How does a wristband help a founder build a $169 million company?
Ryan Allis is the founder of iContact, a provider of email marketing tools for small businesses. And a company that was recently sold for $169 million to Vocus.
Here’s a quote from the last time I interviewed him, “we incorporated in July ’03, lived in the office, slept on futons, cooked on a George Foreman grill, did whatever we had to do to keep expenses low, while we built up revenue and customers, and improved the product.”
Those are the challenges for a startup and it was inspiring to hear his story from those days. This time, I want to ask him about the challenges of going from a successful startup to a company that generates tens of millions a year.
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Ryan Allis, iContact
Ryan Allis is the Co-Founder of iContact, a provider of email marketing tools for small businesses.
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All right, let’s get started. Hey, Freedom Fighters, my name is Andrew Warner. I am the Founder of Mixergy.com, home of the ambitious upstart, and home for over seven hundred interviews with proven entrepreneurs, who come here to tell you their stories, so that you can learn from them, and build your own success story. Today, in fact, before I even announce this interview, I’ve got to do a standing ovation over here. Hang on a second. Where’s the camera? There’s the camera. This standing ovation doesn’t work here. But, man, Ryan, do you deserve it. Man, do you deserve it.
Ryan: Thank you, Andrew. I’m glad to be here.
Andrew: Wow, almost two years since we did this interview. Last time I did an interview with Ryan Allis, he had a wristband on. This time I want to ask and answer this question in this interview. How did the wristband help a Founder build a $169 million company. Ryan Allis is the co-founder of iContact, a provider of email marketing tools for small businesses, and a company that was recently sold for a $169 million to Vocus. Here’s a quote that I pulled from last time that I interviewed him. Quote, he says, “We incorporated in July of ’03, lived in the office, slept on futons, cooked on a George Foreman grill, did whatever we had to do to keep expenses low, while we built up revenue and customers, and improve the product.”
Now, those are the challenges of a start-up, and man, did he get past them. It was inspiring to hear, Ryan, how you did get past them. In this interview I want to go to the next level. What happens when you get past the challenges of a start-up, and have to build a bigger and bigger company? You got into the tens of millions of dollars. And, the second thing is that I’d like to talk about is the mind set. That wristband did something to you. It’s part of the way of thinking of the world that I want to learn from you about. So, first of all, thanks for doing this interview, especially so soon after getting acquired. I know that, usually, after getting acquired you want to take a step back and not do media. I appreciate you coming here doing this interview. And second, for anyone who didn’t see that wristband, can you explain what it was? What was on your wrist?
Ryan: Absolutely. Well, I’ll show it to you now, because I still have it right here. I had two wristbands on two years ago. One said, ‘Make Poverty History’ which is a passion of mine to use business and entrepreneurship to create sustainable economic growth in the developing world. That’s something I hope to pursue for the next three or four decades ahead. The other wristband said, ‘One Hundred Million in 2012, iContact’. And, that to me was a personal goal, to either get to one hundred million in revenue, or get acquired for north of a hundred million this year, in 2012.
We started the business in 2003, and you’re right, we did everything we could to keep expenses low. Sleeping on futons, eating lots of Ramen noodles as we built up iContact over the years to seventy thousand customers, a little over forty seven million in revenue, and over a million users, in email marketing and social media marketing. So, it was great adventure. But, certainly, having two primary life goals on your wrist is a very visible way of focusing your efforts on achieving them.
Andrew: So, let’s learn about how you come up with the goals and how it helps you to get there. How wearing them on your wrist and being so open about it gets you there. First, how did you pull $100 million? Where did that come from?
Ryan: Well, let me do it the other way. Let me tell you about the process first, because I think that will answer the second question, how do you get the specific goal. I learned a process from a book almost everyone’s read, Think and Grow Rich by Napoleon Hill. Once a year, at minimum, take – and what I do is the last five days of every year, so from December 26th to December 31st every year – I don’t work, I’m generally at my parents’ house in Florida, and I make sure I take some time to reflect, to write a reflection on what I did that year. What I achieved on my goals, what I did not achieve on my goals, and I always like to hit about 50% of my goals. If I hit more than 50%, then my goals aren’t ambitious enough.
I go through the process of actually writing down what I want to achieve in the year ahead. And they tend to be about ten goals per year, and maybe one or two big ones. So I do it on a 12-month period, so I have a 1-year set of goals, a set of goals for 5 years, and a set of sort of lifetime goals. So within those three categories, every year I update that list. And I ensure that what I’m doing on a day-to-day, week-to-week, month-to-month basis, is aligning toward the primary goals I want to achieve that year, and the longer term lifetime goals.
Andrew: First of all, how do you come up with the list of goals? The thing is, when I sit down, I’m not, well, in fact…I’m having a hard time coming up with the right questions here. I’m really excited to be doing in this interview, and it’s showing in my voice. I should be so much more professional and so much more composed than I am right now. But, can you give me an example of what’s on the list? What kind of things would you have on the list beyond building a $100 million company by 2012?
Ryan: Sure. Some of them might be travel, countries that I want to visit that year. It’d be the personal traits and values I want to build into my character over time and work on improving, it might be experiences. For example, last year one of my goals was to go skydiving for the first time and check that off the list. Often times, it might be educational. And often times many are within the realm of business and entrepreneurship. In terms of the process of setting the goals, you have these categories, you know, family, personal, experiential, educational, and professional and business. And you put in a couple of goals for each, and it really doesn’t take that long. It really takes maybe a couple of hours to do at most, every year. And then I have a personal Wiki, which is a password protected sort of like Wikipedia, just for me. And I keep my goals going all the way back to 2002, when I was 18, to the present, by year. And every couple, two or three times a week, I go in and do a journal update to see how I’m progressing each week and whatever I’m learning. So that’s the process I go through and the categories I have for the goals.
