How does a founder who used her birthday money to launch a company end up selling it for over a million dollars?
In 2001 Erica Douglass created SimplyHosting, a web hosting company that she sold about six years later. I invited her here to talk about how she launched it, built it, grew it, and sold it.
I also want to find out about her newest company, WhooshTraffic. You can find it, of course, at WhooshTraffic.com, and it helps your site show up high in Google Search results for specific key words.
Andrew: Three messages before we get started. If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you read his articles on Venture Beat, you know that he can help you with issues like raising money or issuing stock options or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at WalkerCorporateLaw.com.
And do you remember when I interviewed Sara Sutton Fell about how thousands of people paid for her job site. Look at the biggest point that you made. She said that she has a phone number on every page of her site because – and here’s the stat – 95% of the people who call end up buying. Most people though don’t call her, but seeing a real number increases their confidence in her and they buy. So try this, go to Grasshopper.com and get a phone number that will make your company sound professional. Add it to your site and see what happens, Grasshopper.com.
Remember Patrick Buckley who I interviewed? He came up with an idea for an iPad case. He built a store to sell it, and in a few months he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store on Shopify.com because Shopify stores are designed to increase sales plus Shopify makes it easy to set up a beautiful store and manage it, Shopify.com. Here’s the program.
Hey there, freedom fighters. My name is Andrew Warner. I’m the Founder of Mixergy.com, home of the ambitious upstart. How does a founder who used her birthday money to launch a company end up selling it for over a million dollars? In 2001 Erica Douglass created SimplyHosting, a web hosting company that she sold about six years later. I invited her here to talk about how she launched it, built it, grew it, sold it, the works. I also want to find out about her newest company which is called WhooshTraffic. You can find it, of course, at WhooshTraffic.com, and it helps your site show up high in Google Search results for specific key words. Erica, welcome.
Erica: Welcome. Thank you.
Andrew: You get out of one company, you don’t end up on a beach somewhere or just bumming it around the world, you decide you’re going to launch another company soon after, huh?
Erica: Of course. [laughs]
Andrew: How much did you sell SimplyHosting for?
Erica: It was $1,104,000 to be specific.
Andrew: Where did the four dollars come at the end?
Erica: The $4,000…there was some extra desks and some chairs and whatnot that was in there, so.
Andrew: So you got money for the desks and chairs and everything else?
Erica: Yeah. It was what I wanted to take out of it, which was some furniture that I wanted, so, including a coffee table, which was the strangest thing.
Andrew: You had a coffee table. How much outside investment did you get in this business?
Andrew: None. In fact, I knew…
Erica: I completely failed at talking to investors, or getting any money for my hosting company whatsoever.
Andrew: Oh, good. I want to find out about that failure of getting people to invest in the business, and I want to find out about some of the painful moments there. Do you think, by the way, that those people ended up regretting their decision?
Erica: It’s hard to say. I know there was one guy that I pitched to. I have some interesting stories about investor pitches from my last business, but he ended up investing in another company that the guy literally ran off with the money. And so, how do you say whether he regretted not investing in my company or not? Certainly, he would have made money. He’s probably made money in other ways. So it is what it is.
Andrew: I always want to imagine that they sit around going, “Why didn’t I invest in that? What was wrong with me? She’s so smart. She’s so good, and I’m such an idiot.” I guess they really don’t work that way, but it is helpful in those down moments to picture them feeling that way.
Andrew: Let’s go back and see how you built this up. What were you doing just before you launched SimplyHosting?
Erica: I had just dropped out of college and really realized that I needed something that wasn’t a big corporate job. I had worked at a startup. This was doing the dotcom boom in Silicon Valley. I worked at a startup. We got bought out by Sun Micro Systems for $2 billion in the crazy dotcom days. We’d never made a penny. We’d never been profitable as a company. I was doing tech support, so I was 18 years old, I wasn’t a founder or anything cool like that in that company. So I was doing tech support, and I made a little bit of money from the stock which was cool. And then when Sun bought us out, I realized that I hated working at a giant corporation with six levels of management above me and everything was ridiculous. So, I …
Andrew: Why? Can you give me one specific example of what made you say, I’ve got to leave this environment?
Erica: I can give you a lot, but I’ll tell you this. The company that I worked for, the start-up, was called Cobalt Networks. We made little blue web servers. We were the first company to put user-friendly control panels onto a web server. That was a novel idea. Now everybody has hosting accounts with cPanel. That stuff didn’t exist back then. So the company that I worked for was the first company to do it, and that was really cool. At Cobalt I learned Linux. I learned PHP, which had just released Version 4.0, so that tells you how old that was. I was really into the whole Linux, PHP, MySQL type of deal. I wanted to bring that to Sun. One of the things they put me on at Sun was converting part of their intranet sites, the internal websites, over to Linux and running on Cobalt servers. They were running all old Perl code. It was really atrocious. I had the job of porting that stuff over. I was very outspoken. I really enjoyed learning new things, and I felt like Sun was stuck in an old, last century … you know, Solaris is the best thing ever.
I will tell you this. Scott McNealy was up in front of a large audience, talking to people about how … I will never forget this. He was talking to probably a group of 500 employees at Sun, and he said there are basically two development platforms today. He said there’s Microsoft and there’s Java. And I stood up from the back of the room with my little teenager self and I said, what about Linux? And he stopped his presentation, and [??] he said Linux is what the kids [??] when they still have to ask their parents …
Andrew: You said … our audio, for some reason, just went down there. I think when you shouted, it did something to the mike. You said Linux is what the kids use when they still need to ask their parents for the car keys.
Erica: That’s what he said. Yeah. So I asked him what about Linux, and that was his response. I think that was about a year or a year and a half before he walked around in a penguin suit declaring that Linux was the next big thing. But that was a pretty clear moment where I realized that my values didn’t quite align with how Sun was working.
Andrew: My brother had a job kind of like what you did, working for a big organization. One of the things that he hated was, he was working on Wall Street doing development work there, and he had to come in with a shirt and tie and look all nice. Why do you need a shirt and tie if you’re a developer? Where do these rules come from, and how do you get them changed? It’s hard in those bigger organizations.
Erica: Yeah. That was an IBM thing. Sun hated those developers wearing ties. They didn’t like that, but they also didn’t want us to have permanent desks. They felt like we should be able to work from anywhere. Kind of a utopian ideal, but I actually prefer having my own desk, so that was another way where I didn’t quite fit in with the Sun way of doing things.
Andrew: All right. You know what, though, I’ve got to say, so far I’m not seeing anything to hate. I love your creativity, and we’re going to show people how creative you were in starting your business, how much of a hustler you were, and it’s all inspiring. I can see how that personality wouldn’t necessarily fit in a big organization, but so far it seems like everything is pretty good about working for Sun. You learn a lot, you get to yell at the CEO, you get to be right.
Erica: Yeah, basically it was just that I was always wanting to do something new. At Cobalt, when I would go say hey boss, IT manager guy, I want to do something new, he would be, like, all right. Go do it. We’re a start-up. Go do this if you think it’s going to make the company better. At Cobalt they were paying me $15 an hour, so I really don’t think they had anything to lose with me developing new things. But at Sun there was this hierarchy of, I’ve got to ask this guy, and then he’s got to ask his boss, and then it’s got to go up here, and then we’ve got to have a meeting about it, and then it’s got to go up here. And why is this 19-year-old saying that we should move to Linux? What does she know? That was basically what it came down to. I got really frustrated with the long process it took to do everything at Sun.
Andrew: All right. I get that completely. All right, so where did the idea for Simply [SP] come from?
Erica: When I was working at Cobalt Networks, I used to … everybody loves this story. I used to dig hardware out of the dumpster when it was dead. At Cobalt, they didn’t really have a refurbishing program in stock for their servers. So if something died and they couldn’t repair it easily and send it back to the customer, they would just toss it. It would just go…this was dot com boom, you know? Who needs old stuff? Bring in the new stuff. Customers wanted all new servers. There wasn’t much of a market for used equipment at that point. So I saw an opportunity. I started digging servers out of the dumpster, and I repaired them as best I could, repaired the hardware, and then I took them and sold them on eBay. And eBay was a pretty relatively new thing at this point, too. So I took them, and I actually ended up making … and some months I made more money selling servers on eBay than I did actually getting paid for my job in the IT Department at Cobalt. So that’s where everything got started, because the CEO of the company finally tracked down this rogue eBayer who was eBaying all this stuff and traced it back to me and said okay, don’t do that anymore or you’re not going to have a job here.
