How does the man who helped found Priceline go on to help America become more entrepreneurial?
In the mid-90s, Scott Case was the founding CTO of Priceline, the “Name Your Own Price” company that reached a billion dollars in annual sales in less than 24 months.
Currently he’s the CEO of Startup America, which provides resources and connections to young companies and supports regional startup ecosystems.
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Scott Case, Startup America
Scott Case is the CEO at Startup America, which provides resources and connections to young companies and supports regional startup ecosystems.
Andrew: Three messages before we get started. If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you read his articles on VentureBeat, you know that he can help you with issues like raising money, or issuing stock options or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneurs lawyer. See him at WalkerCorporateLaw.com.
And do you remember when I interviewed Sara Sutton Fell about how thousands of people pay for her jobsite? Look at the biggest point that she made. She said that she has a phone number on every page of her site because, and here’s a stat, 95% of the people who called end up buying. Most people though don’t call her but seeing a real number increases their confidence in her and they buy. So try this, go to GrassHopper.com and get a phone number that will make your company sound professional. Add it to your site and see what happens. GrassHopper.com
And remember Patrick Buckley, who I interviewed? He came up with an idea for an iPad case. He built the store to sell it and in a few months he generated about a $1 million in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store in Shopify.com because Shopify stores are designed to increase sales. Plus, Shopify makes it easy to set up a beautiful store and manage it. Shopify.com
Here’s the program.
Hi, everyone. My name is Andrew Warner. As you know, I am the founder of Mixergy.com, home of the ambitious upstart. Over 700 proven Entrepreneurs have been a part of this project where they come here to tell you their stories, teach you how they built their companies and help you learn from them so that you can go out and build your own successful business and that is the goal, the mission, the heart of everything that we do here at Mixergy.com. And I’m lucky to have had such great entrepreneurs be a part of it.
And today you’re going to find out how the man who helped Priceline become one of the legendaries internet companies, how he went on to help America become more entreprenurial.
In the mid-90s, Scott Case, who you see up on your screen was the founding CTO of Priceline, the name of your own price company that reached a billion dollars in annual sales in less than 24 months and one of the few companies from back then that’s still around and still a power house.
Currently, he is the CEO of Start Up America, which provides resources and connections to young companies and supports regional startup ecosystems.
Scott, welcome and thanks for doing this.
Scott: Thanks for having me. Glad to be here.
Andrew: I know my audience, they expect me to come here and do interviews that will give them some specific well defined benefits and I know the first they’re wondering is I even do this interview which is what’s in it for me?
So why don’t we start off with that. What’s in it for the entrepreneur who’s hungry, who’s listening to you. What’s in it if they’re part of Start Up America?
Scott: If you’re starting a company right now, you are no doubt, heads down, making your business happen, you may be doing product development, may be you’re really on your way, you’re doing customer development focusing on how to get your business off the ground and grow it and that can be both a lonely opportunity and a challenge but it also can be one that’s incredibly rewarding as you go through and build your company.
So Start Up America is all about helping companies like yours grow your business and we focus on that in three key categories. The first is access to other start ups like you. Going through this challenges, they’re building their business too. Doing that on a national basis by joining Start Up America, you get access to thousands of start ups all across the country regional basis, 19 different start up regions all across the country. Everything from Start Up Colorado and Start Up Florida and Start Up Tennessee, Start Up Iowa, Start Up Vermont and dozens of others and you can connect locally to serial entrepreneurs and experts.
And then finally getting you access to local and national experts. We do a daily learning series, all of which can be found on our website at s.co, s as in start up dot co.
And the final piece that we connect with is once we brought that whole community together, we allow start ups access, all kinds of opportunities to help you reduce your cost and grow your business through a series of deals we’ve done with over a hundred partners. Anything from $1,000 dollars in Google ad words, when you spend a $1,000 dollars to premium membership on LinkedIn are for free for 2 or 3 months to offers to accelerate your miles on American Airlines to get access to marketing programs for American to discounts on hardware and services from Dell, to Microsoft’s entire stack for three years for free to be able to build your products and services on, to our most recent sponsorship with the New York Stock Exchange, where we’re actually helping your startup get access to literally hundreds of listed companies where now you can create strategic partnerships with some of the largest companies in the world to help you advance and grow your sales. So it’s really about community and finding other startups that are like you in that same stage and then helping you find very specific ways to help you grow your business.
Andrew: So community, experts, and the last part, if I could sum it up, maybe I can call it [gills].
Scott: Yep, [gills] and resources to help you cut costs and grow your business.
Andrew: Is this government funded by the way?
Scott: No, we’re not funded at all by the U.S. government. We have a great partnership with the White House and several government agencies, but our founding sponsors were the Case Foundation run by Steve Case, no relationship to me, and the Kauffman Foundation for entrepreneurship based in Kansas City, and they became really the anchor. And then we have a half a dozen corporate sponsors to help us pay the bills and run around the country helping to step up America’s startup economy to the next level.
Andrew: And Steve Case is the chairman of Startup America?
Scott: Correct, and co-founder of AOL.
Andrew: All right. And it’s a non-profit, Startup America?
Scott: Yeah, we’re actually a non-profit project at the Kauffman Foundation, and we’re on a three-year project to help elevate the startup economy and the startup ecosystem all across the country.
Andrew: OK. All right. And if people want to be a part of it, they can go to s.co, and there’s a big button–you guys know how to create those buttons–really big, very clear button that tells them where to get started, and I hope the people do from the audience. I’m going to come back to this in a moment, but first let’s get to know you as an entrepreneur, as a person who founded one of the leading companies of our time, Priceline. You were at Walker Digital before Priceline.com ever launched, right? You were thinking up ideas to do what?
Scott: So the whole premise at Walker Digital and ultimately at Priceline was to look at the emergence of all kinds of new technologies, everything from the network we look at now, it’s the Internet, and all the things that stack on top of it, but also to understand how new businesses would get created leveraging those new assets. And [??] how the combination, largely through a lens of what we viewed as marketing systems, could take advantage of all kinds of new technologies. And one of the core concepts we came up with was the basis for Priceline, which was the idea that in a world where consumers could be empowered to specify certain types of conditions under which they would be willing to become customers. And so the whole notion behind Priceline’s name-your-own-price engine is the idea that customers were out there willing to pay a certain amount of money, but they’d be willing to trade off certain choices in order for them to be able to get a yes from a seller. From the seller’s perspective, the whole notion was how do we allow for those customers to express their demand and then give the sellers the opportunity to say yes to a consumer’s demand under certain conditions? And that intellectual property was the basis for building Priceline as the business that it is today. And when we chose travel, we focused on travel because it had a very, very high volume, highly priced, sensitive marketplace that was also a commodity. An airplane that takes off with empty seats or a hotel that goes overnight with an empty room doesn’t express or generate any revenue.
