Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and the place where over a thousand entrepreneurs have come to talk about how they came up with the ideas for their businesses, how they built them, and to be confronted with some of my challenging questions. I have an audience of not dabblers, not want-repreneurs, just lookie-loos. No. Real entrepreneurs who are looking for real ideas, real lessons, real direction, because they’re building real companies and this is critical for them. That’s what these interviews are about.
One of the things that I noticed is that there are content sites that I read that are making money not by running banner ads, but by running deals. Deals. One of my favorite blogs, for example, does posts about iOS updates, about the new Yosemite this and this and that. From time to time, they also have a post about a deal, like a drone for under $100 that you can just buy and use around the house or around the neighborhood. Or speakers for a fifth the price that you could buy them ordinarily on Amazon.
Well, the company behind those deals was founded by a Mixergy fan. I invited him here to talk about how he did it. Josh Payne is the founder of StackCommerce. The company helps publishers monetize their sites by selling products that are relevant to those sites’ readers. If you want an example, you can check out deals.thenextweb.com.
This interview is sponsored by a page I created, andrewswelcomegate.com. I basically have a page on my site that when people land on it, it clearly explains what my site’s about, clearly explains what people are about to get, and it asks anyone who’s on the site to give me their email address in order to get more access. That page worked incredibly for me. I want to give it to you as a template that you can use on your site. If you have a problem where people are coming to your site but they’re not sticking around, they’re not giving you their email address, they’re not allowing you to build a relationship with them, this is going to give them the opportunity to do it. It’s high converting. If you go to andrewswelcomegate.com, you can get it right now. Andrewswelcomegate.com.
Josh, good to have you on here.
Josh: Yeah. Thank you.
Andrew: If I was actually one of your partners, instead of talking about Andrew’s Welcome Gate, I might be promoting a different product. Maybe I’d be the guy promoting drones. That’s how it would work?
Josh: It all depends on your audience, but yeah.
Andrew: I get to pick the products that I sell to my audience?
Josh: That’s something that we found very early on. Publishers have this thought that they want to pick the products, but in reality it’s more about a conversation about who your audience is, their demographic, their interests. We typically are the ones that go out and find the products. We source the products for you, and then we get exclusive deals on them and then bring them back to you. You have a right of first refusal as a publisher, to say, “Hey, I don’t want these products on our site.” But what we’ve found is that in reality people don’t want to take the time to pick those products. They want us to do that for them.
Andrew: I’ll tell the audience later on about an email that I found in my inbox from back in the days that you were struggling. We’re going to get to the whole story of how you overcame it. Let’s give them a taste of where you are today. What size revenues are you doing?
Josh: I can’t go into exact details, but we’re well into the eight figures.
Andrew: Eight figures. That means you’ve done over $10 million. Is that a run rate, or is that revenue already this year?
Josh: Revenue this year.
Andrew: Whoa. Wow. Even since the pre-interview, you guys have grown.
Josh: Yeah. We’ve been growing really fast. To give a sense of user growth, it took us about 35 months to get to 900,000 registered users on the site. We got to a million in the 36th month. Now, just about 2 months later, we’re at 1.25 million.
Andrew: 1.25 million registered users?
Josh: Registered users, yeah.
Andrew: When does a person become a registered user?
Josh: Whenever they buy something. They might sign up for a sweepstakes, they might sign up for a freebie. We give away a lot of free digital products.
Andrew: Gotcha. Wow. All right. Before you built this business, you were in business development at Yahoo, and you were looking for a startup idea. This wasn’t one that just hit you out of nowhere. You made some effort to find the idea. What was your process for finding your business idea?
Josh: That’s a great question. Prior to StackCommerce, I had actually started another company that was around social discovery. It was called discover.me. And then that process, to tell you about the idea quickly, it was a feed of all the sites that you and your friends visited on the web. You can imagine it was kind of controversial from a privacy standpoint. We scaled that up to tens of thousands of users, but it was almost impossible to monetize until we got to millions and millions of users. As part of that, I realized that building a social site, a social network, or anything that didn’t have transaction revenues was going to be really tough.
So then, I switched over to more of an ecommerce idea. And I got inspiration from a lot of areas. That was, sort of, late 2010 when there was the rise of all the flash sale sites: Groupon, Gilt, Fab. They were all really crushing it, and there was one site early on that was really interesting in the Mac software space, called MacHeist. They were doing Mac bundles, and I read somewhere, that they did like $1 million in revenue in 2 weeks. And I thought to myself, “Well, shit. Why couldn’t I do 50 grand in revenue in 2 weeks, right?” And so, I started to flush out this MBP of a Mac bundle site and kind of go from there.
Andrew: I bought my Mac, I guess, a little before that, but I remember in the early days of having a Mac, I would go to those bundle sites and I’d buy them all. So, I get it.