Andrew: So, one of the things that happens to me when I set goals like that is, there will be one thing on there like, run a marathon every quarter. And then I’ll get to maybe March, maybe April, and realize I’m not anywhere near running a marathon. And I’ll be afraid to look at all the goals, and I’ll ignore them, you know? Because I don’t want to feel like a loser, I don’t want to feel like a failure. And then by the middle of the year, about July, I would’ve forgotten completely about the list and I’ll re-evaluate it in December. Does that ever happen to you? Do you ever feel like that?
Ryan: Well, here’s the secret to success. You have to be willing to fail enough times to figure out how to succeed. So, for me, with goals, the secret with goals is, if you’re hitting 75% of your goals, your goals aren’t ambitious enough. And most people feel bad when they don’t hit a goal. I feel bad when I’m hitting too many of them, as ironic as that sounds. So, you want your goals to be sufficiently ambitious that they’re hard to get to. I remember we chatted last time about a goal I set when I was 16, to build a company to have $100 million in sales by the time I turn 21. And I told you I missed that goal by 18 days, but you know what? I was 21 years old and 18 days, and iContacts got to $100 million in sales. And that enabled me to do everything that came after.
So, you want to have ambitious goals. And I actually did have a goal to run a marathon in 2010, and I was all set to run one in April, and then I got sick, so I signed up for a December marathon and ended up spraining my ankle and only finished a half marathon. So, sometimes you miss your goals and that is okay. You just have to understand that the best way to succeed is to fail sufficiently and think Edison failed 5,000 times when trying to come up with a filament before he came up with a successful and incandescent light bulb. Keeping that mind set in place is critical to long-term success.
Andrew: I see. So I might maybe [??] realize that I have not run a single marathon, even though I promised myself I would run four and say ‘ Goal setting just does not work’ or just ignore it completely; you would say ‘You know what? That is part of the 50% that I am not going to get done. It means that I am setting the right kinds of goals. Let’s adjust.” Then you will adjust throughout the year.
Ryan: You never adjust your goals. Your goals are locked for the entire year. [??] yourself against your original projection. But, you set a goal. You set a series of goals; maybe ten, and you try to do five or six. That is how I do it, anyway.
Andrew: OK. All right. So, goal setting is one. We talked about how you do it. What else? What about reading books? You are someone that just loves to learn. I read the transcript of our past conversation, and you kept referring to books and how they changed your life right from an early age. How do you read books different, do you think, than the average person might be reading books who is not getting as much out of them as you are?
Ryan: Well, I think that a successful entrepreneur is often a voracious reader and a successful person is often a voracious reader. For me it was the formative years of my life, my teenage years, where I really was exposed through my parents to some really important books. I remember mentioning to you ‘Think and Grow Rich’, ‘Rich or [??]’, ‘How To Win Friends and Influence People’, and then there are some others that really inspired me. But those were the three that really opened my mind to personal development and personal finance, which ended up being critical to my later book and success. I do not read that much anymore.
Maybe I read two books a month. It is not that much. But I do not watch TV. I might watch a total of a half an hour of TV per month. I do not even have cable. I do not have an antenna. So, if I want to watch TV I have to go out to watch TV. I think that that is an important characteristic I find in other similarly ambitious people, that they focus their time in their efforts on doing the things they love and what they are passionate about and not being sort of sedative in one place watching information come to them.
Andrew: You mentioned education. Beyond reading books, where else are you learning?
Ryan: You learn every day, right? You learn through the mentors and the people in your life. I am actually considering additional schooling and education. I dropped out of UNC in order to build iContact, so I may go get a graduate school degree some point in the next few years. But I think that the most important place you learn from is from the primary two or three mentors in your life. I try and surround myself and find people that are 10 or 15 years ahead of where I am that I can learn from and go out and simply model from them and learn from them.
Andrew: How do you get those people to give you so much of themselves?
Ryan: That is a great question. In my case they were either the people that I hired as my C-level executives, or they were the folks that invested in iContact either as equity investors and [??] investors or as a [??]. So I think it is important to find people who have already achieved what you want to achieve and bring them in your life. But in order to get the level of collaboration, you often need to have aligned economic interests in some way by allowing them to invest in your firm or by [??] paying them on a monthly basis for their advice.
What I have found is that by having a CFO who was in his mid-to-late 40s when we had hired him [??] already [??] CFO the company that exited for 500 million plus dollars about 10 years ago. By having him as a mentor. His name was Tim Oakley, our CFO. By having [??] Buck Goldstein as a mentor who had been [??] venture capitalist and who had been in public companies CEO by having [??] from JMI Equity and Carter [SP]Griffin from Updated Partners; you know these were the people along with my senior team that really gave me the knowledge I needed to execute and build iContact into a successful company.
Andrew: Do you have an example of that? Actually what I am looking for is this. I think I have got an example. In 2006 you hired the CFO Tim, right? And he helped you raise half of a million dollars in funding and you used that to buy pay-per-click ads on Google. So I can see how these guys help you. But what I have noticed is that I have interviewed a lot of entrepreneurs who have good CFOs, who have great investors, but they don’t tap them for information, for knowledge, the way that you do. How do you do it? Is there some formal way that you do it, to make sure you are getting the most out of them? Instead of doing what most people do, which seems to be just give the investors as little, or as much as you have to, and then get them to back away so you can focus on your work. What do you do to make sure you’re learning from them, and growing?
