How Assistly created a killer product by using Lean Startup methodology

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And here’s the program.

Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. In 2004, Alex Bard launched Goowy and told a friend of mine that it would be bigger than Google. I love that kind of determination. Unfortunately, things didn’t work out that way, and, as a personal favor to me, I asked him to come here to Mixergy to talk about his experience with Goowy.

Goowy’s a company that set out to create a web-based desktop and operating system. It pivoted and focused on creating widgets and then finally sold to AOL in 2008. Alex and his team have since left AOL and launched Assistly, which providers hosted, cloud-based customer service platforms. And Assistly’s offices is where you are in right now, right Alex?

Alex Bard: That’s right. That’s right. Good to catch up with you.

Andrew: Good to talk to you too. You’ve actually been a friend who’s helped me out so much. You let me have the very first San Diego Mixergy event in your office back in San Diego.

Alex: That’s right. It’s been a long time. Now it’s interesting, I’m still part time in San Diego and San Francisco, splitting time, as you know. And I do a mentorship with a lot of entrepreneurs in San Diego, and I’m hoping that that community really starts to develop. It’s been a bit of an uphill climb, but I’m really passionate about helping that group of entrepreneurs out.

Andrew: Yeah. Really good people there.

Alex: Yeah, absolutely.

Andrew: So here’s what I’d thought we’d do. I’d thought we’d just tell people what you’re doing right now. That’s what you’re passionate about. That’s what you’re working on day in, day out. We’ll talk a little bit about that, then we’ll go into Goowy — what happened in 2004 that helped you launch the business, how you built it, how you pivoted, what happened afterwards. Then we’ll come back and catch up on Assistly again.

So, just so people know what you’re doing now, who are some of the customers who are using Assistly?

Alex: Assistly’s been around for a little over a year. I’ll just give you a bit of a background.

Andrew: Okay.

Alex: [interference] raised $4.7 million in financing. We made the product publicly available in September of last year, and since then we’ve brought on some amazing customers: Twitter, 37signals, Square, DirectTV, Mochi Media, Disqus, Grooveshark Audio. A whole series of what I would call kind of progressive web companies have jumped on board and have been using the product for part or all of their supportive environment.

It’s been a really great start for us. We’ve done no sales or marketing to date. It’s really been all around organic growth and us helping them fulfill a need that they have. I’m really excited about our current momentum, and you’ll see a lot more from us in 2011.

Andrew: Did you say who the funding was from?

Alex: We actually did two rounds of financing. Our first round of financing was in March of last year from True Ventures and Howard Lindzon. And then we just closed our financing at the end of 2010, and that was True and Howard Lindzon and we brought in new investors including Index Ventures, Bullpen Capital, and an independent investor/advisor, Kenny Van Zant who is just outstanding and has been helping us figure out a lot of our sales and marketing machine and scalability.

Andrew: Wasn’t Mark Cuban an investor both in Goowy, your previous company, and Assistly, your current company?

Alex: Mark was an investor in Goowy and was on the board. At Assistly, he’s an advisor.

Andrew: Okay. All right. So let’s go back and find out what happened with Goowy. What was the original idea for Goowy?

Alex: It’s interesting. There’s a core founding group of us, including the same group at Assistly that’s been together through four companies. Goowy was actually our third company. The first two were customer service software companies. So when we started Goowy, we wanted to do something dramatically different than we had done in the past.

As a matter of fact, our previous company to Goowy was a company called eAssist and it was on the verge of going public. We grew from six founders to 300+ people. We filed to go public. The markets exploded. That was during the era of the dot bomb, and so we struggled through a painful four years after that. And coming out of it, we said we want to do something completely different. We don’t want to do something that’s enterprise-based. We want to do something that’s consumer-based, that leverages some of the skills that we’ve acquired over our last seven or eight years together.

One of the things that we noticed that the trend was that e-mail, at that time, if you can mentally rewind to 2004, e-mail, and this was really before Gmail. It was early 2004. E-mail was still Hotmail and Yahoo! Mail and mostly click, wait, refresh, a really kind of poor experience in a browser and something that everybody used. And so we thought because of some of the new developing technologies — Flash as an example — because of the fast broadband Internet connectivity, we could build a very vibrant, fun mail client because that’s where people spend a lot of their time.

That was the original idea for Goowy, Goowy being kind of the play on words of graphical user interface because we were going to deliver this really rich experience into the browser. So that’s how Goowy started.

Andrew: And it’s spelled G-O-O-W-Y. And it’s pronounced like GUI, graphical user interface. Beyond e-mail, were you thinking of creating the desktop on the Web?

Alex: So when we first started, we knew that we were going to start with the collaboration tools. We knew the early vision was e-mail. We knew that we would add calendaring. We knew that we would add contacts, and we had an early view into potentially adding instant messaging. We wanted to capture all of the ways in which you communicated.

As we rolled out the product and got it in front of more and more people and started to get feedback on it, we decided to bring in additional capabilities and those capabilities came through the concept of widgets. So it started more from just an e-mail client or personal communication client into this web dashboard that had widgets and data that you were able to pull in. It was where you effectively would start your day. That was the goal for what we set out to do with Goowy.

Andrew: In the original vision, before you started to think about widgets and adjusting, when you thought of the great vision of what the future could hold for Goowy, what was that big vision?

Alex: The big vision really was around personal communications. It went back to in 2004, and today I would still argue, one of the most widely used applications was e-mail. We just thought it was being done so poorly and that we could make it make it much more dynamic and fun. And not only dynamic and fun, but that the mail messages themselves could have Flash content that created more of a personality around how you communicated with people. So this was really about taking communications almost from Morse Code, which e-mail was, this simple plain dialogue, into a more personal, engaging interaction. That was the big idea, the big vision.

Andrew: Ah, I see. Okay. And e-mail was awful back then. The vision that you had was, for me and for you and for the people that are watching us, instead of using the old clunky HTML-based e-mail systems and instead of using Outlook, which was just a giant mess, this is a web interface to the e-mail they already have?

