This is the story of a bootstrapped entrepreneur who built a multi-million dollar software company.
And how did it all start?
By secretly doing the work by hand while giving the impression that software was doing the work.
Guillermo Sanchez is the founder of Publitas.com which is a software company that enables retailers to drive conversion with online and mobile catalogs.
Guillermo Sanchez, Publitas
Guillermo Sanchez is the founder of Publitas.com, a software company that enables retailers to drive conversion with online and mobile catalogs.
Andrew: Hey, there, freedom fighters. My name is Andrew Warner. I am the founder of mixergy.com which is, of course, home of the ambitious upstart and the place where over a thousand entrepreneurs have come to tell you the stories of how they built their businesses, break down the process of getting their first customers, their first idea, getting and building their businesses so that you can learn from them.
And hopefully, after you build your successful company, you’ll come back and do the same. Pass on to other people. And this is the story of a bootstrap entrepreneur who built a multimillion dollar software company. And how did it all start? By him secretly doing the work by hand that his software was supposed to be doing.
It’s called Concierge MVP, right, in the lean startup methodology. That’s what you’re going to find out about today. The entrepreneur’s name is Guillermo Sanchez. He is the founder of Publitas which is software that enables retailers to drive conversions with online and mobile catalogs that are just brilliant the way they work.
And this interview is sponsored by Scott Edward Walker of Walker Corporate Law. If you are an entrepreneur and need a lawyer, whether you’re raising funds or selling your company or buying a company, etc., you want to check out walkercorporatelaw.com. But I’ll tell you more about him in a moment. First, I’ve got to welcome Guillermo. Guillermo, thanks for being here.
Guillermo: Thanks for having me.
Andrew: Hey, I said multimillion dollar company. What are your sales right now?
Guillermo: We’re about $2 million recurring revenue.
Andrew: How much?
Guillermo: Two million dollars yearly in recurring revenue.
Andrew: In annual recurring revenue, two million.
Guillermo: Annual recurring revenue. Yeah.
Andrew: Let me ask you something. I was prepared for you to say, we don’t talk about that. Actually, before we officially hit record, I said, I know you don’t want to talk about the revenue. I want you to be comfortable saying no, and you went for it anyway.
Guillermo: Yeah. We’re not really . . .
Andrew: You keep it private.
Guillermo: Yeah, I think it’s important also for entrepreneurs. I really believe in helping entrepreneurs. And I think in the spirit of disclosing and understanding how to build better businesses, you know, it’s better to share all the information.
Andrew: Well, I’m really grateful to you for being here and being so open, and it’s another reminder you have to keep asking as an entrepreneur and as an interviewer. Let’s hear how you got here. You at four years old were selling. What were you selling at four years old?
Guillermo: Yeah. Actually, I started selling when I was four years old. I remembered that after years. I studied computer science and went to work as a consultant and actually found out later on while starting a company, you’re forced to sell. Especially when you’re bootstrapped, your funding is your sales. So basically later on I thought it went pretty easy for me and I thought back and I remembered that the first time I started selling I was four years old.
And I started selling pencils to my classmates. I got these big collections of pencils that I would get from grandparents and things like that, and at some point, I discovered getting in bulk and retailing and selling pencils.
Andrew: Oh, you really made it into an operation.
Guillermo: Yeah, exactly. Yeah. Eventually, I ran out of pencils, but again, that’s where it all started. My passion for entrepreneurship.
Andrew: Tell me something. I’m curious about nature versus nurture here. Is it that you were selling pencils because your parents and family encouraged you so much and said, oh, congratulations on selling a pencil, and you felt so good that you wanted to go and sell another pencil and feel good again from your parents. Or do you feel that, instinctively, internally, there was a creative need to express yourself through sales. Which do you think it is?
Guillermo: For me, it was definitely the second one. Basically, I come from a first generation immigrant family and my parents were very clear. We don’t want you to waste money. So the only way that you could get some money to do some things was to earn it.
Basically, it turned out that selling has a lot to do with it’s a people business. So basically, it’s not selling but pleasing people, you know, giving them something that they really want. And, yeah, I really found out very early that that’s what I like to do.
Andrew: I get that completely. For me, I feel that it’s the same way. You said that you were an immigrant. I’m looking at the first version of your site from 2006. It’s in Dutch. Where are you right now and where were you an immigrant from?
Guillermo: Yeah. Right now I’m in Amsterdam, a beautiful office in the city center close to the canal so we can see the canal from the window.
Andrew: Oh, yeah.
Guillermo: Yeah. So my roots lie in Spain. My parents are Spanish. When Spain was a dictatorship in the ’70s, they immigrated to the Netherlands. I grew up here.
Andrew: So you did that, and then I want to talk about one other thing that you sold when you were growing up. You were in the PC business, PC repair. How old were you then?
Guillermo: Yeah, that was a little bit later on, like 15-years-old. My own customer list of people that I [??]. I repaired PCs. At some point sold CDs to a whole school [??]. Things like that. Small operations. Always finding a way to keep a small shop running and earning some money, and entrepreneuring. Nice things, buying computers with that and things like that.
Andrew: What about the CD part of that business?
Guillermo: Yeah, I have to be careful. I might get sued for that. [laughs]
Andrew: I think it’s okay.
Guillermo: Something like a little bit copyright infringement. But I actually, at some point . . . this was when copying CDs was quite new. I think I was 14, 13-years-old. Basically I made money repairing computers, then I bought a CD burner. One of the first CD burners that they had. And I started copying music CDs for my classmates. And basically at some point I would go to the library where you could borrow the CD.
So I would get a request for a new kind of CD, and I would go to the library, borrow the CD, make a copy, and then sell the copy. And at some point I even would differentiate. So you could choose between different qualities of CDs. So you had the cheaper ones for less. Or the one that had 50-year [??] warranty. With or without labels. You name it. As we say in the Netherlands, ‘The customer is the king.’
Andrew: You know, it’s so much fun to sell, to be in business. We sometimes forget because we’re so caught up in the business that it is fun to make these little ideas come to life. And yeah, you’re a teenager and so you’re goofing around with CDs that you got from the library. But the essence of coming up with an idea, executing it, of watching somebody buy it from you, of convincing them, is so much fun.
