Gonzo Arzuaga grew up in a tiny city in Argentina. This is the story how books opened his eyes to opportunities he wouldn’t have known existed before and enabled him to launch several successful tech companies.
You’ll hear how he launched GauchoNet, an internet portal for Latin America, which he sold to Terra-Lycos in 1999. You’ll hear about the stunning setback he had after. You’ll hear how he recovered by launching KillerStartups, a directory of new companies. And how he went on to launch Startups.com, a deal site for startup founders.
Gonzo Arzuaga, KillerStartups
Gonzalo Arzuaga is the founder of KillerStartups.com, a user driven internet startups community and Startups.com, a Daily Deal community for website owners. Offering 50-80% discounts on software, web apps, and more.
Andrew: Before we get started, tell me if you got this problem. You’ve got a great product, but you’re not getting people to even try it, let alone buy it. Well, the problem is probably that you’ve got too much text on your site. But check out what these startups have done. Here’s SnapEngage. They’ve got a video explaining their product right underneath the free trial button.
Here is Sengrid [SP]. Right next to the get started button is a video explaining the product, much more than text. It helps people understand what you’ve created and convinces them to try it and buy it. And the company I recommend that you turn to for this, it’s Revolution Productions; same company that did both those startups and many other videos. Revolution Productions. And when you go to their site, RevolutionsProductions.com, and contact them, I want you to talk directly to the founder, Anish Patel. Tell him I sent you. He’ll take great care of you and make sure you have a good video that convinces people to try your product.
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Alright, I’ve talked too fast and for too long. Let’s get right into the program. Everyone, it’s Andrew Warner. I’m the found of Mixergy.com home of the ambitious upstart here today for you with an interview. I’ve been wanting to do this interview for a long time. I’ve known today’s guest, I’ve used his site for years. I’ve asked him for a long time to do the interview and he finally agreed to come in and help me out and jump in with the interview. Big question for this interview is how do you build killer startups by helping killer startups? Joining me is my buddy, Gonzo Arzuaga. He’s an entrepreneur who has spent his life building companies that help startups. In 2007, he launched KillerStartups.com. Probably the world’s biggest directory of startups. It reviews 15 new startups every business day and Comcast says, Gonzo, that you have one million visitors a month. Over a million visitors a month. In 2011, he launched a daily deals site called, as you can see over his shoulder, Startups.com. Great name for it and great domain. I invited him here to tell the stories behind those startups and the other companies he founded.
Gonzo: Thank you so much, Andrew. What an introduction!
Andrew: You know what, actually, I did have a whole lot there and I know I still missed a lot but I didn’t want to stick too much in there because, well, I figured I’d let you tell some of your story. Including, actually, there’s one big company that I missed from the list. In 1999, you sold a business. What was that called?
Gonzo: Right, you’re talking about Internet history but it was called GauchoNet. A search engine for Latin America but with my brother, we started in 1986. So it’s a long time ago for being an active Internet entrepreneur at that time.
Andrew: Are you going to tell us in this interview how much you sold the business for?
Gonzo: I’m going to give you a rough estimate. We kind of disclose numbers but it was a good transaction. Very happy, actually, with it.
Andrew: OK. How rough can you get?
Gonzo: In the millions, that’s a good.
Andrew: I’m going to leave out, here’s the thing. One of the things we agreed in order to do this interview is we’re not going to push certain, in fact I agree this with every interview we do. I don’t know if the audience know, we don’t go into what the guests feels comfortable saying and what the guest just is not going to reveal. I’m not here to push and I just want you to know we don’t do any editing so don’t let anything slip that you don’t want out there. But, congratulations on that sale. The latest company is startups.com. Can you give me an example of a deal on Startups.com so my audience gets a sense of what’s on there?
Gonzo: Well, Startups.com basically, you cite owners good deals on web apps, software, I don’t know. Things that they need in order to grow their site. This week we have ServBody [SP] which is SERP for SEO ranking tool, 89% off. We got also contact form surveys. We’ve got Olark, which is a live chat system. We’ve got quality design for your business card. We also have the Lean Startup from [??] and from Eric Ries.
We’ve got a bunch of stuff, but mostly we’re interested in bringing web apps that help site owners make their lives easy. We all know that it’s very hard to come up with a startup and struggle everyday.
Andrew: So SERPBuddy, how much do you guys have it up on the website for? What’s the price?
Gonzo: It’s 89% off. We get 360 bucks for only 39 dollars, which is a savings.
Andrew: 360 dollars is what most people would pay to get SERPBuddy, and you’ve got it for 39 dollars. What’s SERP? Why do I not remember what the acronym stands for? It’s Search Engine . . .
Gonzo: I think Google made that a [??] very famous, is Search Engine Result Page.
Andrew: Search Engine Result Page. Great. We’ve got a sense of what you’re doing today, how much you’ve built up until now. I want to go back in time and cover the story from beginning to end.
The first business that you launched. I understand you were very young, or younger than most people would expect. How old were you, and what was the business?
Gonzo: Well, you have interviewed very young people, under 20, so it’s not going to impress anyone. I was very into the technology world, and in the year 1994 I did an internship at Novell. Remember the red thing, the red box for software? In 1994 I got in touch with the Internet, and then I started when I was 25, in 1996.
As the market in Argentina and Latin America was very slow, because there were only 10,000 Internet subscribers at that time, I was 25 and it took us three and a half years to sell it in 1999, which was exactly the right time. But it was not the right market. If I had started that in the US, I would be a different . . .
Andrew: Especially, at the time, when you recognized the value of the Internet, and where it was going, and how it was going to be a place where you can build a business. Back then, there weren’t really banner ads online. I don’t think the first banner ad had gone online back then, right?
Gonzo: Well, the old Wired thing was the first banner ad in 1994, but it was not popularized in the rest of the world.
Let me tell you a funny thing. I know that you like anecdotes. It was the end of 1996 and I got an email. I never heard of them before. It was called Ogilvy & Mather. To me, it was something completely strange.
They were asking for the advertising rate. I had no idea how much to charge them, because they were based in Miami, and they wanted to do advertising in Latin America. As you know, you cannot charge too much because you will be overboard, but you cannot be cheap because it’s not perceived as a value thing.
I told them “500 bucks.” Then I learned about Ogilvy & Mather, and the client was IBM.
Andrew: The client of Ogilvy, and you sold them only a 500 dollar ad?
Gonzo: That was at the end of 1996, and from there on the advertising started growing and growing and growing, because the traffic just kept growing. At that time Internet users were jumping on board, so the traffic was growing, so the advertising revenue grew. In 1999 came Lycos.
Andrew: Let’s take it a little slower. First of all, I was looking up the information. The first banner ad, according to Wikipedia, was sold by Hotwire and paid for by AT&T, and it was put online in October 1994, roughly the time when you launched your business.
When you’re looking at this, you’re seeing only a few thousand people online. You’re seeing that it’s not the huge business that it became back in the late 90s, when every company was going public and making every 19 year old a billionaire.
You’re just seeing this little dorky thing. What’s the business opportunity that you recognize in there?
Gonzo: I don’t know. It was just a hunch. It was not a business plan thing. It was not a business opportunity, venture-backed kind of thing. All the complicated words, I learned them later. At that time I was just a kid trying to make money with the Inter . . . Who? Internet.
At that time nobody knew about the Internet, at least in Latin America. I had to evangelize a lot. I bought a couple of books about it just to share and to give to potential advertisers [??].
It was not a business plan. It was just a hunch that it was going to be big, but honestly, Andrew, I wasn’t guessing there was gong to be that huge at that time. I was only 25 and I was trying to make a payroll for myself, kind of, with the other seller.
Andrew: Oh, I see. And did you image that the revenue was going to come from banner ads?
