The Marketing Secret Weapon Behind Fast Growing Startups – with Sean Ellis

Posted on Jun 29, 2010 - 2:50 PM PST

I need to be honest and admit that an interview is a pretty weak way to find out how Sean Ellis helps shape marketing at fast-growing startups. He’s fiercely protective of his clients and techniques. But I HAD to have Sean on Mixergy because my past interviewees kept urging me to interview the man they trust most with their marketing.

And they were right. Even though he cited NDAs more often than I’d allow any other Mixergy interviewee, I know you’ll get a lot of value out of this interview because you’ll see how Sean drove massively scalable growth at companies like Dropbox, Lookout, KISSMetrics, Grockit, LogMeIn, Xobni, Eventbrite, and others.

The FULL program


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About Sean Ellis

Sean Ellis is the founder and principal at 12in6 Inc., a firm that helps startups transition to high growth companies. Helped first six startups each achieve massively scalable growth (worked with most from early Beta): 1. Uproar (IPO) 2. LogMeIn (IPO) 3. Xobni (Khosla Ventures, FRC) 4. Eventbrite (Sequoia Capital) 5. Dropbox (Sequoia Capital) and 6. Lookout (Khosla Ventures)

He blogs at Startup-Marketing.com

(The best way to learn how he works is to have your investors introduce you to Sean. The second best way is to buy him a coffee or beer at a conference.)

*Raw* transcript


This is a raw, mechanical transcript. Readers (like you) are editing a better version here.

Andrew Warner: Before we get started, I have to tell you about three great companies. PicClick is the first. It’s a one-person start-up from my friend Ryan in San Diego. PicClick gives you a visual way to search eBay, Etsy, and other sites. Ryan is already doing one million product sales per month on PicClick.com. Not hits, but sales. Go to PicClick.com to see how he’s doing it.

99Designs. It’s the largest crowd-source marketplace for graphic design. When I used them, I wrote a description of the design I needed and how much I wanted to pay. I got a bunch of designs back. I gave each designer feedback. I picked the one I liked best and that’s the only one that I paid for. Try them for logo design. If you need a blog design use them. If you need app icons use them. There’s so many different reasons why you night want to use them. Check out 99Designs and you’ll see why so many past Mixergy guests have used 99Designs.com.

And Grasshopper. I’ve had them now as my longest sponsor for a reason. Not only does my audience love them, but you might have heard several guests who are on Mixergy say that they use Grasshopper.com as a result of these messages and they love it. It’s the virtual phone system that entrepreneurs like me love because it offers us multiple extensions, music on hold, call forwarding. It gives an impression of having a big professional organization but also caters to your need to travel and to be flexible. Check out Grasshopper.com.

Here’s your program.

Andrew Warner: Hey everyone, it’s Andrew Warner; I’m the founder of Mixergy.com, home of the ambitious upstart. Today I have a guest that’s been the most requested guest here by other guests. I think Hiten Shah I interviewed asked me to have you on. I can’t even think of the list of people, but your name has come up a lot in my interviews and I am so excited to have you on here.

Sean Ellis: Well, thanks, Andrew.

Andrew: Sean Ellis is the secret weapon behind start-ups that have had incredible growth. Here’s a partial list of the companies he’s helped, this is partial: Dropbox, Eventbrite, LogMeIn, Lookout, Xobni. Incredible list. He has a systematic metrics-driven approach to marketing. Sean, welcome to Mixergy. I want to understand that systematic metrics-driven approach.

Sean: Sure. Thank you. I’m excited to be able to share it with the listeners.

Andrew: I want to understand the steps you take a start-up through. I thought the way we could do that is to ask you about the rough outline that you use when you approach a start-up, then we’ll go in and put some flesh on that outline by talking about how you applied those steps with companies that you worked with in the past. So, can you give us the rough steps?

Sean: Sure. It’s been a bit of a moving target on what exactly those steps are. A big part of my motivation over the last couple of years has been to figure out those steps and to refine the steps. This is a snapshot of where I am now, which is essentially . . . I’m going to start as any sort of good start-up would, to state the problem that I was trying to solve and to show how the solution of these steps has come in. One of the big things that I recognized after running marketing at two start-ups over a ten-year period, both of them did really well. Coming off of the second one we just filed for an IPO listing, and really looking at that second one and trying to figure out — OK, I could jump into another start-up, but I was honest enough to realize that I had some pretty good things that were in place there that allowed me to be successful. For me, part of it was that I tried to figure out what are those elements in the first place to where I can be successful. I think a lot of marketers don’t spend enough time thinking about that and so you get some really talented marketers that fail because they put themselves into the wrong place. At first, I didn’t realize what this was, but what now is sort of each of those phases that I take a company through or that I need in place, one of the most important is that they need to have what many people call product/market fit. Without product/market fit, let’s kind of talk about that in more of a, well, we’ll go into the details, you wanted me to take a high-level first.

At its very essence, product/market fit is somebody has to need the product at all. If nobody needs the product than great marketing tactics aren’t going to work very well. The first thing that I’m looking for is just trying to find opportunities where people actually need the product and then hopefully they reflect big enough markets that we’re not going to hit saturation in too short of a time.

Andrew: OK. Therefore, that’s the first thing that you do.

Sean: That’s the first thing that I’m looking for. To me that’s the riskiest part of any start-up, is actually creating something that matters to people at all. I actually avoid that space because that’s something that to me is really up to the founder of a business who are really rewarded for figuring that out and if they can’t, then that’s OK. They may have to hit the restart button and try again. Many founders don’t find that success until the third or fourth business. For me, my expertise is not in creating something that people want. I don’t consider myself to be all that visionary. For me it’s more about finding something that gets that early validation. You don’t need a ton of growth at that point. You just need some early feedback that says, ‘I consider this product to be a must-have. I would be very disappointed without this product.’ If you have enough people saying that then you have that core element that says,
‘Wow, with the right execution, we’ll be able to build a real business on this.’ That’s the point where I come in. I think the problem you have with many businesses at that point is one, it takes a lot of patience, potentially, to reach that. With the first version of your product, you may come out and nail it, then it doesn’t take a lot of patience. More often than not, it takes a lot of reiteration, a lot of patience, keeping burn really low until you get to that point, and then you have to shift into this growth mode. It’s time to actually try to move this business forward.

Andrew: So, if they don’t have that product/market fit yet, they’re not ready to work with you. Once they have that, then the conversation can begin because at that point you have the expertise to help them grow.

Sean: Right Exactly.

Andrew: Let’s assume then that you’ve got somebody who’s at that stage. They’ve got a product with the right fit, but it’s still early stage. What do you do next?

Sean: Then the next thing is, potentially you could go and you could just try to grow that business. What you would do is you’d have a really hard time trying to grow that business. I’ve learned that the hard way. In the early days of LogMeIn, we created a product and I went out and tried to build channels to grow that business. I hit a wall pretty quickly. We just could not find effective ways to acquire new users in a sustainable sort of way. Part of that when you looked at the conversion process was that it was very inefficient. We were losing people. For every thousand people who hit the website there may only be ten people who were actually getting to a good experience with the product. All the money you spend, if you’re paying to acquire users, is to get people to the website, and all the value that you unlock in your return on that investment is based on your ability to give people a good experience. We were really bad at that. Traditionally a marketer says, ‘Maybe I’m going to work on the messaging a bit.’ That falls within the domain of most marketers. ‘Maybe I’ll even do some landing page testing.’ That’s still within the domain. Once I get that surface-level thing, the product is what the product is. That’s outside my control. I’m going to go out and try to grow this business and it’s really hard to do without an efficient conversion process.

