JamLegend: A Postmortem On The Company That Zynga Bought – with Andrew Lee

Today we’re featuring and interview with one of the first entrepreneurs that I ever interviewed.

We’re going to catch up with him and find out how he built his business. We’re going to find out what happened after TechCrunch put his business in the dead pool and what happened when he moved on to Zynga. The guest is Andrew Lee, the founder of JamLegend, which used to let you play a rocking guitar game online for free.

When they closed, the team was hired by Zynga. I invited him to return to Mixergy to talk about what happened, tell the story and to tell us what he learned along the way.

Watch the FULL program

Andrew Lee, Zynga

Andrew Lee is the founder of JamLegend, which let you play a rocking guitar game online for free and was recently acquired by Zynga.

 

Raw transcript

Mixergy's audio transcription is done by Speechpad

Andrew: Coming up, one of the things that all the books behind me have in

common is they believe in only studying success and I’m sure you’ve [??]

down the books in your bookcase and in your Kindle. Well today we’re going

to study both success and setback. That and so much more coming up. Stay

tuned.

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together, what service did she use? Grasshopper. With Grasshopper everyone

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Finally, when Dave Jackson and Dave Petrillo invented a product that keeps

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months he sold over a million dollars in cases. Get your beautiful online

store at shopify.com. Here’s the program.

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the

founder of Mixergy.com, Home of the Ambitious Upstart, with an interview

featuring an entrepreneur who was one of the first entrepreneurs that I

ever interviewed. We’re going to catch up with him. We’re going to find out

how he built his business. We’re going to find out what happened after

TechCrunch put his business in the dead pool and what happened when he

moved on to Zynga. The guest is Andrew Lee, he is the founder of Jam

Legend, which used to let you play a rocking guitar game online for free.

When they closed, the team was hired by Zynga. I invited him to return to

Mixergy to talk about what happened, tell the story and to tell us what he

learned along the way. First of all, Andrew, welcome back.

Andrew L: Thanks for having me.

Andrew: You know what? I was a little stalling there with the intro. I

didn’t read the intro as I wrote it. I started stalling because just saying

the word dead pool was painful to me, especially around you, a friend of

mine. When you heard, or when you read on TechCrunch that your company,

your baby was dead pooled, what did you feel? What happened?

Andrew L: I actually laughed because the reason why, people don’t know

this, but we actually, the reason why TechCrunch dead pooled us was because

we sent out a glass [SP], email to all of our users telling them that Jam

Legend would be no more, but that’s because we actually were, we were

acquired by Zynga about a year ago, so as a result of that, it was funny,

because at the time, when you’re in the middle of an acquisition, you can’t

really talk about the specifics of what’s going on and they were, at that

point, wanted to be in control [??]. The next thing that had happened

immediately after that was people were like, “Oh my god.” A day, literally

24 hours later, “We’ve heard that actually Jam Legend has been acquired by

Zynga.” It’s one of those things where, it’s [??] early in the morning, you

have some friends who email you and some of those friends say, “Hey. I

heard about this really recently. I’m looking for a great team. Go ahead

and join me online, next great thing, so take a rocket ship to the moon.”

Then halfway through the day, people are like, “Oh. Wow. Congrats, man.

That’s super awesome.” You basically have a wide range of emotion that

occurs.

Andrew: But you did have to close down Jam Legend, right? Which means that

the product, at least, itself was dead pooled. Right?

Andrew L: Yeah. To the extent that it’s no longer alive, yeah. We had two

million users there who were really interested in continuing to use a

guitar [??] online game. Zynga owns all of the assets. They own all those

things and that puts them in a great position if they ever want to execute

on the music gaming market, but they have way bigger fish they’re [??] to

fry over there. It’s a great company and they have a number of different

things they want to work on.

Andrew: What I want to understand is both the highs and the lows. I want to

understand about how you got this acquisition. I want to understand what

happened after the acquisition. But I also, I’m going to challenge you to

do what we as entrepreneurs instinctively don’t want to do which is to go

and talk about the frustrations, the set backs, the vulnerabilities, the

issues that we couldn’t overcome.

Andrew L: Yep.

Andrew: Let’s go back to where the idea came from. It was a basic idea,

right? You wanted to take a product and move it online. Can you describe

what that was?

Andrew L: Yeah, so Jam Legend essentially was you take Guitar Hero, you put

it online. The real key here was that we knew that everybody on their

iTunes account and in general had all of their music on their computer. The

perspective was hey, you know what? A lot of people want to go and play

like Viva La Vida by Coldplay and they can’t do that. They literally cannot

do that with Guitar Hero or Rock Band. Is there a way that we could do that

within the browser? And more importantly can you plug in your Guitar Hero

and Rock Band guitar? We made a system. We literally had[SP] technology

that could take any song and put it online inside a game. That was the

initial concept.

Andrew: And I could rock out with my keyboard? Just my computer keyboard

and start playing guitar? I don’t even need to buy a device.

Andrew L: Yeah, you could rock out with your computer keyboard or you could

plug in your guitar and your Rock Band guitar.

Andrew: All right, I should point two things out that people have noticed.

I hate when I’m a listener and the host doesn’t even acknowledge it. First,

I choked there earlier. My drink just went down the wrong pipe or something

as I was talking to you. Thankfully I was able to hit mute midway through

the cough.

Andrew L: I mean, you shocked us all. I thought Andrew was in a dead [SP]

pool. Oh, no, he got acquired. I had no idea. I mean you had the action

right there.

Andrew: Right. What is that sound all of a sudden? Yeah, and also I am a

little bit close to the dead pool I feel this week. I just got back from

New York where I was down with a fever. The other thing is your camera

seems to be going bigger and smaller, wider and thinner. It’s just

something that apparently happens with some cameras. I just accept it

because it’s not about the camera, it’s about the story. All right,

everything acknowledged…

Andrew L: It’s trying to adjust for my weight, actually.

Andrew: Smart camera. All right, you raised a little bit of money. Was the

first round of money, did that come from Launch Box?

Andrew L: Yeah, so initially we came out of an incubator. It was Launch Box

Digital. It was very similar to like Y Combinator. Great group of investors

there, Sean Green, Julius Genachowski, [SP] and John McKinley. Each of them

have gone on to do different things nowadays. But great group of initial

guys. Then afterwards we came out here to San Francisco. You know, it was

one of those things where you’re out there meeting some folks and you’re

just like hey. You know, there are some people who will just give you a

check after giving a demo. Really, really amazing people. Very, very bright

people. We raised our round, approximately about like, you know, $650,000.

That was our first angel round, actually. We’ve just been operating ever

since which is great.

Andrew: What was the, overall how much did you raise through the life of

the company?

Andrew L: Overall, through the life of the company we raised, that was

pretty much it. Basically $650,000. That $650,000, [??].

Andrew: Oh, OK.

Andrew L: I mean during that time, if you think about it late 2008 that was

like a godsend.

Andrew: Yeah.

Andrew L: It was one of those things where it was just really impossible to

be able to go ahead and do anything else.

Andrew: One of the things you told me about back then was that your vision

was to launch a simple product which, back then, was kind of revolutionary.

Instead of blow it up big, go big or go home, have every feature that

anyone could imagine and dominate by beating the competition by having

every feature before they could even think of it, you said no, I want to

focus on a few things. It’s got to be free, it’s got to be online. Just a

few different things and then we’ll launch. Then that got you to a million

users within how long?

Andrew L: A million users was pretty fast actually. We got to a million

users, that was at the beginning of ’09, like mid ’09 essentially. We got

to a million users in a little upwards of probably like three or four

months. It was really quick.

Andrew: What was it about that? I want to study, as I said, the success and

failure of the story. The success and setback I should say. How did you go

to a million users so quickly before you could piggyback off of Facebook’s

traffic, before you can sneak in through Twitter back doors? I don’t know,

what did you do?

Andrew L: Yeah, so the thing for us is we had a couple, like three

different strategies. The first one that we did was so on a practical, on a

sort of topic level, right, the theme that our perspective was we needed to

[??] both inherently viral, which is very important. Then more importantly

was if we made it free and we also made it, could it be something that was

like inherently social? We didn’t do any of the Facebook, Twitter

integration or any of that stuff initially. What we did do though was

tackle things. The first one was, we did a number of different hacks, that

I guess people have done later on and we’re not the first to be able to do

this.