Andrew: How much work went into taking a server that was in the dumpster and making it into one that you can sell on eBay for fun and profit?
Erica: It totally depends. It depended on what was wrong with it, essentially. There were some parts of it that I couldn’t fix. Cobalt had a proprietary motherboard in the servers, so if there was something that was a motherboard failure, there wasn’t much I could do. But if it was a hard drive or memory failure, those were swappable. I could just go out and buy one.
Andrew: Just buy a hard drive and swap it [??].
Erica: At Fry’s or on one of those gray-market websites. I used to use pricewatch.com, I have no idea if they’re still around, and get hard drives shipped to me. That’s what I basically did in order to get some of them up and working. Some of them were not salvageable.
Andrew: I see. All right. So then you have some revenue and the revenue stops. It’s time for you to think about a new business idea. Is that where you were?
Andrew: Okay. And how did you decide hosting is going to be the new thing?
Erica: Well, I had this pile of servers stocking up in my cubicle at Cobalt Networks, and when Cobalt got bought out by Sun, I realized that I could probably use this stack of hardware that I was just carting around that was half broken and do something with it. The only other logical thing to do, since I wasn’t allowed to sell it, was to use it to do web hosting. So that’s basically where I ended up.
Andrew: Ah-ha, I see, okay. I mentioned at the top of the interview that you used birthday money to help you get started. How much birthday money, and what did you do with it?
Erica: It was a couple of hundred dollars as I recall. What I did with it was I took it to a local colocation facility and I said, I have this lovely blue Cobalt server. Let me put it in your colo [SP] facility and get it connected at high speed to the Internet so I can host my own website. I had some of my own sites, and some friends were paying me $10 a month to host a couple of their own websites, so I wanted to get it in an actual hosting facility, and that’s what I did. I signed a contract. It was really scary. I was 20 years old. I had never done anything like this before. I signed this long contract with the hosting facility, and I put one Cobalt server in there, and that’s how I got started.
Andrew: Seventy-nine dollars a month is what you had to pay for that.
Erica: Yes. And let me tell you, think about how much that is to some kid who’s 20 years old. You’re getting paid 15, 20 bucks an hour. I got a couple of raises in between when I had started and now, but it wasn’t a lot of money, especially in San Francisco. The high cost of living was ridiculous, even back then, because of course the dot com boom was happening. Things were about to crash and go bust, but they weren’t quite there yet. Real estate hadn’t caught up, so it was extremely expensive. So [??] was a big leap, but it was one that I had to do.
Andrew: You know what, you did me a favor and you came in and helped out people in our Mixergy Premium program by teaching this hustler’s approach to building a business. You showed the pictures. I think you even had a screen shot of the eBay sale that you had of the Cobalt computers, and you walked us through how you did it. It was one of the top courses in Mixergy Premium, and I’ve got to just say thank you for doing that. In fact, we were so surprised by how effective it was that when we sent out a few small email tests to promote it, the numbers were off the chart for us. People just wanted to click over to see what it was. Of course, once they were there, they got to watch you talk about how to take this approach to business.
Erica: Yeah. I got a ton of great feedback on that, too, so I’m really glad that’s up in your Premium section for people to munch on. I got so many emails and chat requests. I sit on the whooshtraffic.com live chat a lot of times when I’m at the office. I got so many chat requests from people, like, I love your Mixergy interview! Tell me how you do this. It’s cool. It’s really neat.
Andrew: All right. So now I see how you got hosting. I see how you got the computers. What I’m curious about is, how did you get customers? How did you get people who paid for the business?
Erica: I hung out on the #PHP Channel on what is now known as Freenode but back then had a different name in IRC. People would wander into the PHP Channel trying to learn PHP. This other guy and I both were running hosting companies, and whenever somebody asked for a recommendation for a hosting company, we just [??] with links to our companies. And, it was just him and me and the big hosting companies out there like Pear and all the ones that were around back then. I don’t even think that HostGator or any of the ones that are large right now were around back that. It was all of these larger companies and this other and me. We were all just like, “Yeah. My hosting company. It’s only like $8 a month.” And, we’d send them links.
Andrew: Was it mostly spam? I know it was.
Erica: I wouldn’t say. No. Because people were asking for it. So, spam would be like if I just went into the channel and I didn’t know anybody and I was like, ‘Check out my hosting company.’ But, this was in regards to people actually asking for recommendations.
Andrew: I see. So, they just come on and say, “Where do I get my website even hosted?” And you say, “Hey. I got a hosting company.”
Erica: Exactly. PHP back then. Most hosting companies didn’t support it. Or, if they did support it they had really ancient versions of PHP. So, one of the things that I did was make sure that we had the latest versions with all of the fancy extensions. I guess is what you call them. The dash dash when you compile it. Oh, that’s awful. I did all these custom compilations of PHP. I actually released some of the stuff that I did as open source so people could see how to compile PHP cobalt servers with all of the fancy new extensions that came out.
Andrew: You also told April Deickman [SP] who pre-interviewed you that you were on SlashDot and that’s how you got users. How did you get users or customers from SlashDot?
Erica: I was the most famous girl on SlashDot for awhile.
Andrew: Were there a lot of women on SlashDot at the time?
Erica: Yeah. I went by the username SlashChick. It was from SlashDot. Some people asked if it was another way of. No. It was just SlashChick because it was SlashDot. Like that’s what I was. I got tired of people responding to my posts on SlashDot and saying, ‘He said …’ And so, I created the SlashChick persona to show people that, ‘Hey, I am actually a woman.’ And, so that they wouldn’t mistakenly say that I was a guy.
SlashDot introduced a journaling system. Much like blogging platforms are today. And, you could write blog entries on your own SlashDot profile. And, you could pick up followers. And, so what I did was I would [??] and write posts I knew that would get voted up on SlashDot. And then, SlashDot allowed a signature. So, I would signature link to my hosting company. So, I got a lot of business from that. And, I would also signature link to my journal or try to link in my posts to my SlashDot journal. So, people would follow me on there. And, they would get notifications when I wrote a new journal. This is all so weird talking about this today. Right? Because now you have WordPress, Twitter, FaceBook, and all these, YouTube, and all these places where you can get followers. But, back then, that was how I built it.
Andrew: Weren’t you-. I know that when people try to sell. They get nervous about offering something new. They get nervous about selling themselves, selling their products. Weren’t you nervous about doing this on IRC, on SlashDot, about putting yourself out there online, at all?
Erica: You have to know that if you’re afraid of sales, you’re never going to get anywhere in business. And, you just have to go out there and do it. Listen. I am selling to this geeky market. You know how crazy geeks are. Right? And, I am a geek. So, I can say that too. I mean, we’re the ones who are always like, “Uh. She sent me an affiliate link.” Or, “Uh. That sounds salesy.” Or, just when you say I really liked my insert brand name of something here. They’re like, “Uh. Don’t tell me to buy one of those.” I’m not tell you to buy it. I’m tell you I like it. So, geeks are like sales allergic. And, they have this allergic reaction whenever you mention anything about sales. So, what I found was that just by focusing on writing really good. This is the same strategy I use today. Focusing on writing really good content and then linking that content to my own stuff. People would find us and they would say, “Oh. Hey. It just so happened that I was reading this SlashDot post by you and I needed web hosting so I clicked through to your website.” So, that was basically how we picked up a ton of customers in the beginning. We, I say we, but it was really just me.
Andrew: Just you. Erica, was there a time when you felt nervous or shy about putting yourself out there and selling online?
Erica: I wouldn’t say so only because I was so hungry that I had to make it work.
Andrew: Why were you so hungry?
Erica: I was, literally, like scraping by. I had some clients I had picked up on Craig’s List for things like website design and development. I was pretty much, at that point, really good with PHP and there were only a handful of people out there that were that good with PHP at that point. It was a virtually unknown language. And, I picked up a lot of contracts on Craig’s List and whatnot. I just remember I had one client who was paying me a fair amount of money. Basically, paying all of my bills. And, he looked me straight in the eye when I walked into his office one day, and was like, oh, I was reading this article. I think he still had a newspaper. It was really old school. And he said, I heard you can hire Indian PHP developers for $6 an hour. So tell me why it’s so important that I hire you for $50 an hour. And I’m looking at him. Are you kidding me? Fifty dollars an hour doesn’t buy a sandwich in San Francisco. I’m standing here in your office. I’m physically right next to you, and you’re asking me why you shouldn’t hire somebody who’s from India because they’re cheaper? That was the moment where I …
Andrew: Were you living on your own?