Ryan: I think the key is always in the selection of the people, and then ensuring that [??] there is an ongoing process for you to spend a lot of time with them, to learn from them. There are different types of investors. There are investors who don’t really know all that much about operating a company, the operations of a company. They are not that value added. They really sort of, just want their money, and then not to talk with them again.
Then there are investors, like the ones we were fortunate enough to attract, that not only provided five hundred thousand, [??], for a total of 53 million dollars, over the last five years in iContact. They not only provided money, but actually provided strategic advice. Every six weeks we would have a board meeting, or a board call. I would get interaction formally [??], to set up a monthly call with our major investors from JMI Equity, to make sure I was getting the feedback, and mentorship and guidance that I wanted, to ensure that I got.
On the CEO standpoint, his office was next to mine, so we would see each other every day. The tactical thing that we did with our senior leadership team; because sometimes teams are bad at communicating; we had a daily 9:46 AM huddle where we got together for ten minutes and just shared, “What are you doing today? What problems are you trying to solve?” That helped us learn from each other very rapidly.
Andrew: Why 9:46? Why not 9:45?
Ryan: Well, you want it to be an abnormal time, so people aren’t late. If it’s the normal time, people are four minutes late. If it’s an abnormal time, then people are right on time.
Andrew: Because, they feel like there must be a reason why Ryan picked 9:46, I better go and see what that reason is.
Ryan: You got it.
Andrew: All right. And, all you do there is just talk about, “What are you guys up to today? What are your plans for the day?” That’s as informal as it is?
Ryan: Yep, “What’s your schedule and, are you hitting any roadblocks?”
Andrew: Before I get into the rest of this, the way that you work, you mentioned you raised 53 million dollars, right?
Andrew: You were basically at cash flow break even. You had a business, from what I could tell, didn’t need that much money. Did you raise that money to take some cash off the table back then?
Ryan: Absolutely. We raised three rounds of capital. In 2006, we raised five hundred thousand dollars from my DF Fund partners, in Durham. That was our RST round. We had about a million and a half in revenue per year when we raised that money. In 2007, we had quadrupled to about four or five million at the time. We raised five million dollars from updated partners, in Reston, Virginia is our Series guy. Then we use that to build out our senior management team, and scale to the forty million in annual revenue. Then we raised a forty million dollar round of funding, in our Series B, from JMI Equity, in August 2010. All along the way, in our Series A and our Series B, we were able to sell some of our personal shares. So, the actual amount that went to the balance sheet of the company was more like thirty million dollars. You had some amount that went with our personal shares, that we were selling to the investors.
Andrew: You mentioned Napoleon Hill earlier. One of the things he talks about is the need to be all in. To take a risk that’s so big, that you have to succeed, or if you don’t succeed you fail completely. Remember, I think you talked about Cortez, who earned the ships after he landed. You didn’t do that. Why not?
Ryan: I think the role of the entrepreneur is to constantly minimize risk, as ironically, as that sounds. Your goal is to arrange land labor capital, entrepreneurial ability to create a volley of output that’s greater than the sum of the inputs. Hopefully, create jobs and give back to the community, and have a great experience for your customers while you are doing it. I don’t think it’s about all or nothing. I think it’s building up value for your customers. Creating a great work experience for your employees. Creating value in your community. And over time, prudently assessing your situation and taking small amounts of risk, in order to reinvest in scalability, and growth. So, I don’t think it’s an all or nothing thing. Certainly, after the first year or two when you’ve gotten into some revenue generation.
Andrew: How did your life change after you took some money off the table?
Ryan: Well, you know, I think there’s a sense of, for me, the purpose of money is only that it enables me to do good things. It enables me to invest in other companies. It enables me to invest in companies in Africa, which is a passion of mine. I don’t really have… I’m not a material person, I don’t really care for material goods. I think the value of an entrepreneur having $1,000,000 in their bank account, for example, is that it does allow you to think longer term and to think bigger. Therefore I do encourage entrepreneurs, if they have the opportunity, to take some chips off the table when they raise their 2nd, or 3rd, or 4th round of funding to do it. That allows you de-risk a little bit and focus on the longer-term value creation.
Andrew: What do you mean? Do you have an example of a risk you were able to take because to you took some risk off the table?
Ryan: Absolutely. In 2007 I contact[SP] raised about $5.3 million or $5 million from updated [SP] partners and my co-founder and I were able to take some chips off the table and we built the company up over a number of years and then in 2010 we raised $40,000,000. We would have never gone out. When you raise $40,000,000 in capital the risk profile goes up. You might say “You have more money in the balance sheet therefore the risk is lower” but the reality is that you’ve taken $40,000,000 of capital, that is senior in the capital structure to all the common shareholders, only below the debt
Andrew: [??] The connection went down, he said “Only below the debt”
Ryan: Right. You end up getting nothing.
Andrew: Can you repeat that? I missed it because the connection was going down a little bit as you were saying it.
Ryan: Absolutely. Basically when we raised $40 million in series “B” preferred security which is how you do venture capital, that $40 million is now senior in the capitalization structure which means it’s above all of the common shareholders which is me, my co-founder, all of the employees. So if you don’t sell for more than $40 million you get nothing, but you need that capital in order to go out and really take chances and really go big in the market. We wanted to go big or we wanted to go home, but we didn’t want to be foolish about it. So we took some chips off the table which allowed us to think long term and get the capitol we needed to succeed.
Andrew: I see. What about peers? You talked about going to mentors, in fact, even when reading your back story I read about who you talked to regarding structuring your company when you first launched. There were always these smarter people around you who you were turning to for advice. What about peers, other entrepreneurs who you can have conversations with about how to structure your debt or whether to take on another round. Who do you talk to and how do you do it?
