crowdSPRING: How To Build A Marketplace From Scratch – with Ross Kimbarovsky

Posted on Dec 17, 2010 - 8:40 AM PST

Over 17,000 paid projects have been listed up on crowdSPRING’s online marketplace for creative services since the site launched in 2008.

I invited Ross Kimbarovsky, the company’s co-founder, to tell me how he launched because marketplaces are notoriously hard businesses to start. Marketplace-based businesses force a fledgling startup to pursue two constituents at once. In this case, Ross had to get both customers and creatives to join crowdSPRING or the site would be useless.

Find out how he did it in this case study of a successful marketplace launch.

The FULL program


(Can’t see video? Go to Mixergy.com)

About Ross Kimbarovsky

Ross Kimbarovsky is the co-founder of crowdSPRING, an online marketplace for creative services. For buyers, crowdSPRING is a place to post a creative project, watch the world contribute ideas and choose the one they like. For creatives, crowdSPRING is a global stage for creativity where title and experience don’t matter.

You can ask him about his eyepatch on twitter.

Raw transcript

This transcript was prepared by SpeechPad.

Three messages before we get started. If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you read his articles on VentureBeat, you know he can help you with issues like raising money, or issuing stock options, or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at WalkerCorporateLaw.com.

Do you remember when I interviewed Sarah Sutton Fell about how thousands of people paid for her job site? Look at the biggest point that she made. She said that she has a phone number on every page of her site because, and here’s a stat, 95% of the people who call end up buying. Most people, though, don’t call her, but seeing a real number increases their confidence in her and they buy. So try this, go to Grasshopper.com, and get a phone number that will make your company sound professional, add it to your site, and see what happens. Grasshopper.com

Remember Patrick Buckley, who I interviewed? He came up with an idea for an iPad case. He built a store to sell it, and in a few months he generated about a million dollars in sales. The platform he used is Shopify. If you have an idea to sell anything, set up your store on Shopify.com because Shopify stores are designed to increase sales. Plus Shopify makes it easy to set up a beautiful store and manage it. Shopify.com.

Here’s the program.

Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the found of Mixergy.com, home of the ambitious upstart. This is the place where entrepreneurs come to teach you how they built their businesses so you can get motivated, fired up, and pull out information that you can use as you’re building your business. Hopefully you can build it up so big you can come back here and do an interview like today’s guest.

Joining me is a Mixergy fan, Ross Kimbarovsky. He is the co-founder of crowdSPRING, a site where you post your design or writing job and the price you’re willing to pay for it. Then you get a collection of finished projects and only pay for the ones you want. Over 17,000 paid projects have been listed up on crowdSPRING since the site launched in 2008. I want to find out how he got to that point. I want to find out how he launched, how he built his business. I want to find out everything. Ross, welcome to Mixergy, and thanks for letting me find out about everything in your business.

Ross Kimbarovsky: All right, Andrew. Thanks very much for the opportunity to talk with you today and with your viewers.

Andrew: So who has used crowdSPRING? What kind of companies?

Ross: We built crowdSPRING primarily for entrepreneurs and small businesses. Over our two year history, those have been the dominant users. Thousands of entrepreneurs, small businesses from almost 100 countries now, but interesting enough we have also attracted Fortune 500 companies and agencies. Although we’re not directly marketing to them, just to give you a flavor we have worked with Amazon, with Phillips, Forbes, ConAgra, Epic Records, Random House, LG and countless other big brands. On the agency side, we’ve worked with some well established agencies — Crispin, Porter & Bogusky, Element 79, BBH, Draft.cb and many brands of agencies that we can’t mention because we allow people to post projects under non-disclosure agreements. Obviously, we are bound by those, as well. Really a very eclectic group of businesses and agencies from all around the world.

Andrew: Ross, why? I understand why a new entrepreneur or a younger, smaller business might go to crowdSPRING and have a bunch of designs created for them and then pay a low price for the one that they want. I get that. When you’re listing companies like Amazon, in the back of my head I’m thinking Amazon must have somebody to design their logos, to design their web pages, to write their ad copy. Why do they need to outsource it to crowdSPRING the way that some mom and pop store would, why?

Ross For starters, we do talk to our customers a great deal to try to understand what motivates them and why them come to us. For some of the larger companies it’s often about price. They are price sensitive in this economy. They’re finding that the cost . . .

Andrew: LG, Amazon, those businesses, Random House are price sensitive? They need a cheap logo, cheap design?

Ross LG certainly isn’t, and what we’ve done with LG has been very different. We’ve done product design projects. They’re motivation is very different. We’re just talking about other companies that come to us. These are not companies that are spending $500. Amazon, for example, spent $10,000 on a e-mail newsletter, to try to get ideas for e-mail newsletters.

Take Amazon as an example. Here’s a company that has tremendous marketing capacity. It’s one of the largest eCommerce sites online. It does a lot of user testing. A lot of its testing is done within seconds. One of the things that they tried to do when they are marketing off their site, like e-mail, is test different variations. Part of the problem in getting creative from agencies has been really the ideation, getting great ideas and lots of them to test new things. This is why we see more and more brands and agencies come to crowdSPRING.

Andrew: I see. Okay. So if I hire one designer, I’m going to get one idea. If I hire five designers, I’ll just have five ideas. But if I’m Amazon and I put up $10,000 and say I need a newsletter design, I’m going to get more creative ideas and more of them from a collection of people who I wouldn’t have access to otherwise.

Ross You’re going to get hundreds of ideas.

Andrew: Okay.

Ross Many good ones. In Amazon’s case, they actually ended up adding awards so they could buy more because they wanted to test even more ideas in the marketplace.

Andrew: Gotcha, because they pay for each one that they like. On a smaller level, if I’m not Amazon and I just want a new design for my newsletter I can pay less. I can get a collection of designs that I can pick from, and they’ll all be customized to my needs.

Ross Exactly. I’ll tell you something that when we launched back in 2008 and this provides a context for why agencies and larger companies are interested in crowdSPRING . We worked with Element 79, back in, there’s my daughter . . .

Andrew: We’re talking to you today from your home office, right?

Ross Right, we are.

Andrew: Do you need to talk to your daughter? Family comes first.

Ross Give me just one second.

Andrew: Yeah, go for it. Did you crowdSPRING your daughter’s name? I’ll ask you that when you come back.

Ross All right. I’m back. Thank you.

Andrew: Did you crowdsourcre your daughter’s name? I see people crowdsourcing all kinds of company names there.

Ross No, we actually spent a lot a time thinking about it, but came up with it ourselves.

Andrew: That would have been a very good PR move. What I’ve seen about you is you guys are great at coming up with these PR moves. I’ll come back to the PR moves. I’ll also come back to the agency question that you asked before. Let me understand one more thing about where you are today. Then we’ll go back in time and figure out how you built up this business to the point where you ended up with 17,000 paying customers and all the activity that you talked about on the site. The question I’m wondering is where is the revenue coming from? You told me in the pre-interview that there are three sources of revenue. What are they?

