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Here’s the program.
Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. This is the place where I interview successful entrepreneurs about how they built their businesses so that you can get some of their best ideas, implement them in your company, build it up strong, and hopefully come back and do what today’s guest is doing which is an interview about how you did it. I want to hear from you about how you use these ideas.
Let’s find out about today’s guest. He’s a bootstrap entrepreneur who built a successful, profitable web app. I know you guys love bootstrapped entrepreneurs and this guy’s got a great story. His name is Danny Wen and he’s the co-founder of Harvest. Harvest helps business people track time and send invoices. Danny, welcome.
Danny Wen: Thank you, great to be here.
Andrew: I mentioned that you were profitable. How long after you launched did you guys get profitable with this web app?
Danny: Well, it took us about a year or two to get profitable. What happened was, we’re transitioning at the time from our consulting company. In 2003, my business partner and I, Shawn Liu, we started a consulting company to do web design and web development. About two years into it, we started thinking this web thing is pretty interesting. We know we can do the design. We know we can do the development work. Let’s start hashing out our own ideas and see what we can do there. We started looking at problems that we were having as a consulting company and one of them being we need to track time and invoice our clients. We started to think about how we could make that process better given what we knew about the Web. We didn’t want to do it on spreadsheets and all that good stuff. When we launched Harvest, it took about four months of development to get the initial product out. The short answer there is after about a year of transitioning, where we’re building the product as well as doing some consulting work, we were able to finally get enough revenue in Harvest itself so that we didn’t have to do any more consulting work. So, yeah, about a year was the transition period.
Andrew: Wow, four months to launch, a year to break even, a year to profit. That’s very impressive. You and I, before the interview started, had a chat about what you feel comfortable revealing as far as revenue. What do you feel comfortable saying for last year’s revenue?
Danny: Yeah. So, because we’re a private company, we don’t go into the details about some of these numbers. Today, we’re a multi-million dollar company, and we have thousands of customers around the world, in over 100 countries. That much we can tell you.
Andrew: By multi-million, we mean over, we’re talking about sales last year, so over a million dollars sales last year, right?
Danny: Absolutely, yeah.
Andrew: All right. What else did I want to talk to you about before? How many people at the company?
Danny: Right now we have 13 people.
Andrew: Okay. All right. My goal here is to find out how you got here. One year after launch, you get profitability. Four years afterwards, this is last year was your fourth year of Harvest, you’re a multi-million dollar company. I want to find out how you got here. So, you were saying that you started out doing consulting work. Can you tell me what the first projects were like?
Danny: Yeah, sure. If I may, I’m just going to rewind even a bit further.
Andrew: Okay, good.
Danny: I met my business partner, Shawn, back at college. We were both studying computer science at Cornell and we had a mutual interest in design. As undergrads, as we went through the computer science program, we started looking around on the Web. This is in the late ’90s. The Web was really just, still in its infancy. It’s really interesting to us. You had sites like Word.com, Fray.com. They were trying to push the limits of what you could do on the Web. We really liked the idea of combining that design aspect with the technology. Even back as undergrads, we were thinking, it would be great one day to set up a studio of some sort where we could get some great design work done alongside some technology work. After we graduated, we both went to work in consulting, in the consulting world. Within a couple of years, we had the dot com crash, and we’re both very good friends still at the time and thinking about what we want to do next. The idea of finally getting around to that company or that studio that we wanted to start was now seeming like a great time to do it.
In 2003, we formed the company Iridesco. We started to do some client work that we were able to get through our network of people that we worked with for our first couple of years after school. Yeah, the type of work that we did initially was around here in New York City. Clients in pharmaceutical, clients in finance, and essentially doing some visual design, frontend work and some backend work. We also worked on some projects for non-profits. It was anything that we could do, any clients that we could get a hold of, we were servicing.
Andrew: What do you mean by frontend and backend? Do you mean the design of the website and the functionality of the website?
Danny: Yep, absolutely, yeah.
Andrew: Okay. What kind of design and what kind of functionality?
Danny: One of the more interesting projects that we did was for a non-profit organization called AFS. It is an organization that sends students around the world as exchange students and has intercultural learning. What we did for them is create a CMS from the ground up where you can translate the site into dozens of languages as needed by this worldwide company. That was one of the first sort of big web application undertakings that we’ve done. We helped to design the sites that the CMS was powering as well as the CMS itself. One interesting tidbit about the CMS is we were using Ruby on Rails at the time, which back in 2005 was really, really early for the framework. So we’re pretty interested in just getting some development going with that. That’s kind of the history there.
Andrew: Earlier you said that it was a great time to do it, a great time to go off and start this business that you guys had in mind. But this was the crash. Why is that after the dot com bubble burst, after the market crashed, you guys felt that it was a good opportunity to go launch your own thing?
