Hey, before we get started, have you tried FreshBooks yet? You know that millions of entrepreneurs use and love FreshBooks, but have you tried it yourself? Do you yet know how much faster you could collect if you used FreshBooks? Do your customers know how much more professional you’ll look if you use FreshBooks? Try it – it’ll take a moment, and I promise you’re going to enjoy FreshBooks. Millions of other people agree with me, so it’s not just me telling you that. And FreshBooks wants to make sure that my ads are working, so here’s what they’re doing. If you use the name “Mixergy” as your referral when you sign up for an account and you – well, actually, if you just do that, there’s no and . . . if you do that they’re going to pick one new person every week and give them a birthday cake. It’s their way of saying thank you to you, and also their way of saying hey Andrew, are these ads really working? So give it a shot – test them the way that they’re testing me – by trying out FreshBooks for yourself and seeing on your company how much faster you could collect your, and how much easier sending invoices could be. FreshBooks.com.
Also, you know, I got an e-mail recently from a well-known, respected angel investor who said, “Andrew, I kept seeing these spots for Scott Edward Walker. Should I really e-mail him? Should I really talk to him?” And I said, “Yes, absolutely.” How do I know? Because I’ve known Scott Edward Walker for years. I’ve worked with him, he’s been great, but more importantly I see the e-mails coming back from people who are telling me about their positive experiences using Scott Edward Walker, the entrepreneur – the lawyer that entrepreneurs love, especially tech startups! So give him a call. Walker Corporate Law if you want to find more information.
And finally, if a friend of mine came to me and said, “Andrew, I want to sell something online,” you know what I would do? I would send them to Shopify.com. Why? Because Shopify.com is so easy to set up they’ll never have to bug me with tech support issues. And because they’re going to be so well-represented online with this beautiful site that actually increases sales, that it’s just going to do wonders for my reputation to be the person who inspired that and led them to it. All that to say if you or anyone else needs to start a store online, will you please check out Shopify.com? You’re going to be grateful. You’re going to thank me and more importantly, the people whose stores get set up because of your recommendation are going to thank you! Shopify.com. Here’s the program.
Andrew: Hey everyone, I’m Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Want to learn how to take a flailing idea and turn it around until it becomes a profitable business? Joining me today is Jerome Breche. He is the co-founder of SnapEngage. In 2008, he launched an online video discussion system that – well, the video discussion didn’t go very far – then he and his team adjusted and adjusted and adjusted, until they ended up with a profitable business model, the one that they have today.
My goal for this interview is to get you two things: I’m going to show you how you can co-create your product, a hit product, with your customers, and we’ll do that based on Jerome’s experience. And my second big goal for this interview is to find out how you can get customers, because Jerome’s been doing a really good job of it, and I want to find out how he did it.
SnapEngage is a live chat application that you add to your website so you can talk to your customers while they’re actually on your site browsing around. Jerome, welcome to Mixergy.
Jerome: Hi Andrew. Thank you for having me around.
Andrew: Cool. Profitable company, how profitable?
Jerome: Sorry, we are a private company so I’m sorry Andrew, but I’m not going to share this information. I can tell you we are profitable. We are growing the team so it’s going pretty well. But yeah, I don’t think there is any value for me to share the revenue with you at this point.
Andrew: Absolutely. Actually I’m smiling because Jerome and I talked about this, and I know that it doesn’t make sense for your business to talk about it, and we talked over and over and said Jerome, then don’t say it – even if I ask you, push back.
I happen to know what the revenues are. It’s a really good success story, and a few years from now you’ll actually get deep into the details of the revenues, but for now it just doesn’t make any sense. Congratulations on the success, and we’ll leave it there.
Jerome: Thank you.
Andrew: Let’s talk about the product itself and understand it before we understand how you got to it and how you got customers for it. So I understand products better through examples. Give me a specific example of how someone might use SnapEngage.
Jerome: Okay. So one example, for example, I think AppSumo. You got Noah Kagan, the host, a little while ago. He’s using SnapEngage on his website, and he’s using a proactive chat capability, where the system automatically pops up a message on his website, but the system uses the name of an agent who is currently online.
So if Noah happened to be online, they’re going to get a message from Noah, AppSumo, saying, “Hey, hi, I’m not a robot. Can I help you in any way?” And when people see this, with his picture and his message, most likely they’re going to respond. And then when they respond to his message we notify Noah directly in his instant messenger. These are connected to [inaudible] off Skype, and from there he can start a conversation and engage with his website visitors, so it’s a good way to engage with the visitors and turn them into customers ultimately.
Andrew: All right. I’ve actually been on Noah’s site and it’s kind of cool when he pops up and says, “I’m a real human being. Do you want to chat.” It’s fun, but is it effective for Noah? I know that it’s effective for you because I imagine that he’s paying you monthly, the way others do. But is it effective for Noah? Is it effective for other customers?
Jerome: Yes. If you look at our testimonials you’ll see customers saying that it improved their conversion rate by 60 percent. In the first three weeks of using the product they sold $300K of product. In the case of Noah specifically, he knew it was effective, but he didn’t get the real [inaudible]. A few weeks ago he was thinking of hiring somebody full time to be on Live Chat, but to be able to measure what was the benefit of using SnapEngage Live Chat, he just turned it off for a little while, and he saw his sales and subscriptions going down drastically.
So it’s kind of a [inaudible] example, but it proved that the product is really adding to his sales, and he quickly turned it back on. Now he’s adding somebody full time on it.
