How did a guy who says he used the fattest, dumbest execution turn things around and build a smart, profitable company?
He says that instead of following the lean startup method, he ended up with the fat startup mess.
At one point, he and his fiancé had to move into his parents’ basement. But he made it. And this is the story of how he did it.
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Hey there freedom fighters! My name is Andrew Warner, I’m the founder of Mixergy and it is home of the ambitious upstart. In this interview I want to find out how a guy who says that he used the fattest, the dumbest execution, how he turned everything around and ended up building a smart successful company. Jeff Epstein is the founder of Ambassador, formally known as Zferral.
It turns your customers into brand ambassadors. He says that instead of following the lean start-up method, at first, he ended up with a fat start-up mess. At one point he and his fiancé had to move into his parents’ basement, but he made it and he is growing and he is here to talk about how he did it. Jeff, welcome!
Jeff: Thanks, Andrew. I appreciate it.
Andrew: You know what? I didn’t realize how funny it was to read this right out of your notes, the fattest, dumbest execution until I said it out loud. That’s the way you felt, huh?
Jeff: Yeah, I would have to say it was before sort of the lean start up methodology and I’ve certainly learned a lot and this was several years ago, but looking back on it it’s embarrassing to see how many mistakes I actually made at that time. But I think the beauty is that you learn from it and hopefully you adapt and just like a business would pivot, a person should also learn from those mistakes and help grow their [??] the way that they’re growing the business and the way that they’re operating the business.
And I had to do that otherwise I would probably still be in my parents’ basement or having to work for somebody else or doing something else. Those were the things I had to change in order to be successful or on the path to success.
Andrew: The shocking thing to me, having first of all read the research on you and also taking a look at the pre-interview notes that April put together, it’s that you made it and then you had to have a hammer on your head and deal with getting back up and now here you are again. Let’s see where you are right now. Revenues last month, what were they?
Jeff: They were, I’m not going to give specifics but our run-rate is roughly seven figures so we’re…
Andrew: So we can estimate over 100,000 a month.
Jeff: Yeah, we’re close to that. You know we’re triple digit year over year. 10-15 percent month over month and attracting really quality customers is sort of the goal of what we’re doing so everything is looking great from a metrics perspective. The team is awesome and growing, we’re ten people now. We were 3 basically last year this time so it’s been a pretty big year and everything is sort of firing. We’re pretty excited.
Andrew: I’ll get deeper into what the company does and in a moment I’m going to ask you about this online poker business that you had and you mentioned to April, this was a legal business and I’ll get to it in a moment but the reason you know, or one of the reasons why you know it is a legal business, is you went to law school. Why didn’t you stick with law school? You had a career, you had a path. Why did you leave it?
Jeff: I did and so right after undergrad I went into law school and I thought it was the place for me. My family was excited, I was excited and I totally hated it. I didn’t feel like I fit in. I did Okay, I just didn’t really enjoy anything about it and I kept thinking like I saw my future ahead of me of wearing a suit every day, and I was in Chicago at the time so it was like going on the train and I saw that entire life and I just knew it wasn’t what I wanted to do.
Andrew: Why? Was there 1 vision of that life that made you want to say “not me?” Was there a guy who you saw maybe on the train, or, or, I don’t know, someone in your school who spoke and you said “Wait if that’s the model then I don’t want to go and be that.”
Jeff: Well the one thing that i, that I didn’t really like actually was the fact that it wasn’t scalable. ? so that you worked ex amount of hours and that was, your performance was based on hours built. And that’s, you know, I guess if you own your own practice it’s slightly different but it all comes down to the amount hours built and it just rubbed me the wrong way.
Ever since I was younger I traded baseball cards, I, I did things if I needed money, playing poker when it was legal again and it just didn’t, it just didn’t sit right with me, I just didn’t, I’d rather, you know work really hard and make a lot less then know I was ex amount per hour for the rest of my life, for me it just didn’t work, for some people it’s great, you know it depends on your personality and for me it was, it was not the right move.
Andrew: I remember as a kid I’d watch all these great law shows on television and think maybe I should be a lawyer and one day I went into a law firm and I saw the copier and there was a number pad on and I said “What is this crazy number pad attached to the copier?” and someone told me, “Well before you copy you have to put in a client number so we can charge it to the client.” I go, oh my goodness these guys their so, it’s so petty and now I have to be also shackled to this petty system and type in their code. I can see why you wouldn’t want to be a part of that. You said you were playing poker, were you playing poker while you were in law school?
Jeff: A little bit, yeah, I definitely was back when there was obviously a huge craze on t.v. and a bunch of my buddies, and this sort of goes into, since while I was in law school, a bunch of my buddies while in undergrad played, and ended up playing professionally online, again when it, when it wasn’t legal always, and it was, I think that was intellectual challenge I really enjoyed it, paid for a lot of my bills while I was school, and a lot of other people in that time also have done that, it was, it was a lot of fun.
Andrew: And then you built a poker company, what was it?
Jeff: So it was an affiliate company. Essentially what we did was we took and again this was a set of my friends from Michigan State who also played and we referred people to play online at various different websites, it’s a very simple idea. The difference for us was that we have this network of poker players and they went to different high schools and a different groups of friend, you know, we all knew each other from college, and they had ten friends and those ten friends had ten friends and it was the network effect…
Andrew: this is just referring your friends?
Jeff: Yes, it was just referring our friends.
Andrew: You didn’t have website, you didn’t go to message boards?
Jeff: We had the most basic embarrassing website ever. It was originally a free blog spot blog, I spent like literally no money on it. I put a post up there, I believe one person signed up, it might have been my grandma or something and I made $500.00, we took that $500.00 dollars and then bought a website for $500.00 and it was, I mean it was awful and then we made a couple thousand and we sort of did it that way, sort of stepped up, I mean, we only probably only spent a couple of thousand dollars total.
And at one point I was like manually calculating hundreds of peoples, like, earnings, it was pretty, it was pretty sloppy but it was also a lot of time, you know, I just essentially took a lot of time and just did it and eventually we learned to automate things and make it a lot better but, like I said at the end of the day it was like I said people referring people and it was, again, for us it was AOL instant messenger, which is hilarious when you think about it know, but it was, we were sort of missed the Facebook, you know, boom really, it was a little bit before wide spread social network for people that were in law school.