Danny: Yeah, sure. One of the things that we wanted to do that I think really helped us is we just had this image, mental image in our minds of what it was like to set up our own studio, have this office, and making that happen. That was sort of the motivation, right? We just wanted to have this freedom of showing up at an office that we could set up and we could do our work throughout the whole day. We’re also about 23 or 24 years old at the time. Being so young, I think we didn’t have very much to lose. We essentially said, “Okay, we know we just need to make a little bit of money to cover our expenses. Then we can have this lifestyle that we’re dreaming of, which is basically to do some cool work and do it our way.” When you look at it that way, the risk profile of starting a company at that age is actually very low. We didn’t have mortgages. We don’t have families to take care. It’s very simple. That made it easier for us to get . . .
Andrew: What about finding customers? How were you planning to find your first customers?
Danny: As a services company or . . .
Andrew: As a services company.
Danny: Yeah, as a service company, the only way we could get work was through people that we knew. Thankfully we had a small but a great network of people who were working with some great clients and they would bring us into the fray to work on projects with them. That was really key because we spent a ton of time designing business cards, designing our first website for our own company, but a lot of time those things don’t really matter. It’s all about who you could find to get you through the door of the relationships there.
Andrew: Did you lock them in before you started your business?
Danny: Absolutely not. When we started the company, we started with zero clients. We had two desks, two computers, and we said, “Okay, we got a company going.” We spent a couple of weeks designing those assets, such as our letterhead and business cards. These are, they were just things that didn’t matter, but what did matter was our first client was brought in by a friend of ours. It was just to help this woman get online and sell videos for children. It was an educational tape that she wanted to sell to a children’s market. It really was, okay, whatever would come our way at the time, that’s what we’ll take. We’ll hopefully build upon that as part of our portfolio.
Andrew: Gotcha. What size budgets did your clients have?
Danny: They started as low as in the hundreds at the time. We said, “You know what? This is no problem. $600 for a website project, no problem.” Right? This is us sort of not knowing how to do anything at the time. We quickly learned that we have to build some real value in our services so that we could start building a business. Then it would start climbing. Projects would come in and there’d be thousands of dollars. Then there would tens of thousands of dollars. Then things were more realistic in actually creating business where you can actually hire people to help you do the projects. Yeah, it was an evolution, but from the beginning it was just hundreds of dollars.
Andrew: How do you go from hundreds to thousands and then, more importantly how do you get tens of thousands of dollars?
Danny: Again, thinking back to how we did it. The relationships that we had were really key. We had to get introduced into the right places and have the right meetings so that we were able to say, okay, we’re working with an international bank and they are going to have your appropriate budget for the type of project they’re thinking about. You just have to start aligning with what you want in terms of the projects. Then there are certain rules that you start to establish, where you say, “Okay, let’s not do the really small projects because those will never help us to get to where we want to go.” You start saying no to some projects. Really hard focus on pursuing the projects that are of real value. Then you have to determine what real value really means. One of my former colleagues had a great piece of advice, which is when you think about projects, you want to qualify them. You want to have some rules that say, what is going to make this project worth my time. You can have . . . a quick rule of thumb is, does a project fit? Is it going look great on my portfolio in terms of where I want to take the business? Is the project profitable because it’s going to pay really well? Or is the project simply going to help me going to learn something new that I’m really interested in? Now, if you can get two out of the three criteria fulfilled, then it might be a good, a really good way to say, “Okay, let’s go with that project.” If you can’t get two or even three of three of those criteria, then you might want to say no to the project. So setting up some sort of rules will help to filter out what’s good and what’s not.
Andrew: I understand that that’s a very helpful filter. But what I’m wondering is how do you get people in the door who you end up filtering out? Maybe you can give me an example of one client who you got early on that brought in tens of thousands of dollars of business. Do you have one that you remember?
Danny: Yeah, sure. Kind of getting back to our AFS example that I brought up earlier, that specific one happened because a colleague of mine had brought me in to say, “Hey, we have an opportunity.” She was actually doing design for the organization there. So we went in and looked at the project from a backend perspective on that one, and said, “Okay, this is actually a pretty big scale project. Here’s the type of budget that it’s going to take to get that done.” The simple answer there is because we had kind of built up a reputation either as individuals or as a team that said, okay, we can actually do the work that’s required. Then it took somebody taking a chance, kind of bringing us into that relationship but also knowing that we could do the work, to make it all happen.
Andrew: Okay. And these were just friends who would introduce you, or did you did any kind of networking to go out and bring new people into your network?