By the way, every day when I come into the office here, and I record from an office, I have to come through the door, which is nice, I go through security, and then I have to go up the escalator one flight, and then to the elevator. And the escalator is narrow. And often, I’m standing in front of people, and I just want to run right up the escalator, but they just stand there. Like, they don’t want it to get to their floor. They want to just take their time, because they’re not excited about their work. And I just want to tear them down because I’m so excited to be in here! And that’s the difference.
Guillermo: Exactly. That’s how I feel every day.
Andrew: Now, I get how you were excited selling CDs, and I get how you were excited even selling pencils. But what about when you were working for Deloitte? Did you enjoy that, when right out of school you were working for Deloitte?
Guillermo: Yeah, I mean, I did enjoy it. Deloitte was like, once I finished college, I did my final project with Deloitte, and actually I got a job directly. The nice thing about Deloitte is, you’re very young, you’re a management consultant, and basically it’s like running your own shop. Of course within the boundaries of the big company, but basically you do consulting work, you do international engagements. At some point, you understand also . . . at least in my case, I understood very quickly how to please the customers.
Andrew: What would you do to please a customer? You were working for a giant company.
Guillermo: Over-deliver. Always.
Andrew: What would you do?
Guillermo: Under-promise and over-deliver.
Andrew: So do you have an example of something that you over-delivered on that made them really be amazed?
Guillermo: Basically, what we do with Deloitte, is Deloitte is . . . I hope they’re not watching, but what we always did was to take difficult problems and make them complex and earn money from that. [laughs]
Andrew: So how would you make a difficult . . . You did S.A.P. implementation there, right?
Andrew: That’s pretty complex anyway. So how do you make it even more complex than that?
Guillermo: I mean, you start by indicating what all the risks are. You implement S.A.P. for example, and these are used for other projects. And so you need to implement it right, you need to . . . Just to give you a small example, when you [??], you have, for example, the segregation of duties. Something very small, the processes are configured in such a way that fraud is very unlikely within a company.
Guillermo: Because that means that that affects, let’s say, the profit and loss statements and things like that if you have a company that’s publicly traded. You can have the same problems like we have in the beginning of 2000s with Enron and the whole [??].
Guillermo: [??] was going on. So basically, you know, you create value with the customers. So you make them understand the risks that are involved in what they are doing. So once they understand and appreciate the risks, they appreciate also the solutions and the relief that you can give towards this.
Andrew: Ah, I see. Where we might, as sales people, have the instinct that says reassure the customer from the start and say, oh, don’t worry. It’s not a big deal. You’re not going to get in trouble. Everything’s going to be okay.
You’re saying, no, you want to do the opposite upfront. Tell them all the risks which shock them into seeing how bad a problem this is and then when you solve it, it feels so much better and you come across as more of a superhero.
Guillermo: Exactly. And the more risky the problem and, let’s say, the bigger the risk, the more the solution is worth and the more satisfaction at the end.
Andrew: I see what you mean. I had a lawyer who used to do that to me. I’d get a lawsuit or threat of a lawsuit, and I’d bring it over to him, and he said, oh, this is awful. This company’s really big. They have deep pockets. They could sue you into oblivion.
But it would freak me out and I couldn’t pay attention to anything else after that.
Andrew: I guess it’s the difference of talking a small new entrepreneur, like I was at the time, versus talking to a customer that has some money to solve the problem and can see that they could solve it if they have the right people. Wow, there’s one thing that I learned from this interview right there that’s tremendously useful.
Guillermo: Yeah, but the thing is when you work with a company like that, I mean it’s nice. I would say it’s a great company to work for in terms of working for a company. But still at the end of the day, at least for me, my dream was always to entrepreneur and to build something from scratch. To make your own bed in the universe.
Guillermo: A unit that’s very small then. To create jobs and that was, at least for me, the reason to move on.
Andrew: So the idea came to you when you worked for Dell at their help desk in the Netherlands, and a friend of yours said what to you?
Guillermo: Yeah, this was about two years before during college. I used to work in the evenings and weekends, a job at Dell. We ran the help desk center for the Dutch market. And I had this friend of mine, a colleague, who was always working there. This guy is, like, I would always call him the mad scientist.
Andrew: Constantly tinkering with ideas.
Guillermo: Always tinkering with ideas and usually, like, how did you even come up with it. So it was fascinating. So basically, I left when I graduated from college and went to work for Deloitte. We always kept in touch and at some point, we came together after, let’s say, about three years.
It was literally on a Friday evening, we were drinking something in a pub and he was telling me about this new technology he had developed. And he wanted to know what I thought about, you know, could a company be developed from this.
Andrew: What was the technology?
Guillermo: Basically, it was a very simple page flip effect. So basically, you could take a PDF and convert it in a very simple theater roll publication, which looks pretty awesome. You could add some things.
Andrew: I see it here. There’s an image, a flash image on your website from 2006. It looks like a magazine and when the pages flip, they don’t just flip over like they’re stiff cardboard. They bend over and curl, actually, the way a real magazine would curl.
Guillermo: Yeah. Exactly.
Andrew: So that was his idea. He just said, look, I could take a PDF and make it curl and look real so it feels like something that you’re familiar with and stands out in a very flat world online.
Guillermo: Exactly. Yeah, so we brainstormed about that, like, drinking a beer for about two hours. And basically, after that, we just decided that it was a good enough idea to just try. You know. And basically, Monday I quit my job.
Andrew: So Monday, you quit your job. The job at Dell, not the job at Deloitte.
Guillermo: No, no, no. The job at Deloitte. Yeah.
Andrew: Oh, I see. So you met him at Dell. You were working at Deloitte. He shows you the page curl that I’m looking at right here and you say, I’m going to quit my job. Did you have an idea for what you would do with it?
Guillermo: No, actually, I had no idea. So basically, I had some money saved up. And I thought, you know, okay, if I’m going to do this, for me at least, I have to put myself on the spot. Then I know I’ll figure it out. You know, if I don’t do that, I . . .