Ryan: I’ve got a few groups, three groups that are particularly helpful. I joined EO, which is Entrepreneurs Organization, in 2005 which is a group of entrepreneurs under 40 with more than $1 million in annual revenue. They were very helpful to me. I was in a forum with 7 other individuals, all of whom were peers, and I learned a lot from them. Second there is an organization called Young Presidents Organization, YPO, which is a group of peers under 50 who have more than $10 million in annual sales, usually. That is a group I’ve recently joined and I think will be a good peer group in the future. Finally, I’ve been part of a network of entrepreneurs you’re probably familiar with called Summit Series. Through that I’ve met a number of other entrepreneurs, many my age, who’ve built companies into the tens of millions of dollars. I’ve been able to create a network that I can call on for advice any time.
Andrew: EO is the one you’ve been part of the longest. Do you have an example of something you’ve been able to do because of the conversations you’ve had in EO that you wouldn’t have been able to do otherwise?
Ryan: As you probably know, half of the value of EO is on the personal side. Being able to talk with people in a confidential forum and environment about what you’re going through be it a divorce or marriage, a new child, and understand what you should do so that you can focus on your business efforts and hopefully also take care of your personal life. On the business side, I remember a forum where we had a company coming to us that had made an offer to buy our company a couple of years, buy iContact. I took it to the forum and asked “Is this something I should do, or not something I should do?” and I ended up getting some very valuable advice and we ultimately decided that we weren’t going to go down that path. Having that network of peers, of entrepreneurs who have been there before is just as important as having a network of mentors who have been there before. You want people who were not only there 10 years ago, but also people that are in the arena whose faces are marred with dust today in your group.
Andrew: You know, I wish when I was building Bradford and Reed I was part of a group like that. There is so much that in retrospect I didn’t know. For example, I didn’t know the importance of diversifying your revenue. I thought “Well, if I have a few customers, then I can take better care of them and really build relationships with them. I didn’t recognize, well, if you have a few customers, then if one of them goes down you’ve lost a significant portion of your revenue.
I didn’t recognize that until I had an audited financial statement where they put that down as a risk, where I thought it was one of the good decisions that we made in the business. I didn’t recognize when sales were going down, I was comparing myself constantly to sales at their height and thinking, “I’m a failure. This company’s a failure,” instead of realizing, wait, take a step back. If you look at this as it is, you realize that there’s solid revenue there.
Anyway, there are lots of little things like that that today I can go back and say, “Oh, I was not that smart.” I made mistakes, that if I was around other people, I think I could have had it fleshed out.
I just didn’t. . . I thought I was the only one. I thought I was the only one who was thinking about business the way I was. I thought I was the only one who was ambitious the way that I was, the only one who was impatient in the way that I was. I didn’t realize that there are other entrepreneurs like that.
You find that, too? I see you’re smiling you’re saying that.
Andrew: But, there aren’t a lot of entrepreneurs like you, Ryan. From an early age you were able to build up not just a company that raised money from a seed fund, but a company that was generating solid revenue, a company that was going somewhere, a company that kept building up customers. You weren’t like a lot of the people who we read about on TechCrunch. You weren’t like a lot of people who you might have gone to school with.
Where did you find those people that made you feel like, this is okay to think this way?
Ryan: Well, building a company is a lonely journey. You have to have a lot of self-confidence in yourself, and you certainly have to have the perseverance to get through tough times. You know, at the end of the day, while there weren’t that many folks who were in their twenties the scale that iContact has reached, there are many, many people out there that are often 40 or 45 or 50.
If you’re able to get into those networks and really surround yourself with people 10 to 15 years your senior if you’re a younger entrepreneur, you can often get a network of peers and mentors that have been there and done that. So, there are thousands and thousands of public company CEOs in the United States alone, and probably tens of thousands that have done it over the years. So, they are out there in every community. It’s just up to you to find them and to bring them into your peer group.
Andrew: You said it’s lonely to be an entrepreneur. I’ve heard several entrepreneurs, both in my audience and in interviews, say that it’s lonely to be entrepreneur. I want to understand that, because I have to say, I never felt lonely like an entrepreneur. I felt like there were too many people around: too many customers – not too many customers, but, you know, a lot of customers – too many people who are vying for my attention.
What I did feel was scared a lot, and do still. Frankly, now I feel scared a lot even though things are fine. Nothing’s ever going to go bad, but I feel like, “What if I screw up an interview and I say the wrong thing? What if I admit that I’m nervous in an interview that should be routine and people see through whatever exterior I put up? What if my customers all disappear tomorrow?”
You know, scary, but I don’t understand lonely. Can you help me understand it? Maybe I’ll identify with it once I really understand. What do you mean by lonely? When do you feel lonely? How do you feel?
Ryan: In a perfect world, as an entrepreneur, you would always have spent sufficient time identifying the next mentor, the next peer group, that can help you get to the next platform for you to jump off of, the next, you know, shoulders upon which you can see from.
I think something I speak about often, having [??] fortune to find a number of mentors. That’s something in hindsight that I wish I would have spent more time on, actually finding people proactively before I needed them, as opposed to after I needed them, who are one or two steps ahead. While I found [??], a great group of individuals who had built companies between $1 and $25 million in annual revenue, once we got to the $25 million in annual revenue mark, I didn’t find as many local mentors I could connect with.
So, there is this combination of I hadn’t really found too many people who I could relate to, who I could gain advice from, and there certainly weren’t as many that were 23, 24, 25, 26, 27. So, while I was able to find some older mentors, I couldn’t find a lot of people I could relate to on a human, peer, you know, mid to late twenties young entrepreneur basis. I was often dealing with difficult decisions in challenging times that I went to my group for advice on, but ultimately had to make the final decision on.
