iCracked Is Making Millions Because Its Founder Noticed That We Keep Dropping Our Phones – with AJ Forsythe

How big of a business do you think can be built by mobile phones?

AJ Forsythe says when he was in college his phone broke and figured that the same thing must be happening to other people.

So he built iCracked, which has local techs that can fix your broken mobile device. Or, if you would rather, then can also buy your mobile device from you.

Watch the FULL program


About AJ Forsythe


AJ Forsythe is the founder and CEO of iCracked Inc. which is an iPhone/iPod/iPad repair and Buyback Company with over 320 on-demand iTechs in 10 countries.

Raw transcript


Mixergy’s audio transcription is done by Speechpad

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Alright, let’s get started. Hey there freedom fighters my name is Andrew Warner and I’m the founder of Mixergy, home of the ambitious upstart and in this interview I want to find out how big a business do you think can be built by fixing these? Plain old mobile phones. Well actually not plain old, these are smartphones. This is an iPhone right here. Well, AJ Forsythe said when he was in college he broke his phone and he figured that the same thing must be happening to other people who caring phone like this so he built iCracked which was local techs that come and fix your mobile device or if you rather his company will actually buy the device from you. I invited him here to talk about how he built his business. Hey there, AJ.

AJ: Hey, how you doing, Andrew?

Andrew: I actually read that a little bit quickly in the intro, I want to make sure I got this right. The techs actually don’t come to me right?

A.J: I would say 90% of our iTechs as we call them are mobile. We built some really incredible real time dispatch software to try to give you a AAA you press a button and our iTechs will setup an appointment to come.

Andrew: So you’re saying they will come into by office and do it?

AJ: Yes, they will.

Andrew: Oh, I misunderstood that. Alright.

AJ: We’re trying to pioneer what we call on demand repair and buy back.

Andrew: That’s impressive. How much revenue can you make with this type of business?

AJ: That’s an interesting question. You figure there is about 400-500 million devices in use worldwide right now. And with our repair rates we are seeing about 25 percent devices are breaking, have battery issues, have broken screens. We do a lot of cracked front and rear glasses. In the U. S. alone you’re looking at Americans have spent well over 7-10 billion dollars just fixing their IS devices which is a pretty staggering statistic.

Andrew: How much money have they spent on you? What were your revenues for 2012?

AJ: 2012 we did just over 2 million in revenue. Then we’re currently seeing about 25 percent month over month growth on what we’re doing.

Andrew: Really? And this is a company that is how old?

AJ: We are just about to turn three.

Andrew: I want to find out you got here in three years but I don’t want to make it look like a Cinderella story where everything just turned out perfectly for you. In fact there was a time that like me you were watching your friends get these great jobs while you were an entrepreneur. You got to talk about what that was like to watch these people go on. What kind of jobs, what kind of salaries were they making when you were just starting?

AJ: Absolutely. We started on a college campus at Cal Poly and I broke my iPhone 1 too many times. I was shelling out 200.00 every time I broke it for a new device at the genius bar. I said there had to be a better way to do this and I have always been fairly good at repairing things, fixing things, and building things. So I ordered some parts online, took my phone apart, broke it more than what it was broken beforehand. But after a couple hours, had replaced the screen. I kind of learned that this could be one of the coolest college jobs because you essentially your customers are concentrated college students that tend to be a little bit outgoing with their devices on the weekends and kind of setup something in my living room at the time and started repairing other students’ phones. That really kind of snowballed into “How big can we make this? Do we want to scale it?”

This was in 2010, when my dad kind of said, “Hey. Get your act together. You need to start thinking about getting a ‘real job’ after college.” I remember I went to a Career Day with 30 or 40 printed resumes on nice paper. By the way, paper is a ridiculous industry. So I went to the Career Day and I was walking around with one of my friends, Phillip. He, by the way, coincidentally, graduates next week. And he’s going to come work with us. But, we were walking through the Career Fair and, before I even talked to someone, I turned to him and said, “Dude. I’m not meant to do this. I don’t want to hand out resumes and be put through the system.” It was actually somewhat of an epiphany. I was in there for less than five minutes. I turned around and threw out all the resumes in the trashcan and went to the library to sit down and figure out how we could start growing the company. The library ended up being one of our first offices. School just immediately changed and started to become not as important as it should be.

Our hiring practices are actually somewhat formed from what I learned in school or what I didn’t learn in school. So, we don’t really care about backgrounds or resumes or degrees. We care more about ambition, curiosity, and what school can’t teach you. It’s just kind of grown from a college library to where, now, we outgrow offices every six or eight months, which is . . .

Andrew: I want to break this down so that I understand how you did this — how you got your first customers, how you built up from there, how you got the iTechs who actually started doing the work after you couldn’t keep up with it. I first want to just quickly understand what goes on. Yes. It’s easy to say, “I tossed my resumes in the garbage because that life wasn’t for me” and then pretend that it wasn’t a difficult decision. But wasn’t there a time when you were watching your friends making over $100,000 a year when you were barely able to even pay yourself? In fact, maybe you weren’t even paying yourself.

