Imagine selling your company, having the exit that so many entrepreneurs dream of and then having a breakdown afterwards. That’s what today’s guest says happened to him.
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Hey there freedom fighters, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Imagine selling your company, having the exit that so many entrepreneurs dream of and then having a breakdown afterwards. That’s what today’s guest says happened to him. I invited him here to talk about it. Joe Palko is the co-founder of SolidCactus which has a team of designers and programmers who have designed and redesigned more than 3500 eCommerce sites.
I invited him here to talk about what happened as he built it and afterwards. Joe, welcome.
Joe: Hi, Andrew.
Andrew: We were trying to figure out the right way to explain what happened to you. We went with breakdown, but as we both agreed it doesn’t really describe it. What happened after the sale?
Joe: Oh, after the sale… First, I have to say I couldn’t have asked for a better buyer, right? Web.com was really very, very nice to deal with. But you can’t forget that when you built something from the ground up and it comes time to sell there’s a lot of personal feelings attached to that business. So after I sold I had stayed on in the role of basically still running the company, but I had to now change the culture. Even though they did keep a lot of the culture we had in place, I didn’t always agree with what I was tasked to do.
Andrew: For example?
Joe: But I had to do it. Here’s one example I can think of. Our employees used to work an eight hour day with a one hour paid lunch. So basically they had seven hours paid, one hour paid lunch. And that was not the company policy. So we let that go on for about a year, but then a year later they said we’ve got you guys in line with the rest of the company.
Andrew: They weren’t going to pay for lunch.
Joe: What’s that?
Andrew: That meant no pay for lunch.
Joe: Right. Basically, how it worked, you had to work a nine hour day instead of an eight hour day.
Andrew: You’re a guy who’s used to calling the shots because you’re an entrepreneur who has called the shots, and now suddenly someone’s calling the shots for you and they’re not the shots you want. What happened to you on a personal level as a result of this?
Joe: Over the time that’s what brought me down because you fight for what you believe in. It’s not like it’s one-sided. It wasn’t like me against ten people but instead of things just being like my decision… When you’re in the corporate structure other people have a say. So it was a lot of fighting. I wouldn’t say fighting fighting. It wasn’t like we were fighting, it’s a battle. After being an entrepreneur for basically 20 years, I was tired.
Andrew: How much did you sell for?
Joe: I would say millions, but I don’t want to go into the details on that.
Andrew: Were you a millionaire before the sale?
Andrew: Because the company was doing really well, SolidCactus.
Joe: Yes, it did. It did very well. I actually initiated trying to sell the company about six months before the economy got really bad. I felt it coming, but I didn’t know what it was going to be. So, what was really difficult was I had always been very, very loyal to my employees, they built the company. When the economy really did start to tank we were only maybe three quarters of the way through planning the sale and our numbers started to take a hit. That started to change things because you figure you’re 6 months in and now you’re revenue is now not what it was. We haven’t done a lot of analysis on the revenue and everything and they’re like, oh these numbers are coming down. It was one of the hardest points in my life was actually laying off people. I had to lay them off prior to the sale so I couldn’t hang onto them and let it be their fault.
Andrew: Yeah, let it be the acquirer’s fault.
Joe: Every business I had for the most part, including that one, grew year over year over year. But, what took place in 2009 was really scary for me. I felt it coming, I knew the economy was too hot and a lot of it was really fake, I was scared. It turned out to be a good move, it really was.
Andrew: I’m going to tell the story, or you’re going to tell the story through my questions of how you built up the company because that alone is an interview that I think the audience needs to hear. But, on a personal level I know you’re willing to reveal a little bit of what happened to you. What do you feel comfortable talking about? About what happened to you, what you did after the breakdown.
Joe: I became, as a person, somewhat numb I guess. I really lost my personality. I didn’t really notice it but other people did. To me, I was just a guy with troubles.
Andrew: Sorry, there’s something that I know we talked before the interview, that you might be willing to reveal, now that the interview has actually started do you still feel comfortable talking about it?
Joe: Of course, sure.
Andrew: What is that?
Joe: When I was in a rut I found comfort in gambling. I’m not ashamed to admit it because at that point it became a problem, I guess what the problem is, is when you just don’t know when to stop. What happens, and I highly don’t recommend gambling to anybody, I to this day regret that point in my life but at the same time it made me a better person.
Andrew: What kind of gambling?
Joe: Slot machines, I love slot machines. Don’t think that they’re just penny machines that old people play, there are slot machines that take 100 dollar bills so….
Andrew: How much would you be up or down on a single day?
Joe: An average bad day for me was $5,000 down and an average good day, there were days, there was actually one time where I went to Las Vegas and I took $5,000 out of my account, I said I’m just going to spend $5,000. I came back with $70,000. So, there were good experiences too.
Andrew: Overall how much would you say you were down?
Joe: Oh Boy. I would probably say that it took me for $200,000, you know I didn’t gamble away everything, I’m glad I actually got help before…
Andrew: What kind of help?
Joe: I didn’t go to a 12 step program or anything, help just meaning friends that really cared about me and friends that knew I was on a destructive path and really they helped me get busy doing other things. That’s what it becomes, it becomes almost like if you were addicted to social media and all you did was sit in front of Facebook all day. People who develop addictions like that do so because they’re running away from things. The one thing I learned was when you go to a casino every day and you become a regular, the people who are there every day tend to be widowed women who’ve lost their husbands and are just there because it’s something that makes them feel better. In the real world you would hope that your family would spend more time with you, maybe they don’t even have family. It was really good in a way because it touched me, I got to meet a lot of wonderful people who all had problems and one thing interesting in that, in gambling is that the regulars go every day. Of course it didn’t help that I was still living in Pennsylvania, I would go back and forth between Pennsylvania and Florida and I had a casino by my house in Florida and a casino by my house in Pennsylvania.
