Real lessons learned from a startup that took risks – with Jason Shen

Jason Shen is the founder of Ridejoy, a community marketplace for long distance ride shares. I invited him here to hear how he built up the company and what happened afterwards.

He is also the author of a book called, Winning Isn’t Normal, and he has a blog called, “The Art of Ass-Kicking.”

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About Jason Shen

Jason Shen is the author of Winning Isn’t Normal.

Raw transcript


Mixergy’s audio transcription is done by Speechpad

Andrew: Hey there, freedom fighters. Both hands, hi. My name is Andrew Warner, hey, and another for…excuse me, and another set of hands there for my guest, Jason Shen. Let me go back to the beginning and start off by telling you, I’m Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart.

I love entrepreneurs. I love people who take risks. I love people who succeed after those risks, but people even who fail. If they take the freaking risk, I admire them like the start of that Nietzsche book, “Thus Spoke Zarathustra” where he starts of by praising the man who was on the high wire and fell, because he took a chance.

I feel that’s what Mixergy is about, and I feel that’s what entrepreneurship is about, and I feel that’s what our startup community is about. When I read about the closing down of Ridejoy I was both disappointed and curious. The founder of the company was good enough to not just say, “Hey, you know what, I’m walking away, and embarrassed by this thing,” but he said, as a team actually, I believe they said, “We’re going to teach other people what we learned from this so that we leave the entrepreneurship community better off than we found it so that we pay back to the people who were there before us.”

Frankly, I also believe when you do that you also help yourself by setting up a reputation for yourself, by also being the kind of person that other people want to work with in the future. Anyway, I read that post, I got disappointed, I got excited, I said, “We have to get the founder on here,” and as a team we worked together to get him on.

As I said earlier, his name is Jason…how am I mispronouncing Jason today? Jason, Jason, Jason Shen. He is the founder of Ridejoy, a community marketplace for long distance ride shares. I invited him here to hear how he built up the company and what happened afterwards. He is also the author of a book called, “Winning Isn’t Normal,” and he has a blog called, “The Art of Ass-Kicking.” You could find the blog at JasonShen.com.

One last thing before I get into the actual interview. This whole shebang over here is sponsored by Scott Edward Walker. He is the entrepreneur’s lawyer, which means if you’re an entrepreneur or you need a lawyer, go to his site, WalkerCorporateLaw.com, and hire him. Jason, welcome.

Jason: Thanks so much, Andrew. Thanks for having me on. That little, you know, spiel there about entrepreneurship just got me so pumped up. I think that your enthusiasm makes this so much fun and makes this exciting for me.

Andrew: When I started doing these interviews, the thing to do was fling the startups into the dead pool, and it was like “Hey, here’s another guy in the dead…”I was never into that. I celebrate any entrepreneur who is going for it, and I want to learn. Speaking of exciting moments as you said, there was one exciting moment where you got a call from the founder of Y Combinator, Paul Graham. Do you remember where you were when he called you?

Jason: I remember exactly where I was, Andrew. I was with my two co- founders and roommates at the time, Calvin Wang and Randy Pang. We were at Calvin’s mom’s house. He grew up in Saratoga, which is in the south bay of California, which is very close to the Y Combinator headquarters in Mountain View. So we had had our interview earlier that day. We had spent ten minutes going through our big idea, and then we had to wait.

One of the things about Y Combinator is that you don’t have to wait very long. You get a word back that night, or that evening. The day was going on. I remember one of our friends had come over, and I was talking to her. I wasn’t sure if the interview had gone well, so I was a little nervous, and saying, “What would I do if I didn’t get in,” because I had already quit my job. I was pretty nervous. Me and Randy were sitting there too, and Calvin was in the house somewhere.

Then, the day is starting to get dark, and I see Calvin kind of coming out the side door. We’re sitting outside. It’s kind of warm because it’s in March, April in California. He’s on the phone, he’s like “Uh-huh. Uh-huh. Yeah.” Calvin has got a very sort of like flat tone, so you can never tell what he’s really thinking or feeling. He’s got a flat tone. He’s like “Uh- huh. Yes, would it be okay if I put you on speakerphone?” It’s like “Why? Who is he talking to? Why does he need to put him on speakerphone?”

He puts him on speakerphone, puts it down on the table, and there’s Paul Graham’s voice coming out of the phone, and he’s like “Hey guys, we’d like to fund you.” At the time, we had talked about among ourselves saying like, “Yeah, you know what we should do is we should ask for…you know…if he’s going to ask for seven percent we should ask for six percent, and negotiate a little bit.” Nothing to lose, right? Nothing to lose.

That moment when he offered seven percent for, you know, $20,000 or something like that we were like “Okay.” He was like, “Do you need time to think about it?” We were like “Nope, we’re good.” He was like “Okay. Great. We’ll see you June 1st.”

We hung up, and then we all just like gave each other like the biggest high fives in the world. You know, I was a gymnast. I was a gymnast for 16 years. I helped win a national championship, but I have to say that there has never been a particular single moment where I was as excited as this moment.

You know, I think it’s funny because things like Y Combinator, things like raising venture capital isn’t necessarily something that we’re supposed to celebrate because it’s only a step in a journey, but then again every step is only a step in the journey, getting a customer, closing a deal, whatever it is. Everything is a step, and that particular step was a big deal for us, so it was very exciting.

Andrew: I could imagine. The pitch that you had was no Ridejoy as we knew it.

Jason: No.

Andrew: It was something else, a combination of two different ideas. What was it?

Jason: Yeah, so what we pitched in the interview…what might make more sense is that we started talking about our ideas for applying to Y Combinator in January, this is January of 2011, and we talked about all these different ideas. Eventually, we felt that the idea that we all we really passionate about was something related to the feeling of nostalgia. The feeling of rediscovering something from your past that you forgot about, and then you re-remember, and then you re-love.

The idea that we applied to Y Combinator with was called, “Re-love it,” and what it would do was resurface content that you had previously shared, favorited, or liked, and brought it back to you at a moment when you hadn’t expected it. YouTube video you saw six months ago, you’d probably enjoy it if you watched it again, right? That was the idea, and we submitted that idea to Y Combinator.

At the time we heard back from them, and they said, “We like you. We want to interview you, but we’re not feeling this idea. We don’t think that there’s like a real market for it. We don’t know who your customers are, so come prepared.” We said, “Do you want us to like put together a demo like write some code?” He’s like “No, come prepared to talk about new ideas.” This was a week before the interview, so we said, “Crap, what are we going to do?” We went through this whole, you know, thinking about all kinds of new ideas.

It was like Saturday evening, the interview is on Sunday. We still weren’t sure. Finally, one of our friends who had gotten into YC at the last batch said, “What did you like about the original idea?” We started talking about it. We started talking about ways that we could monetize the original idea. We had these ideas for how you could monetize it like a calendar, a map of all your FourSquare check-ins with calendars, and things like that.

We said, “Okay. What about photo books? Photo books are a physical thing. We could sell them. We could make money, and we could algorithmically generate photo books that were sort of using the same nostalgia algorithm.” We walked into the pitch, and we said, “We are the Mint.com for photo books,” which didn’t quite make sense. It made sense in our head like, “Oh, it sorts and organizes it for you automatically,” but you know, we went on to pitch it, and it sort of made sense to them.

What they tell you in Y Combinator, to prepare for the interviews, is that you’re going to get rapid fire questions, and we didn’t get that many questions, which made me a little concerned. There was some silences. No one was saying anything. There’s Paul Graham, Jessica, Robert, Trevor Morris, Sam Altman, and there’s some silence.

Everyone points…Sam Altman was saying something about…or Paul Graham said, “You could disrupt yearbooks,” and I had never thought about that. I said, “Yes, of course,” but no follow up, and Sam Altman goes, “Oh, you know, I used to be the editor of my high school yearbook, and the software is awful. We could totally use something like this.” Paul Graham and Jessica were like, “Oh, that’s so great. You were the editor of your year…that’s so…you’re so talented.”

Andrew: They’re saying that to Sam?

Jason: To Sam. We were like, “This is like a family reunion. What’s going on here?”