AJ: I would say, certainly, there’s so much truth to start-ups being one of the hardest things you can ever do — to start a company. It is one of the most lonely, up-and-down, roller coaster. I’d say a lot of it is more frustrating than good.

Andrew: For example, take me through. Because I’ve heard so many entrepreneurs say entrepreneurship is lonely. But then I hear the company’s growing 25% every month. They just got a new round of funding. Everybody loves them. There’s an article here in Inc. magazine about them. They just beat people in their office park at dodge ball, as you guys did. And it sounds like this fun, easy life. But we can’t brush over the fact that there was a point in your life where you were second-guessing yourself. I know it’s a little early in our conversation here, for you to bring it up and to talk about it, but I’ve got to understand that. Because I think it establishes the basis for the rest of what you were able to build. Because it shows that you’ve got past this insecurity. Because you did, you were able to build what you did. So, when you were insecure, what was going through your head? What were you second-guessing?

AJ: I think startups are extremely lonely. By no means have we arrived or have things gotten easier. I’d say it’s a fairly constant up-and-down roller coaster. Having a strong support system and an incredible co-founder makes it a journey that is worth going through. You have to love what you do. I feel like I was put on earth to grow this company and eventually put one of our iTechs in every city worldwide, hopefully in the next 24 months.

Andrew: Okay. Let me break down how you got there. Here you are, fixing your own iPhone and it works out well for you in two hours. But that’s clearly not a business. Once you discovered this was going to be a business, you needed to get some customers. Help me understand where you got your first customers — the people who were going to pay you to fix their phones.

AJ: I actually met our Marketing Director. Her name’s Leslie Lambert, I met her about two weeks after I had officially started the company. And I had made some fliers in MS Paint and I showed her them, and she happened to be, or happens to be, a graphic designer, and she was like “, absolutely not. You can’t hang these at school.” And so it really started hanging fliers in every classroom. And I was fortunate enough to have started a fraternity while I was in college as well. And so I got a bunch of the guys in the fraternity, we started to go hang fliers on campus with us.

Andrew: And were these the MS Paint fliers?

AJ: No, these were some Photoshop ones, which they look horrible now but they did the job then.

Andrew: OK. And did I understand that you paid with two dollar bills for these fliers? Tell me about that.

AJ: There’s something funny about two dollar bills. And people are more motivated by the two dollar bill than they are the actual amount of money And so the guy who designed some fliers with us as well, Elliott, I sat behind him while he was working and every time he did something that I thought was awesome, I’d give him a two dollar bill. And it cost me like 40 dollars, but it’s… and then he had like 20 two dollar bills. Which I actually paid one of my roommate rent for in gold quarters, or gold coins.

Andrew: Because there is a higher perceived value to two dollar bills and gold coins. You could take the same amount of cash…

AJ: Well, I just think it’s funny. Like I think it’s funny we have two dollar bills to begin with.

Andrew: Have you also done this with bartenders, where you give them two dollar bills because if you put two singles on the bar, or a two dollar bill, the two dollar bill seems more official?

AJ: Yeah, absolutely. And so I was talking to our CEO this morning, and we’re actually going to – we have all these mason jars now, because I just did a cleanse with her. So we have all these mason jars now and we’re going to fill them with two dollar bills and every time something does something good in the office, they get, like, ten dollars or whatever. But I can go on a tangent about that.

Andrew: So fliers helped you get customers from your campus. You also set up a Facebook page and Twitter account. How helpful were those?

AJ: You know, I think they’re as helpful as you can make them. I think it’s certainly more helpful now. And making a Facebook page is certainly a lot easier than making a website, which I can’t speak highly enough of designers and developers for what they can do. But it was kind of very like, hey, I’d put my number on the flier and I’d get these calls and I’d set up time. And after doing that for about 6 months, I met, or I had known my co-founder Anthony Barton, who went and played baseball at UCSB. And we kind of got together and really thought “how can we scale this?” because it’s not…

There’s a book that we really like called “The E-myth Revisited,” where it outlines the three different types of people that makes up everyone. Where it’s like there’s part of you that’s an entrepreneur, part of you that’s a technician, and part of you that’s a manager. And each person has a different baring degree of each of these. And if we had just stayed on one college campus, it would just be technician. And so what we came up with was this licensed affiliate system which allows us to expand from really city to city with incredible people. And so…

Andrew: Forgive me, I’m sorry. I really want to understand this so I can’t brush over what you’ve done up until this point. Let me write down ‘affiliate’ so we can come back and understand that. But first of all, a guy with an idea and fliers very rarely ends up getting enough business to really build a whole company on. What was it about this that was – was it just the fliers, was it something else that you were doing that made it work? When you were just yourself on campus?

AJ: I mean, it was without doubt credit cards.

Andrew: What do the credit cards go to do?