Andrew: You said, it’s so cool, I’ll figure something out to do with this.
Guillermo: We’ll figure it out, you know. So basically, I quit my job. I had something like $15,000 saved.
Guillermo: And at that point, I thought, you know, I can survive for a couple of months on this. No problem. But the thing was, when I quit my job, I actually was moving to a new apartment.
So then the first surprise came after the first week. This was a rent apartment and because I had quit my job, I don’t know how I even found out, but they get like a signal like officially you’re jobless. So they called me, yeah, you’re jobless. And I was, like, I’m an entrepreneur.
Andrew: Oh, wow. Okay.
Guillermo: So I decided to become an entrepreneur. But in the Netherlands back then, the support for start-ups was a little bit thin. So no, basically you’re jobless. So they asked me to wire over $10,000 as . . .
Guillermo: . . . security for the apartment. So I was, like, holy . . .
Andrew: Yeah, I get it because first of all, I would feel like what an insult to call me jobless because I’ve started this thing out. And frankly, what are you doing in my business that you even know that I quit.
Andrew: That feels a little bit too invasive. But the third part is now two- thirds of your savings are gone like that.
Guillermo: Yeah. So it was either moving back in with my parents, which didn’t seem a very good idea, or just coming up with the money and say, okay, the long way got just a little bit shorter. So I took my vacation days. I had a lot of vacation days still at Deloitte, so they let me go pretty early.
I finished some things but basically, after quitting, I handed in my resignation on Monday. About three weeks to four weeks later, I was out completely. And we started this adventure and we had no business plan, no idea. Basically, we had the script and no idea where to go next.
Andrew: Before we continue with this story, there’s something cool that you did to get customers that we need to talk about in the interview. But first I have to say that, if you’re an entrepreneur, even if you’re just at the stage where we are in the story, oh, good, I’ll let you adjust your camera while I do this.
Even if you’re just at the stage where we are in the story where it’s just two co-founders and an idea or two co-founders and a search for an idea, I think finding a lawyer who can help you put your company. Especially in the U.S. where there are all kinds of lawsuits that you’re subjected to and you want to stop those lawsuits at the door of your company.
Or you don’t want them coming into your personal life, so you want to incorporate or get yourself an LLC. Or if you’re partnering up with someone, you want to make sure that that person doesn’t run away with half your business if things fall apart between the two of you.
You want to set yourself up right from the start, and to do that, you need a lawyer with experience. I recommend Scott Edward Walker, not just because he has tons of experience. This is his focus, start-ups, tech companies, specifically the kinds of companies that Silicone Valley is known for, but also anywhere in the U.S.
But you want to find a lawyer who can do that, get you started right, and also charge you a reasonable rate for it. That’s why I recommend Scott. Tons of experience, good price, and more importantly, this is the stuff that he does. I mean it’s one of the things that he does. It’s not his focus.
His focus is helping you when it’s time to raise money, when it’s time to sell your company, when it’s time to buy a company, when it’s time to take your business to the next level, but he’ll set you up right from the start. So no matter where you are in your entrepreneurial adventure, when you need a lawyer, get Scott Edward Walker of Walker Corporate Law.
Experience, the right price and the right connections. Check out walkercorporatelaw.com. So before I get to the customers, I think this is clever what you did, did you find a group of people who you thought could use this technology? Did you find a use for it at this stage in the story?
Guillermo: The first month or so, we tried everything. I mean, like I said, basically, I had experience selling. But at an amateur’s level, right? Nothing really like being . . .
Andrew: Selling pencils to school kids.
Guillermo: . . . things like that.
Guillermo: So at some point, out of despair, I even thought of picking up the Yellow Pages, you know, and just calling companies.
Andrew: That’s not a bad idea. I’ve seen people do that really well. Yes.
Guillermo: Yeah. Exactly. At some point, we ended up spinning the idea towards . . . initially, selling it as a service. We set up some Google AdWords campaigns, and we started getting some leads to convert PDFs into this flippable publication. This is the site that you have . . .
Andrew: PDFs is where you went to, but am I wrong in understanding that looking here at the first version, one of the first versions of the site, where you say, basically, this technology, which you show using the flash that I talked about earlier, could be used for anything. Brochure, catalog, magazine, let’s see what else . . . Any printed matter you could put online. You have an example of a digital email I think, or – no, e- magazine. You were just putting it out there and saying, ‘Here’s what it does. You can use it for all these different ideas,’ at first.
Andrew: And then you started to focus in on catalogs.
Guillermo: Basically, we took a detour. So, first on everything . . . The thing is . . . then by accident, we got some decent traction. We went from no revenue, to, actually pretty soon, like in one year to 600,000 euros. So, this is about on a dollar system a little bit more in revenue. In a year, so that was not bad. We got a good return on investment there. So at some point, we thought, okay, let’s . . .
Whilst I was consultant for Deloitte, I used to read a lot of professional magazines that I was required to read. Financial magazine, [??] magazine, things like that. So, I did a lot of work internationally, so I had to carry those things with me [??] that I read them. So, we thought, “Hey, wouldn’t it be a cool idea . . . ” and this was maybe a year before the iPad was launched, 2007. “Wouldn’t it be cool to have a platform where you can have your magazines digitally, and you can access them, read them digitally, make them findable in search engines so when you are looking for content that’s relevant you can access . . .”
Andrew: I see, so the detour was to magazines.
Guillermo: Exactly, professional publishing magazines. So, basically what we did is we developed a platform to sell digital subscriptions of the magazines. We got even customers to pay for that before it was finished and launched, so they pre-financed the build of this platform. Because we had very little money initially, we even had it built in the Middle East.
Andrew: Let me break this all down, because you’ve said so much there. That part of the Middle East is a whole story in itself, but let me break it down then. So, the way you got your first customers, your first potential customers, was what? What did you do?
Guillermo: Basically, the very first customers we started cold calling.
Andrew: Cold calling. Okay. Just random cold calling. What about the part where you created a script to crawl the web?
