SendGrid launched just eight months ago but it already has over 6,000 users, sold to over 1,000 direct-paying customers, delivered 1.4 billion emails and even reached profitability. I can see why TechCrunch used the word “bajillion” to describe how much email SendGrid is responsible for. The numbers are staggering.
I invited co-founder Isaac Saldana to find out how he did it. I asked him how he discovered the big pain point that his company solves. How he got his first customers. How he evolved his product. How he bootstrapped his company in the early days. And why he raised money.
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Hey, everyone. It’s Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart. I invited Isaac Saldana to Mixergy to find out how he did it. He launched SendGrid eight months ago and now; has over 6,000 users; over a thousand direct paying customers; delivered – according to TechCrunch – a bajillion emails; and, and tell me if this is true, Isaac, you have a profit already?
Andrew: Wow! Eight months, that’s how long it’s been since you, guys, launched.
Andrew: What is SendGrid?
Interviewee: At SendGrid, we believe that the best method of communication a company has with their customers is email. So, we tried to solve the problems around email, probably the biggest problem is email deliverability. So on average, 20% of all the emails sent by Web applications either go missing or they get caught by spam filters. So, SendGrid is a cloud-based service that delivers emails on behalf of companies to increase their email deliverability. We have a few other things and features on our product, but that’s pretty much what we do.
Andrew: Can you give me a use case, maybe talk about HootSuite, I had the founder of HootSuite here on Mixergy. I use HootSuite to send out tweets and message on Facebook. How does HootSuite use SendGrid, if that will help me understand what the product is?
Interviewee: HootSuite sends email notifications when an event happens on their site or their application. If you added a column or search for a specific string, they email everyone on the team about that addition. So, HootSuite uses SendGrid to send these notifications. As they go to SendGrid, we do things with these emails, we do multiple things with these emails to increase email deliverability. So, again, if you didn’t do anything to these emails, if you try to deliver them yourself, if you’re trying to set up your own infrastructure, on average, 20% of these emails are going to go missing. Of course, these emails have different ROI for different companies. For company like eBay, they made a study and found that if they don’t deliver 1% of their yearly email, they lose $14 million yearly.
Andrew: Yearly. So, if 1% of their email doesn’t get delivered, they lose $14 million a year.
Andrew: And if you think of them as an email-based company, and it just goes to show that email is a part of every company.
Interviewee: Yes, exactly. For example, account confirmations, a lot of sites and account confirmations, and if they don’t confirm their account, they can’t log in. So imagine losing 20% of your customers because you can’t deliver emails.
Andrew: Not because your product stinks, you’re losing 20% of your customers just because your email isn’t being delivered…
minute 5 to minute 10
Andrew: Not because your product stinks, you’re losing 20% of your customers just because your email isn’t being delivered. That’s the basis of this business, that’s what you help companies do. Let me explain to the audience what’s coming up here. I’m going to talk to you about why SendGrid to understand the product, to understand how it helps companies. But I also want to help the audience learn from your experience. You’ve built this business up in eight months, I want to find out how you did it. You told me before the interview that mentorship was important to you, and I know you as a guy who had his company backed by TechStars that you must have gone a lot of mentors through that program. But I want to find out, not just how you got the mentors, but how you will get the most out of the mentors.
I also want to find out about product development. I would think that it would take eight months of just looking around to try to figure out what the product is before you can start actually making sales. And here you did it, you did it within a year of launching. You figured out the product and you also have gotten your customers. I also want to find out how you got your customers, and we’ll talk about some of the big names that are using you. You’re a first time CEO, that can’t be easy, I want to find out about that. We’ll also learn about team building.
So, we’re going to learn like, always here, hear your story, here’s the story of a guy who just came out of nowhere and built a phenomenal company that’s profitable, that’s bringing in lots of big brands behind them. But along the way, I want to learn as much as possible so I can arm my audience and send them out there to build incredible companies so that they could sit where you are in the not-too-distant future. Maybe somebody is listening to us right now, and eight months from now, they’ll have an incredible company and I’ll get to interview them, I hope. That’s my goal here, it’s more than hope.
Okay. So, let’s just continue to understand the product here, because there were questions in the chat room about how you’re different from iContact, who’s founder came here at Mixergy. Can you explain that iContact is a service that I might use if I want to contact the Mixergy audience to tell them about the interviews that I did from week to week. How are you, guys, different?
Interviewee: Just some background on email marketing, in general. There are a lot of companies doing email marketing, big players – ConstantContact, VerticalResponse, ExactTarget – and they are really big players on email marketing. With SendGrid, you can’t really generate the content of these emails. So for example, these email marketing companies provide you with tools to generate content like really nice-looking emails and things like that. Once you have your email composed, you can go ahead and send it. It’s usually the same email broadcasted to a huge list.
At SendGrid, we don’t have the tools to generate these great-looking emails. We just focus on the actual infrastructure of email delivery. So for example, we have email marketing companies having the tools to generate this content and they use SendGrid as a backend to deliver their emails and increase their email deliverability, provide stats, and stuff like that. So, we focus a lot on email, in general, and not only email marketing, so we handle all the infrastructure scalability, deliverability, and analytics.
If for example, let’s take HootSuite as an example. If HootSuite were to send their email notifications, they would have you do convulated API and stuff like that to use these companies like iContact, VerticalResponse, and stuff like that. Again, they were designed to do email marketing. If they want to send their email through SendGrid, they just need to change three settings, no coding at all. Three essential piece of settings and they’re done. So, we actually are replacing all their email infrastructure. Again, we work with email marketing companies, so they just completely have outsourced all their infrastructure to SendGrid.