Andrew: And so when you say AOL instant messenger you were going on messenger and to your friends saying “Hey, sign up for this, you’re going to like it and I’m going to get some money.”
Jeff: Exactly. And that’s what they would do to their friends and just and just…
Andrew: and would you get a share of that? Were they paying kind of pyramid commissions?
Jeff: Yeah, essentially that’s how it all worked.
Andrew: Oh wow, you referred a friend, you got money, that friend referred another friend, you got money and the friend got a commission, too?
Jeff: Exactly, it wasn’t like a negative pyramid scheme but it was like, sort of like a tiered structure, so multiple people earned commissions, everyone sort of won, sort of along the change and obviously these websites did amazingly well, we were sending them at the end millions of dollars in revenue each month and then people, you know, some of our customers were also making enough to live off of just by referring their friends too, so it was pretty interesting and it sort of opened my eyes to this, you know, everything really, it was insane.
Andrew: You suddenly went from day to day to a business that doesn’t scale to seeing one that clearly scaled out of control.
Jeff: Exactly, exactly.
Andrew: Monster size. How much money did you make?
Jeff: So I mean we never, I mean I don’t have specifics I ended up selling out and we were making five figures a month and that was profit, like…
Andrew: five figures, over ten thousand dollars a month in profit?
Jeff: Yeah, way over, way over that.
Andrew: More than fifty thousand?
Jeff: It wasn’t six figures it was, it was, but it was solidified figures, it was split up between a bunch of people…
Jeff: But it was for a college kid it was, I thought I would be retired by now, it seemed like it was so much money, and of course, in reality, it wasn’t a ton, but it was . . .
Andrew: How much did you sell for?
Jeff: Not a lot, to be honest. I sold for actually just about what I owed at my school loans, which I’ve been paying down with the money I’m earning, but enough to basically completely wipe out all my debt, and then be able to start, and then come home with some money, and I think I had enough for like a small down payment on a small house, and it’s in Michigan, so it’s not a lot. And but that was what I, like, had for myself, and it felt pretty good, but it wasn’t nearly as much as it could have been. It was right when the law started changing, and I just tried to get out from under (?).
Andrew: And I can also see now you’re understanding the affiliate process about how companies that turn their users in Ambassadors both benefit themselves and their users, all right we’re going to get back to that and how you integrated into Ambassador. The house thing, you bought a house, and then did you get into the real estate business?
Jeff: I did. So I briefly, when I originally moved back, I was sort of studying the market, and for me I like just dived in feet first, you know. I hadn’t been on my own ever in Michigan, aside from college, and when I moved home I wanted to find the best opportunity to invest, you know, sort of hard-earned money.
And I ended up picking up a location I thought college kids were moving into, again in Michigan that was rare, most people were leaving, at least Southeast Michigan at that time, and so I bought a house, I actually fixed it up, got my real estate license, and I started investing a little bit of my money in real estate for just a year or so, while I was doing, actually trying to figure out, like, an online business on the side.
Andrew: So how did that go for you? I mean we’re talking about, I think it’s roughly the period where other people are flipping and eventually getting burned, so what did you do?
Jeff: So actually did well. I was able to, I flipped a couple houses, and then I actually bought mine, fixed mine up, and then flipped it, and then we actually flipped ours again. So, you know, my wife and I, you know, that was part of the reason why we were in the basement at my parent’s house. The timing didn’t work out great, but it was a pretty interesting (?).
Andrew: Net, were you up or down?
Jeff: Oh up, yeah, for sure.
Andrew: How much money we’re talking about?
Jeff: A good amount. I mean (?) . . .
Andrew: Hide the exact numbers, but give me a sense of . . . if you bought a house in Michigan back there as an amateur real estate guy, who’s just getting started, what would it cost you, how much would you put down, and then when you flipped it, what would you get out of it?
Jeff: So one house was under sixty, you know, and it was like seventy, eighty thousand dollars.
Andrew: For a house.
Jeff: For a house, yeah. I mean, this is, you know, not the best area, not the most prominent real estate market.
Andrew: Incidentally, that’s about my rent here in San Francisco for a year.
Andrew: I’m not even . . . let’s (?) around here. Okay, so that’s how much it would cost?
Jeff: Yeah, for one of them. And then you may be put in thirty, forty thousand, and then that one actually sold for around one-eighty or one-ninety, I believe.
Andrew: So you put in thirty, forty thousand down payment?
Jeff: That was like in fixing it up.
Andrew: In fixing it up. And then what’s your down payment.
Jeff: It was probably like fifteen, or something like that.
Andrew: So you put fifteen in, you put thirty to forty thousand into the business, when you sell it you get a $180,000.
Jeff: Yeah, that was an interesting day, when I saw that it was pretty big check.
Andrew: And when you pay taxes on that, are we talking about capital gains or earnings, because of the amount of time it took you to flip it.
Jeff: That’s ordinary income, that one.
Andrew: Ordinary income at that point.
Jeff: But when you saw us, your personal residence, so it would be, you know, capital gain, actually your personal residence, this is actually what I learned in law school, probably the most valuable thing in law school, if you’ve lived in a house for two years and then sell it, you get to keep the capital gains, and that is actually what we did with the house that we lived in.
Andrew: I see.
Jeff: And that was how we sort of, you know, moved in to a nicer house going forward, just blocking a net gain.
Andrew: All right, so at that point you’re living in your parent’s basement, there’s a guy who you told April, your best man at your wedding stood up and gave a toast, what was the toast?
Jeff: So this is my cousin who, you know, like a brother to me, he stood up and he said, Jeff is a, I believe a bright-eyed dreamer living in his parent’s basement, something to that effect. And it was, so everyone, it was hilarious, everyone laughed, I certainly thought it was funny, but the thing was about living in Michigan, which is not a super entrepreneurial, especially when you talk about, sort of internet based, you know, entrepreneurship, people really didn’t know that I had a job, like I don’t think people knew what I was doing.
Most people would be like, what are you doing, how is the internet, you know, it’s like so broad, they had no idea what it was. So that was actually really, I mean, it was tough, and it was really funny, it was a funny moment, but it was certainly a tough point in, you know, just getting married and trying to provide for, you know, wife and . . .
Andrew: What year are we talking about here?