Andrew: He’s hiring someone full time to just be there and the idea is, as soon as you land on his site, if you’re there for about I think it’s 30 seconds, a chat box pops up and there’s a real human being to talk to. I’ve talked to him about it, and he says, ‘Imagine if you were actually talking to every one of your customers. If you’re a good salesman, you could close just about every sale or you could at least engage people and build a relationship that might lead to a sale in the future.’ And compared to the revenues that he has on his site, or compared to the margins that most of us have on our products, the price of hiring a live person to just sit there is tiny, right? I mean, we’re talking about a live person might cost you 12, 20 bucks to have on there. If he closes one sale then you’re profitable.
Jerome: Yeah, and this person doesn’t have to do this only. Because we integrate with your existing IM’s, this person could actually get some real work done. And then they get notified only if somebody wants to chat with them, and that’s why they [inaudible].
Andrew: I’m going to add that note to my site, because I actually use SnapEngage and I know that it’s helped me, but I want to know, if we have time later, I want to know how to make it even more effective and how to pass the work on to somebody else so that other person knows how to interact properly. I don’t want to just say, “These are what my products are, now go chat with people,” but give them a little more guidance. If we have time we’ll add that how-to section.
You’re bootstrapped, or you got investment? I keep asking these questions like I don’t know the answer, but I don’t know how to have you fill me in on the story without kind of asking questions that I know the answer too. So we’ll accept that some of these answers I know, but I’ll ask anyway. Are you self-funded? What’s the funding?
Jerome: We are mostly self-funded.
Andrew: Right.
Jerome: Our company was selected for TechStars in 2009 so we got a little bit of see funding from TechStars but I still consider us as being bootstrapped.
Andrew: Still bootstrapped. How much money did you get from them?
Jerome: I think it’s public. It’s less than $20,000 because we are [inaudible] at the time.
Andrew: And you didn’t take any more money after that?
Jerome: We didn’t take any more money, no. I think our funding, a little bit of it comes from our credit cards, so we can say thanks to American Express, for example.
Andrew: How much money did you take on your credit cards to launch the business?
Jerome: No, it was more personal. At the beginning we were not making any money, to make sure we . . .
Andrew: Oh, to live day to day, to pay for the food and rent.
Jerome: To live day to day, yeah.
Andrew: How much money did you take out at your height? What’s the most you had out?
Jerome: Oh, probably in the 30K range.
Andrew: 30K?
Jerome: Yep.
Andrew: Did you pay it all off yet?
Jerome: Yep.
Andrew: Okay, all right. Let’s find out how we got here and learn about how to come up with the right product and get the right customers for it. So I mentioned that you launched with a video discussion system, that’s when you took it in to TechStars?
Jerome: That’s what we took in to TechStars. The good news with TechStars, that they really select the team, and not necessarily the idea. Maybe to give you a little bit of background of this idea – I don’t want to spend too much time on it – but I worked for a very large Fortune 500 company with my co-founder, and we are managing remotes of 12 development teams in India, Brazil, China. It was very difficult to communicate with them, and that’s how we got the idea to actually use video as a way to better collaborate and get the team to know each other. Because of the time difference it was difficult to do it in real time using Skype, so we came up with a video discussion solution with whiteboarding, screen capture, and all the good stuff and that’s what we applied to TechStars with.
David and the TechStars team selected us, I think more for the team than the idea. This was great. We are pretty proud of this [inaudible]. In 2009 when we applied about 500 companies applied and 10 were selected for TechStars in Boulder, so this was a great expanse, we learned a lot. Unfortunately for us I think TechStars was feedback overload, so we kept focusing on our initial idea on the video discussion.
Andrew: What do you mean by feedback overload?
Jerome: It’s a great program. We interact with a lot of mentors who introduce us to customers so we get people using our product initially. The problem is that those mentors were all giving us feedback in different directions.
Andrew: Can you give me an idea of some of the feedback you were getting back then?
Jerome: Yes, that we should use the product that we had at the time for medical collaboration. Trying to sell this to IT people, which was our initial target, was a bad idea because in general geeks don’t like video too much. And we’ve learned this, this is true. We learned it the hard way. Those are some of the feedback, so it was like going in a bunch of different directions.
Andrew: Okay.
Jerome: I think it was unconscious, but because of too much feedback we decided to just keep going in the same direction. We’ve made a small adjustment, that instead of targeting our remote development team, we started targeting our sales team, so sales and support team, really, to give feedback to the customers. And this was very good, because some people actually started using our product. The feedback was: Hey, this is great, I love it! Unfortunately we discovered that after a few weeks of using it they would always revert back to e-mail.
Andrew: To where? To using e-mail?
Jerome: To using e-mail for asynchronous communication.
Andrew: So the idea was that if I wanted to communicate I’d do a quick video, I’d record it, I’d send it to you, you’d watch my video and then you’d send it back to me. Asynchronous meaning kind of like e-mail, not-in-real-time video chat. And it would be better for me to do that because my voice and my expressions would communicate so much more than just writing. The problem with that, and you and I talked about that how [??] must have experienced it too. People don’t want to sit through watching video and also recording it’s a little awkward. Am I understanding it right?
Jerome: Exactly, yes.
Andrew: Okay.
Jerome: But this was still very positive because we got people to actually use it, giving us feedback. The most important feedback we received was: We love your stuff, but could you make it where I could give this capability to my customer, so from my website they could send me a message? And by the way, I don’t really need the video and the whiteboard, I just want the screen capture you have.
So we had a screen capture capability which was a very small feature in the software, but they wanted people to be able to send a message from the website, just leaving their e-mail address, a quick message and a screen capture, and this was it.
Andrew: I see, so they would know exactly what the user was seeing at the time that he had the trouble.
Jerome: Yes.
Andrew: I get that. Okay. So let me see . . .
Jerome: This was after TechStars, so September ’09.