Andrew: I think that explains it. If you, guys, have any questions in the audience, let me know. I looked at LinkedIn and I saw that you started a couple of companies before this. Can you talk a little bit about the path to this company? Let’s start with…how about ThemBid, the founder of ThemBid, Elmer, is the one who introduced us. How did you, guys, started with ThemBid and what happened there?
Interviewee: Elmer has been a long time friend, I’d known him since school. He’s an awesome person, really smart. We have this idea of…have you used Elance or things like that? It was the same concept but at a local level…
Interviewee: It, it was the same concept but at a local level. So, you would post your need for a specific service. A plumber, an IT person, and local businesses would bid for your business. And based on the price and rating of businesses, you would just choose whoever, instead of calling the yellow pages. You would just do that.
Andrew: Yeah, with Elance what, the, the reference Elance is, with Elance if I wanted somebody to redesign my website or to program, to program some web app for me. I go in there say, “ this is the job that I need.” Have people bid on that project. I look at their bids, and I look at their past reputation, and I pick somebody, and I hire them. You wanna do the same thing and go beyond those kinds of services. So, if I need a plumber, I’d be able to say, “ I need a plumber. This is the job,” bid on it and I get to pick on, get to pick the person I want. That was the idea for the business? How did it go?
Interviewee: The, so, the technology worked great. We couldn’t scale it, the, the marketing; we just didn’t have a good plan. Marketing was just, it was gonna take us too much money to do. So, we decided to, not to pursue that. I still think it’s a cool idea, but. [Laughs.]
Andrew: I think it’s a great idea, but I can see the issue with it, that, that you need to get, it’s a marketplace, so you need to get both sides in that marketplace, and you need to get them in bulk and at the same time.
Andrew: You wanna make sure you have enough plumbers that are there. You wanna make sure that you also have enough people who are looking for plumbers.
Andrew: And that’s just one category.
Interviewee: Exactly. You’re exactly right. And that was, we didn’t know where to concentrate, there on the businesses, or consumers or both. And we decided that we needed to concentrate on both as you mentioned. And that was even more challenging, so.
Andrew: I think it’s a challenge. I think it’s a great idea though for a business. I love to have this, this marketplace for myself.
Interviewee: Yeah. The, so I was the CTO there. And I learned a lot. I also dealt with email deliverability there. And, so, I have, I have over ten, ten years of experience dealing with email servers. And, and then [inaudible] the following company [Night] [Pall] dot com. The, I experienced the same problems, and after that is when I decided to, to just solve them for good. And After working on a solution for over three months, I still couldn’t solve it! So, that made it more interesting. And called our co-founders, and then, we started the opening the [inaudible] solution too.
Andrew: [Night] [Pall] is the second company that you launched? The second major company I’m sure that, actually did you launch others before this? Are you an entrepreneurial person who built things ever since he was a kid?
Interviewee: I was more, no not really, not, not since I was kid. In fact, I got into being an entrepreneur after Elmer introduced me to, gave me a reference to a book called Rich Dad, Poor Dad.
Andrew: Hmm, hmm.
Interviewee: And, and then it completely changed my mind. And,
Andrew: Rich Dad, Poor Dad? That book is what got you to be an entrepreneur and turn your mind around about business?
Interviewee: Yup. [Laughs.]
Andrew: All right, I, all right, I guess I can see that. I can also see Elmer. Elmer is a very inspiring person. I can see him bringing the best in the business, person out of you. Ok. So, [Night] [Pall] is the company you mentioned. The idea behind [Night] [Pall] as I, I looked at the website, here’s what I understood: I love Motley Crew. Laugh at me all you want but I love Motley Crew. Say they’re not coming here to Buenos Aires where I happen to be this summer, but I want them to be here. What I would do is go to Nightpall.com and say, “ I would to pay a hundred and fifty bucks for a ticket to see Motley Crew.” If enough people do that, that Motley Crew sees that there’s, that there’s actual cash in coming here, they might come. If there aren’t enough people or Motley Crew decides to be a pain in the butt and not come down here, then we get all our money back. That’s essentially the idea behind Night Pall, right?
Andrew: Why didn’t that idea work? What happened? I like that idea too!
Interviewee: Marketing. The, it was, I was working with the VP of Business Development at Buy.com, Owen Mathews. Awesome person. He was the CEO. I’m thinking, not enough resources for marketing. So. Again, I learned a lot from that company also. I was the CTO there. So, I’ve been always the geeky type. So, after that, then I, I started [Sangrid] so, as CEO.
Andrew: What did you learn? What are some of things that you learned there?
Interviewee: The, it’s important to validate your market before you do anything. So, before, I
15 to minute 20
Interviewee: Before you do anything or before I decided to turn SendGrid into a business, I called Tim Jenkins, Co-Founder, and Jose…
Interviewee: Correct. Tim Jenkins is our CTO and Jose Lopez is in charge of web development. When I called these guys, I already had a pretty big customer <0:00:33.0>. He is from Turkey and he is our official partner there. I had already verified that there was a big need and it was extremely challenging to solve email deliverability. It was not…
Andrew: How did you know there was a big need and it wasn’t just a big need for you? You are a guy running two bootstrap operations before this. You are running them virtually on your own without help of the top mentors that you have today. Maybe it is not a real need outside of your limited experience. How did you know that it was a bigger need than yours?