Ross We have three sources of revenue. First is a listing fee, which ranges from $39 to $199. We have three kinds of projects: economy, standard, and pro. Those reflect the level of privacy that you need in your project. The bigger brands, agencies, and startups tend to post projects with more privacy, non-disclosure agreements, with private galleries. The second kind of fee is the crowdSPRING fee and it’s 15% which we charge in any kind of project. Then we have a la carte items, like search engine exclusion, private galleries. If you post an economy project but still want a few of those features, we let you do that. We found initially we only have two kinds of projects. We spent a great deal of time talking to our community and our buyers. We found that a lot of them wanted the opportunity to pick and choose how they created privacy in their projects. Earlier this year, we effectively unbundled some of the project types and created a la carte ways they can post.

Andrew: Why not free? Why isn’t there a free option for a business to go list their request and get designers and only pay if they get the right design?

Ross: In a sense we have that. We offer 100% buyer satisfaction guarantee. It’s not quite free, because we do not refund the listing fee or any optional items. But we refund their works in full and we refund our fee in full, because we want our clients to be completely satisfied with the quality of work. A free marketplace isn’t a business. One thing that we believed from day one is we wanted to create a business. To have a business you need revenue. If you need to have revenue, you need to have somebody pay for you to stay in business. We don’t charge designers. They work, they earn 100% of the funds. We think we create a lot of value for buyers. As a result, that’s why we charge for our products.

Andrew: Before we go back in time, I’m curious about the way I might use crowdSPRING. If I do this interview with you, can I hire somebody on crowdSPRING to just sum up the interview and only pay for the best summary but have multiple people create summaries of this interview? Is that the way the writing projects work?

Ross: It’s an interesting question because we have 21 different categories of writing projects. We don’t have a direct category for, let’s say, summing up the interview.

Andrew: How about blogging?

Ross: But there are certainly categories where you might post that kind of a project, and it certainly could work that way. Where you can say here’s a video, I need you to write a short blog post summarizing this interview. I’ll offer $200 or whatever the award may be in. You’ll have multiple writers submit work for you to review. It works just like design projects. We’ve had some phenomenal writing projects. Most of them tend to be company names, product names, but people have sourced entire books on crowdSPRING. We’ve had scripts for television and safety videos. We’ve had sensual fantasies.

Andrew: How do I source a whole book? I can get somebody to write a whole book for me? Ghostwrite the Andrew Warner autobiography or ghostwrite the Mixergy collection?

Ross: It’s pretty phenomenal. When we first saw it, we wondered ourselves how it would work. You had a smart entrepreneur who wanted to bring a book on social technologies to market, who offered a ton of awards, one per chapter in a book. I think it was $1,000 per chapter. That entrepreneur wrote the opening and closing chapters, so it was total 12 chapters. Rather than spend a year writing it, he worked with a group of 10 individuals and was able to bring it to market within months rather than a year. I believe it’s either released already in the past few weeks or is about to be released.

Andrew: All right. Okay. Let’s find out where you came up with the idea. Where did the idea come from for this business?

Ross: There were two things that motivated us. This was back in mid-2006. I was practicing law full time. My background is a trial attorney. I persuaded my firm to redesign our website. I led that effort, got a budget, talked to the top firms that were doing this work. Hired one, saw the results, and hated all of them. I was very frustrated and at the same time Mike Sampson, who ultimately became my business partner, was looking to acquire a small video postproduction business here in Chicago with the idea to outsource the work to Indie, postproduction work. I had this meeting with the web design firm. Very frustrated, went home, and started researching. I was fairly good at doing this. This is what I did for my career. I found a group of Malaysian students who were holding print design competitions, creating print advertising. This was the middle of the night. I went and pulled a lot of my publications and started comparing the quality of the work. What struck me was how well the print designs looked in these competitions from students. I called Mike in the morning, and I said we may have an opportunity here to change the way people buy services. We weren’t sure what kinds of services, but I said, “Let’s meet for lunch.” That started us down the path for about six months until we actually said, “You know what? There’s something here. Maybe we should pursue it as a business.”

Andrew: Was there another company online doing this already at the time?

Ross: There were a few things that were happening at the time. 99designs didn’t exist at the time, but their sister company; SitePoint, had a small forum called Contests, where they let people post logo contests. For, I think it was a $10 listing fee, you worked in a B bulletin forum and you were able to solicit logo designs. There were about five or six designs, so it wasn’t really a thriving business at the time. There was also an interesting product from iStockphoto called By Request, where you could ask photographers or other people to contribute photos. Not necessarily ones that they would find online, but to take actual photos, let’s say of a couple watching a plasma set for an advertisement. So as we started looking around and we saw companies like iStockphoto that had great stock photography for non-professionals, we started seeing the possibility that non-professionals in various industries could actually do some pretty outstanding work. We ended up focusing on graphics design. The only one at the time that was doing anything in that segment was SitePoint with some contests. I think Worth1000 was doing a few things as well. They had PhotoShop contests, a couple that were going on. Very phenomenal work from people that were doing this just for fun.

Andrew: All right. You had the idea. You looked at the market to see what was available at the time. You decide, okay, this opportunity, there isn’t a lot of competition in this space. This opportunity is real. We need to jump on it. What’s the first thing that you guys did?

Ross: For about three months, we actually didn’t think of it as a business. We just wanted to try to understand the market, the size of the market, who was in this market. We didn’t really know that graphic design would be our first industry. We just wanted to try to tackle this question of how can we change the way services are bought. We would wake up in the morning. We would have a brief call. Really the challenge was to try to disprove that day that this was a good idea, because it was taking up a lot of our time and we wanted to just find some things that said to us you’re wasting your time, move on to another project. Every evening we would have a conference call and get even more excited about the possibilities, because everything we found was even better. We spent some weeks doing that.

We started doing some original research. We looked at other potential competitors, companies like Elance.com, Guru.com, that were in the freelancer space but not really with the business model that we were looking at. We started reading about them, all the information that had been printed, some of their press releases and the content they produced. We actually did some original research. We assumed that some of the information they may be sharing was either dated or skewed. So we literally monitored for several weeks some of their project postings in different categories. That’s what ultimately led us to start in graphic design because we saw that graphic design on both Elance and Guru represented a significant portion of their business.

Andrew: How did you know that?

Ross: Well, we literally monitored, every day, project postings.

Andrew: Because they have a list, they show the number of postings under each category, right?

Ross: They do and we would look at the projects. We would assess the amount of dollars offered. We would look at how many buyers. We created our own financial model essentially based on these businesses. Because what we wanted to understand was, is this a meaningful opportunity? Is this a big enough market? This is at a point where we actually thought maybe graphic design could be our first industry.

Andrew: Gotcha.

Ross: Is this a meaningful market and how can we validate that? Because the graphic design industry around the world is in the billions of dollars. Of course, there are lots of components that fall into it. We just wanted to get a sense of online marketplaces. Do they have a significant enough level of business for this to be meaningful for us to do?

Andrew: What are some of the other categories that you looked at? In addition to graphic design, what else?