Guillermo: Yeah, okay, that’s a good one. Yeah, I forgot about that. Basically, that was, we created a script to crawl this company directory in the Netherlands. We created, we brought [??] a web crawler, crawled the whole directory, got all the emails on board, and basically sent . . . what we today now consider a kind of spam approach. Sent out our email, and basically we got our first two customers from that mailing.
Andrew: From just doing that. From scraping a list of customers, a list of companies.
Andrew: Was it magazines or catalogs that you were scraping?
Guillermo: Everything. Every type. So basically from that, actually a Dutch publisher that published Playboy magazine here in the Netherlands, a very big, the license holder of Playboy magazine, and a big retailer, like the Dutch Toys-R-Us, became a customer from the mailing. So we were like, wow!
Andrew: Did the product work at the time? Could you just take their magazine or catalog, run it through the software that your friend created, and end up with a digital version?
Guillermo: Yeah. So basically what would happen is we didn’t have an online application where they could do that themselves. So they would send us the PDF, we would convert it into this format, and send it back to them or host it on our site. But let’s say our infrastructure wasn’t that powerful at that moment, so it was one cheap server, pre-cloud hosting. And we would send it over. So we would do manually the labor, enrich it if necessary, things like that.
Andrew: When you say enrich it if necessary manually, how would you do that?
Guillermo: Yeah. Adding things like links, videos, video content. It was even so that we even didn’t have internal clues to do this in a decent way. So basically, you would have to be editing things like in photo shop and in the code, adding links to the software was really, really messy.
Andrew: I imagine adding links using the kind of tools that anyone would have on their desktop, right?
Guillermo: Yeah. . . .[??] . . .
Andrew: Like today I used Preview. Maybe you used a version of a program like that.
Guillermo: Yeah. No, even more deeper, like in the code editor. You know adding things into the code. So creating code links in the product and things like that.
Andrew: I see. I see. So that’s the part that’s manual. It was sold as we have software that will enhance your catalog and make it look all curly and beautiful. But really all you had was software that would make it look curly and beautiful. The rest was done by hand. A human being had to go sit and highlight the text and then put a URL behind it, etc. Wow.
Guillermo: Everything, everything.
Andrew: So how much did you charge for something like this considering the kinds of companies you got?
Guillermo: That’s nice. That’s one of the things that I learned is, initially, especially when something’s new and you’re innovating, if you know to whom to sell, that’s always a premium to be charged. So these customers are actually not paying only to use the product, but to be the first ones to use the product.
So average, initially, to create a publication, there was a time that it could cost, maybe $1500 or $2000 per publication. And just go to give you an idea, you know, now a publication could cost you between five and ten dollars. You know. And it will be created in ten seconds, you know, automatically.
Andrew: Without anyone touching it. It just gets done.
Guillermo: Nothing, right?
Andrew: You know. The other thing I see here on your site is, before there was a buy button, there was a form. And the form basically said, tell me the URL. Tell me about what you plan to do with this. You’re trying to learn about your customer before you’re selling to them. Right?
Guillermo: Yeah. We’re trying to profile the leads that would come to our website just to understand what they are looking for in a very early stage. And a lot of times, even not converting them. I mean we didn’t have the trial at that moment.
So, like I said, we didn’t have a product. There’s also growth hack. At some point we needed something to convince customers to leave their data on our site, to carry the lead. So basically, a lot of companies have a portfolio site where they have examples of other customers.
Guillermo: What we did is, you know, we didn’t initially have the time or research to create a nice video or something. So we thought, you know, let’s call this demo. Put the examples of the customers behind the log-in and ask them to fill in their data to get to see the examples. And that worked, like, great. You know.
Andrew: So they had to fill in their data in order to see the demo.
Andrew: And that’s how you got their contact information and you understood what they wanted to use it for. So the form, for example, says things like, do you plan to use this for a magazine, a newspaper, a catalog, a brochure, a folder, annual report, other. Tell me what you’re looking to do.
Guillermo: Exactly. Yeah.
Andrew: I see.
Guillermo: It’s about learning and scaling. Yeah. So we did it deeper into publishing and we got some traction in the market. But we finally found out that the problem was specifically scalability. So we found out that, basically, publishers, even though there was actually a nice idea and later on.
Like now, you have Spotify for magazines and things like that. It was an early version of that, but we were way too early. And basically, at that point, they were just interested in selling paper. Because they earn most of their money by logistically moving paper.
Andrew: I see. And so magazines did not want the digital version.
Andrew: They weren’t going to make good money. Catalogs, on the other hand, did because if someone bought, then it’s money in the bank for them.
Andrew: By the way, let me ask you one more thing before I continue with the story. Are you guys technologyforbusiness.com also?
Guillermo: Yeah. That was the very first URL. Yeah.
Andrew: That’s the first URL. And the company was launched what year?
Guillermo: Basically, we officially launched the company in 2006.
Andrew: So that’s the curious thing on the bottom of the site. It says, copyright from 2004. Were you doing that to give the impression of longevity?
Guillermo: No. That was the time that since my co-founder started to work on that technology. So he wanted to make sure that . . .
Andrew: That you got the credibility that comes from having been around since 2004, even though officially this site didn’t launch until 2006 in the business–
Andrew: All right. That’s clever too.
Andrew: All right. So you’re doing this all by hand. What’s this part that I see in Jeremy Weisz’ pre-interview notes from you. Here it is. ‘It cost us fifty to one hundred dollars to buy a script that was a product that we used with them, and then that made us our first six hundred thousand dollars. What’s the script and what did you do?
Guillermo: Initially the technology that you saw to curl the page, [??] had developed a version. At some point we found out we wanted a better version of that script, so we considered developing it ourselves. But after he was developing it and basically he kept working the whole night, and then he got this idea of, ‘Couldn’t I just Google it and find it, buy it somewhere else?’ So…
Andrew: So it turns out this big thing that he created that was a launching pad for your business, that was so cool that you said we have to start a business around it, he Googled and he found that someone else created it anyway?
Guillermo: Yeah. And he was selling it really cheap, just selling the script. So we said, “Okay.” So instead of rebuilding anything, somebody else had also built another version of this, which obviously was better than the one that we had.
Andrew: Good for you guys for not sticking to what you created just because you created it. If there’s a better product out there then go with that. Wow.