Gonzo: No clue, I had no idea.
Andrew: You had no idea where the revenue was going to come from?
Gonzo: Oh no, it was 15 years ago. I was putting up a page and at that time, you got to learn yourself html, ftp, how to host a website. It was a very, very primitive back then. It was really . . .
Andrew: Here’s why I’m surprised by that. First of all, I got the age wrong. I thought you started it much younger but here’s why I’m surprised by that. You taught me so much about positioning, for example. I remember we had a conversation once about positioning and the books that you read to help you think through a business and I’ve seen the way that you think through businesses today. Are you telling me that back then you weren’t thinking that way? That you didn’t have this analytical mind that said here’s where the market’s going. Here’s how I can position my business properly there. You just said I’m going to toss this out and see what happens?
Gonzo: Right, yeah, well, yeah, absolutely. I’m sorry to let you down and that strategic mind but at that time I was just trying to follow my hunch and see where it leads me. It was not, if I thought about it, I would have never have done it because I would consider that the chances were too slim but I’m glad that I didn’t know a lot. Sometimes, ignorance is bliss, as they say, and in that particular case, it was true for me.
Andrew: OK. So, let’s talk about what the first version of the site looked like. You had the site via basically a hunch. You say you’ve got to create something. What was the first version?
Gonzo: You don’t want to know. Really, it’s really, actually, I did the design of the logo myself. Can you imagine? I got a business background and I love marketing but I’m not good at doing any logos or anything. It was just a hunch and putting it together, launching it. It was sort of experiencing and experimenting. I didn’t really expect to be a big business, actually. If I make $1000 a month, I was going to be the happiest kid in the world working at home. Basically, that was it. Lucky was three and a half years later, it was a huge company doing a rollup in Latin America willing to buy ISPs and portholes [SP] and we were there saying, you know, we’ve got the audience and do you want it? And they were doing an IPO six months later so they say sure, let me get it.
For me, it was life changing as you can imagine. I was 28 at that time.
Andrew: Was it more of a search engine like Google or AltaVista? Or was it more of a directory like Yahoo!?
Gonzo: It started out as a directory and evolved into a search engine and it’s a portal. Myself, I always like the content side of being an Internet publisher, like the publishing sites so it was not. Our strength at that time was not so much in the technology of the search engine, but it was more into the all the service that we provide like news, horoscopes, jokes, chat, that kind of thing.
Remember, 1988, 1989; that was all about the chat and that part of them.
Andrew: I see. So, right, today we get excited about search engines because we know that there’s money from ads within the search results and we know that it’s something that becomes a tool that people use day to day. But back then, it was just a reason for people to come and once they came to your site, your goal was to get them to go the horoscope page and so on. How did you figure that out? In the beginning, did you know it was going to be that or did you think it was just going to be a search engine?
Gonzo: Well, no. It had started out a directory. We tried to copy Yahoo! because it was very successful at that time so we say let’s come up with a Yahoo! for Argentina and that’s what we did. We started out as a directory with no resources. I got to do the html myself like not really good. It evolved naturally as the market evolved in the U.S. They went to, now you got to say that you have a search engine. Fantastic, we sort of come up with a search engine very primitive and then the world trend was you got to be a portal because the portal was the keyword at that time. So we became a portal but that was really basically copying Yahoo! evolution and if you recall, Andrew, in 1988, Yahoo! outsourced the search engine to Google and we know how the end of the story ends.
Andrew: One of the problems with directories is that they are very helpful but they also just take a lot of manpower to put together.
Andrew: Yeah. So who did it? How did you get all the entries into your directory?
Gonzo: It is funny and it’s very interesting in the directory business because in the beginning, you had to do all the work yourself. You got to search newspapers, magazines, and try to put yourself by hand. But after you basically reached a tipping point, then it becomes very easy. It becomes downhill because everyone wants to be there. So they come to your site and they submit by themselves which is exactly what happened to M. Peter’s [SP] stocks. At the beginning, we got to go out and search for websites to review but now, we get hundreds of submissions per day because it’s become a valuable resource. So everyone wants to be there because of the promotion on site for that, for the exposure.
So the director is varying in that particular sense. At the beginning you get to do all the work yourself and then, later on, after you reach a tipping point it’s becomes easier and easier. But, you get up early and you get to see it changes. The work, it changes a lot.
Andrew: I wrote a note to come back and ask you about how you pick and how you edit overkiller [SP] startups. So I see. So eventually it became people submitting and you just had to make sure there wasn’t any spam, if they kept calling themselves “The best in the world chocolate company”, “no one like us”, you want to get rid of all the superlatives. Is that the word I’m looking for?
Andrew: And just focus on start up stores. I mean a chocolate store in that care. OK. So I see where that goes. The funding in my research already told me you got only, you only used $300 to launch the business?
Gonzo: Absolutely. You had it absolutely right. My mom gave me $300, which has made stickers to put in your screens. Remember the screens back then were a huge thing where you have something like me on the roof of the screen there of the monitor. And then we made some pads to take to local cyber cafes. So, everyone could see our brand in there and they were in the cyber cafes so they can write out, go to yowshnet to see what it’s all about.
Andrew: So, you know what I’ve actually seen a lot of entrepreneurs to a lot of stuff like this. They take stickers, they go into cyber cafes or comedy clubs or bars, wherever they happen to be. They put their sticker up and to me, it doesn’t feel like it’s going to be effective at all. How many people can you possible reach with that and what’s the incentive for them to go and click over? Just feels like they have all this passion and energy but they don’t know where to put it and that’s why they put it in stickers. Am I missing something? Did it work for you? It seems like you want to jump it.
Gonzo: It did work. It did work.
Andrew: It did?
Gonzo: It did. The thing is, it is not an isolated marketing activity. For sure, we’re talking about grass root, we talking about boost trap [SP]. We’re talking about frugal activities. But, if you put it together that the sticker paying with maybe a press release that shows up in newspaper and a friend telling your friend. And you’ve got some viral activity in your website, it is a more complimentary thing, like more integral part of your marketing initiative. Only putting stickers in the street for sure is not going work. But, if somebody tells a friend and then you go walk on the street or you go to a night club and you see this sticker, maybe it becomes, “Wow, these guys are gaining momentum.” But, yeah I think it worked. I think it worked. If I were a 20-year-old guy who’s starting out, for sure I’d do it again. For sure.
Andrew: Put out stickers, go out everywhere and stick them around.
Gonzo: Absolutely! There are people that do it in the cars. It’s kind of a border but still it gets the message across because when you’re sitting in a jammed freeway, you will look around and maybe you see it. It is very grass root and frugal activity but I would strongly recommend it.
Andrew: Again, going back to Ari’s note is like this is so crazy. So I’ve been getting help doing research as I told you. I introduced you to Ari, the researcher. And she says, “First paycheck. A check for $500 from IBM for advertising but the check got lost in the mail. Frowny face.” [laughs] Which is actually helpful when I looking through my notes to see the frowny face. What were you going to say?
Gonzo: Well, actually it was not lost. It was stolen.
Andrew: Oh, it was stolen!
Gonzo: It was stolen and it was the very first check that yowshnet actually generated. I started in 1996 in March. I said I’ll give it until the end of the year to see if it works or if I got to get a job. And in December, the check was mailed out from Miami to Argentina but I never cashed it because I never got it. It wasn’t lost in the mail. It was stolen and it was check in Chile in another country.
Gonzo: Get that?
Andrew: Interesting, yeah.
Gonzo: But still, I was really strapped for money but it really didn’t hit me because really, (____) they did the mono. We’ve got a business here so I was so happy that I sort of never really felt bad for the check, that it was not even cashed in my country. Can you believe that?