Andrew: Yeah. [I read it . . . I can’t bring it up right now because we’re having a bad Internet connection. At the beginning of this interview I turned off my browser and lost it, but in preparation for this interview, I read a . . . you know what? Actually can we lower the volume on your side? I think it’s picking up my audio a little bit on your mike. Testing one, two, three. Yeah, that seems to be better.] So I read this press release from back in the ’90s where Walker Digital basically said you and a couple of other people spent two years working on this problem and solving it, and as a result you ended up filing a patent application on this. What I’m wondering is–two years is a long time–what is the problem you initially set out to fix and how does that solution evolve over two years?
Scott: So the whole group at Walker Digital and subsequently Priceline are largely made up of entrepreneurs and startup types. And so our strategy . . .
Andrew: I’m sorry, let me stop right there. What do you mean by entrepreneur types? I’ve seen a lot of people say that they’re entrepreneurs within Priceline or founders within Priceline. What does it mean? It doesn’t seem like you put up the money to fund it. Did you own a piece of the business? How did it all work there?
Scott: So I was part of the founding team, and yes, there was equity for all the members of the founding team. There was actually options, other types of programs for employees that came on later like any other startup. I had started my own company in college. I had actually started another company founded with a college professor. I’ve only started companies my whole life. Most of the early people at [??], including Jay himself, have a lifelong startup and an entrepreneur himself. We had spent our time thinking about, ‘What are the types of new companies that were going to exist in this new environment, particularly when you have the [??] network. We were really looking for opportunities to create companies that either would exist in the future and it might take five years before they were readily a viable business, at that time, ’cause technology had to mature or marketplace had to mature. In the case of Priceline, what became really attractive to us was that we had identified a challenge within these perishable commodities that could be built today, and today being 1997. That’s where we focused our energy.
Andrew: It was a bunch of entrepreneurs who are all within this family and was the idea that, ‘We’re going to create these businesses and each one of you will go off and essentially launch and run them?’
Scott: We weren’t exactly that formal about it, as you might imagine. Jay, who at some point, you should spend time with.
Andrew: I should. The guys is freaking brilliant and as I did research on you, I kept seeing all the creative work that you guys did together and then, obviously, before and since, he also had a tremendous career. What I’m trying to get at here, and I don’t think I’m doing a good job of working out the questions for you, Scott. What I’m trying to get at is, how does he assemble this team of smart entrepreneurs? How does he then find these creative ideas with you and work? More greedily, what can my audience do, based on what you guys have learned? ‘Cause if you can create all these great ideas, I want them to come up with, each of them, at least one. Frankly, I’d like to come up with one of these brilliant ideas myself. Walk me through this. Teach me.
Scott: Here’s the formula. Jay is a brilliant guy and this may or may not work for everybody. It’s fundamental and it’s very straightforward and simple. What Jay did was, willing to invest his own capital and his own time and energy to bring a team together to do what I’m about to describe to you, which was to identify markets that were ripe for disruption, much in the same way that lots of other startups would do this. Clearly articulate the problems and what the commercial opportunity to solve those problems was. What’s a business that can be built around solving a problem? Not just, ‘Hey. This is an interesting innovation.’ But to actually take it to the next step and say, ‘What’s the economic model that sits behind it? How big a business could this possibly be? What are the trends that it’s going to ride?’ We spent a lot of time brainstorming around marketplaces and business opportunities. Not all of them were the creation of markets like Priceline was where you had buyers and sellers, although we spent a lot of time thinking about those things. From your audience’s perspective, the key takeaways for me working [??] visual in those early days and at Priceline was, you can spend a lot of time and energy on any size business. The trick is, is the opportunity big enough for you worth spending your time attacking? Attack big ideas, big opportunities, big spaces and go after them aggressively.
Andrew: How do you know what those problems are? Obviously one problem that people are always gonna have is they want a lower price and one thing that they buy on a consistent basis is travel.
Scott: That’s actually very interesting. That’s not the problem we were solving.
Andrew: It’s not?
Scott: The trick, for you as you’re thinking about trying to find your own big problem, is to really understand who your customer is. In the case of Priceline, the customers actually, and the problem we were actually solving was the fact that there was unsold inventory that sat inside airlines, hotels, car rental companies, in fact, lots of other markets that we attempted to do. Where the novelty of it was to say, ‘OK. You’ve got an unsold inventory.’ There’s a bunch of reasons why that inventory goes unsold, not the least of which is that customers who might be willing to pay a lower price for that seat, have no ability to communicate that to you as an airline or as a hotel company. The core insight here is, ‘Whose problem are you solving?’ When you architect these kind of businesses, you need to understand whose problem your solving. Depending on what the topics of your interests are, which is the other pieces. You ought to be working on problems that are interesting to you. In the case of some of the folks at Walker. We are interested in all kinds of problems, because that’s the kind of people that we are. But, most entrepreneurs, particularly first timers, who might be going after your first business, identifying spaces or markets that are both familiar with and have interest to you are really important.
Then spend as much time defining the problem early on, that you’re solving. What’s the problem? Who are the customers for that. One of the challenges I have, talking to a lot of start-ups around the country is that they don’t really understand who their customer is. In this case, like many other businesses, really understanding the customer relationship and who they are is critical to the long term success of the business. What makes Priceline a successful business today is it solves a clear problem for airlines, hotels and car rental companies.
Scott: Because that’s really, ultimately who foots the bill. Even though consumers are basically paying you, at the end of the day if you don’t have inventory from the sellers you don’t have a business.
Andrew: I see. So they were the guys who had the problem. Who had familiarity internally with the airline industry and the rental car business and the hotel industry to know, hey, you know this is a problem of perishable inventory that these guys face everyday. If we can solve it life will be golden for them. And they’ll take our calls and they’ll buy into our innovative solutions. Who had that?
Scott: I wish it was that easy. The reality is any kind of market place and any kind of industry, you’ve got to have domain experts. So, the first thing we did is, we studied it as outsiders. And understood it as best we could. Then we brought in domain experts, which is really what most start-ups need to do. So, bringing people who are deeply familiar, embedded in those businesses and part of the founding team was part of that. Understand how to engage them in a meaningful way and helping you understand that domain area. Because if you’re going to be disrupted, part of the challenge is being outside of understanding and identifying those problems and then it isn’t easy. You know, the biggest challenges that start ups have that’s really, really important. You’ve got to be building a network of people around you that, both understand that marketplace, but are also familiar with what you’re building. One of the things that Jay did really well. He pulled through his experiences as an entrepreneur prior to getting Priceline off the ground. But then certainly, throughout his career, as I do mine, is building up a set of relationships that you can, that are so powerfans of whatever project you are working on. And keeping them updated along the way. So that when you have an opportunity to say that we need to maybe pick up the phone and get access to a creative meeting, those are well informed people along the journey. Not people that you found in today’s market, we didn’t have this then. You found on LinkedIn that are one degree separated from you. And hey would you introduce me to the executive vice-president of blah blah blah company.