Guillermo: Exactly, yeah. So that was a good decision to make at that point.
Andrew: Earlier you said we decided to charge a premium. When you say a premium, for the first one that you do like this, are we talking about $10,000, $50,000, $10? How much? Roughly.
Guillermo: The first one that we did ever?
Guillermo: Yeah. We would charge for creating a magazine, I don’t remember the exact prices but it would be maybe, let’s say two to six thousand dollars.
Andrew: Okay. All right. So basically the money that your landlord took from you, within a couple of months you were able to bring in.
Andrew: So I know how you got your first two customers, Playboy and Toys R’Us equivalent in the Netherlands.
Andrew: How did you get the next batch of customers then?
Guillermo: Basically through different channels. So then we started experimenting. We started with Google AdWords, we started cold-calling, we started developing these different channels, and they all generated a response to a certain degree. At some point we noticed that specifically there was a lot of interest from a retail perspective, because the catalogs on the retailer sites were very popular with consumers. Actually the catalogs were one of the more important sources of returning visitors. Not only catalogs but mainly also weekly ads. For example, the Dutch Walmart.
Andrew: Those circulars that they send out in the mail?
Andrew: Got it.
Guillermo: The funny thing is we didn’t know that. At some point we saw the [??] and we thought, “Okay, this is nice.” But at some point we started talking to the Dutch equivalent of Walmart. The guy starts explaining how much these catalogs are used by consumers, and we’re like, “Whoa, this is interesting.” So we can create some values. So if we were able to, let’s say, increase engagement by X percent, we make you this much money. Yeah, that’s true.
Guillermo: So we were able to increase commercial buyers. So that’s when we started to understand, okay, this is the business case behind these video catalogs, and that was actually our first stepping stone to retail. And then we started moving the product to catalog / …
Andrew: How did you get to this big retailer that you say is kind of like the Walmart of the Netherlands?
Guillermo: Really, by accident. I’m not even sure how we developed. I would have to go back, but I know that we were doing service mainly in publishing. We thought publishing is very logical. Magazines you want to read online, things like that, web content. But at some point, I think they saw the magazine or they could have seen, I don’t know. We generated our leads. At first they weren’t spending that much money, so it didn’t register directly. At a certain point when we started realizing retail is not going to be the thing for us. I’m sorry, Publitas.
Andrew: Was it a situation where if someone filled out a form like the one that we talked about earlier and gave you their phone number, you would follow up with them and then try to understand their business before you sold.
Guillermo: Yeah, of course. Exactly. At that point we had already a couple of people that were also working in the company so not all the sales would go directly through me. So I was mainly focused on getting our strategic proposition that we thought was publishing . . .
Andrew: I think I just lost your audio. Can you hear me?
Guillermo: Yeah. One second here.
Andrew: Tilt your camera so that the light from the window is in your face and that the background is the other side.
Guillermo: Is this it?
Andrew: Go to the other side I think it might be better.
Guillermo: I’m going to turn it around.
Andrew: There you go, yeah.
Guillermo: Yeah, the sun is turning right now.
Andrew: I can see it.
Guillermo: I think it’s the biggest window here, so.
Andrew: Oh, that’s good. There you go. We can’t see behind the window. I can anyway. What about outbound calls? Did you guys do any of that?
Guillermo: Yep. Specifically, initially we were on top of it. So when we really, really first started it was like I probably might even (?), but I’d say at some point during when we started to understand the game, when we started to understand business development, we still do business development on highly targeted retail. I mean, our potential customers, so we call out or we email out. So it’s a very successful challenge.
Andrew: Do you do some research to see who you should call, and then you make a call, and I know of many people who did that.
Guillermo: Yeah, we know who we want to work with, and we know what companies we want to work with. Basically we know who the decision makers are and then we find the responsible . . .
Andrew: A very interesting thing happened with the sales department. I’ll get to that in a moment, but we said earlier that the original script got you to 600,000 in sales.
Andrew: To get to 600,000 in sales was the email scraping that you did and that brought you, at least, your first two customers maybe even a few others. You bought some AdWords. Did you do anything else that got you to that level? No, it was just that. Outbound email and AdWords and did AdWords work well considering your high price point and your low cost?
Andrew: It did.
Guillermo: It was that. In our case, the conversion rate. Back then it was really different also. There was less complication. So it was less professional, and yeah. I think it’s still the same game now with AdWords. It’s about targeting. It’s like with business development. It’s about targeting.
Andrew: I see. And the process wasn’t come to the site, click a button, and buy, go to the shopping cart. It was tell us about your business, and we’ll call you and sell. By calling and selling you can learn more about your customer, increase the perceived value, deliver real increased value, et cetera.
All right. So then you got to the sales people who were making outbound calls, and one of the things that you did was I heard you set up a competition internally to see who could do what?
Guillermo: Okay. Who could make the most appointments, yeah? In our sales at some point we had some bumps along the road. So at some point we hired two sales guys and we used to incentivize. At some point you’re working as a team. It’s nice to have a competition.
Guillermo: So we had this reputation of a hundred bucks . . . The company would put like a hundred dollars . . .
Andrew: A hundred bucks on the wall and say whoever got the most sales in this period of time [??]
Guillermo: Exactly. It would sometimes even everybody would put in their own money [??]
Andrew: Oh really? They increased the [??] by putting in their own money. Okay.
Guillermo: Get in the game. Their idea was . . . Basically, you know, the person with the highest amount of appointments would be decided or the customers would take the money out, so.
Guillermo: At some point we found out that we had some colleagues that would make fake appointments just in order to take the money and that was really disappointing for me. I found out actually, after I fired them anyway. Because the fit was not the right one. These are some things about entrepreneuring, I would never have thought about somebody doing that. I would understand taking my hundred but let’s say taking the company’s hundred dollars, but taking money from your colleagues. It’s an unfair bet. That’s not…
Andrew: No that’s not the kind of environment you want. It’s funny though, how incentives will do that to people. I remember interviewing Dennis Crowley back when Foursquare first got out. And said, I couldn’t believe it! People were manipulating our system just so they could be called mayor of their favorite coffee shop. They were cheating to be called Mayor in an app. It’s a fake title; they’re not the real mayor. But, you know, people do it. Uh, you also changed the software in a way that allowed you to sell it as software as a service. How did that happen? How do you go from a script that needed a lot of hand-holding to [SAS] that allowed people to create their own end result?