Danny: We tried to do some networking. When you start that business, in the early 20s and you just graduated and you just sort of move into a new city, the network is going to be limited. We started to branch out and said, “Okay, well, maybe we need to meet some people at the Chamber of Commerce.” Some of that stuff, it just never really panned out. We would show up at the Chamber of Commerce meetings, and it’d be us, the two young guys and everybody else was in their 40s or 50s. It just didn’t make sense. We were not gelling. We were not seeing the world in a similar way. I think that the networking really had little to do for us in getting where we got. I would say it’s probably a little bit different now because the Internet, even in the last few years, has come a long way since the early 2000s. It’s also enabled a lot of people, especially in urban areas, such as New York City, to have offline meetings, have offline concentrations where people are either looking for similar things or on the same wavelength at least. So I would say networking today is certainly very different and very plausible as an approach to really getting out there and actually finding clients.
Andrew: Yeah, the Chamber of Commerce really doesn’t have dynamic businesses in it. It’s mostly the local florist, the local real estate broker, mortgage broker, and maybe one guy who’s doing websites for hundreds of dollars a pop. Everyone’s looking for a deal from that guy. We’ll let you create our website for free, if you put your name on the site or something.
Danny: Exactly, yeah. So, it’s the early lessons that we learned. How do you really run a business? You have to go and build some relationships and then figure out how to market yourself. How we marketed ourselves then as a service company is very different than how we market ourselves now as a product company.
Andrew: How’d you do it? Then I want to find out how you created the product. How did you market yourself when you were a service company?
Danny: This is definitely not a great job, but we had all sorts of strange ideas where we could create websites that were very anonymous, but perhaps it had great value in art and would really engage with people. They would be seeking out who created that sort of piece of art and lead them to us. If I can remember, we sent out postcards as a separate example. Again, we put all our energy into focusing on creating a great piece of, what I would say, letter or postcard and send it to all the local businesses. If they needed some design or development, they would say, “Oh, wow, this company that’s in the area can really help me with my marketing and communications.” That’s kind of how we did it back then. Now, how successful we were with that? I think it was a lesson because it was actually very . . . we were beginning to realize that is actually not a very effective way to get real paying work. You might get one or two leads that come in, but for the most part, they’re going leads for products that we don’t want, that aren’t a real match. As we started to build out more projects that were a match in our portfolio, simply word of mouth would bring us to the next great project for us.
Andrew: Okay. All right. Then what I found is companies in your position who are consulting based businesses who are charging by the hour had a hard time transitioning to a product based businesses. There is just too much money in doing work by the hour. There are too many obligations. You get too tired. Did you try to shift to apps and fail before you made the successful leap? Or was Harvest your first time?
Danny: Yeah, so, that’s, there are a couple of questions there. The first one, the first interesting point I’ll bring up is when you’re a services company and if you’re doing well, the dollars can be tough to turn down, right? Because you have lump sum payments coming in for these, perhaps, large projects. As you continue to take that, you’re going to be running on . . . as you grow the organization, I should say, you’re going to run a burn rate which is going to require more projects to feed into the organization, and it becomes a cycle of that can be very hard to give up. The fortunate thing for us is we’ve always kept things pretty lightweight. We’ve had about three to four people at any given time working on various projects. When you’re talking about a small team of three or four people, it means that you have lower overhead. You have flexibility. It means you can’t do a ton of business because you only have four people billing hours. At the same time, it affords you the flexibility to say, “Okay, well, perhaps, let’s put a pause on some this consulting stuff and let’s try to do something else.” For us, that was the opportunity because we only had about three people at the time when we created Harvest. We were able to say, “Okay. Let’s really just look at the cash flow that we have in the bank. Let’s plan out how much time it’s going to take to create a product, and let’s just go for it.” That’s kind of the path for us.
Andrew: Did you just pause client work so you could focus on your own product?
Danny: Yeah. So, in 2005, we started looking at the Web. This Web 2.0 phenomenon is something that’s really interesting. You can very quickly build simple products that can solve simple problems. We started to say, okay. The first project that we built that taught us a whole lot about what we could do was a product called Super Glue. What that did was, it’s an aggregator of different feeds, whether it’s photos from Flickr, bookmarks from Delicious, it kind of puts it all together in one page so that you can republish it, if you will, as a feed. Kind of like what [0:22:12] Feed did.
When we approached the idea, it was just very easy aggregating various RS feeds and putting a design around that. Building that site it took about, from idea to launch, was only about four weeks. When it launched, it got on Delicious popular. It got a lot of attention around the Web. What we learned from that was, wow, we only invested this amount of time into a pretty small project and look at how people are writing about it. Look at the attention that is happening and the people that we are talking to as a result of it.
That started to make us think. Well, we didn’t really know what to do. We didn’t really know how to create a business out of that. We knew the server costs were actually starting to make its mark in our expenses. Especially, it’s incredibly server intensive to crawl all these different feeds. The more users you have, the more server capacity you absolutely need.
We started to think, okay, we were able to do that relatively quickly but here we are in a situation. We’re in a cash flow bind. We know that we’re probably not going to create a real business out of this product. Let’s go back to another idea that we’ve always had for our consulting company which is Harvest. Let’s make that the product which we know we can charge for, which we know will be a real business. So, that’s kind of the evolution from how we had the idea to really executing on a product and getting that out on the marketplace. It was having the lessons that we learned from building the small product that we knew we had the ability to take an idea and execute and put it out on the market.