Interviewee: I went to the forum and started asking questions.
Andrew: Online forums…those chat boards?
Andrew: So which one?
Interviewee: I went to a couple. I searched for email deliverability and found different forums. In fact it is funny that is how I got into TextStars. The founder from Ignitor posted a blog post on how to solve email deliverability or atleast best practices and I am like oh this is a company from TextStars and I started looking into TextStars and founded that it was an awesome team and they had a lot of email experience. In fact with term path is probably the best email deliverability in the world. Their CEO and President are advisors so we decided that text was going to be great for us but just to answer your question. There was lot of different forums. Pretty much every hosting companies out there as a forum and a lot of their customers have these problems and that is how I met <0:02:32.9> at first. It is a big customers and I talked to <0:02:39.9> and asked him if he was going to try our Beta. Our Beta didn’t go too well and…
Andrew: Actually lets hold off right there. Let me see if I can understand a couple of things here. Before we get into SendGrid the reason that I asked you about <0:02:59.0> and your experience before is because the story that gets a lot of attention with you and in this industry as a whole, a guy comes out of nowhere and 8 months later has an insanely profitable business. Everybody loves him, has customer up the wazoo and that is the way of building a business and if you don’t have that or if you haven’t built it in the first time out in your early 20s or as a teenager in high school on the side then they just sense well what is wrong with me. If these guys can do it they are making all these headlines by building businesses under a year that are incredible what is wrong with me. So I wanted to just build up and show look there is a history before this. The second thing I wanted to understand is you are working hard in both these companies. You cannot work with Elmer without bringing in everything you have got and you are working with Elmer and you are working with great people at <0:03:46.4> you are spending a lot of time in development and it is still not really catching fire. How do you feel at that point about yourself as an entrepreneur and about startups in general honestly and candidly?
Interviewee: Well I am going to speak from my position as a CTO on those two companies, sometimes it is really disappointing that you built these really cool technology and you realize that you are going to need a lot of money to make it available to customers or find creative ways. So at one point you start thinking about a lot of creative ways to market your business and if it doesn’t work out, I guess you feel disappointed but there is a lot of stuff to learn. For example when you are working <0:04:48.7> Elmer got really good at social media marketing. So we got blog post in front <0:04:57.9> multiple times. So that was 5 times and we got 100,000 unique visitors a day….
Interviewee: Elmer got really good at social media marketing so we got blog posts on the front page of Dig multiple times. So that was 5 times and we got 100,000 unique visitors in a day only like 10 would convert and things like that. So it was a huge challenge and we found a lot of things that we thought were going to make a difference but they didn’t. So yeah it is not necessarily good when that happens but I guess if you look at it in a positive side, you learn a lot. For example I know to not necessarily focus on a lot of written blog post that get a lot on the front page of Dig for X reasons. So I think there has to be more. You have to have a strategy behind it instead of just dragging traffic in general and things like that I have learnt a lot from <0:01:12.3>.
Andrew: Can you talk about the moment of the biggest doubt that you had before you launched this company or before you launched SendGrid?
Interviewee: Sales that was…I have always been a geek so I never talked to anyone before just my boss or my cofounders and I was always coding all day. I didn’t get to interact with a lot of people. So when I was starting TextStars I was thinking about maybe bringing even a CEO because usually the CEO has to be the best sales person in your company. So I thought that was going to be difficult for me. You get over it and I am pretty good sales person now.
Andrew: How did you become a good sales person?
Interviewee: By doing it…by doing public speaking I got extremely nervous. I still get nervous but not as much. My first presentation was during the investor day at TextStars and oh my god I was so nervous but after you start doing it I think you realize that you are the best person to explain to your customers how valuable your service is. I am really passionate about telling my customers everything that we do and I am really proud of the technology that the team has built so to answer your question directly it was mainly public speaking and sales. That was my biggest fear.
Andrew: Now let us continue on with the story. You are noticing problems with the email deliverability<0:03:11.8> and noticing similar problems at <0:03:14.3>. You decide that you want to look around to see if there is a solution. You go to forums and you realize no other people also have these problems too. What point did you think you had the solution for this?
Interviewee: August 2009.
Andrew: In August 2009, LinkedIn says that January 2009 you incorporated.
Interviewee: That is when we started working on SendGrid but we actually incorporated in July and launched in August.
Andrew: Oh Okay January 2009, you started working SendGrid looking for the solution but you didn’t have the deliverability solution.
Interviewee: So I came up with something that was a solution. I just put a bunch of servers together kind of like a cloud base email service and <0:04:10.0> I was mentioning him earlier. He is in fact even after a year he is still with us and he is an awesome person. So I talked to him and I told him okay I am going to offer everything for free you just pay for the server cost and I am going to be working for you 24 hours a day 7 days a week to make sure we solve it. He was willing to help us with that and this was like 30,000 emails a day. So it was a huge volume for just a new service and that didn’t go too well. We learnt a lot and it took us fair amount of time develop an algorithm. In fact we still tweak algorithm even now. There are many things that we learn and we set our algorithm to learn from different emails and…
Interviewee: Even up to now there are weird things that we find. For example, one of our partners, it’s Heroku? I don’t know you know the guys from Heroku, a hosting company for Rels Applications. We found that if the word Heroku was in an e-mail that was sent to Yahoo, it would trigger spam filters. So, weird things like that, right? So have to contact Yahoo and tell them, hey, the word Heroku is one of our partners is triggering spam filters, so they updated the rolls and stuff like that.