Ross: We looked at everything from coding, programming. We looked at business categories. We looked at writing. If you think about Elance, which is the largest online freelance marketplace, they have dozens and dozens of different categories of projects. We looked at a bunch of them to try to understand which represented bigger opportunities and more importantly which represented bigger points of pain for businesses, because there are some things that we could sell better than others. Our model doesn’t depend on proposals. On Elance, you get bids when you post a project. People bid and say I can do this work for X dollars. We wanted to build a marketplace where you were picking from actual work for businesses that really were in a lot of pain because they were unable to hire freelancers and really unable to work with them. We ultimately, down this path, decided that graphic design really presented the greatest opportunity both in terms of market size, but also because that’s where we, much like ourselves my own personal pain, that’s where businesses had the most pain. They had a difficult time hiring designers. They could not afford some of the higher prices. They didn’t know how to pick from the designs they were given.

Andrew: Okay. Let’s talk about the ones that you rejected. I want to see how you figured out the opportunity. How you knew there was an opportunity there. Coding, for example, the idea for a crowdsource coding would be, I would say I need a new pop-up e-mail collection request for Mixergy.com. I would put that up on crowdSPRING, and a bunch of developers would create this for me. I would only pay the one that worked best on my site, that didn’t cause any trouble, any lags, and collected the e-mail addresses properly. That would be the vision for a crowdSPRING that launched with coding first, true?

Ross: Yes.

Andrew: How would that work with bigger projects? Most people don’t need just a small little pop-up. They might need something like a whole site developed or a whole web app developed.

Ross: One of the things that we did early on, we actually surveyed both freelancers and clients to try to get a sense of where some of their pain was in working both off line and online. We really tried to understand, on the freelancer side, how could we create good opportunities for them. Allow them to compete but make it fair. Because we worried about people investing a lot of time into projects that potentially didn’t translate into a creative difference. Here’s what I mean. If I’m a buyer looking at translations from Italian into English but I don’t understand Italian, I don’t have any way of determining which is the best translation. We thought of coding in the same way. Buyers who don’t understand coding don’t really understand the difference between this solution for coding versus this solution for coding, versus a third option. We worried that even though all of the coded solutions could work, buyers would not have any ability to pick the best one.

Andrew: I see.

Ross: Then we would force freelancers to do a lot of work without really giving buyers an opportunity to make a meaningful decision.

Andrew: What about writing? Why’d you say no to writing then?

Ross: Initially, we didn’t see writing as a big market compared to graphic design. Writing was a pretty significant market and growing because of the increased online opportunities available, but it wasn’t, at least in our calculation at the time, as big as graphic design. We spent a lot of time talking about writing as a possibility. We weren’t only looking for the biggest market at the time. We were also looking for the biggest points of pain. What our research revealed, we talked to buyers one on one on the phone, on Skype, in person. The most problems, ultimately, in the small business entrepreneur community were finding graphics, getting your logo, building your website, building your blog, creating banner advertising for those that were doing banner ads.

Andrew: How did you find customers and freelancers to survey and interview?

Ross: We would look online. We would talk to our friends. We would talk to friends of friends. We would use opportunities when we participated in forums and in other forums and on blogs. Whenever we’d meet somebody and they’d happen to have a business that could potentially use these services, we’d ask them these questions. We tried to get a sense from as varied a community of people as we could what pained them the most.

Andrew: Okay. All right. So you saw the opportunity. You decided you were going to go after design. What’s the next thing that you did?

Ross: We did our surveys. We were pretty comfortable that we understood at least the points of pain for freelancers and clients. This was in probably late November of ’06. We decided we needed to write a business plan, for ourselves, because we really still weren’t thinking of this as a business. It was an interesting idea. We found some very helpful and reassuring results from our surveys. We committed to write a business plan and we did. The goal was let’s get up by January 1st, 2007, grab a cup of coffee, read the plan, and if we like it, consider launching this as a business. That’s exactly what we did. We wrote a far bigger business plan than probably was necessitated. But because we were writing it for us, we weren’t focused on size. Our criteria was if we sat down with our wives and they would say, “Okay, you can quit your job and go pursue this,” then that would be a good business plan.

Andrew: How quickly did you imagine that you guys would break even?

Ross: You know back then, one of the things that we started doing . . . we’re not, as you could probably see, Mike and I are not 20, 21 year old entrepreneurs. We’re a bit older.

Andrew: Yeah, I see gray in your beard, right?

Ross: That’s right. I was working full-time at a very successful legal practice. Mike had a successful consulting practice. He had a very successful career as a producer and director in the movie industry. We built some very complex financial models for ourselves to try to get a sense of how this business could evolve. At the time, we envisioned that we would reach profitability in two to three years, given whatever level investment we thought would be necessary to bring some scale to the business.

Andrew: You were willing to not take in any money for two to three years to make that kind of sacrifice for this business.

Ross: We didn’t know at the time when and if we would need to raise funding.

Andrew: I see.

Ross: At the point of time we did the financial models in 2006, we weren’t even thinking of this as business. We were just really assessing the potential of this industry. Frankly, we could have just as easily said we’re not going to purse it. When we actually decided in January of ’07, we like what we’re seeing, we think there’s a great opportunity here to change the way that companies and individuals buy services. It really leveled the playing field for this vast community of designers. Then we started to think about funding, and we actually ended up raising some angel funding in 2007. It took us a very short time, three to four months. For about 9 to 12 months, we bootstrapped as we were doing the research, the initial planning. We did some very light initial coding just to play with it ourselves. Then we raised $3 million from angel investors here in Chicago and started development in earnest in mid-2007.

Andrew: Okay. What did the first version of the site look like?

Ross: Ah, it was terrible. Ironically, two to three weeks from the time we supposed to launch in March of 2008, a private beta, we actually initially hired a design development firm to help us. We ended up firing them because they couldn’t get the job done. One of the reasons that frustrated us, when they presented us with the three concepts for our site, we hated them. It was an interesting moment because here I had just gone through this personal experience with my law firm and the exact same thing happened to us. We actually, when launched into private beta, we had two sides of the site. One was a private site where we were testing with a group of freelancers and buyers some of the features. One project was public to design our own website. In March of 2008, we invited the world community to design our site. We figured this was a very risky move because if it didn’t work, so much for our idea of inviting other companies to trust the world to create their identities, their designs. But if it did work, then it would let us say we’re confident enough to launch our business and trust that people around the world can solve our own problem. March 2008, private beta. May 2008, we launched publicly with our brand new design.

Andrew: Okay. You said that you had some freelance designers already in that beta community while it was private. How did you get them to be interested? How did you get them to find out about your business? How’d you get them to get interested in it? How’d you get them to participate? It’s very hard to get those original marketplace members online. How’d you do it?

Ross: Back in 2006, we’re talking with designers, interacting with them. These were graphic designers, web designers, and industrial designers. We had some phone calls, e-mail exchanges. We talked to them on forums. We surveyed them. A year later, when we were ready to launch, we had this list of 100 to 150 designers. We said to our marketing director we have this great list of people from a year ago that we could invite to our private beta. He laughed at us. He said, “You have a one year old list of people that you talked to and you think they’re going to show up?” Some of it was naivety. We thought that they would be interested enough in a new way to conduct business. That’s essentially who populated our early community.

