisked around on helicopters, they’ve been flown on private jets. You get any of that?
Roy: Not quite to that level.
Andrew: What’s the most fun thing that you got to do? The most Lifestyles of the Rich and Famous?
Roy: There’s a couple of things. One was just these guys have top notch seats at Fenway and at all these kinds of events. So we got some pretty nice treatment.
Andrew: My banker gets that. The bankers always give you that special treatment. They take you in there. Give me something bigger.
Roy: Yes. Well, the biggest thing, I think, was getting invited to certain events. So there’s one VC that’s part of Ecosystem. I won’t say exactly who, but that has probably the biggest house that I’ve ever seen on Cape Cod that has. . . It’s like three houses. There’s like the main house, which is massive. I don’t know how many acres it is. 10, 20 acres. Their own tennis courts. They have a private beach as part of the house. Plus pool. We had a crazy lobster and clam bake there. So, that was maybe not, it was definitely not a helicopter ride, but it was just being invited to that private residence and taking advantage of all that for the day was very nice.
Andrew: [laughs] It is incredible. I remember, actually, when I went apartment shopping. I was going to buy an apartment in Manhattan, and I see the beautiful freaking places, and I wonder, who are these people? It would be like the guy who made shoelaces but found a way to make them cheaper than everyone else who made shoelaces, or the guy who had, not the widemouth Billy Bass that was sold on TV, but the guy who knocked it off, and he ended up with a big palace in the Hamptons.
It’s amazing to see people’s places and to find out how they ended upt here. All right let’s go back to business. People in the audience are saying Andrew loves those stories. Yeah, I love those stories. I want to find out what it’s like. Let’s go back to the business that gets you there. You structured something a little bit different. Here’s a quote from the email you sent me. BCC’ed with prebaked A round is what you got to fund your business. What does that mean?
Roy: So, we talked about friends and family, we talked about Angel. We decided we wanted to go the VC route probably, but we didn’t want to raise a huge amount of money up front, and it might have been more difficult. We did have a number of different offers for that. But once we decided these are the firms we wanted to go with, the approach that was discussed that I think, maybe there was a slight preference from their side, but I think we were all sort of on the same page on was let’s get some money in. Let’s test this out.
I think it’s counterintuitive to a lot of entrepreneurs, and I’m not necessarily advocating this, but one of the things that I say a lot when I mentor companies is, a lot of these things, the number one person that you need to convince is yourself, right. So just going out and raising a bunch of money, if you realize that it’s not the right thing or it’s not going to work, yeah OK. You can eke it out for a few years and fake it, but it’s not going to be fun, and you’re not going to feel good about it.
Jason Cohen at SmartBear has some great columns about having fun and all that. So we just really wanted to make sure for ourselves that we felt this was going to be. . . We’re going to be hiring people, pulling people out of their jobs. We just took it as a big responsibility. So we got that seed amount, but we didn’t want to go back and fundraise three months or six months later. It’s a huge time. Everything that people say about it, it’s a big, big distraction, mostly for me at the time, but some for friends as well.
So we did, it was basically an A round that was done in what’s called a traunch, or two traunches. And so there was the first traunch, and there were some nominal milestones for that. But the realities of milestones, they don’t really matter. The VCs are going to put in the money they one. They’re not going to put it in if they don’t want. There’s always going to be a loophole. So in our case we had some milestones. They were stretch goals, and that was good, and I think there were three. We hit a couple and then we were close on another one.
But before we had even. . . I think we were expecting to talk about it in six months. I think it was three or four months in, they said, ‘You know what? We like how things are going. We like what you guys are doing. If you guys want to go ahead with it, let’s just put in the rest of the money now and kind of hit the gas.’ So for us it worked out pretty well. There are risks around signaling. What if they do the first part not the second part. We had a variety of, we had other term sheets for pure convertible money. We had terms sheets for higher evaluations, but we wanted to go with these guys and this approach worked for us.
Andrew: How did you even meet these guys? You’re a first time entrepreneur. You didn’t have funding before. You’re not part of that in crowd. How did you get to meet the investors, and how did you convince them?