Josh: All right!
Andrew: This was right, and people were doing it and making money from it. I even interviewed, I forget the name of the entrepreneur, but I interviewed a guy who was just a teenager in school, who built a business like that. So, what was the problem? Well, before we get to the problem, what’s the first version look like?
Josh: Wow, yeah. So the first version, even getting to that first version, is a story in and of itself for entrepreneurs that we’re sharing. You know, look, I’m just a business guy, like most other entrepreneurs with a crazy idea. And the first thing that I had to do was get a developer to believe in my idea and actually come out and build it. And you can do that in a couple of different ways.
You know, go online or [??] or whatever and pay someone $50 per hour, which usually gets you very poor product. Or, you can do what I did, which is I started, I was in San Francisco at the time, and I just started going to tons of meet-ups. Actually, I met my original CTO at a Yelp hackers and founders meet-up, and he turned me down 3 times. So I came up with the idea of Stack Commerce, and then finally, he agreed, and then built the MBP out. It was a very, very simple site, and we just did, essentially like I said earlier, Mac bundles, originally. So flash sales for Mac software, essentially.
Andrew: What was on that first version?
Josh: In terms of functionality?
Andrew: Mm-hmm.
Josh: Yeah. You hit the page. It was really just a couple pages. You hit the page, and I gave a description of, ‘Hey, you’re going to get these 10 products for $50.’ So it was basically 10 pieces of Mac software, worth $500, that you could buy on our site for, actually, it was $44. And then you would buy it and then would give you the license codes to download the softwares. There was no visible delivery. The margins are good on software. There’s no incremental marginal cost to the software developers.
Andrew: I think I see an early version of the site right here in one of my screenshots. You had wallpaper wizard; vitamin R; narrator, which ordinarily goes for $40; Mac cleanse 2, which goes for $20; surface, $15 usually; Mac journal.
Josh: That’s the original.
Andrew: That’s the original one? Why did you need a developer for it? Why couldn’t you just get all that software, and then put a PayPal button or a Scribe button on there and be done?
Josh: Well, we could have. You know, I wanted full credit card functionality, and also, there were some issues with the way the licenses were delivered that they needed to be delivered in an automated fashion. So, we needed to handle the API’s of the developer’s products.
Andrew: Okay.
Josh: And I was thinking a little bit more long term. Even if it didn’t work out, I wanted to try to find sort of a cofounder CTO, and so, that was the first choice. If I got turned down by everyone, eventually, I probably would have done something much simpler.
Andrew: You told April in the pre-interview you did a test, and the test went well, so you quit your job. What was that test?
Josh: So that test was this product or was the bundle that we’re talking about now. So I actually was still working at Yahoo at the time and did this. I was probably working, literally, 80 plus hours a week. All right. So I was going to my day job, and that night I was sending emails to software developers, trying to convince them, promising them that I would get them a thousand plus sales within two weeks on this bundle, and I had no product. I had no website to send them to. I had nothing. So, I was basically just selling the dream, which you know is not an easy thing. In about two weeks, we ended up selling just over 500 of these.
Andrew: Wow!
Josh: Yeah, so we did a little over 20 to 25 thousand dollars in top-line revenue, and that was with no advertising. That was with no connections in the industry. That was with no historical, you know. I had nothing.
Andrew: You didn’t have a blog in the apple space, nothing. So what did you have? How did all these people find you and buy?
Josh: Yeah, so that’s kind of the story that I talked to April about a little bit. I put my reputation on the line with these guys. I get these 10 software developers, promise them all these sales on a very similar system that MacHeist does. We’re going to bundle these up and people are going to come and buy in droves. They were willing to discount their products by 80-90% in order to get volume. The night before, PayPal revoked our payment license. I was probably up for 36 hours. We were fighting with PayPal, trying to figure…
Andrew: Why did they revoke your license?
Josh: It was weird. I actually can’t remember, because it was three years ago. It got approved, and then the night before something happened with our application. We actually just applied for a whole new account with different information and somehow got it in time.
Andrew: Okay.
Josh: The point is we actually went live that first day. It was absolute crickets. I think on the first day we got three sales. We turned it on and we really watching intently Google Analytics. We’re waiting for the sales to come in. Absolutely nothing happened. I was crestfallen. I didn’t know what to do with myself. I’m starting to panic. I think we did spend a little bit of money on Google Ads, very nominal, to try to bump it up. We tried to get some PR around it, so we did a press release and some things. Sales were just trickling in.
But what I did notice was that the sales that were coming were coming from blog referrals. What we saw was that there were a few bloggers that I was able to reach out to. They would pick up the story. In that first week, we got about a hundred sales. But I was in absolute panic mode. I had promised them 1000, and we’re on track to do 200. Again, for me this was not just an NBP. I had put probably three months of development time into it, six months of the idea overall. I had promised all these people something, and that meant a lot to me, to deliver on that promise.