Andrew: This is really useful information to know. That if I could imagine if someone in my audience says, I want to tackle the supermarket’s problem. I’m not really in the supermarket’s world because I’m in technology, I’m going to go and listen to what Scott Case has just told me. Build relationships there and they will tell me their problems and they’ll be available to me and understanding of my business when I have a problem that I need to talk to them about. Immediately the issue their going to have is the same one that I brought up to you at the beginning of this interview. What’s in it for me? The people who they go to when they, and in the grocery business they’re going to say what’s in it for me to listen to and talk to this nuance entrepreneur, who I don’t know, who doesn’t know what he has yet. How do we give them enough incentive that they’re going to buy in to us, the way the people bought into you?
Scott: I think it’s, the key thing is actually the other way around. And so, what you need to be delivering immediately when you are creating any kind of effective relationship with anyone, is what can you bring to the table? Ideally, to them immediately that can be of benefit or service to that other person. So, it’s not going in and looking for how can you help me build my business. It’s really turning it around and saying, I want to know more about the grocery industry. I want to know more about this particular sector. And most people, who are domain experts, in a sector, they love their sector. And the best one. They want to talk to you about it. So, if you come into it, truly, honestly, authentically curious about that marketplace, about why they do the things they do. About some of their pain points. About what the challenges are they face. Then when you come to them with potential solutions that you want to validate, they’re interested in understanding you. And frankly, if their not interested in talking to you about their business, they’re probably the wrong people, keep looking. Because most people who are in domains, or have domain expertise, they are themselves interested in talking about the challenges they face. They’re also, they’re interested in their business. Otherwise they shouldn’t be in it anymore. And so, your job, as an entrepreneur, is to build up a broad network of people who are authentic and credible and you have to be that way too. And you have to find ways that you can help them. Maybe one of their challenges if they don’t have the relationships that you might bring to the table, maybe they don’t understand technology and you can educate them about it. But any time you’re creating an authentic, deep relationship there always ought to be a win win in both parties and important for the entrepreneurs, you got to be the one’s giving first.
And the last piece I’ll say. Really, really important. Don’t under estimate the power of the fact that in the United State just about everybody’s separates by only two people and you can see it first hand on LinkedIn. Everyone that asks you, hey, what do you do for a living, or, what do you do with your time or who do you work for? They are all potential people that could be valuable in your community and be valuable to your network down the line. So, just because they’re not in the industry that you’re in now or the focus you’re in now, you’re job as an entrepreneur is to built authentic, meaningful relationships with as many people as you can because you will be surprised at how you can draw on those relationships down the line.
Andrew: I’ve seen that too. You go to a party and you hear someone tell you a story about what they do, it doesn’t necessarily tie into your industry or your life or your dreams, kind of interesting, you build a relationship with them and boom, a month later they discover that you have a problem that their cousin or their brother or their wife or husband can solve perfectly because they happen to be there and your friend and they help out. It’s amazing how that happens.
Scott: And the universe will pay you back but you’ve got to pay into it. For those of you who are in the audience who might remember bulletin board services, way back in the day, part of the rules for participating in those communities was you had, in order to download you had to upload. And what I say as an entrepreneur, you got to be in the uploading business. What can you deliver, relationships, opportunities, ideas, knowledge, community, to help other people and you’ll get paid back by multiples of ten.
Andrew: I love that memory. I do remember those bulletin board, you’d connect to them, you’d upload maybe a megabyte of a program and then you’d get to download two megabytes. So they were generous with you but then you had to put in some work first. Hey, before I ask you the next question and the next follow-up question and just keep pushing and pushing and pushing, let me ask you this, what’s it for? I’m listening to myself ask you all these questions and every question I answer, I ask you, gives me even more homework for my business, you know, now I have to go build connections here and do this there and go do that and I keep thinking of all these entrepreneurs I’ve talked to here, over 700. I’m so proud of that number. You’ve talked to even more entrepreneurs. Some of the best in the world and one thing you might have noticed is when you tell them what you are doing next or what are you doing now. It’s never, hey, you know what, I work really hard, I work my face off, I built this company, I talked to every customer and even strangers and their cousins and I did it and so now I’m going to relax. It’s always, I did it and now I’m struggling with this other issue. So, before we tell people what else to do, let’s tell them what it’s for. What’s the benefit of having done this all if we do it all right and one of the winners in this game, what’s in it for us then, what happens?
Scott: Well there’s a few different concentric circles, right, of why entrepreneurs do what they do. Most of the most successful founders that I know are in it because they like to solve these big problems and they gain personal satisfaction and joy from attacking interesting problems. And that to me is the majority of the truly successful founders in the world. They get intrinsic value out of attacking interesting things and delivering product to market or service to market that addresses those kind of needs. There is a small group of people out there that do it for wealth creation as a pure objective. I’m less interested in talking about that as a, because I just don’t see it as being a successful driver. So, first thing is you have to be satisfied intrinsically. The next piece is you should be able to drive wealth from it because if you’re truly going to be successful in building a growing concern, you’re going to need to have a wealth creation engine, both for yourself personally, for your team and for ideally your investors if your on a track where you’re taking in outside capital. So, you need to create some level of wealth. When you create wealth for yourself, for your employees, for your investors, you create wealth for the society that’s around you and that can be massive wealth or that can be highly localized or highly limited wealth. At the end of the day, the start-up economy in America is completely, it completely drives the overall economy. All the net new jobs created in America in the last 30 years were created by companies less than 5 years old. So part of what you’re doing by being a successful entrepreneur is you’re actually contributing to the overall well being of our society. And if you like living in America and you like the freedoms and the opportunities that we enjoy, than you actually have a higher order of purpose than even your own intrinsic value in that you’re success and the collective success of start-ups all around the country is that our country is stronger and we’re more capable of serving the rest of humanity in a better way and whether that’s for our children or our nieces and nephews or for our grandparents, the start up economy is what drives the national economy. So, I think it has to start with you personally, but know that you’re playing in a bigger game in both the wealth creation engine, but also in the strength of our economy. It’s what drives it forward, is the development and creation of new enterprises. And the ones we focus on at Startup America are those high growth enterprises.