Back in ’09 it felt like we were the only people doing it. We actually

created limited access. Everyone thought you shouldn’t limit access but we

limited access. We said we only have 1,000 registrants, and the truth is

the server probably could’ve taken more but we said we’re only giving a

certain number of invites codes out but if you Tweet about us, if you

Facebook about us, we’ll go ahead and let you in and we’ll move you to the

head of the line. In fact now, there are companies that build this now,

it’s that fascinating.

The next thing that we also did was we made sure that when we built in a

system, that we built in a system for experience points, which at the time

we used to lodge some of the Social Games, which was just use game

dynamics, right? The more people that you invite, the more powerful your

character becomes or your particular presence, then you can move up in the

leader boards. That was actually something we created sort of artificial

scarcity. In both instances there are artificial scarcity, both one in

terms of access getting in, and then two, being of the move up within the

game itself.

Then the last thing was, it was just inherently viral, we honestly didn’t

know how fast it would grow, but all of a sudden my co-founders and I, all

of us were staying up nights, literally nights on end every single day. I

remember Arjan and Ryan, my arm in long, and Ryan Wilson, my two co-

founders, were just literally each have a text message that would wake them

up and didn’t get any sleep for three days.

Andrew: Text messages when there was trouble with the server?

Andrew L: Yes, exactly. Basically a new instance each time.

Andrew: I see. What kind of power would a player who’s just basically

rocking out to his mp3 collection need to have, what kind would he so covet

that he would do whatever you guys needed to do to grow your business?

Andrew L: To be fair, I think what we did was we wrote a lot of different

waves too. We talked about this in our previous interviews, which was

essentially every great surfer needs a great wave. That’s like the basic

fundamental tenant of the Bay area, has always been that. Every great

surfer needs a great wave. You can’t be a great surfer without a great

wave. The important part about that is that when we were thinking about

creating our product, we knew that Guitar Hero and Rock Band were huge. We

knew that they were huge mavens. People were very, very deep into those

games so our perspective was, how can we empower those guys? How can we

make the game both more core, harder for them but also at the same where

they’d want to go ahead and invite their friends and be able to create a

really great place.

Andrew: OK. I see. You’re tapping into the wave of enthusiasm that existed

around the game of Guitar Hero and I do remember going to people’s houses

and seeing that they’d have the guitars all set up, waiting for somebody to

ask them if they could play. You also mentioned earlier that you’d give

players more power if they did things like share jam legends or business

with their friends. What kind of power would you give them? I understand, I

guess I didn’t play the game deeply enough to experience the significance

of power. Can you tell me what kind of power would a player have?

Andrew L: Eventually what we did was if you had a number of users come to

the website, what you could do was increase your level of experience, and

whose experience points help you level up. The more level ups that you

receive then the more power ups you could have. This is later on we

actually developed power ups within the game that you could use. You could

explode things, you could have different ways to move forward within the

game too. Essentially, it’s the essential equation that happens with most

games which is the Jam Legend, you could play by continue to grind or you

could buy power ups, or as you grinded you got more power ups as well.

Andrew: But I can play to my own music no matter what, it’s just what level

am I at depends on what power I have?

Andrew L: Yes. If the medal of above. Think about it this way. If you want

to be the number one person on Viva LA Vida, there is this other guy who’s

doing pretty well, but if you buy a power up or if you been on the site for

a pretty long time and you have your own power up, you’re going to be able

to go ahead and do fairly well with those guys.

Andrew: Meaning, if I miss a key, when I don’t play one of the keys in the

game, I don’t lose a point?

Andrew L: You don’t die, there are a number of different things. We had

some pretty cool effects where it would explode, there all these really,

really cool effects that we did.

Andrew: OK. And that’s basically the game play. On the screen it says hit

this key to play this instrument at this time. If you do that then you’ve

got the point and you’ve advanced a little bit. Then hit this key to play

that sound at this time, so it’s about playing the right sound, hitting the

right key to do it and doing it at the same time, doing it at the right

time? You used all of that. You got to a million people, how long did it

take you to get to the second million people?

Andrew L: The second million, that was more steady growth. We eventually

reached that probably in September, October, actually I think it was around

December of ’09, early 2010, at that point. With that point, we hit those

two million users. I have to look at our blog post, it’s been awhile. We

got to those users and it was great when we got there. We’d celebrate every

single time and we loved our users. They were great people.

Andrew: How’d you celebrate the first million?

Andrew L: The first million I think we went and ate Indian food. It was

this place nearby that a lot of other startups go to. There’s this place

that’s a combination Irish pub and Indian curry place and those two things

put together must equal celebration.

Andrew: I’ve gone to those places. I love them. Have you heard from L.A.

where they have a place that does that, King’s Head in Santa Monica to

Argentina where there was a curry and Irish pub combination. It just rocks.

A decent celebration. It seems like, then, the second million happened,

when? In ’09?

Andrew L: In ’09 and around 2010.

Andrew: Around 2010 is when the second million came, but when you sold the

company, you had [??].

Andrew L: [??] 2011.

Andrew: Then, at some point did it plateau?

Andrew L: For us, yeah. Essentially what happened was, this is where the

setbacks occur. We essentially did the initial, if you looked at it. Paul

Graham talks a little bit about this where it’s like you can go ahead.

There’s the shark fin that happens when you get some media spike, you drop

back down and then you start moving and then you start having real, organic

growth that you’ve been actually working hard to go and get. Then it’s been

pretty hard, because the thing is, that a trough of sorrow here that

occurs, and then when you’re here, you’re actually at this plateau of

sorrow where what you really need to do is, you want to go and get a hockey

stick up into the right and the truth is that, I think there were three

things that happened with Jam Legend. The first was that, no matter how

hard we were able to go and work, I think that the market just tapped out.

We hit a large number of people and, at the same time, while Rock Band and

Guitar World were duking it out, it literally saturated the market. If you

remember during that period around 2009, 2010, it was a significant amount

of investment by those two guys and they were just working really hard, non

stop to go and market out their products. The issue is that when the market

becomes saturated like that, you have to grow in some other fashion.

Exogenously what was happening was people were moving away from consoles

and they were also moving into social gaming, to a certain extent, and

those are two different [??] of demographics. They were highly female here

and highly male here, but there were [??] that were happening. Either

people were going more in depth or they were playing lighter games on

things like the iPhone, for example.

Andrew: What else was going on? You’re saying that there are a few things

that were going on at the time?

Andrew L: Another one was that, I think that for us, we realized that a lot

of people were playing very deeply, but then we also started doing analysis

on different countries and we noticed that a significant number of our

users were actually in other countries and what that taught us was a [??]

setback, which is, “Hey. You know what? How do you then monetize a

significant audience that’s outside the United States?”

To be fair, United States was our number two place, but the number one

place was someplace in the Philippines and great group of people, amazing,

great English speakers and really well connected. The issue is when a

country like that has low GDP per capita, it’s very difficult to go and

monetize. We had to think of very creative ways to figure out how to

monetize on an international level. A lot of people think that growth is a

great idea. Growth is a great idea. It’s a great way to go and validate and

test a particular group, but more importantly though, is that even if you

just grow, that’s not as important if you don’t take into account the

average revenue you might get per user. Growth is not good if all of a

sudden the people who are helping you grow are five year old children. If

it’s all five year old children who have no way to go get their parents to

spend money or find some way toward a business model, you’re just basically

providing a free service.

The way I like to describe it is this, websites out there are very similar

to the locations around in the real world. Think of Facebook. Facebook

initially was, probably, think of a community park. A community park where

you can all get together, see each other. People sometimes bring some

photos, they share some photos, you can see someone else’s photo, you can

make comments about those photos and Facebook thinks to themselves, “What

we should do with all these people here? Let’s build a mall. Let’s build a

big mall inside the community park.” Turns out the biggest place in the

mall that everyone goes to is actually the arcade, which turns out to be

Zynga. The difference with Jam Legend is that Zynga is an arcade inside a

very well established mall in a great suburb, within a great suburb.

For Jam Legend, we found ourselves building a great game, great sort of

arcade area. But our arcade area, we find ourselves in a sort of a not

nearly as high income area. It’s not like the mall where everyone goes to

spend money. It’s really just that we happen to be in a place where mostly

kids who come there are frequent there don’t have a lot of cash on them.

Andrew: Is that, why not? Is that because what we’re finding is that the

nice areas are all walled gardens as we’re calling them? Like Facebook and

if you’re just out on the internet, hang your own shingle with your own

website, you really out on your own and probably in a bad neighborhood,

where things that could happen to you are going to happen.