Andrew: Sorry. I just interrupted. Exactly. You were saying that’s the moment when … sorry. What were you saying?
Erica: I realized I was done with contract web development. It was the most awful job. Because I realized, okay, well, maybe somebody from India’s not going to get the contract because they may not be searching Craig’s list. Of course they are now. But at that point they probably didn’t know that. But what if somebody comes in next week, like, yeah, I know PHP, and I’ll do it for $40 an hour. I just realized that was going to be the price pressure, and I was barely making ends meet. Yeah, $50 an hour sounds like a lot, but I was nowhere near full time with this. I was lucky to scrape together 10, 15 hours a week per gig. When I went in for interviews with people, and they’re sitting across the desk from me, and they’re a 45-year- old white dude, and I’m this 20-year-old spunky-looking girl, and I’m, like, I know PHP. And they’re like, who is this girl? This is ridiculous. I didn’t get most of the contracts that I went for, even on Craig’s List. Nobody was hiring full time. Valley [SP] had gone bust, and nobody was hiring. I sent resumes everywhere. I sent resumes to Google, I sent resumes to Yahoo, all the big companies. Nobody was hiring.
Andrew: Wow. So this was … I guess, you were roughly 20 years old?
Erica: I was 20. I was born in 1981, so I was 20 in 2001 when things started to go bust, and that’s when I started my hosting company. And then as I went through and did PHP contracts … I quit Sun Micro about a year later and did PHP contract work for a couple of years after that until I finally was able to go full time into hosting. It took a while.
Andrew: Were you living on your own at the time?
Erica: Yeah, I was. And it …
Andrew: And you couldn’t go back home?
Erica: Yeah. There was very little way I could make ends meet on my own. I had an apartment, but it was a very tiny apartment in a little bedroom community pretty far east of San Francisco called Pleasant Hill. People who are in the East Bay will recognize that name. Pleasant Hill’s a sweet little town, but it’s pretty far away from San Francisco, which is where my servers were, which is where my job at Sun Micro was, which was where a lot of my clients were. So I ended up doing a lot of commuting.
Andrew: Could you go home? Or was it that you had no option but to build this business?
Erica: I didn’t have any choice. I was from Indiana originally, and I was not going back to Indiana. My mom and dad always hinted at it. They said, you can come back here and repair computers. Please. There are so many people who need your skills, and they need to have their computers repaired. And I was like, if I’m going to have a life of repairing viruses off people’s computers, no thanks. I’m not doing that. And mom was like, well I know you’re making $50 an hour out there, but I’m sure you can make $50 an hour repairing computers here. And I’m like, no, that’s not what I want to do. I want to stay here. I want to do this. So that’s what I did. I had to make it work. I didn’t have a choice. And I think that’s where the hustle comes in. If you don’t have to make it work, it’s really easy to not sell and to step back and to say it’s okay, I’m not going to push it. I’m not going to sell. But when you have to make it work, when somebody paying you is literally the difference between you eating and you not eating, or in my case sometimes not getting evicted from my apartment because I was paying the rent late, that is when the sales skills come in. You learn it because you have to, and you have to be that gutsy in order to really push it and be successful. It’s scary though, it really is.
Andrew: You know what, it really is. And I don’t want to underestimate that by making it sound like it’s fun. It is scary in those moments, and you are at times feeling like, well, maybe I’m not going to make it. Do you ever get…want to move on with the story here, but I’ve got to ask you this. Did you ever find yourself frozen, unable to move, because you were so nervous, because you were so scared? What did you do?
Erica: I was depressed almost the entire time I ran my business. No joke. I’ve struggled with depression pretty much my whole life. It seems weird because you see me talking, and I have a strong personality, and I’m fun, and I enjoy doing these sorts of interviews. But it is something that I want to address because I think there are so many people out there who look at someone successful like you or me and they think, ugh, I couldn’t do that because I feel bad about myself. Dude, I felt bad about myself the entire time I was running my business. I had little to no self-confidence, a lot of depression issues, a lot of am I ever going to make it? This is completely ridiculous. I have one dollar left in my bank account and five thousand dollars in credit card debt and everything’s maxed out and I don’t know what to do and all this crazy stuff was going on and there’s no, like you start here, and then OK, success happens, great. That’s not the story though. The story is the stuff that people don’t like to talk about, the stuff where you’re just sitting there crying because you have no idea how you’re going to possibly make it and something happens, something comes along, somebody pays a bill or signs up and you’re like, “thank God, I can eat tonight.” That really is how it is, like, somebody would pay me ten dollars a month for hosting and I’d be like, “Yes! That’s like a burrito or something or I can buy some Rice-A-Roni!”
Andrew: So how do you-, and by the way I’m surprised to hear that because I’ve now had many conversations with you, just in planning our interviews and the course that you did for the premium members, and you always seem like you’re such a naturally “up” person, so when you’re feeling down and uncertain and unsure if you could feed yourself or find a way to live, how do you project confidence to a potential customer? How do you project confidence through your site? How do you do that?
Erica: I’ve always had confidence in what I sell, I haven’t had confidence in myself. That’s the big difference. I always, you know, it’s funny, I’ve gotten into these conversations even recently with close friends. Even running a start-up now has its ups and downs and there are days during this start-up that I’ve been really depressed, but I’ve never lost faith in the ability of my company to succeed and the fact that what we’re doing is awesome. It’s only that I lose faith in myself or I feel like sometimes I’m not the person that I need to be to drive this forward and that’s just honest. It shouldn’t scare anybody because everybody should have those moments. I truly believe that there’s just no easy path to success. It took me six long, brutal years to sell my company for one million dollars and there were a lot of mistakes I made along the way. We could probably do ten hours of interviews and I’ll tell you every frickin’ mistake I made from hiring bad employees, to not listening to the good employees that I had, to racking up credit card debt for the company …
Andrew: What’s the biggest mistake? What’s the one you look back on and go, “I can’t believe I did that, if I could go back in time, this is the one thing I’d love to change.”
Erica: Get a handle on my finances, both personal and professional. In terms of the business, we had all kinds of stuff wrong with our corporate status. We had all kinds of stuff wrong with the way we filed books and it was just a mess. I was trying to do it myself to save money and “Oh, well I’m a smart person, so I must do this.” Realistically, yeah, OK, so you and I and probably pretty much everybody watching this are pretty, frickin’ smart people. If you have enough money that you’re buying a computer and watching Mixergy interviews, you’re probably one of the more intelligent people in the world. That doesn’t necessarily mean that you’re going to be good at everything. I know that some people are nodding their heads right now going, “yeah, that’s true.” I suck at books. I am terrible at books! You hand me QuickBooks and my eyes glaze over and I can write programming, and design and develop web sites, and market and do copy writing, all this great stuff, but books, no. I should have from day one, gotten somebody in there to do the books right.
You know what, I got that advice from a customer of mine who said, “Erica, seriously, you need to hire somebody to do the books.” I’m like, “I don’t have the money, that’s like three or four hundred dollars a month. If I had three or four hundred dollars a month I’d be paying my rent on time!” It was that trap though. You have to have support in doing what you can’t do well, and you really need to have that from the beginning. So, this time I have a really awesome bookkeeper and believe it or not, five years after I sold my last company I was still trying to straighten out tax nightmares from that last business. Still, to this day, my accountant is about to go back and re-file years of taxes from that company, in order to net me twenty thousand dollars or more in taxes that I paid, that I shouldn’t have. Think about that. So when your company grows, that three or four hundred dollars a month that you didn’t spend suddenly multiplies into “I just spent the IRS twenty thousand dollars that I didn’t need to send them, because I filed my taxes improperly.” That’s the kind of situation I’m in still, to this day.
Andrew: So you’re saying, if you could have done it again, what you would have done is paid a few hundred dollars for someone to do the books, and then use the time that you were sweating the books, and doing the books, and re-doing the books to pick up customers or do something that you’re good at.
Erica: That’s the lesson you have to learn as a business owner. You cannot possibly do everything it takes to run a successful business, so you have to be really clear on this is what I like to do, this is what I enjoy doing and this is the stuff that I need to get out of my hands ASAP. Does that mean that you need to go spend $10,000 on Aeron Chairs, or that you need to hire big fancy attorneys in Silicon Valley to do all your paperwork? No. If you can file an incorporation on LegalZoom, file it on LegalZoom. Get the advice when you know that it is going to save you more money than it’s going to cost you right now. Getting a bookkeeper in on day one probably would’ve saved me on the order of $50,000, or more, through the life of my company. Probably more, that’s a low guess. It wouldn’t have cost me nearly as much. That’s one of the things I learned the hard way.