Andrew: I’ve heard that that happens in those pitch sessions, that they help you formulate the idea right there. I think the Wufoo guy said that that’s what happened to them, that they didn’t walk in with this idea. Why do you think they liked you so much that they invited you in even though they didn’t like your idea? If you look at your resume so to speak or your application, what was it about you three that made them say, “We want to invest in these guys?”

Jason: Right. I can talk a little bit about our application, and then I can also tell you about what he told us, because when we got in there, a week after we showed up to YC we decided…or the day after we showed up to YC, we said, “We wanted to change ideas.”

And then we started ideating and we asked him at one point, “Why did you fund us?” And he said, Let me check my notes. And he goes back, and he looks at his notes, he comes back, he says, super enthusiastic founders, fund for the new idea. Which at the time we thought meant fund for the idea we had pitched in the interview, because we had, you know, pitched this new idea from our application.

And then a year later we found out, because they wrote a book about our batch in YC, The Launch Pad by Randall Stross that actually fund for the new idea meant fund for the idea that they’re going to have after they get into YC and decide that the idea they just pitched us is no good. So —

Andrew: You mean fun for them —

Jason: Fund.

Andrew: For the idea that Paul Graham and the team had for —

Jason: No, fund for the idea that we would come up with next.

Andrew: Ah.

Jason: The next idea, not even the one that we were talking about —

Andrew: Oh, fund for that. Gotcha. Gotcha, right. So it was the enthusiasm? There was nothing in your background that made them say, they built this, so they can do –? Was it, was it what you were doing in college with gumball capital?

Jason: Yeah, so I think that there are some interesting things about our background. So Calvin and I both went to Stanford, and Calvin was a computer science major, I was a biology major. But we first got in touch when, during my junior year, I had gone through this awful knee injury and I was out of gymnastics, I wasn’t spending as much time in the gym.

And I got involved in a group of students who were working on a project related to microfinance, which is the sort of act of providing financial services, especially small loans, to really, really poor people who often don’t have collateral. And it makes a big difference in their lives. And this was just kind of getting started, Kiva.org, which many of you have heard of, was just getting off the ground, and we were excited to sort of do things related to that.

And so me and Calvin met and this student activity, the student project, turned into this full-on 501c3 non-profit that I became a co-founder and the executive director of, and ran, and we ran these challenges across college campuses to raise money for microfinance. So that was our first interaction, our first time together. So in a way, we kind of started a startup, you know, a non-profit startup while in college. And so I think that they really liked that.

Andrew: And the deal was, you gave each team some money, and you challenged them to see how much more money they could raise?

Jason: That’s right.

Andrew: It’s like your funding them, and asking them to do it. One of the cool ideas that I heard that you guys came up with was, or the students who were participating came up with, was the Tower of Quarters, where —

Jason: That’s right.

Andrew: Where students would pile some quarters and they would challenge other students to come and add to this pile of quarters they were — well, how tall?

Jason: They were trying to make a case that they could create the world’s tallest tower of quarters in this one week period. And I think that worked, because quarters are such a small amount of money, and you can see them stacking up, and after a while you see this stick get bigger and bigger and bigger, and it’s kind of exciting to be a part of it.

They ended up having a stick that was, like, 11 feet tall. You know, not the record, not the world record by any means, but certainly impressive when you just look at how many quarters that is, you know, a good chunk of change. Several hundred dollars when it was all totaled, and —

Andrew: Who raised the most money?

Jason: I think for that challenge, that was run at Stanford and I think they were one of the winners. I think that, actually, there was, like, a high school or a set of high school campuses that raised, you know, upwards of $1000 in their challenge. And so that was pretty impressive. I think what really stood out is the fact that there’s so much creativity happening with these students and we had to give a lot of trust.

We would mail $27 in cash to all the — they would tell us how many teams they had and we would mail them check, uh, cash in envelopes, which I think mirrored the sort of thing that was happening in microfinance, where they’re making loans to the poor, which people would tell them, Forget it. That money’s as good as gone. But, you know, when you lend, when groups, and there’s this reputation and there’s, like, there’s this community effort, those loans actually are a pretty good deal. You know. So —

Andrew: I love this idea a lot, and I can see how it brings out people’s creativity. I can see why that would make the Y Combinator team feel more enthusiastic about you. All right. You get in.

Jason: So, so, yeah. And then the tide in Randy, we, me and Calvin started to live together in San Francisco after we graduated, and we had one roommate who only stayed for a couple months and wasn’t quite working out, and then we got really serious about finding someone we thought was really great.

And we went through a whole series of interviews and ended up finding this guy named Randy, who was a recent Cal grade EECS, electrical engineering and computer science. We lived together for a year before we decided we would apply to Y Combinator, and during that time we became friends. We talked about that in the application process, that we had all kinds of discussions, we fought, we made up, and we figured out how to work together well.

Andrew: Okay. I like that you keep looping them in. I don’t mean to ever discount the other co-founders who are not doing the interview here, but if they’re not doing the interview, forget them.

Jason: Yeah.

Andrew: No, I’m kidding. I try to keep it simple. I know sometimes when I listen to podcasts and interviews I have a hard time keeping everyone straight in a story.

Jason: I understand.

Andrew: I try to keep it simple for the audience, but you’re right. I don’t want to ever leave out the other important people in the team, and Calvin and Randy are just as good as here. You then get in, the three of you, into Y Combinator. Your idea, chucked out the window. Where does this new idea that becomes Ridejoy come from?

Jason: Yeah, so we were a little frustrated when we realized that we couldn’t do this idea, but at the same time we knew that we wanted to do something that all three of us were excited about, and that’s why I bring them up so often is because so much of what we did was sort of decided together.

We decided together we don’t want to do this book printing idea. It’s not software. It’s like a physical business. We’re going to have warehouses. We’re going to be shipping. We don’t want to do that, so okay. I think the one thing we could really get behind is this idea of Airbnb. We loved Airbnb, so many things to love. The community elements of it.

You know, the fact that we’re allowing people to make money, the connections that are [??] travel, and so we started looking at things like what other…Okay, so Airbnb has got like the biggest money making marketplace that hasn’t emerged yet, which is the space marketplace, but what else is there? Is there…you now maybe like skills is one of them. Maybe like…expensive goods was one of them. One idea that we played around with was camera lenses, you know, and lending those around, but I think the rides idea was something that evolved from something we had thought about before the interview.

We had originally thought about this idea of driving down to Saratoga. Calvin lived in Saratoga, and he often was trying to get rides with his friends, because he went to high school…you know, he had high school friends who lived in San Francisco, they’re driving down 101…for those of you who don’t live in California it’s kind of a pain. Cal train, the train system is not good, so you want to get a ride, but it’s tricky.

We ditch that idea the first time around, because we said, “Is anyone going to be willing to spend enough of their time to pick somebody up for like five dollars?” You know, it didn’t seem like economically it made sense, so we kind of gave up on the idea, but we return to it after we were kind of messing around on Craigslist.

Somehow, I don’t remember how we found the ride sharing section on Craigslist, which I did not know existed until that moment. We checked it out. We saw that there were like 100 to 150 posts every single day in the San Francisco bay area. When you’re thinking ideas you want to look for what we call, “Proxies for demand.”

The idea that there are 100, 150 people every single day, logging on, posting on Craigslist…which by the way had no real filtering mechanisms, no maps, no authentication about who they were, no payments. None of these things, and yet people are willing to put up all this effort to do it. There must be more people who would do this if there was a better system in place. That’s what we thought.

Andrew: That makes sense. That took you — you just expressed in maybe three minutes, but it took you about three weeks to come up with that idea within Y Combinator.

Jason: That’s right.

Andrew: Is there pressure while you’re in the group with all these other people around you, building so fast, having ideas? Some of them actually walked in with ideas.

Jason: Some of them walked in with businesses they had been running for a year before they even came in.

Andrew: Did you feel any pressure?

Jason: Oh yeah, we felt a lot of pressure. I don’t think it came from the partners. They were very…as soon as we said we wanted to change our ideas, I mean, they expected it, so they were like “Okay. Great.” We were internally freaking out because Y Combinator is a 10 week program, and we were eating up 30 percent of our time sort of sitting at home, Googling things, tweaking, you know, messing around with gadgets, trying to like get something that we could get started on, and so there was a lot of pressure.