Guillermo: I mean, basically for us, the first step was to build a platform, to build the SAS platform. The funny story about this is that we built our first [version]. So when we had the script selling the script as a [??]. Along the way we started automating certain parts. We created our own tools to do the labor, the work faster. And cheaper and less difficult. So what type of creating publication, let’s say initially it would take a day? Then later on, a month or two later it would take for hours and then two hours and… This is how we slice.
Andrew: And it’s just automating the things that take you the most time?
Guillermo: Yeah, exactly.
Andrew: Not necessarily building a software as a service but just speeding the things that waste your time up. Okay?
Guillermo: Yeah, exactly. Then we took and next step and said we want to sell this software service. Now we know what people want and this is also when we wanted to make a big move in publishing. I mean, we had money but we were self-funded. So basically, my co-founder is Persian. So, he found this company in Iran that could develop the software at the cheapest price we could find to develop the software.
Andrew: So an Iranian company built your software? The very first version that was custom made for you? Wow!
Guillermo: Exactly, exactly. So I went to Iran. It was really interesting because I didn’t know anything about Iran, so it was like I came to this…? You see a lot of things on the news about Iran? But, I had no perception…
Andrew: What was it like in person? I’ve never been there.
Guillermo: It’s totally different than what you see in the media. That’s true. You heard a lot in the media…
Andrew: I think we lost you there for a moment. So you were saying we hear a lot in the media, what?
Guillermo: Yeah, it’s very different from what I’ve been hearing in the media. I went there thinking I was going to [??] of people. You know, I going to find all kinds of terrorists here everywhere. But basically, I found out they are super, super nice people and highly intelligent. Everybody is, like, you could be in the U.S. if the government wasn’t Islamic and you have these…
Andrew: So you’re saying you just walk around and it just looks like a Western country for the most part?
Andrew: I see.
Guillermo: A couple of cultural things, okay you have some rules that you have to obey. But they are not very strange or something. It’s very normal. I was totally surprised. It was totally different from anything I could have imagined. The funny thing is now, I’ve seen a post [Ben Hur]. It’s about the Iranian start-up scene.
Andrew: Oh, I didn’t see that.
Guillermo: Yeah you should look at it. Basically, I share this all the time. Internationally, people are starting to discover what we discovered very early on.
Andrew: I wonder? I don’t know. Are American companies allowed to work with Persian developers? I don’t know if we are, even.
Guillermo: I have no idea. There are some economic constraints.
Andrew: Sanctions and restrictions.
Guillermo: Exactly. So…
Andrew: That’s too bad. I’d like to work with start-ups over there too. I wonder if they’re all listening to Mixergy too. I hope they are. Please email me if you are. I see. So you get to work with Persian, with Iranian, I should say, developers. They build this out for you.
Guillermo: Yeah. Yeah.
Andrew: How did that first version that they built out for you go?
Guillermo: The great part is basically, you have to imagine this is a system that eventually generated about plus $5 million in revenue.
Andrew: What generated five million in revenue? Your . . .
Guillermo: The system that they developed.
Andrew: Oh, I see. The software that they developed ended up getting you five million in revenue.
Andrew: The first version, the script got us to six-fifty.
Andrew: This got us to five million. Okay. So it worked well then?
Guillermo: Yeah. Exactly. So the nice thing is that they built it in six weeks. And for initial investment, about 15,000 U.S.
Andrew: That’s it?
Guillermo: Yeah. And basically, it was like 18,000 U.S., but we negotiated a discount.
Guillermo: At that point, you know, it was, like, serious money and everything. But in retrospect, it was, like, you know, incredible feat. You know. They did a great job. And with a small army in six weeks delivered a system.
Andrew: That’s unbelievable. So what did the software do back then?
Guillermo: Yeah. So basically this was a publishing platform. So you could sell subscriptions from it. Digital subscriptions magazines. The production part was fully automated so the customer could upload the PDF themselves, add video, enrich it with all kinds of . . .
Andrew: So they could do all that by themselves. All the things that you used to do by hand, they could now go in and, on the web, do it and see the end result.
Guillermo: Exactly. Exactly. Yeah. Everything.
Andrew: So how did that change your pricing then? You can’t charge the same for that, can you?
Guillermo: Yeah. Okay. So that meant we went down in pricing and we started doing more volume. So that’s when we started selling more subscriptions, so that’s when we evolved from the concierge MVP to a product. We started selling subscriptions and expanding our client base, and going from a decreasing amount of services to an increasing amount of product revenues. Yeah.
Andrew: All right. So things are going well. And then you say, all right, enough of this cheap software we can find online for 50 to 100 bucks, or even the simple Iranian software that only cost us $15,000. Let’s really spend real money and see what we can get. So for version 3, how much did you spend and what happened?
Guillermo: Yeah. Version 3 has cost more than a million.
Andrew: More than a million Euros. Okay.
Guillermo: Yeah. Yeah. And, yeah, that’s now running. So at this point, just to give you an idea, our software is being used by, monthly, about 16 million consumers that view our catalog. These are our customers’ customers.
And we have 300 million international retail clients. Mostly, we operate in Europe still. But we work with a European counterpart, internationally, for example, of Walmart. So that would be the Metro Group. Metro Cash and Carry. So these kinds of these breeder companies.
Andrew: So it worked out.
Andrew: The third version cost more money. But what’s one of the magical features that you got when you spent a million as opposed to 15,000?
Guillermo: User friendliness.
Andrew: Ah. Okay.
Guillermo: Reliability. In our case, reliability is very important. So the catalogs are used by our consumers’ customers, right? So you have a consumer. You get the new weekly ad, for example, a new catalog.
They shop nowadays from these catalogs, so that means that if Walmart, for example, is shooting out an email, and, in your case, like, Target is also sending out an email, our platform must be as fast and as responsive, let’s say, and different from if there are two consumers on our catalogs or fifty million.