Andrew: Just listening to you talk there, I get excited. That’s a size that I want to play in. That’s the kind of impact that I want to have on the world around me. And it’s true that I do see entrepreneurs do that. The one thing that I wish that would happen is that they’d get more credit for it because, frankly, Steve Case of Startup America and AOL gets that kind of credit. People know that he had dramatic impact on the world. Many people who I’ve interviewed, many who are friends of yours and mine have been online just because of AOL and because of the work that he did. Many people have been impacted by the work that you did, and they know you to a lesser degree, frankly, than they know him. But I wish that they would know you to a bigger degree, and I wish that we would idolize entrepreneurs in general the way that we . . .
Scott: I totally agree with you, so a big part of what Startup America is . . .
Andrew: Yeah, tell me how you do that.
Scott: More broadly. So we talked about the fact that we’re doing some things that very, very specifically benefit startups that are building their companies right now. If you’re a growth-oriented startup, join Startup America and get access to a whole set of tools, resources, relationships that can help you grow your business . . .
Andrew: Everybody. Is there a gatekeeper that says to a new entrepreneur, “Hey, you know what, you’re not big enough, you’re not connected enough, you’re not this?” No, it’s just wide open.
Scott: You’ve got to be two people committed to starting and growing a company, and you’ve got to be growth-oriented . . .
Andrew: You can’t be [??] no single founder?
Scott: Research shows that if you’re by yourself, you’ve got to bring somebody else in because a lot of companies that try to go it alone eventually have got to bring somebody along with them. So if there’s a limit on it, we say it doesn’t have to be an employee. It can be an advisor to you. It’s just that somebody else is engaged with you in the act of development and growth of your business. So that’s kind of . . .
Andrew: OK. Fair enough. And what’s the other one?
Scott: . . . base level criteria. But to get to your point, what we need to do in order to step up America’s startup game is a focus of Startup America. One of our legs is celebrating and evangelizing the importance of startups, and we do that through a series of different things. But we are focused on partnering with some of the largest corporations. We spend a lot of time with the media. We spent a lot of time with thought leaders across lots of different channels to explain that startups are different. They’re a different category of company. They’re run by founders focused on growth. They’re not small businesses that somehow magically get big. Most startups that I know and founders that I know of, they think of themselves as big companies even if they’re only three people. They’re solving big problems and they’re focused on growth. They’re also not large companies yet, so they’re not up in the Fortune 1000 or the Fortune 5000. They’re starting out and they’re growing their businesses, but they have a common set of traits [??] startup culture, their founders, they’re growth oriented. So one of things that we’re doing is celebrating those folks. Every day we celebrate a startup of the day. We communicate it throughout multiple channels, and on a weekly basis we reach over 3 million eyeballs, if you will, and that’s growth. We’re also working with our startup regions, where we’re highlighting and celebrating startups through events and activities where we’re highlighting some of the best startups. One of the things I’m encouraging a lot of governors and mayors to do is to allow startups to literally pitch on a regular basis to their press corps, to their economic councils. In fact, in Owen, Illinois Brad Keywell [SP] has got this going, where they’re pitching on a monthly basis and getting the exposure to the startups that are growing their business right now in those states because from an economic standpoint, home growing startups is critical to the success of any state’s economy. It’s not enough to try to move big companies into your jurisdiction. It’s important for you to grow the successful startup economies right where you are. So tomorrow I’m going out to Indianapolis. The mayor there really gets it. He understands that for Indianapolis to be a successful city he’s got to have a strong startup economy there. And tomorrow I’ll start up Indiana launches, where we’ll focus on the entire state. It’ll be the twentieth startup state. So the plight here to celebrate entrepreneurship has to happen on a national level. We’ve got to tell stories about successful startups. We need startups to tell stories about themselves. One of the reasons joining Startup America is so important is we can help highlight you and what you’re doing and bring you to other startups, but also to other partners. So you have an obligation as a startup to tell your own story. And then if you’ve got people here who are listening who know serial founders, one of the things that we need to do more of is to bring the serial founders that are all over this country up to the forefront into leadership positions as champions to the startup communities that they’re already engaged in and elevate their stature up to the next level. And you’re absolutely right, the entrepreneurs that are watching you, the people who came before them and the people that come after them are the heroes of our economy and we need to do a lot more to celebrate them. That’s a big part of what Startup America is focused on and we’re stepping up our game in that area, as well.
Andrew: When Zach, the Founder of Code Academy, had Bloomberg sign up to take courses on his website and was invited here to Washington, D.C. for a meeting, I saw him after, I think it was the day that Bloomberg joined and I think it was right after he had some White House meeting, the guy was standing like he was 30 feet tall. We were sitting down over a beer to talk about his business and beyond the confidence that came from that, there’s no doubt that he got a bigger audience because the mayor of New York was a part of his program and because it raised his profile, more people had joined in and helped him grow and get credibility. That stuff is huge. Let me ask you this other question. I feel like we got a little bit of rapport now so I can ask you this question and see what you’re saying. I see you’re adjusting, you’re flexing, which is good for this question. It occurred to me, the press release that I read from back in, I don’t know what day it was. Wish I didn’t lose this. There’s this patent number 5, 794,207 for the world’s first buyer driven e-Commerce system, that’s probably one of the patents now that Jay Walker’s using to sue other people. Right? He’s now using his patents, one of the issues that entrepreneurs have is that, I’ll talk in more specifics about my experience. I built this company, Brad [??]. We did online greeting cards. Some nudnik comes over, a company called Tumbleweed, calls me up and says, ‘We’re going to sue you because we have the patent on online greeting cards.’ Now I’ve got to go and hire lawyers. I have to deal with this guy who’s trying to make some money off of me. It’s a problem that entrepreneurs have. What do you think of the patent system and how it affects us entrepreneurs?
Scott: I can’t speak to any specific examples, ’cause I’m not a first [SP], nor in the weeds on it. I’m a big believer in well executed intellectual property. I think it’s one of the fundamentals of success of the American system and essentially one of the few things that’s [??] written into the Constitution is the idea that people should be able to protect their ideas. I think the challenge is executing against that and as a named inventor on a lot of patents, one of the things a lot of people don’t know is that you have an obligation when you file a patent to identify anything that could be considered to be what’s technically called prior art. You have to do a thorough job. You don’t have to turn over every rock in the universe, but you need to do your homework to understand, ‘Has somebody already done this before, and if so, how are you being innovative around it?’ As it relates to the last 20 years of patent law, it’s been evolving and patent offices attempting to keep up with the changing dynamics and I’m sure that there are patents out there that are arguably super tight and strong, Amazon has one in their one click ordering system. It’s held up and been licensed. I think that the most successful patent holders, both have a background in building businesses around them, but also recognize that licensing is the right strategy and creating good, strong licensable relationships. There are others out there that have a different point of view, but mine is that intellectual property is really important.