So, I think it is true to say that it can be lonely at the top, oftentimes because people are afraid to talk to you if you’re at the top.
Andrew: Who’s afraid to talk to you when you’re at the top?
Ryan: Oftentimes, members of your company. Oftentimes, your employees won’t tell you what they really think because of a fear out of how you might interpret it?
Andrew: For example?
Ryan: I mean, I can’t tell you examples, not that it is something that didn’t exist. But, there were certainly many times, I’m sure, where things were happening, or trends were occurring in the business, where they should have been brought to my attention. But, perhaps, an employee who was a few levels down in our organizational hierarchy didn’t want to bring it up to my attention. For fear of how I would react. I did my best to build personal and connected relationships with a lot of folks at the company. But, certainly, there is this executive amplitude, or leader’s amplitude, where people are afraid to come to you and tell you things. So, you just have to proactively reach out and be extremely friendly, and do skip level meetings, and things like that.
Andrew: You mentioned earlier having difficult decisions, you have to make on your own. Like what? What’s the toughest decision that you felt like you had to make? Was it just you, or the toughest decision in general?
Ryan: Ultimately, in November of 2010, we decided we would launch a free version of iContact in response to some of the competition on the marketplace. Having done that successfully, ultimately, that was my decision. I went to the Board, I advocated for what I believed in, I made the decision. And, when a company gets large, it becomes more like a cruise ship than a speed boat. So, changing the direction of the cruise ship versus changing the direction of the speedboat, takes a hundred times longer.
It’s very different for an entrepreneur who has a tendency to have a bias toward action, to act quickly to move an organization with 300 employees versus an organization with 3 or 30 employees. So, I learned to lead a number of people in organizational groups through a strategic shift. But, I mean, there’s decisions like that. There’s decisions to raise 40 million dollars, from JMI Equity, which ultimately became my decision. Decisions to propose to the Board that we go through with the sale of the company. You know, these are decisions that you ultimately make. You know, staring out your window in your office and it’s you making the final call.
Andrew: Is that how you make your decisions? Just quietly on your own? It’s not a writing down process? I did an interview with an entrepreneur recently, who was talking about doing the pros and cons, to try to help make a decision. You don’t do that, it’s just sitting there and thinking it through?
Ryan: Yeah. It’s finding the answer, and this feeling in your gut of what’s right. It’s probably thinking through the pros and cons, talking to a number of people. It’s making a decision and going forward with it.
Andrew: Why is it so tough to offer a free version? It seems to me, from the outside, you’re an email business. Companies pay you to use your software to reach their audiences via email, and get their audiences to sign up for email contact. It seems pretty easy to say, “You know what? We’re going to offer a free version. Just run it for a thousand or less, and see what happens by Friday, and then we’ll adjust.” Why isn’t it that simple? And, I see you smiling as I even describe this. It’s like a fantasy land when you’re a bigger company. But, why? What happens at that point? What can’t that happen that easily?
Ryan: Well, imagine you had a company with 45 million in revenue and 20%, to make up a number, of your revenue happened in that range, which you are about to make free, right?
Andrew: So, you give up 20% of your revenue. But, once you’ve decided, and have told the Board, this is what I want to do, and they say, “You know what? Okay, Ryan, you’re the boss, you have a vision here. We can see, based on your analysis of this, how it could eventually help us in the future. Do it.” You can’t just send out an email to the company saying, “You guys in technology ,anyone who is this size customer, from now on gets it free, and guys in advertising, please market that we’re offering free.” You’re smiling as I say it. Tell me why?
Ryan: Because, I think as an entrepreneur, that’s what I would have thought as well. The reality is, that as a larger company, there are systems in place. Things like accounting systems, billing systems that have to comply with Sarbanes-Oxley, and revenue recognition for gap accounting controls, [??]. I’m sure that you passed your audit. Things that you don’t think about. You have to, you know, redesign your entire couponing system. You have to figure out how to communicate with all the different types of customers it effects if you redesign your pricing form. Things that take three to five months of work to do, that have to have the right, proper planning in place. I think when you get beyond; I think the magic number is 150 employees; things become challenging at a multiple of a degree of difficulty than they were previously, in order to drive change, within an organization.
Andrew: That’s what I came to this interview to learn. That’s one of the big things I came to learn. What are those bigger issues that entrepreneurs face when their companies become as big as yours did? You explain some of it, now you still, within this infrastructure you need to operate. You need to convince you can help them get things done. How do you do it? How do you lead in that situation?
Ryan: Well, I think you’ve got to talk about the job description of the entrepreneur versus the job description of the CEO. The job description of the entrepreneur is CEO, Chief Everything Officer, right? You are in charge of Janet taking out the trash. You’re in charge of managing the checkbook. You are in charge of getting customers, getting the product out, hiring people. You do everything in the first twelve to eighteen months of a start-up. Until you’re about a million dollars in annual revenue, your job is everything, right? And then eventually, the magic thing happens, when your team has a team. And then, another magic thing happens, when your team has a team who has a team. So, it generally tends to be that when you get to a scale of about fifty employees, you need these wonderful things called processes, and these other wonderful things called metrics. Your job then becomes a leader, becomes the person who sets the big picture strategy and the key [??]. Then you become the Chief Executive Officer, rather than the Chief Everything Officer.
Andrew: The Chief what Officer versus the Chief Everything Officer?