Andrew L: Well, the truth is this happened to a lot of other companies. I

mean, like if you look at, I guarantee you, if you look at any company that

has had rapid, significantly rapid growth, you should look at their

demographic breakdown between both low income, high income. And look at

specially country breakdown.

You had a large number of people, when the world was talking about rocking

and slide for a while, a lot of those guys were pulling in people from

Turkey. And nothing wrong with the Turkish people, they’re great people.

The issue is how do you figure out a way to monetize and I think this is

actually a very big problem for international business.

This is one of those things where, if you run an internet company, you’re

able to go ahead and determine that you’re actually able to make, run an

international company. You have to deal with questions of exchange rate.

You have to deal with questions of [??] per capita. And I think the main

problem is that when you think about companies like that, nobody actually

thinks about how to build growth.

Growth is good but growth by itself is not always good if it’s the wrong

type of users. Because they both impact how your product develops and also

how your product gets received and I think going back to the analogy, ours

was not a walled garden. I wasn’t completely a wall garden.

And if there’s one thing I would have done in the very beginning is I would

have not wanted as much growth. I’ve wanted to product market fitted at the

very beginning with a certain group of users and actually walled it off so

that it’s only, for example U.S. users or a certain number of users.

Because the way that I think we should think about it is that human beings

naturally want to go to a place where they know there’s high value. They

want to go and consume products they know have high value.

So, you don’t want to go ahead and use the thing that all the other people

are using, all the other people that you don’t respect are using. You want

to go use the thing that everyone you respect is using. Think of all those

people who at the time of the very beginning when Facebook first started.

Facebook had a great strategy where they first started [??] being an open

network actually they thought about this instead of being open network,

very similar to MySpace, they wanted to be a closed network. And having a

closed network generated more value.

And for us, I think that the way we thought about it was the way that the

product came out, it turned out to fit a pretty good audience. The issue

was that when you have countries like the Philippines, it’s difficult to

monetize them. So this is one setback but the thing is, we figured a way to

monetize that which was great.

But it also meant that you had to cut down on growth usage, which isn’t

always so great if people care about….

Andrew: How were you going to monetize that? What was the original plan for

monetization?

Andrew L: The original plan for monetization was very easy. It was like

Premium, we basically have a premium service where you can play a certain

number of songs that you own, if you wanted to play more there’d be a surge

service. Additionally to that, we were also going to be thinking about is

there another area we can sell power-ups or virtual goods. And that by

itself was a good model. And lastly we would do advertising for all the

free users.

The issue was that when we thought about how to go monetize, we found out

that hey, basically if we couldn’t monetize them via advertising, if

they’re in the United States, we find giving them free advertising. Then if

we couldn’t monetize through advertising, then we monetize the premium

service. The issue was that then, at that point was if neither of those

business models work, then as a user that user is just costing us money.

And we should then probably block them up.

Andrew: That’s when, I think it was December 2010 you said, “Look, if

you’re from certain countries, we’re going to ask you to buy a Pro or

ProPlus membership”, right?

Andrew L: That’s correct.

Andrew: OK. We’ll get to the response to that but let’s spend a little bit

time on the earlier days. So the original idea was you’re going to make

money from advertising or virtual goods or power-ups. Those are the three

areas, do I have it right?

Andrew L: It was actually premium service, advertising and virtual goods.

Andrew: Premium service meaning more music that you can have.

Andrew L: That’s correct.

Andrew: Premium and then, what was the first one that you launched of those

three?

Andrew L: The first premium service that we launched or the first virtual

good?

Andrew: First revenue generating leg of these three legged stool.

Andrew L: First one that we ever did was we actually did both a little bit

of advertising and we did a little bit of the [??]. So initially it was,

actually, we were developing in 2009, we were primarily working on our

technology. The very, very big technology: can you take a song and

immediately turn it into a game? We were so focused on that and we put it

out there and turned out, it worked out pretty well. People used it, people

started using our premium service, they started converting, but they didn’t

convert nearly at the rate that we wanted them to. At that point, we were

like, ‘Let’s start monetizing through advertising.’ Then we started going

through a large number of different models and testing different models

against our user base.

Andrew: How long did it take you to test a model?

Andrew L: It depends. My co-founders are super human so sometimes they

would take two days. Other times, they would take a month. It never took

more than three months.

Andrew: Do you have an example of something that you tested quickly that

got outsized results? Unexpected [??].

Andrew L: Advertising is probably the easiest one. At the point where we

knew that we needed [??].

Andrew: I’m sorry. We lost connection for a second. What was that?

Andrew L: Advertising.

Andrew: Advertising.

Andrew L: Advertising for us because we had a big enough base and it was

easy enough to go and just throw a banner on and then if we used the Google

dart system, or used a number of different systems, we’d rotate through a

number of different ad publishers and then compare those CPM rates against

each other and then we’d easily be able to determine which would start

performing well. It actually turned out to be a great way for us to go

ahead and determine how to think about each of these geographies. The way

that we did it was, we took every single country, we lined them up in an

Excel spreadsheet and we figured out the CPM rate that we got in each of

those countries.

Then out of those countries, we then determined, here’s how much it costs

for us per user, in terms of our cost of goods sold in each of these

countries. For every individual, for any person who comes to the site, we

assume an average perspective. If that’s the case, that it costs this much

and we get this much of a CPM, is it then worth it to go and keep that

particular country in there? We actually looked at it from that perspective

and we said, ‘In that case, this country is more prone to using a premium

service than to actually using advertising,’ because the advertising

infrastructure is not nearly as strong as if in a developing country, or

developed country. For a developed country, we still had a premium service

and we still have virtual goods. Every woman could buy virtual goods, but

the question was, ‘If you could then monetize these countries through just

advertising, would you just stick with advertising?’

Sometimes we actually said to ourselves, “You know what we do? We don’t

even care about advertising for these folks, we just want to upsell them to

premium service,” because the advertising is really for game companies.

Game companies we try to advertise against our game because it was legion

for them, it fit in with their audience and our perspective was, “Hey. We

want to keep them in our page” so we would sometimes shut off advertising

for them. In a way, using both models to interact with each other was a

great way to figure out how the curve exactly worked out in terms of how we

would monetize. And it turned out really well. We made money.

Andrew: What was the most profitable, the most lucrative of these three

different options?

Andrew L: Initially it was advertising and then our premium service started

catching up once we started doing geographic restrictions. Initially it was

advertising and then advertising didn’t dip at all because basically what

we did is we found a way to go and monetize the free people who we couldn’t

[??] monetize for advertising. We just turned toward the premium service

and all those people jumped up and started making more of the premium

service.

Andrew: When you said you have to be premium or nothing, that’s when it

shot up?

Andrew L: We incentivized their retention by saying, “Hey. You can only

play one free song a day.” That would get them in, they would be like, “I

want to play more.”

Andrew: If you want to play more, you have to pay.

Andrew L: That’s right.

Andrew: You also did Super Awards run by a past Mixergy interviewee. How’d

that go for you?

Andrew L: That’s right. We did Super Awards. The alternative payment

structure was pretty good. If you think about it, all it is is the ability

to go ahead and generate a lead for another service. It worked out pretty

well, it was just a good alternative payment structure and that worked out

pretty well for the premium service and for buying virtual goods as well.

You fill out a survey, we get paid because the other business gets the

information that they need and they’re able to go and generate some lead

gen and then for us, the user is happy because they get a bunch of free

power ups or they also get some areas of the premium service.

Andrew: The user does something like, go sign up for Netflix or takes a

survey and in return, you get money and the user gets, as you said, power.

I want to make sure the people understand what Super Awards does. I assume

that everyone in the audience understands that, and actually you did a good

job of explaining it, but I thought, “Let’s just absolutely be sure that

everyone is following along with every part of this so that they can use it

all completely.” So was that — were you generating more revenue from that

than you were from cash directly from users? Was it Super Rewards-type

revenue more, or was it cash from users?

Andrew L: It’s a little difficult because the thing is, we actually stopped

using — I think we tried doing, like, our own payment processors through,

like, PayPal and such, but the truth is, it was easier through Super

Rewards because they actually had — for them, they actually had a

significant number of — they had four different — they were able to go

and take multiple number of payment strategies and we didn’t want to deal

with it, so we were just —

Andrew: I see. So they handled your credit card payments also?

A: Yup.

Andrew: I see. Got it.

Andrew L: That’s correct.