We invited this group of people. Nearly all of them, even though it was a year stale list, showed up. We had a small group of people that was interested, was willing to do the work. We spent a lot of time working with them because we really wanted them to feel that it was their community. We built our marketplace really in response to what we learned from all of these people during the course of the prior year. We asked them what kind of things they didn’t like in the existing marketplaces when they were working online. We asked them what kind things were important to them. We asked them what kinds of things they would build if they launched their own business to do this. We really wanted them to feel ownership in the site. We grew that side of the community whenever we saw good work in the one public project for our website. So if people did pretty good work in the public project, we would invite them back into the private beta. We built that side of the community slowly but surely.

Andrew: Okay. How many people do you think you had? I’m sorry for staying so long on this, but it’s important. With the marketplace there’s always that chicken and egg problem, right? You can’t get customers, small business owners to come in and submit their proposals unless you have freelancers. You can’t get freelancers to be engaged in the community unless you have paying customers who are already on there. That’s why I want to spend some time finding out how you got those freelancers when you didn’t have a lot of businesses online at the time. How’d you do it?

Ross: You know, it’s an enormous challenge because you’re absolutely right. Unless you can maintain a balance, one side or the other may get frustrated. We wanted to create a balance, but we didn’t know what that balance was. We didn’t know how many projects we need to keep 100 designers happy. We didn’t know how many designers we need to keep buyers happy. It was a touch and go at the beginning. We populated it with projects. I called my mom and I said, “Mom, I need you to post a project.” We called our friends. We paid for these projects ourselves for the first 50 or so. We could’ve posted these projects ourselves, but we really wanted real buyers, sophisticated and unsophisticated businesses to try to get a sense of how our marketplace worked.

Andrew: What kind of project did your mom post?

Ross: She did a logo project. We had friends that posted website design projects.

Andrew: What did she need a logo for?

Ross: My parents have a construction company. They were just starting it at the time. I said post a logo project for the construction company. Interface with our designers and see what you think. We did that with friends. We did that with other people that we knew. We started with a handful of projects. We observed for a couple of days to see how the freelancers reacted to it. When we saw people were participating, we would consistently talk to the freelancers. We would ask them whether the quality of the projects was good enough. We’d ask them about pricing. This was very early. In the very early days, you have to be very nurturing, and you have to get as much information as you can. We asked them the kinds of projects they wanted to do. We brought in logo and website. We had a couple of people say, “You know what? We would love to do some header projects.” Blog headers and ad banners. So we’d reach out to other people and say “Hey, can we get you to post an ad banner or a header project?” For the first 50 projects, we actually paid for these.

Andrew: That’s because you had investments and you were able to do that. What about the freelancers? I’m spending a lot of time on this section. We’ve got to move on past it. I’m too curious about this. The freelancers that you got were the ones that you surveyed. How many surveys could you have sent out? How did you find enough freelancers for it to be meaningful when you launched? We’re talking about 100 freelancers?

Ross: A 100, 150. There are a couple . . .

Andrew: A 100, 150 freelancers who are all designers. How did you reach 100 to 150 freelancers who were all willing to come in day one?

Ross: We did a couple of things. First of all we were testing some of our ideas on existing marketplaces. We posted real test projects on other sites. We posted one on SitePoint. We posted one on Elance. We posted one on a site called iFreelance. We also would regularly engage with people on forums and blogs. Anytime that we would engage with people, we would try to get their contact information. People that participated in the projects that we posted, we would also communicate with them and try to get their contact information, because what we ultimately wanted to do was try to see what the experience was on existing marketplaces. We wanted to see where the points of pain were for other people. We wanted to test some of our theories. Could we create a business built on buyers picking from actual designs or actual writing as opposed to proposals?

We gathered a list of freelancers who responded to some of these projects, who responded to some of our posts on blogs and forums. Other people found out from some of these freelancers that we were looking to do something, although we weren’t especially descriptive at the time because we didn’t really know. They’d reach out to use and give some feedback as well. Our goal really was to try to assess. We didn’t know that we would start with graphic design. We just wanted to assess freelancers that were working online and even some that were working offline. What were the biggest points of pain for them? Was it getting paid? Was it finding clients? Was it protecting their intellectual property? Was it communicating with clients? File transfer? As we started talking to more people, we asked them to introduce us to more people. Do you have some friends that are also freelancers that might also benefit from a new way to do business? We were able to build that list. It was very much hands on and required a great deal of effort.

Andrew: Okay. You get that first site launched. You had your vision. You even wrote it down in a business plan. Once you launched, what was different? You look back at your business plan and your assumptions before you launched and say, “How did we think that? We were so wrong?”

Ross: There are a lot of things, of course, that you find you’re wrong about. We’re daily wrong about 99% of the things that we predict. One thing that stuck out was page views. We spent some time trying to assess page views for our site in part because we were looking at a number of different financial models at the time, advertising being one of them which we ultimately rejected in part because we wanted to understand what we needed to do to scale. Our best assessment of page views, I don’t recall what the number was at the time, for the year I think we exceeded that on the first three weeks of launch. We were so off on that figure . . .

Andrew: How? I thought you were going to the opposite. I thought you were going to say we launched and it took us three years to get what we imagined would happen in one year. Usually you overshoot with your expectations. What happened that you got so many extra page views?

Ross: We tried to be very conservative when we created the financial model. We did that for a couple of reasons. First of all, we believe that we needed to persuade ourselves that this was a viable business. We needed to persuade our wives. I have three little kids. My partner has two kids. This wasn’t two single guys or two single gals starting a business. We had families, we had established careers. We also at that point decided that we were going to seek some outside angel funding. We knew that we needed to present to them our best guess at the financials. It’s a guess, ultimately, because you’re not an operating business yet. We did our best based on studying our competitors. I’ll give you . . .

Andrew: I’m sorry to interrupt, but I’m only interrupting because I’m fascinated and I’m curious and I want to get as much out of you, to be honest, while I still have you here in the interview. I understand the need to be conservative before you launch. How did you end up with so many hits afterwards? What did you do that lured in so many people and got them to be so engaged that they kept clicking and increasing your page views?

Ross: I think part of it, well, there are a couple of things that happened when we launched. First of all, it turned out in retrospect to have been good for us to have this public facing project to design our own site. It was unusual at the time. We offered $6,000 in awards, which was a pretty large amount. It was unusual because we were essentially risking our entire business and our business model on the possibility that this may succeed or fail. We tried to create as best as we could a good, comfortable atmosphere for the freelancers. We were really very fortunate that the freelancer community organically grew pretty quickly. I think by the time we hit June we were close to 1,000 people in our freelance community, which we did not expect for it to grow that fast. Buyers were pretty happy after the first 50 projects, when we funded them ourselves. For the next 20, 25, we would find other buyers and say, “We’ll pay for half of it. You pay half and we’ll pay half.” At some point in the beginning of May, we said, “You know what? We think we’re ready. We’re ready to pull the cord and let the site stand on its own. If we can attract buyers, then maybe we have something here.”

Andrew: What did you do to attract buyers?