Alex: Exactly. And with more of a personality. We really wanted to add personality to . . . I remember the first version of Goowy, you couldn’t resize it. It was a small Flash window, which we then addressed. But we had things like, in the background, you could pick a landscape and then that landscape would change based on the time of day that it was. So we brought a lot of personality. Small little things like that, but a lot of personality into an application that people spent a lot of time in.

Andrew: In some ways, we as entrepreneurs and the businesses we create are products of our time. Can you describe what was going on at the time when you were launching your business or hatching the idea? What is it that inspired you that was going on?

Alex: It’s interesting because, again, I’m trying to mentally rewind back to 2004. I had just come out of two enterprise companies. The first one was successful. It sold as a public company. The second one was an unbelievable roller coaster ride. In both companies, we had done a lot of what was then called DHTML. So we built these interfaces inside of the browser, but they were mostly . . .

Andrew: We’ll get the connection back in a moment.

Alex: . . . e-mail was a core part of [inaudible 09:18].

Andrew: Sorry. For a second there we lost the connection. I should tell people that we are in Alex’s office. He found a quiet place for us to do the interview, but a quiet place doesn’t always mean that it has the best WiFi connection. If we lose you completely in this call, I’ll just call you back and we’ll reconnect. If we lose a few words here and there, I’ll do my best to help everyone catch up.

You were saying DHTML and I think we lost you soon after that. Can you pick it up from there please?

Alex: Sure. Absolutely. What I was saying is in our previous two companies that were enterprise companies, we had done a lot of DHTML scripting inside of the browser to deliver our product to agents, customer support representatives who were supporting their customers. A big part of that was actually e-mail. E-mail was a major channel for support. So we wanted to leverage some of that experienced learning but do it in a non-enterprise way.

So fundamentally, for me personally, I wanted to do something that was dramatically different from our previous experiences. So we knew we wanted to go to consumer. If we could leverage e-mail as something that we did that was interesting, that would be great because we had just spent a lot of time in it. Broadband connectivity was finally the big up and to the right that everybody had predicted, and Flash, as a new technology, was starting to be used beyond those Flash websites into building applications. So those are all the things that we kind of fundamentally said, “Hey, this would be an exciting, big idea to build.”

At the time, as I think back, TechCrunch had just started as a mechanism for Arrington to kind of talk about startups and what they were doing. So we were really fortunate in that we started right around that same time and at the same time that there were phrases coined like Ajax and Web 2.0. We got caught up in a lot of that excitement of new companies starting and building these very dynamic consumer-based applications. We were kind of part of that wave, that whole shift.

Andrew: Right. You were one of the first people that Michael Arrington at TechCrunch wrote about. His posts back then were much more factual, much more, almost like a CrunchBase article would be today, and less of his personality in them. And you can see the change in him over the years as I read the Goowy articles.

Okay. So I see what you had in mind. I see the vision that you had for the business. What’s the first thing that you do? Do you start building the product, or do you start going after funding?

Alex: The first thing that we did . . . we were fortunate in that our previous two companies were somewhat successful and so we had a financial base. And so the first thing that we did is we started to build the product.

Andrew: Using your own money, you mean?

Alex: Using our own money. That’s right. And really, the money, even then . . . I’ve got some really interesting anecdotes that I could tell you about how we hosted Goowy and some of the things that happened in managing your own actual physical servers. But most of the money was not about putting into the product or hiring additional developers. Most of the money was opportunity costs and our own personal runway.

The benefit that we always had was we have this core group of founders that are have very complementary skill sets. We have marketing and product UX, and then most importantly, we have development. So we didn’t need to, in the early days, go out and hire anyone else to build our vision. We could design it and we could build it and we could launch it. And that’s exactly what we did.

Andrew: Okay. Actually, I’d love to hear one of those anecdotes about hosting your own systems back then.

Alex: I don’t remember exactly when it was. This was probably late 2004, so we had launched the product. We had a writeup from Mike on TechCrunch. We started to get a lot of interest and traffic. We probably at that time had, I’d almost say 100,000 or so users of our product, which is pretty unbelievable scale, especially when you didn’t have things like Twitter really and Facebook and TechCrunch and all these other great avenues and channels that we have today.

We had our own physical servers. They were hosted in a facility in L.A. and we were in San Diego. The reason they were hosted in this facility was because it happened to be the cheapest facility. We bought the servers and we drove them up and we installed them.

I remember now, it was late summer in 2004, and all of a sudden, we’re trying to login to the application and we’re getting all this strange kind of usability. It’s going up and down and crashing and just performing really strangely. So we try to connect to our servers and again we’re having problems. We get a phone call as we’re going through this from the data facility. “Facility” is a stretch, because it was more like one room with a guy in it where our servers lived. Basically we were told that it was so hot in L.A. that day that their air conditioning exploded and so they had to put these big fans on our servers, these massive fans on our servers to keep them cool and that, in fact, some of our servers had actually started to melt.

So we realized that at that point you can’t really run a business on servers that can potentially melt. We got into the car and drove from San Diego to L.A., which was about a three and a half hour drive in this sweltering heat, got into the hosting facility, shut the whole thing down, grabbed the servers, and put a message up saying “We’re terribly sorry. We’ll be back up as soon as possible.” We drove down to San Diego and overnight reinstalled the servers in a real, or I should say, a more scalable data center.

Everybody today who starts a company, an Internet business, is very fortunate that there are things like Amazon and all these other great hosting virtual server facilities that they don’t have to worry about managing their own servers and having them melt.

Andrew: So, actually you launched April 2005, and I looked at the article that Michael Arrington wrote about you and he said you guys had 30,000 users on the day you launched and he thought that it was because of Macromedia. You guys were building on Flash, Macromedia probably promoted you, and that’s how you got your first users. Can you talk about that? How’d you get those first users specifically?