Jeff: This was two thousand and, like elevenish, 2010, yeah.
Andrew: And people still didn’t know what the Internet was there?
Jeff: No, no, they just didn’t know what I was doing.
Andrew: I see, okay. It is a big mystery. Frankly, I worked for years at Bradford and Reed on an internet company. My dad for years didn’t understand what it was, and my friends didn’t fully get it either. I get that, but when you were in your parents basement you might have seemed like you were not doing well, but you were okay.
Jeff: We were okay. This is where you can start talking about a completely fat startup, right. I was putting all the money that I had saved into the [dominant] of this company.
Andrew: I see. Okay, so you’re still waiting for the big hit. You’ve got some success and you’re thinking I can do it, and you’re now taking all this money that you made from real estate, and you’re plowing it into an idea, and the idea was a company that already existed, right?
Jeff: Yeah, so there’s that one hiccup along the way as well, so this was I guess a little bit before that time. This is a year or so before. I did have somebody and again, this is money that I made in real estate, and I actually bought an existing company that was doing really well. It was a couple hundred thousand in revenue and I bought it for pennies on the dollar to be honest. It was someone who just didn’t want to do it anymore and he had another business that was doing really well.
Jeff: I had no idea, it was SDL related, I didn’t really know much about SDL other than what it was. I didn’t have any nitty gritty experience in SDL, and I totally just ran it into the ground. It was embarrassing.
Andrew: What mistakes did you make that made this business that was already generating cash fail, as we’ll see?
Jeff: The biggest mistake was I didn’t have domain expertise, so I couldn’t really speak, I couldn’t be the figurehead of the company and speak to it well. At high level I could talk about it, but when people asked me what I was trying to sell, and there were some pretty large customers. I couldn’t talk the talk fast enough or well enough. I didn’t have the passion for it. It was a good investment. I probably should have put someone there who was excited about it and it probably would have done well.
The second biggest mistake was the technology was not good and I didn’t have the proper skills to bet that. What happened was, the biggest challenge was it cost more for me to fix the problems than it did to just let it go, and that’s what I ended up doing.
Andrew: You know what I’m going to continue with this story, but I’ve got to just point out on your t-shirt you’ve got your logo. On the white board behind you, you’ve got your logo. We’re clearly sending the message of what company you work for, and maybe I’m working on it alone to just hold off and let people keep wondering as we build up the story here.
Did you wear the t-shirt and think of the backdrop because of the reminder email that I sent explaining to people how to look good on camera, because you’re coming across really well?
Jeff: Oh, no. Actually, I had another interview a week or so ago and we had the logo up there and I figured it . . . wear the shirt today.
Andrew: Gotcha, okay, just when I’m saying that everything’s going well. I see that you’re internet connection just stalled out on us. There, but it’s back. I was curious because I’ve been now as part of my prep with guests, I automated an email reminder just like you saw earlier today. In it, I say here’s how you can look good on camera. In it, I give people some suggestions, but clearly, you’ve had some experience so you know what you need to do.
In the basement you’re starting this business, basically it seems to me you’re thinking about it the way you were thinking about real estate. In real estate, you can invest in the property without falling in love with every brick in it. In real estate, you can basically talk the talk without really being the passionate visionary behind it. When it comes to development though, what issues did you have that you couldn’t overcome by hiring the right people? By paying the money, I don’t know letting someone even rewrite the code?
Jeff: That was the plan actually rewriting it, and I actually structured a deal with someone to give them part equity to rewrite it. They basically gave up after a certain point and said, “We can’t, it’s costing me and my team way more than I imagined and it doesn’t make sense.” At that point, it’s frustrating, even with a legal background and a legal contract in place, it’s expensive to try to remedy that situation, or force anyone to do something.
My heart wasn’t in it, I sort of already knew that there were some strong costs there and I figure, I didn’t want to put good money after bad and I just let it go. Literally, the URL just redirects to probably a 404 and it’s just gone.
Andrew: What’s the URL? What’s the site?
Jeff: It was called linkxl.com.
Andrew: Yeah, I don’t see anything coming up for it right now, maybe it will as we continue. Let me see. What kind of software would search engine optimization even need? Wasn’t this a service business?
Jeff: No, so it actually was a really interesting technology. It placed hyperlinks into different WordPress blogs, so it…
Andrew: …Got you…
Jeff: …Yeah. There are a couple of companies out there that do really well and probably make million. We were sort of one of the second or third best I guess out of those companies. It essentially would allow people to buy links which, again, isn’t really a savory business. It’s gotten worse and worse. At the time it was sort of accepted.
Andrew: What years are we talking about here?
Jeff: This is like 2009, 2008.
Andrew: Okay. Here I see, new, do follow and no follow text links, instant link placement, no updating to do. You set the pricing on your links. Monthly commission payments. And, for advertisers, instant link placement, complete automation, relevant links in content on publishers’ websites. Your links get crawled. Value is passed on.
That’s the site, I’m looking at an old version of the site. In my research here I see that you founded a company called eSparty. You founded something called Finest Affiliates LLC. You founded something called Funded by Night. What are all these companies?
Jeff: eSparty is maybe one of my favorites. That was when I was at Michigan State University. It was the year 2000, and I started a company with a buddy of mine. It was more of a website, almost like a window to the Internet. Which is funny, but in 2000 most people did only a dialup.
What we did that was pretty interesting with esparty.com was we had online ordering for food. This was in 2000. So, three or four years before GrubHub even started. It never took off. We couldn’t get companies. We had probably a couple of hundred orders from a couple of local places, but it never took off. As I graduated we sort of gave up on the idea…
Andrew: …I see…
Jeff: …and that was my first foray.
Andrew: Have food delivered directly to your door with a single click. Interact with fellow students in eSparty board’s message forums. And, here’s the most telling part of it all. In 2001 at the top was, click here to download Gator free. gator.com provides free software which you can download to protect your password on your computer.
The reason that’s the most telling is that they were an affiliate that you got through BFAST. I forgot who BFAST was. It shows that the revenue fromthe business wasn’t generating enough, so you went to affiliate sales. And, again, affiliate sales on your site.
Jeff: Exactly, exactly.
Andrew: Do you remember who BFAST was? Who was it?
Jeff: I don’t even remember.