Andrew: Why didn’t you stick with Super Glue as your main product and say, it’s already effective, it’s costing us money, but with a little bit of effort we can find a revenue source in it. Why didn’t you look for that revenue source?
Danny: We had various reasons not to do it. The most, perhaps the most important one was the cost of maintaining that service was extremely high. We didn’t look at venture capital as something that we’re interested in doing despite having some calls from VCs as a result of that. I would say it was just merely because we wanted to create something that was self sustaining. With an aggregator service, like Super Glue, there wasn’t much of that happening to make that happen. I think one of the easier ways is, okay, you can put some ads on all these pages, then sort of have that pay for itself. That wasn’t really interesting as a model for us. We just decided to, let’s pursue something that we know. We know about small business, and let’s make that what we work on every day, what we believe in.
Andrew: Why not take on venture capital especially if venture capitalists are talking to you about funding your business? You don’t even have to go out and look for them. They’re coming to you.
Danny: Yeah, I think it’s just philosophically we believe in doing things ourselves, bootstrapping it and creating something that we have a lot of control over. We have complete freedom to dream up what we want to do next. Those are ideals that are very important to us. VCs, our perception, especially at the time, were essentially thinking well, we’re just going to be signing up for jobs where we’re going to be working for somebody else. That’s not really interesting to us. A VC can exercise a lot of control over the company, etc. That was especially, the mentality at the time. We wanted to create our own goal, our own product, and our own environment.
Andrew: Now, that you haven’t taken venture capital and have done well on your own, can you talk about some of the benefits of going at it alone?
Danny: Yeah. One of the biggest ones is you have complete control and freedom to really do what you want. We’ve been able to do that. If we want to be a VC backed company in Manhattan, have an expensive or relatively expensive office, just because of our location, we can do that. We are able to essentially make decisions about what we believe are important for a company. For example, we believe and we invest in our employees quite a bit. We believe in creating a great work environment where people can learn from each other, have the resources to learn from wherever they are, whether it’s in getting more books or going to conferences, etc. These are some of the fundamental things that . . .
Andrew: Couldn’t you do that even if you were venture backed? If you were venture backed, you can still invest in your people. You can still buy them books, send them to conferences. If anything, it feels like venture-backed companies are splurging on those . . .
Danny: To do those things. But I guess another way to look at is if you were venture-backed, you would need to perhaps scale the company in a different way, right? Maybe they’ll say, well, you know, building a technology company in New York may not be such a great idea. You’re going to be in a talent war. The cost per resource is going to, on average, be higher than everywhere else. Economically you could be at a disadvantage. Perhaps you want to open up an office in one of the tech centers outside of the U.S. and staff up your team that way. Those are some of things that, I guess, for us have been . . . naturally, organically [inaudible 0:28:36] to where we are. We are from New York. We like it here. We are working with people who live here in New York as well as in other places, actually. That has been, sorry I should mention what I mean by in other places. Our team, out of 13, we actually have 4 people who are remote. Our remote team has been with us actually from the very beginning. As we slowly grew, we’ve been adding more or less people here in New York City. But what’s been good is the economic value of whether you build a company in Europe, or actually anywhere else, has been we have the flexibility to do that and do that well.
Andrew: Okay. I see. So you own your company. You’ve got completely flexibility to do what you believe because nobody’s your boss, except for your client. You get to drive the company in the direction that you want to take it. All right.
Danny: Yeah.
Andrew: Four months, you said, it took you to launch the first version of Harvest. What did that first version of the product look like? I mean, design and features that were in there. Then I’ll ask you about the features that were not in there. But what did the first version look like?
Danny: We started as a focusing on just one problem and one problem only, and that was time tracking. We wanted a better way to put timesheets on the Web as well as actually track time while you work on the Web. Our first version, this is sort of the heydays of Ajax technologies as we know it today. We had a very simple timesheet layout. Actually, interacted with it, you filled out your time for the week, for example. Our application will save all that time that you don’t lose any of the work. The functionality itself was relatively simple. It tracked time. You could start and stop a timer. You could send timesheets for approval. You had reporting. That was it. We kept it super simple. One of the things that when we look back that we think is funny, the design of it while we thought it was really cutting edge at the time perhaps, it was something new and refreshing for the market. We look back and say, “Wow, we can’t believe we used those colors.” It’s such an eye strain, when we look at it today. Yes, the first version was very simple, but it did what it had to in a relatively quick fashion.
Andrew: Was there any feature that you wanted to include in the first version that you had to be disciplined and keep out because you wanted to launch quickly?
Danny: Yeah, in the first version, we had to make a choice of, for example, do you do a timesheet purely only by the week, or is it something that you can enter on a daily basis?