AJ: So the credit cards were there to initially buy inventory and then eventually – I mean the credit cards funded our company before we raised any seed capitol. And so I remember Anthony and I opening new lines of credit – and this was in 2010, when the credit markets were a little tighter than they were in 2007. And we end up ringing up $30-40,000 on personal credit cards.

Andrew: So you could buy what?

AJ: It was inventory, I mean, it was inventory, paying people, food, rent, whatever you could…

Andrew: By inventory, you mean screens and…

AJ: Yeah, screens, startup kits, marketing material, paying for lawyer fees, drafting the initial documents. The fact that an unemployed college student, which was myself at the time, could open a $50,000 line of credit is pretty amazing, I don’t know if that’s a good or a bad thing. I would say, we haven’t really started paying ourselves much now even though we’re doing fairly well. What we’re building here with our culture and team, we’re hiring about 50-70 new iTechs per month. It’s so special and it’s been a very…I’m very fortunate to have had the support system and more importantly, the team that is with us at our…

Andrew: AJ, that’s exactly why I want to break down every part of this and understand this in detail. I know the person who’s listening to us is going, “This is amazing and I’ve seen how amazing it is on Techmeme or Inc, we want to understand how you did this.” You got the parts, let’s understand where you got the parts, where did you go to get the screens that you were using?

AJ: We ended up using Alibaba.com. My brother started a winery while we were in college, I was fortunate enough to be involved with it a little bit. I don’t know what I was thinking, but I wanted to start a Vodka distillery. I was looking at how do I source ultra premium Russian Vodka and I had stumbled upon Alibaba.com. I remember, filling out import paperwork for bringing a 25,000 liter cask of ultra premium Vodka from a distillery I had found in Russia. That idea ended up not coming to fruition, which is probably a good thing. The supply chain that we’ve set up is a pretty unique supply chain, I’m traveling in China every two to three months now. I was there this weekend, got back this morning, so I’m a little jet lagged.

Andrew: Since then, you even played dodgeball, I don’t know how you’re able to get all of this in.

AJ: We have a very fun office, so…

Andrew: AJ, when I go to Alibaba, the way that you might have done back when you were starting and I type in, “iPhone screen,” I see iPhone 5 screen replacement for $42, iPhone 4 screen replacement for $23.89. Is it as easy as just buying a bunch of these?

AJ: No, it’s certainly not.

Andrew: What’s the problem, what am I missing if I just look at this like an Amazon type of store to buy parts?

AJ: It comes down to quality, language, and cultural barriers. We’ve worked with well over 100 suppliers and manufacturers to set up our supply chain. You can certainly buy less expensive parts on eBay, Amazon, Ali baba, but it’s a $600 device. You need to put on original or all of the parts that you could never tell that that device was repaired from a function standpoint. It does void your warranty to open your device, but most of the devices we work on are out of warranty.

Andrew: What happened when you went on here and you started buying from these suppliers? Can you give me an example of one of the problems that you had?

AJ: The cultural barriers are huge. It’s been a very long journey to get to where we are with trust and logistics. Our mission, or why we feel like we go to work every day and night is we believe we’re a customer service company that happens to buy back these devices and resell them, or repair these devices. It doesn’t really matter what we do in the sense that we care about the customer above all. We’ve built this system that allows individuals to go to iCracked.com or our mobile site, press a couple of buttons and we can dispatch one of our iTechs to them in real time.

Andrew: You know I love you, you know I love this story, but we’re jumping all around, I want to stay focused here. Do you have an example of what happened when you went to Ali baba and you bought screens? What happened when there was a cultural difference?

AJ: There’s a lot of…well, I wouldn’t say there’s a lot, but there’s…we ran into having wired money for parts and never having received the parts.

Andrew: Got you, OK, so that’s a dramatic problem. Anything else where the parts were a little bit off or looked fake?

AJ: Yeah, we decided early on never to sell any subpar quality units. Even if we lose money, we’ll never sacrifice the customer experience, period.

Andrew: OK, so you’re still at this point in the story, on campus, selling your own labor and maybe a few friend’s labor, right?

AJ: Yes.

Andrew: If you’re repairing a phone for $75, how much do you…

AJ: Yeah, repairs were anywhere from $75 for your three GS’s to $100 for an iPhone 4 for us.

Andrew: OK. Roughly, you’re ending up with what, $40 an hour?

AJ: Yeah, it comes out…we treat this as a…some iTechs are doing very well. We treat this as $50-120,000 a year job.

Andrew: Wow. All right, so I’m understanding how you got customers when it was just getting started, flyers, Facebook, Twitter and mostly, doing stuff by yourself. Then, what you’re saying to me is “I wanted to expand beyond my own college and I hit on this affiliate process.”

AJ: Yes.

Andrew: What is the affiliate process that allowed you to open up in other places?