Andrew: All right. So I understand about where the revenue is coming from —

actually, no, I don’t. Let’s go a little bit deeper in it. What I’m

finding in these interviews is, you’ve heard this framework that you’re

either selling ice cream or aspirin. You’re either selling somebody

something fun that they get to do, or you’re selling them something that

relieves a big pain. And you’re more likely to get revenue by selling

aspirin than you are by selling ice cream.

Andrew L: That’s correct.

Andrew: I’m wondering if, in a game business like yours, there’s any

aspirin — is there any pain that people experience in your site when you

tap into that and give them a solution to it that they’re willing to pay

for?

Andrew L: Yeah. I think the way that people think about it though is that

if you think about it as a entertainment vehicle — the way that I would

think about Jam Legend was, we to a certain extent for people in developing

countries, at least in, like, the Philippines, for example. We’re, like,

huge in the Philippines. We’re, like, an Alexa 100 site there. So in a

country like that, people — we were — if we were to take away the power

for them to go and play Jam Legend, they felt that it was something that

was so part of their formative lives and that they wouldn’t want it to

disappear. The issue is like this, right? You can either be at the

beginning selling aspirin or ice cream, but if you sell enough ice cream

and everyone eats it every single day, you take away ice cream, it’s going

to feel just as bad as taking aspirin, right?

Andrew: I see. Right.

Andrew L: The way — I think that’s how most people think of it in terms of

entertainment business. The people who you care about are those who you

highly retain, so what you want to do is, at the beginning, you make a lot

of ice cream and you figure out, hey, this is the biggest audience for all

my ice cream. And then these people are coming back for more ice cream. And

then what we do is then, we continue keep on doing that and we determine,

okay, well, in that case, if we’re doing that, are they willing to go and

pay if we were to take some parts of it away or giving — would they

understand if they wanted ice cream? You want to habituate them to the ice

cream itself.

Andrew: I see. So it’s either taking things away that allows you to charge,

or adding new things. And for taking things away, how do you know what’s

going to cause the most pain for people to live without? How are you able

to figure that out and then know that’s what we need to charge?

Andrew L: We actually looked at — the way that we thought about it was

very similar to a lot of other game companies, right? You think about the

curve, where the curve that goes like this and the curve essentially tells

you that there is a median usage and you have a bunch of hardcore people.

Now, the question is, at what point within that curve do you want to go

ahead and say, hey, this is where we’re going to start charging in this

area because this is abnormal usage and we know that these people will be

able to go and pay it because they’ve converted fairly well. These other

people, we’re going to incentivize their retention. So we’re going to

incentivize some other metric that we care a lot about. Virality,

retention, whatever it is. So in this part of the curve, our perspective

was, okay, let’s focus on this area and if we focused on this area, what

can we do that would make sense if we were to crack it and we were to go

ahead and say, hey, all of these people play — on a more concrete example,

let’s say people play ten songs on Median, all right? But then more people

play up to, like, 25, 50, 60 songs. Anybody who plays more than ten, up to

12, for example, 12-plus is when we start charging. Okay, you played a lot.

You might want to go and — you should pay for our premium service or we’re

going to show you some video roll ads. People are like, okay, I don’t want

to do that, right?

Andrew: I see. So what you’re looking to do is say, what characterizes some

people as super users and take that and charge for that because the super

users are getting the super advantage from this site. The super users are

the ones who are more likely to stick around, more likely to feel pain if

we take these features away. And you’re saying also you don’t have to take

it away completely. You can make it harder to get by putting pre-rolls in

there.

Andrew L: That’s right. So that’s one way. That’s the freemium model. The

other model is when we think about the virtual goods model. The virtual

goods model is more — very similar to what you have in a game curve,

right? So the game curve, essentially, as you level up, it’s really easy to

start leveling up and then it gets harder and harder and harder and it

takes this much — it takes a huge amount of effort to move up one level

later on. The protective with that is that since you have a game curve, the

game design curve naturally lends itself to being able to go and sell

things like power ups or virtual goods because someone has to either spend

time in order to be able to progressively gain, or they have to go and

spend money. Time and skill, or they have to be able to go and spend money.

So then, what you do is you give them the right types of virtual goods at

the right instant so they can get to the next level. That is where you

create scarcity again.

Andrew: Is that more about eliminating pain or giving them pleasure? What

are you charging for at that point?

Andrew L: At that point, what you’re really doing is, it’s funny that you

say that. Most games, most people would say, ‘Is that pleasure or is that

pain?’ I’m working so hard in order to be able to go and form my goals or

I’m working so hard in order to be able to go ahead and mine my crafts all

over the place, or try to get a mine everywhere. I think what that is is

its flow. It’s how much time and effort someone has to go and take to be

able to get to where they need to and most people want to find the

shortcut. It’s just natural. Humanly it’s something that’s inside us. It’s

a part of our human nature. We want to be able to go and do that.

Andrew: You mentioned earlier that the game world was changing. That, on

the one hand, people are going into these super games that were on consoles

and on the other hand, we’re seeing more and more people going to casual

gaming, like Farming on Facebook. Did you consider either switching your

model towards a casual Facebook like game or creating other products? What

did you consider doing?

Andrew L: What happened was if we follow this chronologically, Jam Legend

grew, we started reaching this interesting plateau, especially with the

music gaming market getting saturated. Our perspective was, “Hey. You know

what? We notice that there were a lot of guys on Facebook that were

actually doing OK too.” We’re like, “OK. These guys are doing pretty well

on Facebook. What’s going on with that?” What we did was we actually made a

game called Super Jam on Facebook and we made it completely different. We

created a whole new system. It worked out fairly well in terms of us being

able to create games.

Fundamentally, what we did was when creating those games, we found out that

we could take the fundamental Jam Legend structure and be able to create an

avatar on top of it, put in more virtual goods, make the songs much more

shorter and it actually turned out OK. It was very similar to another game

called Music Pets that one of our good friends over at Conduit Lab made.

The deal now is he’s a partner over at Spark, and he was over at Zynga for

a while, too. What we found was that pivot into that platform was a

completely different platform than what you found in the [??]. We didn’t

get nearly as much growth on that though. I think it was primarily because

Facebook, at that time, started clamping down a lot of viral channels

because they started seeing what FarmVille had done or what Zynga and a

number of other companies had done to use the platform. Their perspective

was essentially, “Is there a way that we could,” for them, they’d already

gone to a significant number of users. For us, it was more difficult. It’s

one of those things where you think about, much like, great comedy. We just

miss the timing on that boat.

Andrew: There was time there where you could just slam people with games

and then slam their feeds and so on and then Facebook clamped down on it.

What about mobile?

Andrew L: We were significantly thinking about mobile. We’d actually worked

with, people don’t know this, but Adobe had reached out to us before, back

in the day when Tap Tap Revenge was pretty big. Adobe had reached out to us

and they said, “Why don’t you help create an Android version?” We tried to

do it within Flash on the Verizon Droid device and it just was not the

experience that we wanted it to be. We never actually did an experiment

within mobile. That’s something that we, my co-founders and I talked about

this after the acquisition. We’re like, “Well, you know, it’s something

that we regret in that we wish that we would have gone to mobile,” but at

the same time, we still don’t think that music gaming would have had legs

in the mobile gaming space. Social gaming, on the other hand, would have,

or just any types of games, but music is a tougher nut to go and crack.

Andrew: Why do you think music was tougher on mobile?

Andrew L: If you think about music gaming in general, music gaming is one

of those things where you have a lot of issues with the market. Most of the

time, it’s already hard enough to build a startup. It’s already way hard

enough to go and build a startup. Trying to build a startup, there are a

lot of things that will kill you, but in addition to that is the music

licensing problems. We remember days when music license guys, we’d get

something from Warner Music and they would say, “You could use this song.”

Then all of a sudden we put it up and all of a sudden EMI calls us and

says, “You can’t use that song.” [??]. Warner Music just told us you could

use the song. They’re like, “No. No. No. But we own the publishing rights

to that.” We’re like, “Wait. Didn’t you guys ever talk about this stuff?”

They’re like no, no, we don’t. Then you kind of get them together and they

sort of try to talk about it.

Andrew: Oh, wow.

Andrew L: Fundamentally though, I mean beyond the licensing problems

though, are that if you think about the market itself competition in a way

is actually a good thing. From the perspective of being able to have many

types of experiments happening within the market, right? The reason why the

Facebook platform started evolving so well was because you could get so

many users, you could immediately monetize very quickly. There were enough

players out there who were trying to experiment all over the place where

they would essentially copy each other and try to see what the other person

was doing and sort of do another experiment on top of it.