Andrew: Before we go on from there, what do you think TechStars saw in you that made them say yeah, we’ll spend our money, our credibility and time on these guys?
Jerome: Hmm, I would probably have to ask David Cohen and the team. I’m not sure. I think we were really motivated to get it done and maybe he sees some of the advice to the other companies were going to apply for an incubator. We were on the product, communicating with David daily. As he gave us feedback about the product we would just implement it, so prove that we can iterate quickly. And the other thing is showing that we’re all motivated. We were waiting for invitation to TechStars for a Day here in Boulder. We didn’t wait for it, we just booked our ticket and sent David an e-mail saying, “Hey David, we booked our ticket. Looking forward to seeing you next week in Boulder.”
Andrew: That’s amazing. At that point did he already interview you?
Jerome: Yeah, we got some interviews and some exchanges already at this point.
Andrew: So you just didn’t get the okay from him, but you assumed he was going to say yes based on your conversations with him?
Jerome: No, we didn’t know, we just went for it. We said we want to get to this event – and this was one of the selection steps – so we just went for it, and his answer was, “Okay, you’re invited.’
Andrew: Because you booked the trip it helped.
Jerome: Yeah, so maybe a small advice for some of the . . .
Andrew: Where are you from by the way? Where’s the accent from?
Jerome: Oh yes, so sorry. The strong accent is from France initially.
Andrew: Okay.
Jerome: I lived in Alabama for 9 years, but it’s too late for me. I’m too old to lose my accent any more.
Andrew: Alabama for 9 years?
Jerome: Yep.
Andrew: What were you doing in Alabama?
Jerome: I worked for a company which was at that time called SCI, which stands for Space Craft Incorporated.
Andrew: Okay.
Jerome: There is a lot of NASA-related industry in Huntsville, Alabama, which is a good place to live.
Andrew: Go figure. So you got the product. People are telling you that they want this one thing. Was the product being used on websites at the time?
Jerome: No it was not, it was being used as a stand-alone discussion solution.
Andrew: Okay. And so when they were asking you for the screen shots, how were they using it? Can you give me an example of how someone was using it when they said, “No, I like the screen shots but I don’t want the video?” What were they doing with it?
Jerome: [inaudible] Company, for example, was using it for customer service, helping customers to install devices like routers in their house. They would record a video and they could show the device and say, ‘then take the cable and plug it here,’ these kinds of things.
Andrew: Oh, I get it. You know what? I actually do that right now for people.
Jerome: Yep.
Andrew: I will show my screen and I’ll do a video of myself and in one minute I could explain it to them in a much easier way than if I typed it out. OK, I see what they were doing.
Jerome: But to get back to the feedback, we were actually in San Francisco looking for investors for our initial idea, our initial product, really taking advantage of the momentum created by TechStars to get investment. The timing was wrong for us because we didn’t have any paying customers. We had customers who said maybe we will pay you, but no real commitment. So one weekend we just decided, okay, let’s close this. Let’s listen to the feedback, develop what they want. We actually developed it, called it SnapABug initially, put it online and a week later we already had paying customers.
Andrew: Okay, I’ve got to pause right there again. You’re going through a system, a process at TechStars where a lot of your peers are getting funded and you’re not getting funded. Why don’t you just give up at that point and go back to Alabama and, you know, say maybe you’ll start a new company later, in the future?
Jerome: Yeah, it was a motivation to make it on our own. So I think it’s wanting to solve a problem, really listening to customers, getting feedback from them about what they want and actually delivering this solution, and getting them to thank you because you built exactly what they wanted. This is pretty rewarding.
Andrew: I see. You just wanted that high that comes from people loving your product enough that they would integrate it into their lives and pay you for it.
Jerome: Yep, that’s the idea.
Andrew: Okay. All right, so you finally decide you’re going to build SnapABug. How much time does that take you to build?
Jerome: First version, we built it in a weekend.
Andrew: In a weekend?
Jerome: In a weekend in a coffee shop in San Francisco, actually.
Andrew: And you got paying customers for it, you said, within a week. How’d you get those customers?
Jerome: They were initial users of the other solution who gave us the feedback that they wanted this solution. But very quickly, actually, they told others about it and that’s how we got additional customers. I think that . . .
Andrew: Okay. Did you get any customers at the previous version when you were doing video?
Jerome: Yeah, we got about 4,000 registered users.
Andrew: Were they paying?
Jerome: None of them were paying.
Andrew: So now paying customer at all, and suddenly in one weekend you build this new company and you get paying customers right away?
Jerome: Yep. Not much, the first ones were paying $7.00 a month.
Andrew: How’d you come up with the price?
Jerome: The pricing, it’s a science, it’s an art, so we just came up with a low price initially so we can still adjust later as we build features. I think we were under-pricing it, but this was kind of our vision of what it took to build a product and the value it was providing. It was very simply initially, and the feedback we were getting was, “This is not a product, it’s just a feature.”
Andrew: Interesting. And so, it’s not a product, it’s a feature – why didn’t you at that point stop? How did you know that it would become a product and a business if people were all giving you feedback saying, ‘it’s a little too small to actually be a business’?
Jerome: Yeah, and we were confident that we could build this feature into much more than just a feature but make it a product. And this happened actually fairly quickly, based again on customer feedback. They told us what they wanted the tool to do, how to improve it. And one feedback that was coming fairly often is that ‘the solution was good to get messages offline,’ but they wanted to be able to help their customers faster when they were online, so they started asking us for live chat.
Andrew: I see. All right, that makes sense. You’re first giving people just snapshots of their web pages, and they’re saying, ‘we want to actually chat with them while they’re giving us this snapshot.’