Andrew: Ideas and software aren’t different from patenting hardware, for example?
Scott: They are different and you should invite a patent attorney on to talk to you about the differences there because I’m not gonna attempt to do that. But what I can say is that from a startup’s perspective, as you ‘re look at intellectual property, there’s a lot of open systems out there and as you look at developing your business, one of the things you have as a startup, is an obligation to go out and understand who came before you, what’s out there and it’s worth doing a patent search to understand who are the companies out there that hold patents that are related to your marketplace, so you’re aware of what the basic intellectual property is.
Andrew: If it’s important, would you ask every entrepreneur who went through Startup America to do a patent search? Would you help them do it, if this is an important thing? Or is it something that can wait ’til later?
Scott: It depends on the kind of business that you’re in and where you are. My experience with building companies is it’s all about execution, execution, execution and that, whether you think you have something patentable, really understanding how to execute it, understanding your market is way more important. Some firms it is, I do think that it’s worth, if you believe that what you’re doing is patentable, it’s always worth doing an exploration around . . . [sneezes].
Andrew: I’ve done that on camera too.
Scott: Apparently, I’m allergic to the topic. I do think each individual founder has to make those calls. The reality is that the vast majority of businesses that are being developed are going to be drawing on all kinds of sources, and most of things are leveraging lots of different technology to build their businesses. You need to prudent about the software status.
Andrew: You said everyone does potentially violating some patent. We all know about now, the Twitter holds that patent about pull down to refresh. See it on Google’s G-mail web app. I see it on other apps. It’s become just the way to refresh online, but we could get sued by Twitter or the next owners of Twitter. Aren’t we all potentially violating something?
Scott: Well, I think the question for our patent system is, and that being still worked through, is how do you meet novelty and non-obviousness, which is the core principle behind what it is that you can get an issue of patent for. I have no idea what Twitter is patent for. I don’t know what the claims are. I don’t whether those claims would [??] up. You could keep asking me questions about IPI, ‘m just not an expert at answering them. I do believe that we need to evolve our system, and we need to understand where there are opportunities.
Andrew: OK. One further question. Evolve to what? What would you like to see happen?
Scott: Well you need to understand how new technology and how we continue to protect the rights of people who are truly innovative and creating new opportunities so that they can be rewarded for those innovations. While at the same time, recognizing that there’s all kinds of innovation that’s derivative of these things and how do we reconcile that. I don’t have the answer for it, but it’s part of what the process is. I just don’t think you throw entire classes of intellectual property one way or another, or grandfather them all in. There needs to be a balance.
We’ve gone through this before in history. The notion of having windshield wipers on a car. Right? I mean, at some level somebody had to come up with the core concepts behind that. Do you believe that they should have been rewarded for that behavior or not? Every industry goes through this. You probably, you may or may not know this, but there were over 100 car companies in the late 1800s and the early 1900s. There are only a few now. They all had innovations that they had to build. They all had things and they had access to the patent system which allowed some of them to create high leverage opportunities. Every industry goes through this. The maturation of the technology industry, and the information technology industry, will also mature in the patent system or mature alongside it. It’s going to be messy ugly, and it can be messy ugly along the way.
Andrew: Alright. Startup America has been around for a little over a year now. What’s your proudest accomplishment so far?
Scott: I think what we’re most excited about are a few things. One is, is that startups have been both joining and connecting with each other all across the country. We’re seeing fantastic young high growth companies in just about every sector and every state in the union. That’s been very rewarding, because there’s been no in great demand, but there’s been a great opportunity for us to find specific ways to help them. The fact that there are regions around the country with entrepreneurial leaders in them, in places like Tennessee, like Florida, like Iowa, like Colorado, where there’s real leadership saying we want these cities and these states to become great places for startup to grow and scale their businesses. It’s been incredibly rewarding because that’s the nature of the long-term success of what is going to build our countries status up and take it to the next level. It’s leaders across the country that are deciding to invest in their communities.
Then, I’ve been incredibly grateful for the number of partners who have recognized the importance of these young high growth companies and have stepped up. We have over $1.5 billion in in-kind resources that have been committed from dozens and dozens of companies. They’ve all stepped up and said, we know startups are important, we want to have relationships with them, we’re going to do our part to help. So kind of across the board we’re seeing some really robust and enthusiasm for this. Then you’re starting to see the thought leaders in our society understand the power of it. It’s great to see legislation like the jobs that get passed, we’re seeing state governors and mayors get engaged where I’m growing our own in our state. We’re seeing the next way that people need to get involved. We’ve always known as of you that there are great startups all across the country. It’s great to them being [??] out, becoming visible and helping each other.
Andrew: What is the benefit of that? I see more and more entrepreneurs say that entrepreneurship is a lonely experience, that we need to find other entrepreneurs to talk to, to learn from, to help out. I thought entrepreneurship was supposed to be a heads down business, talk to your customers, talk to your employees, but you don’t need to talk to other entrepreneurs. What’s the benefit of it? What have you seen? Do you have an example, maybe, that we learn from?
Scott: Yeah. Look, it is a challenge because you reach a point where you need not only do your product development, your customer development, but successful entrepreneurs also do network development. A strong part of your network is other entrepreneurs, ideally, that are slightly ahead of you in the building and development of their business, they may be behind you or in parallel with your peer group.
The reason that’s so important is that you often face challenges that you can’t talk to anybody else about and you need people who understand where you are in the development of your business; but it may not be germane to the specifics. It’s not like you are going to face some technical challenge you need help with. It’s usually some kind of an operating challenge. You are having a challenge with your co-founder.
Andrew: Like what? Give an example of one, of an issue that one of the startups that have been a part of Startup America has had and how having a peer to talk to has helped out.
Scott: So, there’s a startup that’s been really trying to figure out how to . . . actually, it’s a story I heard recently. So, they had a co-founder. They were building their business and growing their business. They had originally split the business 50/50. But one of the co-founders was there full time and the other co-founder had a day job. The co-founder that had the day job couldn’t contribute nearly as much to it and was unwilling yet to take the risk of resolving it.
Now, how do you resolve that? This has happened to lots of co-founders throughout the country. If you are actively engaged with someone else who has resolved that and done it recently and it’s in their recent history, that’s a great opportunity to have a dialogue.
In the case of this co-founder, they were in discussions with other people and other startups. I don’t know how they resolved it at this point, but that’s a common ailment. If you don’t have the ability to talk to someone else, who are you going to talk to? You can’t talk to your existing co-founder. Probably, can’t talk to your board because there is some risk or even some of your advisors. You certainly can’t talk to your employees. But you are feeling this sort of challenge or anxiety.