Andrew: You were a regular in both.
Joe: Oh yeah.
Andrew: And there’s something about being in front of a machine like that, that almost, it seems to me, like you were saying, I don’t want to talk to people.
Joe: That’s exactly what it is. It’s…
Joe: …mesmerizing. You look at pretty colors and lights, and you’re not even there for the money, that’s what’s kind of crazy, you’re really there just to do something. To take your mind off of…
Andrew: Be a couch potato.
Joe: …how bad your life sucks. [laughs]
Andrew: Let’s get into how you got here, and specifically, how you built this phenomenal company. It all started with a ferret store online, right?
Joe: Yeah. Back in ’94, Scott and I…
Andrew: Scott San Philipino [SP].
Joe: San Phil…
Andrew: Huh? Oh….sorry.
Joe: Scott San Philipo [SP].
Joe: We were in college, and we started selling ferret supplies, and we were actually not selling them online at the time, we were selling them at ferret shows. We would actually go, and people laugh when I say ferret show, I can’t tell you how many times I’ve said the words “ferret show” and people bust out laughing. There really are ferret shows, where people come with their ferrets, and they win prizes for having the most perfect ferret, the big ferret, the ferret with the bushy tail, you know, and we both liked ferrets, so we started vending. Scott and I, as a part-time job kind of thing, were like, oh, we’ll go to the shows, we’ll have ferrets, and we’ll sell products. And at the time, Scott was working for an Internet services provider. So one day, he builds a store while he was at work, he worked in the tech support department – don’t forget, we were young, we were, like, 19, 20 – and he’s like, hey, we could sell these products on the Internet. Check this out! And the Internet was something that people didn’t have then, it just started to creep up. We had, like, AOL for DOS at that time. [laughs] They were just moving over to the Windows version, and there weren’t shopping cart software back then.
So it was, basically, so, I’m not a computer programmer, but there were scripts in place that you could have a shopping cart and collect merchandise, and, well, what happened is, we would call the customers, they’d place an order, we’d log into our order string, we’d see new orders, we’d print them out, we’d call the customers and get their credit cards. I was, like, this is really fun. And then, add technology to that, where the Internet started to grow really fast, where domain names weren’t $300 apiece anymore, people were getting Internet. I’ll never have such a fun time in my live as that time, because we actually built that company up to be pretty large, before we sold it over to Foster and Smith.
But, eCommerce was really interesting, because we didn’t have competition. So, we were a niche player, which is what pretty much succeeded on the Internet 10 years later, but we found that by accident that was successful. That was very accidental. The ferret store was accidental success. Everything we did worked, and we really, just, weren’t trying, it sort of happened. But when you have a good idea, and nobody competing with you, and because it was such a niche, we were able to build a community around the product we sold. That’s basically how that happened, and we sold that in 2007.
Andrew: What’d you sell that one for?
Joe: That one I don’t want to say either, because that was private.
Andrew: Was that in the millions also?
Andrew: It was.
Andrew: So this little ferret store that you guys launched online, back before most people even knew what the Internet was, ended up being such a hit that you were able to sell it for that much money. For millions.
Joe: Yeah. Well, it did millions in revenue, but it also became harder for it because competition started getting stronger and stronger. So we were actually on a down cycle when we sold out of that business. It’s still a really strong business with a really strong customer base, but competition was eating away at our average order values.
Andrew: When you sold, was it all cash upfront, or did Drs. Foster and Smith buy it with an earn-out that took forever?
Joe: No, there was no earn-out. There was actually no earn-out on either sale. I was lucky in that regard. I’m trying…you know, it was so long ago…I think with Dr. Foster and Smith it was a cash sale, but I had to clear up all the accounts payables. They didn’t want anything lagging, and it was actually the same thing with web.com. Anything that we had that was in Accounts Payable – theirs was a little different, the web.com sale, they paid off all of our AP physically, but with money from the sale amount.
Andrew: I see. So, they basically said, “Before you fully get this cash, you need to pay off your accounts payable.”
Joe: Yeah, they actually paid them off. In the web.com one, I gave them every piece of accounts payable. Their accounts payable department went through and satisfied all those debts because they didn’t want anything to come back.
Joe: They wanted to make sure they were all clear.
Andrew: OK. How do you then launch Solid Cactus?
Joe: It’s now like 2000, and we wanted to redesign for the ferret [SP] store. We put out online and the forums where people built websites and were like, “Hey, we need a designer to redesign our website.” We found one, and they did a really good job. It actually won an award back then, but at the same time there was some guy who sent me an email and said, “I can do your whole redesign and program it for $500.” I was like, “This can’t be real.” I mean, even then labor wasn’t that low. I said, “No, thank you.” Then they sent me a mockup. They’re like, “This is what we would do.” It was unbelievable, it was a beautiful web design. I’m like, “OK, so what’s the deal?” I actually started talking with them through Yahoo! messenger. They went on to explain that, “We live in a country called Kurdistan [SP], and we pay $25 a month for rent. US dollars mean a lot here, so we can work really affordably.” I was like, “Wow, there’s such a demand.” I mean I wanted a website. I’m sure anybody else who, at the time we were on the Yahoo! store platform. They knew Yahoo! store. They found it very interesting.