I honestly think, and sort of…we’ll hit on this later, but I honestly think that if we hadn’t had that pressure of the 10 weeks we probably wouldn’t have settled on Ridejoy, but we did because it was like the best of what we had based on the time, and the situations that we put pressure on ourselves.

Andrew: All right, so now you’ve got your idea.

Jason: Yeah.

Andrew: How long does it take you to build the first version?

Jason: It took probably another three, four weeks to get a V1 up. Let’s say, June…so late June. You know, June 21 we set on RideJoy. I think we launched BurningManRides.com August 1st. Something around there, so…

Andrew: Of 2011?

Jason: Of 2011.

Andrew: Okay.

Jason: What we thought was “OK, how do you jumpstart a marketplace like this? The only way to do it is to pick a niche and just kill it.” We had two that we talked about. One was like SF to LA, and the other one was Burning Man. Calvin [SP] Macrovanard had gone to Burning Man a year prior, and he knew that this festival in the deserts of Nevada, 50,000 people go.

There are no real sort of systems to get there. Everyone is kind of sharing rides already, and they don’t have good mechanism to do that. We could get in there, so we looked into it, and we decided, “This is it. This is where we’re going to make our mark. This is our D-Day.” We launched BurningManRides.com, and had it very much sort of culturally fitting the Burning Man ethos when we launched.

Andrew: I see it. I mean the site is still up, and I’ve got a sense of what the business is going to be from this. I think you updated it since the first version.

Jason: Sure, yeah.

Andrew: Essentially, that’s it. How much programming went into matching people up?

Jason: We didn’t in our initial version match people up at all. We just had buttons that allowed you to post either a ride offer or a ride request, and then we allowed people to look themselves for what they were trying to find. You could do some basic filtering about like where you were and where you’re trying to go, but you know it was just a giant list, and we had it sorted by date, so there are enough things there that you were at least not having to read like hundreds.

Ultimately, we got something like 1,600 people who signed up, and 1,200 rides posted on the site, so it got pretty big in just a couple weeks, but you know with that filtering in place it was manageable, and much better than previous sort of systems that existed.

Andrew: A step beyond where Craigslist was, because of the filtering. I think you even had photos, right, so people can see each other?

Jason: That’s right. There’s Facebook integration, so you automatically got those photos, and you could even…yeah.

Andrew: Speaking of Facebook, you needed to…once you launched this you needed to market it and get people to come to this site, right?

Jason: Right.

Andrew: What did you do on Facebook to help grow it?

Jason: Right, and so you know, we got pretty lucky I would say that the Burning Man Facebook Group sort of noticed what we were doing. We were out there. We were trying to Tweet at people. We were trying to, you know, get in the forums, and they saw this.

They just linked it to it on their page, which has 250,000 likes on it, and so immediately it got that pick up. It got maybe 1,000 or 2,000 likes by the end of the whole thing, and so we were really lucky to get that and to have a chart that had any kind of…up into the right. This is what we always talk about.

Andrew: Suddenly just took off, but you weren’t charging, right? It was just…

Jason: No.

Andrew: Okay.

Jason: We were very concerned about sort of stepping on the toes of the Burning Man culture, which is very much a gift economy. Some money does exchange hands, but it’s fairly rare, and we felt that that would hurt our chances of having this service be promoted or used, so we didn’t charge anything.

Andrew: Okay, and people could not charge each other?

Jason: Nope, they had to do it with cash.

Andrew: Bare minimum, you were just up and running. Things are looking good, you now go into demo day, right?

Jason: That’s right, yeah.

Andrew: Why did you turn a cartwheel before you spoke on Mike at demo day?

Jason: You know, we were talking about how our batch was 63 startups, and that was the largest batch that had ever been in Y Combinator to that point. It was like a…demo day was like a two day event. There was like three different breaks. It was a long endeavor, and so a lot of the feedback even when we watch rehearsals was that it is was “So slow, so boring.” You get zoned out.

And so, I think we as a company, we’re always good at finding little ways of standing out, and this was just one of them. I was the one who was going to be doing the pitch, and someone suggested like “Maybe you should like throw out a cartwheel.” I think it was a joke at first, but then we were like “No, yeah, we should really do it. We could totally do this,”

And so when I went out I threw out a cartwheel. The other person is walking back, I’m walking in, and I just throw in a cartwheel, which just kind of throws everybody off and I think I ad-libbed a little something that said ‘You guys looked a little tired over there so I wanted to wake you all up’ and then I launched into my pitch. But, people did not forget the cartwheel.

Andrew: You raised 1.3 million dollars. What is the best thing you did, the most effective thing that you did for raising that money? Because there are so many things that went into it and I want to move on to the business but I think maybe we can cover one thing that you did.

Jason: Yeah. So, I will tell one story which is that we were pitching Owen Van Natta who was early at Amazon, Facebook, leader at Zynga, and we were telling him about our ideas. It was me and Calvin pitching together, which often people would say “Don’t do that, have one person pitch” but we wanted to do it together. We did it. We were telling him about our ideas.

He is looking a little glazed over, not that excited, and I said “Wait, let’s stop. Why do YOU invest in companies? What makes YOU excited to invest?” and he says “You know, I don’t think of myself really as an ideas guy, I don’t really know about the future but I try to invest in people. When I saw Mark Zuckerberg, I wanted to work for him, blah blah blah.”

And I said “You know what, let me tell you about me and my buddy Calvin and how we started a non-profit together. I was a national champion gymnast”, you know just totally changed the pitch and he signed that day. He did not have time to meet again. He said ‘Let’s do it’ and so that was one little piece of a bigger journey, for sure.

Andrew: All right. Facebook gets people into the burningman site, burningmanrides.com. It is time to keep on growing. You’ve got some money in the bank. You got an idea that works, that’s been validated through Craigslist. It’s time to get users. You go back to Craigslist with a hack. What do you do? What is the first thing that you do?

Jason: The first thing we did was we said “Okay, there must be a way to sort of insert ourselves into this stream.” When you think about traffic and growth, it’s coming from somewhere, it has to come from somewhere else. There are sort of streams that exist. There is the Facebook stream. There’s the [??].

And then there is the Craigslist stream, the people were on Craigslist and we wanted to find a way to exist there and draw some people in and Craigslist, similar to burningman, has a bit of an ethos of “We don’t want commercial activity, we don’t want people who are just there to try to make a profit” so we had to be careful and what we decided to do was come up with a calendar because I cold-called about 50 people who ride-shared on Craigslist who had left their phone numbers over time and had conversations with them.

One of the things they said that was really challenging was finding rides that matched their ride because some people would say ‘Thursday’, some people would say ’02/17′, some people would say ‘next week.’

Andrew: So, it’s not enough to find a ride from San Francisco to L.A., it also needs to be on the date that you are going and by calling people up, you discover that. Did it take a long time and a lot of phone calls to figure that out, or did you find that pretty soon?

Jason: I think it was important to do a lot of phone calls because we were fairly new to this space from a personal usage perspective. I think that one of the things that we validated quickly, we thought the number one problem would be flaking, people not showing up. We actually quickly found that that was not a problem that people made the arrangements and people showed up. So that happened pretty quickly but I think it was good to do more just to really get that broader perspective.

So we did this hack where I looked at all the rides in the last three days, I put them into a spreadsheet with the link to the URL, sort of where it’s going, try to figure out the date myself, and produce this little document that we pasted into Craigslist and we said “List of rides going out of San Francisco” and we had a little letter at the top that said “Hey, my name is Jason. We just wanted to help the Ride Share section. We are working on a little project. Check out this calendar we made.”

All true things, maybe not everything that we were doing, but all true, and then we posted this calendar. And we waited. I said “Email me if you have feedback or thoughts on this.” We immediately started getting a lot of messages. People were emailing back saying “Oh, this is so great. I love that you made this. This is what the Ride Share section needs. It’s so hard to find rides.”

You know conversion rates are crazy. If three people write you a message, three hundred people looked at it. We knew that this was [??], so we started to find ways to automate the system. We hired one of our users part- time to start to collect those [??] on Craigslist.

Andrew: Jason, were you linking those posts to Craigslist or were you at this point moving some of those entries to [??].

Jason: Right at that time it was only links back in to Craigslist.

Andrew: Okay.