Let’s say I have a key employee that’s a pain in the ass, how do you resolve that, right? Let’s say you have a board member or an investor who’s really giving you a tough time and you’re not sure whether they’re adding a lot of value to the experience or are they just busting your chops. You kind of can’t talk to certain people about that, but you can talk to other founders that are founding their companies. So, that’s an example of sort of resolving those things.
Let’s say you are trying to grow your customer base and maybe if you sell into large companies, you are selling an enterprise, you land in one or two companies, but you’re having a really tough time getting the next ones. How did other startups resolve that? Maybe they are in your domain, but maybe not. They just have experience having built a sales team and driving them, maybe that’s not your area of expertise. Maybe you’re a technical expert, but you’re not a sales expert.
All of those are people that are your contemporaries and your peers can help you build that out and I will tell you that the experience that those other entrepreneurs bring can’t be bought. You can’t hire a consultant to know what those people know because they’ve lived it already. So, that’s the real value is having people that have lived these experiences or are living them right now in your network.
It’s also true that you want domain experts. You want people who have expertise who work in large companies. You want a broad diverse network around you so that you can deliver value to the network, but you can also get value from it.
Andrew: You know what, actually, I have seen that happen. I saw it in California in LA where John Bishky [SP] used to put together this group called Billionaire Boys and Girls Club.
He’d get entrepreneurs together, and I remember one of them had an issue with his business, he introduced him to first round. First round ended up investing. He did a poker game. At that poker game John Bishky had a question about Ruby on Rails and whether it was stable.
This was back when Twitter seemed to be going up and down and people were wondering if the software they were built on was what was causing the problem. He talked to a developer who said, hey, here’s our understanding. We’ve been building apps on this for months and this what we’ve learned and I could see how those kinds of conversations are hugely helpful.
What about accessing experts, what’s in it for the experts?
You said that one of the three things that Startup America gives is peers . . . well, actually, one of the three things is access to experts. What do the experts get? And the reason I ask is because I’d like to go to experts and get them to help me with my business, but I always feel like, well, what’s in it for them. They are already so far ahead, they’ve got nothing that I can give them.
Scott: Well, you almost always have something that you can give and everybody has a demand. It might be just your opinion, might just be feedback on their own businesses and how they contribute. What we see with the experts that participate in our learning series is it’s a low lift, high value experience to engage with startups all across the country that are usually doing something that is a natural interest to the expert themselves. So they can contribute in a meaningful way and invest their time and energy into startups all across the country. The most value that the experts get out of it is being able to share their experiences in a way that’s helping someone else but there’s also a real opportunity to potentially build their business. If you’re a VC [SP], you’re always looking for [??], so by you participating in our Ask [??], you might be exposed to companies that you wouldn’t otherwise be exposed to on a Friday. We have a guy who does pitch coaching. Every Wednesday he’s hearing pitches from startups all across the country. It helps him be better at what he does. By hearing a wide range of different pitches, he can give all kinds of different feedback so when he gives his feedback to his paid clients, he’s got a wide range of companies that he’s advising already. It can be to help you build your business, but if you’re an expert that’s part of our learning series, we ask you to come to it with a way of contributing to our overall mission and our success, which is to help step up America’s Startup game. By the way, there are secondary and tertiary benefits to your experience, but you should be experiencing it for the experience of engaging with some of the most optimistic, opportunistic people on the planet, which are America’s founders of startups.
Andrew: Let’s go back to Priceline again, for a moment. We talked about the importance of getting together with domain experts. We talked about how to think about the problem. What else did you do there that you’d advise other entrepreneurs to do? What else did you get from that experience that we can grub?
Scott: A lot of the things that we, and a few others, in the early internet days were pioneering had become germane and core and almost obvious to startups today, but they may [??] repeating. One is, move really fast and live in a world of permanent beta. Be constantly recognizing you got to be deploying your product, your service to the marketplace and getting your customer feedback on it and making adjustments on the fly. That said, one of the things that we did at Priceline really well, that I think more startups need to do, is to step back and really understand the business and the business model and the architecture of your business. Who are all of your core constituencies? Who are your customers? Who are the people that need to be part of your ecosystem to be a successful business, but may or may not be a customer yet? One of the things that Jay did very, very well was to understand the full architecture of the business. Not just the product but how that product will solve problems, but integrate it into a larger ecosystem of constituents. A lot of entrepreneurs, similar to the network problem, they don’t do the network development well, they don’t understand the ecosystem that are around their product really deeply and it’s important to take some time every so often, either key milestones that you’ve met or just on the natural time limit, every once a week, could be once a month, but to take some white space and say, ‘Where are we in the business? Are we still on our mission? What is our model and our architecture for our business?’ That’s an important part that a lot of startups today I see missing it. I think the idea of saying, ‘We’ll figure out the business model later,’ is a cop out. It’s a thought exercise. You don’t have to build anything, you got to sit down and really understand. You might have three choices and see which one is going to evolve. That’s fair, but you really need to understand who are your core customers and what’s the core economic driver for your business. My advice to entrepreneurs on that is, if you can build your business with a singular revenue stream, do it. ‘Cause anytime you need more than one, you should rethink that whole thing. Try to find a way that you’re going to have a strong successful business with a singular revenue stream. As soon as you need multiple of them, that means, by definition, you’re going to build lots of different relationships, lots of different resources, lots of different engines. If you can build a business, there is no much stronger business. That doesn’t mean you can’t add ancillary revenue later. Really have a strong revenue stream up front.
Andrew: A lot of entrepreneurs think the other way around, which is, ‘If I had multiple revenue streams, then all together I’ll have more revenue. If one happens to go down, then I’ll have another ready to go.’ You’re saying, ‘Focus on one,’ because then you can have conversations with one set of customers. You can solve one set of customers problems.
Scott: And grow to scale. If you can’t scale that up, I suspect there’s something wrong with your business. If you look at the largest businesses in the world, very few of them require multiple revenue streams for them to be successful. They tend to have one core revenue stream that’s been successful for them and they built [?] business or [?] revenue around them but, I mean, Google’s the poster child for this. Facebook’s a poster child for this and those cases are third part ad supported businesses for the most part. It’s true in every business. The telephone company, their a subscription business, sell services on top of what their…at the end of the day if you don’t have a handset from your mobile provider, you don’t have a handset and a service plan, you don’t have a business. All that stuff charging you extra for text messaging and data plans, all those things, it comes out of one core very simple premise pay for access to the networks.
Andrew: The one part of that that you said, I’ve got build fast and be permanent data, I’ve got core continuants understand who they are. A third was figure out the business model even if you don’t go after it just have it as mental exercise and you should be thinking of what that is. Number four out of the entire list that you gave was a single source of revenue and five scales make sure that it scales. The one that I didn’t understand was the core constituents. We should be asking ourselves who our core constituent, can you give me an example to help understand what we’re not seeing as entrepreneurs when we’re making this mistake of missing the core constituents and how we can do it right, do you have an example of that?