Roy: Yeah. It was something at the time that we thought these were almost untouchable people. But their job is to shield themselves from some kind of noise, but it is definitely to find great people. They were actually very different. So I think it was, so Bob, my cofounder Rebecca who is extremely social. She’s one of these social planners herself. She’s extermely social. She went to a talk or a panel that he was on, and I think she just went up to him at the end and told him about the company. And he said, call my admin, and by the end of the first meeting, he was saying that they wanted to invest very likely.
So that was basically a cold call, or a cold meeting. And then the other one, General Catalyst, so I had a lot of connections to them. And I knew a little bit about what they were doing. I think especially at the time, but even now they’re one of the more consumer oriented technology firms, or VC firms in the area. So I wanted to approach them a little bit later in the cycle when we felt a little more confident at the previous company had some connections to them. Our former VP of business development actually was almost about to work there. And then when we talked to them, it turned out that they really knew our advisor from the media lab. So it was just a lot of ins to them. But as you see from the examples, it varies a lot. I do a lot of intros to people that I think VCs are always interested in that.
Andrew: How much of the product did you have when you first talked to them?
Roy: We had an ugly second or third prototype. It was Boston only. It was in the thousands to low tens of thousands of users. So it was still very early. I think more so than most VCs will happen these days.
Andrew: Let’s see what else. Naughty gifts. Naughty Gifts was you guys, right? That’s the virtual gift that people can give each other on Facebook, and it was things like hand lotion, like blue balls. I’m trying to find the clean stuff that we can say here.
Roy: Wait, was that you, or did somebody write that in?
Andrew: No, that’s you. I actually saw the pictures. You guys apparently sent this stuff out . . .
Roy: Is that your questions, or did that come from the audience?
Andrew: Oh, no. That’s my question. I’ve got it here on my list. I’m going down the list of things that I saw when I was looking you guys up. I forgot that you were behind Naughty Gifts. What happened there? How did it start, and how helpful was it?
Roy: That’s was interesting. Especially at the time, but even now in Boston, there’s a lot of talk about, there’s not as much of a social media culture. There’s not as many really viral marketing geniuses and all that. So we always were trying to be very attune to that, and our COO also was very keen on identifying young talent.
So we had brought on a few people that were just a year or two out of school that were really familiar with Facebook or MySpace, and that just had a lot of off the wall ideas for marketing. So what happened is, I forgot what year, probably ’07 I’m guessing, when Facebook opened up the Facebook platform and first allowed developers to create applications to run inside Facebook.
And so I think we were looking at a couple. We did do also kind of a core Going functionality app. But we had a few of these very smart people with kind of off the wall ideas. And this was one of them, and we decided to kind of let them run with it. And it did pretty well for a while. It got it to six and a half million installs. But then Facebook kind of started changing the game.
So it made some money for us for a while. We did sell it for a little bit of money, and we got some audience. But the problem is, it’s a little bit. . . It’s sort of related but not really. And as you were saying, I know it’s fun. People had mad fun with it, but it wasn’t a very smooth transition to the core product.
So we got a little bit of a boost, but I would say those kind of viral techniques are great to try, but you really need to think ahead of how you’re going to bridge that to your main business.
Andrew: How much money did it bring it for you guys?
Roy: It was probably 100,000 or. . .
Andrew: The whole time that you had it was only 100,000?
Roy: Between advertising. The chart was kind of like this. So, you know. . .
Andrew: [laughs] For the MP3 listeners, it’s like a roller coaster going up fast and going down fast, because Facebook changed their rules.
Roy: Right. So, we did a couple of ad deals and then the sale itself. I forget the number on that sale, but I think it was a few hundred thousand.
Andrew: All right, I’ve got a few more notes here of things I want to bring up with you. The first is the name change. How did the audience react to your changing the name from Hey Let’s Go.com to Going.com?
Roy: It was mixed. Overall, definitely positive. We liked the name. There were a couple of issues with it. It was a little long. Some people got really hung up on the apostrophe. And especially over the phone or when it was noisy, even though it’s such a clear, Hey let’s go to the movies, Hey let’s go to this. It just sounded a little bit weird, and people didn’t always get it. You had to repeat it. So there are many reasons why we changed it.
Some of the early users that preferred a little bit more the whimsical kind of style. So we changed the logo as well, and it was a very nice logo. They kind of missed it. But then again, that was only 50,000 or whatever the number was at the time. So I think for the million that we reached after that, it was a good move.