Andrew: Why? Why would the word Heroku trigger a spam filter now? You don’t know?
Interviewee: We don’t know. We just know that it does.
Andrew: Okay. Is that really essentially the trouble with e-mail deliverability? That there are all these different blacklists that every keeps that are separate. Everyone is watching for – maybe the word Heroku was in an old Viagra ad ten years ago, or five years ago, and now suddenly it’s catching up with this company.
Interviewee: Exactly. There are many things on e-mail deliverability. For example, first is, spam filters solve a huge problem, but they also introduce a new one, which is deliverability. So they filter legitimate e-mails. They filter out spam pretty good, but they also filter out legitimate e-mails, and there are many filters that we have. We have Postini. We have Cloud Marks, Spam Assassin. There are a lot. So we actually — as e-mails go through Sendgrid — we actually scan with all these filters to determine if someone has deliverability problems with these filters that are mainly used in enterprises. But we also – things like Hotmail ICs like Hotmail, Gmail, AOL — they have their own filters. So we also have to consider those and see when they trigger problems. And so we have the filters, we have now technologies that ICs expect, like signature son headers to verify that you are allowed to send from the domain you claim your are sending from. There are many technical issues and in less than five minutes companies don’t have to worry about that, and just use Sendgrid stop all those issues. They are only issues that also keep changing. So we make sure we keep them updated and learn. We sent over a billion e-mails and for every e-mail that we send we actually learn how to best optimize e-mail deliverability.
Andrew: So what was that first solution that you thought you had, back in the early part of ‘09?
Interviewee: It was just a cloud-based service of e-mail servers, and it was open sourced e-mail servers. There were Postit servers. We had a bunch of Postit servers to scale e-mail delivery. So, the technology behind sending e-mail – it’s pretty easy, right? So you just need the protocol, SMTP, and you can put a bunch of servers in the cloud to deliver e-mails. But if you don’t have an algorithm how to deliver e-mails, then it’s going to be a nightmare. So that’s initially what I did. I set up in this cloud service all the technology behind it, like the signatures I talked about. They are called DECAM Domain Key SPF Records. I thought that was enough. And I was extremely wrong. So, luckily we have the advantage of having this volume of e-mails. There was thirty thousand when we started. So we learned a lot from all this volume.
Andrew: I see. What was the name of the company that Sinan worked for?
Interviewee: Sinan has his own company. So he’s –
Andrew: Can you spell the name?
Interviewee: S-I-N-A-N. Sinan. And his company is called In Box Bulletin
Andrew: In Box Bulletin
Interviewee: And he is in Turkey.
Andrew: Alright. So, you got this guy to basically fund your experiments and fund the early part of your business by having him pay for your servers, and he in return got someone who was just going to non-stop think about this one big headache of his, and he can focus on the rest of his business, like how to grow the mailing list subscribers at In Box Bulletin.
Andrew: So you keep going. Do you eventually make headway before you – Well how much progress do you make before you go to Techstars, the seed funding company?
30 to minute 35
Interviewee: I had about something like 50,000…I was sending about 50,000 emails a day from different customers not so many I think around 5…yeah so I was doing that. We just learned and we started getting customers and…
Andrew: So you were kind of improving deliverability even if you didn’t get a 100% and you atleast were getting more than they were getting on their own.
Interviewee: Yeah and we were in charge of that because we knew that there was still a lot of learning to do but around June we had a pretty good solution. We also took advantage of the advisors from <0:00:53.4> awesome guys by the way so that helped us improve our deliverability a lot.
Andrew: Okay so you are doing these things for free and essentially these guys are just paying for the servers. You are learning and learning and improving and improving. You have got customers now or people who are ready to become your customers once you start it yourself. Why did you go to TextStars? Why not continue this own your own? Why do you need their money and why do you need their mentorship? You are on the right track.
Interviewee: Right so as far as money. We raised around on December 750K.
Andrew: December what year?
Interviewee: 2009 so after TextStars. I am just going to go forward just to explain the money part. We did need money so <0:01:48.0> was profitable. We raised another round about a month ago for 5 million that we didn’t need but it is about the team, the mentors, and the people to give you feedbacks. So Foundry I worked with Ryan McIntyre and Brad Feld a lot…amazing people and extremely smart. Now as investors they have invested interests in our company and we were so happy that Foundry came in. on December we brought in a bunch of cool people. Highway 12 our lead investor Dave Cohen who is the Founder of TextStars. We brought in <0:02:41.5>…awesome guy, Jeff<0:02:44.8>
Andrew: Dave Cohen the Founder of TextStars and investor too. Okay so you are saying by going into TextStars you had entry into the venture funding world that they were able to introduce you to people who ended up funding you?
Interviewee: We didn’t go to TextStars because of funding, we went to TextStars because of the mentorship. We knew as first time CEO, I learnt their advice and it is really advising connection. It is really a key…connections are easy to get but the advices are really hard to get. I think in TextStars, they told us if you want to ask for money or ask for advice or something like that…so I strongly agree that the advice that these guys provide is just invaluable to run a business.