Scott: Sure, I’m going to turn it around on you. Give me the pitch for the business your building right now.
Andrew: I run a website where entrepreneurs tech other entrepreneurs to build their businesses.
Scott: OK, so one of your core constituents is the entrepreneurs. So you have the people that you’re interviewing and then you have the audience of people right?
Scott: Who pays for your existence?
Andrew: Well I have two sources of revenue and I’m hearing you say and I’m thinking maybe I don’t need it. It’s sponsorship, which people saw at the beginning of this interview and it’s more, much more then that it’s premium members, people who pay to have access to courses where entrepreneurs turn on their computers and they teach how they get traffic or how they generate sales, how they increase conversations etcetera. But’s its members.
Scott: You’ve identified four constituents [?] you’re managing. You’ve got the entrepreneurs, your guests, you’ve got entrepreneurs that are watching and learning from you, you have premium member entrepreneurs or premium membership and you have your sponsors.
Scott: Do you have any employees?
Andrew: Yeah, there’s a team of people who put this all together.
Scott: Ok so that’s a constituent and do you have any investors?
Scott: OK. So, do you have any industrial prospects, do you have an ambition someday to have industrial prospects?
Andrew: No, I don’t think so.
Scott: So you’re going to boot strap the business right? So, you might have, do have advisor for the business?
Andrew: You know what? No I don’t but I should. Well yeah I do actually, Bob Highler, huge advisor, yes.
Scott: Formal or informal advisors, do you have strategic partnerships?
Andrew: No, we need that don’t we?
Scott: So my point is that you have a set of constituents that you’ve been able to identify quickly but there are all these other people out there that could be there. It could be strategic partners of yours, they could be peers of yours, and it could be media partners for you. You have constituents of people you want talking about what you’re doing. How are you relating to those people? What is your relationship with all those folks? So, it’s identifying who are the constituents these can be around and depending on the business it might be a short list, it might be a really long list.
If you working in the health space, you’ve got all kinds of people. You got insurance companies, you have the service delivery, the actual health care providers, you have the patients themselves, and you have the patient’s families. I’ll take an education play. If you in the education business chances are you going to have to deal with the parents as well as the student and you have to deal with who the educator is and who’s managing the educator.
If you’re selling to an enterprise customer, right? You not only have a decision maker who’s going to be your buyer but you also help them sell other decision makers inside the company , alright? So it’s not just the one person your interacting with, it’s all the people around them that you have to be as your constituency. In order for entrepreneurs to learn about your website you need to have other entrepreneurs hear about it and so how are they, how are the people that might be referring entrepreneurs to you, who are those people? So, it might be employees of startups that might refer other people here. So as you deconstruct all the people that you touch, those are your constituents and break them up and prioritize them. I’ve got my primary, my secondary, my [?] and start defining it that way.
Andrew: I see and just have a clear understanding of all those people who I might have overlooked when I though hey my audience is really my one constituents, some of them pay, some of them don’t and the other one is the sponsors and that’s who I live for. You’re helping me identify more of them and that’s what you want all of us to do.
Scott: Yeah. Identify who those are and then build relationships around them so that you can really understand those constituents.
Andrew: All right. One other thing that I do is I like to talk about big setback just to see what we can learn from them. When I Googled your name and I restricted the search to the year 2000, one thing that came up was the story about Priceline Auto Service. I was wondering, why didn’t that work out? Now that you’ve had some years to think about that, what do you think some of those setbacks of Priceline, where you tried to extend beyond hotels and travel. What do you think? What did you learn from that?
Scott: I think there’s a few things. There’s what quarter of the business and there’s what’s the environment we were in. So, if you do a lot of Google searches around the year 2000 in general, the context in which Priceline was operating is really important. You had the internet bubble, you had a lot of economic changes. If you go all the way through to 2001, where you end up into 9/11, you have a whole set of economic realities that were going on and right sizing of a bunch of different things. If you look at what Priceline did at that time, it was really smart to reduce down to the core business. We had done some line extensions and retrenching and focusing on a few core business models was really critical. As you can see from the success of Priceline today, the execution of the team there, Jeff Boyd in particular as the CEO, has been phenomenal. They have done a fantastic job really maximizing the value of the sector that they’re in. For us, for me in the name of a price for a new car, we were attempting to apply the name of Priceline to a low frequency, high value product line. Where as travel was a kind of medium frequency, limited value. Hotel room, $150, $200, a airline ticket might be 300 or 400 dollars. You’re buying a car, it’s tens of thousands of dollars, it’s a high touch sort of experience. You might do it only once every three or five years. I think some of the things that worked well with Priceline and name your own price for a car, was that we were able to bring an offline marketplace, in the case of new car dealers, now they are all digital, at the time they weren’t, online. And, create a new dynamic for customers. What challenged the Priceline model was that the cost of creating a marketplace were just too high to deal with a customer base that was going to be very low frequency, even though it was a high value purchase. Believe it or not, the margins on cars are actually incredibly thin. So, you have to sell a lot of cars and there is only 16 million cars sold in America. You have to touch a significant percentage of them and gather a very relatively small amount of money from each one in order to have high value business. It didn’t make sense to continue to operate that. When we looked at it coming in to Priceline, we were looking to identify an experiment were a new model, new models were bringing in new marketplaces, what could work and what didn’t. We looked at launching a new car business as an opportunity for us to explore those other spaces.
Andrew: I see, so what you learned was that there wasn’t enough of a margin for you guys to prosper in. There wasn’t enough frequency for you to show results for the end user, for the customer. What else could you have done beforehand or how else would the analysis beforehand have helped you identify this if it was done differently? Or could it have?
Scott: Some things are experiential, you can analyze things to death, sometimes you just got to get in the market. The lift for us to get into that business was relatively small. We had a small team of people that built it very quickly. I don’t remember the investment dollars, but I’m sure it wasn’t significant, so for us to be able to get into that space, to invest the dollars and the personnel against it, it was worth building it to see where the opportunity lied. We focused on getting the first set of actors to transact with each other. That was the first test we could get those players to play and would they be willing to pay to participate. We actually prototyped a lot of stuff by hand. I read the original test and again, this is dating the platform, but email addresses at car dealerships didn’t exist, but they had fax machines. I literally faxed, by hand, offers for cars to dealers to see how they would respond to it. We built it a lot of it and that’s how a lot of entrepreneurs ought to be prototyping stuff. I was at a start-up weekend a couple of weekends ago and game development was one of the tracts. You can do paper prototyping, I watched my 10 year old as an avid gamer sit for over an hour and give feedback to somebody on a cardboard mock up of an iPad with a sliding piece of paper they are swinging through the jungle on. He was engaged. He suspended his disbelief and he participated in that case as a potential customer for this video game. So, don’t under estimate the power of prototyping and trying things. We did enough of that and then decided to go build something. When we built it, we learned a lot about the market place and what was going to go to scale. There is probably still an opportunity out there for somebody now, since a lot of these things are automated, to create a very low fixed cost, high value product around the notion of creating a market place of buyers and sellers. I know there are start ups out there right now building business around those very models. The market wasn’t there for us at the time.