For me, a big part of what I learned at LogMeIn and what I’ve tried to take to companies afterwards and really specialize in and get better at is, how do you take a product that is good and take the on-ramping of new users and have a really systematic way of getting that so that you’ve got really efficient on-ramping of new users. Sort of the first step in that is messaging, which I touched on. Most marketers know that messaging is important. One of the things that I’ve really learned over the past couple of years is how important. It’s not just messaging that drives conversions. It’s actually messaging that reflects why people love the product. You need a certain amount of calibration in that that many people just don’t look for, and I didn’t. Many things that I’ll talk about today are things that through my first two, definitely my first start-up, I didn’t do at all. The second I got a bit better at it. Really, each start-
Up that I’ve worked with I’ve gotten better at each of these elements.

Getting through the big picture really quickly, kind of going back, product/market fit is the essential piece that you need to build a business. Then it’s this period of transition where you need to figure out a good, efficient conversion process that starts with messaging, so that’s where the first project is that I deal with many companies. Help them figure out why do people consider this a must-have and how can we build messaging.

Andrew: So, it starts with messaging and then it goes to on-ramp, then what else is there? Let’s just go top-view and then we’ll go down-view.

Sean: OK, so the messaging that reflects that good experience then the fine-tuning of the funnel that delivers that good experiences. Then to some degree in there, you need to layer in the economic model that allows you to fund growth. All of that is based on an understanding of why the product is a must-have and the benefits that people are getting out of it. Then you’ve got the economic part. Those are really the critical things that you need to have in place before trying to grow the business.

Andrew: OK. So, let me see if I understand this.

Sean: OK.

Andrew: A company comes to you, you want to make sure that there’s a right product/-market fit. Great product, the few people who are using it see it as a must-have, and maybe those that don’t yet know about it would see it as a must have if they were introduced to it. At that point, you say, ‘It’s time for us to start marketing it. That’s what I’m great at.’
The first thing you do is you help the company with messaging to help them explain what it is that they’ve created. Then you help them with the on-
Ramp to get new people into that funnel, into the system. Then you help clarify the funnel to make it into as efficient a process as possible. Then you make sure that there’s an economic model on top of it so that they can, for example, go out and spend money on advertising and grow the business through advertising and know that the profits will be there. Alternatively, if it’s viral marketing or if it’s SEO, you want to know that there’s enough of a conversion rate through your funnel that you can afford to spend time and resources to tweak the SEO or to tweak your viral marketing.

Sean: That’s a really good point. You bring up one important point, that ultimately how you layer that economic model in that phase; you need to have a pretty good idea of how you’re going to try to grow the business. It may not play out exactly the way you think it is, but if you think this is primarily a business that’s going to grow virally, then you can have a relatively low friction, low cost, or low value per user on sort of a lifetime value-level and you can still build a really good business because viral marketing is essentially no cost on the customer acquisition side. You can have relatively low revenues per user to support that. If you’re going out through search engine marketing or through radio advertising or through something that’s going to have a relatively high acquisition cost per user, then you really need to obsess on an economic model that is going to give you a high revenue per user that’s going to fund those channels.

Andrew: OK. All right. So, let’s put some flesh on this. The guys from Dropbox, they came to you. What did they have at the time?

Sean: I started working with them about the week of Tech Crunch. I can’t go into many details on many companies because I’m under NDA. My NDA does say that anything that they said publically, I can repeat. Drew has been really open so they’re a good company to talk about. One of the things that Dropbox, what Dropbox had that was really good was a very easy to use system where people could install it and however you’re articulating the benefit of what they deliver; essentially, if you installed it on multiple computers you were able to synchronize your data across those computers.

Andrew: So, Dropbox is that hard drive in the cloud?

Sean: Yes.

Andrew: When they came to you, they already had the hard drive set up in the cloud?

Sean: Yes. The product was pretty close to what it is now. They’ve done some tweaks to it, but it was pretty close to what it is now. The early users on it loved it. They had basically the piece that I would say, they had product/market fit. They had some early users that came in. They were pretty creative about bringing in many users around that launch. To me probably the biggest value that I gave to Dropbox was it’s very tempting to listen to all of the marketing experts that are out there who essentially say, ‘You need to be in a category. You need to position this product in a way that you can bring in a lot of new people.’ The closest category to Dropbox when they came out was either back-up or cloud storage. I was able to help Dropbox really dig into the customer-base and understand that wasn’t why customers loved that product. They loved that product for some of the other benefits that I just talked about, particularly the synchronization of data across devices as well as the ability to collaborate on data between two separate people so they’ve got a shared drop box that’s synchronizing between them. To me, that’s that piece that I talked about that if you’re not really tapping into why people loved the product in your messaging and in your early experience you’re going to miss the ability to. Essentially, what’s amazing is if you message a product as back-up or if you message a product as something that’s inconsistent with why people love the product, people will use that product differently. They’ll come into it and they’ll have different expectations about the product. When I started with Dropbox they basically had very little messaging on there because it was all engineers. Engineers go one way or the other. They either have lots and lots of messaging that describes every single feature that exists or they don’t have any messaging. Fortunately, these guys had no messaging. It was a lot easier to then tap-
In and only highlight the things that really represented why people loved that product and to keep that calibration going. I spent a lot of time with them identifying friction in the early acquisition process of the user and trying to front-load the experiences that ultimately created very gratified and loyal users of the product.

Andrew: OK. Let me dig into what you’ve said so far. The first thing is you’ve said there was already an audience there of people who loved Dropbox. How did you know that? How did you measure it?

Sean: One of the things that I’ve really evolved over time is my surveying ability. At my first company, Uproar.com in the 1990s, it was a pure A/B testing company. We did no surveying. LogMeIn, we got better at it. Just over time, I’ve gotten better.

Andrew: Uproar-wise, we’ve talked about these two companies that you’ve worked with. Uproar was an online gaming website, right?

Sean: Right. Uproar was an online gaming website.

Andrew: And LogMeIn allows you to log into your computer from anywhere, so that if I forgot some file on my desk at work or I needed to adjust something on my desk at work from my computer at home, I could log in and do it.

Sean: right.

Andrew: So, those are the two companies that you’ve brought up so far. Going back to how you knew at Dropbox that there was passion.

Sean: Basically, it’s a question that I came up with when I was at Xobni earlier. It’s one that’s become really important with everything that I’m doing which is basically asking the early users on the product, ‘How would you feel if you could no longer use this product?’ What I’m really focused on is the users who say that they would be ‘very disappointed’ without the product and learning everything I can about those users and kind of ignoring everybody else.

Andrew: So, how did you do that at Dropbox? How did you even get to ask those questions?