Jason: Then what happened over time was that we built a web scraper that scraped the rides, collected them. We started to set up a virtual team in Vietnam that would sort of read it , was it ride offer , ride request, what day was it, and sort of like that. Understanding, [??] it , and then parsing it into our own database.

Andrew: Was it taking all of the craigslist posts from all over the country or was it West coast at this point.

Jason: At this time, it started in San Francisco, but as we expanded, we started scraping all of the cities that we were trying to serve.

Andrew: So you scrape it and you have these guys help you out by making sense of the data and putting it into Ridejoy. Now Ridejoy essentially has the same data as craigslist , but in a much more organized way , much more user friendly way, so you go back and your posting those calendars , but this time those links are going back to Ridejoy.

Jason: That’s right. The links go back to Ridejoy. It’s almost like an i- frame. So you’re seeing it as it was in Craigslist. People eventually started to post their own rides , then you had the Ridejoy rides right there too , [interrupted]

Andrew: And they were posting on to craigslist too. Additionally , we [??] so that after we posted a ride on Ridejoy, we said “Hey , why not put it on Craigslist to add additional eyes on it?”, and we sort of did something where almost everything was filled out and all you had to do was press send , they still pressed send , but we sort of drafted an email for them that said “Hey , I’m a friendly 20 something year old who’s looking [??] , and then we sort of based it off of what we already knew , what they already told us.

Jason: So they didn’t even have to, if they clicked an email link in craigslist , they’d have to type out that kind of message and basically sell themselves as good ride companions , but on Ridejoy you pre-populated most of it based on what you knew. All they had to do was hit a button and it pre-populates your email and adds a couple other things based on Ridejoy.

Andrew: That’s right.

Jason: Boom. I see what you’re doing. A lot of this is, as the original idea was , inspired by Arabian B.

Andrew: Yeah, the Arabian B definitely did a lot of things on craigslist because somebody was so massive host back, that I don’t think they did any calendaring. The one thing they did that we definitely did not do was pretend to be someone who was a regular person and then messaged other people who had sublets and said “Hey, you should check out this cool site.” We didn’t do that and we felt like that was disingenuous and we felt that we we’re trying to be clear. We said rides brought to you by Ridejoy and things like that.

Jason: How much of Arabian B’s story is shared in Y Combinator, where much of this story developed , were other people talking to you about it? Are other people saying, “Look, here’s what Arabian B did, you should learn from your fellow Y Combinator.

Andrew: I think some of what they were doing had been publicized in various websites. As part of Y Combinator, there are these Tuesday sessions where they have entrepreneurs come in and our batch [??] come in, and then the folks did come in , and they spent a really long time with us. They went through the story from beginning from where they were then.

And I just remember thinking “Man, they deserve all the success that’s coming to them because they were at the bottom of the barrel at various points. It was very inspiring. It was much more about inspiration than particular tactics I would say.

Jason: I want to tell anyone in the audience who is listening to this, they should go back to the Mixergy interview with Arabian B, will you hear this story early on. I mean they were so new. I remember emailing, I think it was Joe, saying “Joe, you know my site, you know the emails here, was Arabian B big enough yet for us to do this interview?” Then hearing back and they back then were so much smarter than I even realized. You can see it in the interview. You can see it in the way they even approached me.

I think they were one of those entrepreneurs who even gave me the message, the ideas that they were going to share with the audience, because they were so aware of what worked for them, and so determined to talk about it. Things like messages that are now a little better know like “Do things that don’t scale.” The stories behind it too that they shared are fantastic. They’re a great company to learn from.

Jason: Yeah, I would say so. It’s an amazing story, definitely.

Andrew: You guys should go check it out on Mixergy. Just type in “Airbnb” and listen. Let me do a quick plug because I think it relates to this next thing that happens to you because of Coachella. A lawyer comes in and —

Well, we’ll find out what happens, but first I should talk about the lawyer that sponsors Mixergy as I said earlier on, Scott Edward Walker. He is the entrepreneur’s lawyer. If you have a lawyer who doesn’t understand your space, he’s not going to understand some of the things that happen like what you’ll hear in a moment, and freaks out, you’re doing yourself a disservice.

You need a lawyer who understands where you’re going. You need a lawyer who understands your environment. You need a lawyer who can help you figure out where you’re going and how…this a whole lot of going.

I guess, because it’s Rideshare. When you get started, if you don’t set your company up right it’s going to make it harder for you to raise money, harder for you to sell it. It’s going to be harder for you to add…fund…excuse me, funders, partners. It will be harder for you to break up with them, unless you do it all right from the start.

If you want to do it right from the start, check out WalkerCorporateLaw.com, talk to my friend Scott. If you don’t, there are tons of other lawyers. Just type into Google search, “Lawyer for startup” or “Lawyer, I need…”what is it? Just “Lawyer,” and you’ll see how many out there. They’re not all good. I recommend Scott. This thing that happened to you, you said, “All right, Burning Men is working…”

Jason: Yeah, so we started to do partnerships with other events, and so we would go out. I had this big list of festivals, music festivals, art festivals, yoga festivals, and we were just going out there. I’m calling them up. I’m sending emails. I’m trying to get them to basically…we would make a custom page for them, Ridejoy.com/TadasanaYogaFestival, and they could direct their attendees there.

We were basically just saying, “We’ll build you a free Rideshare portal. You will love it, and we’ll get new users. It’s sort of a free trade. We’re going to do a lot of work, and you just have to promote us.” That worked to varying degrees. I think that uptake wasn’t always right.

When Coachella came around in April of 2012 at this point, we said, “This is one of the few festivals that’s as big as Burning Man,” you know, something like 40,000 people are over…and I think it’s the first time they split it up in two weekends. We built out, but we did the full on thing. We did the CoachellaRides.com. We had a big picture of the festival, and we just started promoting it.

We said, “You know what, those guys, they’re not going to want to work with us. It’s…they’re too, whatever. We’re just going to promo it ourselves. We can run ads against Coachella. You know, we know people who like Coachella.” We started doing that, and then we got this…first an email, and then a phone call from one of the lawyers of…I forget it’s like LimesGate or whatever the parent company is, GoldenVoice or something, and they said, “You need to take this site down.” We said, “Why?”

They said, “This is a trademark. You’re infringing our trademark.” You know, he was good enough to say something like “I understand what you’re doing is helping people, but you can’t run this site anymore,” so that was a little concerning. We were getting some uptakes, and we didn’t want to shut it down unnecessarily. We contacted the Y Combinator legal team just to get a little bit of advice.

I think I agree that if you don’t have a lawyer that understands what you’re doing, and that you really trust and can count on it’s very scary. He was up in arms. He said, “That’s ridiculous. They can’t do that,” and that gave us some confidence. We looked into it, and we realized that Coachella is both, the name of a festival and a place. A location and…

Andrew: Of course. You know what, that didn’t even occur to me. Of course.

Jason: Right.

Andrew: Of course. Just like you can say, “Ride to LA,” you should be able to say, “Ride to Coachella.”

Jason: Right, and so what we did is we had this banner that said…that was a picture of the festival and it had the words, “Coachella is a three day event.” We just changed it. We had a picture of the desert, and said, “Coachella Rides,” and we said, “Rideshare to Coachella, a part in the Southern part of California that’s this many acres, that’s home to wine vineyards.” You know, we just…we didn’t do anything else that…he called us back, we said, “You know what, actually we don’t have a problem, because we’re not ride sharing to Coachella anymore. We’re just ride sharing to the area.”

Andrew: To Coachella Valley.

Jason: He was kind of pissed, but nothing happened and I think he realized there’s nothing that he could really do and it’d be too late by the time he did anything. So that was our little touch out of that mess.

Andrew: And that was effective for you because, like you said, you could buy ads against it. The only way you could afford to buy ads is because you were starting to generate some revenue, right?

Jason: We were starting to generate a little revenue. We had implemented by that time a payment system and, you know, the way it worked is, and one of these challenges that you face when you’re building a startup is how much do you try to conform to the existing behavior that your users have and how much do you try to kind of push them into a different way of doing things. And often the challenge is also you have this core group of existing sort of early adaptors and then you got the main stream market and they sometimes have different styles.