Jerome: Exactly. Give them an answer quickly, because the idea is to reduce the support cycle, to get the customer in and out very quickly and then increase customer satisfaction.
Andrew: All right. You and I did so much prep for this interview, that’s why I know some of these answers already. One thing that you told me over and over is that, ‘we don’t come up with our own product ideas, our customers tell it to us.’ And I’m hearing you say that right now, and I’m thinking as you’re it of David Heinemeier Hansson, who said – hope I’m pronouncing his name right . . .
Jerome: Mm-hmm.
Andrew: . . . that’s a whole lot of name to pronounce – who said, ‘You have to know your customers! How could you be in a business where you don’t know your customers well enough to know what they want?’
And here you’re leaving everything up to your customers, so let me sharpen this question by saying how do you keep your customers from driving you crazy? They’re going to demand every fricking thing under the sun. How do you know what to build and what not to?
Jerome: Yes, they do. We get tons of feedback. I think the main difference compared to our initial product which failed is that we were just following our vision, just ignoring the feedback. We would say, “Okay, this is what it should do,” and we were just building it.
We still have a vision, so we still know where we are going, where we want the product to get, except now we don’t implement our vision. When we have a great idea of what we want to do next we put it on paper somewhere, and we wait for customers to actually ask for it before we build it.
Andrew: Give me an idea that you put on paper that you waited for customers to tell you about, and then you built.
Jerome: Integrations. Early on we integrated with systems like Zendesk and Faceforce [SP]. We had a long list of integrations we wanted to do but we didn’t jump on it and build them directly, we waited to get enough requests to figure out which integrations were really interesting to build.
Andrew: Oh, I see, so now your system works with Highrise, with Batchbook, FogBugz, Basecamp and so on.
Jerome: Yep.
Andrew: You didn’t know which ones to start off with, in fact you weren’t willing to start off with any of them, you just knew you wanted to integrate, and you waited for people to tell you and demand which of those to build.
Jerome: Yes. So the angle of our vision is that we don’t want our customers to have to change their [inaudible], so that’s why we want to be able to just integrate with whatever solutions they use today. Except there are tons of solutions out there, so to decide which one to build, we waited for the customers to ask for it.
Andrew: All right. I like talking video. I just told you I record videos for some of my customers when they’re having issues. What if I e-mail you and say hey Jerome, build me video into this? I want to be able to talk to people in real time – that’s a nutty thing to ask! But how do you know whether to add it because Andrew asked for it, or to ignore it because it just doesn’t make sense? How do you know what’s right and what’s not?
Jerome: We don’t know always. We make mistakes. I’m sure we build features that are not really used, or somebody was really pushing for it and said it will be useful, but at the same time we jackpot on a lot of other features, like the live chat and the integrations. But video is in the list of features, so I’ll add your name to the list and let you know once we build it.
Andrew: I see, okay. But then how do you know which one of the items on the list to go for? Is there a system for it? Is it based on how much time it’ll take you to build it? Is it based on who asks?
Jerome: It’s a combination of all. I think we don’t have a very set process for this, but it’s mostly based on the frequency of the request. If we keep hearing the same thing over and over and over, and even if we’re not convinced it’s a good idea, it’s probably a good idea. If 100 people ask for it, we should probably build it.
Andrew: Okay.
Jerome: So, it’s a little bit of this, and then the size of the customer can have an impact on this, and then how difficult it is to build.
Andrew: All right. So you told us how you came up with the idea to take a snapshot of people’s pages, you told us how you came up with live chat. What’s the next thing that they asked for?
Jerome: Integrations and more in-depth features. In the live chat, for example, you can now do it from your Google Talk or Skype. Again, our idea was to integrate with your existing workflow, so why install another live chat application? You already have an IM that you are using today to chat with your friends and your colleagues, so you might as well be able to chat from this IM directly. And then we started adding short-cut capabilities. The co-browsing feature is actually a great one which was pushed by some of our e-commerce customers. They wanted to directly send the customer to the right page for the product. So let’s say you want to buy a mattress. You’re asking the live agent for a recommendation and they want to show you a mattress that’s interesting for you, so they can just redirect you to the right page on the website for this product.
Andrew: And that’s within the system right now?
Jerome: It is within the system, absolutely.
Andrew: Okay. I heard that Olark [SP], one of your competitors, also applied to TechStars and was accepted. I don’t know if they were or they weren’t, but if they applied they probably explained their idea to TechStars. TechStars would have known about it. Did TechStars come back to you and say, ‘Here’s an idea that we saw someone coming up with’?
Jerome: Actually never, no. So the live chat or Olark never came up in the discussion with TechStars, and I don’t think they would do it because the information shared with those incubators – and this is probably true for TechStars, [inaudible] and others are [inaudible].
Andrew: They may not hand you a document and say, “Look, this is what they told us,” but once the knowledge is in their head and they know this is a good idea because they’ve seen people come up with it. How do they, could they influence you? Was there any influence? I’ll ask it this way. What was TechStars’ input as you were coming through the process, as you were building it up?
Jerome: Feedback about the product, how to make it better, but mostly connections – introducing us to people who they think are going to make a difference for a company or a product.
Andrew: Did they help shape the product at all? How did they help shape it?
Jerome: No, maybe just at the individual feature level, not too much on the [??] level, as it’s really our decision when you are in those programs within the incubator to build the product we want.
Andrew: You said they introduce you to people who’d be helpful. Who are some of the people they introduced you to?
Jerome: Yes, so we work a lot with the team in [inaudible] from Tendril who help us a lot, knowing the business. It’s a local company here in [inaudible] but very successful. And then we work with Chris Moody, who is still one of our mentors today. For example, I still meet with Chris very often, and he’s giving us feedback on what is the next step for the business.