I’m pretty close to my dad. About one week in, I called him and I talked to him about all the pressure that I felt. Honestly, it was something that really drove me. I actually broke down in that moment because I was so worried about failing. Failure, if you’re success driven, it is quite the motivator. That moment, he gave me…
Andrew: Before we get into what he told you, let’s just understand how you felt in that moment, what was going on in your head? When you say failure is such a tough thing to accept, what was it about failure? Did you start to imagine your friends at Yahoo saying that you’re a failure? Was it the Mac community never respecting you again? What was it about failure? Was it about your co-founder?
Josh: I think that feeling is what makes the best entrepreneurs who they are. It’s what drives you to perform. There’s something inside of me that will not let me fail at any cost, or at least my cost is substantially higher than the norm. Whatever I have to do to succeed and come through, I’m going to do. I know that it sounds trivial or it sounds trite, but it’s…
Andrew: It could also cause you to stall out. If you are so success driven and then you’re failing, your mind just feels everything that you want is gone. “What am I doing here? Everything I worked for is a failure. I spent months trying to put this thing together. Nobody’s coming here. Maybe I just don’t know what I’m talking about.” Right? It becomes that important to you that it almost works against itself, doesn’t it?
Josh: It can, unless it forces creativity. If you’re failing and you turn internally and you just beat yourself up about it and can’t find a way out, I think it can definitely be a big negative.
Andrew: Did you beat yourself up about it?
Josh: A little bit. It really just drove me to think about, “OK. What can I do?” I’m one week into this two-week sale. I have one week left. Everything I’ve tried has not done much. That was the week of WWDC, which is Apple’s worldwide developer conference. I knew that a lot of top Mac blogs and publishers were having parties in San Francisco. I had moved down to L.A., so I was in L.A. at the time. It was Sunday night. I had just talked to my dad. I was supposed to go to work the next morning.
I called in sick, bought a flight, and flew up to San Francisco. I crashed a party at a blog called Cult of Mac. I ran down and found the publisher, the head guy. His name’s Leander. I pitched him on why he should just do a post about this. That conversation, that post ended up driving a couple hundred sales out of the 500. When I realized the power of what that blog and that post could do is sort of what helped to form the idea around building a platform where publishers would recommend relevant products to their readers.
Andrew: I see. If that’s so powerful, then that should be the product.
Josh: Right.
Andrew: Partnering up with them.
Josh: Right.
Andrew: What did you say to him that got him to say, “Yes, all right. I’ll write about your bundle.”
Josh: Actually, it wasn’t that hard of a sell. He basically was like, “Oh, yeah. Our readers love bundles. Not only that, its great content for our readers. Not only that, but we make from it.” It wasn’t…
Andrew: Oh, I see. Okay.
Josh: That’s honestly the pitch that we give to publishers and people today. What we do is very incremental in terms of revenue to publishers. More importantly, it’s relevant. I think the challenge with banner ads in general is the lack of relevancy to the reader. They’re annoying. We’re delivering a product that the readers treat as content and that the publishers get to make money from. It’s kind of a win-win.
Andrew: I didn’t realize that back then you were setting them up as affiliates, so Cult of Mac got paid every time a sale happened.
Josh: Yeah, exactly. In the early days, when I saw that there was a desire from the publishers to get paid from product recommendations, I thought, “How can we build a better mousetrap?” There was a company called PriceGrabber. I think it’s still around. They had a widget on Cult of Mac, and they would make a couple hundred dollars from it a month. I talked to them about what products were in that widget, and it was mainly tech products, per se. Monitors and printers and things that no one really cares about.
I said, “Is that what your audience really wants to buy, or did they want targeted products that are truly relevant, like Mac software and iPhone cases and games? Things that are accessories and more interesting.” He’s like, “Listen. I don’t really know. If you could make me twice as much as what I make from this widget, then I’ll partner with you.” It’s kind of funny, looking back. In that very first month, I estimated that we would make about $500 dollars for him, that he would earn $500. I ended up writing him a check for four grand in the very first month.
Andrew: He replaced his widget with your ad. What was in that ad? What was in the widget that you created for him?
Josh: Instead of going the widget route, we actually went a different route. We had him write a post every day about the deal of the day. We would drive those users not back to stacksocial.com but into their own white labeled store.
Andrew: How did you come up with that plan? The post every day and the white label store.
Josh: Well, I saw the effectiveness of getting sponsored posts or content on a publisher site. We just thought about what would keep the user in the flow. If you send a user from one site to another, that’s very disruptive. But they already have brand affinity with that publisher. If you go to Wired.com every day, or The Next Web every day, you have trust and you have affinity with them. I thought, “Why not build a white labeled store that would have a better flow, instead of taking them somewhere else and losing that conversion?” It’s a much better user experience to stay on-site and on-brand.