Andrew: Mm-hmm.
Danny: When we first launched, we said, “Okay, we’re going to keep it really simple and we’re just going to launch with a weekly timesheet. We won’t have the start and stop timers or perhaps some of the approval functionality that will come later.” There’s certainly tons of other things. We didn’t have any add-ons. We didn’t have API access, and all those things didn’t matter until we can get a little bit of traction with our customers. You put a product out there and say, “Okay, is this really work going to work? Is this actually fixing or helping these people with their business problems?” Thankfully, the answer came back in and the answer was yes. So we were slowly able to evolve from there.
Andrew: Okay. What about the first customers, how’d you get them?
Danny: Early on, when we launched, we reached out to bloggers that do cover whether it’s productivity tools or small business tools. Specifically, we reached out to a blog called WorkHappy.net, I believe, and Lifehacker. These guys after they got it and some of our friends they started to say, “Wow, this is actually kind of interesting in the way that they’re approaching this.” They started, whether it’s a review or just to highlight us on the blog, it started to generate the buzz. People were seeing it on these blogs and they were writing their own posts like, “Wow, this is a new tool that I just discovered.” That got us an initial set of traffic.
We started looking at marketing as one of the first things that we could possibly do. At the time, there was, it still exists today, but the Deck network. The Deck ads, they were just getting up and running, I believe, probably less than a year at the time. They were one of the first advertisers we looked at and said, “Hey, this is pretty interesting.” They reached the right crowd. We agreed to place that [inaudible 0:33:53], why don’t we try an ad with them and see how it goes? It worked pretty well for us early on.
Andrew: Really? So, the Deck ads were profitable?
Danny: Yeah, for us, especially given that the network that it reached and it’s evolved through the times. We have to look at where it’s reaching today, as compared to where it reached before. At the time, it reached the right influencers and the right, essentially the right crowd, where people are really interested in new technology and they’re interested in getting a new way of doing timesheets.
Andrew: What about a . . . actually before I get to that, what other places have been good for you for getting customers?
Danny: Let’s see. I would say, especially, I’m trying to think about the early stages as something that might be more interesting. I think being covered in a relevant place, in a place that, where people are entrepreneurs, where people are in need of the tool that you have. In our case, entrepreneurs, freelancers, designers, and developers, these key demographics were really important for us . . .
Andrew: So, you’re saying being covered by blogs that reached that audience.
Danny: Yes. It’s the blogs that reached our audience were definitely, perhaps, the most effective for us.
Andrew: How do you get those blogs to cover you more than just the one time when you launch?
Danny: I think you have to be newsworthy. So when we . . .
Andrew: So how did you do it?
Danny: One of the things that we made interesting is timesheets in general is such a hassle for people. People have a horrible association with trying to sell timesheets. What we did is we’re one of the first to come out in the market and say, “Hey, here’s a brand new way to do it that is actually really simple.” So, if you need a team to get on the Web and start doing timesheets, you have a couple of choices, whether to go with the old school choice which is to use something that is relatively awkward and perhaps pricey for the company, or you can select a new, sort of, I hate to use the term but it applied at the time which is a Web 2.0 way of doing things, which is keeping it really simple, having a great user experience and relatively reasonable costs.
When we entered the market with those parameters at the time, it just became something. I said, “Oh, wow, this is a really refreshing take on the old problem which has been a pain point for so many people.” That became, itself, newsworthy. Our users, Ajax, was also interesting. We also launched a dashboard widget. All these things were relatively new at the time, and people like to talk about things that are new and interesting.
Andrew: So, every time you added one of these new cool features, it gave you an excuse to go out to the bloggers again and say, “Hey, we’ve got a dashboard widget for the Mac.” Then that gives them an excuse to blog about that. Every new feature is a potential news hit because it was new.
Danny: Not only is it new, but new relatively to the times.
Andrew: New use of technology.
Danny: New use of technology and new ways of doing things. Time tracking with widgets, for example, was not something that people did. Prior to that, dashboard widgets, on a Mac, for example, were not even that hugely popular. Slowly all these things started to come into play and okay, things are getting popular and we’re also providing support for those things. That makes it overall very interesting for the media.
Andrew: I see, right. It’s kind of like when the apps were first available for the iPhone. Anyone who created an app for the iPhone got press, and the more apps there are in the App Store, the fewer apps get attention.
Danny: That was the case for us as well. When the iPhone came and finally had apps, first it had web apps. We launched an iPhone web app version. That got us a lot of coverage. Then down the road, when the iPhone native app came out, that got us another set of coverage. Certainly, kind of seeing what’s going on with the environment has been . . .
Andrew: I saw that. I saw Mashable covered you and others when you came out with the iPhone app. When you’re that cutting edge, I understand getting coverage for being so cutting edge. What about users, does it lead to more users? Were users engaging in the iPhone app before it was a real app, back when it was just a web app?