Sean: Well, Dropbox had enough early users that we had a really big survey sample group, so we were able to send a survey out to users. Anyone who’s curious on the key questions on the initial survey that I send out, I have a survey template online at survey.io that lists those questions, but the one important question on that survey, the most important question, is,
‘How would you feel if you could no longer use this product?’ What I found, without going into the specific details of the answers on the Dropbox survey, what I find is that there are two interesting groups. One is the people who say that they’d be ‘very disappointed’ without the product. They give really the key nuggets of that’s the value we’ve created and how do we really tap into that value to grow the business. There’s a second group in the people who answer ‘I would be somewhat disappointed without this product.’ That has some pretty interesting information. The biggest thing that I see on the ‘somewhat disappointed’ group is, the most important things is, I have a following question that asks whey they selected that. Many of the people who say, ‘somewhat disappointed’ they refer to ‘I would just use product X if this one wasn’t available.’
Therefore, depending on the attribute that they’re focused on, if they’re focused on something that the initial product uniquely offers, there is no product X. If you tae the Dropbox example, the normal pressure that a lot of people gave me, and marketers in general are told to position on existing categories, the existing category would have been cloud storage or back-up and that’s a really tough, crowded space. However, what I was seeing consistently in many companies, again without getting not details of Dropbox, are people who say ‘I would be very disappointed without’ or ‘How would I feel? I would be somewhat disappointed.’ The primary benefit that they’re getting is usually something that many other products can give them and so it’s a commodity attribute that basically makes it a not very defensible business and not one that drives many must-have users.

Andrew: I see. Therefore, if you’re asking this question, ‘How disappointed would you be?’ and many people are saying ‘Somewhat disappointed.’ You dig in deep and you realize it’s because there’s an alternative product out there, and then you understand this isn’t essential enough for this start-up to grow. If you’re seeing many people coming back to you and saying, ‘There is no way I could live without this.’ Then you want to find out what is it about this that’s making them so passionate.

Sean: Right, and that’s what this survey really give us is the ability to segment that initial user group and really tap into why people consider it a must-have. Then there’s always going to be a group of people who say, ‘I get no benefit from this product. I would not be disappointed at all if I could not use this.’ I just ignore those people. Part of the process that I go through is that crowd-sourcing process where essentially the company’s created something, they’ve put it out there, it may completely fail, nobody likes it, but generally, there’s pockets of people who like it at different levels and that’s what’s really great about this early survey. It gives you the ability to say here’s the group that say, ‘I would be really disappointed.’ Here’s the groups that say, ‘I’d be somewhat disappointed.’ Here’s the group that say, ‘I would not be disappointed.’ By focusing on the ‘very disappointed’ people and really trying to learn what is it about these people and the use cases and the benefits of these use cases, they really hold the keys to being able to build a successful business. I’ve run this survey across a couple hundred companies. I get many just inbound people saying, ‘Hey, here’s my survey results, what do you think?’
Therefore, I’ve looked at it across a couple hundred companies now. What I consistently find is that people in the single-digits ‘very disappointed’
So 7 percent, 8 percent, even 20 percent of the people saying they’d be ‘very disappointed’
Without it almost all of those companies have a really hard time getting traction and growing their businesses. Once you get around 40 percent or more, those businesses usually get traction and sustainable growth. For me, that’s really the piece that gives you at least some level, if you really drill into why I’ve done that, if you’re considered a must-have then you’re very unlikely to turn from the product so they’ve got this ability to have those early users stick and stay on there. They wouldn’t say they’d be
‘very disappointed’ without it and then suddenly uninstall and stop using it. It gives you that sort of sustainability where your early users aren’t turning and you’re creating real value. Generally, word of mouth is pretty correlated with that as well, so a high level of word of mouth starts to bring in some organic growth that comes in on top of that ‘very disappointed’ line. So, even before I come in and work with a company if they’re good at creating a product that makes people consider it a must-
Have then those two elements together are actually going to give you somewhat of a positive growth curve in the business without any real effective marketing.

Andrew: I see.

Sean: I think a lot of my success is being in the right place at the right time by looking for those metrics.

Andrew: Or being good enough that the people that have invested in companies that have hit those metrics would send those companies to you to help them grow,

Sean: It’s sort of a self-fulfilling, my deal flow is really good because of the success; my success has been good because I’m looking for those sorts of things. That doesn’t create particularly interesting businesses, that creates sustainable businesses that do OK. Really, the role that I’m doing is taking that growth curve that would be somewhat positive and basically saying if I can take conversion rates from a really low number and suddenly bump those up to a stronger number, now we’ve got twice as many people at least. I’ve had companies that are ten times as many people converting to a positive experience through really good funnel optimization. Now you take that word of mouth that’s happening and those people don’t stick until they’ve had a good experience. That’s why it becomes so critical to get that first user experience right, because otherwise you’re just wasting all that positive word of mouth. They’re just going to be bouncing off the site. Getting that efficiency right means that you’re getting more of those people to actually come in and stick which then takes your growth curve up another notch, so you’re steeper on your growth curve. That’s what’s nice is that before we’ve even started to focus on growth, just getting that first user experience right through funnel optimization already starts to steepen the curve. We definitely saw that at Dropbox as we started to obsess on that first user experience.

Andrew: OK. So, our first goal as entrepreneurs, as product developers, is to build a product that’s so good that when we survey our audience about it, not sell them, not try to grow the audience, but just survey that audience that we already have, our goal is to have a double-
Digit response rate of people who say, ‘I can’t live without this.’

Sean: Yes.

Andrew: You did the example of Dropbox. When I interviewed the founder of Eventbrite, we talked about how using the different survey, just that one question that he asked, which was, ‘How likely are you on a scale of 1-
10 to recommend Eventbrite to a friend?’

Sean: That’s a net-promoter score. That question.

Andrew: We talked about the book behind that. We talked a little, I think, about the research behind it. Once you get that up, then it’s time to focus on the second thing, which is the messaging, and the messaging comes from going back to those people and saying, ‘Why? Why did you give me a high net-promoter score? Or why did you say you can’t live without this?’ Right?

Sean: well, I want to make sure that I distinguish between net-promoter score and the ‘very disappointed’ number. I do think that they’re actually different. I would say, for example, that Virgin America probably has a pretty high net-promoter score but if you look at it, it’s not that differentiated from different airlines, so, in a sense, net-promoter score becomes more important in a relatively undifferentiated category. The question that I’m talking about, if you’re a brand new company coming into a category that exists and you’re not very differentiated, you don’t have a chance. Therefore, you have to start by being able to create a must-have product. It’s not that you don’t have a chance, because clearly Virgin America would be an example of a relatively new company that has been successful. To me, I wouldn’t put my money on companies being able to come in with a nice-to-have product and a high referral rate, a high recommendation rate, but on a nice-to-have product. I would always put it on the must-have product because of the sticking. The one thing that a high net-promoter score is that you’re a lot more vulnerable if you suddenly burn your relationship with users, that net-promoter score could drop overnight. One bad Puerto Rico move. Where, if you’re a must-have product, you can screw up many things on the relationship with the users, but if they don’t’ have a good alternative they’re going to stick with you. They’re going to hope an alternative comes out, so you should definitely maintain a good relationship with users. I just wanted to separate, I think having a good number on that does generally correlate to a good recommendation rate, so there’s some correlation, but I think for a start-
Up that net-promoter score is not as important n the early days. Fortunately, in the case of Eventbrite, they were really strong on both numbers. The ‘very disappointed’ number to me is something that is essentially a milestone for the business to basically say, ‘We’ve created something that is now a must-have and we can go from that super low-burn, super patient, conservative mode of just gathering feedback, where it may take us years to get there.’ To ‘All right. This is an inflection point in the business where our priorities have changed. We want to start growing this business as quickly as possible. There’s a few things we need to do first so that we can efficiently grow the business.’ That’s the part where I come in to essentially help them get through those parts quicker because I’ve done it multiple times.