So the early adaptors like to do things at cash, mainstream market much more comfortable with credit cards online. So what we did was we split the difference, we said when you posted a ride you could accept money, either cash only or credit card only and we set it in the middle. So we said, you know what? You have options.

And amazingly a lot of the people would actually switch their link over to cash only and we were like what are you doing? Don’t you want to get paid upfront and they said similar to the no flaking thing, they said I know I’m going to get paid. I’m going to drive to a gas station and they’re going to pay me right there, it’s not going to be a problem.

And then the new users who used to pay online, they got the credit card. They would do it but it was a fairly small portion of our total user base. So it wasn’t a lot but we wanted to build that traction and investing in a little bit of advertising was worth it.

Andrew: That makes sense. And so if they were doing cash you weren’t going to take a cut of that. If they were doing credit cards then you’d take a processing fee.

Jason: That’s right.

Andrew: Got it. And were your ads effective? Where they cost effective?

Jason: I mean, I think cost effective, it was definitely not a cost effective if you look at the idea that, you know, you sign up, let’s say it was like $1.50 per user. The chances that they were then going to post and then going to find someone who matched and then pay with a credit card, you know, it didn’t work out that way.

And so that was not something that would have been scalable for us but with this marketplace, and this leads to some of the challenges to why this did not succeed, was the fact that this is not a frequent use case product. If we had acquired this person one time and maybe they posted, they found someone but they’re going to post again tomorrow, the day after or next week, a couple of times in the next couple of months, in the next month, then they would probably match eventually and they probably would make us money and make us more money over time. But you might go to Coachella and you might not need another ride for six months.

Andrew: Right.

Jason: And so that was a real challenge and we also felt this was a sink or swim proposition, like a shark. If you’re not active then you are, you know, quickly the volume of rides on the site goes to very low, you get a reputation for having no rides on the side and no one goes there and game over.

Andrew: I see. By active meaning this community isn’t going to keep perpetuating itself. You have to keep bringing new people in. So that’s one problem.

Another problem is many people wanted to pay cash, as you said. Another problem was I’m on the site right now, Ridejoy.com/Coachella and I see someone offering a ride from Palm Springs to Coachella for $5. From San Diego to Coachella for $20, Los Angeles to Indio for $25. It would cost me, tonight I’m going to be doing these interviews until about 9pm. I will get into an uber or lift or sidecar. It will cost me maybe $10, $15 to get home. These guys are charging for so much further and that’s like a 4 mile ride for me.

Jason: That’s right.

Andrew: This is unreal.

Jason: Yes. And that was one of the weird dynamics about it is that short distance rides, really short distance rides can be really lucrative. Medium distance rides are maybe not worth it and then long distance rides sort of become worth it especially if you stack your car, right? So there’s some people who will go and fill a car, 4 seats, $45. You know, they just made $180 and, you know, you can start to see why there’s some economic value in there but there’s a lot work involved as well.

So the problem is that you have to look at the alternative which is a bus, right? and a bus probably is going to get you for $25, you know, whatever it was like, San Diego to Palm Springs. It’s probably around that, you know, and so there are some challenges on either end of it. But you know, it’s comparable.

Andrew: So you’re still trying to figure out revenue but it’s ok, you know, you just want to get some kind of revenue model in there. The big focus is on getting more users and getting continuous users. Craigslist seems like of all the things you did, the most effective.

Was it effective? Do you have any memory of the numbers that you were getting from Craigslist?

Jason: Well, so let’s see. Like we [??] it’s about 50% of our new user growth. We were growing maybe 25%, 30% a month for 8 months straight up until August. At one point we were getting something like 300 ride posts a day. I would say that maybe that’s like 200 users posting those 300 rides. Does that make sense? Let’s say it’s about the same amount of users because some users don’t post, some users post more. So 300 unique users a day, so that means 150 users coming out of Craigslist every single day for a period of time.

Andrew: All right. So 150 new users meaning people posting rides?

Jason: Signing up for the service and then, you know, some number of them…

Andrew: Posting some take.

Jason: Right.

Andrew: I see.

Jason: Yes, yes, yes. 300 new users a day because 300 rides a day, 300 users a day and we were [??] $1 o convert from Craigslist to RideJoy if you estimate the whole operation that we were running. It’s free because we weren’t paying any money but we were paying people.

Andrew: I mean, the scraping operation in the data entry and so on. Okay. So you’re looking for more places. You launch an iPhone app.

Jason: That’s right.

Andrew: And one of the challenges with the iPhone app was too many features. What extra features kept you from launching it ride or made you feel like it was too much?

Jason: Yes. So we sort of put all our thoughts about [??] into this iPhone app which we thought, sort of you get into this mindset where you think something is going to save you and then you want it to be perfect. You know, our app, I still think is one of the most beautiful apps on the site but it did a lot of things.

So there are the natural things that you can do on this site which were like post a ride and message people and kind of search. And then we were starting to think about do we want to have a search on the app or not or do we want to do something else. And we decided to do more of a matching system so everyone had to post a ride, no one was allowed to search and you had to change some of the dynamics of your app to do that.

When you posted a ride you could include things like have snacks, have Wi- Fi, preference for a safe driver. So those added those little UIL elements. We had an integration and car dial which allowed you to take your credit card through snap a picture of your credit card, which is very cool technology but, you know, was it strictly necessary? I don’t know.

And then we had a sort of section that was called like Popular Destinations. We were trying to give that feel. We had a similar thing called hubs on the site where you could kind of go into a hub like an [??] area and see the activity so you could feel something happening. And we, you know, iterated a couple of different types before we came up with a system that we liked for it.

So we kind of just repolished and reworked the app again and again until we, you know, felt it was ready to go and we also felt like God, we got to get something out there. And we probably should have shipped in April, we ended up shipping in August.

Andrew: Oh, wow, okay. I can see how adding a Wi-Fi option might be a little much for example. How many people need Wi-Fi in the car? I can also see one of the screen shots here. You allowed people to indicate whether they had an auxiliary connector or not.

Jason: Right. so again, we started to have a little fun with it and, you know, I think that’s fine generally but, you know, in a strategic point of view is not what we needed to do.

Andrew: Okay. But I see why mobile made sense for you, right? Everything is moving to mobile but specifically rides are, I’m thinking of examples like if I had to use my computer for uber it just wouldn’t work, right? I would have to come back to the computer and look for a car and then go downstairs. So I see mobile. You made the right decision to get into mobile….

Jason: Right.

Andrew: . . . How did it work out?

Jason: Well, we teed up a lot of press, and the press went well. So we had, you know, six different pieces right about us. We put up . . . we invested in some in-app ads, like pay for downloads, and we were able to juice our metrics so we could be top 25 in the app store for free aps which is a whole process . . .

Andrew: How did you juice it, what did you do?

Jason: So we used a service called, I can’t remember, they’re one of the biggest ones out there where you basically pay something like around a dollar to a couple dollars per download, per install. The install only counts if they open the app one time after they’ve downloaded it. It’s usually in some kind of game where they have coins in the game and you can either buy coins or earn them, but it takes a really long time.

Or you can download this random app, so there are a lot people who are randomly downloading apps and opening them one time to get the 50 coins that they needed it for. So it’s a weird economy, but what you hear is that it’s really valuable to be in the top 25 of the app store. We want to do it because you get an organic lift. People don’t usually scroll past the top 25. People are often looking for new apps and they’ll go to the 25 and then they’re done. If you get into the 25, the idea is, you pay yourself to get into the top 25 and then you can ride the organic lift to fame and glory. And lot of downloads.

Andrew: So you made it to the top of the charts?

Jason: We made it to the top 25, and we didn’t really see a lot of organic lift. Not a lot of people downloaded it on top of the paid installs that we bought. The press didn’t do a lot, and we even blasted our own site. Everything that we did was not taking off as we hoped it would. I think the week after that happened, it was very disappointing. It’s hard to be . . .

Andrew: It is.

Jason: Yeah.

Andrew: I wonder why not. You know there was a music festival here in San Francisco. I took an Uber to get there, it was a pretty expensive ride actually at that point. And then to get back because there were so many people there, it was surge pricing. I think that the time I was using a different car sharing, but it was surge pricing to get back home if I could even get a car.

Jason: Right.