Alex: Just to be clear, my dates may be wrong. It may be ’05 when we launched and had that many users, if that’s from the article.

Andrew: Right. I don’t know what date I said, but April ’05 is when you launched, and that’s when Michael Arrington anyway said 30,000 users.

Alex: Yeah, so it must have been in the summer of 2005 when we had the . . .

Andrew: Oh, I see. So after the big article, after you’d been discovered by the world and everyone was watching you.

Alex: That’s right.

Andrew: Now I see. Going back to the day you launched, how do you launch with 30,000 people?

Alex: Well, because before the article we had a lot of people who were using it. We were in beta. We had other blogs writing about us. We were telling everybody that we could about it. And Mike was right, we had built a relationship with Macromedia and they were really supportive at that time. We were brought to their conferences. They talked about us quite frequently. So that got us a really great spark of distribution early on. I believe that we were really pushing Flash as an application development environment as far, if not further, than anybody else at the time.

Andrew: And do you remember if there was some way, formally, that they were promoting you? Were they running you on their website? Were they sending e-mails about you? Because just being in conferences and just being talked about by a few blogs back then before you launched doesn’t seem like a way to get that many users.

And we lost the connection just for a little bit. Oh, here he is. So take it from the answer. I lost your connection.

Alex: There wasn’t a formal relationship, although we spent a lot of time with them, with people like David Mendels and Kevin Lynch, who was their chief architect. They did promote us at their conferences and [interferences] where they brought in really interesting companies that were using their technologies, and they talked quite a bit about us.

Then it was just a bunch of hand-to-hand combat that we ourselves were doing. And at that time, there weren’t nearly as many Web 2.0 startups as there are today, and so it was easier to capture somebody’s attention than it is today.

Andrew: Ah. I see. Okay. All right. Actually, before I get to the investment, a question that I love asking entrepreneurs is what’d that first version look like? The first version that you launched with.

Alex: Ha. Well, the early beta was actually a small client in the browser that you couldn’t even resize. I think it was 1024×768, and it was fixed and it had moving parts in the background. You know, it was as [interference] designs in 2004. Lots of gradient, lots of greens and colors. Not something that I think I would [interference].

Andrew: Okay. So we lost a little bit of the connection there, but I get the sense of it. Very simple, also had the Web 2.0 look of it. And as you keep saying, you say it’s small. Why so small on the page? Why didn’t you allow people to expand it? Why didn’t it go as big as their screens?

Alex: We changed that really quickly. We just hadn’t thought about it. When we first started, we designed for 1024×768 and it was easier for us to build it that way. There were a lot of moving parts once you make it resizable in Flash more specifically. We just did it that way to get it out the door, to get people to interact with it, and then very quickly we made it so that you could fully resize it.

Andrew: All right. I mentioned Mark Cuban as your first, or one of your first investors. How did you get Mark Cuban as an investor?

Alex: So this is actually really interesting. I had no personal relationship with Mark whatsoever. I read his blog. I had a lot of respect for what he did professionally, and then after he sold Broadcast.com to Yahoo! how he continued on with his career and pursued his personal passion in the NBA and HD and all the other things that he does.

So, we were going through a period of fundraising. We started to go out and meet with traditional VCs. And this was . . . I want to make sure I get the dates right. I believe this was at the end of . . . it was either at the end of 2005 or the end of 2006. I want to say it was at the end of 2006, right around there. But I could be wrong. It could be ’05. It could be ’06.

In any case, we had started to go out with our traction and started to raise financing. We were meeting with traditional VCs. Mark Cuban is somebody that I personally had a lot of respect for, and I wanted to see if I could get him on board as an advisor. And so, through his blog, I just e-mailed him. Right through the blog, I sent him an e-mail saying “Hey, this is what we’re doing. Here’s what I thought you might think is interesting. Let me know if you want to have a conversation.” It was unbelievable. Literally I’d say probably within three or four hours, I get an e-mail back.

I’ll tell you another funny anecdote here. I get an e-mail back from Mark Cuban and we start a dialogue. And at that time he was an investor in a company called IceRocket, which was a search. And so I said, “Hey, look, we can build you a se arch widget into our platform.” He said, “Sure, let’s see it.” We built this search widget into Goowy, probably within an hour and a half. It was real easy. It was just a skin that we had to do, and we were able to build that in and I said, “Here you go.” He saw and it said, “Wow. That’s pretty cool. I’m actually going to be coming out to L.A. for a game. Do you want to have me come down and we’ll spend some time and meet?” And I said, “Absolutely, that would be great.”

So we set up a meeting for Mark Cuban to come down. At the time we were in downtown San Diego in an office that was probably 600 or 700 square feet. So we’re waiting for him. The meeting is set for, let’s just say anecdotally, 10:00 a.m. There were other companies in this little building. It wasn’t an Internet office or anything. As a matter of fact, the company right across from us on our floor, it wasn’t a company, it was a psychic. Just to give you some context of the type of place we were in.

We put up this sign on our window. It was kind of this piece of paper that I wrote on it said, “Goowy Welcomes Mark Cuban.” I see some people walk buy and kind of laugh. The meeting was set for 10:00. So it’s 10:00 a.m. and no Mark Cuban. And then it’s 5 after 10:00, 10 after 10:00. I look around and start thinking to myself, I never actually talked to Mark. [interference] can’t be sure if I exchanged e-mails with him or an intern. I just e-mailed him through a blog. And so I didn’t even know if he was really going to show up at that point. I thought maybe I had been punked.

Then we see a car pull up outside and there he was, Mark Cuban. He comes up the stairs, and we spent the next four hours with him going back and forth on what we were thinking and our vision and debating with him. And we had lunch with him. As a matter of fact, our waiter ran out and got a camera and started taking pictures of him and Mark Cuban together. And he said, “Look, this is interesting.”