Andrew: Let us also talk about how you do that? You mentioned Brad Feld, he is a super busy guy. He has got to keep looking for his next investment. He already has multiple investments that he needs to help out. He didn’t interview here. He has got lots and lots going on in his life. Talking about Dave <0:04:02.6>, he is not even in your city. He is out now…I don’t know which part of the world he is in but he is doing the gigs on his plane. He is flying investors and entrepreneurs all over the freaking world. <0:04:13.8> is an investor of yours right. He has got to deal with WordPress. If I have a virus in my WordPress last week and I am sure he has got that headache to deal with in addition to…I mean my personal virus. In addition to everybody else’s viruses and launching the new version of WordPress. The bottom line is that these are very busy people and they are actually giving you advice. How do you do it? How do you get information and make it useful?
Interviewee: You have to be really to the point. So you have to tell them I need X, Y, and Z and they do take the time and it could be over the email or the phone…
Andrew: Give me an example. Let us put some flesh on this.
Interviewee: I needed an intro to a company then if someone knows something…give me an intro. If I go to…
Interviewee: If I go to the Bay Area lots, if I need, if Dave McClure is around, I ask him for advice. We at least take an hour to meet. Same thing with Jeff Clavier. In fact me and Jeff…
Andrew: What kind of…
Interviewee: Advice as far, what kind of advice as far…
Andrew: Yes. Give me a specific piece of advice that helped your business that you got from Dave McClure.
Interviewee: Hiring. The hiring has been our biggest bottleneck, because we are trying to put together an awesome team. So our team is pretty much the main reason why we’re here. We have a great team.
Andrew: So how did he do it? What did you go to Dave McClure with? How did you present the issue to him and how did he help you out?
Interviewee: So I told him about our bottleneck and he made an intro to the guide. He didn’t actually say “OK, here is what you are suppose to do.” He just put me in touch with the best person he knew and it was the company JobScore, the co-founder there and got awesome advice from Dan. So that’s pretty much what they do. It’s simple solutions that take less than five minutes. That’s why you have to be really specific on the things that you ask them for.
Andrew: I see. Alright, Dave McClure does seem to know everybody and while he is on a jet he could make an introduction for you. So you went to him with what specific hiring situation.
Interviewee: Pretty much everything. We were five people up to I think February. Now we are at fifteen, so we just hired ten people in the last few months. So just pretty much general advice on how to get better camp dates when you would advertise for a position. We found that there is a huge [inaudible], that it is pretty much like an ad, you are trying to sell your company to awesome people, and learned a lot from that. This is just one specific thing, there are many things I have asked. We also have a board meeting every month, so that I can get advice from our investors. It’s funny, our investors are also my mentors and they sit on the board. So that is Ryan McIntyre, Mark Sullen, and David Cohen. Awesome people to get advice from.
Andrew: Who did Dave McClure get you in touch with? What was the name of the company?
Andrew: OK. How about one more example about David Cohen. What specific issue did you take to him and what specific advice or mentor-ship did he give you in return?
Interviewee: Pricing. So David Cohen I talk to a lot. He is a really cool person. He has helped me since before he was an investor in our company Tech Stars. Then he became an investor in our company. He sits on our board. So I talk to David a lot. One specific example that comes to mind is pricing. When we were at Tech Stars we didn’t know how to price our service. He just guided us on how to research and how to do different things on how to find what is the best price.
Andrew: How? How do you research a price on something like this?
Interviewee: We, instead of starting with asking customers “Would you pay $200,000 for this service?”, we started really low. “Would you pay $10?” We kept increasing it until we found some resistance, but not too much resistance. After we found the threshold, we compared that with our margins and see if they made sense. That’s really important. Make sure you just look at your margins because if you find good pricing but it’s not going to give you any profits, it’s not going to let you grow and improve on your technology, that’s really important.
Andrew: When you are testing out these prices, are you just having conversations with potential customers and saying “would you pay $10? Would you pay $20?”
Interviewee: Yes. We had the advantage that a lot of our sales were successful, so like over 90% would just sign up anyway because there was a huge need.
somewhere 90 percent and lot of would bit your business and base on the price and reading of basis is just colabor and you would just do that.
minute 40 to minute 45
Interviewee: Need…so initially they start for really cheap and we kept increasing until it made sense. Initially the first customers that we ended up losing money because we just wanted a test but that is part of the…I guess price for testing.
Andrew: Were you going to the same customer and sitting down with them and saying <0:00:23.5>would you 10 bucks or would you pay 20…no. you were going to different customers and say hey would you pay 10 bucks…yeah sure of course. Then when <0:00:31.1>comes around would you pay 50 bucks. He doesn’t know that the last person got 10 bucks. He doesn’t need to know because you say would you like to pay 50…yeah I will pay 50 bucks. Great and you keep going. That is what David told you to do to just go out there and toss prices out on the people and see what sticks.
Interviewee: Yeah he advised us to do <0:00:50.3> pages too…marketing and stuff like that. We didn’t get to do that. We were lucky enough to have a lot of leads that turned into customers.
Andrew: Okay lets transition now into customers. How did you get all these leads?
Interviewee: Introductions and just kicking ass on the intros. For example David <0:01:14.5> started with…he made an intro with him and Shaw…you know <0:01:20.1>Shaw from <0:01:20.8>…awesome and super smart person. At that point, he didn’t have a need but he said my friend Jared from wegame.com has a need. Wegame is a social network for gamers…really cool site. We started working with Jared and had this <0:01:47.5> campaign and ended up being really successful or algorithm called <0:01:52.2> millions and millions of emails a day were delivered. So that was an awesome case study for us.
Andrew: How did you kickass with him? I interviewed him too by the way and these are great people. How do you kickass for him? He introduces you and you got to say before you deliver…you got to kickass. You got to say I can do what….how do you sell him?