Andrew: OK. I see. You’re saying, not just survey the audience but survey to find out how many of them must-have the product. This survey identified with you a lot. I think KISSmetrics, that this is one of their template surveys that they offer for free that anyone can put on their website.

Sean: Yes.

Andrew: The ‘Sean Ellis Must Have Score’. We need a good name for that.

Sean: I don’t know what it is.

Andrew: OK. You found out how many people, you found out there’s a significant amount of people who are passionate about the product and can’t live without it. You want to then find out what it is about the product that makes them must-have it.

Sean: Essentially, you’re trying to orient the whole business around that if you can really dig into that. On the survey.io, one of the questions that’s on the free template is, ‘What is the primary benefit that you’ve received from this product?’ You’re just trying to get some sort of consistent signal from the people who say it’s a must-have, what is the primary benefit that they’re getting from the product. The more that you start to understand that, that starts to give you some important insights on all parts of the business. Obviously, messaging as I talked about, but also on what is the part of the experience that delivers that benefit first and how can you front-load that.

I think Pandora is a great example of a company that changed the sign-up process where most companies have a registration form and a series of things that you go through, they basically just had, I know they switched away from it for a while, I think they switched back, but they had a box that says, ‘Enter the name of an artist or song that you like.’ You enter it in there, suddenly you start hearing music from similar artists or that artist, and they’ve gratified you. You’ve got a good experience to where they can start to ask you to do more things. It’s when you try to change that radio station that it asks you. ‘Do you want to save that station?’
Ultimately, whether it was through luck or some sort of a similar process, they realized that that’s the experience that made people say, ‘Wow. This is great,’ and how could they get that as early as possible. They’d turned it into a one-step process to get to that experience. You have not acquired people until you’ve delivered a good experience. I think that’s an important piece to think about. Many people assign a value to registrations, but registration is nothing compared to delivering a good experience. If you deliver a good experience, they’re going to repeat visit. They’re going to tell people about it. They’re going to convert to a purchase. There’s many benefits that you get from delivering a good experience that some traditional metrics point you in the wrong direction with things like, ‘Oh, I got a registration.’

Andrew: I see. OK. I’ve read you talk about this ‘The Gratification Engine’ is what I think you call it. What’s the gratification engine at KISS Insights? Or at KISSmetrics, the same company, two different products.

Sean: That’s a good question. I think we’re still figuring that out. For a lot of business, again, I’m under NDA, so I can’t go into too much detail under any particular business, but for me the gratification engine for any business starts with that must-have experience that we talked about. The gratification engine is ‘What’s the process of delivering that must-have experience?’

Andrew: Let’s talk about that at LogMeIn. That’s been talked about a lot. What was the gratification engine at LogMeIn?

Sean: Why don’t we talk about GoToMyPC, one of LogMeIn’s competitors, then I’m definitely not in violation of an NDA on some of those things.

Andrew: OK. Actually, I’m a paid user of GoToMyPC whenever I’m on vacation and need to access my computer I log into my computer using GoToMyPC and it’s that easy. I love it. I’m also a user of LogMeIn.

Sean: Good. So, think about your first experience when you ever went there, in the case of GoToMyPC, they did a lot of radio advertising, probably a lot of word of mouth, search engine marketing. However, it was that you first found out about it. How did you first find out about it?

Andrew: Leo Laporte talked about it on his show.

Sean: So you probably had a pretty high momentum because it was an endorsement from Leo Laporte so you’re going to come in with a bit more momentum then if somebody saw a banner ad, for example, that was pretty light. However, basically, when somebody gets to the website they’re going to see a value proposition on that website that in the case of GoToMyPC it will be access your PC from anywhere. Then someone’s going to say, ‘That sounds pretty good. How’s that work? All right, I’m going to fill out a registration form.’ Now GoToMyPC’s also going to make you enter a credit card. Therefore, now you’re going to lose many people at that credit card step. Probably 70 percent of the people are going tro drop out at the at credit card step. The people who stay are going to be much more likely to convert to a purchase, so, it’s OK, I’m sure they’re very calculated in how they do those things. Basically, you’ve got registration form, now credit card, then you have to download the software, then you have to install that software, then you have to set up your firewall to make sure it’s not blocking it. There’s no gratification we’ve seen anywhere through here. Then you have to go to a different computer and know to go to www dot their website and then log in there. Then sometimes, I’m not sure in their case if you have to download a client on that side, but, OK, so they’re just pure web browser, and then from that web browser you now are seeing your computer there, the link, now you’re authenticating to get into that computer, you still have to enter in passwords.

Andrew: What you’re saying is you’ve got a mess, a long process.

Sean: Well, to have your first good experience, after all of that, you finally experience the value-proposition of accessing your PC from anywhere.

Andrew: Yes.

Sean: You try to start a thousand people on that process, there’s probably ten who have the good experience of accessing the PC. Therefore, however much they paid to get a thousand people to the website and some of that is going to be word of mouth and organic channels, ultimately ten will enter actively into a trial. Some of them will say, ‘This is awesome.’ Some of those people are going to convert to a purchase. Because the collected a credit card up front they’re probably going to have a pretty high conversion to a purchase. However, to me the gratification engine is really up to that point of having that good gratifying experience, everything that happened from that value-proposition, all the way down to having that good experience. How can you fine tune that gratification engine with effective — the best businesses want to measure everything in that process and do a lot of testing at each step and qualitative research and really understand why people are moving through and ultimately have something that’s really a very efficient process. That takes what is ten people who get to that good experience and find a way to get it to thirty people or fifty people. Every time you see a doubling there it means that every dollar you’re spending externally to drive traffic the effectiveness of those dollars are doubling as well. There’s a lot of leverage in having a good gratification engine.

If we were to compete with GoToMyPC. If you and I were to create a new company that would allow people to log into their computers from anywhere, we would say, look at all these friction points. What can we do to remove these friction points? What we could do is remove the need for a credit card. We don’t need that at first. Maybe what we do is we remove the need for registration, we just say, use your Facebook profile to register. Or you don’t register at all; we’ll email you a link so you’ll always have access to your account without having to give us your name. We’re just shaving it down by removing steps and maybe making it easier for people to understand the process so that more people get through that funnel.

Andrew: OK. I see. Can you give me the example with numbers that you gave me in our first phone call about LogMeIn? The numbers . . .

