Andrew: Hey there, Freedom Fighters. Andrew Warner, Mixergy. I want to just find a better intro, I think, than that. So I’m just going to jump right into it. Harry Zhang is my guest today. He is the Founder of Lob. Here’s what I’ve got in my notes, Harry for how to describe Lob, a company that is building a suite of API’s for enterprise. I don’t like that one sentence. What do you think of that?
Harry: Yeah, no. I mean that’s fair. I think to the average person you don’t know what that means. So let me clarify that a little bit for you. What we’re really offering is a suite of API’s around print and mail. How we think about ourselves is not just a mail company. But really it’s about building tools and resources that companies can use to really streamline their mail process.
Andrew: See, I don’t even love that, and I don’t even love the fact that you guys don’t call yourselves a mail company. It feels to me like the way to describe it is something like, “We help integrate physical mail into whatever software you’re creating or working with.”
Harry: Sure, do you know what the sub-headline is about this?
Andrew: Send physical mail as easily as email.
Harry: There you go.
Andrew: All right, that makes sense. I just wonder though, why you guys talk a lot about the API’s and less about the mail.
Harry: Sure, that’s a great question. We really think of ourselves as building multiple, different API’s and API’s don’t have to exist just for the sole purpose of sending mail. The first layer of what we’re building today and what we talk about is this print and mail API. So you can now send a letter or postcard or even a check, as easily as you’re sending email, like your email API’s. But the next layer of what we’re building here at Lob is really around data in the service layer. So [inaudible 00:01:35] find additional information that you don’t know about your users and offer that through an API?
Andrew: I see and you don’t want to be known as just a mail company because you have visions beyond the mail company.
Harry: Exactly.
Andrew: I see, but then doesn’t that take away a little bit of the clarity of today of what you’re doing? We don’t understand fully that we could easily integrate mail into whatever software we’re building, and so we’re left to figure it out by looking at the sub-headline.
Harry: Yeah, absolutely. I think there’s a middle ground there, right? I do think people know that when they think about Lob they think about mail. We have customers that are using us, 5,000 of them, so we’re definitely not having a problem communicating what we’re doing. But I also think it’s about finding that balance to help people understand that it’s not just mail that we do. We offer additional services beyond that. As an example, we have address verification. Address verification is typically related to mail and ecomm, so someone doesn’t have to send mail to use that API, and we still want to be able to discover these tools, like help them be successful.
Andrew: I see. All right, and you also have check services that I could send checks by mail through you. All right, let me ask you this. By the way I’m a very nice person. For some reason, it’s sounding like I’m very agitated here or agitating in the interview. But what about this, this is my mail that came in to my mailbox, let me see.
Harry: You got any good leads in there?
Andrew: It’s like three months ago. Do I have any…? I don’t know. It came three months… I just leave it in this envelope with this big obligation that I should go through it. Does the world really want more mail?
Harry: Yeah, that’s a great question and I think people do want more mail. But the difference is they don’t want spam mail. They want mail that’s relevant to them, things that they care about because you do use direct mail. The fact that you’re holding it and that you’re looking at it, and you’re saying, “This is all the mail I got.” You haven’t thrown it away yet, is saying something.
Andrew: That’s true versus a lot of email that I would delete.
Harry: Exactly, or you don’t even see it because it’s going its going into your spam folder.
Andrew: You had some stats. What are you looking at? It sounds like you’re looking for something.
Harry: Yeah, I’m looking at some of these stats, in terms of how much people look at mail and some of the numbers I’m seeing here, 80% of people browse household mail. That’s a big number. Would you read 80% of your email?
Andrew: No.
Harry: Definitely not.
Andrew: My Gmail filters read more than 80% of my email. I get the remaining, it auto-archives. All right, so that’s your point. Give me a use case that somebody who is an entrepreneur in my audience can relate to. And then I’m going to get to how you built your business because I don’t just want to be about where you are today. I want to know how you got here. But give me an example that someone here in the audience could relate to.