Interviewee: Well first I sold the technology. I said we do have algorithms in the back and we do take care of all the scalability and we take care of all the technical issues that you are going to have to do anyways. It is a lot and it is really time consuming to do this. So I was going to save a lot of time from his plate. Again it just happened to be really easy to integrate so if he didn’t like it, it would just take less than 5 minutes to go back to his existing solution. So that made the sales much easier. You don’t lose much by trying. He ended up trying for millions and millions of emails and was really successful. After that buzz started happening, so it just happened that Jared is well connected and <0:03:14.2> Shaw is well connected. I think buzz started there and we hadn’t done any marketing at all. I guess we can consider this a way of marketing but we have just been focusing a lot on the product and kicking ass on the technology and we were just running our VP of Sales and brining our VP of Marketing to start scaling sales in marketing because we just sold the product.
Andrew: Can I suggest this. There is a club and <0:03:42.7> Shaw is in the club…who else David <0:03:48.5> is in the club. There is a club of people all talk to each other and who are all top of this internet business. If you could connect with one node with one person in the club, they will introduce you to other people and you will at least get a shot in selling your product to them.
Interviewee: If you kickass.
Andrew: If you kickass but if you are just a guy and you are just out on your own. If it was just you and Elmer, it would be harder I imagine. It would be harder to get in, it would be harder to get feedback if they turned you down…is that true?
Interviewee: Well initially I got some…we were startups right so for big companies like Wegame is high volumes so it is really tough to trust small startups. I did a lot of customer development. So I went to San Francisco and met Jared personally…went to lunch and stuff like that. So we put in a lot of effort into our first customers. So because…
Interviewee: …because we kicked ass the buzz started, not because of, not necessarily the connections, right? Also, it happened that the need was pretty big so you know deliverability again is a huge problem that we’re solving, so companies were willing to try our solution again because email is extremely critical and because there isn’t a good solution out there besides SendGrid.
Andrew: Ok. How did people know that this was an issue? How did they know that they weren’t getting the deliverability that they wanted? Cuz once you send the email out there, it’s just out there
Interviewee: A lot of companies don’t know. That’s a great point. We had to tell them that on average that was the case. We were going to set up a test so that everyone can test their deliverability. We haven’t had the need to do because of all the inbound sales that we have, but we’re planning on setting up something like that so you can test your deliverability. But after we told them that and then they tried it and they saw their open rates go up, then they actually believe and trust in what you say and again that’s part of all the buzz that gets generated. So yeah, you have to be good with your stats, make sure you know how to sell and do a lot of, I guess, research on the value that you bring to a company and once they’re willing to try it, just kick ass
Andrew: Let me read a quick exchange here that’s going on in the chatroom. Jordy is saying “How did you settle on a name?” Tim Jenkins your co-founder says “Well, we started as SMTPAPI and the rest of the text stars teams mocked us nonstop until we found something else.”
Interviewee: Yea that’s true. Again, I know I was a geek. We have an API on top of SMTP. When you send emails in the header you can actually use a complete API to do crazy things on top of the email. So we developed this huge platform on top of email. And because we have an API on top of SMTP then the first thing to look for SMTPAPI. Of course that domain was available so we ended up selecting that name and we went to Text stars that’s I guess the most notable change, the name. Some people are pronouncing SMT-Papi or something
Andrew: Laughs… Alright so we talked about mentorship and we see also about how peer pressure can be helpful. We talked a lot about product development but I want to talk just a little bit more about it. It is very easy to just type in your SMTP information into my email program and use you guys for a little bit and then type in my old stuff, my old data and move away from you. Is that the way you always started? That easy?
Interviewee: We started over using a web API. So we asked, we didn’t ask users because we didn’t have users, but the initial I guess solution was to make it over a web API. That was too easy and it was too easy to do for the developer, but really complicated for the customer. So we decided to do it the hard way and make it extremely easy to integrate. Make it difficult on our end and make it easy on the consumer end.
Andrew: So at first your customers needed a developer in order to interact with your system.
Interviewee: No, we actually didn’t release that. So you can still send email over web, but we just decided to go with the easiest way to begin with
Andrew: I see. When you launched, when you were actively looking for customers you went with the easiest
Interviewee: Easiest for the customer… harder for us. Because it was easier for the customer to try it and not to commit to our service
Andrew: So how did the product develop and change over time? It seems like essentially what you’re doing now is just a tighter version of what you originally thought of. You’re watching out for more things that would trip email on its way to its destination but essentially you’re still doing the same thing
Interviewee: We have a huge algorithm and the algorithm again keeps changing. The algorithm to deliver email to yahoo is different than delivering to hotmail, Gmail and things like that. Think of it as Google search algorithm right? It keeps changing because of new things. It’s the same thing with our algorithm to deliver email
Interviewee: We are focusing a lot on statistics. Click through rates, open rates. You’re going to be able to see if a specific person opened your email, clicked on it, real time logs.
Andrew: How do you know how to add all these features in there. You didn’t launch with that right?
Andrew: So how did you decide which features, people are going to ask for the moon, how did you know what to give them?
Interviewee: Yeah, so we, everyone at our customer desk support. Everyone, even developers, we have live chat. We use SnappaBug for that. Everyone, if you try to get support, you’ll talk to a developer who will actually try to get you an answer. Customer support has been extremely important to us. Once we have hundreds or thousands of competitors, I think. So if someone could replicate our technology, if someone did steal our technology, I think we would still have better customer support than everyone else.