Andrew: I was just listening to Paul Graham speak to students at Stanford. One of the things he said is that if you get a job before you start your business, you’re going to learn a lot more and connect with people and so on. What did you learn by doing business development at Yahoo that allowed you to set up these deals?
Josh: Actually, the job that I learned the most from was a company called Meebo. They got acquired by Google in 2010 for about a hundred million dollars. I joined there as the 35th employee. It was backed by Sequoia and some others. They eventually took on 75 million dollars in funding. I learned an enormous amount there.
Andrew: What did you learn?
Josh: I would never have been able to start my company without working there. First of all, Meebo.com was a destination site that people went to. They ended up figuring out that to monetize, they had to build a platform. They started putting a real-time chat widget on publisher sites. My job was to go talk to publishers, Hearst, Conde Nast, and all the big publishers in New York and LA, and to convince them to embed real-time chat in their sites. I took a lot from that model and brought it to what we were doing. I learned a lot from…
Andrew: Do you have anything specific? By the way, I’m surprised that you guys were able to get them to do it. That took over the net for a while. I think the Wall Street Journal even had it up on their site, right? And then it disappeared almost as fast as it came on the scene.
Josh: Right. Yeah, it was kind of disruptive. It was a bar that was always present at the bottom and people, you know… At the end of the day, you’d be surprised what publishers will do for incremental revenue.
Andrew: The revenue they were going to get was those ads that would kind of pop out of the bar?
Josh: Right. So, if you hovered over the bar for a little bit, it would pop up and you would see a big 900×400 video ad unit. It was very clean, elegant UI, but at the end of the day the adoption of the actual live chat wasn’t there. It just didn’t stick. I think that was the real issue.
Andrew: People didn’t want to chat with whoever happened to be on the Wall Street Journal’s website the moment that they’re on.
Josh: Right.
Andrew: I see.
Josh: They were sort of passing through.
Andrew: So, did you learn that you could just talk to anybody and offer any crazy deal and they’d be open to it, so you might as well just start with what you think makes sense?
Josh: Well, I got a lot of education around the fact that in the publisher world, think about it, banner ads and advertising in general is plummeting. CPMs are crashing and click-through rates on banner ads are plummeting. Publishers in general are seeking out new ways to make money.
Andrew: Okay.
Josh: And so for us, you’re seeing — and I know this is a buzzy word — you’re seeing this convergence of content and commerce. It was [??] things that were separated in the past, you know, separation of church and state around advertising and editorial. But now we’re seeing [beeping noise] publishers like BuzzFeed… Sorry, I’m getting some notifications here.
Andrew: How do you get any work done? I’m seeing a lot of beeps going off.
Josh: Sorry, man.
Andrew: What is it that just made that sound?
Josh: That was Google Calendar.
Andrew: Okay. Nothing to apologize about. I want to get you in your environment, where you’re working, with the way you’re working, so that I can ask questions like that. Where are you right now? Is this your home or office?
Josh: This is actually my apartment.
Andrew: Okay. Why are you at home?
Josh: The office is way too loud. There is no quiet room in the office. There would have been four people who would have walked in by now.
Andrew: So you worked from home today just for this interview.
Josh: Yeah, exactly.
Andrew: Oh cool.
Josh: I have to work around your schedule.
Andrew: Thank you. I appreciate it. How many people at the company now?
Josh: We have, I think, 32, 33 people now.
Andrew: Wow.
Josh: Yeah.
Andrew: At what point did you raise money?
Josh: We raised money in May of 2012. It’s kind of a unique story there, as well. I was, like I said, in Los Angeles. We got into LA in a very unique and unfortunate time. LA was kind of dead before 2012. I was in San Francisco and moved to LA and all of my friends were like, “You’re committing entrepreneurial suicide. What are you doing?” It actually turned out to be a huge blessing in disguise. LA is growing insanely in terms of tech entrepreneurship. I got here right at the time when a couple different accelerators opened. Amplify, MuckerLab, and Launchpad all launched at the same time and I applied and got into Amplify, which is the accelerator here, and raised a small seed round of about $800,000. Actually, I’ve never touched it, though. We’ve been profitable since we launched.
Andrew: So you gave up a piece of your business but never got to use the money you exchanged for that piece.
Josh: Right.
Andrew: Why did you take money?
Josh: We took money for a lot of reasons, a lot of strategic reasons. The number of introductions that I’ve gotten to publishers and partners has been instrumental. You get a lot of credibility, as well. So, when you’re trying to hire really good talent, people want to know that other people believe in you. I think just having some social proof is huge. Every stamp of approval that you can put on your resume as a start-up is huge. It builds a lot of momentum around who wants to work for you and who wants to partner with you.