AJ: Anthony Martin really helped structure this, our iTechs are all licensed affiliates of the company. We have a couple of hundred people a month apply online to be iTechs and read about the process, what it takes, what it involves. We’re pretty agnostic as to tech background. One of our mentors, Robert Steven says, “There are three things you can’t teach, curiosity, ethics, and drive.” We really try to bring on individuals that are curious and can built and serve our customers. We can teach just about anyone to repair these devices and we do through our do it yourself kits, but we’re really concerned with…this license affiliate model allows us to expand rapidly and quality control who represents our company.

Andrew: What is the license affiliate model?

AJ: People apply online and we take them through a very structured four person interview process, we background check everyone. We sell them a startup kit, which allows them to have their initial inventory. We do a lot of virtual training, webinars, marketing support…

Andrew: They run the business on their own, at first it was on the campus, they run it, you just send them customers, training, and everything that they need in order to grow this business.

AJ: Yeah, we look at ourselves as the backbone of their own businesses. What’s really cool about this is we’ve ended up creating this model that we’re passionate about that can empower other entrepreneurs to control their own financial future and success.

Andrew: Like the franchise model.

AJ: It’s similar to a franchise, but we want to stay away from the rigidity of a franchise model.

Andrew: What do you mean?

AJ: I think, franchises can tend to sell snake oil individuals, it’s kind of a very onerous relationship. We want to look at ourselves as partners in success of our iTechs and end up funneling customers to them and be able to control the customer experience from start to finish.

Andrew: I’m looking here at my notes on you and I see a lot of references to advisers. You just mentioned one of your mentors, who are these advisers, how do you get them when you’re just starting out?

AJ: In order to understand advisers…my background….my dad runs a composites company in Boston. He and my mom were extremely supportive of both my brother and I’s entrepreneurial efforts. I made a decision early on never to involve friends or family in financing activities because I think that can stress relationships and I don’t want to talk about it at Christmas. Our real big . . .

Andrew: Advisers?

AJ: . . . start, came from Y Combinator, when we had moved up here and that has really led to a lot of great relationships with advisers, mentors that we now work with, regularly and they’re… We just feel very blessed that we can hang out with other entrepreneurs. Silicon Valley is one of the greatest places on earth for that.

Andrew: Okay. Alright, well actually here, I’m looking here, at notes on your dad. Your dad was an investment banker . . .

AJ: Yes.

Andrew: . . . he then, I guess he turned around a composite company. What’s a composite company?

AJ: High Performance Plastics and he’s. We lived in Dallas growing up and he had bought this company in Boston and ended up travelling four days a week for I think, six years, back and forth from Dallas to Boston, which I, looking back, I have such an incredible amount of respect for someone that like, will sacrifice so much time and energy to provide for their family.

Andrew: Okay and I’ve got a note here about how he emailed you that he hit 5 million dollars?

AJ: No, 5 million miles, flying.

Andrew: Oh, 5 million miles, okay.

AJ: So he’s, [laughs] he’s flown 5 million miles on American Airlines, which is, which I think topped like, one in 1000 or whatever.

Andrew: Okay. So, you’re watching him turn this company around, you’re learning business from watching him, from watching him grow his company. You also, did you get any advisers before Y Combinator? Didn’t you have advisers when you were in college and soon after, before you got into the Y Combinator program, maybe somebody that advised you?

AJ: Oh, yes certainly. I think . . .

Andrew: Who are they?

AJ: . . . Well, Jeff Whitis comes to mind, who I met in, in at Cal Poly, the center for Innovation and Entrepreneurship. And he was actually very supportive of us starting out. He, I think he is bought and sold like, 12 or 13 like, software companies. I remember having a talk with him while we were thinking about staying in [??] after I graduated in June of 2011. And I remember him saying like, “AJ, like, right now you’re just like, wading, waist deep in a pool. If you want to get this company off the ground, you’d have to go, all in.”

And, that kind of, really stuck with Anthony and I because it’s so true at the time, where we thought that. Well, we didn’t understand just how incredible Silicon Valley is, and so, about a week or two after graduation, and this is before we had raised any seed [??] capital, Anthony and I [??] his truck and drove 200 miles north to San Francisco and ended up staying on my brother’s couch for a couple of months, setting up meetings, really just kind of, taking in how incredible this place is and ended up finding a house in Sunnyvale, that had a basement in it.

And, we started out of a garage and a basement up here. And at this time, I think we had 25 I Techs and we were adding a couple per week or per month. And, we really liked our passion about expanding this I Tech network and so, it’s been a very crazy journey. . .

Andrew: How do you get an adviser, who sells so many companies, to help you out, especially at a point where you’re not even growing big? He has to tell you, “Get Bigger.” How did you get him?

AJ: I think, it was actually an elevator pitch competition that we participated in.

Andrew: Okay.

AJ: . . . and he was one of the panelists or judges. And I think, that kind of, interested him but, I think, telling an interesting story and trying to really, sell the dream on how, how big this business can really be because . . .