Andrew: All right. You had the hardware, you told us how you got some customers, but what you are telling those customers on IRC is, “Come to my website. Build your website.”
Erica: Yeah, I did.
Andrew: How long did it take you to build that site?
Erica: Oh, my God. I’m the worst perfectionist in the world and I’ve had to learn ship, ship, ship. I have big notes all over. Ship stuff, ship stuff, get it out there. It took, the first time, well over a year and it wasn’t because I didn’t know how to do it, it was because every day I would go on there and be like, “Ah, this could be moved one pixel to the left and I could move it and I could change the font and this would be this color.” Don’t do that crap.
Andrew: One-a-year to launch?
Erica: Yep. Easily.
Andrew: We aren’t talking about the hardware or about the hosting component. All that was working.
Erica: Just tweaking stupid stuff on the website. That’s the other thing you have to get over. You have to ship it and if it sucks, then the conversion statistics will tell you that it sucks and then you can change it. You have to have that data before you launch it. I’m like that with my team now, too. We launch stuff all the time. We are launching three giant features that will [??] this week alone. I’m always like, “Ship, ship, ship. Get it out there,” because you don’t even know what people really want until you get something out there. Right now, if you’re sitting on a website that’s sitting on your computer, or some staging area somewhere, and it’s not public and you’re not getting feedback on it, that means the only person who can decide what goes on that website is you. That’s bad. You’ve got to get out there, set the website up, send people to it, and then, what I do, I personally sit on the live chat and traffic. People are always surprised when they see a little pop-up and it says, “Hi, I’m Erica,” and they’re like, “Is this really Erica? Is this a trick? Are you a robot?” I’m like, “No. It’s really me. I’m in the office chatting with you.” Why don’t I outsource live chat to somebody? I will, at some point, but for right now, what it’s doing is it gives me feedback on what customers are looking for when they’re coming to our website. That’s the key. You’ve got to know, you’ve got to be able to get something, anything, up there. Get a blank page with Times New Roman and CSS and ugly tables and black and white and no pictures and a buy button.
Andrew: And a buy button. I did that about you. You’re a pretty introspective person. Talk to me about the psychology about what is it that makes you hesitate to launch a site for months and months and up to a year? What goes on in your head? What’s the thing that’s the barrier?
Erica: Back then, I think it was just not understanding that I had to have it out there for customers to buy it. I thought it had to be perfect before I launched it. I was trapped in my own neurosis of, “This would look better if it was over here and constantly redesigning, redesigning, redesigning.” I don’t have that problem anymore. Well, that’s not totally true. I still have a little bit with my blog post because now I have so many readers on my blog, it’s kind of intimidating to get that published because you know somebody is going to send you an angry e-mail, no matter what you say. I’m still getting over that, too. That’s why I don’t publish blog posts as often as I could. That’s something I struggled with for a long time, but with websites and with the products, boy, I tell you, it’s just . . . we probably launch new websites for Whoosh Traffic faster than most other start-ups launch entire product lines. We roll-out a new website every week or two. We’re just constantly testing. Is this better? Is this language better? Since I work in an environment with lots of other start-ups, in one giant space, what I can do is cart my laptop over to somebody and be like, “Does this make sense? Would you buy this product?” and do the customer development side of things there, right here in the office with other business owners who need our stuff. That’s been really helpful to me.
Andrew: I see. Because you’re in a co-working office space, you have lots of other entrepreneurs to bounce ideas off of and have them test his product..
Andrew: OK. April, in the pre-interview asked you what did you do to launch and you said, “Set up a website” which we talked about. You wrote your own Shopping Cart software which knowing you we understand, and also knowing the time today things are different, you could get Shopping Cart software. Back then, you could do it. But here is the thing that surprised me. The third thing that you told her was you basically started looking for some extra money. What do you mean by that? Is that the funding?
Erica: Right. Was this talking regarding launching the site?
Andrew: Yeah. Did you immediately start looking for funding?
Erica: No. I did not actually. I did not look for investors until, I think, it was 2005 that I pitched the one and only time, I think it was maybe once, maybe twice to investors and we did not even go anywhere.
Andrew: Yeah. Let us get into that. This was, you said, 2005. You launched 2001. Why did you four years after launching decide that you wanted to start getting some funding?
Erica: Right. I went to a course that taught you how to raise funding, and there were so many other companies doing it. Then there were a lot of people in that course, and they asked me about my business, and I said I run a web hosting company. And they said, “Oh, cool.” You know, I started talking about the customers that we were hosting. We hosted some of Silicon Valley’s hottest startups. So part of WordPress.org was hosted with us, and we had a company called PBworks which was started by a friend of mine and it became pretty big in the valley.
Andrew: Sorry? A company called what?
Erica: PBworks. It was PBwiki. David Weekly is an old friend of mine. And we hosted Powerset’s website, their front-end website. So Powerset got bought out by Microsoft. There were some other really big names in there, too. So I started talking about who we hosted and how I had set up the company. And people started getting this confused look on their face, and I said, “What is going on? What is with the look?” They said, “Well, you look like you’re 18.” I always look really young, right? Now I am in my 30s.
Andrew: As I say, today you look like you are 18.
Erica: “You look like you’re 18. You don’t look like somebody who…” I do not know who they pictured, but it certainly was not me who was hosting all these crazy startups and what not, and plus the company was already making well into six figures at that point. I did not think any of it because honestly most of that money was going right back out of the door into costs. I did not have my pricing model down very well. So they were like, “Who is this girl who is running this really successful business?” And I am like, “No. No. Anybody could do this.” I realize now that is not true. Not anybody can do this. It takes a lot of effort. I think the thing that most people do not have that make startup people so successful, that make successful people successful at least, is just persistence. I feel a lot of people who never launch, they are like they are still stuck in this like, “I want to do this startup and I am in this fantasy land of, like, start-ups would be awesome, but I’m not going to do it, because if I actually launch then I will have to face reality of the fact, like, nobody is buying this.” [?] If you are in that stage you got to get out of it by launching right away. Launch anything. Launch a $7 E-book. Launch an interview. Go interview somebody famous and sell that. Get their permission and sell it or go write an E-book about something that you are doing well or something that you know.
Andrew: I am going to get back to this funding, but I have got to ask you about that. You say go do an interview and sell it. You say go write an E- book and sell it. Just to get yourself started. I can imagine the person who is listening to us now who is hesitating to launch, saying to himself or herself, “That’s not going to look good. That’s not going to represent me well. I don’t want to be just another person creating a shoddy E-book or selling just an interview, especially when Andrew’s has got all these interviews on his site and when all these books are already out there.” What do you say to that hesitant person who has got greatness in him, but just is not buying what you just said?
I am going to respond with a story and I think it is OK that I share this publicly. So I was really good friends with Ramit Sethi who runs the blog “I will teach you to be rich.” Ramit and I used to have dinner together all the time and we both lived in the valley. One night he sat down for dinner and he was still working over at PBwiki, PBworks and he said, “I really…” Actually, what he said was… He handed me a sheet of 8.5 x 11 paper on which was written in very small print all of the things that he wanted to do over the next year. Then, I flipped it over. There were more things that he wanted to do in the next 12 months, and I am looking at him like, “Ramit, ten people could not get this done in 12 months. This is completely ridiculous.” I told him, “You have to quit your job. That’s it. You have to quit your job. This is serious. There are like 70 odd things on this list.”
There was like, “Write a book. Do all these blog posts. Start an info product, and interview these people,” and all the stuff that he wanted to do. I said, “You have to quit your job. And he’s like, no, Erica, I can’t quit my job, because you don’t understand. People know me, and they know PBworks, and it’s an amazing company. And they know who I am as the person who was one of the founders of this company. And I said dude, you’ve got to do it. I said, here’s the thing. Here’s the thing I told Ramit. And this is what stuck with him, and he will tell you the same story. To this day, this stuck with him. And this was the thing, the catalyst, that got him blogging full time.
I said Ramit, people never remember who you were; they always remember who you are. And so if you literally … like on a sidebar he had I’m the co- founder of PBworks. And I said if you change your blog sidebar and say, hey, I’m doing this blogging thing and I’m launching these products and I’m a money blogger, a financial blogger, that’s it. That’s what they’ll remember you for. Nobody remembers me for my hosting company. We had, like, 160-something-odd customers when I sold the company. Yeah, they were paying us a ton of money, and so we were making a lot of money, but we didn’t have a ton of customers. Very few people remember me from my hosting days. But now that I’ve launched my blog and I’ve done all these great interviews, people know me more from that than they do from the hosting industry. And he looked at me and he said you’re right, all right, I’m going to do this. I’m going to quit my job. And he did.