Andrew: Why can’t I remember the name? I’ll look it up. Alright. What about Finest Affiliates?
Jeff: That was the poker. That was the poker.
Andrew: Alright. Then, Funded by Night?
Jeff: Funded by Night was just a conference. When I realized I wanted to get back in the startup scene in Michigan I decided I was going to throw a conference and help with a couple of buddies of mine. What we did was essentially like a startup challenge. We had 25, I believe, startups come to the metro Detroit area. They pitched a group of local investors. We had some amazing speakers. We had Noah from AppSumo there. We had Micah Baldwin from Graphic.ly.
It was just an awesome event. It was one of the first real startup focused events that I knew of in the area. I just figured if no one was going to do it I would. It was great. I met a lot of people. I’m really glad I did it. It was super hard. It was way more work than I thought. We lost money. I lost money. But, it was totally worth it. It was a lot of fun. But, it was probably six months of my life while I was doing other things, too.
Andrew: Right, and maybe you ended up with connections to people like I know you did.
Jeff: For sure, yeah. It was awesome.
Andrew: BFAST, I should’ve known this, is Commission Junction.
Andrew: That’s the affiliate program that you were using over 10 years ago on your site. Alright. I see how all of this stuff in some way seems to connect to affiliates. Then it came time for you to start the business that we’re talking about today. What was the original idea behind it?
Jeff: The original idea, it was called Zferral at the time, was to allow companies to have an in-house affiliate program. The reason why you’d want an in-house affiliate program is that unless you have a really recognizable brand and you can pay a very high percentage or commission you are not going to do well in a marketplace anyway. Because people will choose someone more recognizable or someone who pays more for the…
Andrew: …Marketplace meaning like Commission Junction. If I don’t have any software of my own, I don’t know how to build it myself, I go to Commission Junction. They list me in their marketplace. They vet me. They find me affiliates. I pay Commission Junction. Commission Junction takes a bite, and they pass it on to the affiliates who promote my ads.
But, they take a bite, and it’s hard for me to stand out in a marketplace with so many other people. And, I think, no they’re not. I was thinking Apple was in that marketplace. But, companies like Apple go to marketplaces like that. You’re saying this is who you compete with and it’s tough. So, your idea was, have your own affiliate program. You don’t need those guys.
Jeff: That’s exactly correct. You have companies like Netflix or big recognizable brands that will pay. They know their LTB. They know their customer lifetime value much more so probably than you do as a small business. So, Netflix knows they can pay 20 bucks for a free trial. Whereas you’re going to maybe want to pay a couple of dollars. The math doesn’t work for most small businesses to go into an exchange and compete with lots of companies that are probably much farther ahead than they are.
What we wanted to do is allow any company to have that capability and move it in-house. Because most likely the people that are going to help you are going to be people that you already know. So, you don’t have to pay for that part of it. You pay them commission, pay for the software, but don’t pay to find people that you’re going to find…
Andrew: …But, you guys would host the software, right? I don’t even have to run the software on my server…
Andrew : …but I pay the commissions, right?
Andrew: Okay. If I don’t have any software of my own, I know what you do, but how would you do it?
Jeff: If you didn’t have software?…
Andrew: …Right. How would you keep track of which of my affiliates need to get paid?
Jeff: Yeah. Our system creates unique URL’s. Those affiliates, now we call them ambassadors, have their own URL’s. They can put them, whether it’s in banner ad, or a post on Facebook or Twitter or LinkedIn, or in a blog post. Our system tracks that, determines where it’s coming from, and will credit the correct person with a commission or award or whatever they’re…
Andrew: …I’m sorry. What I mean is what did you do to make sure to connect the final sale with the affiliate that referred it? I know there are multiple ways to do it. I’m just curious about which one you used.
Andrew: Alright. It makes total sense. It’s easy for a site to implement. They don’t have to create their own software. They partner with you. I can see how you’d make money with it because you’d be charging me for the software. Where’s the fat dumb execution here?
Jeff: Yeah. The fat execution was really in the beginning when I initially started. This was early 2010, even before the site was live, because I had some experience. I knew enough to be dangerous. I knew this was roughly what it looks like. Maybe I don’t know all the terminology, but I know what companies could be using.
So, I sort of mocked everything together and gave it to some developer and said, here’s what I want to have. I outsourced. I found some guy who was reputable and pretty solid based on my prior experience. I started paying him, and we started building it.
I don’t think…To me methodology, like talk to customers, I had no customers for like a few months after we launched let alone during the process. So, I would’ve done that all differently. Instead of thinking and, again, talking to customers and doing customer development, I was doing some real estate stuff on the side. I wasn’t focusing on the business itself. A couple of successes came pretty easily, and I sort of assumed it would be easy.
Andrew: I see. And you already had done affiliate programs in one way or another for about a decade, so you figure you know it all. Right?
Jeff: True. Right.
Andrew: So, when you finally launched it, where were you wrong? Where do you feel like you were out of touch with your customer?
Jeff: I think the biggest issue initially was there was a lot more that I needed to do from a marketing perspective, from onboarding new acts. Things that you don’t think about.
My first website wasn’t a website to serve people. It was strictly information. So, I didn’t have to have an amazing onboarding experience. They basically logged in and saw numbers.
With Zferral people had to integrate it into their website, and I had to explain to them how to do that efficiently. If I didn’t, I would lose them. That was something that I wasn’t super skilled at. It took a long time to learn that. It was a process of feedback and having a lot of companies give you feedback and not be excited about things.
It was a tough go for a while. At that time as well it was essentially just me. So, it was a single guy doing a startup. As I’m sure we’ll touch on later, the company has grown. Now, everyone’s in-house, so it’s a very different experience now. That was part of the reason why we rebranded and relaunched a new website.
Andrew: I see. Onboarding stinks. Give me a little more specifics on that. When you say that you weren’t experienced in onboarding, I get it. But, what did you do that was wrong? What did you do that, in hindsight, you’re almost kicking yourself for.
Jeff: I probably spent more in the first, you know, the three months before we launched and three months after we launched, and, you know, last quarter or you know maybe not with ten employees but, I mean we spent a ton of money without having any validation other then I thought this was a good idea.