Andrew: Here’s a quote from the time. This was a pilot talking about Priceline Auto Service. “As we rolled out the pilot, we recognized that this business required significantly more touch with the customer than selling airline tickets,” said Priceline executive Scott Case. For example, Priceline’s policy is to maintain the anonymity of potential buyers which meant that it, not dealers, had to go back to consumers with offers and counter offers and I can see how a pilot will give you that kind of information before you roll it out nationwide. I don’t even think this was in New York, where I was watching you guys like a hawk. I was amazed how Priceline just kept growing and showing up in places, like my grocery store, at the time.
Scott: I haven’t looked at that press release, probably, since it was written around business, but that was the basis for what we needed to do.
Andrew: I always look to see if there is anything bad in this guy’s history that I need to watch out for, before I do the interview. You are basically a guy who walks on water in a lot of people eyes. CEO of Malaria No More from 2006 – 2011, Chairman of Network for Good, 2005 – Present, which is a national non-profit which has distributed more than $475m to 60,000 non-profits.
Scott: We are up over $600m now. I don’t know when that bio is from?
Andrew: That’s our research, which is out of date, I guess. Let me ask you this. I want to do a better job here at (?) with the interviews that I do, the kinds of conversations that I have with the information that I pull out from guests for my audience. What’s one piece of advice that you can give me that will make interviews in general more useful for an audience of ambitious entrepreneurs that want to leave a legal mark on this world?
Scott: I think teasing out from the entrepreneurs you interview understanding how to talk to them and get them to talk about areas where they have failed. Where they have fallen down and giving examples of those. For example, I’ll give you one from my experience. On one of the first start ups I was engaged with, we had the field of dreams problem. We believed that we built the world’s greatest problem people would break down our door to get access to it. Turns out that’s not true. If your really going to understand this, understand your customer. Understand how to market to them. Understand how to build community around your products is critical to the long term success of your business.
Plenty of engineer entrepreneurs don’t think that way. If I build this wonderful widget it will take off like a rocket. That’s number one in times of failure. The other is analyze times of success. If you study the history of Pinterist. If you talk to Ben about his experience building Pinterest, he will tell you he didn’t have any users. Can anybody use the thing? It wasn’t until a bunch of craft type people in Iowa started using the thing he understood the dynamics of building something that was going to cater to that audience.
It’s these kinds of stories we need to tell and you can help us tell that give entrepreneurs the ability to say, I am struggling with these same kinds of things now but maybe there is a light at the end of the tunnel and I’m not alone. These businesses don’t just emerge out of nowhere. We spent months understanding how Priceline was going to go out the door and we still made mistakes. We had a $25.00 fee to make a 2nd offer after your 1st offer for the same trip. It plagued us for months. We got rid of it immediately. We put another mechanism to stop people from re-offering over and over again, but that was a mistake. We were solving one problem and the way that we solved it wasn’t going to work for our customers. We had to back track and re-think about the consumer side of the equation. So, talking more about getting more startups and successful founders to talk about areas where they had real challenges can help us all learn more.
Andrew: Scott, what was the business that you spent so much time building before you launched? I’m going to use that as an example in pre-interviews with people who aren’t ready to talk about their failures. I can say, ‘Well, look. Here’s what Scott Case taught me,’ and immediately they’re going to see the benefit of that.
Scott: So, I started a couple of different companies while I was in college. In one I was part of the founding team of a company called Precision Training Software. It was actually started by a college professor of mine and me. I was a green engineer. I wrote a flight simulator, we built a simulation of an artificial intelligence engine for a certified flight instructor. We built this unbelievably amazing product over a three-year span. It was top. In fact, it’s still for sale today. You can buy this product today. We launched the first version of it in 1992. So, that gives you a sense — 20 years. Really, impressive technology. But, we couldn’t get the phone to ring. We spent the next two years as a group understanding how to create demand for this product that was oriented toward general aviation pilots. It was hard. I didn’t know the first thing about it. I read every book I could find on sale. We sold hand-to-hand at conferences. I read every book I could on telemarketing. I read every book on direct mail we could find. We basically had to learn everything from the ground up on how to do what we needed to do to sell direct. It was a shrink-wrapped software product at the time. So, we misunderstood the need for us to create demand around the product. And I know exactly what I would do now, doing it again. I wouldn’t do what we did.
Andrew: What would you do now?
Scott: I would have started marketing and sort of selling the product into our constituency and our community much earlier in the process. I would have created demand for the product even before we had the product to market. That would have done a couple of things. First, it would have helped us make better choices on trying to get the product to market faster. We also would have architected it so that we were in product development mode where we were doing releases over time and had a roadmap. We didn’t have any of that. We didn’t have a product roadmap. We had a perfect product that was going to be delivered as version 1.0. I wouldn’t do that again. I would deliver a .1 version of the product, tell everybody about it, have a limited number of customers beat the crap out of it and then figure out what the .2 version needed to be based on that feedback with a roadmap down the line that sort of readjusted the roadmap based on customer feedback.
Andrew: You know what? That’s a great story! Because, that addresses a problem that so many of us entrepreneurs have. We keep making that mistake. It’s good to hear you talk about it and the pain of having two years to sell the product that, if you would have started selling it before it was ready, before it was fully launched, you would have sold much faster and built much more response.
Scott: We could have given the product away. It might have just been creating a community around the product well beforehand.
Andrew: I see.
Scott: Anyway, I don’t know if you’ve got anything else, but I’ve got to go to my next gig.
Andrew: Absolutely. No, that’s everything that I’ve got. The website is s.co. I know many people will join. I really appreciate you doing this. I’ve kept you on for a long time because I’ve been looking forward to this conversation and to learning from you and I appreciate all the time you spent with me.
Scott: No problem. So, before we go, do you chop this up? What’s the final product here?
Andrew: We go with it, including this part, until you tell me to stop recording. We keep the whole thing in there and we let people watch, sneezes and all.
Scott: All right, well, break. I’ll see you later. Thanks so much.
Andrew: All right. Thank you very much.
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