Andrew: So you’re saying that if he had any hesitation about people thinking poorly of his first work because he was with PBwiki, which became PBworks, you’re saying they’re not going to. You just stop selling yourself as the PBworks guy and they’ll stop judging you as PBworks, and then you could take risks.
Erica: Right. Exactly.
Andrew: But still, he can separate himself from his company, and the person who’s listening to us can separate themselves from their company, but we can never separate ourselves from our sense of how great we want the world to think of us. And so, fine, I won’t say anything about the company that I work for, about my family, my background. I’m just going to say, I’m launching this e-book. But I’ll still feel bad that this e-book might suck in comparison to how great I think I should be, and I don’t want to be another guy just selling an interview. What do you say to someone who has this attitude?
Erica: Stop comparing yourself to everyone else.
Andrew: And to your higher self. Just launch so you can improve.
Erica: It’s horrible. Everybody compares themselves constantly. They’re, like, I could never be as good as Andrew at interviewing people. Well, okay, so you interview different people than Andrew. Or, you do five interviews and the first four suck, so you throw them away and then you get better at it by the fifth, or the 50th, or the 500th, or the 5,000th one that you do. And you learn how to captivate an audience and how to ask the right questions and how to keep the conversation going.
And one of the first things I did after I sold my business was I started selling interviews. You know, I told you in my last interview with you that what I wanted to do was do something like you wanted to do, and I actually formed a whole company and decided to do it. And I launched a few of them and I made some money, and I sold some interviews, and then I decided it wasn’t what I wanted to do, so I moved on. And I’m really glad that you’re here doing that because I think it’s needed.
So that’s the example. You know, okay, so you sell a $7 interview and you sell five copies of it and everybody’s, like, this sucks, I want a refund. Well, what did you learn? All right, well, why do they want a refund? Is your interview too short? Does it not have a transcript? Does it not give any valuable information? Well you get the feedback from … the cancellation feedback, by the way, is some of the best feedback you can possibly get as a business owner. Because if somebody says I want to cancel, your first response should be why? What happened? Why are you cancelling? And if they’re like, well, this is my expectation. This is almost always what they’re going to say unless it’s just price, or they just sold their business, or something like that. They’re going to say something like, my expectation was x, and what I got was not x. And so you’re going to think, okay, well, I’ve got to make my website say more about x, or I’ve got to reframe how my product is so it meets your expectation. That’s why companies that I run have a very low cancellation rate, because I’m stubborn. I’m the first one to get in there. They’re like, ugh, your product doesn’t have x. I want to cancel. And we’re like, oh no, we’ll have x in 24 hours. Don’t worry. [??]. We’ll make that happen for you. We do. We literally did that yesterday. A guy was paying us a pretty fair chunk of …
Andrew: Hang on. Something happened again to the audio. I think whenever you get excited, the computer goes, I don’t know how to process this. This is too much. And then mike goes down. Let’s see if it works now. No. Still coming in very quietly. Try saying your name.
Erica: Erica. All good?
Andrew: Now it’s good, yes.
Andrew: So, yeah, what was the feature that you heard yesterday? And then I want to get back into the financing issue.
Erica: Sure. So we had the guy sign up his agency for CEO [SP] tools, and he was signing up on a pretty large package. And he came in and said, I really need you to track Google local results. So the search engine … you know, you type in a local search term and it gives you results with an address for a company.
Erica: We weren’t tracking those. We weren’t the position of those results in our service. And so, he said, “Hey, I really need this.” So we pushed up the feature today. We’re about to write a blog post and chat about it and tell our customers that we pushed this amazing new feature, and we hope we can save him from canceling. We let him know that we launched that feature today, but we turned it around from within 24 hours of him saying, “I want to cancel because you don’t have this.” We came back and said, “All right. No problem. We fixed our code and pushed up the change, and now we have those.” [laughs]
Andrew: So stick around. Of course, just to keep the two companies straight, this is with WooshTraffic, your newest product.
Andrew: This is where people ask for…this is where this guy asked for this feature, and you gave it to him.
Andrew: And hopefully you got to keep that business. Let’s see, so going back to Simply, SimplyHosting, you decided that you wanted to raise money then just because all of these people who you were talking to said you seem like too small a company and it’s just run by one person. You said, “All right. I’ll make it bigger if that’s what you guys are looking for,” right?
Erica: I thought that it would be a useful way for me to grow the business because with web hosting the situation is you buy, like a $1,000 server, and then you lease it out for… My goal was always to lease it out so it paid back the hardware in about four months. So lease it out for $250 a month. And then, four months go by and that’s just paid back the hardware, and you’re still a little bit negative coming into the fifth month because you have expenses other than hardware to think about, like power and network, staffing, things like that. By the fifth month though, you should have it paid off, and then you’re just raking in the month because it costs like $30 a month for power and networking and all that. And, maybe, another $20 or $30 a month for the staffing required to service that customer. And then, that’s pure profit.
The problem is that upfront cost. Now there are companies that will lease hardware to you, but if you ever looked at the terms, it’s outrageous. A $3,000 server is going to end up costing you $20,000 by the end of the lease term. So we did some leasing, and I’m really glad I had good credit and still have good credit for that. One of the things I wanted to look into was investors because, put pure and simple, the more money you have in terms of hosting, the more hardware you can buy, the most customers you can put on it, the more money you’re going to make long-term. Most of your customers will stick with you for 12 months or more, assuming there’s no major issues with it. That was my goal to just simply the more money in, I knew was going to mean more money for the company.
Andrew: OK. So then what happened when you took this idea out to investors? What was their response?
Erica: So I did an investor presentation, and a couple of people came in. I was a night time presentation. I sent out nice little invites and everything. A couple of potential investors came in very drunk, and one guy, in particular, started heckling me from the front row, bottle of beer in his hand, and yelling basically from the front row. I was up there with my PowerPoint, and I didn’t know what to say. I was totally speechless, and this guy was just like, “Are you going to get on with the presentation or what?” [inaudible]
Andrew: The audio just did that thing again. What are you using audio? Are you using that camera that I sent?
Erica: Yeah. It’s got a microphone built in.
Andrew: So, it’s got a mic built into that camera. I’ve got to remember to never buy that camera for anyone again. The video quality is beautiful. It’s so crystal clear, but the mic, for some reason, just cuts off when the volume goes up. Oh well, hopefully, now it’s working. I was talking just to give it some time to catch up. Wait, investors who come in drunk? Is that just because of the time that you were in?
Erica: I don’t know. That seems so unrealistic. It almost sounds like it’s not true, and I wish it wasn’t true because that was such an embarrassing moment for me, but that was the case, and it just happened to me. He came up to me the next day and apologized and basically said, “I realize, I hope that I didn’t ruin your presentation”, but he still didn’t invest. [laughs]
Andrew: I don’t know these guys. Were they venture capitalists, angel investors?
Erica: Angel investors.
Andrew: OK. All right. I can’t imagine that kind of thing happening in our community right now because it is so tight knit, because people would be discovered for this, and they would never be able to live it down. Would you feel comfortable…
Erica: Yeah. This guy wasn’t the typical valley investor that you would hear from now. I find that investor presentations are much more professional now.
Andrew: Right. With Adeo Ressi of TheFunded.com letting entrepreneurs talk about venture capitalists and with angel lists and everything else that we’ve got going for us, that doesn’t happen anymore. Would you feel comfortable, even though you know that I can’t edit edit interviews, revealing the name of this investor that was drunk?
Erica: I’m not going to only because he’s not a Valley investor. He was, what do they call it when it’s just like some guy who has a bunch of money, who doesn’t really know anything about tech. They have names for those guys. Anyway, it wasn’t anybody that you would run into in the Valley or anything like that. I don’t think you have to worry about it.
Andrew: All right, when no investment came in, did you begin to start to doubt your business because of that?
Erica: I wouldn’t say I doubted my business. Most of the feedback I heard back from investors was basically like, we want growth that looks like this, and your growth is more like this. We were really consistently getting new customers on a regular basis, but it was just most investors were saying that we want something that is going to be a billion dollar business or $100 million business. My company wasn’t that we were six figures going into seven figures a year in revenue. It is what is, you know? For me it was a way to build and sale a boot strapped company and, you know, like you said earlier in you interview, look back on it and go, hmm, I bet they wish they would have invested.