Lucky, I think we were, I was kind of right, I mean in some, in some regards, like people do want that and we’ve pivoted a little bit, moved a little bit I think into, into a better space, but at the time I really, I made a lot of assumptions and I didn’t back them up and I’d say that was really the saddest part, and I spent a lot of money…
Andrew: how much?
Jeff: For myself.
Jeff: I mean maybe 30, 40 thousand dollars…
Andrew: in how much time?…
Jeff: it was basically everything I had, so it was maybe even more than that.
Andrew: Wow, okay, in how much time?
Jeff: Six months probably…
Jeff: six, seven months at least.
Jeff: Yeah, it may even been more, but, yeah I don’t even know.
Andrew: I don’t mean to put the whole process down, frankly the fact that you even hired developers and was able to get them to build this as a non-developer that’s, that’s an accomplishment. How were you able to do that?
Jeff: It was probably a combination of luck and their expertise. I mean I, like knowing, looking back on it I shutter to think about what I was doing, you know, I don’t know and I think it probably cost me a lot of time and money just making modifications as I got feedback or as I missed very obvious things that I would recognize in a moment now that I didn’t recognize for months or maybe, maybe even a year or so. So I think those, those were just expensive lessons I would say.
Andrew: I get it. So you finally built this thing, it’s time to go out and get customers, how did you get customers?
Jeff: So I, and then again this is also sort of the, part of the, sort of the fact, you know, experience I guess. I would like to go like meet ups, I went after startups, it was the worst, worst idea ever. I love startups but startups are not necessarily good customers for, you know a sass business especially one that your hoping that are going to invest money in acquiring more customers.
So if your, you know, scrapping and clawing and trying to be efficient with your funds you may not be in the area, you know, in sort of growth mode where you’re going to start acquiring customers really quickly.
Andrew: Right. By the way looking at your website today I see that your customers the ones that your, that you’ve got listed on your site are companies like Progresso, Sendgrid, Sage, so yea, I could see how startups are really tough audience to go after, they don’t have much money, they’re not ready to fully scale out and maybe they’re a little bit more willing to build their own.
Jeff: Right, I mean I think there’s, there’s definitely and inflection point in every company where you have, you know, you can spend more, your money is more important than your time. And we want the companies where there time is certainly more valuable….
Jeff: and I think, you know, and so we definitely have shifted focus a little bit, but at the time I didn’t know any better, I didn’t know how to get a hold of Bear…
Andrew: so you went to a meet up and you’d say “Hey, this is what I’m doing you should use it.”?
Jeff: Yeah, I mean I would do things like that, I mean I would, you know, I started doing some blogging and some things like that, bless you by the way.
Andrew: Thank you, I hit the mute button and sneezed, I ? as much as I could. Was it working, did it help to go out to actually talk to customers at meet ups, to shake their hands, to explain your product, to adjust your explanation based on their understanding of it or was it just a big waste of time?
Jeff: It was helpful, it was helpful in probably most importantly in my life as an entrepreneur is getting out there and talking to people. If you can’t sell or be able to be, talk to people, it’s going to be really hard to build a company. And that was something I never thought about when I started. I was actually scared to pick up the phone, I didn’t want to, I preferred to just do email.
It doesn’t really work if you want to sell to, you know, thousand, you know, tens of thousands of dollars, you know, contracts of software, so, those were things I just, I had to do and another part which was huge and a little bit later was getting into ? and being forced in that situation where I was meeting with people, you know, five or six investors a day, and then people were, you know, grilling me with, it wasn’t necessarily always friendly, it wasn’t necessarily not friendly, but it was a challenging discussion, to say the least it sort of felt like law school.
Andrew: They do push you.
Andrew: Did you get into Tech Stars with an actual product that was built or where you still in the wire frames stage at that point?
Jeff: So the story about Tech Stars and how I get into it, so I actually, I heard about Tech Stars when I had just had literally just launched ? I probably had five customers, this was in probably early 2010. I applied to Boulder, I had just heard about it, it was my first, sort of real, I guess start up moment, like I didn’t know about startups being in Michigan that was the first time, oh start up incubator that sounds awesome.
I applied with the company that actually had built software with me, and we got to the final cut, but we didn’t make it, so we were like, out of a couple hundred we were in the final 20, but we didn’t make the final 10. And that was when I decided I’m going to, you know, go full steam ahead, it was sort of the validation I was looking for, or, you know, I guess it was validation enough that I said this is a decent idea, let’s run with it, and now is when I sort of pushed everything else aside and focused on it full time.
I then brought people in-house, getting feedback, and realizing that maybe a remote development team isn’t the best way to do an incubator, and, you know, hire a few people, and then decided to go to Techstars and got accepted in 2011 in New York, and that was when Zferral officially morphed into Ambassador based on a lot of feedback, and also rebuilding a lot of the technology as well.
Andrew: Well, I was looking at Zferral from the outside, and to me it seemed like you were doing well. It was so hard to tell.
Jeff: Yeah, I mean, we were doing well, you know, I think Zferral was, it still makes up a part of our revenue, we still have over a hundred customers on there, so there’re people still using it, it works well, we’re still supporting it, and it’s a great company, or a great product, I should say. But what we’re doing now, I think, is actually much bigger. The space that we were in with Zferral was, I think, somewhat limited, and it wasn’t focused on . . .
Andrew: What do you mean, what’s the difference? I thought that affiliates, uh, the affiliate business was huge.
Andrew: That every web . . .
Jeff: I’m sorry, go ahead.
Andrew: No, you say it, what’s the difference, why not be in the affiliate business, but just do it right by talking to customers, by building an on-boarding process based on their feedback . . . etc.
Jeff: So I think the affiliate space is huge. I think there’s even a bigger space, and when we talk about referrals, I think the affiliate space is a part of a referral, and the reason why this is changed is because social is not . . . you know, affiliates used to have, essentially publishers was the only people that can use affiliate links, typically. People can now be publishers, right?
You have a voice on Twitter, you are probably, you can get as much with a tweet as much attraction, or as many clicks, as a, you know, huge article on a major publication. So people are now, I think, just as important, if not more so, than publishing entities, and so . . .
Andrew: I see. So why limit yourself to that, to just website, to just blogs, when there’s so much, when there’s so many other places where people publish and could put links to affiliates?
Andrew: To affiliate programs. I see, so they’re not considered affiliates, they wouldn’t think of themselves as affiliates if they were just a top tumbler, for example, is that what you’re saying?