That type of market is a great market to be in. Because then you can really

get a good sense as to where eventually everything is going to evolve. The

issue is that trying to figure out where everything is able to evolve when

there’s only a market of, say, two or three people in this sort of music

gaming online space. That’s really hard. That’s just way, way too

difficult. Because you don’t have enough experiments.

I still personally believe that at some point there will be a great music

game that will happen on the device and there will be great ways for people

to interact with music that we don’t even fathom right now, right? It could

be as a soundtrack to a game. It could be like a thing very similar to any

of the Zynga style games. But the truth is that fundamentally what’s

happening is that it’s just too hard. I think that you need more players in

a space. Not having competition is maybe not a good thing.

Andrew: Why’d you stick with music then?

Andrew L: I mean, that’s what, that was our goal, right? It’s kind of like

this, if our hypothesis is we think that we want to bring music gaming

online. That’s the hypothesis, that’s what our investors invested in.

That’s what we believed in. We wanted to move forward enough, for us the

perspective was we could have pivoted and we definitely, yeah, did pivot a

number of different ways. But the perspective was the thesis has always

been music gaming online. And was there a thesis that we could draw on and

follow and figure out whether the hypothesis proved true or whether the

data didn’t support the hypothesis.

Andrew: What was the best advice that you got from one of your advisers or

investors?

Andrew L: Probably the best piece of advice was, let’s see here, we owe a

huge amount of gratitude. There are some great investors out there. In

particular just some great investors that were part of our round. I mean

there was Haroon Mokhtarzada [SP] who’s the CEO of Webs. He’s just an

amazing, amazing entrepreneur. He’s out in the Maryland area. Then probably

two of the other guys who are just amazing are the Partovi brothers, Hadi

and Ali. I mean, I can’t, beyond compare. They are some of the best

investors that you could possibly ever have.

Andrew: Why?

Andrew L: The reason why is because those guys not only, the thing about

the Bay Area is that these guys have been through it, right? The

perspective of having gone through of being acquired, having gone through a

lot of the ups and downs of having to pivot, trying to move to different

platform. These guys are the top of the top of the line sort of investors

that you could have out there. I mean the Partovi brothers by themselves

are already doing great work with both Drop Box, what they [??] iLike, and

with Tell Me.

Andrew: Give me an example of something that they either told you or a

piece of advice that Haroon from Webs.com gave you?

Andrew L: Yeah, the great thing about Haroon is that as an entrepreneur he

was always able to go ahead and like understand what we were going through.

The way he would do it is he would always say things, he’d be a coach,

right? We had one of these ideas where we said hey, we should charge for

storage right? We should have people upload their songs and then if you

don’t own the song and someone asks you to come play it against you then

you should have to buy the song.

Well, doesn’t that like fundamentally break the social loop? Right, if I

own the song but you don’t own the song but I want you to play it and then

you have to pay for it in order to be able to do it. The way he did it was

he didn’t do it in a way that was, a great adviser is one who’s a coach.

The way he said it was he sort of suggested it to us most of the time. The

truth was he was absolutely right about that. He was absolutely right about

how we should be thinking about product. Another thing…

Andrew: How, well let me see because right now I’m only seeing your

perspective. Say Jen Legend comes over to us and says look, you guys now

can play the same game but if one of you owns it and the other doesn’t the

one who doesn’t has to pay for it. If I say to you Andrew, let’s play, I

don’t know, Stairway to Heaven. I have Stairway to Heaven, I play it. You

go dude, you jerk and now I have to buy it? Forget it, I’m not playing

this. Wouldn’t you be upset? So how do you make it so that it doesn’t come

across as a jerky move? It sounds like he helped you find a way to present

it properly.

Andrew L: Right, right. It was basically being able to put it on Amazon or

find a way to go ahead and be able to play it. There were a number of

different ways that we thought about it but I think fundamentally the way

that when Haroon was thinking about it, his piece of advice was that when

we fundamentally think about the product we should think about what it

means in a social context. And more importantly, he always had great

tactical advice. When he thought about how to think about the product, or

how to figure out that solution, he just basically said, “The way you

should think about it is, how do you make it so that no one feels like

their social relationship is a burden?” If all of a sudden, I want to play

Stairway to Heaven with you, it shouldn’t feel like, “Oh man. This guy just

wants to make me spend money and not have me enjoy my time.” And then we

had to think about that problem. It’s that type coaching that I think is

fairly important.

Andrew: OK

Andrew L: In terms of the Partovi [SP] brothers, and with Ally and Hotty

[SP], it was both, they’re whizzes at negotiation, but beyond that, they

were able to go and see where they thought the future would be, in terms of

the market. And their perspective was very similar to the extent that,

“Hey, where could we go?” In terms of, where could the music gaming market

go. They were great, in terms of really thinking about on a very high level

where they thought the market of music was eventually going to go. And the

issue is that, I think it’s still going to get there, the problem is the

music industry just takes forever.

Andrew: What’s the best advice that you didn’t take?

Andrew L: Best advice that I didn’t take. Probably that music is really

hard. I don’t do music. I like games, but I don’t do music. Some people

were like, “I don’t do music or games”‘ I feel that with the music gaming

market, at some point, the perspective is that a lot of people where

absolutely correct in that, how could we know whether there was a minimum

buyable product initially, and how could we know that we could monetize

such product. We probably should have, at the very beginning, started

charging much earlier. Because then we would have known that our audience

was not nearly as good as we thought it would be.

Andrew: Charging earlier so that you know whether the audience is really

valuable. That’s one of big take-aways that you got?

Andrew L: Yeah. Well, for us, it was actually just knowing what the

audience was, right? It’s difficult because the thing is, growth is good.

Growth is definitely a good thing. But the thing is, in an environment

where a significant number of your growth is not coming from valuable areas

or from users that you want, then you’re going to have to deal with what

that problem is, right?

Andrew: Speaking of minimum buyable product and the lean start-up movement,

you were one of the first people, first entrepreneurs to talk about it and

to say that you’re building your business based on customer development

philosophies. And now, before this interview started, you said some people

get too hung up on it. I thought we should talk about that. How is your

thought process changed or how is the world gone way too far in the

opposite direction to establish a following?

Andrew L: So this issues is, that it’s essential the Donald Rumsfeld

problem. The Donald Rumsfeld problem is essentially, there are known

knowns, there are known unknowns, and there are unknown unknowns. The

problem is, customer development and when we had started methodology, only

gets you the known knowns and potentially the known unknowns. But there’s a

huge amount of exogenous factors of luck, that basically encapsulates your

whole product. We had no idea, right? We had a pretty good sense that a lot

of the validation already occurred because of Guitar Hero and Rock Band. We

knew it would work because of Guitar Hero and Rock Band. So being able to

go and do that one step change function, is totally fine.

And I still believe that a lot of [??] should do that. It’s not really that

you’ll ever come up with anything out of thin air. You really just think

of, ‘How can I take a blah idea, combine it with another idea and together

that Hegelian dialectic equals great synthesis. The issue I think now is

that people are focused so much on doing a survey, or so much on doing a

landing page, that that they don’t take a risk. And they don’t also

understand that, just because someone says, for example, ‘Just because, I

go shopping already. I don’t want to go ahead and sign up for a

subscription service for men’s clothing.’ But the truth is, only until

you’ve actually had the power to go and use that subscription service for

men’s clothing, will you know that that’s exactly correct. So for me, I’m

advising a company called Bombfell [SP] and I love them, I’m actually

wearing their shirt right now.

Andrew: I was trying to read what that shirt said. So it says Bombfell. OK.

Andrew L: Yeah Bombfell. Everyone should sign up. It’s really, really good.

It’s essentially like Columbia House meets men’s clothing.

Andrew: So I get to buy clothes on the cheap, but I keep buying them on a

regular basis from them?

Andrew L: Yeah it’s a monthly subscription service and the best part is

this, here’s the best part, Andrew.

Andrew: Hit me.

Andrew L: I don’t like shopping at all. I really don’t like shopping at

all.

Andrew: I can’t stand it.

Andrew L: There’s a buyer who used to work in New York City. She actually

selects the clothing for you that fits. She sends it to you. If you don’t

like it send it back. She doesn’t charge you a single thing. So, it’s the

ability for someone else to basically shop for you. Which is just amazing

and it’s inexpensive too. You pay $70 and you get clothing that’s worth

$110, so you also benefit from an economy scale too. But anyway . . .

Andrew: So, you were starting to say that you advised them about how to

use

Lean Startup without going too far.