Andrew: Any advice for somebody who needs to change the name of their business?
Roy: Don’t spend four months debating the names internally. That’s probably one of the main things. It’s funny, because after we changed it, some people were saying, is it too simple? And then of course you have to rebrand everything. We have to come up with a new logo. We literally had spent three or four months, knuckle time, debating the names internally. And we didn’t want to spend another three months on a logo. So we came up with a pretty simple font.
And when something is new, it feels a little weird. And everybody thought, that logo is so plain. It looks ridiculous. It looks like a fifth grader did it. That’s just you. Nobody knows. Six months later, a year later, everybody outside of the company thought it was completely normal and fine. In fact, I’ve seen it almost kind of copied. So I would say just really set some milestones and don’t get overextended.
And I think there’s a number of guidelines. I think I kind of covered some of them. It has to be pretty easy to communicate. That’s sort of the biggest to me. If a friend is telling another friend, and the other friend is like, ‘What?’ or ‘How do you spell that?’ or if they make you repeat it three times, that’s not cool. And then I think something that has some. . . What we liked is it had some flexibility. It can be a verb. It can be a noun. It can be used in different marketing elements, so that was something that we appreciated.
Andrew: You said earlier that you needed to court the leaders, the guys who were going to invite the most people out to events and then help you sign people up to Going.com. How did you do that?
Roy: Mostly women.
Andrew: Oh, mostly women. OK. How did you do that?
Roy: We did a few things. So one is just the actual content that we had. We had to have really, really high quality content, stuff that you couldn’t just get in the newspaper or online or whatever. So how we did that, a lot of user generated content. We talked more about that, but the product itself has to be very solid.
Secondly, we just had some tools. So you could kind of track you calendar. We had a couple levels of commitment. You could say, I like this or I’m going. We had a graphical calendar. We had a list calendar. You could easily invite your friends to a specific event.
And then we had pretty nice tools for the event contributors as well. So if you were organizing an event or you heard about an event that you wanted to share, we let you make it look nicer with a large poster about the event, better widgets for HTML, message boards about it. And then later we had widgets, so if you had a MySpace page, you could take your event with you. So a lot of great content and then tools to let them spread what they wanted to communicate and getting them to participate in better.
Andrew: What about biggest mistake?
Roy: How long do we have?
Andrew: [laughs]
Roy: Biggest mistake. I think overall, I would say it’s related to pivoting.
Andrew: OK. To pivoting, you said, for the transcribers. I want to make sure they got that. OK. What happened with pivoting, or what should’ve happened?
Roy: Yeah. You know, pivoting or selecting a market. So we pivoted in some ways a lot, in some ways maybe not enough. So early on and over the years, we tried three or four major models to this approach. One was very, very content focused. Just have the best, a little Kayaky. Just have the best content, best navigations, filter, where you can easily find the best stuff.
That did fine, but the engagement level wasn’t as high, because it’s just not as fun. We then tried a deeper social aspect. So profiles, suggesting people with similar tastes to you. We even did this little flash application that does really cool, let you kind of graphically show your taste. Photos of events you went to. Kind of like building your little poster on a corkboard and so on. And that was OK, but people just didn’t want an end social network.
We played in dating a little bit. There was a lot of that going on, but the question was always, is there a line that’s going to freak people out that are in a relationship or don’t want to be dating or don’t want to be hit on. So that was a trick for us. So we just looked at it from a number of different aspect.
I think ultimately, I think we did well, but maybe we could’ve chosen one or two other opportunities, like maybe going after ticketing. We built our own ticketing engine. We sold several millions of dollars of tickets. We could have gone after that a little bit more strongly, more like what Eventbrite is doing.
Andrew: Why? Why would that have been the one thing that could’ve helped you go so much further?
Roy: I think part of it is, I think from a revenue standpoint, if it does well, I think you can get a little bit more your destiny in your hands versus raising more rounds or having a combination of many revenue approaches, which is fine, but it’s a little bit of a distraction. And then I think, so we found a lot of benefits in ticketing, because besides the revenue, it brings traffic to the site. People have to go to the site to buy the ticket. And again, if it’s a good event, you start to get a buzz, positive association.