Danny: Yeah. I think you’re going to see a huge spike from some of these coverages, depending upon the outlet. A lot of them will not add to real value for your business. A lot of them won’t translate into direct users. But I think the net effect is over time. This is the PR way of looking at things. Over time, we’re covered in these various places and people are reminded until the time when they actually need, now, I need to get serious my timesheets. Now I need to get serious about my invoicing. Now, they’ll think, well, I’ve been seeing this Harvest app all around. Let’s give it another shot now that I need it. There certainly is value from that perspective.
Andrew: But do they use the new tools that you guys launch, I mean the ones that are cutting edge? Or are they just ways of getting your potential customers to hear about you?
Danny: I think they absolutely do use the new tools that we launch, especially in the case of, let’s say, iPhone and mobile. People really care. Time tracking is not just something you do on the computer anymore. You’re out in the field, you’re doing consulting work at a client’s office. You might want to just take out your mobile phone and quickly log the hours, log the expense. That’s sort of the market is shifting a little bit, right? Saying well now I can do a whole lot more on my mobile. I would like to do a whole lot more on my mobile phone. I think all these things tie together, and they provide real value to the users. Hence, the users will become customers.
Andrew: How about a big mistake? Tell me about one big flaw, one big stumble you guys had with Harvest.
Danny: Okay, let’s think about that. I’m sure we made many mistakes actually. I think one, let’s saying [inaudible 0:41:11] it’s really not focusing us on the marketing of the product perhaps early enough. Our backgrounds were we studied computer science, we care about designs. We’re a design driven company. What that means is we care a lot about the product. What I would say is creating a product is really important. Getting that product market fit. Another thing that you really want to pay attention to if you’re creating a product and a product company, it’s really looking at how you market the product. How do you get to your end users? Because we’re so heavily interested in the product itself, we didn’t really spend a whole lot of time in the marketing side of things. I think, looking back, if I could go back a few years, that’s one of the things that I would immediately do, which is, okay, let’s look at our game plan for having a product reach the market that we need it to reach.
Andrew: I see. Can you do that, though? Can you focus on both making the product and making it right and making it what your customers are looking and at the same time focus on marketing it?
Danny: I think that there’s definitely a balance that you need to achieve, but as soon as you have I think a product market fit, you know the product is matching this demographic, then you can say, “Okay, how do we fuel this flame, if you will? Let’s just get more customers into the product. We know we can get more customers given the product as it exists today. So, how do we just get more customers?” I think that can happen actually fairly early on once you have a little bit of traction. Maybe even a year, year and a half into having to track down the market you’ll get a sense of whether or not it’s going to actually work and whether or not you can reach a wider audience.
Andrew: Here’s a question that I’ve been asking a lot of bootstrapped successful companies. What was the first million in profits like? What was it like to hit that milestone?
Danny: I think the, when you’re creating a SaaS company and you’re seeing the revenue slowly rise, it’s incredibly rewarding and interesting. I’m not talking about millions. Even at the very, very start when you’re looking at just getting enough revenue to cover the rent, enough revenue to, now we can cover servers and all these little milestones along the way, those are really what makes it. Those are the things that say, “Okay, wow, now we’ve created something that is self-sustainable. Wow, now we have enough revenue to hire another person.” I would say those are the moments that have been the most profound and rewarding along the way. Then as you get larger and larger in revenue, it becomes thinking about how you spend your revenue wisely. How do you reinvest some of that profit right back into the business so that we continue to grow? Yeah. But when we look back on the first few milestones, those were certainly the best moments.
Andrew: Want to ask you about one other product that you launched, about Co-op. Can you tell people what Co-op is?
Danny: Yeah, sure. Co-op is a in communication product. What we mean by that is, the easiest way, you have sort of a Twitter for business model. We launched this product back in 2007. At the time, our team works, we had two people in New York and one in Europe and one in Minnesota, so we had a team that wasn’t all in one location. We needed a good way to stay in touch with each as well as just to have an office vibe going. We started thinking about using some really short messages to communicate what we were doing to each other, as well as having an integration that is everything tied into Harvest. As creators of products, we actually use Harvest every day to track our time. One of the ways that we found to be the most effective way to track our time sort of inline as we go and work throughout the day. Imagine, just entering a status that, I’m having this interview with you right now. Starting a timer and letting my teammates know that Danny is working on this call right, and I can look on that clock feed and I can see what the rest of my team is doing immediately. That kind of puts everything on the same feed and say, right now Shawn is busy working on sketching out some designs, and Adam’s working on marketing. All these things can allow individuals to teammates to say, well, I need to catch up with this specific person because they’re working on something that is going out tomorrow. I know I have some input there. That’s Co-op in a nutshell, which essentially just helps everybody stay on the same page whether they’re in the same place or not.
Andrew: How do you monetize Co-op?