Ryan: [??] Is to hire and retain the senior team. It’s to set the key performance indicators. (the Chief Executive Officer) So, it’s building a team, right? It’s recruiting and building a team, and maintaining a team. It’s holding them accountable to results, and setting the right GPI’s [SP] for the company. It’s raising funding to make sure you have a strong balance sheet. It’s owning and being accountable for the results in the business, and it’s culture. It’s relations with the media and it’s relations with investors. That is the job of the Chief Executive Officer, as a leader, as someone who inspires others. It’s not the job of the CEO to do everything. It is hard as an entrepreneur who is a detail-oriented micromanager. At times we all are as an early stage entrepreneur. Just step back, and realize you have to delegate, you have to get the right people in place, and you will only scale beyond five or ten million, in annual sales if you get a solid team behind you.
Andrew: You mentioned having processes and metrics, how did you create the processes? How did you share them with the company? Is there a procedure manual? I’ve heard other entrepreneurs talk about that. Is there a different way that you would lead through processes?
Ryan: Yeah. Well, I think you have company wide processes for like, payroll, things like granting stock options, for things like employee policy, type of thing. And certainly, every company has an employee handbook, generally. It’s good to have it on an intranet or a Wiki, so that it’s editable and updatable. We had a corporate intranet. We used ABP for our payroll. We had an HR system with ABP and we collaborated and communicated through an internal system, [??] sales force called Chatter, and of course, their email. Over time you establish accounting controls and processes. You establish HR controls and processes. Then you have processes for achieving your corporate objectives that your second tier, your senior leadership team, puts in place to be able to achieve the results. It’s sort of up to them to create the processes in their departments.
Andrew: So, what we do hear at Mixergy is once this interview is done, I upload it using Cyberduck, to a rack space. Joe the editor downloads it. He has a how-to guide that’s within our manual that shows him how to put it into Screenflow, how to edit within that, how to export it, how to post it on the website, and so on. It’s all organized that way. And, that’s what I’ve been hearing from some past interviewees, that they’ve done. Did you do the same thing? Do you also create a similar collection of those how-to guides internally, or was there more flexibility because you want people to think for themselves? It seems like I’m hearing both things in interviews.
Ryan: Sure. Well I think all companies are a collection of people, products, and processes, and oftentimes it’s your processes that differentiate your company, in addition to your people and your product. So we documented nearly everything. I remember in year 2 of the company, sitting down and personally writing the first employee handbook that documented all of our processes. Eventually you have to open source the process list, and that’s why we put it on an editable corporate Wiki where anyone can add to it and subtract from it. Eventually the processes become departmentalized as you grow to another size of scale.
Andrew: Sam Carpenter, who wrote the book “Work the System” about how to create these systems, said that you should also identify what your company stands for so that everyone else knows where these processes originate and how these processes should work. Did you do that? Did you have a list of things that you stood for at iContact?
Ryan: We had, originally, a list of 10 company values, and we thought that we’d checked the box on that, but really we had failed. We had failed because we didn’t know what they were. They were very vague and abstract, and I even tried to say what they were, as a CEO, and I could get four. So in 2009 we went through a process to come up with five company values we’d call “WOWME” and they are to Wow the customer, Operate with urgency, Work without mediocrity, Make a positive wake and Engage as an owner. And I’ll be able to tell you that in fifty years, because it has an acronym that’s memorable, that’s pronounceable, and everyone in the company knew WOWME and knew what our values were and could relate all the things we did in the organization back to the core values of our organization.
Andrew: How do you come up with that as an entrepreneur? Here you are. Creating this list of values could either be the most corporate-y thing you do, that’s a little too rigid and won’t even be remembered by the founder, as the first list. Or it could be something that you feel you’re inspired by and that allows you to create the future, to almost play god in business. That’s kind of what we’re about. We’re creating something in the way that writers might create whole worlds in novels. We’re creating it in the real world. How do you do it right? How do you make it that inspiring? Do you have a team that you work with on this? Is it a process to get there?
Ryan: I’ll tell you the exact way we did it. First I’ll say that every company needs to define, in words, its culture. You need to define, in words, your why statement, and you need to define, in words, your values. Our culture was fun, creative, caring, hardworking, and those were the four adjectives that we applied to our culture. Our why statement was to make online communication easy for small and mid-size businesses and non-profits so that they could succeed and grow. Then, our values were WOWME as I just shared with you. And I think it’s one of the first things you do when you get beyond a handful of people.
When you get to 10 or 15 people, you need to find the adjectives that describe your culture and you need to take the time to write down the values. We did it in year 6 of the business, so we already had a values statement, but it was too long, so we got our entire senior team together and decided to brainstorm. We did this in one day with the help of a third-party consultant. We brainstormed a list of dozens of words that we felt described our culture. We grouped them into similar words, then we narrowed them down to ten, then we narrowed them down to five, then we rearranged the words to make them fit into an acronym. And all the other words we had, we ensured that they were included in the description of each one. That was an important part, to make sure that there was legitimacy across each department and that the senior team felt that they were the right values.
Andrew: A lot of entrepreneurs in your situation would say, “Dude, leave me alone, I’m running this company that’s growing at hyper speed, I have way bigger issues than how to create this document that seems more like a Northrup Grumman requirement than an entrepreneurial obligation”, and so they pass it off. Tony Hseih of Zappos famously said that he did it because, at his previous company, things just went to pot. People didn’t care about the business, he didn’t care about coming into work because the culture just was, not corrupt, but it wasn’t exciting. It was–there was a problem with the culture. Did you have to wait until there was a problem in order to jump on this and say, yeah, we should define our values and we should explain what we stand for?