Andrew: Boom. Now I’m not the only one in this big packed place that’s going to Noe Valley, that’s going to the Mission. Someone’s got to be going close to there. I thought it would make so much sense especially in that desperate moment to say, I’ll split a ride with you.

Jason: Right.

Andrew: Why doesn’t that work?

Jason: So basically my theory on this is that you should never underestimate a consumers interest in purchasing convenience. If something can be more convenient, more reliable, and faster, people will pay for it. A simple example of this is the Keurig one shot coffee things. It’s very convenient. You just pop it in, you snap it down, you press a button, and coffee comes out. It’s fast, there’s no mess. It costs way more than buying regular ground coffee, but people are willing to pay for it because of the convenience.

Andrew: I see.

Jason: Uber is way more convenient than trying to coordinate and find someone which is awkward. You have to wait, you don’t know how long you have to wait. One of the big things about Uber and Lift and Sidecar is they show the car coming. Yes, it’s only a block away. I can’t wait. The second piece of this is that the difference between sharing a ride and being a lift driver is very different.

Sharing are ride is that you are a participant in this activity or this festival. You’re going just like everybody else, and your trying to pick this thing up easily on the side. For a lift driver, this is their job . . . this is their employment. I know a number of people that do Lift because they are underemployed or they are unemployed, and this is a way for them to make real money.

So they call themselves ridesharing, and no knock on them they are doing amazing work. One of my best friends is the head of their community, I love Lift. But they are not a peer to peer service. They are creating a, you know…in the same way that eBay sort of turned into this power cellar dynamic where regular people who are just auctioning off their monitor or whatever got squeezed out by these folks who basically had their garage filled with electronics, and then they were blasting them out.

It has to become a job for you. It has to be…a marketplace that’s peer to peer eventually bifurcates into professional sellers, buyers, and consumers. Most people aren’t willing to do what it takes to become a professional, and then the professionals sort of knocked out everybody else.

Andrew: I see, so then even if I were to have a service that allowed me to get a ride home it would be from an unprofessional person, which is the end of a concert where I’m ready to go home is not what I want. If I’m so cheap that I’m looking for a bargain, then I’ll take the bus.

Jason: Right.

Andrew: Okay. Things are tough here, and you’re starting to understand the market. Then Craigslist does…

Jason: Well, we get a letter. We get a letter from Craigslist, and it was a cease and desist. Through all the things that we were doing on Craigslist, we were violating their terms of use. You know, it sounds a lot more onerous than it really was. Websites exist on the internet. We click “Yes” to all the terms of use on every piece of software, and never read it. Websites sort of…are even weirder because they don’t even show you —

It’s not like you have to approve the terms of use to load Craigslist on your screen. You know, it’s just there, and they can just say whatever they want on it. They had a bunch of things like “You can’t encourage people to post into Craigslist from third party sites. You can’t post things into Craigslist that aren’t related directly to the thing that you’re talking…”very natural. Very understandable for them, and at the same time very understandable why we were doing what we were doing.

At the time there were a lot of startups who were doing a variety of activities to kind of verticalize Craigslist, and sort of…it was the sleeping giant, and the sleeping giant woke up when PadMapper really starting taking off the apartment finding site. They actually got into a lawsuit with PadMapper and this other thing called, “3Taps,” which was irrigating Craigslist data. They had hired a legal team, and the legal team’s objective was to say, “Go out, and find anybody who’s doing anything that abides their terms of use, send them a cease and desist.”

When we had all that great press from our iPhone app, one of the things that we included in the press release was at the very bottom, “You can also find rides on Craigslist on Ridejoy.” I don’t know for sure, but that…

Andrew: That triggered their search, and boom.

Jason: We’ve been operating for a long time, you know, doing our thing, and no recourse, and all of a sudden it happened. We say, “Oh crap.” We say, “We knew that this could have happen at any time.” We always knew that. This was not like “What is this? We thought that we would be okay.” We knew that there was some day that there was a risk that this could happen, and our goal was always to get enough traction, do enough other things to get off of the Craigslist channel.

Unfortunately, at that time we had done the events, we had done the press, we had done the iPhone app. None of those things were doing is good to Craigslist, so we’re in a tough spot. We find out that one of our YC peers has also received a cease and desist. We talk to them. We confide. We confer. They said that they spent $10,000 on their superb legal team, and it was determined that they had to desist, so we said, “Well, we better desist.” We sat down with our team, and we said, “Look guys, this has happened. It sucks.

We knew that this could always happen. It’s unfortunate. We’re not in a position…”and we had sort of right before this gone through this little sort of putting the feelers out. We had raised 1.3 million. We had at that point spent 600 of the 1.3. We had 700 left in the bank, but we obviously had more people than…we had eight people essentially working full time for us as contractors, but still seeing expenses.

We talked to our investors and we said, “What do we need to be able to do to raise a series A in seven months?” We said, “What if we take our growth rate and made it 50 percent even more growth,” so 40, 50 percent growth month over month, and we improved in conversions, and we did all these things, could we raise money? We got a range of answers. Some of the answers were “You’re on the bottom end of maybe.” That was the best answer we got. The worst answer was “No way in hell. I have portfolio companies that are making over a million bucks in revenue, and they can’t raise a Series A, so you have no chance.

But we’re entrepreneurs. We’re an optimistic type. We said, “Bottom maybe?” We faced worse odds than that. C’mon. We can do this, but when the CraigsList season happened, we said, “Okay, we were trying to scrape our brains to grow more. Now we’re not growing at all. This model of pure long distance, ride share with this pay model is not going to fly as a venture- backed business.

So we need to look at it. So we sat our team down. We said, “We’re going to spend some time. We’re going to talk about pivots, and if say pivot I say the pivot in the way that it’s used in basketball which is you have one foot on the ground and you move your other foot.” It has to be related. Somehow, either the technology or the market or the customer case, something. So —

Andrew: Gary Tan was one of the partners at Y Combinator actually advised a different path. He said, “You know what? You guys should stop this, go talk to other Y Combinator companies, find out what problems they have, and just sell them solutions and look for problems that other people could have.

Jason: They did. He did, and it was really hard to hear that. He advised us to do that sort of a little bit after we had looked into pivots. We spent those two weeks, and we looked at pivots around my carpools, around a social community for ride sharing, and we didn’t feel like any of them were good. And then we realized that our team — We couldn’t support the team that we hired, especially if we didn’t know what we were going to do.

And so we had to let them go, and that was extremely painful. We helped them get new jobs. We had good severance. We’re still in touch with them even today, but we went to this wilderness. And some time in that wilderness was when we got that call from Gary Tan. We had gone back. It was like a ton of work. We had gone back in time to the first day of Y Combinator when we decided not to do this idea any more.

And we’re back in our program. We had moved into an office, and then we moved out of the office. It was the three of us again in this apartment a year and a half later. But everything is different now. Everything is different. We had raised money. We also got through this somewhat traumatic year of sort of the challenge of we gained where we were and then seen it all go away. And we didn’t have a deadline. We didn’t have a time frame where we had to do something.

The money was going to go quick when we had eight people fully staffed. They were paying market salaries to, but when we were paying ourselves founder’s salaries living in our apartments it was pretty indefinite, the three of us. We could go like for a couple of years, right? And so all of a sudden the time pressure was off, and we spun our wheels, right?

The way I like to say it is that it’s like breaking up with your long-term girlfriend and then trying to get married, right? Trying to get married the next week, and it’s really hard to do that. It’s really hard to feel that same excitement, same passionate idea again after you had it and you poured yourself into it and it didn’t work.

And that’s when we called Gary Tan. We said, “Gary, what do we do? We’re so stuck. We don’t have any ideas or we have some ideas, but we don’t have an idea that we all don’t want to do. What should we do?” And Gary was giving us some tough love and he said, “Guys, we’ve got applications right now. I’m about to go and read thousands of applications. And you know what? All of these founders wish that they could be you. They wish that they could be you guys right now. I see founders with money in the bank. You can do whatever you want. ”

We were like, “What about our –” He was like, “Screw the investors.” And he was an investor. He was saying, “Screw the investors. Do whatever you want.” And that’s when he said, “Doing a business can be very simple. All you do is you call up [inaudible 04:36] companies. You find out what their problems are. You fix those problems for them. You get them to pay you, and then you find other companies that have the same problems as they probably do, get them to pay you, and la-de-da you have a business.