Danny: Right now, we provide Co-op for free for any small businesses or teams. Our goal there is to get in there, help them with streamlined communication, but also put in front of them, Harvest. When they register for Co-op, they’ll actually see a little track time tab whether they have Harvest or not. If they’re interested in getting set up with Harvest, they simply click through that track time tab and learn more about Harvest. It’s our way of reaching small teams and businesses that ultimately can and will use Harvest.
Andrew: How do you compete with Yammer? I know they’re really popular.
Danny: Yeah. The interesting thing about that is we’re essentially working in parallel. At the time when Yammer was working on their product, we were working on Co-op. When they launched, we launched a couple of weeks after them. The interesting thing there is right now we’re not too interested in doing everything that Yammer’s doing. What we’re interested in is providing a very, very lightweight tool so that especially service professionals and service type businesses can stay in touch with each other and track time throughout the day almost seamlessly. That, essentially, we wanted to reach the small businesses that could benefit from tracking their time while they’re providing each other with updates.
Andrew: I see. So it’s not just about telling each other what they’re up to and putting out updates. It’s about tracking time and having more time . . .
Danny: Yeah, on top of all of that.
Andrew: What else did I want to ask you about? I want to ask you about . . . how do you guys work when you’ve got a team where not everyone’s in the same office? It seems like Co-op is one way that you stay connected, but how do you build that culture and have everyone working together? What else do you do?
Danny: Co-op, just to talk a little bit more about it, we share the post-it on what we’re working on, but it also serves as a play map for things that connect us. The things that connect us could be music, for example, whether we find it’s really interesting or it’s new and we think it will go great with an afternoon at work. We also share relevant news when there’s something incredibly impressive at [inaudible 0:49:53] 5 or something that’s really funny on YouTube. All these little tidbits kind of add up to provide everybody on the team, whether they’re here in the physical states, whether they’re in their home office or another office, it gives them a vibe of who we are as a whole unit. That’s been really important. In addition to that, we create our own tools to help with collaboration.
Internally we created a tool called Kaizen, which in Japanese it stands for constant improvement. For us, that’s how we look at our product development. We launched the first server version of Harvest back in 2006. Over time, we have continually improved based on customer feedback. What Kaizen allows us to do is when customers are providing us feedback or feature requests, we actually log that into various tickets. As we turn tickets into to do’s and actually execute on some of these things, we can reach out to the customer to get more feedback, or when we’ve launched it, give them a personal note that, “Hey, we just got this out and you’re the first to know about it.” Or they’re in the beta test, whatever it is. But it really closes the loop on getting the customer into the fray of how we develop our product.
But using these cloud tools like Kaizen, like Co-op really helps us stay connected. We also do a stand up where we just chat with each other, using Skype video, actually, so that visually and vocally we can see and talk to each other, almost in person but via a video feed.
Andrew: Via video what, I’m sorry?
Danny: Via video feed.
Andrew: Kind of like what you and I are doing.
Danny: Exactly, exactly.
Andrew: I’m sorry. It looks like we’re starting to lose the connection here. Skype is not as reliable as I’d like it to be. Let me end it this way. I know I have other entrepreneurs in my audience who are bootstrappers, who are trying to build their businesses the way that you did. What about one piece of actionable advice, one thing that they could do after this interview, to take action based on what you’ve learned?
Danny: I think one of the most important things that we did is we just decided you have to execute. Whether or not, it’s taking some time out, really blocking some time off, saying if you have an idea, why don’t you take some time out on a Friday afternoon and just work on it? Why don’t you work on that, the idea, with somebody else or with a couple of other people? The most important thing is actually getting down to it. You have to do it. You just have to make the time for it. You have to see how far you get. If that’s the one action advice that I can provide is simply you just simply have to make time and do it, instead of just thinking about it. As you think about, it’s gets far away. You’re like, “Okay, one day I’ll build this giant organization.” You’re just sort of dreaming, right? You need to make the baby steps. So thinking about how you actually execute your first baby step is certainly the most important.
Andrew: So, let me see if I got this right. I was going to end it with that question, but I want to dig in a little bit more. You said three things. First, make it a have to. Something that you have to do not just should do, not just want to do, but have to. The second thing is you said set time aside. The third thing I think you said was get away from your desk, go somewhere else and do the work so that you’re not caught up in work that you do and all the busywork that you need to do everyday. Then the last thing you said was find someone else to work with. Do I have all those four right?
Danny: Yeah, yeah, you hit all the points there, yeah.
Andrew: Let me ask you about that. Why did you have to build Harvest? Why did you have to build anything? Where did that come from for you?
Danny: For us, it was just we wanted to learn. We wanted to . . . there’s this education part where, okay, we run a service business for a while. We know what that’s like. Now let’s try to run a product business and let’s learn more about that. In order to do that, we need to build a great product. Then we can really see how it feels.