Ross: We looked around. We looked at Facebook. We looked at Twitter. We looked at blogs. We talked to friends. This was very much guerilla.

Andrew: You weren’t buying advertising? You weren’t promoting that way?

Ross: No, no, we were not buying advertising. We did a bit of AdWords advertising in 2008, which ultimately was a big failure for us. We did not, at the time, do much banner advertising. We were very fortunate. We went to two conferences. We went to Under the Radar in June of 2008. We were pretty humbled with the other businesses that were there. We were very lucky. We ended up receiving Best of Show at that conference and got a bit of exposure. We were at the Demo Conference in the fall of 2008 to launch this new product, which we called crowdSPRING Pro. It offered a lot of privacy, industry leading privacy that is still unmatched today by anybody in the marketplace and the world. There was a little bit of buzz. We worked very hard though. The fundamental problem in the beginning for any business is finding customers, keeping customers, making people happy, and we were literally using every guerilla tactic that we can.

Andrew: When you present at one of these conferences, both those conferences you have to pay to present. I think they say you pay to get trained to present, however they phrase it, you’re putting up cash to be up on that stage. What kind of result do you get for that money? Do you know how many customers you get? What happens? Do you get money?

Ross: Well, Under the Radar was free. We were invited to present there, and we did not have other than . . .

Andrew: I thought they charged?

Ross: No, at least, we did not have to pay.

Andrew: Okay.

Ross: We had to pay for our transportation out to, it’s California and lodging, but other than that it was free. Demo was not inexpensive. Demo costs us quite a bit of money I think something like $18,000. Huge challenge for a young startup like ours because we, literally, that’s how we looked at it. We asked ourselves, “Can we get $18,000 worth of value out of this conference?”

Andrew: Did you?

Ross: We think so.

Andrew: How?

Ross: First of all, it gave us some exposure in the marketplace. It let us present this new product that we literally launched at Demo. We were very fortunate when we persuaded one of our customers, and this happened to be the Chief Creative Officer from Element 79, Dennis Ryan to come out with us and do the presentation. Here’s a major digital agency, and we were launching this product principally for startups, for agencies, for bigger brands. Here’s the chief creative officer at a major digital agency who came on stage with us. He said some very kind words about us and our product.

Andrew: Is there a way to say because he was up on stage with us and because we were at Demo and because we paid for it, we ended up with $1 more in revenue from that? Or we ended up with X number of customers or X number of investment dollars because of that? Can you tie it back that way at all?

Ross: I don’t think so, and we spent a lot of time before Demo and even after Demo to this day assessing. Before Demo, should we invest the money to do it, and after Demo, did we see the benefits from our participation there. It was an outstanding conference, but it is a challenge to try to tie those kinds of events particularly for a young startup because we didn’t have a lot of exposure at the time and so we couldn’t say that Demo versus something else created more buzz for us. But for somebody who is just starting a business, who is presented with an opportunity to broadcast their startup, their voice, to a much bigger than they normally would, it’s a very tempting option, even though you have to factor in the expense. If we don’t invest the money if we don’t speak at that conference, then we still have to find ways to talk to the broader audience and not just to our families and friends here in Chicago. We saw it as an opportunity to invest some money and reach a broader audience. Our AdWords marketing wasn’t working especially well at the time. We thought it was an investment that could potentially pay some dividends for us.

Andrew: Okay. What was the most effective way of getting customers?

Ross: Pleasing other customers.

Andrew: Beyond that. I get that. If you make me happy, I’m going to tell my friends about it. I might tweet about it. Beyond that, how do you get me in the door in the first place?

Ross: Word of mouth represents for us by far the most effective way of getting customers. We have been, Andrew, a very experimental company. We have had the fortune of having some funding from our initial raise. Our attitude has been we’re going to try anything to see if we can get customers. We’ve experimented with banner ads, with sponsorships, with AdWords, with AdSense. You name it and we’ve probably tried it. We tend to be pretty methodical. We look at the possibility of ROI and how do we measure it. We set some clear goals. We execute, and ultimately we found that 99.99% of the things that we spend money on don’t bring in customers. What absolutely always brings in customers is doing a great job with people that are posting projects. We survey our customers regularly on the buyers’ side and on the creative side. 96% of our buyers recommend us to others. We ask every person who posts a project, where did you hear about us? Invariably, it’s been from a friend, from a colleague . . .

Andrew: Let me ask you this. Right now, today, I must have had five great experiences with companies online. I love them. I can’t even think of which five companies I used today because I love them and then I move onto something else that I love. How do you get a customer, who’s delighted by so many other businesses online, to remember that crowdSPRING made them happy and to bring it up in conversation with someone else when there’s so many other things to talk about? How do you ensure that word of mouth happens in your favor for the business?

Ross: It’s tough. Ultimately, we can, as consumers, of course, I’m a consumer, you’re a consumer. As you’ve said, you daily interact with companies that do a good job. And we can only keep a perspective on just a handful of companies. One of the areas is how much pain were you in and how did the company help you? If we have a lot of pain to do something, for example, our website goes down and our hosting provider solves that problem very quickly. People that have popular websites are going to be very complimentary about that hosting provider because it was quick, it was transparent, and it let us conduct our business. That’s really our attitude. We know that design and written work represents a huge point of pain for our buyers. It costs too much. They don’t know where to find the creatives. They don’t know exactly how to buy these kinds of services. Because their budgets are so much lower in the past, they have a hard time competing against bigger, better funded competitors. If we can solve that problem for them and do it in an efficient way, we know that they will be happy and ultimately they will want their friends, they will want their other business associates to take advantage of the same service.

Andrew: Ross, you don’t have system in place where maybe you give me a cut of sales if I refer a friend? Or maybe you’ve got some system in place where you encourage me to show off the designs I got on Twitter or e-mail them to friends to get feedback on them so that I have an excuse to e-mail my friends about your business? Do you have anything like that that’s formal and in place, designed to juice this word of mouth?

Ross: Absolutely.

Andrew: Tell me about that.

Ross: We have two kinds affiliate programs. We have an affiliate program that we’ve run with Commission Junction for over a year. We have an in-house affiliate program that we run with partners. Both of those work in the traditional way. We can do lots of different things. We can give our partners or affiliates a revenue share. We can give discounts to their customers. We have been pretty active in promoting these. Ultimately, when I said earlier that we’ve tried a lot things and not many of them have worked, for us the affiliate programs have been modestly successful but not successful to the point that we see them representing huge scale in our business.

We’ve done promotions. We’ve built a full discount promotion system where we can reach out to all of our buyers and say, “Here’s a coupon, share with your friends. They’ll get $20 off. You’ll get $20 off.” We’ve done promotions for our freelancer community, inviting them to bring in customers, their customers, other customers to the site. Those have been, again, modestly successful but not to the point where we see that scaling significantly.

You know, it’s something that I guess I didn’t appreciate until maybe during the past six months, the incredible importance of user experience with product or service because it ultimately translates not just into word of mouth but really as a booster to any other way that you’re going to market the product. Your question about affiliates and incentives, if your users don’t have a great experience with your site, you can offer them a discount. You can offer them a discount that they can pass to their friends. They are unlikely to pass that discount on because their experience will be poor. We really have come full circle to understand that it’s all about user experience. It’s really all about word of mouth. Some of the other tactics, at least for our business, can work really well if we really have a good foundation, strong foundation, with our existing customers.