I don’t know if you’ve ever heard of Yahoo! small business or Yahoo! store, but it doesn’t work like a normal shopping cart in the design aspect you have to know the language that Yahoo! created. Go back. It was via web, and via web sold it to Yahoo! When via web created it, they built a programming language. Its own language. The only way you could design these stores was to learn that language. They did an amazing job. I was like, I’m going to spend my time, Scott continued to run the ferret store, and I started to run, I built Solid Cactus basically with these two guys from Kurdistan [SP]. I would play the role of the sales person, and I would sell the store. They would build it. They were building amazing websites for the time.
Andrew: On top of the Yahoo! platform?
Joe: On the Yahoo! platform which was very hard for most people to even design on. Again, a niche with no competition. There was no competition there. We started doing, I would sell a couple a week. They started to get so busy that they’re like, “This is really hard.” I’m like, “This is such a viable business. What if I apply to the INS and see if I can get you guys to come over here to the states? Then we can start a business because you know this language that nobody else knows.” That was a critical piece, right, because you just can’t hire people from overseas and bring them to the US. There has to be a real need, right? I did all the paperwork. I ran the ads, couldn’t find anybody. Then their visas were approved. That was a really fun experience in my life because I got to meet these people from, we were already friends because we were online 8 hours a day together, but I never met them in person. When they had come to the USA, they had taken such a risk. I had a place for them to live. I got them a car. I had all the stuff in place so that they could actually function when they came to the US. They had no idea if I was going to kill them at the airport.
Andrew: Right. [laughs]
Joe: But they did. They just picked up and they moved here.
Andrew: Why did you want them to move there? I mean, I was looking at the notes that Jeremy made on your pre-interview with him and it said, “Rent was $25 a month.” I said, “Jeremy must have been typing quickly” because you guys were talking quickly. There’s no way it cost $25. Then you said, “$25 a month.” I thought, “That seems like a steal.” Now their costs are low, you can sell it at a really low price here in the US. Just keep growing your business.
Joe: But scaling it was a problem. In order to do volume, we had to teach people how to program in this language.
Andrew: You needed more people, and you needed them to do it the way that these guys from Kurdistan [SP] were doing it. The only way they could teach it was in person, be there watching.
Joe: Right, right. They could have done that there, but the risk would have been what about a year later? Would they just stop talking to me and go do this themselves?
Andrew: Right, right.
Joe: To have them here to me it was a tradeoff. It was a 50/50 tradeoff, right? Alright, I’m going to build a company, but I’m going also help you make a better life for yourself.
Joe: Andrew and Scott, Scott still works at web.com. So he’s still there, all these years. Andrew actually works for eBay.
Joe: He left when they became. They got green carded around 2009.
Andrew: So they could go off and do their own thing?
Joe: They could but Scott never did.
Andrew: Alright. So you have them in the country, so now you need to get customers. How did you get customers?
Joe: It was the easiest business I ever built.
Joe: You know the verticals, right? Say you would redesign a website for somebody selling children’s clothing. All 12 competitors of that website would then be there wanting their website to be redesigned.
Andrew: How would they know that you’re the guy who did it?
Joe: By putting on the footer.
Andrew: You always have it on the footer?
Joe: We always put on the footer “Designed by…”. At the time we had started as [Sp] “Y Store Builder”, but then Yahoo had an issue with that later on. They didn’t like the Y because it was indicative that maybe we worked for Yahoo.
Joe: So we became “Solid Cactus”.
Andrew: How did you come up with that name?
Joe: We made it up. Actually, even though Andrew and Scott were my first employees, they were Founders. My first employees name was Curt. Me, Curt and Scott were sitting in this room, like, “What can we name this company?” and I actually think it might have been Scott that did a search for “Cactus”. He said Well, cactus are really cool. We can get this domain named Solid Cactus. That sounds fun! We can make really cool logos with that! That’s all it came down to. It’s actually kind of strange because for years and years and years, our customers always thought we were in Arizona.
Andrew: I wonder if I even thought that when I interviewed Scott. So, I see, being in the footer is a huge help. I’ve seen this so many times from guys who make Facebook apps to, I was just talking to Aaron Fulkerson of MindTouch, and he said “Whenever we created a wiki for our client, we would always have our link in the footer.” Another thing you guys did was, you were on message boards. Weren’t you in the Yahoo store message boards, where people who were building these stores talked?
Joe: That is true. That was back even before Solid Cactus and before Yahoo Y Store Builder. These forums still exist today. A guy named Don Cole runs them. It’s all Yahoo merchants and it’s not a Yahoo owned property. It was actually formed way, way, way, back by some guy who then no longer had his Yahoo store and passed the keys over to Don. I think it’s called Your Store Forums dot com and it’s called that because it used to be called Y Store Forums and Yahoo had a hard time with the Y so they turned it into Your.
Andrew: So, the idea there was we have our own store there on the Yahoo platform. No one else on the planet understands how this whole language works except for people who have their stores on that platform too. Let’s chat with them and learn from each other.
Andrew: And as you guys were learning from each other, when you started to build up Solid Cactus, you had connections to potential customers. Did customers really come from there, or am I assuming that?
Joe: It started there. People talked. Like, Solid Cactus just did my website, what do you think?
Andrew: I see.
Joe: I think what really helped build Solid Cactus at the time was that the designs were, for the time, amazing. Andrew was the Creative Designer and he was really good. He was above and beyond what we had here in the US. Not to say that there wasn’t designers that were that good, but that could actually design for a Yahoo store.