Jeff: Well, I’m saying that I think the way that we view affiliates has changed a little bit. I mean, the end of the day, an affiliate is used to drive revenue, or drive a customer, or traffic your way, and everything boils down to what are you going to get for that traffic.
Jeff: So if you’re going to get an x amount of clicks, you know that, you know, one percent of them will convert, and you know that’s worth some amount of money for your company. We think that having Ambassadors, people that know your product, that know your business, that are potentially influential, and are more trustworthy than some, you know, article, can also do that, and it can be much more effective and have a much broader reach. So, you know . . .
Andrew: Sorry, I’m trying to think of that Y Combinator Company, I forget the name and I forget the founder’s name, is it Danielle, who basically wanted to do affiliate links through Twitter, what was the name of the company?
Andrew: With Furley.
Andrew: So how is this different from that?
Jeff: So Furley took an interesting approach. I think what they did was they work more so on embedding, you know, URLs in content, and they were really going to influence their market. What we’re doing is we’re going to the businesses. We’re giving the businesses software, I think they gave people software.
Andrew: I see, and it’s harder to reach lots of people, and it’s easier to reach companies that can then go could go out and talk to their own people . . .
Jeff: Right, and I think . . .
Andrew: . . . and (?) with them.
Jeff: Exactly, and what we’re doing is, if we sell a business, then that business is bringing in people, instead of selling people one by one. And then also people aren’t paying, so you’re just getting a small fraction. So on our side we’re getting bold, we’re getting, the businesses are paying for licenses, and then there’s also a fraction of the transaction too.
Andrew: I got to get her to do an interview on here. I keep meaning to e-mail her. What else do you think that she could have done better with her business, with referring?
Jeff: So, she’s like super smart. I’ve talked to her. I mean . . .
Andrew: Incredibly smart, she going to be a, she’s going to move on to great things, which is why I feel comfortable saying, that one didn’t work out, and asking you publicly why you think it didn’t work out.
Jeff: So, I don’t know enough, my guess is that she could have done really well. I think that she found something bigger and realized that made more sense for her. I think the opportunity cost was really high. My guess is that it could have been successful. I think it was just a different take on the same theme, that people can be, you know, influential and drive, you know, transactions and revenue for companies.
I think we just took a different approach, and luckily ours afforded us a much longer runway. We’ve been super. . . We’ve been trying to extend the runway as long as possible. We’re getting to a place now where we’re in a really good spot.
Andrew: OK. I’ve got to get her on. Her name is Danielle [Morrill], for anyone who’s out there looking. I just did a Google search. I’ve been reading her blog. I know that she’s now doing stats for startups and she’s helping people understand that market.
Alright. Let’s talk about, then, how you got customers for Ambassador. Now you’re starting to think a little bit differently. Where did the first customers start to come from?
Jeff: The first customers came while we were in TechStar, and actually, SendGrid was one of the first customers.
Andrew: They are TechStar’s success story.
Jeff: Yes, absolutely. They’re probably the most famous, and probably most successful TechStar’s company. Fortunate for us, we were connected to not only the CEO and some of the founders, but people that could really help and talk through our product and their vision and how they could use us. We literally spent a lot of time with them specifically and just said, “What can we do to make you a customer,” essentially.
We did that, and then we’d do that with a couple other companies. Soon we found that this is a repeatable pattern. What SendGrid uses, that would be similar for, per se, for Volusion.
We found a nice little niche with medium sized, or, I guess, medium sized startups. Those companies are much larger, but companies that we get easy access to, we could talk to, they were ready to start growing, growing their customer base, and investing in growth, and we hit the sweet spot there. So we got a really good success with sort of [sass] companies, with companies that want to do recurring commissions.
Also, when I talk about what’s interesting about referrals, broadly, is that it also includes partnerships. I think that’s where we also fit really well with some of these companies, like SendGrid, who has developer partners across agencies, you know, across the globe, who are integrating SendGrid on behalf of a client. They want a way to. . . You know, they’ll make 10 percent or 15 percent of the transaction for the next 12 months, and that’s added revenue for them, as well.
Andrew: I see. OK. Alright. I can see how they’d be trusted. They’d go to their customer, say, “We’re going to include SendGrid for you.” They’d get paid when the customer pays for SendGrid.
What about content marketing? Did that work for you guys?
Jeff: Yeah, so we’ve invested heavily in content marketing. We try to blog as often as possible. For us, the value is just getting out there and becoming a [??] as much as possible in the space. We certainly invest heavily in that. We’ve done a lot of infographics. If you check on our blog, blog at Ambassador.com, there are dozens of infographics there, and they’re pretty sweet. They get a tone of reTweets and republishing, you know, Mashable and, I think, Forbes pick them up. It’s been really helpful for us to just get our name out there.
Referral marketing, if you want to call it that, is still a relatively young space. It’s pretty early. Most companies don’t have a referral program in place, so part of this is just getting the word out there and making sure that it’s on people’s radar and keep it top of mind.
Andrew: What’s the first big hit that you had from content marketing?
Jeff: Almost all of our big customers, especially until just recently, have been inbound. It’s probably almost like our company is basically a testament to content marketing and some other things that we’ve done online that have been really helpful, in terms of getting people to find us.
Andrew: For example?
Jeff: The one tip that I’ll say has been, by far, the most significant driver of leads is Quora.
Andrew: You answering questions on Quora?
Andrew: Or the whole team?
Jeff: Predominantly me, but also the team and just select questions that make sense, where people would be looking for us. That is, by far, the secret.
Andrew: I see.
Andrew: I saw you were hesitating a little bit about saying it, then you said, “It’s Quora, I can say it.”
Jeff: I got some looks in the office, that’s why.
Andrew: Did you?
Andrew: Good, good, that means we’re really opening up here. What about. . .
Jeff: We found people that also know that, because we have some people trailing behind us now. So it’s. . . The secret may be out for some people.
Andrew: When you say content marketing, it’s blogging that’s working for you. Blogging on your own site, or blogging on other people’s sites?
Jeff: Both. Blogging is getting the word out, getting information and links out, wherever we can, to be honest. First on your own site to build a reputation, I think, and then, if you make connections with companies and people, we can get placed in Casposs and another company sites and we do that.