Andrew: A lot of people on stage give this great performance, they might even win those pitch competitions and then, they never see the judges again. What did you do to stay in touch with those judges, to stay in touch with him, and maybe see again in other conferences?

AJ: I think staying persistent. I think, always staying in touch with email, phone calls, like, quarterly updates, just staying persistent and people want to help, people are generally good at wanting to help build other things with you and I think, not accepting no as an answer and saying no, to other people’s nos. . .

Andrew: So, you formally said hey, would you be an advisor, I really admire the way think and I admire how many successes you’ve had. Would you advise us?

AJ: Yeah, I don’t know if it was formal. It was more like hey, we’re coming down to San Diego, do you want to meet and grab a beer or grab some food? People rarely say no to grabbing drinks with you if you ask them to go get drinks.

Andrew: Especially if you make such an impressive performance at that event.

AJ: For sure.

Andrew: OK. Alright. So now you’re doing well. Before you get into Y Combinator, do you remember what your revenues were? How you guys were doing?

AJ: I know exactly what they were. It was less than, I think probably less than $50,000.00.

Andrew: Less than $50,000.00? And how many people were you?

AJ: Really, three people. So Leslie, Anthony and I in Sunnyvale reading Tech Crunch articles and working 80 hour weeks.

Andrew: OK, so it’s the three of you guys and you decide you’re going to apply to Y Combinator and something happened during the application process.

AJ: Yes. So Anthony turns to me and it’s about 10 pm at night and we’re working and he goes Y Combinator’s getting an application every minute, or more than an application every minute and I wasn’t really familiar with incubator and so I was like, what the hell. I guess we should apply. It looks cool enough. And so I spent like an hour and a half or two hours filling out this application and right before I was about to hit submit… I hit submit and the browser crashed or whatever happened and I lost the application, which I later learned that it’s good to fill it out on a Microsoft Word before you go online application.

And so, so I filled out the application again. We hit submit and didn’t think too much of it at the time. But we recorded a 60 second video on an iPhone which actually was, or I think we did it on a GoPro, which I think it would be funny to watch now if we could find it, and we were in Hong Kong when we got the acceptance for an interview. So we flew back early for the interview process which we still I guess weren’t that familiar with how incredible Y Combinator is. And like thankfully got accepted and I remember Paul called us that evening to tell us that we were accepted and they’d love to fund us.

Andrew: What do you think he liked about you guys?

AJ: Probably that we’re trying to build a new type of on demand business. And I think that probably our energy. We’d have to ask him.

Andrew: It was the energy which I’m absolutely picking up here on this interview. But it was also, it wasn’t that you were going the repair iPhones, it was that you had an on demand business.

AJ: Yeah. So it’s never been, we don’t look at ourselves as a repair company as I mentioned before, I think if you look at, I think what Goober’s done is a great example. Consumers need to be taken care of at the click of a button regardless what service they’re trying to get. Whether it’s a car service, whether it’s food, whether it’s an assistant through like Exec’s Network or Task Rabbit. Brick and mortar is not, I don’t think brick and mortar is going to last very long when you start having on demand services and so I think most people when they sit down and talk to us can understand that we’re not a repair company and I don’t think we’ll be a repair company in the future. But we’re going to be a service company that can help individuals on demand which is…

Andrew: So the part that I missed in the intro was the most important part where someone will come to my office. And today it might be come to my office to fix my iPhone. In the future it might become to my office to do something else.

AJ: Or to sell you a new iPhone. And so we’re in the next 45 days we’re launching a on demand buy back program where you can get a real time quote for what your device and your (?) is worth. Press a button, one of our iTechs will come to you charge up a prepaid debit card, which is just as good as cash at any ATM and then buy your device from you on the spot, which we’re actually very excited about launching and getting off the ground.

Andrew: OK. You go into Y Combinator. It seems like you pretty much have your whole thing set up. You know what your business is going to be. You know how you’re going to build through affiliates. What does Y Combinator add that you guys didn’t have?

AJ: I think the most important thing that LiveFeed does, is put you in the alumni network. It’s pretty incredible that we have funded over 500 companies, now. I think it’s all about the network. Being able to contact any other founder, whether to talk about what’s going on that’s good or bad, is actually very invaluable.

Andrew: How do you do that? Do you guys have HipChat running all day long? Is it email?

AJ: It’s a lot of email threads. You could make it a full-time job just surfing the YC list and threads, comments, and whatever.

Andrew: Where? What software did you guys use to make all these comments?

AJ: A lot of it is on Google Groups.

Andrew: So, it’s Google Groups you guys are all a part of?

AJ: Yes.

Andrew: It’s valuable because it’s other smart people the Y Combinator has blessed.