Andrew: Why did you feel you had to? Did you dislike working for customers? Did you dislike being on the clock? What was it that made you say, “I have to build my own product”?
Danny: I think it was the have to came from intrigue. We thought, okay the service business, we know what it’s all about and we’ve sort of hit some of the limits that we’ve been able to achieve already. That’s been interesting. But wow, wouldn’t it be great if we could create a product business where the business itself can generate revenue whether we’re working on it that day or whether we’re sleeping? It becomes just another business model. That was really interesting for us. It’s highly scalable, and it was intriguing as a result of all that.
Andrew: The other thing you said was set time aside and you talked earlier in the interview about how you stopped doing client work completely, right, for a few months so you could work on Harvest?
Danny: Yes. There certainly is a time where we had to make a decision whether or not we wanted to do this next project that a client was offering us. Or if we were going to say, “You know what? That’s really interesting, or perhaps that’s not interesting at all, but we’d rather just work on our internal project and see where we can go with that.” So, we’re starting to set the boundaries to protect our time so that we can reinvest that time into something else, such as something for ourselves.
Andrew: You also said go away from your regular work. I think you told me early on that you got an office for yourself. That you and Shawn didn’t want to work out of your homes or coffee shops even where you might have been able to work at first. Did you specifically go out and get and get an office?
Danny: Yeah, so . . .
Andrew: Why?
Danny: When we first started the company as a consulting company, we set it up, we were living in a brownstone at the time. We had a large living room and two desks in the living room is all you needed to get started. But in a few months time, you sort of, for me at least, you become, have an itch to actually leave the house every day. Make sure that you have that right, sort of transition time, that now I’m at a new location and now I’m working. We got out of our brownstone relatively soon and got our first office. I think it was really important to have that mentality for us to wake up and get ready for work and go somewhere, where the environment says, “Hey, now we’re working.” You get into that work mode, and you start thinking about it in a different way. Then when you leave work, you leave work at the office and you sort of have that.
Andrew: When you working from home, what was that like? Were you sleeping in? Were you working too much? What was it like? What was the issue with it?
Danny: I think we had a side story because of that. When you are working from home, it’s very easy to wake up and you just go to your desk and maybe you’re just not fully prepared for the day. You didn’t brush your teeth, you didn’t brush your hair, you didn’t get dressed, whatever it is. You’re just not getting into the mode. It’s also very easy to say, “Oh, well, I’m just going to go and take a nap and relax for a while.” All these things kind of combine and said, we’re just not in the right mode to be fully productive. Even back then, one of the rules that we sort of made up in our employee handbook at the time is you should not wear to work what you wore to sleep. It is very important for you to get out of the mode and get into a different mode to where you focus on the work.
Andrew: What about other? You said work with someone else. What did you get by working with Shawn that you wouldn’t have been able to do if it was just you?
Danny: I think it’s really hard when you first start, when you’re first starting out. It’s quite an emotional ride. You’re investing all this time and energy into creating something that you hope will have a market for. You have a lot of ideas. You have some good ideas, some bad ones, and you really just got to, I think, talk it out. That’s why I think it’s really important to have partners or other people who you can really collaborate with and hash out ideas.
Andrew: Can you give me an example of how talking with Shawn helped you come up with an idea? One specific example.
Danny: I’m trying to think if there are any specifics. To talk about that a little bit more, what’s interesting is you can balance each other out. If someone’s having a moment where they’re really concerned about something and maybe they’re over exaggerating something, the other person can say, “Hey, here’s another way to look at that same particular issue.” As a result of that, you can say, “Oh, wow.” You can bring down that sort of emotional moment to something where it becomes productive again. You move ahead in solving some of these problems. If you get to something . . .
Andrew: Sorry, the audio went out. Give me an example, for example, give me an example when you needed that.
Danny: Yeah. I think, in our product, for example, thinking about how we wanted to evolve the product. When we were just all about time tracking in the early life of Harvest, we had to think about where we were going to take it next. Some of these things are really big questions. Should we add expenses? Should we go into invoicing? How does that shift the market that we address? Do we put it in the same product? Do we put it in a different product? All these things are, those were questions that we came across. We said, “Okay, if we put everything in one product, it becomes a more powerful product, but is it harder to sell as a result of that? What happens to the original market that we had?” The process of thinking out all of these things more analytically, that is what has been really great for Shawn and myself is to being able to sort that out, have these discussions. After weighing the options, we can say, “Okay, let’s go with this route. We feel good about it because we have talked about all these things that lead up to the decision.” That’s sort of one high level example of how it really helps for me and I think for people who have co-founders in general.
Andrew: Okay. All right. The product is Harvest. The website is GetHarvest.com, right?
Danny: That is correct.
Andrew: All right. Danny Wen, thank you for doing the interview.
Danny: Thank you. Glad to be here.
Andrew: Thank you all for watching. Bye.
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