Andrew: Yeah, I get that. I actually was thinking that maybe it was open even in Argentina. I remember when I was living in Argentina, my mail was open a few times. I couldn’t believe it.
Andrew: I couldn’t believe it! No wonder you moved on from Latin American companies to taking on the U.S. and the rest of the world with startups.com and killerstartups. You want to go bigger and you also want your checks to be safe.
Gonzo: Absolute. Well, no, I don’t want checks. I want wire transfers.
Andrew: Right. Right. You want wire transfers. But she also said after that Citibank, Xerox, Star Media, Patagon.com and a bunch of other companies became their advertisers. I understand how the first company came to you. How do you start expanding beyond that first check and bringing on major advertisers like Citibank? What did you do?
Gonzo: Well, basically I was very lucky because my model at that time was one of the top ten websites in Argentina. Maybe, it was a lie. Maybe, it was true. It was very hard to say at that time, bit I kept stressing that message. As I wrote a couple of books, I was invited to conferences, and I was teaching about, evangelizing about the Internet and the possibilities for business and marketing.
It was basically word of mouth, and every time that somebody sent me an email, like Citibank sent me an e-mail, I said, “Let’s hook up. I want to meet you at your office. I want to tell you all about the Internet.” And then, I put on my suit. I put my glasses on, and I went to the meeting, and I pitched them as hard as I could. I Googled and let them alone until they had signed the contract. Every meeting for me was a live advert situation, and I stressed hat thing.
They were seeing a 25-year-old full of energy, very determined. So then, they’re sitting at a desk deciding on the $1,000 a month. It was not really a huge thing. They were seeing me, like full of energy entering into their office. I couldn’t let them go until they signed the order. It was very kind of weird, but it got the job done. It’s easier when you get one brand, and then when you get the second brand, it’s even easier to get the third brand, and everything cascades from there.
Andrew: You brought up books several times here as one of your ways of getting the message out about yourself and about company. When you and I first met, you handed me a book that you wrote, too. Tell me about writing books as a strategy for marketing a business and a person.
Gonzo: It is, it is, absolutely.
Andrew: It was a strategy. What was the idea? What were the books about?
Gonzo: The first book on Latin American was about business on the Internet. It was 1996. And then, in 1997 I created one, I wrote one and published on marketing in the Internet. It is a fantastic personal branding tool, and it is also a fantastic tool for promoting your business because when you approach them you don’t bring a binder telling them of the benefits of your services. You just go with the book, and then they say, “Gee, this guy knows because no one”‚Ä¶ The perception in the mind is like well, if you publish a book, you’ve got to know something, and you’ve got to be good. So, I trust you already from the start.
Andrew: I see. Even if I don’t read the book, even if I don’t agree with the ideas, the fact that you took the time to write a book means you’ve got credibility. The first book, was it just basically a collection of stories, kind of like my interviews here, but not in interview format, right?
Gonzo: It was not an interview. It was telling you about FTP go for www, what can you do?
Andrew: Oh, that was the first book. I see. You were just saying, this is what’s out there on the Internet. I see, kind of like if I were going to write a book on social medial today, I might say, “This is Facebook, and here’s how you use Facebook. And this is Twitter, and this is Google Plus or whatever happens to be out there.” Just the fact that I’ve put together all this knowledge in one book means I must know social media. Someone is going to, at least, talk to me about doing business in social media.
Gonzo: Absolutely, absolutely because you’ve got to put all the time to do the research, you’ve got to write it.
Andrew: How do you do that? How do you, as an entrepreneur who’s got so much to do‚Ä¶ You’ve got to pick stickers on at bars. You’ve got to organize your directory. You have to find advertisers and pound on them until they pay. How do you have the time to sit and write a book? Most people can’t even write a blog post.
Gonzo: Well, you don’t have the time. You’ve got to find it, and you’ve got to struggle over the weekends and late nights. It isn’t easy.
Andrew: Did you hire somebody to ghost write it for you?
Gonzo: I didn’t do it. If I would consider it now, maybe but at that time it was a luxury. I didn’t know that a ghost writer existed. For me, it was like, you do it yourself, or it doesn’t get done. It is hard. I put two months full-time writing those books, and it was in the summertime where nothing was happening, so I put a lot of hours into writing it.
Today, it might be easier. You can do collection, or you can do copy pasting, but I don’t know. I like writing, and I like writing books and publishing books and promoting my company and my project and my personal brand through books. Do it if you like it. Otherwise, it is a pain. It is a very complicated, long process, and it doesn’t bring you real money compared to the sales of the books. But because of your other business, whether you sell advertising, consultancy in the social media, to use the example that you said.
Andrew: I see. When you walked into Citibank’s office there was a good chance that when you did that, you gave them a book that you published yourself and say, here this will tell you about the Internet.
Gonzo: Absolutely, absolutely. It’s funny because the publishing house handed me over ten books as a gift because I’m the author. I’ve got to buy them a hundred books, so every time I went to see a potential advertiser, the first thing is, hello, let me bring you, as a present, this book. And then, you’ve got a conversation started about the book, and then everything goes down to your business.
As everyone knows about selling stories, when you give them something first, they need to reciprocate to you. So, it was like, how can we do it together? Well, read the book. If you like it, send me comments, but the second thing you can do is advertise on my site.
Andrew: So, Gonzo, let me ask you this. Before when you told us that the way you got advertisers is by just being persistent. I knew that there was more strategy than just persistence, and you just gave us one. One piece is to have a book which gives you a lot of credibility. The other piece is to not just say, hey, I wrote a book. Come see it on the Internet but to hand it to the person. Even if they don’t read it, they feel a sense of obligation, a need to reciprocate.
Tell me another one of the early strategies that you learned and used to get advertisers when you were a nobody.
Gonzo: Well, I was very lucky so I tried to promote seminars, and I like motivational speaking, and I like conferences. Based on my book, I got a lot of invitations to write for magazines, and then I got also a lot of invitations to be present at conferences and give talks. After you give a talk, it is very easy because again the person is sitting there and when they introduce you, you are a fantastic guy with a book which means you know something. And then you give the presentation, and if they like it, they approach you and say, hey, I want to know more. What can you teach me? How can we do business?
And then, it becomes easier. He comes to you, and everyone who’s in the telemarketing business knows that a caller, when somebody calls in, you’ve got 50% of the sale closed than when you call them up on an outbound call.
Andrew: I see.
Gonzo: There was a lot of personal branding, personal effort behind the success of my company at that time.
Andrew: OK. One of the things that I’m recognizing has been a weakness in my interviews up until now is I know that you learn a lot about your space, and I never think to just ask you about how you learn. What’s the process that you take information in, and up until now I haven’t done it? I’ve got to start doing more of it. You’re a great person to do it with because, as I said, you handed me a book or you recommended a book on positioning. Who wrote that book?
Gonzo: Al Ries and Jack Trout. It’s a very old book. It’s very well known. It’s been recommended by a lot of people. Since you opened my eyes to it, I see it now everywhere. The book is called “Positioning”. In that conversation when you recommended that book, you recommended a few other books, and you opened my eyes to ideas that I hadn’t been exposed to. I want to know how you learned. What books did you early on gravitate towards, and how did you absorb the information to make sure that you were using it.
Gonzo: About the information absorption, I loved to absorb more, of course, but my personal way of learning, it is by reading. I read like a lot and books, and not that much blogs. I like the paper because maybe I’m 40 now and I’m kind of old-fashioned. I like the book feeling, and that’s my favorite way of learning, and I love biographies, and that’s my preferred way of learning.
I would recommend to anyone that when I was meeting, all the people that I was meeting and talking and learning by that, so get together with people. Have a conversation of half an hour, and you always learn something. My thought process, even when I was young, when I was 20 I said, “I buy this book for 20 bucks. Even though I only get one idea, it was really worth the money.”