Andrew: I see.
Guillermo: And, you know, we provide those guarantees in order to provide an excellent consumer experience while shopping in the catalogs. And optimizing the engagement and conversion in the end for the retailer.
Andrew: I wonder how do people see this calendar. First of all, let me describe it to people as best I can. I’m looking a catalog from a company called Blocker [SP]. It’s just chock full of images the way the paper catalogs would be as opposed to the web where you just see one image per screen and you move. This if just full of stuff to look at. I get to click a button and flip over to the next page. And flip over again to the next page. Each page is just full of items.
If I mouse over any item and the price is right next to it. But if I mouse over any item, I could see something like more information. I can click on it and then everything quickly gets whited out and the focus is on the one product that I looked at. In this case it’s a Dust Buster vacuum.
I read a little bit of it. It all happens like that. I just click and it works, and then I click the Buy button and I’m taken back to Blocker.ml where I can buy on their website if I click at it. And I don’t read Dutch. I’m just trying to do my best with it. But if I click, I guess, I can add it to the basket. I can add it to my Visa, my MasterCard etc. But the experience that you create is the catalog-like experience where there are lots of items on the page; where I can mouse them over and only get information about the one that I care about and mouse over, right?
Andrew: Basically, the catalog, the functions they provide is the discovery face. I mean, a web shop is awesome once you know what you are looking for. It is very functional. Let’s say for example I want to buy a new iPhone 5X. You go very functionally and look at where to find the cheapest. Or you go to Target.com and you go through the menu to phones, Apple iPhone V.
With visual catalogs, let’s say they perform another function. They’re all about discovery shopping. So, basically, these are, let’s say, these catalogs are sent through Social Media or through the App or through email marketing sent to the customers. Basically they go through these products and they discover new products and promotions that they would normally not be looking for.
Guillermo: I see, so, when I’m sitting on Amazon.com, I’m going specifically, to look for diapers and specifically to look for a book. But when I get a Blocker catalog, I’m just kind of flipping through it and I can see that there’s a wristband that I wear that tracks my running and my sleep. I can see there’s a vacuum that does something especially clever. I can see there’s a coffee maker for 59 Euros that will make my espresso instantly, I see. So it’s the fun of discovering something that you wouldn’t necessarily think that you wanted. So, how are they getting to consumers? Are consumers going to Blocker and blocker.ml and getting the catalog? Or is it coming to them via email? Or what?
Andrew: Basically that’s the nice part, so, two things that are interesting about that. One the channels, our platform provides them the possibility to create a responsive version that works perfectly on any desktop and any browser. But also, on mobile devices, like tablets and Smartphones. So we automize the catalog experience for almost every device. And we try to make sure that the devices are the best they can possibly be.
And next to that we provide them with the possibility to automatically distribute these catalogs through their marketing channels. So automatically, our platform distributes it to affiliates that they might have, to their mobile apps, to their Facebook pages.
Andrew: I see, and then the affiliates get credit for sales that are made through the catalog that’s sent?
Guillermo: Could be, we don’t care about the business model. So, I mean, we’re business model independent, so the business model doesn’t…
Andrew: If I had affiliates, I would still need to put an affiliate code, affiliate links into each catalog. You guys would power that?
Guillermo: Exactly, we just make it easy for you to logistically do this.
Andrew: So if Mixergy has, say, Master Boles [sp] as an affiliate and we gave them our catalog. And someone from Master Boles clicked on one of the articles and then bought something. Master Boles would get credit and the link that would give Master Boles credit would be put in by you?
Guillermo: Exactly, basically, what we do is we would make it easy for you to do this centrally. And to distribute centrally without having all the manual labor, in a format that works on all these channels and basically the whole payment of the affiliate would go through an affiliate program or something that you already have in place.
Andrew: This is beautiful. By the way, I didn’t even think to look on the phone. But when you said with such pride, it works on all devices. I said, ‘let me see what it looks like on a phone.’ Because I know it looks good on a tablet. This is really clever because, I don’t know that people can really see it, but you guys are going to have to look on your phone. Here I’ll show you. So this is the catalog, right? And if I click on an item automatically it pops up, right?
Andrew: But there’s no, this is Safari? There’s no address bar. You get rid of that, right?
Andrew: But it is Safari that I’m using, isn’t it? Let me see.
Guillermo: Yup. It’s the browser.
Andrew: I double click Safari.
Guillermo: So maybe just a side note because the funny thing is you will see that the catalogs resemble at this point still a very close, have a very close resemblance to the paper catalog.
Guillermo: The thing is…
Andrew: I think it does kind of work on my screen, right? People can see what I’m doing here and then if I click on that item immediately something pops up and I can buy it. I see. Wow.
Guillermo: Yeah, so basically we already, I mean we’ve been trying to develop the, you could say, catalog of the future and we have already products in place where we don’t have a catalog that looks exactly like the paper version more like Pinterest, like catalogs like that, targeted and personalized. But, we find out while we were testing was that in some way consumers are so used to the weekly ads, how to go through the weekly ads and through the catalogs in a certain way that, actually to translate to online actually works very well.
So it was very difficult to change the, to disrupt the pattern and say okay, we’re going to do this completely, you know you’re used to going through circulars or weekly ads and you know how to flip through the pages and get this presented to you, so we already tried to disrupt that a little bit. It works at this moment still less well so we took a step back and said okay, let’s not try to fight it. We’re going to try to use it and very slowly develop the catalog of the future.
Andrew: I get it. When I go through ThinkGeek.com I love looking at the different crazy thing that they have. The gadgets are what I’m really into, but it’s a lot of clicking around. I wish that it was just as easy as flipping through. So I never saw this software before and I’m looking through the list of people who use your software and its sites like ReclameFolder.nl, blokker.nl, praxis.nl, Spotta.nl, right? These are services that use you; VD.nl. Is it that it’s mostly Netherlands companies, mostly Dutch companies and not a lot of U.S.?