Andrew: Is he an investor in the business?
Jerome: He’s not an investor in the business, no.
Andrew: Does he have shares in the business?
Jerome: No.
Andrew: Wow. You know, here’s a surprising thing for me. You and I talked and I said you’ve got to give your revenues, or I think you should give your revenues, it’ll make for a much more powerful interview. And you said no, and then you said, let me think about it.
And you came back to me, and you didn’t just say I thought about it – this is the shocking part for me – you said, “I talked with David Cohen. David and I talked and it doesn’t make sense for us.” And in that moment I said, “Holy crap, David has dozens of new startups that are now under his protection, that he has to help out. He has hundreds of new startups to consider for future TechStars programs. He has dozens if not hundreds, hundreds of people who have gone through the program, and he’s taking a phone call from Jerome, not about product development, but about what he should do, whether or not to do an interview.”
This blew my mind, and based on that I would tell any entrepreneur who wanted to go work with TechStars to go jump on that. I’m wondering what else do you talk to him about? This is phenomenal. Blow my mind some more. What else do you get to talk to David Cohen about?
Jerome: But first, I think this is the value of the program, is the amount of feedback you are able to get during the program but even after the program. Yeah, David – I don’t know how he does it. He’s a super-hero to manage all those companies at the same time. But we are getting a lot of feedback from him, but also other members of the program like Brad Feld for example, but also other TechStars companies.
Andrew: How much time do you spend on the time with David Cohen, the guy who runs TechStars?
Jerome: I try not to bug him too much, so mostly through e-mail.
Andrew: Through e-mail, you just send him an e-mail, say this is my issue. He gives you some feedback right there.
Jerome: Yep.
Andrew: Okay. So this conversation happened via e-mail and not on the phone?
Jerome: Yeah, this one was over e-mail. It was quick.
Andrew: You know what? I actually told that story to somebody. I said you’re not going to believe this – Jerome talks to David Cohen. He gets feedback on this little thing, David Cohen comes right back to him. And the guy goes to me, “Andrew, that’s nothing. Get this – I went through the program.” I forget if he was turned down or not. But he said, “When you go through the program, they tell you whether you’re in or not, you’re already a TechStars company, so I’ll take him up on that.” He said, “I get feedback – as long as I’m a TechStars company I can get feedback.’ I called up David Cohen with an issue. David Cohen immediately responded. It was amazing. And then I called up David Tisch. I said, “David I need help with this thing,” and David Tisch immediately introduced me to the right person.
And he says to me, “At that moment I said my goodness, what the hell. That’s phenomenal.”
Jerome: That’s the beauty of the program. That’s why I would recommend it to any startup or any new company.
Andrew: I think one of the first questions I had for you was, you got $18,000 – I forget what the number was that you told me, you said it was like $18,000 from TechStars. I said why don’t you just go and put it on your credit card? What do you need them for? You don’t need that kind of money to give a share of your business for. You said, ‘No, them will take my calls. They will help shape my product.’
All right. So they help shape your product, talking to customers helps shape your product.
Jerome: Mm-hmm.
Andrew: Anything else, any other input, any other way that you were able to take this flailing business and make it into one that actually was profitable?
Jerome: Well, it took a little bit of time. We launched this in September of ’09, took about six months to get profitable, pay off our credit card debt, but since then it’s been growing very quickly.
I think the key is using our own product, so we are on live chat. Twenty hours out of 24 there is somebody on live chat, and that’s how we get feedback about the product, but that’s how we get customers as well.
Andrew: I see, all right. Let me look at my notes and see if there’s anything else that I want to dig into on this.
You know what? It seems very basic, and I could imagine though, if anyone is listening to us and is having trouble, that they’d be thinking, “It seems a little too simple. What? I just go to my customers and I say what should I build next? And they tell me this one little feature that they’re demanding and I make it into a whole product and then I listen to them over and over and they help me improve it and now I have a successful business? That’s how I create a successful business out of a failed business?” Could that really be it?
Jerome: For us that’s been the key. It’s really important, getting this feedback from customers. Yes, it’s very simple but that’s how we built our product, and now we are growing steadily, growing the team as well. Yeah, I think this is the key. There are other things that we’ve done right, I think, that have helped us get to this stage.
Andrew: Give me one of them.
Jerome: Integrations we talked about early on. Finding new customers, yeah, could be difficult but by integrating with other companies – you mentioned Highrise, Batchbook, Basecamp, Faceforce, Zendesk – those companies already have a set of customers, and by integrating with their solution it was easier to get some of their customers on board to use our solution. So as far as this was key, the other thing we’ve done is those companies were kind enough to provide open API so we could integrate with them, so we are doing the same thing. We are providing open API so if somebody else, smaller or larger company, wants to integrate with our solution, they can do it easily. So I think this integration has been key also in our growth.
Andrew: I see. Actually when I checked out Highrise in preparation for my interview wit David, who created it, I saw your logo on their site.
Jerome: Yep.
Andrew: So I clicked over from his site to your site and then I started exploring and maybe was chatting with one of your people. So I can see how the process is good for advertising. How does it work? What kind of integration did you build in, say, the beginning with Zendesk, the first company you integrated with?
Jerome: So Zendesk, yes, was the first one. Went to their website, we looked at the API documentation, we spent the time to build this integration and once it was done we told them. And they wanted to learn more about it and they were very supportive in advertising this solution to their customers.
Andrew: But what is it? What kind of functionality did you give through this integration?