Joe: Because things had to be laid out the right way. The thing was, I saw a real business opportunity because there were some people that actually figured out how to build these stores but not many of them had an entrepreneurial vision. I knew that none of them would ever turn it into a company. They would just basically be a subcontractor. They would be like Oh, I’ll build that for you, and they fall off the planet.
Joe: So, as we grew Solid Cactus it also helped grow competitors. A couple companies did form but none of them really ever got to be the size of what we were. But after we sold to web.com, their focus wasn’t totally Yahoo stores. They still build them. They will still build a store on the Yahoo platform but it’s not their core business.
Andrew: You guys branched out, didn’t you? What was the first thing you did after redesigning Yahoo stores for people?
Joe: I thought, in order to grow this company into something that would be more than just a design firm, we had to start building products and services around the customer base we had… So the first we product we added was a search marketing department. We started doing SEO and PPC. And that actually still exists today at web.com and the department is actually really strong and has grown since I’ve left. But again, that’s a good fit for the web.com customer base, as well. So they sell that into their base.
Joe: After that existed for a couple years, we created a customer service call center. One of the struggles, what really helped me with SolidCactus was being a merchant before I knew all the problems that a potentially successful merchant would have growing their website. So, one of the things is, a lot of people who started eCommerce stores, they have a full-time job and then their store starts to become somewhat successful, but doesn’t make enough money for them to quit their job.
So customer service starts to become an issue. So our call center will give you anything from taking phone orders, it would handle returns, like (?) issuing RMA’s. It would do other things, too. Like they would do data entry for their customers, add products to the stores. So that was how we grew that services part out. I also saw one of the important things was going to be a true service business without a recurring revenue piece was a risk. Because the revenue is seasonal. So you’ve hit parts of the year where it’s actually difficult and then you get into a period where the volume increases so much, again, it’s difficult, but in a better way. So, I had wanted to scale SolidCactus out, so that it had not all of the revenue was from design.
Andrew: And so, what did you find that was going to be, oh, I see. The consistent revenue was from doing this customer service for your customers, helping them get there, their products getting into their stores, etc.
Joe: And then we had even built software on top of that. We had two pieces of software that we built. One was an order management system. Primarily because the Yahoo! store platform is weak in order management. It’s great in some things, like it is a real robust platform, but in order management, it’s very difficult.
Andrew: What do you mean by order management?
Joe: Like your orders come in overnight and now your warehouse needs to process the orders. It is very simplistic. Like, you could possibly ship orders twice, not realize you ship things. There’s no control. And there was no warehouse module. So if you actually wanted to maintain inventory and ship it, it was just a very simplistic model. So if you were doing “day” if you were a merchant processing 50 orders a day, it would get uncontrollable with backorders. You wouldn’t know what you were sending out. So we built software for that for our top-tier customers. And we also built a product called FeedPerfect which I also do believe still exists today and that’s a product that puts your merchandise into shopping.com, Bizrate. It’s a feed aggregator.
Andrew: How did you know that what you were building was something that many of your customers actually needed, as opposed to something that only you and maybe two other people who thought and worked like you needed?
Joe: We were, you know, we did a lot of things differently. We published a magazine, even, every two months, it was a bi-monthly, for our customers. So we were probably pioneers in social media before social media really even existed.
Andrew: I got Scott to do an interview here because he was so big in social media when it was starting to take off. And because you guys were so big, that my audience knew him, even though I don’t know that many of them were really, frankly, operating on the Yahoo! platform or even with customers. You guys were just online. How does having a magazine help you understand what to build for your product, for your customers what they’re actually paying for?
Joe: Because, in addition to that, we surveyed our customers a lot. We talked to our customers a lot. They constantly told us what they needed. Like that was another reason SolidCactus grew so big. People would call into our sales department and be like “We need a solution for this. We need Yahoo! store to do this.” And then we would spec these things out. We’d actually build them for the customers. And then that was an interesting model as well, right? You build it for one customer and now, you sell it to the rest of your customer base. So that was a part of our growth.
Andrew: That’s interesting. Mike Jones told me that he did that. He built a chat program for one his customers but he retained the right to sell it and to make it available to others. And that’s how we knew that he could pay for his development work. Is that what happened with you?
Joe: That’s exactly what we did.
Andrew: So there was no, not no loss, but you minimize your risk and you understood that this was necessary to at least 1 person who was willing to pay for it.
Joe: Right, we would do a little more thought process on that. If we were building it for one person and we didn’t think that anybody else could use it then that customer would pay the development costs. But if it ended up being a feature that we thought we thought that we could sell to our entire user base, we would do that exactly. We would take the development costs, own the product and clip it on. One thing that made it so easy to scale the Yahoo store platform for us was, it’s a very reliable platform but it doesn’t have a lot of features built in. So, at one time we had 30 plug ins, there were just so many plug ins.
Andrew: You were selling them all.
Joe: Oh, yeah. Every one of them sold for different prices and that was a lot of the revenue.
Andrew: What’s a product that failed for you guys, the biggest failure maybe?
Joe: You know, I’m not even saying this out of pride, I don’t think we really had a product that failed. The one that didn’t meet my expectations was actually FeedPerfect. That’s only because, even though the product worked really well we discovered that most people didn’t want to actually take the time to do that. They wanted their products on the shopping portals but they didn’t want to take time to do so. They really thought it should be just a turnkey solution. So, what it actually ended up was we ended up with a lot of web design companies using it as a backend platform for reselling the service. That wasn’t the intent when we built it.