Andrew L: Yes.

Andrew: I’m actually going to Bomfell [SP] right now. It’s slowing down

your connection to me. There, now I’ve got the tapes lines up. I can’t do

too things at the same time on this Internet connection.

Andrew L: So, the question is, for guys like that, they could run a survey

and say hey, if someone had a personal shopping service for you etc., would

you use it. People would say hey, you know what, I already shop already. My

girlfriend shops for me etc., but the truth is that what people should

understand is that a company like this where a large number of people in

the Bay area are using it because it’s essentially like the shopping

service for them, they were only able to go and get that to that point when

they first started testing it and they started getting real customer

interviews from real customers. The problem with customer development is

that you can get some known knowns and some known unknowns. [ring tone] But

aside from that, you’re not going to be able to get everything that you

need. I’m sorry.

Andrew: What was that?

Andrew L: So, I think fundamentally though, the question is with . . .

Andrew: First of all, what was that, just since I want to call out all the

random sounds for the people . . .

Andrew L: That was a . . .

Andrew: That was a cell phone.

Andrew L: Yes, it was my cell phone. My aunt was calling. It would be the

Google voice actually. So, when you use Google Voice everything rings. So,

I Google everything.

Andrew: Oh, see. [laughs] But the, sticking with Bomfell, couldn’t you say

to them, look guys. You don’t have to do anything more than just put up a

quick WordPress site with a nice landing page saying that you will shop for

people. Either you, the entrepreneur if you’ve got a talent for it, will do

the shopping and the advising at first, or you get one person who’s going

to do it for you, and you test it to see if people are going to do a

personal shopper with an individual. And then later on you expand it into a

bigger business, based on the feedback that you get. Based on the unknowns

that you might discover through this simple test.

Andrew L: So, you definitely have a simple test like that. The issue is

that when you go off to an investor and those guys say, oh, too many buying

sites. Too many personal shopping sites. Too many Groupon deal sites. Too

many blah, blah, blah sites. Those guys don’t understand, however, that I

think fundamentally have the exogenous variables changes. Have the

variables around us changed in such a way and the thing is, those are

unknown unknowns, right. It’s just like the Pinterest [?] guys who said

yeah, if I did any of this customer development, lean startup stuff in the

very beginning, Pinterest probably wouldn’t have happened at all in fact.

Pinterest would never had occurred because nobody started using our site

and it was the same way with JamLegend in the very beginning.

The perspective of somehow there would be early validation through traction

is a lot more difficult and I think fundamentally what people need to do is

that the Lean Startup methodology works really well but at the same time

you’ve got to have some guts. It’s a question of how much do you want to go

and invest in your product. You could continue to do small little heat

tests but until you actually take time to build the product, only then will

it actually occur up. It’s a problem of surveys essentially too, right.

People will tell you they want to buy something but will they really buy it

when you actually ask them. Hey will you actually pony up $10, to be able

to do this, and we found vastly different results back on JamLegend. Some

people would say I would definitely pay for something like this and then we

said OK. We’re going to do that, and it turns out they don’t want to pay

for something like that.

Andrew: But then wouldn’t [?] say that’s not a good test then, that a

survey is not a good test. It’s not the perfect test to see whether people

would pay. The better way to see if they would pay is to just charge them.

When he created the first event around Lean Startups I think is around the

time that he and I did the first interview here.

Andrew L: Yes.

Andrew: He said he didn’t just do a survey to see if people would come to

a Lean Startup event, he did a survey and then to people who said yes I

would pay, he said all right, now pay up. And I think he took only a small

deposit from them but in order to measure whether they really wanted to

pay, he charged them.

Andrew L: Yes.

Andrew: So, isn’t that a better test. The survey’s . . .

Andrew L: I completely agree. The issue becomes whether exogenous

variables change. There are some things that you can definitely know within

a subset, but the issue is when you’re trying to determine whether your

products, compared to all the other products out there, will become the

next big product and your trying to look for the big wave that’s occurring.

It’s hard to go and predict those things and when all you’re doing is

working within the microcosm, you’ve no idea what else is happening all

around you. For some entrepreneurs there’s this perspective that I need to

go and do all this Lean Startup stuff to figure out what’s going on but

ultimately it all starts down here. It all starts with a; I have this

problem or I’m going to have this thing I want to work on within this

market. And I’m just going to keep on working at it, and I’m going to work

at it until luck actually occurs.

Andrew: Help me understand that, because to me that sounds nuts. I mean

not nuts, there’s some people for whom it’s going to work. But I don’t want

to wait for luck, I want to understand that what I’m doing does make sense.

I want to make the first batch of cookies, take it out, and see if anyone

likes it. And if they do, will they buy my second batch, and if they do

that, see if I could go and grow a little bit at a time. But I want to have

people try it first, and then build. Before I imagine what they’re going to

want me to build.

Andrew L: You’re right, it’s a combination of cleverness as well as luck.

And that’s what a lot of people will tell you. The issue is that, you know

Michael Lewis just talked about this at his recent graduation speech at

Princeton, is the question of; a lot of people out there don’t want to

ascribe a lot of their success t luck. To a lot of people out there, they

honestly believe that if it weren’t for them they would be the number one

gaming company, number one web company, number one blog company. And it’s

actually the confluence of a large number of things right?

YouTube could not have existed without the wide adoption of broadband;

Foursquare could not have existed without the wide adoption of smart

phones, and a lot of these things you can go ahead and predict, but a lot

of these things you can’t predict, in terms of how they would make sense.

Some people would’ve known that photos would’ve been a pretty big deal, but

no one would’ve been able to predict that actually photo filters would be

the number one thing that would generate a huge amount of growth.

Andrew: You know what, I hear what you’re saying. I think a big part of

this is that; there are two things going on; first of all, Eric Ries has

disappeared, his book has done well, he doesn’t need to keep promoting his

ideas anymore, and he’s probably out working on his ideas with big

companies, so we’re not hearing his perspective on things. Secondly, when

we did start hearing Eric Ries, ‘Lean Start Up Ideas’, there was no debate

about it. Because he did hit at a great time in the world for his ideas, at

a time when seed funding was big, when small accelerators that were only

putting in a few thousand bucks were big.

Of course, his ideas and that kind of money seemed like the perfect

marriage and people just took off with it. Without having the kind of

debate that we often have in our world. To have him justify it and to have

us really believe that it’s true. So he got a quick pass back then. Today

when people are starting to say, hey wait there’s some doubts, we’re seeing

some things we’re not sure about, it feels to me like he’s not around to

defend it, it feels to me like he’s not here to say, “guys let me explain

how I see it or how I’ve changed the way I see things”‘

Andrew L: Right.

Andrew: What do you think of that?

Andrew L: He’s right. Here’s the thing, if you’re trying to build a short

term business that you can get immediate feedback and information

from, Lean Start is perfect right? You have the information in front of you

Andrew: I’m not saying that it’s just for short term businesses, I’m just

saying that it worked in a world where people didn’t have much money to

invest, they had only a little. So they needed a little philosophy that

said start lean.

Andrew L: Right, right. Which makes sense. And I’m still a big believer

that small things come from lean products, that you don’t need a huge

amount of money. But fundamentally another question is, for the big things

we want in the future, like for large robotics or any other industry,

obviously lean start doesn’t completely work out. The question for a lot of

people is whether OK. If we are going to fundamentally, be making a great

business for the future. We need to just choose a market, and we have no

idea how that market is going to change exogenously, but there are some

things where the lean start up methodology on doesn’t take into account.

There’s a variable at the very end that consistently moves that we cannot

predict, and sometimes it has more of an impact upon the success of your

start up then you realize. And I think that is something also that’s a very

difficult thing to go and challenge right? Yeah of course, there’s unknown

variables that we can never be able to take into account. I do, however

think when you think so myopically at the very beginning of your start up

and when your thinking about lean start methodology, you should really be

thinking much bigger. Like thinking about painting the future and then

thinking of OK. What is the beachhead I’m going to do within that area. And

that’s going to allow me to go and build a much bigger company.

Andrew: I’d love to do a debate with Eric Ries and someone who wants to

take the other side, not disagree with ‘Lean Startup Movement’, but to

point out the things that they believe have changed. And his ideas don’t

take into account.

Andrew L: Choose any of the guys from Andreessen or from Foundersfund. I

can tell you that those guys don’t think that ‘Lean Startup’ is a great

thing. The thing is for them, they want to build, they want to have

portfolio companies that are huge. Like portfolio that are fundamentally

going to change the way that we interact with technology and in the future.