The thing is a friend of mine said I’ve got to invent a business. When you buy a book, I sell you the time to read it. That would be a huge business.
Andrew: [Laughs] I almost feel like, and many authors will admit this, that when they write a book they just puff it up with more information in order to make it substantial. I almost wish that they would say, here, this is the puffed up part, and the last two, three pages are really all you need to know. This is the summary that you can use and remember and take this away.
You were going to say something?
Gonzo: I was reading “Made to Stick” the last week, and they were saying that it’s very important, the story part, the story telling for people to remember, not for them to pump up the book. I think that if you read the summary of the book you might get the most important part, but it’s a more intellectual way of transferring information. I think we, as human beings, need a more efficient way through stories, like story telling gets the idea better fast across.
Andrew: You know what? You’re right because on their second book… What was that called? Boy, my memory’s not with me now. It’s a book on, on how to get yourself to do stuff, and how to get other people to do things. On motivation. Of switch: how to get people to switch the actions that they take. They actually do give a .pdf with just the bullet points, with just the take-aways, and, it’s just pretty stale for me. I downloaded it, I have it on my phone. I have it with me on my computer, and every time I look at it, it’s not nearly as powerful and as useful as having read the book and the stories that are still lodged in my head.
Gonzo: I don’t think you’re, I don’t think, it’s too dry. I don’t think they’re every going to read the summary. Actually, there is a company out there called Get Abstracts, that does that, that sells abstracts to books. I don’ t know how good they’re doing, how well they’re doing in business, but that hasn’t caught on, and I think they’ve been on and on forever, and I don’t think people… I don’t know.
Andrew: They gave me a great- when I started doing interviews, they gave me a subscription so if I ever couldn’t do an interview with- or couldn’t read a guest’s book- I could just go to getabstract.com and do the research that way.
Gonzo: Smart. Smart marketing.
Andrew: OK. So, 1999, I hear your revenue was 300,000 dollars by selling ads online.
Gonzo: Yeah. It was $300,000 a year. You have to put it in perspective, Andrew. Today, it would be a very nice income, but at that time, in 1999, in Argentina, on one side, that was magic my friend! That was really a wonder.
Andrew: I have to believe. In fact, I wonder, do you remember when you got the first $100,000 in revenue? Do you remember how you felt when you crossed that threshold?
Gonzo: Unbelievable. The thing is, when you are an entrepreneur and you’re hiring a few people in a small, crampy office, and eating noodles, it’s very hard, and when you get to 100,000, you don’t see the money, because the money flows to pay the expenses. So, it’s not that you are 100,000 rich, it is that your business is growing, and you’re happy, and you’re excited about it, and it gives you motivation to keep going, basically, because if you don’t have the money in the bank, it’s never in the bank, it’s always rolling and keeps going. The thing is when you get a new advertiser, let’s say 2,000 dollars more per month, you don’t think “go on vacation”, you think “who can hire? A new designer? More content? A new server?”. That’s what you’re thinking, like, reinvesting everything. That kind of money is- I know where you’re going, but [??]
Andrew: It doesn’t. So, you then, you own the company 100 percent, right?
Andrew: 100 percent. You sell, actually now that I’m looking at my research and I’ve got a number here for what you sold for, it’s probably just speculation from another site. I won’t read it, because we agreed that we were going to keep this without those kind of details, but what I am curious about is, Gonzo, how does your life change after making that sale?
Gonzo: It did change. It did change. One funny thing, when you are negotiating, for all the entrepreneurs out there and your audience, Andrew, that are going through that process right now, like a negotiation process for selling their business and changing their life. It is one thing: you are very stressed because the money that you think is yours, after you sign the papers, is being taken away from you if this, the paper, doesn’t get signed. What I’m saying is, you are in the same position that you were in the day before, but after you start talking about negotiating and selling the company? That money belongs to you, right there, and then, if the process, you know, if the contract doesn’t get signed, the money is taken away from you. It is a very interesting psychological thing, but it really impacts you a lot, and my life changed a lot, because basically, one word became my reality, and it’s possibilities. You feel that you have all the possibilities in the world, but it comes back to you as a boomerang. What do you want to do now? Because you have the possibility of doing what you want, but, my life was not that happy because right after that we plugged a million-five into the next venture, because we said, “well, it’s easy to create a website and to sell it for a lot of money”. What if we could get a factory to manufacture a web site and sell it for a lot of money? But, eight months later, the reality hit me in the face, as everyone else in the market. It was in June 2000 that we had to shut the business down, because it was not going-
Andrew: And lost that. One- you’re willing to say, publicly, lost 1.5 million on that? Let me say something, I want to just add- I’m trying not to do too much of my own personal stuff in these interviews- but I have to tell you what you said really just hit me. It’s true that, years ago, someone made me an offer for my company, and I was ready to take it, and we went down the path with the lawyers and everything, and then he backed away, and I just got…I don’t know that depression is the right word, but the way that I felt afterwards was liking being hit in the face with a ton of bricks, and I lost my energy because of it, and I just felt like, I already saw myself and where I was going to go afterwards. I already knew what I was going to do next, and now I’m back in here, day-to-day dealing with the issues, it was really tough.
Gonzo: The thing is, you know what, Andrew? The buyer knows that, and he is playing with that. Maybe it’s a negotiation trick like, “OK. If you don’t whatever detail in the contract that I’m trying to put in, in the ninth hour, I walk away and you get stuck in the place that you are, and you stop your dream from becoming a reality.” If they know that, that’s a negotiation trick.
Sometimes for them, they go bust because the entrepreneur walks away, and they lose a job because they were trying to push so hard that it was not good.
Let me give you a little piece of advice before I go, Andrew. You’ve got to listen to Juan, what Juan Martitegui was telling you. You’ve got to put yourself into the interviews, out there. You’ve got to show more of yourself.
Andrew: This Juan who I interviewed. I was thinking that, and I started doing more of it, and then I got this negative email from people saying “I don’t care about you. I care about your guests. Stop going off on these stories about yourself.”
But you know what? I’d take your feedback, and Juan’s feedback. It carries so much more weight than some random person online.
Gonzo: But it depends how you do it, Andrew. If you only brag about it, that’s not good. But if you say real stories, little tidbits, sometimes you come off right. Sometimes you sound like a loser, because I did this and that and . . . People like the human behind the face when you are interviewing.
Andrew: I couldn’t help it. The way that you said it, it just reminded me of it. I’ll tell you something else that I’ve never said out loud before.
I’d started to read On The Road, the Jack Kerouac book. And then I was going to go on the road, I was going to have this freedom, and then it was taken away from me.
I think that something like that happened again to me when I read Jack Kerouac, On The Road, and I never will touch that book again, however many people recommend it. Even though I don’t believe in bad luck like that, I feel like if I ever get into that book, and touch it, bad things are going to happen to me because of that.
It’s a psychological game. I can see how, if a competitor wants to mess with someone’s mind, he could just come in and say, “I’m interested in buying your business. We’re going to do this for a lot of money.” Get you all psyched and then just walk away, never intending to buy the business, but knowing that they were going to do damage.
Gonzo: You get a lot of people out there. When you are selling your life’s creation, you’ve got to make sure that they are really into it, and not just bullshitting around.
I’m not saying that they are kicking the tires to see if you are interested. It’s just that maybe you’ve been negotiating for two months and different situations in the contract, small details, and they play hard and say “If you don’t agree, we’ll walk away,” that’s emotional blackmail. But that’s a negotiation, it’s nothing personal.
Andrew: Why did you bring it up? Did that happen to you? You didn’t say that it happened to you, but is that what you meant?