Jerome: Yes, so for our integration, what you get at the beginning of the live chat, we do a look-up in your CRM or your help desk, so you know a little bit more about the user. If it’s for sales, if this person is a lead, what is their name? This is actually pretty important talking to them: e-mail address, what kind of contact you had with them in the past. If it’s support you know which trouble ticket is currently open for this person. And then at the end of the chat we send the chat transcript into the CRM of the help desk, so this way our customers can keep all of their conversations in one place in the system that they’re using today.
Andrew: I see. How do you connect? How do you know who the person is?
Jerome: Based on the e-mail address.
Andrew: Okay. So to initiate a chat the person is supposed to put in his e-mail address. They put in the e-mail address, they initiate the chat, you utilize that e-mail address to look them up in the contact management system and you bring their data into the chat for the operator.
Jerome: Yeah, exactly, that’s the idea.
Andrew: Okay. What was the first part of it? When you first integrated with Zendesk, what’s the first functionality that you added?
Jerome: We integrated with Zendesk even before the live chat, so initially it was to push the message and the screen capture into Zendesk.
Andrew: Got you. Just to save it in their account.
Jerome: Yeah, exactly.
Andrew: So next time they talked to the person they’d have that information?
Jerome: Yep.
Andrew: Is that where you got the bulk of your users at first, through those kinds of integrations?
Jerome: No, not the bulk. I think it’s less than 50 percent of our users who are coming from an integration, but it’s a good way to get the product known and respected because it already works with solutions that are used today.
Andrew: Okay.
Jerome: The bulk of our users are coming from word-of-mouth.
Andrew: From word-of-mouth?
Jerome: Yes, so to this day we’ve done zero advertising. Our focus is in the product and keeping our customer happy. So being able to help them get set up, providing awesome customer support, and making sure they’re happy – they love the solution, so if they love it they’re going to recommend it.
Andrew: If they love it they’re going to recommend it – I get that, but how do you encourage it? How do you make sure that happens? Do you have an affiliate program?
Jerome: Well you know, we do, but it’s not a big part of how we get new customers. If people like a solution, if it works well for them, if it makes them money because it’s a sales tool, they’re just going to recommend it. We’ve added things where you can Tweet automatically that, “I love it. Give SnapEngage a try. I use it, I love it.” This works a little bit but it’s unique, you cannot really force people to recommend a solution. The goal is just making sure they are happy: they love the solution, they love the team and they’re going to recommended the product.
Andrew: How does being a product that people pay for on a recurring basis impact your bottom line?
Jerome: It’s our income, so it definitely impacts our bottom line.
Andrew: As opposed to selling it one time and having people integrate it over, like, letting people pay one time and use it as long as that version is out? What I mean is, give me some insight into the recurring payment model.
Jerome: What’s interesting with the recurring payment model is that the person signs up, but then there is a life cycle. If they like the product they’re going to use it more, or if their company grows they’re going to use it more, and then eventually they’re going to upgrade to a higher plan, or they need new capabilities, so they’re going to upgrade. I think that’s one of the benefits of the recurring payment model, is that there is always a potential for up sell for the customer.
Andrew: All right. And do you see that month to month, revenue just grows, grows, grows because . . .
Jerome: Absolutely, yeah. One percentage I can share with you is I can tell you it’s a two-digit growth monthly.
Andrew: Okay. Let’s see, what else do I want to know about the way you, I’m curious more about – here’s the thing. Here’s why word-of-mouth is so troubling for me. Because everything is great online, and I’m talking about everything: I get a new app on my iPhone, I talk about it. I get a new pencil, I talk about it. I get a new microphone, I talk about it. We’re all talking about so many different things that its’ really a lot of noise for our friends to try to figure out what makes sense for them and what doesn’t, which is why a lot of businesses hope – they know they’re going to get some word-of-mouth, but it’s not that dependable to build on. There’s usually something built in – I’m trying to see what else there is here that helps you get customers.
Jerome: Yeah, there is probably a way to automate this sort of [inaudible] for us, now it’s been focusing on the product and making sure it works, and we get good recommendations. I think what makes a difference, and maybe this was one of our [inaudible] at some point, when we switched from SnapABug, which was primarily for support, to SnapEngage which is for sales, if you’re prorating a sales tool, you’re going to help people generate more revenue – your customers – and this is much easier to recommend.
Andrew: I see.
Jerome: Internally, inside a company, but also recommend to friends. If it’s very successful for you, it’s improving your sales by 50 percent, you’re probably going to tell your friends about it.
Andrew: I see. So where David of 37signals says “Focus on business,” you might say, “Go closer to the top line of the income statement. Focus on the sales part of business and that’s going to be easier to justify and more readily shared.”
Jerome: This is easier, the affinity, that’s one thing we’ve learned. But we are not giving up on the support at all, so we still have a very large percentage of our customers who are using it for support. But if your tool can be used for support and sales at the same time, then it’s much, much easier.
Andrew: What about this? I’m now on your site and Chris popped up to say, “Hello. Thank you for visiting. May I help you?” And on the bottom it says Live Chat by SnapEngage.
Jerome: Mm-hmm.
Andrew: Certain of your accounts automatically include that stamp on there. How effective is that for you at conversions and new customer development?
Jerome: This is very effective, because yeah, when they see the solution, they know it’s provided by us. This is one of the reasons why we are able to provide entry-level plans, and the basic business plan, at such a low price – it’s because those plans include a little bit of advertising for us.
Andrew: I see.
Jerome: And this is part of the word-of-mouth and recommendation effect as well.
Andrew: What else is like that as part of the word-of-mouth?
Jerome: That we automated to add this part. Now I don’t know what else to tell you. Yeah, customer delight I think is the key.
Andrew: Let’s see what else. Do you have a free version?
Jerome: We do have a free version yes.
Andrew: What’s included in the free version?