The lean start up methodology is great for both big and small but the truth

is that it’s limiting to (??) and that’s the first thing (??) should start

out.

Andrew: You know what, my internet connection is slowing again because I’m

checking out your website right now. And what I see on your website is

epiphany after watching Star Wars. I hope I don’t lose everything. Here,

let me see if I do. You know what, I’m just going to kill it. Did I lose

you? There we go.

Andrew L: Nope, I’m still here.

Andrew: All right, I had to close it out because my Internet connection

just sucks here. Thank you, Regis. You know, in a third world country, in

Argentina I had better internet access than here.

Andrew L: That happens, that happens.

Andrew: This is Washington, D.C. Here’s the thing. I’ve now known you for

what? Three years. Three years at least, over three years. I love your

ideas and I love the way that you think, you think in a very organized way

about our space. I’d love to see you blogging more about this. I saw you on

Hacker News the other day. People were acting like jackasses around the

whole Meebo thing and you came in with a personal story that brought

reality back into the conversation there. I’d like to see you do more of

that. Bring your personal stories and your personal analysis and really

talk about what’s going on in this space. Why don’t you do that?

Andrew L: AndrewLee.com, unfortunately, is a blog that I should be blogging

more at so maybe I shouldn’t have a blog if I don’t blog at all.

Andrew: No, you should have a blog even if you blog once a year. I’m just

going to urge you to find a way to get these ideas out. Right now you’re

doing it through the Founder Institute one on one sessions. I think that’s

a great way to start. But I’d like to see you do it on a broader place

where you can just discuss ideas without immediate practical application.

Just discuss what you’re seeing in the world because I think there’s a lot

of value to it.

Frankly, I was trying to bring it out of you in this interview, partially

because I was sucked into this conversation because it became interesting

to me. And partially because I just know that you’ve got it in you and I’m

not satisfied with the way that I did it. I really could have come up with

better ways to draw you out on this. It’s just not my forte. Still, I think

we got a good understanding of where you’re seeing the lean start up

movement can be improved or needs to be put aside for bigger risks.

Andrew L: I think it’s a great time right now to be an entrepreneur though.

Besides the fact that there is this frothy sort of early stage bubble

problem. But besides that, though, it’s still a great time to be an

entrepreneur. For a lot of people out there, I mean I come from Asian

parents and all those Asian people who are listening out there I mean

honestly, you’ve got to tell your parents and your family about the

question of acceptable risks. It doesn’t make sense how so many people out

there take risks for their families and then they tell their children to

never take risks at all. Right? That seems like sort of like do what I say

but not what I do.

Andrew: You’re saying you had Asian parents who came into the U.S., took

big risks on a new culture, new job, new life, new everything. And then

they say to you hey, you know what? You should get a job because you’re

smart, because we worked this hard to make sure that you could become an

engineer who’s going to do well.

Andrew L: Yeah, like my family still tells me this daily. Like you could go

to grad school. I was like what? Go to grad school, what am I going to do

with that? You know, it’s one of those problems where I think that there

is, to be fair you know, I understand the value of grad school. But the

problem is that the question of acceptable risk is something that our

generation needs to understand.

Supposedly we’re the hero generation. There are a lot of problems that are

going to be happening. Beyond the fact that our federal government might

potentially collapse from all of this debt or all of its programs or

anything like that. It’s a very big question as to can we pave the world of

the future? I think the methodologies and the things that we do, whether

it’s lean start up, whether it’s incubators, whether it’s being able to

have the on the ground training that you have as a start up, that type of

work is hard to find out there.

It’s OK to go and have acceptable risk in one’s life because the truth is

it’s a question of you can’t de-risk yourself all the way. Even people who

are buying up gold right now I can tell you right now you’re not going to

de-risk yourself all the way.

Andrew: See, you went to talk about education, about the next generation

for immigrants, about risk taking, about the hero generation, and then

gold. All these things are perfect for blog posts, for deep examination.

All right, let me tell people about they want to take this relationship,

their relationship with Mixergy to the next level what they can do. And

then I’ve got to come back down from the stratosphere, down to the ground

and ask you a question that no other site is probably going to ask you. Now

all the other sites, I think you go to Pando Daily. Sarah is terrific at

getting the big ideas out of you. What I’m really good at it coming right

back down to the dollars and cents and the on the ground problems and

solutions.

Let me quickly say look guys, if you like my questioning over here and what

you want is more of it. If you’re saying, ‘Look, I want more practical. I

want to know exactly how.’ Let me give you an example. Let’s suppose you

like what I’m saying about this idea, that you need to talk to customers

before you sell to them to understand what to create, and then put out a

small first version for them to use and then to give you more feedback, and

this whole process is interesting to you. You want to know how to apply it

practically.

We got a course for that at MixergyPremium.com. You go there. I keep

talking about this over and over again, because it’s one of the best

courses there. See Cindy Alvarez talking about how she listened to

customers express their frustration, their pain. And how from that they

were able to create a product that’s one of the best analytic packages on

the internet. They’re taking on Google and winning because of this process

of listening to customers and developing for them. If you want to know

about how to get the world to know about your product, we got feefighters,

who’s fantastic at getting attention for themselves. They actually ended up

selling the whole business. I got feefighters to come on and talk about how

they get publicity step-by-step, walk you through how they identify the

right reporters, the right outlets. How they court them, how they get them

to write about them, and how they get all that publicity.

Anyway, that topic and so many others are explained in detail at

MixergyPremium.com. Go over there, sign up and start taking those courses.

The sooner you sign up, the sooner you’re going to see real results in your

business. MixergyPremium.com. I’ve got to keep selling to make sure that

I’m on the right track, that I’m selling to the right audience, [??]

Andrew L: It makes sense, it makes sense. If I had MixergyPremium at the

very beginning, I probably wouldn’t be talking about all the things that

probably are at MixergyPremium. All the different tactics that I already

know. If only I had this package.

Andrew: MixergyPremium.com there’s a great endorsement. Thank you. Alright,

here’s what I want to know. How much did you sell the business for?

Andrew L: Oh. So that I actually can’t tell you.

Andrew: Are you personally a half-millionaire as a result of that sale? Or

more?

Andrew L: I’m sorry?

Andrew: Were you able to put a half-million or more in your pocket as a

result of the sale?

Andrew L: I’m able to go ahead and be happy with where I am. But I think

the truth is, when it comes down to questions like that, I don’t think that

matters, right?

Andrew: Why doesn’t it matter? I’ll tell you why it matters for me. Because

I want you to understand my cycle place. I judge myself based on revenue. I

judge myself based on, I hate to say it, net worth. Because it means that

when I do interviews with certain people I feel like I judge myself very

poorly as a result. I’ve learned to get past that. It’s still a part of it.

My sense of safety comes from knowing I don’t have to worry about paying

the rent here for Regis and if Regis screws me over, and I still have a

contract with them, I can still pay them and go on to another place. Life

feels good. I could take risks asking you questions because if everything

falls apart, I’m not out on the streets. To me, money does give me

security. But you don’t need that. Why?

Andrew L: The best way I like to describe it is this, Money is important,

right? If you’re obsessed with money though, that’s unhealthy. And if you

don’t care about it at all, that’s also unhealthy. My perspective is, I was

born in a very humble environment. Both my parents came from southern

China. Even though, my father was an entrepreneur, he started his own

restaurant in Denver. We did pretty well for ourselves. But the truth is, I

lived in a very strong, tiger mom sort of household, where I learned how to

value the worth of a dollar. And my perspective is always been that,

personally for me, as long as you have a roof over your head, and you’re

able to go do great things. I measure myself, not by the amount of money

that I make, but I measure myself by the change that I’m able to go and see

in the world.

Personally, for me, it’s a question of, OK, Jam Legend was able to go and

be a form of experience for a [??] number of people, for two million

people. We were able to sell to Zynga. Great. My investors got something

out of it. We got something out of it. And it turned out well for

everybody. We all own Zynga stock, which is great. It’s a great company.

The thing now, though, for me, is if you’re an entrepreneur, it’s more

about the times that you have at bat. Baseball players care about how much

they earn. But really what they care about, is they care about how well

they perform also, at the game. And they care about how many homeruns

they’re able to go and hit. How many times they get on base. And compared

to the other baseball players out there, how well they do. That’s the thing

that’s more important.