Gonzo: No. The thing is, the last days, the final ten days of the negotiation of that particular contract, the emotional stakes are so high that you can’t bear anything else. You are so into it you can’t think, you can’t work, you can’t do anything, because your life is depending on it.
They know that. For them it is another day in the office. They go to the next contract. They dedicate their lives to buying companies. That’s their job. Our job is to make money, and create our own business, and run it forever or sell it and go to the next thing. That’s fine.
Andrew: You decide you’re going to create a factory of successes. The company was called Gara Latino. What does Gara mean?
Gonzo: Garage. Garage Latino.
Andrew: Like Garage that Guy Kawasaki had in the US.
Gonzo: Absolutely. They would later change the name to Gestatio, which is more like a gestation kind of thing, and new things.
That was the idea, but sometimes reality hits you in face. We never manufactured any success.
Andrew: Tell me about the model as you imagined it. Then I’d like to find out why it didn’t work out, because it does make sense. You knew how to build one company. There is some kind of formula, it feels like, when you do it right the first time. What was the original idea? Describe that, if you don’t mind.
Gonzo: The original idea was to have a 10,000 square foot office in every capital city in Latin America, with headquarters in Miami, and manufacture ideas for the Internet in the entire region.
It didn’t work out for many, many different reasons. The most important one is that, when you have an incubator, you are a money sucker. You suck a lot of money in order to keep the operations running, and when the bubble bursts you run out of money.
Andrew: Where does the money go?
Gonzo: Paying people and paying operations, basically. Now, from afar, 1.5 million, it is a lot of money. But in 1999, 2000, it wasn’t really. We lost perspective on how much money one dollar was. We thought, “A million dollars? That’s nothing.” But, really, oh boy. It is a lot of money.
Andrew: I see. The entrepreneurs who you were incubating, you were paying their salaries?
Gonzo: No. We had a 25 people operation. You’ve got content people, you’ve got technology people, you’ve got design people, product people, business people. You’ve got a lot of staff. And by the time that the entire operation structure was in place to open our doors to entrepreneurs, it was too late.
We were slow. We were building a huge infrastructure that went nowhere.
Andrew: Oh. You were going to have your own content creation people, you were going to have your own developers. Were the projects going to be run by outside entrepreneurs, or were you going to own all the projects yourself?
Gonzo: It was going to be 50-50. Originally, it was going to be for third-party entrepreneurs, but the very first thing that we found out was that they have unrealistic expectations, so we’ve got to do a negotiation in terms of valuation with every single one of them.
How can you tell an unrealistic guy that he’s being unrealistic? For them you’re being too cheap. There is no middle point, so we decided to turn it and to try to come up, ourselves, with our own projects. It was a huge dream.
The only one, that I know of, that went well was Bill Gross’s Idealab. He got the incubation project fantastically going.
Andrew: Even he had lots of issues too. I thought Idealab had a lot of trouble after the bubble burst.
Gonzo: He sells to Yahoo. I don’t want to be wrong, but it was a billion something, 1.3 billion that he sold it Yahoo for. You can pay all the expenses and make some money out of it.
Andrew: I see the issue. You can’t bring these entrepreneurs on and say, “Look. I’ve got all this, not only my own experience, but I’m now hiring all the people who are going to build your business for you. All I need you to do is manage this thing, and in return for being a manager, I’m going to give you half the business. Essentially, that’s the deal I’m giving you.”
And they’re saying, “No. I’m not giving half my business for anything, to anyone, unless you’re going to sit here and co-found with me,” and so on.
Gonzo: What I wanted at that time, was, “When you go to the bathroom, I want you to be thinking on your business.” It was a lot of problem getting the people to work their asses off to bring their 50% to grow.
Andrew: I see. They still weren’t even motivated.
Gonzo: Right. It wasn’t as I expected, basically. Remember, from 1998, for three straight years, I busted my ass off working on my project. These people were coming here and, at six or seven p.m., they were taking off. I was saying, “Come on. This is the startup life. This is not a job. This is not an employment thing. You either work really hard or this is not going to work.”
Andrew: I see. You end up closing shop without . . . Did you have one project that was up and running, at least?
Gonzo: We had a few up and running, but we were focusing on many projects at the same time, which is a no-no-no for an entrepreneur, because if you don’t focus on one, you don’t make one grow. That’s another huge, expensive mistake that I made.
Andrew: How did you feel at the end of it? Right now, you’re talking very matter-of-factly. You’re saying “This is a huge, big mistake that I made.” I’m not looking at a sad, depressed man. How did you take it at the time?
Gonzo: It’s been eleven years, my friend. I’d better be next to my life. At that time I was too distraught. I had to take a year off, take a sabbatical. Otherwise I couldn’t handle it. I was 30 years old, and I was very well off because of the previous sale, but I was really tired.
I need to find a place where to go, in my mind. What do I want to do next? I took a sabbatical just to find out what I wanted to do. It’s not that easy, at that time, because you’ve got a huge success, unexpected success, but right after that you’ve got a huge smash in your face.
One day you feel master of the world and the biggest champion, but the next day, you feel that you are really shit. You need a lot of emotional balance that I didn’t have at that time, that I had to put together. Otherwise, it’s very difficult to do.
Andrew: I’m guessing this is the time when you did all the traveling. Where have you gone?
Gonzo: I went to Brazil to study Portuguese. Before I lived in Belgium. I learned French there. I went to Miami, not specifically to learn English. Then I had a very interesting experience. I went to China to live in Shanghai for one year to study Chinese because my goal, later on, would be to be a motivational speaker in five languages. Which I discovered in China is going to be extremely difficult.
Andrew: I can imagine. I see, so you were going through all this to try to become a motivational speaker. Why? Why a motivational speaker?
Gonzo: I don’t know. I think that when you are a kid your parents did not give you the encouragement that you need in order to bring the best of you to the world. I think it’s never too late to get somebody else, an outsider, to give you back your confidence that you lost maybe when you were at an early, early age. The thing is you’re not even aware of it. I don’t know. I think it’s kind of a mission, in a way.
Andrew: Who did that for you?
Gonzo: Books. And a few people. Basically, when I was 20 I read Think and Grow, Reach, which was an awesome book. I was 19, I think. I was very young and it helped me out to open my eyes to the possibilities of abundance, wealth, and opportunity. Otherwise, you go to school, you get good grades, you get a job and, depending on the job, you buy a car, then you rent, and then you own. You keep going up the life ladder kind of thing. It opened my mind into the world of unlimited possibilities and I love that. I got a lot from books, basically.
Andrew: The rest of the world, how was it different? It sounds like, if that opened up your mind, you were thinking differently because of other influences.
Gonzo: Well, traveling is also very interesting. Coming from a small town in Argentina, not even Buenos Aires, it’s a very small town with 120,000 people. Naturally, your mindset is kind of small or your environment leads you to think small in a way. Then I moved to Buenos Aires, then I started travelling and seeing the world, opportunities, and a different way of living. When you are living your entire life in one city you think life is this. But when you are travelling you start to think how do I want to live? That brings you back the challenge what do I want to do next?
Exactly what happened to you, you moved from [??] to Buenos Aires, then you moved up North again. You sort of tried to find the way because you know the opportunities and the possibilities that you’ve got there. If you always lived, I don’t know, in DC and you’re stuck for 50 years in DC maybe you don’t even consider that. It’s easier, on the one side, because you don’t have to think about what you want to do.
Andrew: I went to school in Brooklyn and, even though Brooklyn is not a small town outside of Buenos Aires, it’s a borough in one of the biggest cities in the world, the vision there was if you were looking to get into business in any way you were probably evil. If you were an entrepreneur you were probably looking to take advantage of people. If you’re even going to do it and succeed, that’s the life you have if you do it. If you do it and fail then you’re going to be completely devastated. The whole idea of reading business books for fun was just so odd and weird.