Andrew: Who was the money from?
Josh: We raised from 500 Startups, Siemer Ventures…
Andrew: That’s Disney’s arm?
Josh: Siemer, they’re someone else. Amplify, of course. Paige Craig is a big angel down here. Tim Draper, so Draper Associates. Jim Pallotta who owns the Celtics. A couple other guys, some other angels.
Andrew: And all of those connections came because of Amplify?
Josh: Yeah, exactly.
Andrew: Wow, I didn’t realize that they were so helpful. I know that LA has… I lived in LA and I started Mixergy there, and I know that LA has entrepreneurs and investors who are really well-connected. I just didn’t know about this new accelerator. It’s hard to tell.
Josh: The whole LA Tech, or Silicon Beach, or whatever you want to call it, it is a thing. If you look at LA in general, you have companies like Tinder, which is a billion dollar company. You have Snapchat, which is a multi-billion dollar company. Whisper. Beats by Dre is down there, a billion dollar company, Oculus Threft [SP] is in Southern California. It’s a really big market and then there are a lot of younger up and coming start-ups as well. The traction is growing tremendously and I think we’re going to be on the same path that New York.
Andrew: Yeah, I can see that. The challenge for LA was that a company would do really well and then they’d be lured by San Francisco which is just a flight away anyway. And they were coming up to San Francisco anyway so they’d be lost, which sucked.
Josh: Right. You know what’s interesting now? We have a lot of Bay Area investors coming down here to mix up their investment classes and the way they’re investing so we’re getting a lot of SF and New York.
Andrew: Like Tim Draper. [SP]
Josh: Yeah, the money that we raise is probably a third LA, a third New York, and a third SF.
Andrew: All right. So you made this deal but you know what? I don’t want to overlook the fact that you that you gave Cultamac [SP] an article a day. That’s not easy. You’re just getting started.
Josh: Yeah, it’s not easy at all. I think the proof was in the pudding and we saw early on that you if you can hit the relevancy, that’s the number one factor. If you can recommend products that are truly relevant to a site’s audience the conversion rates are extremely high. So instead of getting banner ads where you get typically get a 0.2 percent click through rate. Our articles are getting 5 to 10 percent, sometimes, if they’re truly relevant. So the conversion rates and the click-through rates are much, much higher.
Andrew: But what do you say to someone to get them to take a risk on you and trust that you’re going to give them an article a day and a good product every day?
Josh: Right. That’s the beauty of business development and sales. I have been doing business development for 10 years prior to this and I think it’s providing as many proof points as you can and case studies. After Cultamac I can easily take that a case study and show other publishers, “Look what we’ve done over here. It’s worked over here.”
Andrew: And they’re high profile and that’s a benefit if going towards someone bigger instead of starting out small. No one cares about the small guy but they do care that Cultamac was doing well with you. Do you remember anything about what you said to Cultamac to get them to take the flyer on you?
Josh: In some respects I think we got a little bit lucky. That publisher, in particular, is one that is very open to new ideas and trying different things. Not all publishers are, not all publishers that your approach will be and I think we were really fortunate that we found someone that was willing to try something new. Honestly, that was a big part of it. What I said to him was a little bit overpromising in the beginning and by telling people that you’re going to do something and then having no clue how you’re going to do it but then you figure out a way to get there. That’s a big part of it.
Andrew: And those promises are what kind of sales we’re going to do with this. And you can’t tell, but you’re promising what you believe you can get done.
Josh: Right, exactly.
Andrew: How did you get the product to then sell? Was it easy because you said you have Cultamac here?
Josh: Yes, that was definitely a huge factor. If you think about it, the very first vertical that we picked was Mac software. It’s a very niche, small vertical. So we weren’t trying to boil the whole ocean. We weren’t going after everyone. We went after a very specific set of vendors or product developers or application developers, that we knew had high margin products and we knew those application developers had a real challenge in getting their product out there.
When I talked to software developers and application developers they told me what a hard time they were having about getting the word out about their products. So they were very hungry for the exposure and sales that we could get them. There was just as much of a need on the vendor and merchant side as there was on the publisher side. Because if you think about it, there was Groupon and Gilt and Fab. There was nothing for this niche of makers that were [??].
Andrew: What was your deal with makers? How much would you give them and how much would you give the publisher?
Josh: On the digital side it’s not too much of a secret. It’s typically 50/50. That’s what we do for digital products, on average.
Andrew: So the maker gets 50 percent of the revenue.
Josh: Yeah, exactly.
Andrew: And then it’s a different deal with each publisher.
Josh: Right, yep. And we do a revenue share on the net revenue of the publishers.