Sean Ellis: I don’t recall giving any numbers. Sorry.

Andrew: Basically then, the bottom line of what you’ve told me was, spend X amount of money and you couldn’t buy any more traffic. You couldn’t get any more registrations. Suddenly the same amount of money allows you to grow the amount of registrations and you can keep spending money to grow even more and make a profit.

Sean: Yeah, and if you can get say a 10X improvement, just because the math is easy, if you can get a 10X improvement on the number of people who are getting a good experience. In that GoToMyPC example, a 10X is not unreasonable if you think of all those points of friction through the process. Now when you go out and you try to spend money to grow that business, where channels where you were investing $1 and only getting 50 cents back on that dollar were unsustainable, you would have cancelled them, now those same channels you’re getting $5 back on every dollar you’re putting, you’re going to pour as many dollars into those channels as possible. You spread that across potentially hundreds of thousands of channels, you now have a super-scalable customer acquisition growth engine because of your very efficient gratification engine. That’s really the mistake that I see most companies make. One, the marketer doesn’t really have enough power in the organization to move those development resources to get those first user experiences right and so they skip it or the marketer doesn’t want to deal with the headaches of that or whatever the reason might be that basically companies don’t spent a lot of time. Maybe they’ll do some A/B testing on landing pages but even that is relatively painful QAing the pages, that a lot of marketers even skip that piece, that ultimately they’re’ trying to grow a business in a way that they’re very limited in their ability to do that.

That’s why this gratification engine is critical for it. The second piece is an economic engine that we talked about a bit already but if you can find a way that you get double the revenue per user by being smarter about yields, so let’s say if you charge twice as much and you find there’s very little price sensitivity on your product so now charging twice as much you have the same conversion rate now you have twice the average revenue per user so you can spend twice as much to get them there in the first place. It really depends on how price sensitive your users are and how important a higher revenue per user is in other channels to grow the business. Again, if you’re a virally driven business it doesn’t matter as much.

Andrew: At what point do you think it’s important to add that economic model?

Sean: For me, personally, I used to say right from the beginning of the business. But for me I believe now after product/market fit is when it becomes critical because it has so much friction to people coming in and using the product that it’s just really hard to get to the point where, essentially if you’re doing it on trials if you try to survey that ‘very disappointed’ question for people who are in trials, most trials you’re lucky if you’re going to get 10 percent conversion to purchase. You’re already basically saying, you’re asking people a few days into their trial ‘How would they feel if they could no longer use this product?’ A lot of them have already mentally checked out and said, I’m not going to convert to a purchase.’ That already puts you down at the 10 percent rate right there. Then within that 10 percent you’re looking for that nugget that say they’d be ‘very disappointed’ about it. I’ve found that a lot of companies that are actually able to sell their product still can be in the 20 percent or 10 percent of their users saying they’d be ‘very disappointed’ even though they’ve paid for it. For me, basically, in the early stages you’re just trying to learn what are the must-have users and use cases and benefits. That’s going to give you all the information that you need to grow the business. The revenue that you’re generating from those users really isn’t all that important. Unless of course if you’re bootstrapped than you may need to approach it differently. However, if you’re a VC backed business generating revenue in that early stage, so the one big caveat that I would say, is that I would never try to grow a business without some sort of revenue model in place. I don’t want people jumping on me and essentially thinking that I’m irrational on that front. To me it’s just really, it’s about what are the important goals that you’re trying to figure out at each point, and does money help or hurt your ability to figure out those goals?

Andrew: I see. Wouldn’t though conversions toward payment be a better metric then any survey? Couldn’t you create a product that also had some kind of economic model on it? Also, had something that people would have to pay for? Instead of surveying the audience say, ‘How many of those people are going to the paid model and how do we fix it so that more people go paid?’

Sean: I think that the problem with that is that you start gaining it more.

Andrew: How do you mean?

Sean: You can trick people to upgrade. You can, ‘Oh, there’s some great benefit behind the hidden door here.’ A Ginsu knife commercial — they’ve never experienced the product, all they’ve done is seen the product on TV and a really good salesperson showing them knifes. I think infomercials are a great example. You can get many conversions without an experience. What you’re really trying to do is get a lot of people to have the experience and then understand from there if it’s a must-have experience or not. So then the one other piece that I would say is that if you have people saying that they would only be ‘somewhat disappointed’ if they could no longer use the product and it’s free, then you already have your answer that they’re not going to upgrade to the paid version of your product. At that point, I’m not saying that the ‘very disappointed’ at 40 percent is any gain, but you can learn that much more quickly than having the economic model in place. Once you get to that 40 percent, that’s the time when you want to start introducing, first you want to really drill into the information of why, but then you want to introduce an economic model on two fronts. One other benefit of waiting to do it is a lot of people have this vision of value that they’re trying to create, but once they create the product and put it out there that the value that people get from it is very different from their expectations, from the vision of what their original founder vision had been. It’s very painful to change how you charge for your product and all of those things, so it’s much better to sort of learn the value that people are getting from the product and then layer and economic model that is sort of perfect over than to do it on a guess of what you think you might be able to fit.

Andrew: Isn’t that a whole new product though? Because if you ask people what they love about this product so much that they can’t live without it and they tell you and then you slap a price tag on it, you’re going to piss them off.

Sean: From day one you should be saying that this is free during the Beta period and you will be charging for it.

Andrew: I see.

Sean: So, there shouldn’t be a surprise.

Andrew: I see. OK. That way you don’t have to come up with another product that you’ll have to charge for.

Sean: No. No.

Andrew: I see.

Sean: And you may find that freemium is going to be the right thing in your category where you are, you’re going to want a free version and a paid version, but you might find out that that is not right for your category. That’s where putting it out there first and getting the feedback will help you determine the right way to charge for it.

Andrew: This whole process that we talked about, what’s the part that you’re especially good at? Is it increasing . . .

Sean: I say that there are two places that I’ve gotten good at through practice and two places that I am naturally good at. The things that I’ve gotten good at through practice are the messaging and conversion optimization. I don’t think I was necessarily talented in those before, but I’ve done it so many times now, that if I think about the metrics feedback that I get, every time I do something I start to see the things that work and the things that don’t work. Especially on the messaging side, I’ve read a lot of books on psychology and influence and different things that show how people get their minds around new things that give me the ability to kind of sequence the process of how do I set a context where people are going to be receptive to a promise. Many times a good hook becomes really important there. How do I develop the description on the product that generates convergence? What’s the way out that tends to work the best? All of those you can get through qualitative understanding, lots of practice, and the metrics to tell you what actually works. You can say the same thing on funnel to a large degree.

Things that I am particularly good at are the economics in the business that are going to best help that business grow. So, are we going to go ultra-premium product and what are the channels that are likely to grow this business? Is that the right approach? Or just freemium? Or is free trial? Just understanding the right economic model that is tied to the benefit people are getting and ultimately how are we going to grow the business. That’s one thing that I’m really good at. Then another thing that I’m really good at just naturally is figuring out creative ways to grow the business.