Andrew: First of all, if you have a store you want to publicize it as much as possible especially if it’s on free platforms where people are actually looking to buy. Is the software so difficult that people just didn’t want to deal with it, could they not recognize the value of (??) kind of promotion?
Joe: The software was not difficult at all, it was actually pretty easy to use (??) it really well. What happens over the course of time with ecommerce merchants is, they started drop shipping so people who were selling early on like maybe around 1999 or 2000 had product and they were shipping it from their own house probably. The drop shipping model became more and more popular so companies would be giving you these huge data feeds and they’re like ‘just sell these products online’ and dump them in your store. We had customers with 50,000 products, I remember one with 100,000 products. In order to do taxonomy, you have to basically say these 500 products are beauty products and then if you really want them to sell even more, you have to go down levels. It’s still kind of a problem with taxonomies today, not everybody uses a unified taxonomy so if you wanted to sell on shopping.com maybe they have a category for lipstick but Bizrate doesn’t. It’s almost a full time job just to categorize products and people don’t want to do that.
Andrew: I see, alright that makes sense. I see how this company is growing, I understand now why you wanted to sell you were recognizing a change in the market. On a personal level too did you want to sell because it was time for you to cash out?
Joe: I wanted to sell more than Scott did honestly. Scott actually was very resistant, that was also a problem, you know one of the negative aspects, Scott really didn’t want to sell and I did want to sell because I saw what was coming. I was more of the business manager and Scott was the social guy, so I saw trends developing within our customer base that I didn’t like. We’d never have customers that couldn’t pay their bills and this was starting and I was like, you know there’s something, this is going to be really bad, I think we’re going to have a part of our economy that we’ve never seen before. I felt it about a year before it happened because I do like following markets and reading about finance and that kind of stuff interests me so I was somewhat paranoid, I’m like we’re going to have to get out of this because we’re going to have a time period that’s going to be very, very difficult. Scott was the social media guy who loved to do marketing so he was like, “No, no I don’t want to sell, I don’t want to sell”. I pushed and pushed and pushed so that became a very rocky point in our friendship.
Andrew: How do you get over that?
Joe: I think it’s like anything. If you were married for 20 years and then you got divorced it’s going to be very hard to dislike somebody or be mad at somebody that you spent the majority of your life with. Running a business is not much different than having a relationship in a sense. It’s a different kind of relationship, but you spend so much of your time brainstorming and trying to grow this business. You’re nine to five is. . . That’s the thing, you have a life outside of work, but then you have your work life and it’s probably more time than you actually spend with your friends and family.
Andrew: I was talking to Shahaab from Co-Founder’s Lab who helps entrepreneurs find their co-founders and I asked him about this. This of course is a big issue, do we sell, and do we not sell? What direction you take the company in in general is big, but this one’s huge. He said, ‘You know when you come up with problems like that sometimes the best thing is to take a step away from that question and go deal with questions where you agree so that you’re not battling each other and then come back to it.’ That’s helpful. What did you guys do because this was clearly a different set of directions that you guys were each championing. How did you, and you ended up persuading him, how did you persuade him?
Joe: The course of selling to Web was. . . It took so long, it took almost a year. So I entertained it really for the first three months and Scott was like, ‘No, no, no.’, but I kept going. Then three months in Scott started to get more on board with it, but he still didn’t want to sell but he started seeing the changes in trends too. I never expected that one day Wall Street was going to seize up and there was no money. I didn’t think that was happening. I just thought we were going to move into a, not a depression, but a heavy recession. I was like, ‘It’s fun growing a business when everything is on the upswing, but downsizing it is not going to be fun.’ So I really wanted to get out of it because there’s a large company with a lot of resources. We boot-strapped this thing, neither one of us owed money to VCs or bankers.
Andrew: For debt? Did you have debt?
Joe: Well there was debt, but it was traditional banking debt. We didn’t. . .
Andrew: How did you meet Web.com?
Joe: That actually didn’t come up in the pre-interview and that’s kind of an interesting story. Prior to Web.com they were Website Pros, the CEO of Web.com is David Brown, he’s a real awesome guy, he had an SVP that pretty much did everything for him, he was David’s right hand guy. Somewhere in the Web.com acquisition he left and he moved back to Washington State where he lives and he started his own eCommerce store and he decided to put it on the Yahoo platform. So he hired Solid Cactus and we built his store and he loved the process, he loved how we did the design. This was somewhere around 2008, it was like a year before, this is actually how it started. He had called us and he’s like, ‘Hey, I actually just left Website Pros and I’m fascinated by how organized and how professional you guys conduct business and I know how difficult it is to sell design.’ and he goes, ‘You guys have it down and I want to introduce you to my friend David Brown.’ So that’s basically, it was a customer.
Andrew: I think I might have interviewed the guy. Yeah, he sold Web.com, this is Joe Griffin who ran Web.com and sold it to them, to Website Pros, I think.
Joe: It wasn’t him.
Andrew: Oh he’s not the guy who had that domain?
Joe: No, this guy was with David Brown when David Brown owned Website Pros.
Andrew: No, I don’t mean that this was the Senior Vice President. I mean the guy who sold Web.com, the domain and company, to David Brown.
Joe: That’s an interesting story actually. That’s really convoluted. Web.com was a formation of Interland, it used to be a web-hosting company and then they were basically going bankrupt and some group of investors came in and picked the stock up, repackaged it and then sold it to Website Pros and then Website Pros took the name Web.com because it was a better name.