Ryan: Well, Tony Shea [SP] is, you know, I’ve met him a number of times in person and through his book. He’s sort of been someone I look up to in the world of creating a great, amazing, inspiring, creative culture for a company. And I think at the end of the day, once you get beyond ten or fifteen employees, your success is entirely dependent on the success of your employee base, and their inspiration to come into work and be motivated every day [??] value and achieve. You just can’t create a great company if there are hundreds of people walking around that are not inspired to give it their all, every single day.
And so, we passionately cared about the purpose of our business, we passionately cared about the employees and our whole team; we passionately cared about our community, and we passionately cared about our customer base that we served every day. And through that passion, through that emotion, the emotional side of the balance sheet instead of the financial side of the balance sheet, we were able to create substantial assets that often could not be seen in a simple pro-forma profit and loss statement. And so I believe that you should invest, once you get beyond a handful of people, in creating an amazing culture at your workplace.
Andrew: All right, I’m wondering what else. … what don’t I know to ask you about the last stage of the business? What I mean is–well, maybe I could ask it this way. If you were to go back to the you that you were five years ago and say, here’s what’s coming up as we get really big, you should be prepared for these challenges, what would it be? What would you tell that you?
Ryan: I [??] two really important things. One is hire a chief operating officer when you get to about thirty employees. We never hired a COO at Icon [SP] to act, and so I was not only a CEO that was the external facing CEO in charge of strategy and vision and fundraising, and investor and media relations, I was also the internal CEO responsible for keeping the trains running on the track at the right time, and doing the weekly operations meeting, and managing the KPIs [SP], and managing the incentive comp, and it became too much to do both at the same time well.
I find that I’m best as the product marketing, external strategic-focus CEO, and that I need, in order to succeed in business, a great right-hand person running the operations of the business on a day to day basis. And so I realized that, and probably about a year and a half ago, and never found the right person, was never able to really get on that right chief operating officer, and so, if your focus is external strategy person, get a chief operating officer on board who can take care of the day to day tasks of running the company, while you focus on creating the next iteration. You know, really, after once you get to about 25 million in revenue, as a CEO, you need to be working on thing that’s going to get your next 25 million in revenue, not working on what’s going to happen next week or the week after. And so, my rule of thumb for a CEO of a company larger than a hundred employees is you should be, you should rarely be working on anything that’s going to affect the current month.
If you’re working on something that’s going to affect the current month, you’re working on the wrong thing. You need to be working on things that are going to be affecting three months, six months, nine months and twelve months from now. So the mistake I made, besides never hiring a COO, was we were in the business of email marketing, until October 2011, when we became in the business of social media marketing.
And that was our second big thing, and we got acquired six months later, and so we never really, fully got into the business of social media marketing; however, I should’ve been looking for that opportunity for our next business line three or four years ago, and if I would’ve gotten the right operations partner in place, that would’ve enabled me, instead of working on cross-functional ops, to work on generating the next big revenue driver for the company.
Andrew: So, you said two things. One is get the COO, and what was the other thing?
Ryan: Oh, it’s as the CEO, once you get to about 25 million in revenue, your job needs to be focused on working three to six months ahead at all times, and recruiting the team, and getting in place the next product that you’re going to bring to the market that enables you to grow well beyond where you’re at today.
Andrew: Jason Cohen of WP Engine said that I need to ask entrepreneurs more about the insecurities that go with being an entrepreneur; specifically, he said ask about the impostor syndrome, this feeling that everyone is counting on you to be great, and you have to project this sense of confidence, but at the same time, you have insecurities like anyone else. Do you remember when you felt that?
Ryan: Yeah, you know I think I’m a very self confident person, and I think that that probably comes from my mom who taught me from a young age that I could achieve anything I set my mind to as long as it was something that would make a positive impact in the world, and that I surrounded myself with amazing people. I think, at times, you can lose confidence, but at the end of the day, you often know your business better than anyone else and the best thing you can do is to make decisions confidently and surround yourself with great people. I think I was fortunate to not be affected by that syndrome, imposter’s syndrome as much as others, but you really do have to play a mental game with yourself to continually be confident in the face of challenging situations.
Andrew: What is that mental game? How do you play it?
Ryan: Well, I wish I knew. I wish I could describe it in a repeatable format. At the end of the day, what you create in the world is a function of what you put in the thoughts in your head. Individuals who put thoughts of worry and failure in their heads are the individuals who often do not make it and succeed. Individuals that have ambitious dreams and shoot for the stars often land on the treetops, as they say. So having ambitious dreams and goals, where we started this interview, and then surrounding yourself with people smarter than yourself, who are more experienced than yourself, to [??] was what I did. Because I had ambitious goals in my head, thoughts from a relatively young age that I could build a successful company, that I could find great people to surround myself with, I figured out how to. A lot of it is just mental, positive psychology. Thinking positively and knowing that you can achieve anything that you set your mind to.
Andrew: Here’s what’s worked for me to do that. I recognized at some point in my life that I was very aware and very focused on the things that could go wrong or the things that could embarrass me, and I would just have these scenarios play in my head about how if I lose this business my friends from High School are going to laugh at me and my friends from Elementary School are going to share links of my failure with each other, and those stories would just keep going. I said, you know, that’s why I’m being weak in conversations, that’s why I can’t express myself or take risks and then I had to say, is that the truth? I don’t know if they’re going to share and I don’t know if I care about it but I also know that there’s another truth, or there is a truth which is that if I could make it then here is the great things I could do with the world or here is the way that I can live out my dream and focus.