Andrew: One of the things we do here is, we grill you before we even start the interview, and then I grill you in the interview. April did the grilling originally to find out, like where’s the weaknesses. Where did you find, what did you think your weaknesses were. I kind of covered much of it, but here’s something I haven’t yet. You felt that you had no network and no contacts. Meanwhile as we’re talking, you’re telling me about PBwiki, now called PBworks. Tell me about WordPress.org, Matt Mullenweg is a customer, you just listed all these people that many people in the audience would love to have as clients. How are you getting all these people when you have zero network and you’re coming in from nowhere.
Erica: I think it was a matter of me just being at every ridiculous Silicon Valley gathering that I could have possibly been at. You have to keep in mind to, people like Matt Mullenweg are now at hero status. This guy knows his stuff. People are like Matt Mullenweg is amazing. I met him at a party hosted by a mutual friend back in the Valley in San Francisco. Back then, Word Press was mostly unknown. I started using it in back in 2004 to give you some idea. I was using it when I met him at a party, and he decided to put some servers with us. Most of their servers were over at Serverbeach, but we had a few of their servers, and I retained the rights to being the first person to ever show Matt Mullenweg, in person, what some of his hardware running WordPress.org actually looked like, physically.
Andrew: What you had you going for you was that you had your computers, your servers in Northern California’s co-locations facility, where everyone else was outside of the state.
Andrew: Or definitely outside of the region, I should say. So that’s what it is, you just kept going to events and talking and networking and promoting. Are you someone who feels confident doing that? That feels to like to me, that it takes a lot of confidence to be able to walk up to someone and meet them when you’re a stranger and you don’t have investors in common and didn’t go to school with them or any of that.
Erica: I learned to refine my pitch over time. The common question when you meet somebody at a networking event, especially in Silicon Valley, is what do you do? I use to just say things like I run a web hosting company. Then I started thinking about how I could jazz that up a little bit. How could I make that more interesting to people. I started saying things to people, like, I run a web hosting company that hosts Silicon Valley’s hottest startups, and then they’re like, oh, who do you host. I was like, you know, we have a couple of Word Press’s servers. I start naming, depending on who it was; I might know who they knew, and start naming names that they would know. Then it started connecting with people, oh, oh, she does this hosting thing with a bunch of Silicon Valley startups. That was how I did it. I just tweaked my pitch and refined it just like you would tweak a conversion test a website.
Andrew: Where did you learn to do stuff like that?
Erica: Had to.
Andrew: It’s just the hustler attitude, it’s just I’m going to find a way to make this happen attitude.
Erica: Yep, exactly. I learned, well, one of the most important skills I have is the ability to read people’s faces. I didn’t grow up with any ingrained social skills. I was really an awkward kid and I have ADHD and so it’s rely hard for me to pay attention in an conversation, so I learned how to read people’s faces to see if they’re interested or to see if they dropped off and their eyes have gazed over because I’m talking about tech terms or something like that. I realized that when I was giving my introduction of, I run a web hosting company; it was just rolling right through them. They didn’t have recognition in their face, and so, that’s when I started to play this game with myself. How can I get them to react by saying something crazy. I never lied. And, that’s really important for me. Integrity and honesty are some of my biggest traits. I’m really open about my successes and failures because I don’t ever want to give away, like say that things are easy when they’re not. But, I will say with watching people’s faces, you can immediately tell when somebody’s engaged and when they want to know more because they’ll lean in toward you. And, their eyes will open a little bit wider and they’ll get this look on their face of interested.
And, so, I started just throwing stuff against the wall to see what would stick in introductions. And, what’s the harm as long as you’re telling the truth. What’s the big deal?
Andrew: So, let me ask you a personal question, a question related to this interview. I have my notes up on the screen, next to where your video is and kind of under but to the right of the camera. When I look at my notes as you’re talking, as a guest, how does that come across to you?
Erica: I haven’t noticed actually. I am trying to break this habit of watching my own face when I do the video, but it’s one of those things that’s really hard to not watch your own face because you want to make sure that you’re in frame and that you’re not doing this with the camera. So, I am trying to break that habit and watch you more, but it’s not a very successful thing. So far.
Andrew: OK. Good, that works for me. That helps me. I was trying to read this next note here about the eviction notice you got and how you almost lost your electricity. Can you talk about that?
Erica: So, basically, that was back when I was consulting and doing a lot of PHP work. A client decided, most of my clients were small businesses, too. So, a client decided he wasn’t going to be able to pay me until two weeks when I expected him to pay. And, I got an eviction notice that got on my apartment door. Sort of embarrassing. But, this was a situation where I was, literally. People say paycheck to paycheck. I was living clients paying me to clients paying me. And, I was so scared to give them invoices, especially when I knew I had done a lot of work and I hadn’t sent the invoice in a while. It was going to be $1,500. I was like, “Oooh, we’re sending them an invoice for $1,500.” Really scared me. So, I would often underprice myself or reduce my hours. I don’t recommend doing that. By the way, that was a mistake.
Andrew: Here’s another place where you underpriced yourself. Did you sell hosting for $2 a month?
Erica: I don’t think I sold for $2 a month. I had a company that I sold off actually before I sold my second company for 1.1 million. I sold a division of my company for a little over $50,000 called 10for10.com. And, I sold it to a guy, Larry over at EmpoweringMedia. And, it was the shared hosting part of my company. So, one of things that I did was I took all the people that were paying $10 or $20 a month, including my parents. I sold my own parents as customers to another company.
Erica: My mom thought this was hilarious, by the way. And, I sold it all to EmpoweringMedia. And, then, I got rid of the shared hosting side so I could focus on the dedicated server and collocation which was more fun for me because the customers were a lot larger and it was also more profitable.
Andrew: All right. Why did you decide to sell the business?
Erica: In 2006, I went to Burning Man for my second year. So, I’ve been to Burning Man four times now. And, 2006 was my second year. And, I was super depressed. And, I couldn’t quite figure out why. I am going to give the audience the biggest, most whopper hint in the world about depression. Here is the key to depression. Depression means there’s a choice that you’re choosing not to make that will help you grow. Think about that for a second. If you get out of bed and you hate going to work, there’s a choice to quit work or to maybe somehow talk to your boss and make your job better that you’re choosing not to make and it’s making you depressed. Depression is that friction when you know that you need to be making a choice and you’re not making it. Relationships. Jobs. All very common sources of depression. Money. Lots of choices involve in there. Your life is your own series of choices.
Andrew: It’s because you’re regretting not making a choice that you want to make.
Erica: Yes, and so, Burning Man in 2006, I was depressed and the choice that I wasn’t making was the choice. First of all there were two choices really in there that come out in 2007. The first choice was that I needed to raise my customers’ prices. And this is something that I do like to talk about because I think it is a common mistake. It’s scary, especially thinking about hosting industry. There are 20,000 or were. I don’t know how many there are now. 20,000 hosting companies out there. All competing for customers. And, I was just one of them. And, so, of course, we offered the lowest prices, but it was barely enough to make any money at all. I mean I ran the company into the ground with debt. It was ridiculous and that was before I sold it. And that was not a happy moment for me, either. It was ridiculous. So, the choice I wasn’t making first of all was to raise my customers’ prices to a point where I would be comfortable providing that service to them. And, the second choice I needed to make which I realized talking to other friends of mine at Burning Man was that I needed to sell this business and get out.
There were several reasons I sold. First of all, I saw that the economy was kind of teetering in 2006. There are a lot of blogs and people out there talking about demographics showing that the baby boomers were going to retire and the economy was going to fall off a cliff. So, there was a lot of that stuff floating around in 2006. If you knew where to look, people were talking about it back then. And, I realized that I felt that the economy was going to fall off of a cliff and I was worried because my company was already not really that profitable. So, I needed to make sure that I was going to get out.
And, I was personally have some sickness, some tiredness and some physical symptoms of something being wrong with me that I didn’t uncover for a few years as to what went on with that. But, in 2006, it was this combination of things, like I think the economy may tank. It seems like the demographics are pointing in that direction. And, I am not making very much money. And, honestly, a large part of the decision was I don’t want to do this for the rest of my life. I don’t want to run a hosting company for the rest of my life. I’d run it, at that point, for five years. And, it was enough. I had had enough. I knew it was time to move on. And, I said, “All right.” I told my camp at Burning Man. I don’t know if anybody remembers this, but I told my camp at Burning Man. I said, “By this time next year, when I come back to Burning Man in 2007, I will have sold my business.” And, that’s when I made the decision. So, that was a really eye-opening experience for me. And, it took the next twelve months were some probably some of the craziest twelve months of my life.