Andrew: I said at the top of the interview the company is called Stack Commerce but at the time it was called Stack Social. Why did you call it Stack Social?
Andrew: Why did you call it Stack Social?
Josh: [laugh] The very first idea was actually more a Pinterest for dudes. That was the original Stack Social idea and that’s where the name came from. So it was like, tell us your stack of products that you use to get your job done, whatever software stack. For example, I use Ruby and Evernote and Skype and whatever and then you would put it in a stack and you would socialize that stack with your friends. Again, what I said in the beginning, we realized that route is almost impossible, unless you get to Pinterest’s size, to monetize well. So I thought, here are all these products that these people are using. Why not go to those software developers of those products and ask them if they want distribution and to get them sales.
Andrew: And you just took the name that you had before and said, “Let’s stick with that.”
Josh: We just kept it. It wasn’t so far off, we definitely got questions like, “What’s social about your site?” But it didn’t stop us and we already had a little bit of Vestio [SP] so we just decided to keep it.
Andrew: I see. All right, after Cultofmac what was next to grow the business?
Josh: After Cultofmac it took about three or four months and then we got our second publisher. And then about a month later we got a third, and a month after that we got our fourth and fifth. So we started growing by adding additional publishers to the platform.
Andrew: And was it still you calling up different publishers and trying to recruit them?
Josh: Absolutely. It was all me. I was doing my full time job all the way up for six months before we launched and six months after we launched.
Andrew: What about the developer? Is he still with you?
Josh: Two things happened with the developer. One he wanted to move to Sweden with his girlfriend and two, he wanted to apply to Y-Combinator with a different idea, with a different friend.
Andrew: Oh, wow. Who was the guy?
Josh: His name is Eugene Otto and he eventually did get into Y-Combinator so now he’s in a new company.
Andrew: Ah, he’s in there now.
Josh: Yeah, he’s actually in there now.
Andrew: It looks like Shift is the name of the company.
Josh: Yeah, exactly. He’s doing awesomely, I’m really stoked for him.
Josh: He’s developing a debit card that lets you spend digital currency, loyalty points and regular money according to Y-Combinator’s blog.
Josh: Him and I are still really good friends and we had done more of an equity thing and at the end of it he just said he wanted to go and so I paid him cash and he gave back the equity.
Andrew: Wow, and you became the sole owner and then you raised money and brought in other owners. Wow, is he kicking himself right now?
Josh: I don’t think he is actually. And I know that may sound crazy but he wanted to do his own thing. He wanted to be passionate about what he was building and for him it wasn’t this type of e-commerce. He wanted to do something else. We laugh about it all the time, surprisingly. If I were him I would have gone insane. And he still owns a small, small bit.
Andrew: How do you know what to pay for his share of the business?
Josh: We just took a swag, but really it was a percentage of how much profit we made from the bundle and then a little bit more for an hourly rate.
Andrew: I see. So you just said, “Here, I’ll give you a share from what we made from this one bundle and I’ll pay you for the hours that you put in and you can go.” So he never even got to the place where you were working with Cultofmac beyond that first bundle.
Josh: Really, ironically, he was there for the first week and I told him, “Look, this thing that just happened to me, to us, doesn’t happen every day. This is really special. You should stay on. I’m not just making this up.” And he said, “Look, I have to do my own thing.” And I was kind of happy to get 100% of the company back but at the same time I was also really bummed because I knew he was such a good guy and such a good developer that it would have been great to have him as a partner.
Andrew: So what’d you do for a developer after that?
Josh: I joined Amplify and as part of Amplify I actually got some introductions to new developers. I got an introduction to a CTO there so I joined up with them and he helped.
Andrew: How do you get a CTO through Amplify?
Josh: It was just introductions to a developer.
Andrew: I see. One of the investors or one of the mentors knew a developer they with whom they wanted to hook you up.
Josh: Yeah, again I [??]. Essentially I had applied to Amplify and a couple other accelerators and when I was applying they were like, “Hey! You have this amazing business, you’re already doing 50 to 60 thousand dollars in monthly revenue” (at that point) but they’re like, “the only problem is you don’t have a technical [??] It’s just you.” You know, like, whose going to know this. And they’re like “well, we happen to know that we were built on ruby.” They said, “Well we happen to know a guy” and they introduced me to him and he helped out and got us to the next level.
Andrew: So is that the guy that built the version, the white label version that [inaudible 00:34] used?
Josh: No, actually Gene-
Andrew: You’re still using his software.
Josh: We’re still using his software. And we have 1.25 million users and we’re still using that same original thing Gene built to this day.
Andrew: That guy must be really bright, because usually at that level, entrepreneurs and developers will build something that will work temporarily, maybe for the first year, then you have to rip the whole thing out and start fresh.