Anyway, I just heightened my awareness of the things that I wanted and tried to shift my focus to those every time I worried about the things I didn’t want to have happen. So if I caught myself saying, if I go and do an interview with Ryan and I goof on camera, my friends could goof on me and then I’m going to be this guy who everyone from Elementary School is emailing back and forth about. If I start to get carried away with that, I say, stop, focus on what are you trying to do. How great would it be if you would do an interview with Ryan where one person emails you five years later and says because of that interview I was a better entrepreneur.
How great would it be if because of that interview, someone comes two years from now and says I reached the same height as Ryan because I wore a wrist band and the way that he talked about setting goals, I did it and look at how fast it worked. I just keep trying to be aware of when my head goes to the negative space, shifting it back to the stuff that I want to focus on. Do you do anything like that? I just went on a long description of what I do.
Ryan: Life is too short for negative thoughts. Life is too short for negative people. I only surround myself with positive people and positive thoughts. I am an optimist. I think our world and our society has tremendously positive things ahead. If you look at the data, we’re progressing immensely as a human species toward amazing, important goals for ourselves as a society and so I will always be an optimist and I will always believe that if I find great people to surround myself with, are clear on the goals that I have in my life and the passions I have and work every day to pursue them that I can achieve anything. And I know that anyone listening to this can achieve anything they set their mind to if they follow that same path.
Andrew: Well, you did it. I have the quotes here from our first interview of what you were going to do, and here you did it. What’s next? What’s the next big goal? What’s the next big wristband?
Ryan: Well, I am passionate about creating jobs in the developing world. I’m passionate about being part of ending extreme poverty in our lifetime. I’ve been passionate about that for probably the last decade. I still wear that white wristband that says “Make poverty history” from 2005 from the one campaign (?) I’ve worn now for 5 or 6 years. And to me, I went to Africa in 2008, to Kenya and Uganda for the first time. Since then, I’ve started investing as an angel investor in companies and (?).
What I plan to do for the next 25 years, at least, is to become a great venture capitalist and a great private equity investor in companies and in countries like Nigeria, Ghana, Kenya, Uganda, Rwanda, Tanzania, Ethiopia, South Africa, and really sub-Saharan and middle Africa. I think through investing and providing capital to growing businesses, you can often make a huge positive impact and create long term sustainable economic growth. So that’s my passion and I hope to see a world created in which every human being has access to basic human needs of food, water, and shelter. And I think we’ll get there in the next 20 to 30 years.
Andrew: I have a part of your transcript where you said what you were going to do with iContact by 2012, and you did it. I’m hoping to have you back on here when you achieve that, to talk about how you did it. I’m going to ask you one final question, but first, let me say to the audience that, if you buy into this worldview where it says education helps. It says it’s important to think about how to build your business, that’s it’s important to learn how to do it. If when Ryan earlier talked about reading books, and being shaped by them and acting on them, if this is your worldview, I hope you join us at mixergypremium.com where I invite proven entrepreneurs to turn on their computer screens, and teach just one thing that they do exceptionally well and that they think other entrepreneurs need to learn.
And we’ve done this with copywriting, with sales, with customer development, all with proven entrepreneurs who turn on their computer screens and spend about an hour focusing on making sure that you can do this. And if you look in the comments, we’ve started turning comments on, encouraging comments and turning them on in these courses, you’ll see that there are people who’ve seen results from this and they’ll share their results. Hopefully in time we can get some people who also will be open about their failures from the courses, because I’m not looking to just have those comments be a place to show off. I’m looking for them to be a place where we can help each other build our businesses.
So if this is your worldview, go to mixergypremium, if you’re already a member, you get access to all of those courses, if you’re not a member, I hope you join us. In addition to giving you all that good stuff, it also gives everyone else access to Mixergy interviews. Joe, who edits them, is actually being paid not by me, but now being paid by premium members. And the same thing for Ari Saint, who put together this great outline and great research on this interview. This whole operation is functioning thanks to you guys who sign up to, and are members of mixergypremium.com. Alright, final question is this: If you could give us one takeaway, if people are overwhelmed by everything we’ve talked about up until now, but still want to do something. Still want to develop one positive habit, maybe, based on your experience. What habit would you recommend, would encourage us to develop in ourselves?
Ryan: I think the most important thing for anyone out there, entrepreneur or not, is to follow your passion every single day and find a way where you’re creating value for other people, creating a positive impact in the world, and making a difference. And if you can align what you love to do with what you do every day, you will make way more money than you can imagine today if you simply worked how hard at it and surround yourself with amazing people.
Andrew: That’s a great place to leave it. I’m going to say, before I say thank you, I’ll say, the reason I was so nervous about this interview in the beginning is because, Ryan, you are the kind of entrepreneur that I want to do Mixergy with and for. I don’t want it to be about the get rich quick. I don’t want it to be about…I want it to be about your kind of entrepreneurship. You’re having a deep impact on the world. Even when I told my wife on Skype that you were coming on here, she said, oh, he’s the guy with the bee corporation, he’s the person who…then she started, on Skype, telling me all the things that she admired about you.
And I could do the same thing with her, which is to say that you have this vision for doing something big, you have this vision for helping people. And you just keep doing it every day and achieving it every day and I’m really so proud that I have an opportunity here to talk to you and I’m so proud that this is the kind of site where we could have the hour long conversation that you and I had. And so, beyond thanking you for just doing this interview, I want to thank you for just being out there and being an inspiration. Thanks, Ryan.
Ryan: Thank you, Andrew.
Andrew: All right, and thank you all for watching. We couldn’t do this without you and I’m really glad there are people out there who care about this stuff as much as I do. It makes me feel…maybe this is what keeps me from feeling lonely, knowing that you guys are out there and care about these questions the same way I do. Thank you, Ryan, and thank you all for watching.
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