Andrew: Well, how did you find a buyer?
Erica: So, that’s a good one, too. We were expanding really quickly, probably because we had ridiculously low prices. But, I mean, I have to give myself some credit too. We were also getting a lot of referrals for customers. I was really good with SEO, search engine optimization. So, we were getting tons of new customers from Google, making a quarter of a million dollars a year in new business from Google alone. Not paid ads. SEO. And, I had driven my site to a page rank seven at that point. So, we were getting in tons of new customers.
So, the data center that we were in, we had a cage at the data center. That means, basically, we had purchased real estate by the square foot and we had set up rack with servers in them. And, we needed more space. We were out. I mean, really out of space. And, the data center wanted outrages fees because these starters were coming in and buying whole cages and then not using them. They would just buy the space and not putting anything in it. And, they were like, ‘We will grow into it.’ You know, just like the same thing with Silicon Valley companies that used to buy all these crazy big offices because they were going to be 400 employees in a year. And, that kind of thing. Same thing with data center space. So, I got a list from the data center of all the other hosting companies in the data center and I started contacting the owners of those companies. And I said, ‘Is there any extra space you have that we can sublease? You know, if you’re not using it or if you’re not planning on using it.’ And, I found one that would sublease. And, then I met Bruce who had a large space up on the 16th floor of the data center and he was willing to sublet because he was using less than half of space. So, he had bought this company. Bruce was the buyer of a previously owned hosting company where the owner had bought a bunch of space. And, Bruce was now the proud owner of a bunch of empty space.
So, I sat down with him and had lunch. We ended up talking about hosting for hours. I can always talk people’s ear off about hosting. I love it. I love hosting. Love data centers. I’m a hardware junkie, definitely. And, he was asking me, ‘Well, how did you grow this company so fast, Erica?’
[??] example because most people watching this probably have never seen a data center or don’t have any idea how it works. You have so many square feet of space. And in that square feet of space, you can stick racks and those racks are about 7 feet tall. And, then you stick servers in the racks and they fit into the racks. And, then you plug them in, plug the network and power in, screw them into the racks, bolt them in. And, then you put some earthquake stuff around them if you’re in the valley. And, then you’ve got hosting, basically. You plug into network.
So, anyway, we were filling up a seven foot tall rack of 20 to 30 servers every month with new customers. And, that was massive growth for us and for Bruce who had never seen anything like that. So, he said, “How are you doing it?” And, I said, “Well, I’m not going to tell you because you’re a direct competitor. I looked at your website and we’re basically offering the same thing that we offer.” But talks went on and Bruce said, “You know. I would be really interested in buying your company.” He watched us the first day we came in and we filled up three new racks of servers. And, then, we started building out new racks like every couple of weeks. And, it was insane. We were growing really fast at that point. And, he said, “I want to buy your company.” I said, “No. No. No. I’m going to wait until 2008.” I’d already broken my promise that I had made to myself at Burning Man and so this was early 2007. To give you some idea. And, I said, “I’m going to wait.” But, then a couple of months later, I came back and said, “You know what. No, I’m ready right now.” And, he said, “Well, why the sudden change? Did something happen?” And, I said, “No. It’s just really a personal decision for me.” It was the economy as well as, and I’m glad I got out when I did. Because the economy was rough there for a couple of years. Although now it’s better.
And, really for me I still kept feeling sick all of the time. And, there was something going on. There was something wrong with my body and I didn’t know what it was. Of course, being self-employed, I had terrible health insurance. And, every doctor that I saw basically was just like, “Well, you work 18 hours a day. What do you expect?” And, I knew there was something more going on, but I didn’t know what it was. So, I decided this was the right time to sell the company. I would fulfill what I said at Burning Man. And, in September 2007, Bruce did buy the business. And that is how I met him. People ask me, “How did you meet your buyer? How do you find buyers for your company?” In that case, it was just a simple, “Well, it made the most sense.” Being smart when you sell your business is really important. So, I went and solicited back up offers for my company. So, if Bruce was going to walk out at the last minute, I had two other companies.
Andrew: How did you find two others?
Erica: One of them was a vendor. Actually, both of them were vendors of ours. So, they were supplying us with bandwidth. And, so I got both of them to say yes to buying my company for 1.1 million if Bruce said no.
Andrew: And, you didn’t talk to your competitors?
Erica: Well, Bruce was, honestly, the biggest competitor in that same building. And, it made the most sense to sell to him because he was already in the same building. Now the other two guys. One of them would have moved our servers to another place in the Bay Area and one of the them probably would have moved our stuff to the east coast which would have maybe lost a lot of customers. Or, would have kept it in San Jose but they would have managed it from the east coast which also could have had some conflicts. So, those two companies weren’t as viable of an option as Bruce but they knew me and they knew my business and they knew what I was selling. And, they both agreed to buy it as well if Bruce said no. So, that’s how I met Bruce. Bruce remains a customer. One of the larger customers of my company today.
Andrew: You mean a customer of WooshTraffic?
Andrew: All right. Let me do a quick plug and then I want to ask you a couple of questions. I want to ask you about what you ended up doing after the sale. Because we talked about rough points. I want to know about the benefit of having done it. But, here is what I want to say to the audience.
If you’re wondering what Mixergy Premium is, Mixergy itself is interviews. And, as a premium member you get access to hundreds of interviews that others don’t have access to. But, more than that, you have access to courses, not taught by professorial types. Not taught by people that have never been in business but are great at talking about business. People like Erica, who are real entrepreneurs. Who came on and talked about things like dumpster diving and how to launch a business. How to find your idea. How to develop your idea. In a way that non-entrepreneurs will never know. And, if you’ve gotten a sense of who she is here in this interview, then you have a sense of my ideal course instructor for Mixergy Premium.
Erica: Thank you.
Andrew: Thank you, man. Thank you, Erica. And so, if you’re Mixergy Premium member, go to MixergyPremium.com right now. Take Erica’s course. And if you already have, take any number of any course there that will show you how to find your traffic. How to find your idea. How to develop. How to turn your traffic into customers. Anything to do with business is either there or you will complain about it and we’ll, of course, go out there and bring someone who is an expert and a practitioner to teach it.
And, I recently had someone tell me, “Hey, Andrew, I’ve signed up to Mixergy Premium because I saw that other people are charging so much more for just one course. And, you’ve got all these courses here.” So, it is a good deal. But that’s not why I want you to sign up. No. Sign up because if you get even one idea from one course, it will more than make up for the value of the program. How much will one good idea on how to find a customer be worth to you? Anyway, I won’t over-pitch it. I’m just going to say. I guarantee it will work. You will love it. And, it will change your business. Or you know where I am. I will absolutely give you 100% refund. But, thousands of people love it and I’m sure if you’re watching us, you will too. Go to MixergyPremium.com.
Andrew: Thank you, Erica. I have learned what you say; you’ve got to learn how to sell. At first, I didn’t want to sell anything. I thought it would take away from the integrity of Mixergy. I thought I was doing OK. Why charge people, but what I’ve learned, is by selling, you start feeling a sense of pride for your product. You start to really force yourself to make it better because people are now paying for it.
Andrew: Of course, since I refuse, after making a big mistake spending money on Mixergy. I refused to fund Mixergy, it has to fund itself. Every time people buy they end up giving me revenue that we can use to make better and better interviews. I always funnel all my money into improving the quality of the interviews of the program, so people can see. Here’s the thing. We want to find out how you celebrated, where the good life is, and here’s what we learned in the pre-interview. You raise chickens. You didn’t buy a boat, or, chickens, why chickens?
Erica: Chickens were one of many things; I did buy some stuff for myself. I spent $50,000 just on stuff that I wanted. I bought a new car, and that was a really good felling, and some art work, some really nice art work. It’s important to me to support people who are doing cool things, Shout out to John T. Younger [SP]. I bought some of his stuff and some more famous Romero Britto [SP], and that to me was what I wanted to do with the money. It is still about investing in other people and at the same time getting a benefit of having cool art. I have invested in a bunch of kick starter projects. I have done any Angel investing. I take that back, I did one Angel investment that didn’t go anywhere. I haven’t done much Angel investing just because, I feel like to be a really good Angel investor, you need like $500,000 and you need just to be able, you know, really go for it as a full time deal. I wasn’t there; I just didn’t want to do that. I might do that in the future.
Anyway, yes, Chickens. I bought a house and moved to Austin Texas. Which is where I am now starting my new company. Not really new, it’s been two years now. I decided I wanted to do some goofy stuff. Something that didn’t involve computers or monitors, or TVs or movies, or anything like that. I decided to raise chickens. I believe that they all died.