Andrew: Okay.

Ross: It’s not a big revelation. I think you’ll find a lot of businesses that believe that and as a result succeed.

Andrew: What about blogging? How has that helped your business?

Ross: It’s actually played a pretty important role. From the beginning, we started blogging about all sorts of issues. Some of it was random issues, about graphics, about small business, about entrepreneurs. But about a year and a half ago, we decided that we would change some of our focus on the blog to small business and startup issues. We realized, and it took us a while, we realized that that’s really the community we were trying to address in our blog. We did a reasonably good job of building our designer and writer community. We have 80,000 designers and writers from nearly 200 countries working on crowdSPRING. We changed the focus of our blog to startup and small business issues. We started writing about those issues. How the economy impacts them. The new products that were available for them. Sharing some of our own experiences. So if we ran website optimizer campaigns and made some mistakes or made some revelations in the process, we would write a post sharing what we did and what we learned. We were really fortunate to have gotten some recognition. Our blog is in the top 50 at Ad Age Power 150 in the world. We generally get some pretty good responses from our community to the posts that we provide.

That also actually fed into our newsletter. One way that we promote information, not so much about us, but just information for our customers and a potential customers is we send out a bi-weekly newsletter. A lot of our blog posts make it into the newsletter. We share other contents. In prior newsletters, we have shared some interviews, Andrew, that you’ve done with other entrepreneurs because we want our community to learn not just about the things that we’re doing but the things that other people are doing online that are really helpful for small businesses and entrepreneurs.

Andrew: I didn’t know you did that. I didn’t know you included me in a newsletter. Thank you.

Ross: Absolutely. I started off at the beginning blogging too. I’ve had my personal blog where I really focus on startup issues and entrepreneurs. Some on social media too. I spent a good deal of time in 2009 and 2010 video blogging, creating about 100 different videos. Really, as we were going through some of these struggles on SEO and SEM, working with teams on picking technologies, I would record a short three, four, or five minute video talking about our struggles, some of the mistakes that we made, and really what we learned from that process.

Andrew: Can you tie in orders? Can you tie orders back to the blogging or back to the video blogging?

Ross: Yes, that’s a simple analytics question. We know that people who read our blog come to our site. We know that those people ultimately end up posting projects.

Andrew: Apart from making customers happy, the number one way of getting new customers is blogging? Is that what you guys have found?

Ross: It’s not the number one way of getting new customers because it doesn’t represent a tremendous source of business for us. But it is a way of getting customers. It is a way of building credibility.

Andrew: Is it number two behind making customers happy, or is there something else that’s number two?

Ross: You know it’s hard to decipher that because our greatest source of traffic is direct, and that’s tied to the brand value we’ve created. We’ve done a lot of public relations. That’s one thing we talked about earlier that I didn’t mention. We have invested in public relations. We do a lot of it ourselves. We work with a consultant to help as well. Much of it is literally engaging in other communities. When people write about us, you will nearly always see us visiting the post and leaving a note of thanks. You’ll see us engage in debates in our blog and other blogs on other forums.

Andrew: I see that, actually. Here’s what I did in preparation for this interview. Like I always do, I typed in site colon nytimes dot com space crowdspring into Google search. What did I come up with? That you’re included in a couple of articles, but you also commented on other people’s articles in The New York Times, so you came up that way. I saw that you did that for other blogs, and you must have a community manager who is also engaged in conversation on other people’s blogs. I always think that’s impressive when an entrepreneur doesn’t just come here and say we’re active in the community, we’re commenting on other people’s sites. When I do research and I see that they’ve done that and I see how engaged they are. You guys weren’t writing one or two word responses or two sentence responses. You were really writing like a blog post in The New York Times blog comments section at times.

Ross: Nobody’s ever accused me of being brief. We do think it’s important. We think it’s important for a lot of entrepreneurs and startups to engage in other communities. One of the things that we found is people are very protective of their own community. They’ll invest a lot of effort in working in their own community, whether it’s their blog or their forum. But the reality is that your community is all over the place. They’re talking about you. They’re talking issues that may be interesting to your business. The best way to engage is to try to be in as many of those places as you can be. To try to talk to people in places they don’t expect you to talk to people. Not just about you.

Andrew: One of the ways that I kept seeing your name pop up was just in the media. In fact, I remember hearing Mike Sampson on “On the Media,” one of my favorite shows on NPR, did a great job there, had all the right answers for Bob Garfield, I think was the one doing the interviewing. You mentioned that you guys have a PR company. How long have you had the PR company? What kind of results have you gotten from it?

Ross: We’ve actually worked with two companies at different periods of time and then are now working with an individual. I think from nearly the time that we started, we started working with a PR company. In part because we were trying to build a business and create a market that didn’t exist. So we thought we needed some help to get the media to understand what we were doing. Neither Mike nor I had a lot of experience dealing with media. That’s one area we really thought we could use professional help.

The first company we worked with we thought created a great opportunity for us, or could have created a great opportunity for us. They had a lot of experience in the open source software segment, but unfortunately it didn’t work out for us. After about six months, we decided that we weren’t getting much value. As I said earlier, we tend to be very focused on making sure that when we commit to things that we really plan for a period of time that we’re going to commit to it. If we’re not seeing results, we move on, because otherwise you can end up spending a lot of money and effort.

We hired another firm to work with us and they did reasonably well. They were able to get us into some publications, get us some interviews. But working with a big firm was a challenge for us because we’re a small business. We represent a very tiny portion of their business. While they were interested in what we were doing, we were coming up with more of the ideas. They really were, as best as they could, executing.

Our experience recently has been much better. We found an individual freelancer who had actually had been working at that bigger firm but left at the time and have been working with her. That experience has been really very good. It has done exactly for us the kind of things that we need, and that is come up with a lot of different ideas, give us an education about dealing with the media, make the right introductions. We’re pretty active ourselves in this. When we hire vendors, we do our best to supplement what they’re doing with our own activities. We regularly, Mike and I, talk to journalists on our own. I make it a point whenever I read an article that somebody has written to send them a short note to tell them that I enjoyed the article. It’s not just about crowdSPRING or crowdsourcing, it’s just an article that I enjoyed because that’s the way to build relationships. We found that to be a really good resource for us.

Andrew: Okay. I want to finish off this interview with some action steps for people. My audience keeps saying, “Andrew, tell us what to do. We get into these interviews. It’s exciting, but we want to know what we can do after the interview is over with all this passion and excitement that you have generated in us.” How about some advice on a few topics here that I highlighted in this interview? First, for blogging, any entrepreneur in our audience or business person in general in our audience says, “I see that Ross is building customers and enthusiasm for his business by blogging. What do I do?” Give them some advice.