I think that that works for a certain category of an entrepreneur, and this is not about judgment. But there are some types of people out there who see a glint of an opportunity, and they just go for it.

Andrew: Even if they’re not passionate about it.

Jason: Even if they don’t have an inherent interest in it, but they see mechanically that — Their brain is excited about building businesses about sort of seizing customers and making money. And they just go for the mercenaries and not in a negative way but just in like that’s how their brains are oriented. [??]

But we, the three of us, myself included, I was probably the most mercenary of the three of them, but I was not going to do this alone. I was not going to sort of say, “Screw you guys, I’m going to go out and do something.” And so that was hard for us to hear, and it was not something that we were prepared to go down as a road.

Andrew: And so what did you do with the money?

Jason: So we spent about six months sort of spinning our wheels, prototyping, and coming up with stuff. And around March or so we started realizing that we don’t think that this is going to fly. We can’t keep doing this. [??] can keep doing it. I was so tired of dodging my friends, not wanting to answer questions about what I was up to, and not feeling like I was doing something useful.

And I think it’s so important. One of the things that they say is that human beings have that deep need to feel useful, and I sure as heck did not feel useful. And it was like, first, first world problems every day. And so we started talking about maybe an acquire. Maybe someone could pick us up, but lo and behold just as we couldn’t figure out a company to start, we also didn’t have many companies that we all wanted to work for.

I mean, we didn’t start this to get a job. That’s not why we were starting a company. We could go get a job at Google or at Facebook at the end of this. And so we didn’t see a lot of — It’s kind of weird to acquire a company in our stage.

Normally, if they were going to do a talent acquisition, they would do it when we had maybe spent very little money, like $100,000 and they could sort of backfill that and pay us some cash bonus plus equity. Or when you’re down to nothing and then they’re kind of scrapping the company, but then they’re picking you up again. But then they’re no obligations.

We still had seven, $650,000 in the bank. It’s an awkward amount of money. It’s a little awkward. And so I think we talked to [??], and they had recently acquired a number of companies, and they were not in the market for another small group of three guys who [??] or something. So we said, “Okay” rather than the only other option which is to return the money.

I’m sure you can blow $650,000 pretty quickly, but one of the most important things in Silicon Valley is your reputation, especially with entrepreneurs who obviously were not going to be successful in this business. We wanted our investors to know that we respected their belief in us and we did the best we could. When we couldn’t do it any more, we stood up and announced it and made that return happen.

Andrew: So you gave back their money. You know what? I think that’s the right move. There are zombie companies out there that are just being run by zombie entrepreneurs who just can’t bring themselves to stop, but they’re wasting their lives away. And I know of one specifically who is very well known, so I won’t say his name whose employees left him. And they feel like it’s such a sad situation that he’s continuing when everybody including him knows that there’s nothing there.

Again, a past interview if anyone is in that situation and once to see a great turnaround story it’s — who was — Brad Felt told the story of an entrepreneur who’s in your situation and decided to give the money back to his investors and just take some breath and then go and figure out what to do next. That entrepreneur took a breath and ended up refounding Netflix, not Netflix — Oh, what’s the diet program? He basically launched a diet program using a name that was already out there. NutriSystem.

Great story and great reminder for me that the bull-headed go until the end is not always the answer. And so that’s what you did. You now are doing growth at Percolate, a content marketing platform.

Jason: Yeah.

Andrew: I’m looking at it right on your website, JasonShen.com, where people can read about how to conquer fear and do epic sh^t.

Jason: Yeah.

Andrew: Let’s see, the “i” is gone. One more story before we leave because I think this is a cathartic thing, actually, we will come back to percolate, but a cathartic thing.

Paul Graham talked to you and said you did nothing that we talked about in the whiteboard session. You’ve been feeling bad about that for a while, right? It’s not like you’re the kind of person who just blows off Paul Graham.

Jason: Right. You need to be a very foolish person to blow off Paul Graham.

Andrew: You know what? There’s some jerk who, on Twitter, maybe sometimes on Twitter people don’t think. Paul Graham put up this post, some guy just cursed him out in response. I said maybe this is a troll. I looked him up, he’s a decent person.

Jason: He’s a real person.

Andrew: He’s a real person, decent. He works just a few blocks down from here. So yes, there are some people. You’re not one of them.

What was it that he meant by you did nothing that we talked about in the whiteboard session?

Jason: So that was in relation to the fact that before you go out for [??] day, Paul Graham works here and he kind of coaches you. He’s coached hundreds of startups. This is the way that you should do it based on your business, based on the situation, based on investors, here’s how you should pitch it.

And what he basically came up with was, you know, saying you’re [??] carpooling but carpooling sounds kind of boring. Investors are going to be skeptical of this so what you want to do is say something about how investors are too rich to understand the problems that poor people have and poor people really need this and this is for poor people and there’s a giant subterranean market for this.

He actually said subterranean and we said we don’t want to say it’s for poor people. We don’t think it’s for poor people. Is [??] for poor people? We saw ourselves as [??] and we felt that there are a lot of people who would enjoy doing this as an experiential thing. And I tried saying the word gian subterranean market and started cracking up. I couldn’t say it.

So we ended up pitching something totally different. And he, after day one, he came back and gave us feedback on the pitching and said you did nothing that we talked about on our whiteboard and I started to explain myself and he said Forget it, this is why we find specific companies so if you want to shoot yourself in the foot go ahead and do it. And that, you know, that sucks and I talked to other people about it, I even talked to Jessica about. Jessica says, you know, he’s probably already forgotten about this, don’t even worry about it, there’s a million things on his mind.

But, you know, the other thing that happened was that Paul Graham, even when we originally pitched the idea said I don’t think that’s the best idea. I think you keep thinking about ideas. And we turned around the next day and we said No, we’re doing this one. So those things sort of like stay with you, right? It’s like this father that you disappointed and he believed in us so much, right? He funded us.

This first idea no good, the second idea still not good. We’re still going to fund of him and, you know, and then they came up with something I don’t really like it and they’re not listening to me and now look what you didn’t work out. I mean, we raised a lot of money, we raised more than the average company and so, at least on that front we did something right. But ultimately wasn’t right. And that doesn’t feel very good.

Andrew: And you’re feeling guilty about it and it sucks.

Jason: Yes. It feels like we had a lot of investors in this but I think in particular because, you know, we feel that [??] was such an integral part of us existing it feels extra bad to let that person down.

Andrew: Yes. And I don’t even think in the speed of building the company that what you were trying to do, of course, I think you were trying to be authentic. I think you were trying to take the feedback as you could but I think that Jessica Livingston is there for a reason and she is, and Paul Graham has said to me, I think you’re in Mixergy and she’s there and she has a sense of people that he, I don’t think that he wanted to hurt you the way that he did. But actually the hurt comes from you because you care and admire him so much.

Jason: Of course. He wasn’t being a jerk.

Andrew: You feel like you were being a jerk and that’s the part that you regret. That you came across someone who was [??] so much and you didn’t show appreciation.

Jason: Yes, exactly. And, you know, and then we had this finally counter where, you know, because there’s a book written about our batch [??] and they were shopping around that initial first chapter to pre-release the book. Vanity Fair picked it up, and, we happen to be the first, and, second sentence of the book is, Calvin Wang, and, Randy Pang, are start-up guys. Jason Shen, is a startup guy. We lead this book, and, they publish this article, or, they prepare to publish this article, and, they do a photoshoot.

We’re doing a Vanity Fair photoshoot. This is in early August. We’re getting our make-up done. They’ve brought in a Tesla. We’re sitting in a Tesla with, Paul Graham, and, with, Drew Houstin, and, Araj, from Drop Box. It’s surreal, right.

You do start-up. You do all kinds of surreal things happen to you, which is one of the really cool things about being a start-up, but, this is so surreal. Then what happened is the article actually comes out in October. By that time we had already let go of our team, and, we had gone through all this crisis cease, and assist.

So, the photos coming out, and, everyone’s like, wow, that’s amazing. You’re in Vanity Fair. There’s this book about, I just saw a picture of you in a Tesla. What can you say? What can you say? That’s the most weird feeling in the world where publicly, you look like you’re just unstoppable.