Andrew: Was it as fun as you thought it would be?
Erica: No, it was awesome until they died. That happens, I might do it again. We’ll see, you know, sometimes you just got to try things. Some predator, dog, raccoon, I don’t know had a real nice scrumptious dinner of my chickens.
Andrew: That’s awful, they didn’t just die, and someone, some dog, some animal came and got them.
Erica: Yes, they probably, I mean, somebody had a really good meal, but it wasn’t me.
Andrew: All right, this is the point of the program when I usually tell the audience if they got anything out of this, what they should find a way to connect with the guests and say thank you.
I should tell you guys, just moments before I did this interview, I got an email from James Ashenhurst(SP), who told me, he watched Susan Sue’s course on Mixergy, about how to content creators can take their ideas and turn them into their first products. What I love about James is that, he watched Susan Sue teaches that, and he didn’t just say, hmm good idea, he used it. He didn’t just say good idea, use it. He emailed Susan, so I emailed Susan Sue, who is also in Austin like you Erica. I said what happened? What did you make of this James, a stranger emailing you? Here’s one sentence from her email back to me. She said James and I spoke for an hour; he was really an inspiration to me. Someone who really took action and is on his way. The reason I say that, because over and over I tell the audience, if they saw something useful here on Mixergy or anywhere else online. Don’t be a by standard in life, connect with the person. All you have to do is shoot an email and say thank you.
As you can see James ended up with an hour conversation with someone who was really helpful to him. I’m not going promise that’s going too happened to everyone that listens. That’s not the point of this. The point is, it’s such a simple thing to do. Things like James connection with Susan Sue happen all the time. Usually, I would suggest, Erica, that audience needs to find a way to connect with you. You tell me if this inappropriate for me to say. I think they should go to WooshTraffic.com and when that pops up comes up, with your chat. They shouldn’t take away your time form talking to real customers, I suggest that they find one thing that they got out of this interview and say thank you for talking about, maybe it’s thank you for talking about sales and the importance of it. Maybe it’s thank you for dumpster diving and not pretending that entrepreneur’s don’t get started by diving into dumpsters. Or maybe it’s thank you for being open about depression because most entrepreneurs put on a brave face and don’t really give me the reality of it. Find whatever it is that you like to say, thank you for and that’s it. And do it in that box if it pops up on who’s traffic. Or there’s got to be a contact. Yeah, there’s a contact us form. Send an email that way. Good things always happen. Even if it doesn’t directly happen with Erika. When you reach out to the people who you admire, who you learn from. You end up being in their world. Instead of being disconnected from the people you admire. And living in your own isolation. All right, Erica, by the way, you okay with that? With me suggesting the people to wait for that pop up box to come up?
Erica: Yeah, sure. Bio means, I really enjoy hanging out on a live chat. I can’t be on there as much as I want to be. Although I’m trying during business hours Central time. But I’m honestly not there every day. Over the next few weeks for closing around the funding. I may not be able to be on there as much as I want to be. But I’ll try to be there as much as I can. I love chatting with people. It’s hard, I know I’m going to have to give that up eventually. Because I know it’s not something that a CEO can do forever. But it’s one of those things I really love to do.
Andrew: That’s one thing, it takes up a lot of time. The live chat that we’re talking about is. A user’s on your website. A box pops up that basically said I’m a real person. You have any questions? You want to talk to me? And they can type in anything like why your price is so high? Or I saw you on this interview. Or whatever it is. So it takes up time to chat and it interrupts whatever else you’re doing. What do you got? Give one example of something you got out of spending that time. Out of talking to someone directly.
Erica: I have numerous examples. But I’ll tell you so I can lead into this about why I started WooshTraffic. And why it is the way it is today. People knew after I started writing my blog. My blog became really popular. Right now to give you some examples. My blog is at Erica.biz. E-R-I-C-A-.-B-I-Z. It’s one of the most popular entrepreneurship blogs online. E-mail I don’t write very often. Maybe, once or twice a month. I get one and a half million visitors a year. Over a million of those are from SEO alone. I rank for top terms like make money online and things like that. And people find me through Google. And once I started doing this SEO thing and I did very well with it in the web hosting industry. Now I do really well with it with my blog. People took a look at that and they said, well SEO is a crappy confusing industry. sleazy, whatever you want to throw at it. And we need somebody out there to help us get SEO. That’s why I started (?) traffic. To combine software that we built, that helps you with your SEO. Like you can type in your website URL and it tells you stuff. You can type in the keyword that you want to go after and it tells you stuff about you. And combining it with my personal advice. I like to sit on the live chat because people come in and they ask questions. Both about our software but they also ask SEO questions. What I get from the live chat is where people are. Some people are like, what the hell is this. What is this stuff? What is this WhooshTraffic thing? What does this do? A lot of the questions are like, will this work for me? Basically what I’m doing is I’m teaching you how to do SEO for your own site. Basically WhooshTraffic is if you know you need SEO, but you don’t know where to go and who to trust. That’s what WhooshTraffic is. It’s training plus tools. People come in and they say, will this work for me? This is my company and I learned so much about people …
Andrew: If they say will this work for me, how does that help you with anyone beyond the person who’s on chat with you right now?
Erica: Sure, well as a business owner you have to have a target audience. Right? And I narrowed down my target audience to, you need search engine optimization. I’m not going to waste my time with the people who are like, what is search engine optimization. Because a quick Google query can answer that. But when you’re like, all right I get what search engine optimization is. It’s putting my site at the top of this search engines. And then I don’t have to pay every time somebody clicks on my sites. So that’s cool. And now how do I do that? That’s where we come in. And basically what we do is just show you how to do it.
Andrew: I see. And by seeing what issues people have with it, you understand how to talk to them. And you understand how you’re site should explain the service to them.
Erica: Right. So I’ll give you an example. We have the keywords researched on our front page. And somebody came in and said, I don’t know what that is. I don’t know what keyword research is. And I thought oh geez. I’ve made the typical techie mistake of assuming that since I’m in this industry and my first SEO job was in 97. So I’ve been in it for 15 years. I’ve used it for my hosting company yadda, yadda, yadda. I’ve been on it for so long that I forget people don’t know basics like what is keyword research. And I realized we really need to go a lot more in depth with our trainings. That is what I have been working on over the past few weeks is going really in depth with the training. What is keyword research? How do you do that? And what does that mean? And what benefits does that have, right? Not just how do you do it, but what are the results that could happen?
What is the point? I see and that is something you could not get from analytics. Analytics might tell you someone bounced off your site without buying, but you would not know, hey, it is that one phrase, keyword research, that confused them and made them feel like this whole site was not for them.
Exactly. Another thing we have is, we have on our front page that our tools and our software work with your site no matter what country you are in or what language you use is, which is . . . Our stuff is really popular with people all over the world because they are not . . . Now, all of our training is in English. I have requests to translate it to other languages, but we have not gotten that far yet. But all of the tools you can use if your site is in Russia or if you speak Chinese or if you want to search different Google search engines to see where your site is ranked. So we get these questions all the time. Like I got one this morning, and this guy is like, “Hey. I am in Spain. Does this work for me?” And I’m thinking, “Well it says on the website, ‘Any country, in any language.’”
So I took it to our private chat with only our staff on it, and I said, “Well, how do we fix the website?” So we clearly state on it, “Any country, any language” but we are still getting that question on live chat a lot. You know, do we make pages on our site that say, you know, “Here’s how it works in Spain” or do we do like a drop-down list where you can click on your country, and it will say, “Yes. It works no matter what you click on.” You know, we are debating how to fix that right now. But those are the kind of things where you think if you say it, you know, that they will get that. But they are still not getting it. So there is something there that we need to tweak. I have not figured the best way to go about that yet, but we are working on that.
Andrew: All right. Well, thank you for doing this interview. The website, guys, of course, is . . . I have been saying this a lot. It almost feels like suddenly I made this into an infomercial, but I think the reason I am saying this a lot is because I realize listening to my own tapes recently that I do not articulate certain words, and as I told you before we started, I was a little worried I would not articulate “whoosh traffic” and I think I am over-compensating by repeating it over and over. Anyway, the site is whooshtraffic.com. This is not a paid ad. I do not do affiliate fees or anything. I just really, really like Erica and I know that if you guys get to know her that you will be glad that you have got her on your Skype chat or on your buddy list wherever. Anyway, Erica, thank you for doing this interview and thank you all for being a part of it. Bye.
Erica: Thank you.