Andrew: Who did that for you in the beginning, was it you or you hired people right from the start?
Jeff: Both. We have hired people in house and we also had hired companies to do that.
Andrew: What about tumblr, I see you out there doing a quick search, Is that been helpful?
Jeff: It’s all helpful, it’s all stretchable. You know the key as finding being smart about specific keywords, you know what am I search for and making sure that we can show up in the search, that’s in the end of the day where people find us.
Andrew: Here what I see is some of biggest phrases selling traffic to you, its socials listening tool, that’s big?
Jeff: So we have a big blog about that.
Andrew: I see, so people are clicking over to that, comment to your sit and then that’s how they become customers. Integration tool, you told April in the pre-interview that’s been helpful?
Jeff: Our strategy going for and insisting that we are doing [?] is again, this may be just my mindset being sort of the marketing side, proposed for by the technical side of the team. Was that about I can make my life easier, connecting multiple applications together and that much for a like way to use X offer or Y’s offer and so one of the things I have worked with for big focus on is integrating third-party applications, so do that.
I am going to actually, just release an integration for survey market yesterday and for people I don’t know the [SP] which is one of the most universal question. The question goes something like, How to scale [?] you to refer friend? Almost every company in the world asked a question over survey. If the survey market template actually ties into ambassador now, if you want to, so that your answer are nine or ten, which is strong yes, I could refer a friend, you can actually be created as an ambassador and automatically added to the program.
So we just did that yesterday, I was pretty excited about that. Those are the type of things that well I can add a value and assuming that most companies are asking whether someone will refer, because they ultimately want someone to refer and so we want to make that as easy as possible.
Andrew: The guys over at Snap Engage told me, If you get traffic from being a from partnering with other sites, from integrating with other sites that you also get the credibility that comes from having your logo on all those other sites. Do you remember what it was like to see your logo on the first partner site?
Jeff: Yes, it was funny , people say, your phrases were everywhere. So we do that a lot always I am happy to give you testimonial , first of all its a good thing to do, it’s nice it is, it adds value. People will check it out if someone is shopping at a particular site, they see you assuming their customer and it’s logical they would [?] and they make sense for you to check it out. So we do that, we are on a lot of sites once I would use of course but I always [?] I am happy to provide testimonial and you know, love to do it.
Andrew: I see and so again when I look over your traffics coming from, It’s coming from Mail Chimp, host gater where is the other one [?] these are all integrated partners in one way or the other.
Jeff: Yeah, exactly and actually [?] they actually stop their affiliate program but they actually used us for a while.
Andrew: I see, they were using you to manage their affiliate program?
Andrew: Got you, Okay. What about mail Chimp, that’s where people were going to you to integrate Mail Chimp and to integrate getambassador.com with Mail Chimp.
Andrew: Let’s see, what are the other problems with Zferral was that people didn’t know how to pronounce it right?
Jeff: Yeah, this is another funny story looking back it seems very obvious but Zferral is how to pronounce and its a Z so at any listing we were at last. With ambassador we are almost always first and its fantastic and you know, if you think about SEO where you pay the thousands of dollar to be first listing and tenth or off the page is almost in your worth list.
We are now one of the top links in any directory, it’s actually amazing to sort of realize that and to see that much better people can pronounce ambassador, it’s not spelled correctly but we are working on that and we have a lot of mis-spellings for, I think we are OK with that.
Andrew: What about the issue of the domain? I actually said getambassador.com by accident a moment ago, I started saying getambassador, and then I said no, its ambassador. You guys don’t want ambassador.com. Has that been an issue?
Jeff: It hasn’t, we actually rank higher. If you search the key ambassador, we rank ahead of ambassador.com.
Andrew: What ambassador.com is let’s take a look.
Jeff: It’s a place holder website called…
Andrew: Doesn’t that just piss you off, it’s just sitting there being wasted.
Jeff: I have spoken to him before.
Andrew: Whoever owns ambassador.com, if you want to do an interview. I am so curious about people who log on to website and not do anything with it and don’t want to sell it. I didn’t know the textor a louder, I guess I didn’t know that they had single founder entrepreneurs in the business, in their program. I thought that they wanted multiple founders.
Jeff: So I actually had a team, it was three of us who went to Textor’s. Even though I basically have been working on it. You know for a year, so year and half before we got Textor and then three of us worked and built first version of ambassador and then we now have a team of ten member a building and we called them B3, which is really ambassador sort of B2 and working on B3 now which is truly awesome. It is much more broad application to customer acquisition and not just referrals, so we are pretty excited about that. We are hoping to launch it end of the year hopefully.
Andrew: Are they co-founders I thought you said April, that this was one of the challenges for you being a single founder and having to deal so much of it by yourself.
Jeff: It is, even though [?] I think when you bring people on later, and if you call them a co-founder or not. It’s not the same structure as it would be when three guys have an idea together. It was a very different structure not only entity, but also the business relationship and there is stop, I think that’s how we stop. Business and Amex are difficult , especially startup. Younger people working 70, 80 hours a week for much less than probably you deserve, that’s tough. Those coming out of Textor’s, that was really a tough time.
Andrew: Alright, I think they I should do more interviews with Textor’s people because I am starting to see that when you are in the program you get tremendous amount of help. For you, It wasn’t just re-branding and re-visioning of the business but it’s also customers that just came in because you’re part of Textor’s.
Jeff: It was phenomenon. We got a ton of customers, a ton of connections. There was media connections, there was investor connections. I mean a huge value of myself personally I grew as person more so than any other four month chunk of my life. It was totally a life changing experience.
Andrew: Oh, I see Trada on your website they are Textors right?
Jeff: yeah, they are invested by some Textors.
[?] they are textors company, they are all of your customers.
Andrew: Alright, let me do a quick [SP] from Mixergy Premium. April asked you what your top recommendations are online and You said Mixergy is awesome. You have been listening, what do you get out of Mixergy I want to know what to improve. I want the audience to see that successful entrepreneurs are big Mixergy fans.
Jeff: Yeah, well I think to be honest. You need to, I mean entrepreneur need to almost learn how to become an entrepreneur. There is lot of things because its typically less structure than normal if you don’t learn from people that know more than you, you will probably forge up, you are on wrong up. For me as learning from people that have been much more successful and I am learning tips from people.