Andrew: I see.
Joe: There were a lot of people involved in that.
Andrew: Did you try to sell it to other companies too? Did you look for alternative offers?
Joe: No, I didn’t, but after I started working with the Web.com sale I thought I better get another buyer because otherwise I’m not going to have leverage. So I actually did find a VC company that, you know, a VC firm that was really interested in what we did.
Joe: I did use them as leverage. Before I had to commit I kept going back and forth trying to raise the price up.
Andrew: It seems like that’s one of the challenges of working, I guess, you were in Florida at the time, right?
Joe: When we had SolidCactus before we sold it, Scott and I both were in Florida but traveled back and forth but not as often as I had to after I sold it to Web.com. I would go to Florida for two weeks and then I would come back to Pennsylvania, all that stuff. After we sold Web.com was like, no, we want you to run this location and we want you to be here but I wasn’t willing to give up my friends in Florida. For me it was all about being happy and having friends and living. I liked the life in Florida a lot better than northeastern Pennsylvania. So I would travel every week. When I was working for Web.com as Web.com I would work basically Wednesdays and Thursdays definitely I would be in Pennsylvania sometime. I would do Tuesday through Friday, it would depend what I had going on there. So I would work from home from our PA location. I spent two years traveling every week back and forth.
Andrew: Why didn’t you quit?
Joe: That’s one of the things that actually led me to quit because I really didn’t want to do that.
Andrew: Like I said before, if the point you were unhappy, you were already sold, there wasn’t an earn-out, why not say you know what guys, I’m going to go start another business.
Joe: Actually, I liked working with them.
Andrew: You did?
Joe: Overall, I liked David Brown and his team. I still do. It is a very solid management team. David Brown is a wonderful guy. I can actually say that about the company that bought me. Yeah. I did. There was a lot of it that I did like. The corporate structure was irritating to me, not the people I was actually working with.
Andrew: I see. And so that’s what kept you around and your people, many of them wer e leaving, weren’t they?
Joe: Yeah. It was an interesting story because when we were growing and growing and growing, we always used to buy like a birthday cake every month, and we would . . . This is a funny example, actually. We would celebrate birthdays and we were always hiring really. We weren’t laying people off, so we were always hiring. So for years we would always introduce the new hires with a birthday party. I never really took note. This was my people that were doing this because I had a couple hundred. Before Web.com we had 194 people. We were down to like 140 something. Slowly as we would lose people, we would replace some but we wouldn’t replace others, all trying to get the labor force just right. Now we’re in a situation where the labor force is great, and if somebody leaves we actually have to hire somebody new. We started wishing people well at birthday parties when they were leaving. And every month there was like two or three and we were like. . .
I got an email from one of the employees. It was like, I find it so demoralizing that you’re always at these parties you’re welcoming people to leave. Why are you encouraging people to leave our company? it’s so funny, I never really ever thought of it that way but it’s one of those things that actually happened on its own because Kathy always used to run the parties and Jenelle would make them into. . . We would also welcome new employees because we were replacing ones as they left but it became so apparent that like people who had been there for years were leaving and we were hiring new people to replace them. So I was like it’s a really good idea, Shawn, because Shawn was the guy who brought that to my attention. He was one of my operations people. I was like, yeah, we’d better stop doing that. So we stopped making it a focal point when they were leaving.
Andrew: I don’t want to celebrate people when they leave because then to get that good feeling and to be appreciated for everything you’ve done and to be noticed for all of the things that you’ve done well you have to leave.
Joe: Right. That’s what it turns into. It doesn’t start that way and I can see how it gets that way. Even now working at 3D (?) we’re probably up to 70 some employees here. Relatively many people don’t leave. So the few people who have left I could count on one hand. We pretty much do the same thing, hey, good luck, good luck. But when it starts to become so frequent it actually is strange.
Andrew: I want to know just a little more about how you sold the company because I know in reading my own emails from people in the audience that knowing how to find an acquirer, how to make that transition from, in your case, from customer to acquirer or from other people’s perspective from stranger to acquirer is tough. Was it, they immediately said, “Can we buy you?” or was there some way that you let them know that you wanted to sell and that was what instigated the whole thing?
Joe: Well it did start when we got introduced to David. David is kind of fun. We had a phone conversation and David said, “I want you guys to come down to Jacksonville and see who we are.” So we did, we came and met David. It was really interesting. When I met David for the first time he pulled a file out of his desk and he’s like, “I’ve been watching you for a long time. I knew everything about you.” I was like, “Wow!” We were just real small potatoes in comparison to what they were. It was a lot of back and forth; they came to Pennsylvania a lot, a bunch of us went to Florida a lot. My executive team, the people who ran SolidCactus, knew. So because they were public there’s a whole different mindset. They have to think on behalf of their shareholders so they can’t, I don’t want to say make mistakes, but they really have to cross their T’s and dot their I’s.
Andrew: The reason that the sale was even on the table was because their an inquisitive company.
Joe: They do, they purchase a lot. If you go back to the very foundations of what Web.com is today they’ve acquired a lot, even when they were smaller they acquired a lot of small companies.
Andrew: I see.
Joe: Interland too, the company that became Web.com, was a lot of web- hosting companies that were acquired. So that company is a big compilation of acquired companies.
Andrew: It seems to me some companies whose names aren’t household names, but who acquire a lot and if you’re in your space it probably acquired or tried to acquire a lot of your competitors. If you even have a conversation with them they almost start asking you if they could buy you out. It seems like that’s the way that they interact with people. I don’t know if Web.com is like that, but I’ve noticed that there are some companies that very quickly start asking, ‘Can I acquire you?’