So it’s something that was pretty effective for us, but again we were always on the borderline of, do we really take a major step in that direction. Do we try to begin. . . We sold primarily tickets on New Years and Halloween, and it wasn’t as much of a full round concerted effort for us. So I think there were a couple of those, but I think taking a more decisive step on the more B2B side, which it’s B2C, but a little bit B2B probably would have been a smart move.
Andrew: I see. OK. Finally, you now courted by Venture Capitalists. Now that you’ve had Venture Capital, now that you’ve sold your company, are they flying you around in jets yet?
Roy: You know, they’re not. They are, yes, they are. . . I’ve talked with a number of them anyway, so I don’t think anybody came and knocked on my door per se. But yeah, everybody want to know, what are you up to. What’s your next thing? Did you hear about something good? What can we do to get you to join our company? So it’s good. It’s one of the [interrupted].
Andrew: What are you up to? What is the next thing?
Roy: The next thing is, what I’m up to is I’m there. I’m at AOL. I’m keeping, going, moving forward. For now, I’m involved with a few of the local properties. I’m just trying not to rush into things. That’s some advice that I got from some entrepreneur friends that have sold a company and kind of moved on to another one. So right now, I’m just enjoying having a little bit more time to mentor companies.
I am doing a little bit of Angel Investing, as I think I mentioned. The Hacker Angels group as well. I’m teaching a couple lessons for Founder Institute. I did start up weekend. So I’m just being out there and trying to share what I love.
Andrew: Hacker Angels is a group of Angels who invest in hacker based entrepreneurs, right? Guys who actually code.
Roy: Yeah. We’re generally hackers who angel invest in other hackers.
Andrew: Right. Not necessarily together. Gabriel Weinberg is another of the guys who’s there. I know him from a past interview. And who else do you have in there?
Roy: Joshua Schachter who was the founder of Delicious, Jeff Miller who was a math genius on Wall Street, and he’s starting his own company now. And Jim Young who was founder of Hot or Not.
Andrew: OK. All right. Finally, any last bit of advice for an entrepreneur who’s listening to this?
Roy: I think the advice is, I would say two things. One, just be really, really honest with yourself. As I was saying, don’t just pick some random thing and assume that it’s good and go do it, because it might succeed, but you might really regret it. So be really honest with yourself, get feedback from other people.
But then, once you are convinced, go for it. Knock on doors. I’ve shared a couple crazy stories that we had. Make it happen.
Andrew: Step on the gas when it’s time to go. All right. Well, thank you for doing the interview. For the people in the audience who are talking about yerba mate. I see Mike B thinks I should create ice cream. Let me tell you something. Let me tell you what this is. You know, and you can confirm. Do you drink yerba mate by the way?
Roy: Not here, but I like it when I can get it.
Andrew: What’s great about yerba mate, it is hard to get in the US, but I think when I get back, I’m going to be making an effort to get it. Unlike coffee, if you drink a lot of coffee, it eventually starts to make you a little ill and start to slow you down. It has diminishing returns.
The thing about yerba mate, if you drink it the way that the Argentines do, people more like you than like me, but I’m learning from you guys. It starts to lose its power as you drink more and more of it and need less of it. So the last sip isn’t as powerful as the first sip. It kind of weans you off and lets you go on with the rest of your day. And it gives you something to play with all day. With a cup of coffee, you’re done. Here I’ve got the thermos, I’ve got the mate, I’ve got the straw. It’s like smoking a pipe without all the bad effects of it.
Roy: It’s fun.
Andrew: All right. It’s fun. Thank you for doing the interview. Finally, any way for people to get to know you or connect with you?
Roy: Yes. My Twitter is RoyRod, R-O-Y-R-O-D, and my blog is How2StartUp, with the number two, H-O-W-2, StartUp. Thank you Andrew.
Andrew: Perfect. Thank you for doing this. And I’m going to say, I know I’ve got a lot of venture capitalists who watch these interviews. If you have a jet, please take my buddy out here on a jet, talk to him about ideas. Even if all you end up doing is taking his ideas for one of your portfolio companies, it’s at least worth getting him on the flight. And take pictures and put that up on Flickr so that I can link to it from this interview when they do.
Thank you. Thanks for doing the interview. Guys, thank you all for watching. Bye.
Roy: Thank you. Bye.
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