Andrew: A customer support is going to give you a lot of different requests. One person is going to want one thing, the next is going to want something completely different. How do you pick from all that?
Interviewee: We try to get, we try to see what customers are going to asking for the most. So for example, initially we had issues with setting up DNS settings, we wrote a wizard for that with different developers. Because actual developers see, what’s needed. We just try to look for, for custom, for general requests that customers are requesting the most and try to let our users prioritize what they need, instead of us.
Andrew: How, how do you do that?
Interviewee: We don’t have a system. We have meetings every other day, so Mondays, Wednesdays, and Fridays. And we talked about everything, technology, support, sales. We have a pretty flat organization, so everyone knows about everything. In fact, we use Skype a lot. And when someone talks to someone else, they don’t send direct messages. Everything has to be on a chat room so everyone sees whats going on. And I think we have the advantage of being on a small team. And fifteen, its pretty relatively small, but we were five again like three months ago. That helps us see, what’s up, like everywhere, and based on that it helps us priortize what to do next. But we don’t have an actual system to keep track of all this.
Andrew: Okay. Let’s see what else I’ve got here on the list. Customers, I want to know a little bit more about how you got these big customers. Can you throw out some of the customer names that you have out there?
Interviewee: SlideShare, PlenCast, FourSquare, HootsWeed,Get Satisfaction. They, we didn’t actually target those, they found us somehow? Or through word of mouth. It’s funny when someone like SlideShare or Get Satisfaction signs up, it’s like “oh cool,” I’ve heard of…
Andrew: They just went on the web and they signed up?
Andrew: Get out! Wow! I was wondering how that happened. Okay, so the website is bringing people in because you’re solving a major pain point. In the early days, you were out in forums bringing in customers. Were any of those early customers paying customers, or were they just freebies while you learned?
Interviewee: Everyone was a paying customer.
Andrew: So everyone, from the beginning, you went into forums hunting for people who had this issue, offering to solve the issue and even though you weren’t a salesperson, you were giving them a price.
Interviewee: Yeah, I think its easier when you send a message or email because you don’t have to project any emotion when you’re selling and get really excited about your product. I think it gives you time to think about what you’re going to write. As a salesperson you have to be really reactive and show a lot of emotion when you’re selling and stuff like that. But initially through emails or messages you don’t have to do that. So it was easier for me.
Andrew: How much in business do you think you did with customers you found in forums and were just chatting this way with?
Interviewee: As far as revenue?
Andrew: Yeah, give or take.
Interviewee: Before the summer, I don’t know, 2-5k a month? That’s how much we needed for servers.
minute 55 to hour 1
Interviewee: We needed for servers and after that it started…so lets see about 2 to 5 so about 10 to 20K before we launched…
Andrew: A total of $10-20,000 came in roughly $2-5,000 a month is how much you brought in from business that you personally got from forums and other online channels or conversations online. It is okay if it is off. I am not looking for exact numbers here…under 100,000 but more than 10,000 we can say. Just give us a sense of what the business was enough to be profitable to pay for your servers and have a little bit after.
Interviewee: We actually didn’t have a little bit out there. I think the first profit that we made from servers, I think we paid our co-founder, Jose, the first few thousand dollars around August or something like that.
Andrew: So basically enough just to breakeven can we say that?
Interviewee: No because Tim Jenkins and myself weren’t getting paid. We started getting paid in December so Jose was the first one who was started getting paid. Jose is another co-founder and he started getting paid from August to November and everyone started getting paid in December.
Andrew: So then you get into TextStars. They tell you to change your name, they make introductions, they give you mentors, they give you introductions to customers, and customers started coming from those introductions and then it was on you to close those sales and not to go hunt for them cold.
Andrew: When you were in the forums, I see there are a lot of people in the forums and you don’t know who the person is on the other end. Why do people trust you? Do you have a reputation in the forums or did you have a voice already?
Interviewee: Nope. I just got an account in and send them a message. I guess that is how big the problem was. Some of them realized that there was a problem and some of them didn’t but after you give them these stats I guess customers are more aware of the issues and if they see their open rates going up then they start trusting you. Some of them don’t even know their open rates are click through rates and stuff like that. So that is another valid value that we bring. We actually give them better insight of what happens after their email has been delivered.
Andrew: Okay looking at the list of promises that I made to the audiences before we started I said mentorship we talked about that, I said product development we talked about that, and I also said some of the issues that you had as a first time CEO. How did you learn to be a CEO of such a fast moving company?
Interviewee: I guess it is really tough but if you have mentors around you…I think I rely a lot on my board. If I have some questions I just go to them. We are looking into hiring a COO to provide guidance on the things that we haven’t run into but I think I also learnt a lot from our team because we have a flat company. We don’t have too many levels of managers or things like that. We take decisions as a group. So they provide a lot of feedback on what are the best decisions. So Tim Jenkins provided different feedback on hiring, benefits, and things like that that you are supposed to do as a company and so not everyone in our team who is technical provides only technical advice they also provide…sometimes we take decisions as a group together for random things. A lot of that has to do with culture and stuff like that.
Andrew: What is the biggest issue you had as a CEO so far?
Interviewee: Getting an office and getting benefits for employees.
Andrew: Really figuring out what the right office is? What were the challenges to find right office?
Interviewee: Size, projecting how big your team is going to be and to be able to do that you have to project sales and things like that and then how big your lease is going to be, how much you are going to pay for the rent, what is the best location, what is best for your employees, and things like that.