Ross: The first thing is just start writing. One of the biggest hang-ups for entrepreneurs, generally, is they do a lot of thinking and not of a lot action. When you start writing, some of your early posts are not going to be especially good. I laugh at some of the early posts that I wrote. But you can’t get to a better place, as a writer, until you actually start. It doesn’t need to be a fancy blog. It doesn’t need to have a fancy header. Find a blog somewhere and just start writing.

Second is pick a subject area. Pick a niche for your blog, because you build an audience based on their interest in what you’re writing about. If you’re writing about a lot of different things, you may have an audience of interested people but they may not be interested in the things that you really care about. If you are catering to small business or specific kind of small businesses like restaurants then you ought to think about blogging about issues that are of interest to restaurants. That’s the probably the second best piece of advice.

The third is focus on interesting topics, not lots of topics. A lot of people think that you have to write every day to keep an interesting audience. Ultimately, everything that we’ve seen on crowdSPRING and everything I’ve seen from other people, from my friends and other entrepreneurs, is you have to write things that are interesting to your public, not lots of things. If you’re just creating content for the sake of creating content, people will quickly see that. If you’re creating valuable things that they learn from, that they retweet, that they share with their friends, then that will build your community. Great example of that is 37signals, they have a phenomenal Signal vs. Noise blog. Their content is outstanding. They have a huge audience of people that love their products, love that they share this information and tell other people about it.

Andrew: Let me ask one other one and then I’ll move on to the next area that I have. You guys seem to be very good with lists — top five ways to do this, seven ways to do that. Very effective?

Ross: It could be. There’s a mix . . .

Andrew: Sometimes yes, sometimes no.

Ross: Yeah, mixed views about lists generally. Some people don’t like them. In part, some people don’t like them because these lists tend to be pretty mathematical and not particularly substantive. Lists of five things isn’t especially helpful. Our goal, I’ll share my goal when I write and Mike’s goal when he writes something for our blog. Will the reader, after reading the blog, have an action item? Will they be able to do something that they didn’t know before after reading one of our blog entries? If the answer is no, we don’t write it.

Andrew: For example, can you give me a last blog post that had an action item attached to it?

Ross: Mike posted, I think just today, a video entry on writing business plans. This is the third in a series. Today’s was on refining your ideas in a business plan. The talk was about some of things that entrepreneurs can do as they start gathering their research and consolidating their ideas so they can move on to the next step. I think there’s some great suggestions in there for entrepreneurs for what they can do with their own business plans. That’s a good example of one.

Andrew: Gotcha.

Ross: I just did one last week on crowdsourcing transfer 2011 and the areas in which the industry seems to be moving. For people that are interested in crowdsourcing, let’s say in the mobile space, I tried to give a lot of references to people already in that space. If you’re thinking about competitors, if you’re thinking about the industry, you can quickly research it from the information that we provided in these posts.

Andrew: Okay. I have two others. Newsletter. How about one piece of advice, one actionable piece of advice for somebody who wants to use newsletters as well as you guys are?

Ross: Titles are as important, if not more important than the content. We do a lot of experimenting. We do a lot of A/B testing including newsletters. It’s amazing how a small difference in titles can impact open rates and click through rates. A lot of people spend an inordinate amount of time on content for their newsletters and then give second thought to the title. Think about titles. Good titles will get you many more readers and ultimately will get people interested in what you’re sharing.

Andrew: Okay. Last item on the list is PR. One advice for somebody who’s doing their own PR since you guys are good at that.

Ross: PR is tricky. The best advice that we can give for PR is don’t rely strictly on the person that may be helping you with PR to handle PR for you. I think there’s a good collaboration that needs to take place. If you’re an entrepreneur, even if you’re slightly uncomfortable dealing with journalists and with other people, it’s really important to be in the marketplace.

Andrew: Can you give me an example of how you guys did that? How you actively, personally, reached to someone in the press and got a good story written about you or got included in someone else’s story?

Ross: For me, PR isn’t just about reaching out to a journalist and the press. It does happen. I’ll tell you what I regularly do myself. I read a lot of publications every day, a lot of RSS feeds. If I see somebody commenting on the crowdsourcing industry, it may be a small business consultant, I’ll send them a note. It may be a New York Times article on crowdsourcing and they may quote somebody. I’ll send them a note introducing us and offering to be of assistance even if it’s on background next time they’re looking at the industry. If I see a company mentioned that I’m not familiar with, I might send a note of introduction. These are not lengthy e-mails. They are a couple of sentences. “Hey, I’m out here, I enjoyed your quote and just wanted to let you know that I’d love to talk.”

Andrew: Got an example of a result that came from that?

Ross: We’ve had a number of articles that have been posted including in some major publications. We’ve got some plug posts written about us through that effort. Ultimately, you build relationships with people, because you never know. Sometimes those people will be interviewed for articles unrelated to you and will mention your business. It’s all about relationships. Good PR people know how to build those relationships. Because social media has such an important role today, these relationships can be built anywhere. We’ve had phenomenal success from Twitter, from Facebook, and building relationships with people that are writing for blogs in major publications.

Andrew: How about one example of a reporter who you e-mailed and said, “Hey I like your post, your article on crowdsourcing, just want to let you know hey we’re in this space,” then yada yada yada, you ended up in their article in the future.

Ross: I won’t mention names, but there was a person with whom I built a relationship though Twitter on a number of different topics. Not just crowdSPRING. It actually started about totally unrelated issues. Who ended up ultimately writing about us in Business Week.

Andrew: Interesting. So do you actually, do you keep a list on Twitter of reporters who might be covering your space so that you can engage in conversation with them? Do you recommend that?

Ross: I don’t keep that list. But people can, it’s easy to do with modern tools. Ultimately, maybe I’m not as deliberate as I can or should be with PR and partly because that’s not my main focus. I have a sense of some of the people I’m talking to. In part, I try to talk [interference], and so I’m not going to spend a lot of time talking to a reporter if I’m not learning much. That’s why I don’t classify it that way. I don’t have just a list of reporters that are writing about our space. But I do tend to follow and engage with people that are writing about crowdsourcing, that are writing about the advertising and marketing space, small businesses. Ultimately, in the long-term view, I want to build relationships with them. I want to be helpful to them. If the opportunity comes up that they’re writing about this space, I would sure love for them to mention us.

Andrew: All right. Well, thanks for doing the interview. The website is crowdSPRING, and if people want to see the blog, where do they go?

Ross: So, blog.crowdspring.com.

Andrew: Okay. Any other way for them to connect with you?

Ross: They can connect with me on Twitter. It’s Ross Kimbarovsky. I also do our corporate account at crowdSPRING on Twitter.

Andrew: Ross, you’ve got your Twitter name as Ross Kimbarovsky.

Ross: Yes.

Andrew: Oh, boy.

Ross: And it was available!

Andrew: Really, the other Ross Kimbarovskys did not take the twitter handle before you?

Ross: You know, part of it, I thought long and hard about the Twitter handle. My blog is at rosskimbarovsky.com. I decided that this is in part an effort to try to keep my tweets brief. Keep as brief as possible.

Andrew: Right, when your name takes up so many letters, you can’t go much longer with your content.

