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.

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About Andrew Lee

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.

First, three messages. Who’s the lawyer that founders in the Mixergy
audience trust? Scott Edward Walker of Walker Corporate Law. Have you seen
what Chris Pritchard posted on my Facebook page? His new company’s
incorporation pages that Scott Edward Walker helped him get. Scott Edward
Walker is the lawyer that publications like Forbes trust. Go to
walkercorporatelaw.com.

Next, when my friend had to close her company’s office but still wanted to
give callers the impression that all her employees work well under one roof
together, what service did she use? Grasshopper. With Grasshopper everyone
who works for you could have an extension. They can pick up calls on their
extensions no matter where they are or what phones they use and they can
transfer calls to each other back and forth with ease. Get those features
and tons more at grasshopper.com.

Finally, when Dave Jackson and Dave Petrillo invented a product that keeps
coffee at the perfect temperature, what platform did they use to create
their online store? Shopify.com. Look at how beautiful their store looks.
It’s because it’s built on Shopify. They did hundreds of thousands of
dollars in sales. Shopify stores are designed to help you sell. Patrick
Buckley invented an iPad case and used Shopify as his online store. Within
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.