Josh: We thought about it and we’re still contemplating if we should move to another platform. There’s a lot of different open source Ruby platforms and things out there but, no, I mean Eugene did a pretty fantastic job.
Andrew: Somewhere around that time I got an email from you that I didn’t discover until now for some reason. It was an introduction through a mutual friend and do you remember how you introduced the business back then?
Josh: I don’t. No.
Andrew: You introduced it to me- let me see if I’ve got the email. I got your okay to read it, so I’m not just some jerk whose digging up past stuff from you. Where is that, Robin?
All right: My company, stack social does something similar to that of AppSumo, I know you don’t know Noah well, except we go after a slightly different audience demo and we do it in a different way. Anyway, we syndicate quite a bit of the video content and it’s some of our best selling stuff. I’m a big fan of your videos and would be very interested in syndicating some of your premium stuff to our users. Let me know if you are interested. We can discuss further and let me know if you have a few minutes to chat.
That’s the kind of email you were sending out.
Josh: That didn’t sell you? C’mon EJ.
Andrew: You know what, frankly, if I would have read it- I must not have read it. I think at the time I was putting my email on auto responder because I couldn’t handle it. But what I like about that is it so definitely customized to me. Unlike so many of the emails that I get, you asked Robin to make an introduction, you said, I’m similar to AppSumo which is a product that I’m familiar with and then you said here’s how I’m completely different from them, essentially. Right? So I wouldn’t feel like Noah was being ripped off here. You brought up you to me, which is a direct relevant thing. You said you’re a big fan of my work and I can actually check my inbox to confirm that you are and know that everything is true and you said, I just want to talk to you for a couple of minutes. This is a really well written email from someone who is clearly a pro.
Josh: I appreciate that. Yeah, you know I just think all of the things that you point out is exactly what I would say. You need to find those connections between you and call those out and what value that you’re actually going to bring to the other person.
Andrew: So while we were talking here I was looking around at old screenshots of the site to see what it looked- it didn’t really look like Noah’s site. Noah’s site was basically like Groupon for entrepreneurs. You are from the beginning more of a store, right?
Josh: A bundle and then a store. Yeah, a bundle and then we were flash sales but AppSumo was always very focused on entrepreneurs. We actually, because of Cult of Mac were much more focused on Apple fanatics. It turns out those two people are quite different people. Entrepreneurs want web services and things to help start a business. Apple fanatics want maybe a course on how to build an iPhone app or they might want Mac software or they might want the latest Apple accessory. It could be speakers or whatever. So it sounds similar but it’s actually different.
Andrew: I see. And so you were just using it as a hook to explain to me what he did. Or what you do by something that I already knew.
Josh: Yeah. We definitely took inspiration from AppSumo, like we said earlier. I’m- Noah and I actually worked together at Intel a long time ago and know each other quite well. I was a big fan of everything that he did with AppSumo.
Andrew: You said you watched Noah Kagan’s interview here on Mixergy. Where he talked about launching AppSumo. What did you get out of that interview?
Josh: Absolutely. One of the big things that we took away that Noah talks about to this day quite a bit is their success around sweepstakes. And so we- to this day, sweepstakes are an integral part of how we grow our user base. I mean, something that I would recommend to any entrepreneur that if you provide a very compelling envelopment sweepstakes, that you can do things in a very helpful way to your business.
Andrew: You know, I’m always surprised by that. I’ve done sweepstakes. I used a contest domination and it did really well for me, got a lot of subscribers. By the way, is someone there in the apartment right now?
Josh: No. Can you hear noise?
Andrew: No. It looked like you were talking to somebody. Who’s there?
Josh: I’m sorry. A notification came up.
Andrew: Ah, gotcha. I was trying to hunt down to see who. Do you live with anyone?
Josh: Yeah. My girlfriend.
Andrew: Okay. What’s it like to live with a girlfriend now that you’re working on this? Do you get to see her at all?
Josh: I’m three years in. I think for the first couple years it was literally a 24/7 type of thing when you’re doing a startup. Now, I have 33 really good people in the office. I wouldn’t say that my hours are that much less, but I’m not working around the clock anymore like I used to. The stress levels are probably actually higher than in the beginning, because there’s more responsibility. But in terms of actual hours, it’s not as intense as it was in years one and two.
Andrew: I did contests. They did work well, but I keep thinking, “Why would anyone enter a contest?” I wouldn’t enter a contest for a slim chance at winning. What’s the point?
Josh: Yeah. That’s a good question. We do a lot of things that I’m kind of surprised at how users respond. We have seen a pretty good uptick in traffic from them. We’re able to track how many of them actually go on to purchase and how much revenue that we earn from each sweepstakes. Surprisingly, acquiring email addresses, I think it boils down to that. Acquiring email addresses should be a fundamental pillar of every entrepreneurs business, in my opinion. Figuring out the best way to acquire email addresses is really important.