Harry: Sure, I’m going to give you a really simple one. How do you want use Lob is really thinking through what the triggers are that you want to send mail. If the customer does ask then we want to send a letter. Today the way mail’s done is that you’re just sitting around and saying, “Here’s 100,000 people, I want to send an offer to. I hope they redeem it.” So what you could go out for is simply signing up on a website, and triggering this guy a welcome letter that goes in the mail. It increases your brand image, helps them establish that you’re relevant, and now that’s as simple as just sending an email. It doesn’t matter whether person signs or a million people sign up.
Andrew: What about the cost? Email costs me basically nothing to send out. If I wanted to send a physical letter to everybody who joined, what would it cost me?
Harry: Sure, the same as sending a postcard. It’s $.40. You look at customer acquisition costs today in this industry and you see folks paying upwards between $50 and $100 a customer, if not way more. And while the cost of sending email is almost nothing, you have to send lot more email than you do mail. Think about it like this. Today in the world $130 billion in the U.S. gets spent on marketing, direct response marketing, of which $45 billion or so, is spent on direct mail. That’s the single largest category that exists today. When you think about all of the search and display ads, and everything that people are talking about, that gets a lot of attention. But those two combined, don’t equal the amount of money people spend on direct mail.
Andrew: All right, speaking of money. What kind of revenue are you guys pulling in with this?
Harry: That’s a great question. I’d love to tell you, but what I can tell you is we’re growing at a ridiculous pace. We’ve raised over $9.5 million in funding. We do over a million API transactions a month, so we’re printing millions of pieces of mail.
Andrew: That’s actually interesting. When I first heard that you guys do a million API calls a month, to be honest with you, I blew it off. I was introduced to you by Troy Reese and he said, “A million API’s…” and I said, “Ah, who cares?” Actually because it came from Troy I paid a little bit more attention. But what I didn’t process was an API call for you means some piece of mail is going out. An API call for you means somebody has to pay for it, and the revenue comes into your door. So you’re doing how many API’s?
Harry: Yeah, we’re doing over a million API transactions a month.
Andrew: A month? Okay, more than a million a year obviously based on those numbers, now that I see how you come up with it.
Harry: Yeah, that’s a good way to think about it, and here’s the reason why we look at API transactions. So I think there are definitely people who will always say, “Hey, I want to hear the revenue numbers. These numbers are important.” But really we look at API transactions as the most important mark. Because not only does it show that people are using our product, but it also shows that people are investing developer energy and resources, to build tools around the product. So it’s not just we’re enabling people to send mail, but we’re enabling companies to have the functionality to send mail, on behalf of their customers.
Andrew: Do I need to explain what API’s are? I don’t think I do, but how do I explain what API’s are? I’ve got the definition, application programming interface. What we’re talking about is a way for two computers to talk to each other. Your computer at your business and my computer at my business can talk to each other through API’s.
Harry: I think a good way to think about it is, you’re essentially just passing over data from one system to another and it’s a series of commands you’re essentially telling somebody without actually having to do it yourself. So the way most people know. You’re familiar with an FTP. Almost everybody’s familiar with FTP whether you’re technical or not. The problem with an FTP today is that you can put data in it, but you can’t get data out of it. Once you drop it into there, it’s gone. There’s no response. There’s no live feed of what happened. With an API it’s different. I think of it almost as a new modern age technology. When I send you something, now you give me a response back, and then you can pay me for more information. So it’s a real time feed of data that can go back and forth.
Andrew: All right, speaking of money. Help me make some money right now. I’m going to do a sponsorship message, and then we’ll find out how you built up your business. My sponsor, of course, is HostGator.com. If you go to HostGator and you create your own website… actually Harry, we talked about this before we started. Let’s suppose you were just starting out or maybe you hated your job, and you were doing this on the side, and you wanted to start a brand new business, and you had a HostGator account. What idea would you have for starting a brand new business, maybe even one that would use Lob?