I’ll give you an example. At Uproar.com in the mid 1990s, really looking at we were competing against Microsoft, Yahoo, Sony that had some games and game shows. Sony had Wheel of Fortune and Jeopardy and had tons of television cross promotion. Essentially, we’re this little company that was founded out of Blue Pass that didn’t have a ton of financing or other things to really compete against these guys on $1 for dollar basis. What we had was super talented engineers and creative game makers. So, really looking at how can we grow this business that taps into those strengths and also looking at the web. One of the things I spotted, part of figuring out good ways to grow a business is seeing what’s working for other business. Around 1997 is when Amazon had come out with their affiliate program where they were pushing stores onto websites. Looking at that and thinking, ‘How can I apply some of the things that are working there with some of the strengths that we had?’ We ultimately came together and made a little Java game where somebody could put a little snippet of text onto their website and we would stream new trivia questions to the. Something called Trivia Blitz. We had a button on there that said, ‘Add this button to your website.’ It took them through a viral distribution of this game and over time that game . . . Sort of taking the affiliate program of Amazon, but actually adding really entertaining valuable content to the websites and paying them a referral fee of 50 cents every time they referred someone to us who converted to play games on Uproar at 50 cents for a free active registered user at a time where, I think Yahoo as a public company at the time, had one of the lowest acquisition costs and they were $30 per free registered user. We were at 50 cents per user on this game that eventually spread to 40, 000 websites. That was really the game that allowed us . . . Really, there are a lot of things I’m thinking through. Originally, we thought about doing it in the size of a banner, but we knew if we did it in the size of a banner people would want to charge us CPM rates to get it on there, so we did it in the size of what today is like a YouTube video size. It changed the perception of the sites where they looked at it as, ‘Wow. This is great free content and we can make money off of it.’ That put us at a point where we were able to pass all these people with much deeper pockets and actually become the number one game site in the world and be a lot more focused on every dollar. We complemented those things and put dollars into banners, but we had it down to every dollar that we spent on a banner on InfoSeek generated 32 ad impressions across our work versus 20 ad impressions when we spent money on Excite. So, just being very analytical and careful about how we were spending money and having really creative ways to augment that put us in a position where acquisition across all channels was below $5, which put us, by far, the lowest of any publically traded company during that time.

That’s to me the ability to really creatively figure out how to drive acquisitions is a big strength. I’ve purposefully ignored it over the last couple of years because it’s been a bit of a moving target across start-
Ups. It just changes so quickly that what I wanted to do is get really good at those things that will always be important like funnel optimization and messaging, but increasingly I’m moving back into also working with businesses on the growth tactics that will really work to drive growth in those businesses.

The last piece that’s starting to be really interesting with it, is a lot of these companies have gotten pretty good growth hackers into those businesses as well. When we get together and can brainstorm growth ideas, many times it turns out to be the founder of the business who is really creative about driving growth. I think it’s the same kind of DNA that gets you to come up with a good idea in the first place for a business. It’s the same sort of DNA in driving growth in that business. Now that we’re doing it across each of these companies that have really efficient conversion processes and really good metric systems in place, then I’m able to spot things that are working in one and move it to another. Essentially each of the companies that I’m working with are non-competitive with each other, so there’s this sort of network of learning that’s much bigger than any individual company can get. That partly is because I’m contributing to that network, but it’s partly a cross-company learning that I think is something that I’m particularly good at or a benefit of what I’m doing. It’s a unique attribute that I bring to the table.

Andrew: Hey, Sean, how do you get paid by these companies? By Dropbox, by Lookout, by Xobni?

Sean: A combination of cash and equity. If I could do it all for equity I would just do it for equity.

Andrew: Really?

Sean: I would. The problem is that it’s, I mean just this year alone of exercising options in these companies by the appreciation that’s happened on them, the tax bill that I have far exceeds any cash compensation that I’ve gotten from the business. It’s something that I just don’t have deep enough pockets to always just do it for equity because it’s surprisingly, the cash-flow side is a lot harder than I would have anticipated. I don’t think I’m going to be able to maintain the string of successes that I have up to date, there’s a lot of luck involved with that as well. We’ll see how it plays out in the next batch that come through.

Andrew: So, what you’re saying is let’s take Lookout for example. I keep bringing up Lookout because John Hering’s a good friend of mine and I think he’s got a great company there.

Sean: Yeah.

Andrew: So, you get options in a company like Lookout. The options at some point you get to convert to stock. When you convert to stock, you have to pay taxes on it and that’s where you have to shell out some cash.

Sean: Right.

Andrew: And you won’t see it back.

Sean: Basically between your strike price on that and the fair market value at the time where you exercise, any appreciation is taxed as ordinary income, and it’s a huge amount of money, you can imagine. Therefore, my tax bill this year, just on option executions, liquidity will probably be well off on this, but it’s well into the six figures this year, just my tax bill, plus the amount of money that I had to pay to exercise the option. Therefore, it’s a lot harder to do this financially than many people would think.

Andrew: Is there another way to structure it so that you don’t have this tax bill?

Sean: There is, but I think many of these companies are already VC funded and they’ve created some value so they’re kind of on the backend of being able to essentially exercise the options up-front. It’s one of those things that the risk is too high to just take it as stock and pay the tax on the stock up-front. Probably someone listening out there can give me advice on a better way to structure it. I do have a three-year window to exercise with each company that gives me enough time to basically see that it’s not a huge risk in exercising the options at that point.

Andrew: I see. Wow. I didn’t know that you had to exercise the options. I didn’t realize this was an issue. Why aren’t you a start-up entrepreneur? Why aren’t you running one of these businesses?

Sean: One, because I don’t think that is where my strength is. To me, my strength is on really growing businesses and that in order to get to the point where you’re growing the business you have to create value in the first place and I don’t have enough confidence in myself to create that value to where I’ll never be able to play into my strength. Even though I can get a lot bigger piece of the pie doing it that way, to me the big picture risk is that I’ll never get past that product-market fit stage with a lot of these businesses and I will just be flailing in that area.

Andrew: But a lot of the lean start-up philosophy is about not really creating the product but starting out by creating the marketing and then you build the product that the marketing can support? Couldn’t you just create a bunch of landing pages the way Eric Ries might say. See which one of those landing pages really converts well and then go out and have somebody build a product for you around it.

Sean: We’ll see how well that plays out. I mean, it’s not that I don’t think that those are important parts of a start-up, but to me I think you still need a visionary. Somebody who really tackles a problem worth solving and you still need to be able to create a solution that is differentiated enough and meaningful enough. There’s a lot of pieces that you can’t necessarily rely on being able to iterate your way into. I think, to me, a lot of the lean start up principles will help a larger percentage of start-ups succeed, but most will still fail, and that will always be the case. If you could make it so that start-ups, if there was a sure-fire way to start start-ups in a way that they weren’t going to fail everybody would be doing it and therefore there would be no opportunities because all the good opportunities would be gone. It’s just, to me, I think I have a much more interesting value to add.