AJ: Yes, and I think that starting a company, it can be fun at times, but it’s not glorious. These are people that have gone through the same battles you’ve gone through. Raising money is a bitch. There’s no other word that describes trying to raise a seed round, or a series round. You talk to 100 people, and 99 will tell you, ‘No’. At one of the YC talks, that I think Paul Graham gave, he said, ‘Believe the ‘No’, don’t believe the ‘Why’. I feel like people don’t take that to heart, but it’s so true. No one knows what a company, or start-up, or founders are capable of when they say ‘No’. Understand they said ‘No’, but don’t understand why they said ‘No’. We’ve always looked at it as, “They just don’t get it”.

Andrew: Let me ask you one other thing about the Y Combinator group. If I wanted to start a Google Group of all the past interviewees that I had on Mixergy, I don’t think that the activity would be that high. If others have started online groups, there’s not necessarily a lot of value in it, and there is a lot of back and forth, more junk in your inbox. Why does this group work so well?

AJ: I think it goes back to, it’s a founder’s internal support network where there’s a pretty incredible sense of trust. The network has grown big enough, where you can go if you need an intro, or you want to get in touch with someone, or if you want to use someone’s service. I can’t tell you how many different other YC services we’re using, but it’s probably 15 or 20 companies. I can’t speak highly enough about the network.

Andrew: I can see it right on your site. I can see you’re using Ben Software Olarc, to do real-time chat with your customers, for example.

AJ: Absolutely.

Andrew: OK. What else do I want to know about? Oh, right, you said ‘raise a round’. I didn’t know you guys raised anything beyond Y Combinator.

AJ: We’re still seed funded, but we’re playing with the idea of raising a series, here shortly.

Andrew: OK, so you’re starting to talk to people, and you’re starting to get some feedback.

AJ: Yes.

Andrew: OK. I won’t ask anymore. Let’s see, what else do I want to know? Oh, I know what. “Hiring people is a bitch”, you said to Jeremy. Why? What’s the tough part about that?

AJ: It’s time consuming. I spend about 30 percent of my time now, searching for individuals, going through my networks. We do everything we can to protect the culture of our company, and it is so hard to find exactly who you’re looking for. Starting out, my dad told me, “Hey, hiring people is very expensive. Hiring the wrong people is more expensive.” I think that’s very true, and we’re very thorough with who we bring into our family. We work an incredible amount, we have a lot of fun together, and it’s very special. When somebody has personal problems, their main support network is actually at work and not elsewhere.

Andrew: So, how do you find that? Everyone says they want to find someone who fits their culture, they want to find the right person, they want to find a hard worker, or self-starter and all of that. What are you guys doing differently that no one else is doing?

AJ: One of our main goals is when people come to work with us I want their life to be better and more fulfilled as a result of that. I think that we add a lot of value to the individuals’ lives who join our core team. When we’re near the final interview process we tell people you’re probably going to work harder than you ever have before in your life, but I want you to be happier than you ever have been. If we can find where an individual fits in then it’s a pretty incredible thing because it’s suddenly not work. I think if you ask the people in our office people would feel like they’re meant to do what they’re doing. It’s very cool to know that it suddenly doesn’t become work. I feel like what we do is make people’s lives better. That’s one of our main goals as we expand.

Andrew: How did you get customers when you outgrew the flyer stage?

AJ: Yeah, that’s always been something that has been tricky. Because a lot of it is gaining consumer mind share and educating the consumer that hey, this device, this $600 device on your desk can be replaced in a half hour, or you can get a new screen in a half hour and not only that you can click a button. I think all of our iTechs – we have about 340 or 350 iTechs right now – they’re all evangelists for what we do. So we looked…

Andrew: …What do they do to get you new customers?

AJ: Well, they’re leveraging both their networks. They talk to the carriers. They’re letting individuals know in their areas that they do this. We have billboards, Google Adwords, Google Places, Yelp. We…

Andrew: …What’s most effective out of all those things you guys are buying?

AJ: I would say probably Google searches and SEO.

Andrew: SEO. What are you guys ranking for?

AJ: What do you mean what are we ranking for?

Andrew: What search can I do to see what shows up when, what rank…

AJ: …We do…

Andrew: …search…

AJ: … we market ourselves in areas that our iTechs are in. We use Mixpanel for a lot of our analytics. One of our most interesting metrics we track are keywords for finding our site or finding our iTechs. What’s interesting is the top 3 keywords for ending up at our site are iCracked, iCracked iPhone repair, and iCracked iPhone buyback which is good because it’s showing we’re building a brand around our company. We…

Andrew: …What if I type in something like cracked iPhone San Francisco it’s all in Yelp?

AJ: We should be coming up there. We have a ton of Yelp listings.

Andrew: Oh. Let me see. iPhone cracked screen San Francisco. Let’s see what comes up for that. I’m trying to see what that leads to. OK, I see that you guys bought an ad, upper right. I see Yelp. Let’s see. iPhone cracked screen repair San Francisco. iPhone cracked. No, this is Yelp listing. The other one is Yelp listing. Oh I see. You’re in the Yelp listing. Do you do anything that sends traffic directly to your site? Do you do any organic search that gets you traffic?