And what comes from that is money. That’s a secondary part. I’ve always

lived the philosophy, I think, that money is a way that you can keep score,

but the truth is that it’s really hard being an entrepreneur, so you better

just love what you do. You better be happy by what you do. And you better

be in the flow of what you’re doing. Because if you’re only motivated by

money, then you’re not morally bankrupt, but the thing is, you’re not being

motivated by something completely different.

The Economist did a story about this where they talk about great companies,

right? If every company out there was just there to make money, they would

just say, “Our motto is to make as much for your bottom line as possible.”

But it isn’t, right? We have a thesis and a philosophy that says, “we

network networks.” We want to go and connect people in the world. We want

to go ahead and provide a storage solution for all people. That’s the type

of thing that is so much more important, when you move into the realm –

beyond the bottom realm of Maslow’s hierarchy and you start moving up to

the world of values. And a lot of people get that at a earlier stage,

people get it at a later stage; but all of us need to get it, because at

the end of all things, in the long run – we’re all dead.

Andrew: You know what, you’re right. I think once I get a sense of security

from money, the next thing I do look for is not more money, but how do I

have an impact on the world? How do I not be another guy who’s watching

everyone else live a great life, but live a great life myself too? It’s

those things. How do I end up in a relationship who I care about and not

something I tolerate? Everything else, then, I have more room for. Was it

an acquire? Did your investors get more than the money they put in the

business back out of it?

Andrew L: It depends, right? If you think about an acquire, people think

about it as, are they getting it just for the team? Are they getting it for

the assets? It was a combination. They own all of our assets, and they also

have our team. And we’ve been able to go ahead and justify a lot of where

we ended up. I think the thing is, if you were to think of us as a

strategic acquisition, we were definitely not that. A strategic

acquisition, in which we’re like a [draw something?], where they’re like,

“We need this product doing really well, it’s part of our portfolio.” But I

think that acquisitions like us still contribute very strongly to the Zynga

bottom line, and I can tell you that it’s still something that we think

about a lot.

Andrew: How do you contribute to the bottom line?

Andrew L: Well, in terms of our team as well –

Andrew: In the work that the team does, it’s going to impact the bottom

line at Zynga.

Andrew L: Yeah.

Andrew: Do the investors get back more money than they put into the

business?

Andrew L: I have to look into that, I mean, it depends on how Zynga stock

does. [laughs]

Andrew: What’s your biggest takeaway from JamLegend – can we say that

you’re no longer with Zynga?

Andrew L: Yeah, I’m about to go and leave Zynga. I’m happy, I had a great

time there, great people. But I think the thing with me is, I worked on a

great product, but the issue is there’s only a number of times to bat if

you’re an entrepreneur, and you have to be able to go ahead and take

advantage of those. I was always going to be at Zynga, ten years from now,

twenty years for now, that I can be able to go [???]

Andrew: You’re an entrepreneur, you need to take a risk, I hear that and I

see it in you, and that’s what you’re going back to do, and I would always

like to see you – in addition to this need I have for you to blog more and

write more about your ideas – I think you would be a great adviser. Because

you have strong opinions that are well articulated, and also have good

information behind them. Even if the entrepreneur you’re advising doesn’t

end up taking your point of view, doesn’t end up doing what you suggest to

do, at least understanding how you came up with your point of view would be

useful for them. At least having that rationality in their head would allow

them to either come back to it in the future, when it makes more sense for

them, or to shape their thought.

Andrew L: First of all, I appreciate that. I do not have nearly as much

experience as all the guys out there, but I think that my perspective is

that some things you just learn through osmosis and some things you just

have to go and make your own mistakes. My hope is to be able to have you

not make those mistakes because it’s costly. [laughs]

Andrew: I don’t know if you’re an adviser or not – you are an adviser to

Bomfeld [SP] – but we reconnected with you through the Founder Institute.

We realized, we don’t have to go and look for our own guests if [their

pockets?] with great entrepreneurs and potential guests, we should just

partner up with them. So we went to the Founder Institute, we asked them if

they’d help us meet a bunch of their mentors, and when we saw your name we

said, “Wait, we know him, we’ll connect with him directly.” But they helped

remind me that I needed to have you back on.

.

Andrew: So if anyone wants to work with you, they can go to the Founder

Institute where we connected with you.

Andrew L: Yeah.

Andrew: If they want to find out what you’re up to, is andrewlee.com the

best place or should they check Twitter?

Andrew L: Either one. Twitter is usually, I think, the place where somehow

I feel the noise inside my head needs to come out of my head, and thereby

drowning out all signals, all the others. But a simple e-mail is fine,

andrew@andrewlee.com is totally okay. I would love to hear from people, and

since I’m leaving Zynga, I’m going to go traveling for a bit. I’m actually

going to be spending seven weeks in Alaska, of all places.

Andrew: Wow!

Andrew L: As well as in South America, but I’m really going to be thinking

about – “What is the next thing?” If there’s anything that anybody takes

out of this conversation… if the first lesson that you heard here is

“Every great surfer needs a great wave,” I think the second lesson is,

every surfer just needs to be out there, and more important just needs to

believe that there’s a wave out there, but you should have to figure out

what sort of place you want to surf in.

Andrew: All right, that’s a great place to leave it. Where in South

America, I actually have to do this, too. When I was on Leo Laporte’s

program, and I was in Argentina, I mentioned that I was in Argentina. The

guy who runs the Vines of Mendoza said, “Why don’t you come out to our

place?” I ended up in the Vines of Mendoza, this beautiful vineyard in

Mendoza, and enjoyed a great assado [SP], just because I happened to

mention where I was going, I connected with a great guy. So where are you

going to be going in South America?

Andrew L: This is through the Founder Institute, so I’m going to be doing

some internships with them – Santiago, Chile; Bogota, Colombia; and

Medellin, Colombia.

Andrew: Hopefully, people in the audience will get to see in person.

Andrew L: Otherwise, between middle of July to the end of August, if

anybody wants to find me, I’ll be in Sitka, Alaska, of all places.

Andrew: Right on, Andrew, thank you for doing this interview Thank you all

for watching. Bye.

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  • http://www.ipyxel.com/ Tom Fang

    Andrew, another great interview.  I know you’re looking for more female entrepreneurs, and this interview reminded me of a really really good one who you should try to interview.  I have no idea if she wants to but her name is Jing Chen, co-founder of K-Factor Media, a social gaming company.  She and 2 Berkeley grads bootstrapped this business out of college impressively just when the social gaming boom was taking off in 2008.  Incredibly smart and talented from the outside looking in.  Would be happy to do an intro!

    -Tom

  • http://www.youngwebbuilder.com/ ywb

    Wow, now that is impressive.

  • Anonymous

    I loved the “lean startup throwdown” :)

    I reckon Andrew L. is dead-on when he says there are certain businesses that people just won’t “validate” until they can experience it for themselves.

    It’s just a simple fact that Lean works for some businesses and not others.

    I reckon the real thing that we need to be communicating to people is what type of business they should be choosing depending on their stage in life.

    I think there’s far too much emphasis placed on *first time* entrepreneurs getting into situations of high growth and high funding.

    Since it’s so easy to start small and grow, why not get experience first with the types of businesses that suit lean, and then go on to bigger or more ambitious goals once you’ve got some runs on the board?

    All these skills can be learned independently and the skills you learn in a small arena apply just as well in big business as well.

    I reckon the goal for first time entrepreneurs that we should be evangelising is: become profitable at anything that doesn’t take up a significant portion of your time (eventually – obviously in the early stages it will take up all your time but through systemisation etc. you can free yourself up to work on other things).

  • http://www.facebook.com/people/Michael-Rihani/6208435 Michael Rihani

    As a fellow LaunchBox 08 alum, it was very interesting to hear all the phases of your business over the years. Congrats on all your success and have a fantastic time travelling the world. Keep me updated on what your next idea is, I can’t wait to see it :)

  • http://mixergy.com Andrew Warner

    What part impressed you most?

  • http://mixergy.com Andrew Warner

    What did you think of Launchbox?

  • http://mixergy.com Andrew Warner

    I’m constantly looking for more female founders.

    Could you email our booking producer a bit of data on the company, like how many downloads it has?

    Her email is shelley at mixergy dot com

  • http://mixergy.com Andrew Warner

    I’m curious to hear what Eric’s take is on that.

  • http://www.ipyxel.com/ Tom Fang

    Done!

  • http://www.harak.im/ Hara Kim

    Really found this interview great. He seemed extremely knowledge on multiple topics it would be cool to see more content from this guy.