Jerome: The free version gives you the basic chat capability, but it’s limited to 30 chats per month, which for somebody who’s going to use it for free for a personal website is probably more than enough. And then we also have a plan for startup which is much more affordable.
Andrew: I see. How much is the startup plan?
Jerome: It’s $9 a month.
Andrew: $9 a month. And what do you include in that and what do you leave out?
Jerome: You get up to 100 chats per month and you also get some of the integrations.
Andrew: I’ve noticed that a lot of web apps that freemium based – and now Jerome just popped up – that’s your co-founder, right?
Jerome: Yes, it is. We have two Jeromes in the team to keep people, it’s confusing.
Andrew: He popped up to say, ‘Thanks for visiting, can I help you in any way?’ It’s kind of cool how it pops up on your site. But I’ve noticed a lot of companies that operate on the freemium basis will hide the free. That little line that says “click here for free” is barely noticeable. I didn’t see it until I looked really carefully, and now I’ve learned to look under the Buy Now button. Are people clicking on it? How do you decide where to put it?
Jerome: We tried with this, initially it was part of our plan, so visible for everybody.
Andrew: Like a column for free, a column for basic, a column for . . .
Jerome: Exactly.
Andrew: Right.
Jerome: And then we noticed that other companies, 37signals for example, started removing it as well, And started to say it’s not a bad idea, so we tried to do the same thing. And actually it works pretty well, because people who are looking for a free solution, they’re going to find us on live chat anyway. If they don’t see the link they’re going to ask us and we’re going to redirect them to the free version.
Andrew: I see.
Jerome: So if they start complaining that it’s too expensive then we can show them the free version as well.
Andrew: All right, I get that, and I guess it’s kind of like the Log-In button. People who need to log in, or people who need the free version . . .
Jerome: Yep.
Andrew: . . . are going to hunt until they find it. That’s why the login button isn’t often very big on sites.
Jerome: Exactly.
Andrew: Let’s see what else we’ve got here: recently paid off credit cards, [inaudible] for customers. I should actually be looking at this while you’re giving me answers to see what my next questions are but I’m too engaged in the conversation to see that.
Wait for customers to ask before they build anything – all right, I think I’ve got everything except for the how-to. So now let’s suppose that we sign up for your live chat program or for someone else’s live chat program, and we want to do it right. How do we do it right? And before you answer, let’s get your video back up. It looks like it froze. Do you want to try turning your video off and back on?
Jerome: Absolutely. Let’s try it quickly.
Andrew: It’ll just take a moment. So now your video’s gone.
Jerome: It’s off.
Andrew: I wonder what the audience sees when your video’s gone. And now it’s back up.
Jerome: Okay.
Andrew: Cool.
Jerome: Are we good?
Andrew: Yeah. So how do I do this right? How do I actually go beyond having cool conversations, and have conversations that convert strangers into customers?
Jerome: First maybe a note on the [inaudible] chat, you know, the message we put up automatically using the picture and the name of an agent? You don’t want this to be annoying, so we limit how quickly you can put this up. I recommend waiting at least 45, 60 seconds before putting up the message, because you want to make sure that people are really interested in your website and they may have a question. And then what works very well is if typically they’ve stayed 45 seconds on the webpage – maybe they’re looking at your pricing – and then suddenly you pop up and say hey, can I help you in any way, or do you have any questions. “Oh, yes, buy the way, I have a question. I was reading all this content, now I have a quick question.” And then it’s really just being human, so talking to people.
Andrew: No robots, that’s your T-shirt.
Jerome: No robots, that’s what we’re selling – it’s live chat for humans. We talked about quickly how we got into live chat. What I didn’t explain is that initially we were very hesitant starting live chat. It’s a very crowded market. There are tons of live chat solutions, but when we looked at it we said hey, one of them really sucks. It’s like when I get on live chat with my mobile phone provider I hate it, because I talk to somebody who is not the real person they say they are. They are using tons of canned messages and not really talking to me, they’re just sending me automated messages which have nothing to do with my question. So we said OK, we think there is a good potential to do it differently, and really that’s what we’re pushing is its more human, more personal aspect of live chat.
Andrew: I see what you mean. Live chat is not just the category name by the way, it’s also a name of a leader in the space, right? That’s what you’re referring to when you say live chat stinks?
Jerome: One of the leaders is LivePerson, for example.
Andrew: Is who?
Jerome: LivePerson.
Andrew: LivePerson, right.
Jerome: So this is a big live chat provider for Fortune 500 companies, and I’m sure you’ve had a chat with your cable provider, your mobile phone provider. I’m not going to give any names, but typically it’s pretty frustrating.
Andrew: You’re right. I hate that because I don’t feel like I’m talking to a real person. I feel like I’m talking to someone who’s just going to copy and paste URLs for me and say go to the knowledge base for this page. Here’s the full answer from the knowledge base. But it’s just a pain in the butt. they’re not being human.
Jerome: Yep.
Andrew: But that’s just the way the software’s being used. It’s not the software’s problem is it?
Jerome: True. It is not really the software, but also the software is kind of this ugly pop-up you get most of the time, so it’s not very engaging. But it’s the way the companies are using it, yes. But we are talking about how to be more effective on live chat, and we think the key is to be human.
Andrew: So then if I were watching the competition and seeing that there’s already an established leader in the space, and that the problem with the leader is that people are using it in the wrong way, to be unhuman and to be copy-paste robots, then I would just say, ‘I can’t get in this space. All they have to do to crush me is be more human.’
Jerome: No, that’s not all. Our features and capabilities are different, we are really differentiating . . .
Andrew: Why would somebody use you and not them, then?