Another question I get from a lot of people is, ‘Why not work on the VC side?’ That’s tempting as well. The number of successful start-ups a VC kicks out in any given year is too low. I’d rather go cross VC and take the companies that are coming out of each of these VCs and help them. That’s really, ultimately, for me, why I’m not in the really early stage. I think there’s a lot better entrepreneurs who can really drill into that side and why I’m not on the VC side, because you’ve got too small of a pool that you’re in. Kind of just in the big picture is that I’ve figured out some really cool things over the last couple of years and there’s still a lot of really cool things to figure out. Getting these right and sharing them back with the community will result in a lot more start-ups coming out and being successful. I can make a lot more meaning doing this than I can creating one single start-up.

Andrew: All right. You say too that, I think I’ve got this right, that most start-ups will fail even with the lean start-up methodology that’s supposed to protect you from that. How? Why?

Sean: Essentially because my feeling on them, and this is just me, I’m associated a lot of times with the lean start-up movement, and I think a lot of the things I do are very consistent with it, but I don’t consider myself a lean start-up practitioner or something. It just all works together. Basically, there’s a right way to do start-ups and probably a wrong way and lean start-up covers a lot of the right way. Ultimately, what I found, hopefully it doesn’t make me look too cynical, but basically you can put all the right tools into somebody’s hands but it comes down to a good entrepreneur to actually execute with those tools. Not all entrepreneurs are good entrepreneurs. There are some that you put the right tools in their hands and give them the right opportunity, they’re going to kick a** very single time or most times. I think for those people starting a lean start-up process gives them a ton of predictability for success. But most people aren’t cut out for it, myself included. I’m putting myself in that batch; I don’t think I’m necessarily able to kick out start-ups that would succeed on a regular enough basis for me to be in that group. I’ve never considered myself to be particularly visionary. I’m way too practical. That helps me connect with ordinary customers of products a lot better and look at things through their eyes where a lot of times people who are too visionary and too smart have a hard time looking at it through the eyes of an ultimate customer on a real practical level of why are they going to want this and what are the alternatives?

Andrew: Interesting. I’m curious because you’ve been on the inside of so many companies and you’ve seen the decisions and you’ve seen the entrepreneur from a point of view that most of us don’t have. I’m wondering what you think separates the good entrepreneurs from the bad entrepreneurs. You’ve given a few answers here. You’ve said vision. You’ve said the ability to see the product from the customer’s point of view. What else do you think?

Sean: I think one of the biggest things that I see is a lot of times when I speak in lean start-up groups everybody wants more detail. Everybody wants exact dot-to-dot roadmap, ‘How do I get from point A to point B? If I achieve point A and I’m supposed to achieve point B next, give me exactly the way that I get there.’ To me, every successful entrepreneur that I’ve seen would never ask me that question. They know that part of being a scrappy successful entrepreneur is figuring out the hard stuff. To me half the battle is knowing where to be aiming at any given point and I can give that information. A good entrepreneur is going to figure out how to get there. Every business is different. Many of the things that I talk about are principles that can be applied to most business. I was just on the phone right before this with an entrepreneur that had a very different business. I loved his answers on each part of how he’s going to get to each of the targets within his business and he had a bit of a network effect business that ultimately required some level of critical mass for a product to become a must-have for a group of users. There were local rollout possibilities there. Those are all the unique aspects of his business. There’s no book that’s going to give him those answers. He’s looking for the edge but he’s also knowing that they opportunity’s there because it’s hard. He needs to figure it out and assemble the pieces in a way that he can be successful. The best entrepreneurs that I see aren’t trying to get all of the answers out of a book. They’re looking for nuggets that they can get in many places, but ultimately they’re doers who just go out there and know they have complete faith in themselves to figure it out. That to me is I would say at least 80 percent of the entrepreneurs that are day one trying to figure things out don’t necessarily have that DNA. Some will get lucky by following the process and they’ll do all right. However, there are a group of people that if you put the right tools in their hands they’re going to success more times than not. Those are the guys that I would bet on more often. And, again, I am not putting myself in that group. The part where I have similarities is on the backend of those businesses where all of those pieces are in place where I will tenaciously help them figure out how to grow those businesses and use that same ability to figure things out. There’s not some standard formula that I’m going top be able to plug in where it’s, ‘This is a category 17 business where it’s three parts SEM, two parts SEO,’ and a little bit of berality and it’s off to the races. It’s more of thinking is this a high intent category. Is this an impulsive category where people don’t know they need it? Is this something that’s primarily going to grow off of word of mouth? Is it something that’s going to completely disrupt an existing category where you just need to slightly shift people toward your product?
Every business is so different and it starts with getting into the customers head and starting first with creating value in the first place and then figuring out how can you reach more of those types of people that need that value and then creatively, how do you connect those dots?

Andrew: Of all the entrepreneurs that you’ve worked with who’s the one who just gets it? Who gets the process?

Sean: I would actually say the one that you mentioned. I would say John Hering, to me, is just that classical guy who had really not a ton of experience on the entrepreneur side that somebody would say is classic bet on that repeat entrepreneur. He’s always done very interesting things. I would put my money on him every time. I would say Drew Houston from Dropbox, same thing. Arash, his business partner, I just don’t know as well how his mind works. The thing with Drew that separates him out from a lot of people is he is just so focused on creating value for customers and doing the right thing for customers that he’s just created this ecosystem of growth from, ‘What do they really need? How do we strip away all the BS in delivering them what they need? How do we always do the right thing?’
That’s an awesome business. There’s just a lot of different guys out there that have elements of it, and there’s other people that may get there that I just don’t know exactly where, I think Kevin Hartz you said you’ve had on the program before. Anyone who is a repeat entrepreneur who has been in business one after the other who keeps succeeding I think they always tend to get it. For me it’s been great to be able to be exposed. Mike Simon, the guy who was the co-founder of LogMeIn with Marton Anka, but Mike founded our previous company together, Uproar.com, as well. He’s the perfect complement to me where he’s super organized, delivers great, puts a vision out there where investors and other people buy into that vision well, and just an awesome person at execution.

I think an entrepreneur can have a lot of different strengths. Some of those strengths, to me the hardest part is creating something people want in the first place and that doesn’t necessarily scale into a good business manager that can manage a business with hundreds of employees, but those guys can create really valuable business. They just may not be the ones that take them to the next level. Then you’ve got some guys that are super dynamic that can be there day one and take it all the way through to a billion dollar business and that’s where I think a Mike Simon, who runs LogMeIn, is more similar to that later group. I think every entrepreneur that has had success brings a lot to the table. You can’t really isolate it down to just a single thing.

Andrew: No, you really can’t. I’ve now done interviews with 300 different entrepreneurs. At least 300 different entrepreneurs. You’d think that there’d be characteristics that are just common to almost every one of them. To maybe 250 out of the 300. It just doesn’t seem to exist. They’re so freaking different. One day I’ll have an entrepreneur who says, ‘You’ve got to work nonstop, every freaking hour you’re awake, even in your dreams, you have to have something that will get you thinking about your business.’ Another one will come on and say, ‘Now, come on, Andrew, just maximize the hours that you’re fully there. Maybe spend six hours that you’re fully on-the-job and then take a break so that you can free your mind to think of other things that will create ideas that will help your business grow the next day.’ Just it’s different. You can tell, too.