Andrew: We’ll wait for the audio to catch up. Before you continue, we lost you at, “He said ‘this is interesting.'” The waiter gets a camera and takes a picture and then he said, “This is interesting.” And then what?

Alex: . . . beginning of our relationship with Mark.

The really interesting part of that time in the company’s evolution was this, and it was a really difficult decision point for us. We had a large social network, not to be named, pursuing us. They were interested in acquiring us because they wanted all their social network users to have an e-mail address and a real e-mail client that they could mail out of and into to the social network. So on one hand, we were having talks about a potential acquisition. On the other hand, we were talking to more traditional Sand Hill Road VCs about a financing. And then we were talking to Mark Cuban. So we had all three of these things that we were juggling and trying to figure out what was the best path for our company to go forward, which was a really difficult decision point because they all take you potentially in some very interesting and different directions.

The acquisition was just taking too long, and we had to make a decision on financing and we couldn’t delay any longer, and so we put the acquisition off. Then funding, between a traditional Sand Hill versus Mark Cuban, it came down to business evolution and flexibility. We felt that Mark still gave us more time to really figure it out, whereas with the more traditional Sand Hill VCs you would be, “Here’s the plan. This is what revenue and scale looks like.” And I’m not sure that we were fully there yet. So we decided to the deal with Mark Cuban also because you very seldomly get an opportunity to work with someone like that, and we figured we could always raise additional financing if we wanted to.

Andrew: Why can’t you name the social network that made you a buyout offer?

Alex: Well, just because it never became official or publicly announced. But, you know, I’m sure if you rewind back to those days, your imagination can take you to who it was.

Andrew: Was MySpace at the time acquired by News Corp? No, right?

Alex: They were.

Andrew: Oh, they were. Okay. All right. And MySpace, of course, was in Los Angeles. Okay.

Alex: That’s right.

Andrew: Am I wrong to assume that MySpace was, potentially, the candidate?

Alex: That’s the assumption I would have made if I didn’t know who the company was.

Andrew: All right. So now you’ve got Mark Cuban, first investor on board. Can you say how much he invested?

Alex: Sure. He invested $1.125 million.

Andrew: Mark Cuban put $1.125 million into your business?

Alex: That’s right. It was actually significantly less than we had offered from traditional VCs.

Andrew: I can imagine. Okay. Now how were you planning on putting this money to use?

Alex: Mostly it was to build out the team. Pretty much up until that point it was still only, I want to say, maybe five or six of us and we grew to ten. So it wasn’t that we made a huge investment in growing to scale, but it was for that.

It was for infrastructure. One of things that we learned about hosting e-mail, at the time, again this is interesting because you rewind back to it, but at the time, when we first started, I think Hotmail was offering something like 100MB of space for free, or maybe even 50 at the time we started and we offered 100 as kind of a marketing thing. And then Gmail came out and they were offering Gigs of space, and we had to offer nearly as much to stay somewhat competitive. As a small company, that is a very expensive proposition. So some of the money that we got from Mark was to help us with our infrastructure and scale.

Andrew: Okay. And what about file storage? I saw that as one of the features you guys added early on. Why file storage?

Alex: So we actually partnered with Box.net on our file storage. They were effectively a widget that then expanded into a more tightly integrated relationship. They were a way for us to make revenue because we had an affiliate partnership with them. File sharing is something that people wanted to do inside of this communications network, because at that time it was now beyond e-mail. It also had integrated instant messaging, and so file storage was kind of a natural extension of things that our users were asking for.

Andrew: Did you ever charge for e-mail? I know the plan was to charge $20 a year, but I didn’t see whether you charged or not.

Alex: No, we never did.

Andrew: Okay. And instant messaging. How big a part of the service was that?

Alex: It started to grow. It was around the same time that Meebo was getting a lot of traction for their integrated instant messaging, so it was a natural extension of our overall product. But here is where we started to run into some problems as well. People lost sight of what we were all about. This concept of a virtual desktop is interesting, but also not overly clear. Well why do I need a virtual desktop? And so when people would sign in or create an account or when we would try to message them about what this is all about, we were giving them too much. We were saying well it’s e-mail, it’s calendar, it’s file-sharing, it’s widgets, it’s instant messaging. It became too overwhelming. And so, in trying to capture a lot of what that person did on a day-to-day basis, we also, I think, overwhelmed them with a lot of the capabilities of the product. And that’s where we started to get to the idea of doing a pivot around a widget platform.

Andrew: Okay. And you also had a competitor at the time. Was it Netvibes?

Alex: Netvibes, yeah. There were a couple. In terms of the widget dashboard, there was Netvibes, Yourminis, which was our product, and there was Pageflakes.

Andrew: Oh, right. What was Yourminis?

Alex: This was the tough decision that we had to make as a company. In building Goowy, we realized we got to a product that was probably more than people wanted or could understand, and it was expensive to maintain because we had this mail infrastructure that we had to manage. But out of that product, one of the things we consistently got the best feedback on were the widgets, the ability create your own widget dashboard and drag them around and do really neat things. Because even though Netvibes and Pageflakes existed, they were HTML versions of it. So you had very little ability to customize and create kind of a dynamic and interesting experience.

So what we decided to do was effectively almost abandon the Goowy vision — we kept it and we maintained it, but we stopped evolving it because we had limited resources — and invest in this Yourminis concept, which just took the widget dashboard out of Goowy and made it its own lightweight simple application.

Andrew: And with Yourminis, if I wanted to take a little bit of content from the Web and put it in the margin of my website, you would enable me to do that?

Alex: Right. That’s right. Yourminis actually had its own evolution. It started as your own personal dashboard. Then we let you share your dashboard, so you could actually publicly share a really cool created page of content. And then we let you share the individual widgets that you could then embed in MySpace or on your website or anywhere else.

Andrew: I see. And then how far into that did you realize that you need to let Goowy just go by the wayside and focus on Yourminis.