AJ: Yeah, we have a lot of stuff. We’re in the pipeline right now that increases that. But I think overall we’re very happy with the monthly traction and…

Andrew: …But to…

AJ: …increase…

Andrew: …get to two million there must be one place at least where you’re getting a lot of customers.

AJ: Honestly, a lot of it is organic and people finding out about our brand and googling us and going through the link.

Andrew: I see. And does that bother you because it’s not controllable?

AJ: Well, see, I think it is controllable as long as we can control the brand in our messaging. I would much rather have us start becoming synonymous with buyback repair. We’re going to launch an insurance company here probably in the next 9 months and then redistribution. What’s very cool is that you look at our buyback program that we have in beta right now. We’re putting an iPhone and iPad in consumer’s hands that have never had an IOS device before. What’s cool is we can’t speak highly enough of Apple as well because they make the best devices in the world and we exist because of them. We’re just thrilled to be a part of this.

Andrew: Here’s what I see, you get a lot of traffic from Google, a lot of traffic from Yelp, but more traffic from Facebook than Yelp. What are you guys doing on Facebook?

AJ: We’re trying to grow our Facebook footprint and interact with our customers more.

Andrew: How?

AJ: We do break of the week, promotions, we have a store that people can buy do it yourself kits directly from…

Andrew: Right at the top I see a tab that says, “[SP] iCracked shop and repair videos,” so I could learn how to repair it myself or go to your shop and buy.

AJ: Yes. YouTube is also a large driver of business for us. We really solve our repair videos because we want to help as many people as we can.

Andrew: I see, break of the week. On the left, I see before the iTech. On the right, I see after the iTech and you show what you guys do. I guess, people are wondering if it’s a hoax and you say, “No, ladies and gentlemen it’s not a hoax, we did this, we fixed the phone.” I actually don’t see that much activity here. Frankly, 6,100 likes, not bad, not tremendous.

AJ: We believe that we can certainly do a better job.

Andrew: One other thing I’m seeing when I’m looking at where you get your traffic, The Muse. I recently did an interview with the founder of The Muse, how are you guys getting traffic from them?

AJ: Aren’t they an awesome company?

Andrew: Unbelievable and I’ve never heard of them before.

AJ: We want to show people about our office culture and what positions we’re currently hiring for. We figure that we’re probably going to hire 30 or 40 new full time people in Silicon Valley in the next quarter or two quarters. The Muse does a very good job at creating these gorgeous job listings, so we partnered with them to create a listing for us and we’re very pleased with their services.

Andrew: I see, so you send people to them who are interested in working for you, they send people to you who want to apply?

AJ: Yes.

Andrew: Got you. I think, I’ve got everything except for spearfishing. What’s the deal with spearfishing?

AJ: My brother and I have been scuba diving since…I think, we got certified when we were 12. In the last four years, we got into lobster diving and spearfishing. We end up taking anyone who wants to come in each other’s companies out to an island off of the coast of Santa Barbara for two or three days. We just bring butter, salt and end up spearfishing and lobster diving for three days. It’s the best time you could have with someone, being isolated on an island having to catch your own food.

Andrew: That sounds like a lot of fun. You catch the fish and lobster, grill it and that’s what you’re eating for the trip.

AJ: Occasionally, we’ll find a citrus tree which will provide the lemons or limes.

Andrew: That does sound like fun. Everyone in the company is invited?

AJ: Yeah, everyone’s invited. It sometimes gets a little intense, so we do a full disclosure that it may not be the most comfortable weekend, but it will be one of the most fun.

Andrew: Actually, before I let you go, I know I said that was going to be the last question, but I interrupted you several times when you started talking about this buy back program.

AJ: Yes.

Andrew: Where did you get the idea for buy back and how did you implement it?

AJ: I think, it’s the natural evolution of our service. We essentially wanted to take care of the life cycle of these devices. I think, we’re going to be moving into Samsung devices shortly. There’s a lot of re-commerce. In the US, there’s over a 50 billion dollar industry and less than one percent of electronics are ever resold. We believe that that’s not because…it’s because of antiquated avenues for reselling your devices.

I think, going online and requesting a prepaid shipping label to ship your device off, wait seven to ten days for a check or PayPal, it’s just not consumer centric and that’s not how servers should be because you can essentially run that company in the 1990s, and it wouldn’t change very much. And so we believe that when we can start paying people on demand for electronics they already have, that’s going to build a lot value for our customers because they can suddenly turn these assets that they have into cash in a matter of minutes which we actually very excited about. We actually have one of our prepaid debit cards that we’re using to. . . We have iCracked branded cards to charge up on the spot and give you cash on hand.

Andrew: You know what? It’s only for iPhones, right?

AJ: iPhones, iPods, and iPads. What’s interesting it’s a buy low, sell high model where we can find any device that has value and flip it. I think that’s a very powerful business.

Andrew: I wish you were doing Android phones. I got the Nexus when I got really excited that it was coming out.

AJ: Yeah.