Jerome: Our form looks much better. Our proactive chat capability is really different than anybody else. We show you the picture and the name of a person, but once you respond you’re going to talk to this person. You don’t see a pop-up with, you know the picture of the nice lady with the headset, and the [inaudible]. “Hi, how are you doing?” And then when you click you are actually talking to Bob.
Andrew: I know what you mean, that lady with the headset is weird. We actually had an incident last week where we used, a friend came on live chat for us. And because she was a woman who didn’t have a headset people just started hitting on her. So now I’m thinking we should just use guys pictures even when it’s a woman. Maybe I shouldn’t say it because then people are going to keep asking, “Are you a woman pretending to be Andrew,” or what. But that’s an issue, too.
Jerome: It may work the other way around. You should try a woman picture.
Andrew: Try a woman for me and just see how that goes.
Jerome: Yeah, maybe you’ll convert better, who knows.
Andrew: But I’ve got to ask you this. As an entrepreneur using this product I could see that it’s effective, but I could also see that it’s fricking intrusive, right? Because I’m working and suddenly somebody pops in on my computer screen with an issue and I’ve got to stop my work and go deal with the issue. Isn’t that just a little too annoying to interrupt the day with?
Jerome: It is. But you can decide when you want to be online and when you don’t want to. I think what you see when you start using it is that yes, actually it is annoying but this is of value. It really pays for itself. We try to equate this to a store. You’re shopping in a store and there’s nobody there to help you, you’re just going to leave. It’s the same for the website. You show up on the website, you have a question and nobody’s there to help you, you may just go to the next website.
Andrew: All right. I see that, but to me it’s still very distracting for the founder, or still very distracting for the developers to be on a chat and have somebody pop in. I’d like to be able to bring somebody in and have them take over the chat. How do we do this right? What insight can you give me on that?
Jerome: Having somebody in definitely full time would help a lot. That’s what we do ourselves, so it’s very effective. You talked to Chris earlier. But as founders we are still online from time to time. I’m not online 24 hours a day but for a few hours a day I’m available, because that’s how I get a lot of feedback. But I decide when I want to be available or not.
I think to train the person who’s going to be on live chat is really important.
Andrew: How do you train the person?
Jerome: The way we do it ourselves, and we’ve done it ourselves for long enough that we have a good idea of how it works, is that we’ve given our new employees a log of those conversations so they can see how we can address the solutions. For a couple of days we do live chat with them and we are in the back as a back-up, giving them information. But then very quickly they get it and they are the face of the company now.
Andrew: How do you watch them, physically stand next to them or sit next to them at their desk?
Jerome: There are different ways to do it, so for our local employees yeah, we just do it sitting on the same computer and looking at, sharing the screen. We have the ability, so we have real-time monitoring where in the tool you can see what’s going on in your live chat, you can keep an eye on what’s going on. And giving some feedback through another channel, so we use Skype to give some feedback while the person . . .
Andrew: I see. So I might watch my person talk to the customer, and then on Skype say, “No, no – don’t say that, say this.”
Jerome: Yeah, exactly.
Andrew: I see. What else is helpful?
Jerome: It’s making sure, and that’s what we are selling. We are not contracted live chat. A lot of customers ask us, ‘Do you provide the people?’ And we don’t provide the people because nobody knows your solution or your product better than you or your team. So it’s really making sure that your employees who are going to be on live chat are part of the company and know that they’re representing the company, and are here to help the customer.
Andrew: All right. Anything else that I missed?
Jerome: No, I think it was a pretty good summary.
Andrew: All right, cool. Your T-shirt says “Live Chat for Humans.” The Robot is crossed out. The SnapEngage logo is very small on that. How did you as a founder decide to make your logo so small? Why not feature that?
Jerome: We wanted people to wear the T-shirt. We figured out if the only thing they see is the SnapEngage logo nobody’s going to wear it.
Andrew: All right, fair enough. The company is SnapEngage, and you guys can see it on my website and play around with it. I’ve been trying a bunch of different services to see what it’s like to talk to people in real time. It’s kind of fun. It’s distracting like I said, but it’s kind of fun.
Jerome: It is, and you’re getting tons of very useful feedback.
Andrew: It’s true. I really like it. It’s just so distracting especially like when I’m at home. I’ve got to find a way to do this right. I will want, when Olivia comes home, I’ll just want to sit and chat with people on the site instead of stopping work and just going and hanging out with her. But it’s really cool because people who engage, first of all they’re more likely to buy because they’ve chatted.
Jerome: Mm-hmm.
Andrew: And so it’s worth the time, but also they’re much more likely to want to help out, or much more likely to be a part of what we’re building here. They see that there’s a real person there. I almost want to just pop up on the website live every Saturday or every I-don’t-know-what, and just talk to people because that conversation is so much more valuable than comments or saying send me an e-mail on feedback.
Jerome: Yeah. That’s how I personally met a lot of the people in the industry. I was just an entrepreneur who’d show up on the website and we’d start chatting about the product, but sometime about something else, and so we developed some very good connections.
Andrew: The first question everyone asks is, “Are you really human?” Even though you say “I’m human.” They’ll say, “Are your really a robot?”
Jerome: Yep, they do that.
Andrew: So let me suggest this, guys. When you go to SnapEngage, the very first person who pops up, say, “Are you really human?” and see how they respond to it. I think it’s kind of interesting. So go check it out. If you go to SnapEngage.com you’ll see a little pop up come up, and you can say ‘Are you human?’ to Chris or Jerome or the other Jerome.
Thanks, Jerome. Thanks for doing the interview.
Jerome: Andrew, thanks a lot for your time. I really appreciate it.
Andrew: Thank you all for watching.
Jerome: Take care.