Alex: It was pretty much immediately. I mean, we had to make that decision because we didn’t have enough resources to support both. We just couldn’t keep parallel development going in both products because we were still an under ten person company. And that’s a really difficult decision to make, because at that point, we’d invested in the core Goowy product for almost two years.

Andrew: So how do you make that decision? It seems, as you say, really hard. You had raised money around this idea. You launched around this idea. You got up and went to work every day for a couple of years with this big vision. How do you say, “No, this isn’t the right direction. We need to go somewhere else.” How do you make that decision?

Alex: I think it’s one of the toughest things to do. And I think that, as a successful entrepreneur, it’s one of the things that you need to be prepared to do. There’s this . . . I remember reading an article, and this was after we had done what we did, from Fred Wilson on his blog where he said that seven out of the last ten of his successful exits were companies that exited doing something different than when he invested. Right?

So it’s about the team, first of all, being able to put a vision together, begin to execute that vision, but then understand that market conditions change, your hypotheses now become reality as you start to go to market, and you need to be reactive and you need to be smart. It’s certainly not an easy decision. You certainly shouldn’t pivot left and right as soon as you face any kind of adversity. But you get to a point where you recognize a better opportunity and a better investment of your time and capital, and that’s what happened to us at Goowy.

And, by the way, having somebody like Mark Cuban on board gave us the flexibility to be able to do that. And so we did, we kind of pivoted, which it’s now called. We pivoted into Yourminis, and it turned out to be the right thing for us to do as a company, because ultimately that is the product that led to an acquisition by AOL and a good outcome for everyone.

Andrew: But it is a tough transition. I want to spend just a little more time on understanding how you came to that conclusion. How did you get yourself to do it? When I’ve asked that question of others in the past, they’ve said, “We had no money and we needed to do something, and that’s why we made this big, dramatic pivot.”

Others have said, “Our investors told us you have to go in this direction.”

Others said, “I had clear black and white data, and I finally just let go of my desires long enough to look at the data and that told me to go in a new direction.”

What was it for you?

Alex: It was data and it was the landscape. So let me talk about that.

Andrew: Please.

Alex: For our original product, the Goowy product, when we started, the landscape was very different. It was Hotmail and Yahoo! Mail. When we were two years into our evolution, it was an updated Hotmail, it was an updated Yahoo! Mail based on an Oddpost acquisition, it was Gmail. And so the competitive landscape changed quite significantly and we were competing, even though we started competing against big companies, we were competing against these big companies who had made an investment in that area.

We learned that someone’s e-mail address is a really unique kind of personal identifier, and it’s a difficult thing to get people to switch. So that wasn’t part of our early hypothesis that became more of a reality as we saw the company scale. We were still scaling, but not at the curve that we had hoped.

The amount of space that we had to provide and the cost of that space. As I said, when we first started it was 50MB. Then it was 2 gigs. For a company like Google it’s, you know, no cost. For a company like ours it could be crippling.

We had no real revenue source. So as you said, at some point, we were thinking about charging but then, because everyone was giving everything away for free, it would be very difficult for us to charge for our product.

So those were some of the data points that were contributing to us going, “You know what? I don’t think that this is a go-forward business that we can scale and actually monetize.” The other data points pointed to us understanding what people were using inside of this big product that we had developed. We saw a lot of usage around this lightweight widget concept, which was still relatively new at the time that we did the pivot into that space.

We had enough money. We had probably about, I’d say, half of the money that we had raised left. So we figured we had enough money to try another idea. Otherwise, we were just going to do a slow death with the money that we had remaining.

Andrew: I see. Were there any widgets that did especially well, that people got so excited about that you could get excited along with them? Or was it just the whole concept?

Alex: If I look back and I were to point to one thing that really gave us the trajectory that we needed and maybe pushed us over the edge of making that decision too, and I should have brought this up earlier, is when we went and met with MTV. So MTV saw what we were doing with our widgets and they said, “Look guys, this is really interesting and we want to be able to create these pages like you have in Yourminis.” And because we were so multimedia and more dynamic than the other ones, they wanted to work us. They wanted us to create these pages of widgets around their various vertical TV shows. So all the TV shows they had, they wanted us to launch this widget page where they could broadcast that page, anybody could come to it, they can grab the widgets, they can have this multimedia experience with their TV show content.

So we wound up doing a deal with some really kind of progressive thinkers at MTV, and that is what got us unbelievable distribution, because they put those pages on all those TV show sites that they had and it said, “Powered by Yourminis.” And that really got us into the multimedia vertical. We worked with CBS. We started to work with all these great media companies creating not only these pages for them, but then the analytics behind it to show them how all these widgets were doing, how their content was being distributed. That was the big up and to the right moment for Yourminis.

Andrew: Were they paying you for it, MTV?

Alex: They were. The reason we were able to survive and sustain was we actually got to profitability, because all these media companies were paying us for the distribution and analytics of these widgets.

Andrew: And so MTV said to you, we want our own Yourminis page, you host it, we’ll just link to it and you give our users all the information that we need them to have?

Alex: Right.

Andrew: Wow. Okay. So they were paying you and giving you traffic and I see.

Alex: That’s right. And it’s because Yourminis was such a unique multimedia version of these widgets. So they could point somebody to that page from, like I said, these vertical show sites and that person could have a really dynamic experience. They could see video on it. They could see news feeds. They could see photos. They can grab that widget if they wanted to and put it into their own homepage to get MTV added distribution. It was a really big win for us in exactly the two areas that you identified. One is it started to build revenue. And secondly, and probably more importantly, it got us a lot of awareness and distribution.

Andrew: I see. Okay. And how did they find you?

Alex: Again, it was a different day and age. There are so many companies today, and everybody is competing for your voice and attention. There weren’t nearly as many back then, and we were doing something that was very, very different in an area that was considered hot. One of their producers found us. We had a dialogue with him. We flew to New York and met with them. Then we met with some of the other folks in L.A. and had a really good rapport, and they decided to make that investment.