Then I got into these worlds through books. Of guys like Napoleon Hill, and Andrew Carnegie’s autobiography and I started to see, yeah, just like you, there’s a whole other world there. I wonder if there’s someone now listening to you, Gonzo, and thinking the same thing. Like oh, man, it’s true there is so much that’s possible for me. If you’re doing for them what some of the books that you read did for you. I hope so. That’s the mission here.
Gonzo: Right. One more thing there. My mission is to see this guy, from a small town in Argentina, like really in the middle of nowhere in the world, and he sort of accomplished certain success. By success I mean do what you love, you can find yourself doing what you love. That’s the message. It is possible and you can do it. That’s exactly what I want to say. I put my personal example of every day trying to do something better and to improve yourself. Like Mao Tse-tung’s, this one of my favorite quotes, Mao Tse-tung’s which means every day put effort, every day study hard and try to improve yourself and try to be the best that you can every single day. It motivates me today and is fantastic.
Andrew: That’s a great quote and impressive that you can do it in the original.
Gonzo: Well, I mean, after one year you’ve got to have some certain satisfaction my friend.
Andrew: I’m going to keep you a little bit longer than we originally planned. Every time I think hey, I should move on and look at the time I think no way, I can’t. I’ll deal with whatever the consequences are but we got to go longer.
The next business, Killer Start-ups, you come back and you say it’s time for me to go back into business, into the internet. Killer Start-ups is going to be my thing. Before I get into the deal of Killer Start-ups, it seems at that point you say I’m going to go to the US. I’m not going to South America. This is where I plant my flag with this new business. Was that part of the original vision?
Gonzo: Absolutely, absolutely. Because in 1994 I experienced what it was like in Silicon Valley in San Jose, California. I said this is awesome and a lot of energy is here. It was at the end of ’06 when I was still in Shanghai I sort of came up with the idea of Killer Start-ups which basically was nothing. It’s not rocket science. It was putting together Digg effect into Tech Crunch coverage of the start-ups. That was the genesis of the idea.
Andrew: Marrying Tech Crunch with Digg voting?
Gonzo: Right, the big way of voting. If you’re an entrepreneur and you want to see what’s the next big thing, you go to Killer Start-ups and you say I like this one and you vote for it. If a lot of people vote for it, it means something. That a lot of people think it’s going to be success. For the start-ups it’s a good thing because they go there and they get exposure and people get opinions and comments and votes. That’s a good thing. For you, as an entrepreneur, you go to the homepage and you see many websites and internet start-ups and you sort of get a glimpse of what’s going on and get a feeling of where the market is moving.
Andrew: Why start-ups specifically and not maybe a Digg effect for gossip news or a Digg effect for news in general? Why start-ups?
Gonzo: Because I love start-ups and I consider myself an entrepreneur. I love all the entrepreneurial activity and I get hooked up with news, information, articles and posts about how to improve your own business and the small business thing. It’s just natural. I can’t do a dull, cheeseburger kind of thing, because it’s fantastic and it’s a phenomenal success but I don’t think I would ever do that because it doesn’t ring a bell with me. But a start-up community, that’s what I really love because I consider myself an entrepreneur and I feel connected to that.
Andrew: I’m looking at the home page today. There’s a company called BlogCenterfield.com that has 245 views but only three votes. I see that there is the number one, SetNight.com, has seven votes, more than twice as many and only 150 views. What am I getting at with this? I’m getting a sense of the traffic. I’m getting a sense of how the thing works and what I’m imagining happens is people are sending their own users over here to vote. Was that the original idea?
Gonzo: No, not really. But you can’t avoid that because if you have your start-up on the homepage of Killer Start-ups for sure you want the entire world to support you and to give the impression that you’re larger than you are. That information is discounted by anyone who’s looking at the homepage. They want to see more, they want to get involved. They want to get familiar with it.
A lot of people come daily because they want to know resources. Maybe not interested in the start-up scene but they want to see what new tools are out there. Web apps that are out there because they are useful. My challenge to you would be to go every day to Killer Start-ups and the day that you don’t get anything useful don’t come back. Every time that I go I find one resource that I didn’t know existed and helps to grow my site.
Andrew: The way that I found it is every time I do a search for a company, either for an interview here or because I just want to know what they’re about, I end up with Killer Start-ups in my search results. Is that where you’re getting the majority of your traffic, SEO?
Gonzo: Certainly we get a good chunk of it from SEO. We get another good chunk from people referring. Like hey, check it out. We get an interesting traffic also from our RSS, Twitter, emails, and daily come back with people who come back and check it out. It’s kind of mixed situation there but of course SEO brings a good chunk of traffic to it.
This is one tip that I have for entrepreneurs. It is very difficult to grow your site to 25,000 people per day, 50,000 per day, if you do not have extra help from Google. Direct traffic, it is very, very hard to keep them coming back because you need recurring people to come back to your site to move forward and show progress. You’ve got to rely on Google for a certain part of your traffic as well.
Andrew: I see. I see the SEO, it’s really well done. All the URLs work well. The tags are all where they need to be. You’re doing everything properly here. In the beginning did you know SEO well enough to structure the site? How did you figure it out?
Gonzo: I got a very good friend of mine, he’s my [??] who’s been sort of opening my eyes to the SEO world. I was not even aware of it. And then we got a booth there. We got- the same thing happened to us with Ad Sense [sp]. I was not very familiar with the possibility of Ad Sense. That was going to be, or that might get huge revenues from them, and so we’re making good money, out of Ad Sense, monetizing the site. As you can see here, we have banner promoting startups.com, which is also, which is another project that we are working on.
Andrew: I think it’s time to talk about that, then, right? Is there anything I missed about killer startups? I think we figured out…oh, I know what. Right. This- the content. You guys wrote your own content at first. Did you hire full-time writers? How’d you get the writing done?
Gonzo: Yeah, I think the quality is extremely important, so we have our own people taking care of that. At the beginning we thought, OK, let’s open it to the people to send their own submissions, like a UGC kind of thing. But it didn’t work out at all. It was really crap and was really poor. People were not paying attention, they didn’t really consider- it was really not good quality, and for us, it took longer to rewrite it and edit than to write it from scratch. Right now, people can submit their startup for us to review, and we ask them, you know, their own suggestion of [stacks], but we assume that we are going to write it from scratch.
Andrew: I see. So, you just, you get the submissions of the sites but you still do the writing from scratch. How many writers do you have in order to get to fifteen posts a day?
Gonzo: We have a few people. We have two in the office working full time, and we have some extra help in case we need it. But, after four and half years of running it, we pretty much have a certain dictate, and we, we kind of efficiently move forward with that.
Andrew: When you say, ‘if we need it’, what cause- what if someone’s out? That kind of thing?
Gonzo: I don’t know. If someone goes on vacation or is sick, or something, we have extra resources to help out. Yep.
Andrew: All right, one more thing and then I promise I’ll move on. Do you have time? Do you have another ten minutes for me?
Gonzo: Well, sure.
Andrew: Good. Good. So I’m looking at Compete, here. I mentioned Quancast earlier, but now I’m looking at the compete.com stats, and it was over two million dollars- over two million unique visitors in June of 2010. A year later, June of 2011, you’re at about half a million. What happened?
Gonzo: Well, we have problems with our content, we have problems with SEO, we have a lot of problems. We have problems with technology. You know, as a real live startup, we have issues that you have to deal with. And when they combine, and the problems get together, sometimes-
Andrew: What do you mean? What kind of issues?
Gonzo: Well, we have problems with technology. The technology was not up, the servers, the programming was not in the best shape. We had some errors, important mistakes with SEO-
Andrew: You mean the site was down a lot?