Joe: That came early on. I had that feeling when we had that first conversation when we met David. There was like, ‘No, no we’re not selling.’ I don’t think they were going to keep trying. They might have come back in a year or two if they were still interested, but we had to have shown interest. We did show interest.
Andrew: All right, let me see what else. Actually before I get into the sale or what happened after you left because we already talked about after the sale. I’ve got to ask you a little bit more about you and your relationship with Scott. You guys were polar opposites?
Andrew: How do you work with a co-founder, who you like, who nevertheless is so diametrically opposed to your way of thinking?
Joe: I think it’s really… Let’s take a step back. If you were an independent owner and it was just you, sole proprietor, you’re going to go down a lot of paths that you probably shouldn’t go down just because it’s only your mindset. I honestly think if you have a partner who is trustworthy, because that’s number one, you could have the most visionary partner in the world, but if he or she is not trustworthy somewhere down the road it’s all going to fall apart. If there’s one word I could use to describe Scott it’s extremely trustworthy. He is that guy that will not lie to you no matter how bad the situation is. It’s actually an interesting personality in a lot of ways because a lot of people sometimes they want to be lied to when things are bad. Scott was always that guy that would just come right out and say it and you’d be like, ‘Wow.’ I think what it does is it puts you somewhere in the middle. When you have an opposing viewpoint for virtually everything you want to do it…
Andrew: Did I just lose you?
Joe: I still see you.
Andrew: Sorry there we go. You were saying that…
Joe: I think when you surround yourself with opposing viewpoints in any company you’re going to probably get it right because you see with tunnel vision, the way you want it to be. Then somebody else can be like, ‘No, that’s totally wrong.’ You go back and forth and back and forth and then you come up with something that’s just perfect. Well I think in corporate environments it’s to the extreme because you’re in a matrix organization, you’re working with ten different people and ten different departments and it’s almost impossible to accomplish anything because you get that person in the middle, the one to the right, the one to the left and you end up just going back and forth and basically you get tired of fighting the fight. I think a lot of times corporate environments are kind of counterproductive because if you have a really great idea sometimes you just don’t really feel like fighting for the idea because it’s so exhausting. I think for us it built a really good company because we really are total opposites. Total opposites.
Andrew: I can see how that would be helpful, though. My brother and I started a business together right out of school, and we were very different, and it helped us. The battles even helped sharpen our perspective.
Joe: It did for us, too. We spent a good portion of our lives arguing.
Andrew: In a not necessarily bad way. Definitely not, but, just constantly debating.
Joe: Yeah, exactly.
Andrew: Let me do a quick plug, here, and then I want to ask you question that maybe is a little uncomfortable to ask, but, I think it’s important to ask. And the plug is for Mixergy Premium. You know, guys, you’ve heard me talk about Mixergy Premium for a long time, but I want to talk instead of directly about it to tell you about this guy named Derek Capo, who runs NextStepChina, who emailed me recently, and said, “Andrew, if not for Mixergy, I would have shut down my business.” So I immediately emailed him back and said how appreciative I was to hear that, but asked him why, what happened. He said, “I don’t run my business in Silicon Valley. I don’t run my business with a lot of entrepreneurs around me. I’m kind of my little island here, but I’m nevertheless trying to build my business. And because I’m my own little island, I need help knowing how do I build my Web site.
What mistakes should I be avoiding? How do I hire people? How do I get customers, et cetera?” And Mixergy Premium was his way of learning, the way that many people here in San Francisco might get together for a drink, and ask each other questions and understand how they should be building their businesses, and know what mistakes to stay away from. For him, it was listening to Mixergy as he was building his business, and as a result, he built it so big, that I invited him to do an interview, and we recorded it recently.
And the reason that he likes Mixergy Premium, he said, is, there are all these different areas of business that you need to know. For hiring, for example, listening to Noah Kagan [SP] talk about how to hire interns, how to prize the position, how to give them tasks that will give you feedback on whether they’re the right fit or not, helped him hire his staff of people. He said, and I’m trying to think of some of the other people he talked about, he figured out how to get traffic through one of the ad- buying courses. Actually, it was a course on how to build a business, with Rob Walling [SP]. He took that course, and he said he understood how to buy traffic, because it was something that Rob talked about. So these little pieces of the puzzle are what we as entrepreneurs need to know to build our companies. I’ve been doing this for years.
He’s been a Premium member for years, and it’s worked for him, and if you’ve been listening to me and haven’t tried it, I urge you to go to mixergy.com/premium and try it for yourself. Listen to these great conversations with entrepreneurs, and, I’d say even more than that, try out the courses that are exclusive to Premium members, where you get to see an entrepreneur turn on his computer screen, show you step-by-step what he’s done, or set up his steps for how to get traffic, how to get PR, how to hire people, and walk you through how to do it yourself. It’s all at mixergy.com/premium. And, Derek, congratulations, and everyone else, I hope you go and sign up right now.
As a salesman, how do you think I did with that, Joe?
Joe: Very good.
Andrew: You know what I seem to do? I appreciate the compliment, but I notice when I listen back is that I talk too quickly when I talk about my stuff, and I jam too much in.
Joe: Yeah. Actually, you’re right. I would say that.
Andrew: Right. I need to slow down.