Andrew: Wow. All right. So now you decide this is a new direction to go in. You see the revenue in it. How do you grow it? How do you get more partnerships? How do you find more customers.

Alex: So because we were still relatively small at that time, most of the, call it sales, or distribution partnerships were being done by myself. Everybody else in the company was mostly focused on development. I would go out, meet with these media companies, understand their requirements, bring those back to the company, and we would build whatever widgets they needed and provide them the analytics and reporting for understanding what was happening with those widgets.

Actually, in that process, in going out and meeting with these media companies . . . and by the way, the great thing is once you have one that believes in you, that effectively has given you a stamp of approval, a big one like an MTV, it’s easier to go to CBS. And then if you have MTV and CBS, it’s easier to go to pretty much everyone else.

So that momentum was a great way for us to get in the door at a lot of these companies, one of which was Yahoo!. Oh sorry, one of which was AOL. I apologize. We wound up doing a partnership with AOL where they took our widgets and they put them in their gallery of widgets that people could use on their own page that they had created, their own kind of widget dashboard page. So we started that partnership and started to work closely together, and that’s ultimately what resulted in them acquiring the company.

Andrew: I’m sorry to get so deep into the tactics here, but I’m curious about how you opened the doors at the other networks. Because the thing about L.A. is everyone says because Hollywood is right there, Internet companies should be able to interact with them and Hollywood should have access to technology, but it hardly ever happens. There just isn’t that . . . they don’t even socialize together. How did you . . . I understand going from one Viacom company to another, from MTV to CBS. But how do you then start meeting people at the other companies?

Alex: I used LinkedIn religiously. I thought that it was a phenomenal tool and my hit rate on LinkedIn was astronomical. So a big portion of my day was identifying who we wanted to work with, scripting really short and concise messages to them about the value that we could create, and then reaching out to them. And again, like I said, my hit rate was really high, and we were just able, when we got in front of people, to wow them with what we were doing. And so we were very fortunate in that case.

Andrew: Okay. Going back to AOL. You were getting all this revenue from the media companies that wanted you to create widgets and virtual desktops or space for their users. Do you share any of that with AOL? Do you give them a piece of the revenue you’re getting?

Alex: At what point? When they acquired us?

Andrew: When you started out with them. When AOL said, “Hey, we’ll take you. We’ll give you distribution.”

Alex: No. It was just a straight distribution partnership where they would get access to our content and we would get their distribution.

Andrew: I see.

Alex: That was the initial part of the partnership, and then that partnership expanded as we spent more time working together. They came to us and said, “Hey, we’ve got this widget that needs to be developed. We don’t have internal resources to develop it. Could you develop it for us?” And so the partnership went from distribution to then development, and we were developing these really interesting widgets for their audience and that’s how it grew.

Andrew: What kind of widgets did you create for them?

Alex: We created really interesting finance widgets. Although they had, you know, kind of their own lightweight one, ours was deeper and gave you more data based on their datasets. We created interesting news widgets. We had a really unique photo widget that just kept dropping photos onto your screen, so different than kind of what some other folks were doing. So just, you know, some fun widgets and some kind of really newsworthy widgets.

Andrew: Okay. All right. And so this becomes a dominant part of your business. What size revenues were you getting from it?

Alex: Again, you have to remember, we were a relatively small company at the time. I would say we were on probably . . . we were close to a million dollar run rate.

Andrew: A million dollars annually?

Alex: Yeah, that’s right.

Andrew: Wow. Okay. And, yeah, you were small. When I saw you in the office in San Diego, I thought you guys only had seven people in the whole office.

Alex: Yeah, I think the largest we ever were was maybe eight or nine. We never crossed ten.

Andrew: All right. And then the acquisition by AOL. How did that do? You guys didn’t release it publicly, right? You’re not talking about how much money you brought in. Did Mark Cuban get his money back?

Alex: He more than got his money back. He did really well. So it was a very positive outcome for everyone involved.

Andrew: Really?

Alex: Mm-hmm.

Andrew: Can we say whether it was over $20 million?

Alex: I can’t comment on that. Let’s just say you’re in the range.

Andrew: Okay. So he did really well. Why didn’t he come back in at Assistly as an investor?

Alex: A couple of things. We wanted him as an advisor first and foremost inside of Assistly, and we didn’t need to raise money for the company early on. When we did Assistly, we wanted to do things slightly differently than we did with Goowy and the things that we learned at Goowy. We actually with Assistly believed we wanted to, in our Series A financing, raise money from a traditional venture capital firm. I shouldn’t say traditional, but a more formalized venture capital firm than working with Mark.

It was incredible to work with Mark. He was unbelievably responsive. So when we had ideas or wanted to bounce something off of him, he got deep really, really fast, which was good at the time, but we lost some of the structure that you would have with a more formalized VC firm. And we felt for this business, which is kind of a real revenue scalable business, we wanted to work more closely with a venture firm. And so we brought him in as an advisor. He participates in the company, but we went out and raised Series A from True Ventures who are extraordinary. They are just unbelievable. And Howard Lindzon.

Andrew: What kind of feedback, what kind of advice did you get from Mark Cuban? I want to understand how he works and how he helps a company like yours.

Alex: Yeah. So one of the things that he did was that he taught us to be really responsible in terms of how we spent our capital early on. At the time that we raised money from Mark, there were a lot of companies raising money. This was the Web 2.0 day. And a lot of those companies were spending just lots of money fast, before they really established a business model or kind of a scalable go-to-market strategy. And that’s one of things that Mark said to us you can’t do. You have to be really smart. You have to experiment a lot. And once you then find something that’s working and you believe it’s scalable, then you can invest behind it. It was almost kind of the Lean Methodology before the Lean Methodology became really popular, as it is today. So that was, I think, a lot of his influence on us was just to be really smart about how we spent that money.