Andrew: What’s your number two way?
Josh: Number two way, very similar to sweepstakes, is giving away free product. We work with a lot of digital products, so we’ll actually give away content. Just like what you do. You give away a lot of your videos for free. You have a premium product, but a lot of it is free. People sign up to see that video and then you get them on an email list. You drip campaign them until they sign up.
Andrew: I see.
Josh: Yeah. We do something very similar where we give away free software or free web service.
Andrew: Do you have an example of that?
Josh: Yeah. Right now, if you go on the site StackSocial.com and you go to Freebies, you’ll see a number of them. One that comes to mind is we have a Mac bundle for free now. I think it’s a couple hundred dollars’ worth of Mac software that you can get for free, but you have to perform some actions. We require you to 1) sign up, and 2) I think you have to tweet it or follow us on Twitter.
Andrew: That makes sense. All right. Let’s see what’s next then. What about when you start to hire people to put the deals together on your behalf? You’re a guy who knows how to do this because you had all that experience. How do you find people who are going to speak in your voice and represent you well?
Josh: Right. That’s extremely tough. Building that kind of trust and rapport with your people is insanely important. I, for one, spent an enormous amount of time with my guys. Training them and just having them shadow me. It sounds kind of crazy…
Andrew: What’s your process for finding someone like that? From finding them to training them.
Josh: Oh, man. Our very first salesperson was a recommendation from a buddy of mine in San Francisco. She was working for a flash sale site. We got a recommendation and hired her. To be honest, she wasn’t even in our industry. She knew nothing about Mac apps, knew nothing about tech products. The way I taught her was she came in day one and we worked from 9:00 until 6:00. She was like, “Oh, great first day.” I said, “Yeah, it has been good. I’m going to go get dinner.” She’s like, “Great. I’m going to go to the gym.” I was like, “All right. Great. I’ll see you back here at 9:00.” It was her first day. She looked at me like, “Are you serious?” I was like, “Yeah. I’m serious. I’ll see you back here at 9:00.”
We talk about that story all the time. She thought I was joking and I wasn’t. We came back and we worked until about 1:00 a.m. I think it’s just that process of shadowing and apprenticeship. Really just showing people how it’s done and then having them do it on their own and evaluating it. It can feel like micromanagement in the beginning, and it sort of is in the very beginning. But once you build up that trust, you let them go. Once you see that they can follow what you’ve been doing, you let them go.
Andrew: I get that. You know what? One of the problems with doing this interview is the whole time I have your site up, I keep scrolling around and looking at all the different products that are for sale, including this. There’s something called a Bowblade. A lifelike bow simulator for your iPhone. How am I not going to look at that when it comes up on my screen?
Josh: I’ll give you a coupon code after the show.
Andrew: I shouldn’t have that around the office. Actually, it’s not going to hurt anybody, but I wouldn’t get any work done with that thing.
Josh: Right.
Andrew: All right. I think I’ve got everything right now. I want to be fair with your time. Let’s close out with this. The name change was big. You changed your name between the time you did the pre-interview and the time that we’re recording today. Why did you change? Why not stick with StackSocial, since the name did so well for you?
Josh: Right. Stacksocial.com is our direct to consumer site. It’s where people can go and actually buy stuff. In the beginning, that was our main source of revenue. We were just like an AppSumo or Fab.com or Gilt.com or Groupon. Over time, we kept continually investing in the platform. The platform meaning that we were helping other websites to have their own white labeled stores. Two and a half years in, we had over 500 publishers leveraging our platform.
When our business development guys were going to speak to Hearst or Conde Nast or Wired or some of these big publishers, they would go to our site and really not understand. They were like, “Well, you say you’re a platform, but your site looks like a flash sale site.” It was really about putting a stake in the ground and talking about the fact that we are a platform and we’re not a B2C site.
We’re more about technology that helps other sites to monetize with commerce. We are about being a consumer flash sale site.
Andrew: When somebody buys from one of the other sites, do they join the mailing list and then get promotions for your site?
Josh: They get promotions for the site that they signed up through. If you signed up through deals.thenextweb.com, you would get an email from The Next Web. It’s powered by us, but…
Andrew: But it’s leading to their store.
Josh: It’s leading to their store, not our store. We’re doing everything that we can to help our partners to make money. It’s not about us directly making money.
Andrew: All right. Well, the company is StackCommerce. If you want to see one of their stores, as I said at the top of the interview, you can go to deals.thenextweb.com. Thanks for doing this interview.
Josh: Awesome. Thanks, Andrew. I appreciate it.
Andrew: You bet. Thank you all for being a part of it.