Gonzo: The site was down a lot. There were slow pages. The databases were having problems, were crashing. You know: a fantastic nightmare. Everything put together, and then we had that problem, but now we’re getting backing, Jake.
Andrew: And when you say trouble with SEO, that’s Google penalizing you? In February of 2011?
Gonzo: We had, yeah, we had a problem with Panda. Totally unjustified. But that’s why we’re coming back again, because they sort of, seem to be considering that we’re having original content. It’s very sad when you know that you’re working your butt off in order to bring extra awesome content, and you see that two people who repost your RSS feed content into their site, ranking higher than you…you know, well, everyone in the office was really mad, and they want to sort of, bullshit Google. Everybody said, you know, calm down. It will take time. When they algorithmically or [??], they’ll realize that the content- that we are the original producers of the content. And it happened, I don’t know, a bunch of weeks back when they, sort of, did the 2.3 version of the Panda Algorithm, that they realized that we really were the original producers of the content. So, we’re now, back in shape.
Andrew: I see. OK. Yeah, I, I’ve seen that, too, where someone else who I know has killer startups content, ends up the higher result in my search engine.
Gonzo: That’s unfair because it’s very expensive, as you might very well be aware. It’s very expensive to produce original, good quality content. Very expensive. So it’s very unfair, that somebody else, without- zero effort- without doing anything was getting all the juice, or the traffic. It was really unfair, but, you know, Google has come back-
Andrew: Essentially November or December, that’s when the hit came?
Gonzo: It’s been hitting us for a long time now, but now we’re coming back. And there’s an old saying that goes, ‘That what doesn’t kill you makes you stronger.’
Andrew: That is true. All right, so, you and I talked when you launched Startups.com, and I said, ‘Gonzo, you’ve got with Killer Startups, you have a killer brand in this community. Everyone knows what Killer Startups is in this space. Why not say, create–at the time there was a question and answer site, why not create answers.killerstartups.com the way others might have done?’ And you had an answer for that. What was that?
Gonzo: I don’t remember now.
Andrew: You had to go to positioning, and that’s how the book came up. You said, basically, people can’t hold more than one concept in their heads at a time about a product. Right?
Gonzo: It is essentially positioning the book.
Andrew: Yeah. That’s what made me decide to read the book, Positioning. When you explained it to me, I said, Ah, so that makes sense. Positioning isn’t something that just works for Proctor and Gamble when they create a new product. It’s something that even applies to us. So, tell me about that?
Gonzo: Well, the thing is, when we discovered [??] change, and they were doing fantastic work with the [??] overflow as a Q&A site for a program in questioning developers, we say, well, we’ve got to come up with something that is interesting for the startup community. But keep your startup that already has a positioning, so it’s not going to be impacting on computer setups. Let’s do it on Startups.com, which we acquired two years previous, in 2008 or 2009.
So, we decided to do the Q&A site on Startups.com one year before, but it really wasn’t catching on. There are certainly good things out there. And then [Quora] launch was taking the world by storm, the Q&A world by storm. So, I say, you know what, there’s no point for us doing it. With this fantastic [??], which is Startups.com, so I said, you know what, we got to move forward. We’ve got to table it. And then, the group [??] came along and said, why don’t we give it a shot. Why don’t we even try? And so far we’re very happy; we launched three months ago.
Andrew: What were the challenges in building a question and answer site? I mean, a lot of the site is taken care of by the staff exchange platform, which is very good about doing SCEO, which is very good about getting people to re-engage and give them the alerts to bring them back in; and the badges that makes them feel connected. But, there are still challenges, even though they’re taken care of all the technology of building up an audience in a community. Can you talk about some of those?
Gonzo: Of course, the technology is the easiest part. The stock exchange is awesome with all the [batches], and the technology, the SEO, the redundancy. It is fantastic. But, this is more like a social problem, where the empty-bar syndrome, where you go there and you see that no one is active, then you just take off, because no one is going to answer your question. So, those who have a critical mass would win, and within each critical mass. When you get into a new business you get all your hopes, all your energy, all your expectations up, but it is very hard to pull the plug after one year when you see that it’s going nowhere. But, as a leader, you need to make that call. You need to say, this is going nowhere, and we’ve got to pull it. It’s going nowhere. We’ve got to change that. It’s very hard. Emotionally, it’s very hard, but in your brain you know you’ve got to make that decision–you’ve got to make that call. And it’s only you who can make that call. You’ve got to take it.
Andrew: You bought ads on the margin of Tech Crunch. How did that do for you?
Gonzo: Well, it worked well in Branding terms, but not in terms of results and traffic, or not in that particular sense. So, Branding Wise was also very effective. We also bought advertising into the stock overflow, because a programmer it is an entrepreneur. Well, he might be an entrepreneur at the same time. So, we turned to those and for branding purposes, it is fantastic. But, when you need hoards of people to be active on your site, then it is a different ball game. I think today, Hacker News is doing an awesome job getting new people to your site. Hacker News is a fantastic tool to use. So, if somebody is out there trying to get a promotion for their own site, check out Hacker News, participate there. Those communities that are already formed, they’re looking for news, new tools, and everything.
Andrew: It is tough when you have so much built into a business to just stop it, to close it up completely, or to do what you did, which is close, and move it in transition to something brand new. I sometimes can’t bring myself to make that decision, because I feel I’m not a quitter. You started talking about how you need to do it. How do you get yourself to even realize that this needs to happen and then make the decision that’s really tough?
Gonzo: When I give my talks, my motivational talks, I think the top number one, most difficult question to answer is how do I know if it’s stubbornness or it is the right thing to keep going or to quit and to go to the next project? How do I know? How do I realize which one is the smart call, like whether to keep going or to quit altogether? I think you’re a quitter if you quit out of everything, but if you keep trying and a new project and a new direction, I don’t think you are a quitter. I think you are a fantastic guy and going for it. Quitting is, forget about it, and getting a job and say I don’t want to be an entrepreneur any more. That’s quitting, but saying startups will come and after one year it’s not taking off, I don’t think that’s a quitter.
It was in the year 2000 that I told you about the incubator. One day I got to fire 25 people, and when I realized that, it took me two months to pull the plug, but the thing was I was $200,000 down per month because emotionally I couldn’t pull the plug. So, it was very expensive in terms of emotionally and monetary, like I went down $400,000 because I couldn’t make the call of firing 25 people.
Now, it’s easier because I’ve got the recollection of that painful time 11 years ago and say, you know what, this is not working. We’ve got to pull the plug. I wouldn’t recommend my way of learning because it was very expensive, but I think it is a very good leader who will do that, who makes those calls.
Andrew: I feel like sometimes that you need an outsider. That’s where the guys who have investors who will push them and challenge them have a leg up on the guys who are doing it themselves. Do you have anyone like that?
Gonzo: Yeah, we’ve got a very good partner, which is Matias de Tezanos, who is a very fantastic entrepreneur. You should interview him. He gives me basically outside perspective in the business and in life as well. Sometimes, I’m too concerned about something, and he gives me bursts of knowledge or he’s sharing his experience in life as well saying, you don’t have to worry about. You’re working too hard. You’ve got to enjoy more. Sometimes, when you are enjoying, good ideas come than when you are working until midnight. You’re too stressed out. You can’t think clearly, so I think it’s good to have somebody on your side that is giving you perspective from outside.
Investors, it’s kind of hard to say because they are invested in the thing. Sometimes, they want the best for the project, and sometimes it’s not the best for you personally.
Andrew: Why did you take on in 2007 a quarter of a million dollar in angel funding instead of just doing it yourself?