Andrew: I see. And he was the only investor you had?

Alex: That’s right.

Andrew: Oh, so you guys did phenomenally well. Now you may not have crushed Google, but you did really well.

Alex: We did.

Andrew: Why didn’t I see more of that . . . when I look at the post mortem on TechCrunch even, it doesn’t seem to be celebrating the success. How did you guys feel you did?

Alex: I think that, given the circumstances, we did a great job. I think we started with a big vision. I know we started with a big vision. We tried to execute that vision, and I think we did really well given the limited resources that we had. We very quickly recognized that it wasn’t going to work and I think did a very smart pivot into an area where we did find ultimate success. It was a great outcome for the investors, and it was a great outcome for everybody inside of the company. So for us, internally, we celebrated it as a great learning experience and as a successful ultimate outcome. But, you know, we don’t need to go out and kind of thump our chests to the world. We know how it occurred or how it ultimately concluded, I should say, and we know the impact that we had at AOL during the time that we were there and we’re very proud of that.

Andrew: You guys stayed at AOL, what was it, a year and a half? Two years?

Alex: Almost two years. And we stayed there through the transition of kind of the old guard, the company that acquired us and acquired Bebo and built People Networks, which is AOL’s social kind of project. And then the tip over to when Tim and the team came on board and really changed the face of AOL. So it was an interesting time period from that perspective as well.

Andrew: All right. So what’d you learn? What kind of advice can you pass on to the rest of us based on your experiences at Goowy?

Alex: Some of the advice is be really smart about how you spend your money. I think a lot of this is the Lean Methodology that you’re seeing today. Do a lot of customer development. Don’t think you always know the answer. Iterate aggressively. One of the principles that we have here, for everything that we do, and this was rooted in our experience at Goowy, is this concept of continuous improvement versus delayed perfection. In everything you do, continuously improve with real data versus spending time in a lab thinking you can figure out the ultimate best widget for people to have. So that’s a big part of it.

Be really smart about how you spend money. Invest a lot in building relationships. We were very, very fortunate at Goowy, in that we met some great people who gave us really good advice. We established excellent partnerships that enabled us to scale and built a really good relationship, ultimately, with AOL, who became our acquirer. Investing in those relationships and spending time, to me, is a hugely valuable asset for anybody who’s trying to build a business.

Andrew: Was that your full-time job?

Alex: I would say probably 80% of my job was that.

Andrew: You are the front man on these businesses that you guys . . . it’s the four of you, you, Gary, Brad, and Jeremy. You guys have run businesses together. You’re the front man. How do you, as the front man, the guy who gets all the attention, the guy who gets to do the Mixergy interview, the biggest honor there is in all the tech industry, is there any feeling like, hey, what about us? Why aren’t we the ones who are being talked about more?

Alex: No. And I’ll tell you why. A couple of reasons. Number one, we’re just unbelievably lucky because we’ve all been friends, effectively from junior high school. Actually, one of our partners, Jeremy, was the first guy that we’ve ever worked with, but we have a long, long history together. We have really complementary skill sets. And this has never been about me or them individually. This is always about us collectively. So, when it comes to technology, it’s all about Brad and Jeremy and they’re the front men for that part of the company. When it comes to sales and marketing, I may be the front man. But the best thing that you can do, especially with founders, is find people that you love to work with, that will challenge you intellectually, that are smarter than you and that fulfill a critical role for the company. And that’s what we have and we all love our roles.

Andrew: How have you implemented what you learned about customer development at Assistly?

Alex: At Assistly, early on, very early on . . . we started the company in October of 2009, and in January or February of 2010, we launched our first alpha product. When I say we launched it, I mean we launched it to our early partners. That’s a very short time frame for a customer service product. We did so because we wanted to get as much possible feedback from potential users of the system on their workflows, on their day-to-day challenges, on the best ways that we could use our product to make their lives better. We want to deliver a pain medication, not a vitamin. So that’s some of that learning that we got from Goowy, which is talk to your customers, get them involved in the process, help them help you define the roadmap early and often.

Andrew: What’s one flaw that you released the product with that you then fixed later on?

Alex: One flaw we released the product with that we then fixed later on. Part of our case management system, which is a core part of a customer support tool, didn’t have the right workflows to really deliver value. It didn’t trigger events based on the actions that you took. The actions that you would have to take as a follow-on to the initial action were still manual. So a lot of the interactions were just dropping out. People forgot the follow-up or how to follow up. So we had to re-architect the entire workflow behind our case management system to automate that part of the process for our users.

Andrew: All right. So that’s big. Customers are now depending on you to solve their problem, big pain with someone that’s really important to them, their customers and you deliver a product that’s flawed. How do you recover from something like that?

Alex: The good news about that is we found that out really early. That’s the value of releasing early and often. And so when we found that flaw, we found that flaw within the first weeks, maybe the first month of our private beta and very early on. So the impact to our customers was small. This was before bigger companies are running their entire support organization on our platform. This actually happened a lot during even the testing phase. So that’s the benefit of doing these things in a continuous improvement versus delayed perfection kind of model.

Now, the reality of any of these companies is, we’ll still have flaws. We’ll still make mistakes, and anybody who tells you that they won’t isn’t being honest with you. What our challenge is, or I should say, what our goal and opportunity is, is to absolutely minimize the impact of that. And I think that’s what we’re getting a lot better at is minimizing the impact, being completely transparent with our customers, sharing with them whenever we’re having issues why we’re having those issues and what we’re doing to resolve them.

Andrew: But isn’t that a tough situation to put a potential customer in to say, “You will be my customer but you will also be my guinea pig. It will take us a few years to get this right, and in the first few years, you’re going to suffer along with us.” How do you avoid that? How do you deal with that?