Joe: Well, I was interested in what you were saying, so I was listening, but I’ve actually had that complaint, too, because I do a lot of Webinars for 3D Cart, and when I first started I was not very good at it. Because I’m not super-social, like, I am social, but with Webinars, I’m, like, blah…I started talking really fast, and some of the complaints came from the Webinar were, like, this guy, he talks too fast. So I spent some time practicing, so that I could not talk fast, and then I got lots of compliments. People were like, oh, he’s so informative, and talks just right. So, I worked at it, and I got the pace down right, but you’re right, you really said a lot in a very short period of time.
Andrew: I’m trying to remember. I’m almost rushing through it, because I feel like…
Joe: Should I put this in! [laughs]
Andrew: . . .it’s a commercial, people don’t want to spend too long on a commercial. I don’t know. I need to get my pacing to a place where it feels like I’m proud to talk about it, and it doesn’t feel like it’s taking up a lot of time.
Joe: I agree.
Andrew: Thanks. So, the challenge is in real time, to even recognize that I’m doing it, and then to correct it, but one of the beauties of doing this as often as I do is I have a lot of time to practice. All right, here’s the thing. I’m looking over your shoulder, and you just mentioned a company that you’re with, 3D Cart, great company, I can understand why you’d be there, except for one thing. You just sold a business for millions of dollars, why not go and start another business? Why work with, and they’re great people, why work for someone else?
Joe: I think that you basically answered it, it’s great people.
Andrew: I mean, you could go and have a barbecue with them, have a beer with them, go on vacation with them. Why not start your own business where you get to call the shots, that’s one of the problems that you had with web.com?
Joe: I did it for 20 years, actually 3Dcart is like a startup. I didn’t find it, but it’s like a startup, it operates like a startup. It’s a very fun place to work with fun people and fun things. Actually, to me, it’s how Solid Cactus started. So, I’m in a place where I can actually make a difference and my knowledge can help this company grow. It’s close to where I live.
Andrew: Why not start your own business?
I think about it. I do think about it a lot, of course. I’m always going to be an entrepreneur at heart, I’m 41, so my life isn’t over, you know. I do think about it a lot, I do. But I enjoy this product and I really like working for 3Dcart. For me it’s like its Solid Cactus in 2004. It’s just a lot of fun for me.
Andrew: Do you ever say to Gonzalo, who runs the company, “I’ve got FU money, you can’t tell me what to do?”
Joe: You know, Gonzalo treats me like an entrepreneur, that’s the most interesting thing; he lets me do my own thing here. So, what more can I ask for right, I get to still be an entrepreneur, just with his money.
Andrew: The site is beautiful, it’s 3Dcart.com for anyone who wants to check it out and you guys, basically it is like Solid Cactus, you give people the tools they need to sell online.
Joe: Absolutely, it’s a wonderful, wonderful software product. If I had actually started Solid Cactus with 3Dcart I would’ve never had a business because the software does almost everything that Yahoo store merchants were trying to do all these years. And it’s really just a technology timing thing right. Yahoo store’s customer base for people who started selling online in 1999 and 2000 and it became very successful with a very robust, stable platform that really didn’t do a lot of things. And 3Dcart and some of our competitors even, our products are really stable products that do a lot of things.
Andrew: It’s an online shopping cart with the features that you need today with the design that you need, and it just works, you don’t need to hire a SolidCactus to build it for you.
Joe: You really don’t, you really don’t. You can do amazing things with it and, like I said, Gonzalo, I don’t know if you’ve ever met him, he’s a really killer guy, I just really like him a lot.
Andrew: I really would like to meet him, how old is the company?
Joe: It was a very small company for a very long time and it really started growing, I want to say it really started to take off around 07, maybe. But he started it right out of college.
Andrew: I’ve got to get him on to do an interview.
Joe: He’s a fascinating story too, he’s a developer, so he’s, I don’t want to say shy but you know that mentality like engineers, you know, they’re kind of different.
Andrew: He’s a (?) man right?
Joe: Oh, for sure.
Andrew: Can you help me get him on here by giving him Jeremy’s URL; in fact, I’ll email it to you so you don’t have to remember. So then we do a pre- interview with him, do it right, and then I get him on here to do an interview.
Joe: I’ll try.
Andrew: Alright, I’d love it. Alright, if people want to connect with you and say thank you for doing this interview, what’s a good way for them to do that?
Joe: My twitter handle is my name. It’s Joe Palko. I do use Facebook a lot, I’m an addict, maybe the gambling transferred over to social media, I don’t gamble anymore but I do social media like crazy. I love blogging, I have my own blog, it’s my name josephpalko.com maybe now that people are actually listening to me I’ll start putting some interesting stuff there. I’m usually babbling about something that’s not ecommerce related. Even Scott and I being totally different people, Scott will constantly comment on my Facebook and say ‘why do you post that stuff’ and I’m like, you know what, I’m in this for me. I don’t care, if you don’t like me, don’t follow me.
Andrew: The way that I got him to do the interview was, I think it was Facebook, the first time I ever got anyone to do an interview through Facebook, I think was Scott. I couldn’t believe Facebook actually is a way that professionals connect to do business. He did and it worked and I can see why people would want to follow you and chat with you there and of course on the website josephpalko.com and I hope people will check it out and encourage you to keep blogging. Thank you so much for doing this interview.
Joe: And 3Dcart, come do a demo.
Andrew: And 3Dcart, go do a demo.
Joe: Free demo, no credit card required.
Andrew: I see it right there actually over your shoulder. 3Dcart.com/free. Thank you for doing this interview and thank you all for being a part of it. Bye guys.