Gonzo: Because I wan to have Matias, who is my friend, to be on board, and actually the very first day that I put it up, I said, hey, Matias, I want to share my excitement. Check it out, startups.com. We just launched it, and then he said, “I want to buy it.” I said, “I can’t do that. I just launched it today. Get out of here.” He said, “OK, let’s do it together. I want in” because he sort of saw what I was saying about the opportunity and the possibilities. And then, I said, “Why don’t you invest?” and we bring our friendship into our new business.
Andrew: I see. What’s the share, roughly? You’re majority, right? Does he own less than 25%?
Gonzo: We’re both very happy with the way it’s turning out.
Andrew: We’ll leave it there. All right. So, you then decide to see what’s going on with Groupon and all these deal sites are just crushing it. I want to get into that space. I saw that you put up a counter on your site when Tech Crunch wrote about you. It led to a page with a counter that said if we get a certain number of e-mail addresses from people who want the site, then we’ll launch. How well did that work?
Gonzo: Kind of good. Can I tell you something before? I was really mad that a friend of mine, a cousin of mine, was getting good deals. I said, you’re buying at Money Penny. You’re doing all that bullshit on the Internet. It is for us. We are making the Internet with our website and with our efforts. It’s really unfair that we don’t get any deals. I said, entrepreneurs should never have to pay retail again. We are assuming a lot of risk every day. So, c’mon, there’s got to be something for us, and then everything came together.
At the same time I was seeing in Peter’s startup there were more and more web apps that were under the freemium model. So, they were selling stuff, and people were starting to buy apps. I say, “You know what? This is it. Let’s do it. Let’s put it together” and so far it’s working fantastic. I forgot your question, Andrew. I’m sorry, but I wanted to say that.
Andrew: I was saying how well that it worked to ask for people to sign up to show a vote of confidence and say that they want this. Did it work as a hook for getting email addresses?
Gonzo: Absolutely. Absolutely. Actually, [??] post really took us by surprise. We were getting ready to communicate and to open to the world, the doors, the previews doors. Like saying, we’re going to be opening when we get 10,000. One week before, but we were originally planning to start communicating, so we got rushed and to put together one week before. It took us by surprise. So, it is a good surprise because Tech Crunch commands a huge number of people and a lot of following. So, it commanded a lot of people in the thousands that sign up for our trial [??].
Andrew: Thousands came over and gave you email addresses, and I know that the Tech Crunch audience actually doesn’t work that way for everybody, but this was a good fit for them.
Gonzo: Absolutely. Absolutely. You would be surprised. We were very surprised, in two days, we had thousands and thousands of people on. It was very, the motivation that you need at the very beginning of any project. I mean, when you got thousands upon thousands of people giving you their email, saying, “Hey, when you launch, give me the deals.” That’s a good vote of confidence that is saying, “You know what? There is demand out there. The market is willing to get this.”
Andrew: What’s one thing that you learned about the deal space after you got into it, that maybe you wish you knew before?
Gonzo: That it’s damn hard.
Andrew: It is, right? You know what? Everybody thinks all you do is you throw up deal and you’re in business. It’s so easy you don’t even have to manufacture it. You just make a phone call to someone who has it. So what’s hard about it?
Gonzo: Everything is hard. After fifteen years of being an entrepreneur, this is by far, the hardest project that I’ve taken on.
Gonzo: It is hard to get the word out there and talk to the merchant and explain how it works. And getting all the dynamics because you’ve got to do a write-up and write an email. That’s one part of the deal. Then you’ve got to send the emails to all the [??], the in box delivery. Then you’ve got customers who feel misled, and you’ve got to do customer support. You’ve
got to do refunds, if they feel that it’s not for them, but that’s one good thing that we are doing at startups.com. You’re got a 30-day, money-back guarantee, no questions asked. So, buy it. If you are not happy, no problem. We give you the money back, no questions asked. It’s been a hell
of a ride, in that particular sense, because people sometimes at the beginning were very rough on the edges and the emails were not that clear, but the fine print was not as specific. Now we’ve been improving over that three months. But running a daily deal site seems from afar, it is very easy, but when you get closer and closer to it, it is extremely complicated business. I’m not saying that it rocket science, but this is one of the most complicated ones to run.
Andrew: Alright, well, you now have over, I don’t know what the number is, but you’ve got well over 10,000 entrepreneurs who are on the list. I know it’s more than that. I don’t know what the number is, and I know that you’re not going to want to reveal it here. So let me ask you this? I’d
like the entrepreneurs who are in my audience who have web apps, who have stuff that they’re selling, and want a way to get a lot of sales all on one day. One of the things that I know about the daily deal sites is, I’m learning that it’s tough for you, but it’s great for the guys who are selling their stuff, because they get a lot of customers all within one day or a short period of time. How do I get my guys to come to you and be on your site?
Gonzo: Well, they can contact email@example.com or they can write to me firstname.lastname@example.org so I can give you back the information. So you all are just saying, “Hey, a lot of people around us are interested in doing a deal.” One thing is, we’re not saying you’re going to be selling a lot. We’re saying you’re going to give your company and your product exposed to at least 10,000 site owners. Which it is free for you as a manufacturer of a web app. If you have a web app, what do you want, besides free advertising? You only pay, what we get you to sell, but the advertising is free. You get exposure to 10,000 site owners that are willing to open the email. That’s freaking interesting.
Andrew: That is something that I’ve been finding out too, that for some reason, people end up buying after the deal. The deal goes on, and then the day after, the site that had the product that was featured in a deal. I don’t know about your site specifically, so I’m not speaking for you, but the day after, the company that had its product featured in a deal, ends up getting a bump in traffic for some reason. I imagine that the day after, you should see fewer customers, because people either bought, or they’re kicking themselves for not buying, but now the price that you have listed on your site feels expensive. But, apparently that doesn’t happen. Apparently once the recognition happens people say you know what, now I’ll go and buy it now knowing. I should have done it before but at least I’ll do it now.
Gonzo: Our [??] proposition is very simple, Andrew. You sign up, you just give us your email. Every day, Monday through Friday, we send you a fantastic opportunity for you. A good deal. You buy and then if you don’t want it you just return it. We refund you within 30 days. You have 30 days to try it out. We take all the risk out of the equation for you as an entrepreneur so you don’t have to assume any risk. You go out, you buy, you check it out. If you like it you keep it because you bought a fantastic deal, like 70% or 80% off. If you don’t like it because it’s not for you or you expected something else you ask for a refund. Very easy, risk free thing.
Andrew: All right. Well, it’s great for the audience. Check out Startups.com. If you’ve got a product email directly to Gonzo and tell him that I sent you. Go to Gonzo@Startups.com. Frankly, if I didn’t even anything to offer I would shoot a short email. Guys, short emails really get you so much further in life. A short email and say hey, Gonzo, what conferences are you going to be at? I got to tell you guys, you should meet this guy in person.
Any final words?
Gonzo: Thank you. No, thank you so much Andrew. It’s awesome. Let me give you a little fun [??] thing. I don’t really watch your interviews, I just listen to them on the iPhone. You know why? I put it at 2X.
Andrew: You listen to these interviews at twice the speed? This interview lasted over an hour, for you it’d just be half an hour and you got it all. OK.
Gonzo: I listen to it at 2X on my morning walks. I don’t think I miss something. If I miss something I put it at 30 seconds go back and then I listen to it at normal speed. That works for me.
Andrew: That is great advice. I wonder how I sound at 2X? Probably not chipmunk at that level.
Gonzo: No, no, no, don’t worry. It sounds fantastic.
Andrew: In addition to that you and I have been friends for a long time. In addition to just opening my eyes to Positioning and a bunch of other books, I’m just glad that we’ve gotten to know each other and I appreciate all the help over the years. Thanks Gonzo.
Gonzo: My pleasure, my friend, helping entrepreneurs to grow their business.
Andrew: Rock on. Thank you all for watching.
Gonzo: Thank you, Andrew. Take care.
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