Alex: Well, I wouldn’t say that our customers are our guinea pigs. That’s why you have a beta period. And for us, I think a lot of the way that we’ve been able to condense that time is that this is our background. Prior to Goowy, the two other companies we did were customer service and support companies. So I think because of that we’ve been able to minimize, effectively, that challenge or that pain point. But at the end of the day, if you’re delivering something that is hugely valuable and you’re delivering it in a way that’s fair, that’s affordable, and that’s scalable to your partners and you’re being transparent and honest when you do have challenges, I think people will put up with some of that in order to reap the benefit that you’re creating for them. So, if you build a company in that way, I believe you can absolutely overcome that. You’ll have early adopters who come on board who take the risk with you, who you absolutely should reward for taking that risk. And then you have to build a mature product and organization where that risk or those issues don’t impact your customers.

Andrew: Now what you’re saying, I hear a lot in my interviews. Just release it. You’ll improve it later. It doesn’t have to be perfect. And I understand that it all makes sense, and I understand that it’s the right way to go. But I also know that when you have to release something, it’s really painful to release it with fewer features than you think your customer needs, less than perfect, because your name is on it.

That’s why I keep coming to you, and other people who I interview, for just guidance on how you did it, how you got over that need to release something that’s perfect. And especially from you and I’ll tell you why, Alex. Because, as you said, you’re a guy who’s had a few hits behind you. Three companies you launched before this. You’re a guy who not just had hits but had a reputation. People knew who you were. They couldn’t wait to see what you were going to do next after you sold to AOL, and as soon as you launched, they couldn’t wait to try it out and see what Alex is up to.

How do you get past that? I’m sorry to keep beating up on this, but I’m so curious. How do you get past that? How do you say “Everyone’s looking at me. They’re all waiting to see what I do next. I gotta launch something perfect.”

Alex: It’s actually hard for me, personally, because I am so passionate about design and user experience. And if you ask me to look at my product today, I would tell you that there are a lot of areas that I don’t feel are personally to my standard. It’s kind of the Steve Jobs mentality. It has to be perfect when it ships. But I’ve learned over time, I’ve learned in my experience at Goowy and the previous companies, that the more you can get customer feedback fast, soon, the better product you can build sooner. We can spend a lot of time making something look absolutely beautiful only to find out that 1% of our users are ever going to use it. And we spent a lot of time and energy on something that didn’t deliver value.

Whereas if you roll something out . . . now, by the way, I’m not at all saying you roll out garbage or something that doesn’t scale or crashes the product. But maybe it’s not perfectly tuned to every pixel, to every color that you would want or fully featured, or fully developed, I should say, feature set around it. But you get immediate feedback. Your customers will tell you what they like. They’ll tell you what they hate. By even just using the product. Sometimes they’ll tell you. Other times you’ll be able to tell by the usage, which is why you need a lot of metrics behind this stuff.

And, ultimately, in my opinion, and this has been a hard transition for me, because I want to be perfect in a lot of ways, but ultimately you get to a much better product that delivers true value much faster. If you can get your head around that, then you can start to pull yourself away from, “Well this has to be perfect before it launches.”

Andrew: All right. I can see how it’s a challenge, and I can see how it makes sense to get past that challenge. All right, one more question. You’re advising other startups. What’s the big message that you have to say over and over to them? What’s the big piece of advice that you give them often?

Alex: I think it comes down to really two things. It comes down to, in today’s world, I think you really need to build a product that has business model scalability. There still are a few of those lightning in a bottle, the Foursquares of the world kind of thing, but most companies today have to be built that understand deeply what is it going to cost them to acquire a customer, what does that customer funnel acquisition process look like, how do they best tune it, and what is the revenue at the back end of that funnel? That sales and marketing machine is critical. It is the difference between success and failure more often than product actually is. And so that’s one area that I tell people they have to really, really focus on.

Then the next is you have to be very clear about what your message is. So a lot of the entrepreneurs that I mentor . . . I’ve invested in a bunch of companies, and in most cases those are very mature entrepreneurs and they only ask me for help in key areas. Whereas, I do mentorship programs for newer entrepreneurs that haven’t been through the experience, that have a great idea. For them, the biggest bit of advice is really around positioning the story, making it an exciting story, telling it in a very short amount of time that people understand kind of the value. Because a lot of entrepreneurs, quite frankly, can’t do that. They’ve got a great idea. They’re super excited about it. But they don’t know how to package it in a way that makes tons of sense and gets other people to say wow. So I think that’s where, for newer entrepreneurs, I spend most of my time. Around that storytelling.

Andrew: Can you illustrate that with the package, the story around Assistly that makes people say wow?

Alex: Sure. Absolutely. So, we as individual consumers are much more connected than we’ve been, even three years ago, because of things like Twitter, Facebook and blogs. So when you or I, Andrew, have a good or a bad customer experience, we infect many, many more people. And that puts a lot of pressure on businesses today to be awesomely responsive and participate in the conversation wherever it’s happening. Assistly is here to help you do that in a scalable, affordable way.

Andrew: I see. Okay. So if I, as a consumer, have an issue and I broadcast it out on Twitter, if the company that I have an issue with has an account with Assistly, they’ll know about it and be able to address it?

Alex: Exactly. In an awesomely responsive way.

Andrew: In an awesomely responsive way.

Alex: That’s right.

Andrew: All right. Cool. Actually, I saw that phrase over and over online as I was looking for a key quote about what Assistly is to help explain it to my audience. All right. Alex, thank you so much. This has been a great interview. And thank you for all the help over the years too.

Alex: Yeah, you bet. So great to reconnect with you. Glad we have you back to stateside, and I would love to see you personally the next time you’re in town.

Andrew: I’d love it too. And I’m going to thank two people. Kareem Mayan who first introduced me to you and said, “You’ve got to meet Alex,” and Noah Kagan who reintroduced me and said, “You’ve got to have Alex on Mixergy for an interview.” Thank you, guys.

Alex: Thanks so much.

Andrew: All right. Thank you, Alex. Thank you all for watching. Bye.

Alex: Bye-bye.

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