Guillermo: We have some customers in the US but initially, I mean one of the strategies that we followed being self-funded is focus. You know? You have to focus so initially we decided to go for market leadership in the Netherlands or at least for a very strong position here in the Netherlands.
We achieved that so when we started to build our new platform two years ago which we now finished it was with ambition to take that internationally and now I would say that about 85% of our customers are in the Netherlands and this last year we’ve been growing our customer base from almost zero to 15% and we’re not, let’s say, accelerating that. So…
Andrew: I see the UK is using you. For the U.S., here’s what I see:
Andrew: Bartsmit.com, I don’t know them but…
Guillermo: This week we closed our first customer in Lebanon.
Andrew: In Lebanon?
Guillermo: Yeah, so…
Andrew: You’re really now going all over the world.
Guillermo: Yeah, now it’s starting to, the nice thing also is we have like the bigger customers. One of the biggest customers we have is Metro Cash and Carry. Like I said, they rolled our server out in 18 countries. So that’s nice to see also. You see that you have Chinese consumers using up in China, in Indonesia, you know, so it’s starting to spread.
Andrew: All right, so, last year revenue was $2 million?
Andrew: I see. So it seems that the advantage of being in a small market like the Netherlands is you get to go in there and focus on it where the rest of the world might ignore it but is one of the disadvantages that it’s still a small market? That if you were a U.S. company and you had the same market share here in the U.S. that you’d be doing gang buster business?
Andrew: Yes, so that’s the issue? Are you planning on coming here to the U.S. at all?
Guillermo: Yeah, of course. So…
Andrew: Okay, I mean actual office and come in here and set things up?
Guillermo: Yeah, I think, I mean, now the next step is, that’s the good thing about the Dutch people they’re also very entrepreneurial and internationally minded so our ambition obviously would be, I mean, we love what we do. We would very much like to roll that out internationally. A big challenge with the U.S. is exactly what you meant, it’s a very big country. It’s also an expensive country to expand to but, I mean, it’s high on our target…
Andrew: It’s stunning, you know. Frankly if I hadn’t touched it myself, I would have thought what they’re doing is just catering to backwards companies that want the circular. This is going to die. But when you play with it, anyone out there who wants to check it out can just go on over to Publitas.com and see. P-U-B-L-I-T-A-S.com and see what I’m talking about. What’s a good example on there? Actually, there’s probably a demo. There’s a demo right? Yeah, there’s a demo where people can see it.
Guillermo: Yeah, there are several demos on the website.
Andrew: Yeah, there it is. Look how far you’ve come. I heard you started out just working in a living room, right?
Guillermo: Yeah. So this was the living room of the apartments that, like I said, we rented. Or, that I rented. So the one that helped us was an apartment/office and that was already an expansion from starting in the bedroom, so…
Andrew: [laughs] Congratulations. What’s the best part of having made it?
Guillermo: Of having?
Andrew: Yeah, of having made it. You’ve got a company. It’s profitable. It’s bootstrapped. It’s growing. You’re making people happy. The software works. You can take a step back and feel like even if I, Andrew, start investigating and looking for mistakes it just freaking works so you can be really proud of it. What’s the best part of all this?
Guillermo: The best part is actually that it’s not finished. I mean, to be really honest, the nice thing is about going international, getting new customers, building even more profit base, maybe doing [??]. You know, I don’t know.
Andrew: It’s the world of possibilities ahead of you. That fact that it’s not done and you can keep creating.
Guillermo: Yeah. And basically the way we look at work, we’re very professional. We have a customer satisfaction of 95% but we try to see work not as work. So we cook here, we cook at the office everyday depending on who wants to cook that day. We have this roster so we cook organic meals so we have, you know, very good lunches. We consider this looking at it like, okay, we want to make an impact, we want to build nice things, we’re passionate about quality and this is a good way to make money and to change the world.
Andrew: You know, I’ll tell you where my mind just went. But if you saw my eyes suddenly disappear it was to see how do we even find you? And I see how we found you. Someone named Arka der Stepanian just filled out our forms. Volunteering, not volunteering, actually, yeah, volunteering, just saying here, this is a guy you should be interviewing. Who is Arka?
Guillermo: Arka is our marketing mad scientist so he’s responsible for spreading the word out there.
Andrew: I see. And he saw our site and said, you know what, this is a good fit for our founder and put you in touch with us. Boy that form really worked out in this case. I never would have found you otherwise. I went back and I said whatever we did to find you we have to do more of because first of all, you’re bootstrap. Those kinds of companies are harder to find because you’re not spending a lot of time on TechCrunch and you don’t have a venture capitalist who’s promoting you endlessly.
Second you’re outside the U.S. which makes it harder. And third you’re still involved day to day in your company which means you’re too busy to be out there all the time. So it looks like the form that we have up on the site is incredibly powerful. All right. For anyone who’s listening to this I’m going to give you a couple of things as a follow up. First of all we talked a little bit about the minimal viable products, specifically the concierge MVP where you do things for your customer that your software will eventually do for them.
And the reason we want to do it is so that you foresee if people want to buy it and second so you can learn what they want. What features they really want before you go and create them. Well the person who invented that concept is Eric Ries and I really urge you to go and look for Eric Ries’s interview on Mixergy. Not only do I say it’s one of the best interviews I’ve ever done and one of the best he’s ever done. His wife told me. We were having dinner and she said, you know, it was one of the early interviews with him and I listened and you really got it. You got it back then and I urge anyone out there to go and listen to that interview with Eric Ries.
And second I got this BBC reporter who’s been giving me some feedback over the years. He said look, Andrew, be careful when you’re being too excited about a product and I’ve scaled it back. But I believe if you go to, and there’s no reason, no incentive, I don’t have an affiliate program, he’s not looking for more customers here, but if you got to Publitas.com and click on that view example you’ll see why it’s technology that’s worth being excited about right now.
I don’t know what that first version looked like, but I see what this one looks like, and it’s really pretty freakin’ cool. Congratulations on building so much by starting out with so little. Thank you. Thank you for doing this interview.
Guillermo: Thanks a lot, Andrew. Great.
Andrew: Thank you all for being a part of it. Go out there, build something, and come back. Let me interview you.
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