Sean: A couple things I’d break it down to is, one, an enormous amount of will power to execute on a vision but balanced against being able to respond to the realities that are coming at you about that. That’s why I think a lot of the lean start-up stuff is really good at being able to essentially pivot if something’s coming back and saying that’s just not viable at all. There’s a lot of people that if you can will your way into success, there’s many people who are going to overcome a lot of hurdles, but you just can’t force a product down someone’s throat that they don’t want. It’s a fine balance. So many people that are going to be so responsive with feedback aren’t going to do it in the first place because they’re going to be too uncertain and timid to ever take the plunge. It’s just this balance between confidence and an ability to go really hard that sometimes you’re in the right direction and you get lucky. Those are the dangerous entrepreneurs the second time, and it’s really hard to spot the difference because they may have just gotten lucky and just blasted their way through and they can lave the massive craters on the next business because they’ll raise lots of funding and just execute their way into oblivion. The reason why I think I wouldn’t be a good entrepreneur from start to finish of creating a really big business is that I’m too uncertain. I question everything. I analyze everything. That works great on growth tactics where it’s experimenting across 50 things and having lots of good ideas and killing 48 of those and keeping the 2 that you can really scale to grow the business. It works well on that front. However, I don’t think as a business you can execute that way from day one, because there’s too much effort in building the prototypes to ultimately go out. I would hedge too much, I think.

Andrew: All right. let’s do it this way. Ten years from now, you’re now cultivating businesses, you’re helping them grow, some of them are going to have great exits ten years from now, you’re going to learn about your personal business 12in6, where do you see it all in ten years?

Sean: I don’t’ even think ten years ahead.

Andrew: Really?

Sean: Yeah. For me, my biggest drive day to day and over the last couple of years has just been trying to really figure this stage out that I think is challenging and I think my learning curve in certain areas is flattening out but in other areas, I am just on the front-end of that learning curve. Personally, I’ll probably get bored with what I’m doing at some point and have to figure something else out, but at least for the next year or two, I’m going to just keep doing the same thing. A lot of my day-to-day drive is I just know that the more that I can really understand how you take great technology that people love and a great product on top of that technology and can figure o ut how to bring it to the masses that there’s an enormous benefit to the entrepreneurs, to the masses, to society in general. That’s a fun challenge to be taking on and something that’s similar to the challenge of any individual business. I don’t think I’ll ever perfectly have the answer. There’s definitely places where my learning curve has flattened out a lot. The next point for me will really be just how good I can make the network of businesses that now with so many companies that are in really sharp growth stage, how much cross-pollination of really good growth discovery engines that I can help to build in those companies and help to bring the best ideas. Not everything works in every business so you do have to sort of compartmentalize and categorize each of those. But my vision, I think, over time is to basically have in every interesting emerging category out there is to have a play in that category where I’m helping them be successful and that it’s a non-competitive network where there’s just a lot of, the things I wished I had as a marketer in individual businesses where I was very siloed; where I didn’t have as much time to really tap into what was working for other business because you’re so busy trying to figure out what’s going to work for your own business that if I can bring the outside perspective of what’s working, but not just from what you can pick up from a book, because the best things aren’t going to be in books or on blogs. People are going to be pretty protective of them because they get saturated pretty quickly. If you just put them out there everyone’s going to pile into them. It has to be somewhat of a limited network. If I can bring at least half the good ideas to each one of the start-ups, it becomes really powerful across the board in all of them.

Andrew: If you and I were sitting over a beer and talking, would you be more open about some of your tactics? I know that you’ve got to be protective.

Sean: Yeah. I mean, I think the thing is that the tactics are always a collaboration and I’m not coming up with the tactics necessarily on my own. You’re sitting around and you’re taking them to the next level. It’s just not fair for me to spread them externally to the damage of the companies that I’m working with.

Andrew: I see.

Sean: I may trade. If you’ve got some good ones I may have a good open conversation with you where there’s something I can kind of bring back to the network, but I wouldn’t want to just give, it’s not mine to give up, if that makes sense.

Andrew: I see what you mean. And I’ve got to tell you that this is what many people love about you and it’s also what creates your legend. I get it completely. It’s why I can see people like John Hering was really quiet about his business and loves working with you as somebody who has a high profile. I understand it. I appreciate your integrity. I’m going to find all kinds of other secrets to bring to our conversation when you and I get together over a beer, but for now, thank you for doing this interview. I’m really grateful that you came here.

Sean: Well, thanks Andrew. It’s been fun and I hope we can do it again soon.

Andrew: You bet. Thanks. Thank you all for watching.

This transcription brought to you by www.SpeechInk.com

Sponsors I mentioned

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Grasshopper – Entrepreneurs (like me) love and use Grasshopper because it offers all the features of the big, expensive phone systems (like multiple extensions, music on hold and call forwarding) but it works with any phone and starts at only $9.95 a month.

PicClick – Is a 1-person startup from my friend Ryan in San Diego. His site gives you a visual way to search eBay, Etsy, and other sites. Try it this iPad accessories search, for example, and tell me what you think.

[Thank you to everyone who suggested or otherwise helped me land this interview. Especially Jon Bischke who made it happen.]

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  • http://TannerChristensen.com tannerc

    Wonderfully inspiring advice, what a great interview. Something small that really caught my attention was when Sean mentioned “fitting” into an industry niche, rather than trying to create one.

    If nobody wants what you are making, all of the marketing power (and budget) in the world isn't going to help you.

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  • http://www.brainbackup.net Greg_Gerber

    With regards to not being able to find specific traits shared by successful entrepreneurs. Seems to me that what they all share are excellent products. Maybe they are good at building products or maybe they are good at building/leading a team of great product builders. In the end, I look at what they've done, not who they are.

  • http://mixergy.com Andrew Warner

    Thanks. I hadn't caught that distinction.

  • http://mixergy.com Andrew Warner

    Good point.

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  • http://11strategies.com Peter Knight

    Sean sounds to me like a 'lord wealth profile' according to wealth dynamics (details 8 different profiles) and he's found his flow by utilizing his strengths and applying them in a part of the industry that needs it.

    One of the patterns I'm seeing in the successful entrepreneurs that you are interviewing is that they are playing to their strengths & by the right strategies & they have the right team environment.

  • Sean Ellis

    Agree. Even before creating a great product they are good at identifying products that people actually need. Customer development should help everybody with this.

  • http://mixergy.com Andrew Warner

    Thanks. I hadn't caught that distinction.

  • http://mixergy.com Andrew Warner

    Good point.

  • http://11strategies.com Peter Knight

    Sean sounds to me like a 'lord wealth profile' according to wealth dynamics (details 8 different profiles) and he's found his flow by utilizing his strengths and applying them in a part of the industry that needs it.

    One of the patterns I'm seeing in the successful entrepreneurs that you are interviewing is that they are playing to their strengths & by the right strategies & they have the right team environment.

  • Sean Ellis

    Agree. Even before creating a great product they are good at identifying products that people actually need. Customer development should help everybody with this.

  • http://mixergy.com Andrew Warner

    Yeah. Marcus Buckingham has been writing about that for a while:
    http://www.tmbc.com/mb/books/fysl

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