Andrew: Yeah. People don’t know underneath.

Jason: And, people don’t know underneath. We didn’t hide it. We told our friends, but, we weren’t blasting it off a roof top. I was telling everybody that we because the site stayed up, right. There’s these weird feelings. Really weird feelings that happen.

Andrew: I see the photo right here. I see, Calvin Wang, is right on the cover with a t-shirt that says, share rides, and spread joy. It might be, you guys might be more prominently featured in there. You are. More than, Jessica Livingston, the co-founder of Y Combinator, and, more than anyone else.

Jason: That’s right.

Andrew: You did it though. Any regrets about having gone through this?

Jason: There’s essentially, there’s always no way to know the counter factual, but, it has been very challenging for me to feel like there has been anything that I can regret about this whole situation because every step along the way I felt like I was making the right decision at the time that I was making it.

Obviously, knowing what I know now I would do things differently, but, I can’t at that time have known differently. I’m happy with where I’m at now. I’m happy to be in New York, and, working at Percolate. The connections that I’ve had, the experiences that I’ve learned, the growth of my career is something that I definitely don’t think I could’ve done without having done Ridejoy.

To the degree that, and, I also know that tens of thousands of people use their service. Lots of them found rides to go where they wanted to go. We got a lot of amazing heartwarming stories. Were they $700,000 worth of heartwarming stories? I don’t know, but, that is the nature of venture capital.

I certainly am not, I don’t feel bad for our investors in the sense that I don’t feel like, no one invested, we didn’t have any uncles who put in $58,000 from their retirement fund in there. These are all professional investors, and, this is their job, or, this is their very rich hobby. To that degree I feel like we made a good run for it. We made our best effort, and, we learned that . . .

Andrew: A ton, and, on a personal level I only scratched the surface of the marketing, of the, I don’t know if growth hacking is really the word to use anymore, but, of your ability to market, of your ability to get users in the door. I’m looking to see how you describe it yourself. Does growth at Percolate, so, maybe the hacking part is the hacking part that we’ve gotten off of it, but, you’re doing growth at Percolate using a lot of the ideas that you’ve learned here. Would you do another start-up after this?

Jason: I am definitely interested in doing another start-up. I think that there’s a whole, I totally understand how the notion of second time you’re even more hungry to prove yourself. I think there are a lot of things I would do differently in my next company. I’m probably going to do more B to B versus B to C, which is what we did in Ridejoy.

I think that I would probably mock up, or, build the initial prototype myself, get enough customer traction that I feel like there’s a real valid market and a real need there. And bring out co-founders later who share this vision rather than try to emerge with this vision team first , not to say those aren’t valid strategies , but I prefer to make different mistakes than to make the same mistake twice , and I’m looking forward to that.

I think that right now what I’m excited about is the opportunity to really kill it in my role at [??] is a company that is only a hundred people, but it was like 40 people nine months ago, so it has really grown tremendously, [??] and there was only one person 3 months ago, so I’m really experiencing that growth you hear about with these companies, and that’s something that I’ve never seen. I’ve worked in several early stage companies, I’ve worked at [??] , which is this giant organization , and now I’m getting a totally different kind of experience.

You better believe that I’m soaking it up inside and knowledge about what’s going on here , and putting that into the database so that when I go out and do this again , I’m going to be armed to the teeth with everything I’ve got.

Andrew: It’s so great to have had you on here. The book if anyone wants to follow-up on this conversation is, it’s called “Winning Isn’t Normal”. Let me see if I can give people a taste of what’s in here. I was going to read some of the chapter titles, I don’t think that’s the way to do it, what’s one thing that people can get out of this book? I feel like it’s . . . I don’t know how to describe it.

Jason: It’s a collection of stories and insights that I have done [interrupted].

Andrew: But they’re connected. Like the story even about where you try to fail.

Jason: By walking up [interrupted]

Andrew: [??]

Jason: Sorry?

Andrew: And get rejected.

Jason: [??] And get rejected. [??] rejection. By walking up to someone asking him for a piece of pastry , and he gives you a piece of his pastry. It’s self-improvement [??]

And I’ll show you there’s little pictures here [??]. [??] isn’t normal and I’ll use [??] isn’t normal because that’s one of the essays in the book, and I think that is a [??] part in this idea, which is to win, and when you’re growing up, you’re like “I always want to fit in, I want to be normal”, but then there’s this opposite feeling of “Oh I want to win. I want to be the best, I want to kill it.” Those are {??] feelings.

When you want to do what everyone else is doing, you’re going to get the results that everyone else is doing. That’s natural. That makes sense. It’s safe to some degree, but if you want to start a company, or to be the best person in your field, or to be the best person or create something people haven’t, you by necessity, you are going to have to take actions that are different from other people.

If everyone wakes up at nine, you’re going to have to wake up at six, not specifically for some stupid reason, but because you’re going to have to find things for yourself that are severely different from the population that are going to [??} the result that you want, and I think the rest of the book goes to [??] situations where that example might emerge.

Andrew: There it is, and the sight, of course, it’s Jasonshen.com for follow-up. Jason, thank you so much for doing this. Everyone else, thank you for being a part of it.

Jason: [??]

Andrew: Jason, thank you so much. It’s great to have you on here. I hope it won’t be the last. Bye guys.

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  • http://www.impactlogos.com.au Manny

    Thanks Andrew & Jason for a great interview. Jason was extremely upfront about his story leaving nothing out. It really brings home how hard startups are and what a task we all have. Jason is talented, hard working and did everything possible but it still didnt work out. I take from this interview the importance of putting yourself out there and just telling yourself that even if this idea fails even if it isnt perfect, it will bring you closer to the next idea that might succeed. And that its only through trial and error than we can figure out the right problem /market and solution for each person.

  • http://www.JiansNet.com/ Jian

    Thanks, my take away from this is, just don’t build something on sand (here craigslist is that sand). You just need to have total control for your business, rather than leaving things to chance.

  • http://ClarityScanning.com Thad Wester

    -liked his honesty.
    -A lot more relate-able to hear how he negotiated the “down” of his business vs. a success story.
    -It’s cathartic to hear someone from such a vaunted position (yc funded, and raised large capital) come to grips with a normal outcome.

    Thanks for sharing. One of the best interviews so far imo.

  • Arie at Mixergy

    Thanks for checking it out Thad

  • http://www.salesprocessengineering.net/ Justin Roff-Marsh

    Awesome interview.

    Whatever Jason does next … I’ll invest in it.

  • stairclimber

    I am going to give some tough love advice to Jason.

    Thank you Andrew for making this interview.

    We need more interviews about failures so that we can learn more from others.

    About 2 years ago Jason gave me some tough love advice about mobile app in San Francisco so I am going to comment on his interview.

    First of all he gave me great advice so I want to thank him.

    Secondly, I think he needs to change his mindset and learn to be more humble before he thinks of starting another business.

    I agree with Gary Tan that Jason has assets most entrepreneurs would kill for that he is not tapping into.

    He has access to funds, great advice , technical cofounders and education but he does not have the mindset to exploit them.

    There is nothing wrong with cold calling and finding out the pain of other businesses and try to build a business around it.

    I would advise him to check out the work of Rob Walling, Garrett Dimon, and of course, TheFoundation.

    I cringed when I heard him said that cold calling “works for a certain category of an entrepreneur”.

    If he is not willing to start from the bottom and try to find a product for his potential customers, rather than the other way round, as per advice from Seth Godin, I don’t think he will ever make it as an entrepreneur.

    He seems to poo poo the idea of working for a paycheck.

    Instead , he and his cofounders sat on their behind for 6 months trying to think of a product that they can find customers for.

    There is nothing wrong working for somebody while he pulls his act together.

    I would not invest in his next company until he grows up.

    I like his honesty . So may be he has enough of that to do some serious self reflection there.

  • ShellyWixtedipu321

    until I saw the receipt for $4408 , I didnt believe
    …that…my friends brother woz like actualy bringing in money part-time from
    there labtop. . there brothers friend has done this 4 only seventeen months and
    just now repayed the morgage on there cottage and got a brand new Renault 5 .
    more tips here F­i­s­c­a­l­p­o­s­t­.­?­?­?­