So Mixergy allows that to happen. I mean you can learn, take 20 minutes or an hour and watch an interview of someone who is done amazing and X, Y or whatever. Do one thing that I think is really awesome is that more than knowing to share mentor others. I try to do that on my own. It’s one of the reasons, the key, the value I got from Textors is I had those types of people that mentored me and gave me advice but get on phone, it wasn’t access necessarily to video but essentially you can mentor hundreds of thousands of people through your videos and a lot of times if you e-mail. 90 percent of people they do videos or do interviews with will answer their e-mails. Someone says hey, I saw this thing in your Mixergy.
Andrew: Have you done that?
Jeff: Even getting someone like no, I am from Epsilon [?]. It’s called email, that minute you wrote me back.
Andrew: You said, “Hey, I saw you on Mixergy.”
Jeff: I don’t remember if I saw it on Mixergy or not, I’m not sure. I do know this is a cool email, same with me hailing some other people. It’s just entrepreneurs are usually very available and will answer email. If you ask them they’ll probably give you a few minutes, just be reasonable about it.
Andrew: I’m shocked by that too. I don’t know how you find the time; you’re running your company. I had Jessica Mah over for dinner the other day. The dinner started, I think at 7:00. Someone asked her about what her day is she said, “Well today I had to get up and get to the office by 7:00 a.m. because I was leaving early.” I said, “7:00 is early for dinner? There are going to be work people here you can kind of count this as work.” No, she is up early. I don’t know how, if she wanted to be a mentor, where the hell is she going to find the time? Where are you going to find the time?
Jeff: I think it’s tough and I don’t do it as much now. I usually tell people if they want to meet me at 7:00 a.m., or they come to me instead of me going to them. If they can fit it in sometimes when I’m in the car, I’ll have a call. That’s something we can do in the motor city when we’re driving I multitask. I can do that.
Andrew: You know what? I’ve been the beneficiary of that good will over the years. Obviously, through Mixergy and also in private. In this tech startup community, entrepreneurs are much more accessible I think than they are in any other part of the world. They know their stuff and they are much more generous than I could have imagined.
Let me finish this part of the interview up by saying please, guys, if you want more than what we’re doing in this interview, if you want the backlog of interviews including the founder. Let me give you a recommendation for a follow-up. Warren Jolly, a guy who started a community of poker players. He said, “I’m not going to do poker online. It’s not legal necessarily.” It’s not legal at all actually, but if he created a community, he was able to build up a $400,000 a year business. We talked about how he did it in his interview.
There’s a course by a guy named Geordie Wardman, who talked about how to not do the fat startup, but how to start lean, and actually sell before you even create. I recommend that course by Geordie Wardman.
Finally, one other recommendation as a follow-up, if you’re a Mixergy premium member Eric Reese, before he was huge, before he wrote his book, back when he wasn’t such a natural that he admitted to me recently that he was nervous when he did the interview on Mixergy. His first interview is one of my best because he is so good at explaining the lean startup methodology.
He is so good at coming up with examples, illustrate it, and frankly, he’s good at showing where he uses it. There was one moment in the interview where I said, “Well, did you use this startup methodology on this thing?” He said, “No, I didn’t have the guts to, but I should have.” He talks about that. His openness about that and admission I think is what to me in my mind has always added a lot of credibility.
I’ve known him for years. I trust him for years and his first interview is one of my proudest, so go check out Eric Reese, and all those other interviews and courses I just suggested.
If you’re a Mixergy premium member, you watch all those videos you can get access to everything. If you’re not we have a whole lot of transcripts that are available to you free. Just go to Mixergy, use the search box, and find the ones that I’ve recommended or any number of over 1,000 now interviews and courses on Mixergy.
Here is the final question. April asked you, I’m looking here in my notes. What books you recommend? Here’s the one book that you recommended. It’s a Sass book called “Predictable Revenue.” Why’d you recommend that one? This is by Aaron Ross.
Jeff: There’s a ton of books and Eric’s book, and there’s a book by Ben Yoskovitz “Lean Analytics.” I love the lean methodology, so those are all great. If you’re in sales, “Predictable Revenue” is one of those books for that . . . I should mention obviously, all Steve Blanks books too. Being in the Sass business . . .
Andrew: Again we’re not saying all the other books stink, but I was surprised that this was the book that you recommended, and by the way right now I’m on Amazon, and I’m buying the book right now and sending it to my Kindle Paperwhite.
Jeff: Definitely, you should. For me it was focusing on, thinking about sales in an interesting way, how to scale sales. I think a lot of starting a company is getting to the point people call, “product market fit” this is something people want. Then taking it from okay, we have a couple customers to hundreds or thousands is a whole different challenge. It’s almost learning a different company at that point.
For me that was something that I really needed to think about and learn about. I think “Predictable Revenue” was a book I could read. I think I read it in a day, and I have it by my desk actually here. It was one of those things, combination of easy to read, but logical and made sense and gave some really solid take a ways on how to scale business operations, because at the end of the day in order to grow you need to sell more typically.
Andrew: “Predictable Revenue” and frankly the Kindle version is only 99 cents. I didn’t realize that. The paperback is 11 bucks. 99 cents for a book, “Wow.”
Jeff: It’s amazing.
Andrew: There it is. The website is getambassador.com, and if someone wants to email you and say thank you for this interview, and maybe even get a chance to talk to you while you’re driving in Detroit to get to work. What’s the best way for them to contact you?
Jeff: They can email me at Jeff@GetAmbassador.com and I will most likely respond, as long as it’s reasonable, for sure.
Andrew: Please guys, if you’re doing this, whether it’s with Jeff or anyone else. Don’t start off by asking for stuff. Don’t start off with long emails. You guys are a smart audience. I don’t need to teach this audience how to start connecting with people. I just remind you what you already know.
Go shorter because people who you want to meet are busy, and you want to help them out. Start by offering something, or saying thanks. Then maybe later on you can hit them up for advice, mentorship, or a phone call. Anyway, I’m going to start off Jeff, by doing it myself before I ask everyone else to do it. I’m going to say thank you so much for doing this interview.
Jeff: Sure. Thank you. It was awesome, a lot of fun and I really appreciate you having me.
Andrew: Thanks. Great to have you here. It’s good to know you. Thank you all for being a part of it. Bye guys.