Andrew: What about figuring out who to take money from? Was that an issue and how much of an issue?
Interviewee: So we had a lot of options.
Interviewee: We had a lot of options. We just decided to go with the guys that we liked the most and we did a lot of research on who they were. So foundry, we went erasing money and they made an offer and foundry is an awesome team. Everyone at foundry has been extremely helpful even before the investment. So that was almost a no-brainer for us. So just make it official I guess
Andrew: Ok the last thing on my list is team- what kidn of people do you look for?
Interviewee: I look for a lot of technical guys. A lot of high skill ability…skills, web development. We are wrapping up our sales and marketing team. We’re looking also for a COO. So we’re actually going to start turning this into a real company I guess *laughs*. Now that we mention team, I would love to just give credit to everyone in our team. Tim Jenkins- kicking ass, Jose Lopez, Tim Falls, Kim, Joe Scharff, Kyle…
Andrew: You’ve got fifteen people! We can’t go through the whole list! And then if you leave people out….
Interviewee: ..Eric Beckin and Elmer Thomas
Andrew: Alright. Oh Elmer Thomas is at the company too?!
Interviewee: Yep she just joined
Andrew: Oh I didn’t realize that! Congratulations to you and Elmer. What else do I want to find out about? Why take money if you’re profitable?
Interviewee: Because of the team. The investor team that you’re bringing. Connections, advice…
Andrew: But you raise millions of dollars. You don’t need millions of dollars to get advice you just need another round from angels to get advice. Why the millions?
Interviewee: It allows us to take higher bets on things. So experiment with things that we wouldn’t take chances on if we didn’t have money.
Andrew: Like what?
Interviewee: Hiring a little bit faster than what you need so that you can be ahead of the curve. And have awesome technology. Maybe buying ads in strategic places that you don’t know of… things like that. It allows us to not necessarily worry too much about budget when we want to take specific bets. Also we don’t have to worry about raising money a year from now if we decide to scale the business like super fast. In fact, we’re also growing pretty fast. We are looking into expanding into different countries. Turkey, Japan. We’re looking for hosting companies in different countries to pirate with. And this of course requires capital so I guess it gives us a cushion to take higher bets. Higher risk bets to do things that we wouldn’t do if we didn’t have that much money.
Andrew: Alright, how about this to end with. Someone else might be in your shoes. The shoes you were in when you were launching this business. A couple of companies that didn’t set the world on fire; gave you experience but didn’t give you profits. They might be in that same situation… what advice do you give to them?
Interviewee: I’m going to be a little biased to technical people. Get a mentor. Your customer is always right. Always listen to them. I guess worry about your product a lot and be proud of what you build and make sure it actually solves problems that your customers has and are features your customer are actually uses. At least this is what we did with Tingrid and we still focus a lot on the product and customer support. And that was we learn a lot from our customers. And singin is pretty much what our customers have told us they need.
Andrew: If I’m on your website, there is a little button on the upper right side that says talk to a live person. If I talk to a live person, what are the chances that I have a conversation with you or Time or Jose?
Andrew: A little button on the upper right side that says talk to live-person. If I hit that button what are the odds that I hit that button and end up having a conversation with you, the founder of the company, or maybe with Tim or Jose?
Interviewee: It should be about 90%.
Andrew: A 90% chance that if I hit that customer service button I will talk live to one of the three founders?
Interviewee: Yup. Oh one of the three founders?
Andrew: Yeah one of the three founders.
Interviewee: So Tim…it also depends on the nature of the request. So we have three guys just focused on answering these requests and they transfer the ticket to whoever is in charge of that. So if it is a backend problem you are probably going to talk to Tim, chances of that is in 90% and the same thing if you have a problem with web related, you are going to have a 90% chance that you are going to talk to Jose but a lot of these questions are related with the service and Joe, Kyle, or Ken can answer those questions.
Andrew: I see so there is 90% chance that there is going to be a human being whenever you hit that button and if it is an issue that only one of the two founders can deal with at this point it would be routed to one of the two founders.
Andrew: Alright. Well thank you any last words?
Interviewee: I guess for you it is congrats. You are doing awesome stuff. You are doing amazing things not only for you because you learn a lot of things from this but for everyone. I watch all your videos and I actually learn a lot from them. I know <0:01:58.4> and things like that you know good friends and thanks for that and I guess for your viewers just kickass on your products. Eventually your technology, your products speak for itself. I think you interviewed the guys at Balsamic and almost similar story where they are so proud of their product. In fact we use Balsamic too and we focus a lot on our product. They are really proud of their building and I think that is my best advice to everyone that just kickass in what you do. They probably do know that but eventually it pays off.
Andrew: Right on. Kickass in what you do. What an inspiring story. Guy just goes, solves the problem with two friends, ends up doing well in so many ways, and I am so proud to know you. I am so proud to watch from the sidelines. I see other people feel exactly the same way. In America the audience is saying “SendGrid Rocks they are awesome”. If I continue in this way it seems like <0:03:03.3> mutual love here. I am just going to say I invited you for a reason because I admired your work and I wanted other people to learn from it and I am going to come back what I said in the beginning guys go out there and do this and build something incredible, build a great product, kickass on it and let me interview you, come on here and talk about how you did it. Isaac thank you for doing it and thank you for being here and doing this interview. Elmer thank you for making this introduction. Everybody thank you for watching. I will see you in the comment and hopefully whoever is there watching I will see you right here doing a Mixergy interview not so far in the future. Thanks everyone.