Andrew: I thought I was going to switch to Android, and I never ended up switching. I keep meaning to sell this on Craigslist because I guess I could have gotten even more than I paid for it on Craigslist, if I had done it within the first couple of weeks. But I just don’t have the patience for it now. I’m thinking, should I get someone from Task Rabbit to do it, and the thing is just sitting here. I wish I could go on your site and have you do it. I don’t want to ship it out to someone else. I would rather have someone come in here and do it.

AJ: I think the current state of buy back is a broken system, and people need to have the path of least friction to buy and sell any service or device. So I agree with you completely because it’s an asset. It’s difficult to turn it into capital.

Andrew: Yeah. Or you have to sell it on Amazon which takes forever. I’m not doing eBay because that’s a big pain in the butt. Craigslist works fast, but I never get around to it. I always say I’m going to sell it, and I never do.

AJ: Well, Andrew I’ll send over one of our iTechs. We’ll buy it off you, and then we’ll resell it for you.

Andrew: The Nexus?

AJ: Yeah. I’ll do it for you because we like you.

Andrew: I would love it, but I’ll feel guilty if you guys do that.

AJ: You can be our first customer in the Android market.

Andrew: All right. Done. I will give you my address right now if you guys want to do it. I trust you, whatever price you want. There’s my address.

AJ: All right.

Andrew: Let me know before they come.

AJ: Excellent. Well, I’ll talk to you. We have one of our best iTechs in San Francisco so it shouldn’t be a problem.

Andrew: All right. Well, thank you so much for doing this. The website is icracked.com. If you crack your device, you don’t have to buy a new one. You don’t have to ship it off somewhere and wait for days to not have it. They’ve got it. I’m really excited to have you on here because I said I kept reading about you on other websites, about how well you’re doing. And I said, “I’ve got to get this guy on here and figure out how he did it.” I figured out a little bit. I’m going to try to understand more.

AJ: I appreciate you talking with me, Andrew.

Andrew: All right. Thank you all for being a part of it. Bye guys.

AJ: Have a good day, man.

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  • Scott

    I was just reading about their success on Yahoo yesterday.

    Would love to hear from AJ about what kind of business being on the front page of Yahoo can bring.

  • Chase Carter

    I too saw AJ on Yahoo yesterday. I was prompted to the article on Hacker News.

  • http://digitalxbridge.com/ Jay Melone

    Atta boy, AJ. Congrats to you and Anthony. So deserved.

  • Kyle Patrick McCrary

    Gave me some really good ideas for my current venture. Thanks AJ! And thank you another solid interview, Andrew.

    $ Building a start-up is more frustrating than good. It’s not an easy life.
    $ Start-ups are extremely lonely and are like an up-&-down roller coaster.
    $ Having a co-founder helps make the journey tolerable. Also, love what you do.
    $ Get past insecurities to build what you want.
    $ The perception of something is sometimes worth more than the value.
    $ Facebook may be a better alternative than having a website.
    $ When importing there may be: quality, language, and cultural barriers.
    $ Control who represents your company.
    $ Control your customer experience to make sure they are satisfied.
    $ Don’t involve friends or family in financing activities. It could stress relationships.
    $ Tell an interesting story to capture attention. Then stay persistent.
    $ People generally want to help build things with you. Ask them to a drink :)
    $ Computers crash..Fill out online applications on Microsoft Word, first.
    $ Brick & mortar won’t last long when you have on demand services.
    $ Networking is invaluable. Set up a solid system of communication. *
    $ “Starting a company can be fun at times, but it’s not glorious. Raising money is a b**ch… You talk to 100+ people, and 99 will tell you ‘no.'” – 36:17
    $ “Hiring people is expensive. Hiring the wrong people is more expensive.” – 39:25
    $ Do what you’re meant to do. (Make people’s lives better.)

    * Tools Mentioned: Google Group, Olark, FaceBook, Microsoft Word

    KPM

  • http://www.alaininternetmarketing.com/ Alain Guillot

    Great Interview.

    Every post that I listen I feel so full of energy. Thanks Andrew

  • GQ

    Wasn’t this website listed and sold on flippa a while back?

  • http://digitalxbridge.com/ Jay Melone

    No.

  • Arie at Mixergy

    Thanks for the great notes, Kyle

  • shaun sinclair

    Hi Arie

    Is there anyway to contact AJ directly? I’d love to adapt this model to a service I currently offer.

  • iCracked

    Chase, great question. We are planning to move into the Android market (particularly Samsung) in the next 9-12 months. Keep an eye out!

  • iCracked

    Thanks Jay!

  • iCracked

    Glad you were able to glean such wonderful insights! Good luck, Kyle!

  • iCracked

    Hey Scott! The Yahoo! feature was incredible. We shattered all of our previously held records for traffic, applications, orders, and engagement. It was a blast.

  • Chase Carter

    Thanks, AJ!

  • Joey

    I bet, I drop my phone all them time and have to take it in for screen repair at a local tech hub!

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