Ross: You know people talk about it. The Twitter has made me a better writer because it’s forced me to really think about not just how to write succinctly, but if I’m interested in getting people to retweet some of the things I’m writing, I have to leave enough space. My name sure doesn’t allow for that much space. So it’s actually worked well.

Andrew: That is good discipline. All right. Well, everyone knows to go check you out now at rosskimbarovsky, spelled like it’s pronounced, so you can just follow crowdSPRING. Thanks for doing the interview.

Ross: Thanks very much, Andrew. Great opportunity to talk to your audience, and you keep doing great work.

Andrew: Thanks, and thank you guys all for watching. I’m Andrew. If there’s another entrepreneur like Ross in the audience who’s listening, entrepreneurs who have built a successful business, not one who’s just starting out, I want to make sure to keep this focused on the one thing that I could do well, which is grill entrepreneurs about how they built their business until they either reveal everything or want to punch me in the face. Was it getting a little harsh there by the way there, Ross, at some point in the interview? I feel like I, I don’t think I was asking too personal question, but I do feel like I was pushing because I was really curious about your business. You tell me, honestly.

Ross: We’re comfortable talking about our business, because ultimately we’ve been very fortunate when we have an issue or we see somebody doing something well, we do our best to ask them. We encourage other people to ask us. It’s one reason why we blog so much and video blog. We made a lot of mistakes. We’re not bashful. We share those mistakes with people because we learn a lot from companies that have made mistakes as well.

Andrew: I got the sense in the beginning when we did that pre-interview that you’re comfortable being asked certain questions and that I wasn’t pushing too far. But when I kept asking where were you getting your customers, I felt at times like Ross must be freaking sick of me, he’s got to be looking to see if he could just go hang out with his daughter. What the hell’s he doing on Skype with me? Any of those feelings?

Ross: It’s an important area. It was an important area for us and I imagine for nearly all of your listeners. We regularly talk to young startups and entrepreneurs who always have those series of questions. There’s not . . . I wish there was a formula where I could say here’s what you do to build a marketplace. There have been some great marketplaces built, but there’s not a formula. The best approach is a methodical one. You do everything that you can. It really translates down to guerilla tactics. You have to one by one try to find customers, try to persuade them to post. In the beginning, you don’t have brand recognition. You probably don’t have a very good product. You’re not sure about your community. Your customer service may not be up to par yet. Everything about your company is literally phase one, you’re 1.0, and it probably sucks. You do whatever you can to try to find these customers. It’s different from different businesses.

Andrew: I’ve had some really successful entrepreneurs come on here and say they will never touch a marketplace based business because they have to pursue new users in two different directions. They have to go after, in your case, you have to go after the freelancers and you have to go after the customers. Both are very hard to get but especially for new business. But to pursue both areas at once, really tough. But here’s what I found in my interviews, there are a few ways to start these marketplaces. There are a few ways that have worked for entrepreneurs.

One is what you did which is go to friends and family and ask them to be on the one side of the business. Then go and recruit individually the people on the other side of the business. I think Will Schroeder did something similar. He was building a database of investors that he was selling access to and just went to all of his friends and he recruited them. What he did though was he manually, I think, put their information into his site. He said, can I put your information in and then he added it. I wouldn’t be surprised if he added some without even needing to get permission.

Second thing I’ve seen is scraping. I think it was Oodle or something that the online classifieds. They just went out there and started scraping content. They didn’t wait for businesses to list their stuff on Oodle, they just scraped content from other sites and then they went after different websites that needed that content.

What else did I see? Pay, I’ve seen some people do that. That doesn’t seem to work very well. You pay to get freelancers in your system. Pay to get customers. Fake members, I’ve seen that done a lot but nobody who’s willing to come on a do an interview about that. Fake accounts and you put it on there. Maybe there’s some others in the audience, somebody will come on and tell me how they did it.

Ross: We were fortunate that we have not had to spend any money marketing to freelancers. The part of what we did was level the playing field for freelancers. They can compete just on the basis of their talent. We’re from 0 to 80,000 in a little bit over two years. Today we have people, I think, from over 220 countries visiting our site. They speak 168 different languages. We were fortunate that most of our effort has been on finding buyers, the people that post projects. But it is tricky. In the beginning, we had to find both. As you said, you’ve talked to people that have used different mechanisms, different ways to find both sides of their community to build a marketplace. There’s no one size fits all. It does get tricky. It requires a little bit of planning. It’s a challenge. We did not expect it to be as great a challenge when we were initially planning. Because we realized we’d have two build sides of the marketplace, but we didn’t really think through all of the ways that we would need to grow it. It’s been a huge challenge. That’s why we have experimented so much with different kinds of marketing and PR and advertising. It’s ultimately why we found that 99.99% of it fails. It’s not easy to do.

Andrew: I want to keep going and going here. I have follow-up questions here. I want to just keep having a conversation. Maybe what we’ll do is have you back on again. I didn’t bring up the spec work controversy. I think I’m tired of that controversy. I don’t even know where it stands. We’ll save all the other stuff for another interview. Thanks for doing the interview, Ross.

Ross: All right, Andrew. Thanks very much.

Andrew: You bet. Bye everyone.

This transcript brought to you by www.Speechpad.com.

Sponsors I mentioned

Shopify – Remember the interview I did about how the founder of DODOCase sold about $1 mil worth of iPad cases in a few months? He used Shopify. It’s dead simple and very effective.

Grasshopper – Don’t make the mistake of comparing Grasshopper with other phone services. Check out their features and you’ll see why Grasshopper isn’t just a phone number, it’s the virtual phone system that entrepreneurs (like me) love.

Walker Corporate Law – Scott Edward Walker is the lawyer entrepreneurs turn to when they want to raise money or sell their companies, but if you’re just getting started, his firm will help you launch properly. Watch this video to learn about him.

  • http://twitter.com/mrschwabe Schwabe

    Nice to see an innovative concept in action! Great interview guys.

  • http://dahito.com Louis-Pierre Dahito

    Probably one of the best interviews I have listened to in a while!! Good job guys… There was a lot of valuable information here. Will listen to it many times. Thanks for sharing!

  • Vidinotes

    Ross touched on an area I’ve been struggling with: how to analyze/model an business opportunity when you believe you find one. Are there books or other tools Ross would recommend to neophytes like me?

  • http://twitter.com/PillarMarketing Wes

    I liked:
    - That he’s an older guy with a family and had a successful biz
    - That he tried to “disprove” the biz model before starting it
    - That paid ads didn’t work for him.
    - The info on how he uses social / blogging

    p.s. Andrew really picked him apart! Totally dissected.

  • http://www.socialcow.com Chris Pritchard

    Great interview, it was very in depth. I was expecting to hear more swashbuckling stories. Is this guy just a part time pirate, or what?

  • http://twitter.com/peterjhart Peter J. Hart

    Andrew, a popup email collector? Please no! :)

  • http://www.bread.ly/ Bread.ly

    This interview was great. Very inspiring and great 101 on creating marketplaces. Love the way you dig into the details Andrew.

  • Ertygrhhffhedd

    b2cshop.us

  • Pingback: Getting to Critical Mass: How to Start a Marketplace Business

New Here? Start With These