Harry: Absolutely. So let’s say you’re starting a subscription for an ecommerce business. You’re offering a service to a specific area. Let’s just say it’s San Francisco. Obviously when you’re starting off, you don’t offer service everywhere. So one of the questions you’re going to ask on your website… that might be HostGator … is going to be, “Where do you live?” to check if you have service. Now what you can do is you can capture that address that every single person’s entering in there, whether or not they become a customer, and now you can send them an offer and say, “We know you expressed some interest. How about 20% off and here’s your promo code,” and you make it that unique and trigger based off when a customer enters in an address. You can’t reach them with email, but you can reach them with mail.
Andrew: Do you have an idea of what that service would be if you could start a brand new company? You had nothing but a HostGator account, what would that business be?
Harry: Sure. Let’s say you’re starting a lawn care business.
Andrew: That’s what you would start. If you could start anything other than Lob. You were just in a dorm to keep it basic. Would you start a lawn care business first?
Harry: I wouldn’t start a lawn care business. If I was starting another business, I’d start another mail business.
Andrew: Do you know of a company that does nothing but mail?
Harry: I own a company and we do a lot, including mail. I have had some businesses in the past before, when I was younger. I started a business selling computers. So I could have even used that. Like, “Hey, look. I built…”
[Crosstalk]
Andrew: How about this for an idea, for a company that does nothing, but mail and happens to use Lob’s API, tell me about this.
Harry: Sure, I have an idea for aspiring entrepreneurs.
Andrew: Oh, what is it and then I’ll tell you my idea, what I might want.
Harry: Yeah, I think somebody should build a Mail Chimp for mail, on top of Lob. We’ve built practically all the functionality that you need to make that possible and now you can focus on the user experience. You can focus on how it functions, how people can use it, and you don’t have to worry about how the fulfillment happens.
Andrew: I see. So a user would not have to even know what the letters API stood for. They would just come to this imaginary site that someone in my audience would build. They just need to upload whatever addresses they have, or in fact they just register for an account, and they get a registration form that they could put on their sites. Anytime someone registers they end up getting added to this physical mailing list, and the end user could send out mail to whoever was on their mailing list.
Harry: One of the surprising that I found out, and I haven’t talked [inaudible 00:10:53] for my customers. A lot of folks have no clue what they’re doing when it comes to mail. They’re like, “Oh, do I just go to a website and upload a list and hit send?” And surprisingly it’s not that simple. The interfaces for that look like they were created in the ’90s, it’s that old. I think there’s a great opportunity for someone to come in, and build an elegant user interface that makes it easy for small business owners, who don’t know what an API is, to actually be able to send mail and control mail.
Andrew: Mine’s a little bit simpler and we’re still in the commercial here. But tell me what you think of this idea, Harry. WordPress website uses Gravity Forms, as a plug-in to collect information. A person comes into the site. All they do is they enter their address, their recipients mailing address too, and type in, in a big box, a letter, whatever that is. They hit submit. The next page asks for credit card information. Gravity Forms ties in nicely to Stripe, any idiot can connect it. You have to be a little more an idiot to it, but it connects it. Once payment comes through, the letter goes through Lob which sends it out by mail, and the money goes to our user. All that could be done, I think, in three hours.
Harry: Yeah, why haven’t you done it?
Andrew: Because I’m working on Mixergy, and frankly as it is right there, I don’t think it’s a huge business. All it is, is an easy start, and there are people that I can’t send out email to, like government agencies, I have to sometimes write out a letter. There are some businesses that will not accept things by email or phone. I have to write out a letter. I’m not going to my printer and printing out a letter for someone. I’d like to just go to a webpage, fill out this form, and then have the thing go out. You could even create a fake signature.
The person would type something in, and it goes in as his signature, so it closes out the email that way. Or let them upload their signature. That’s not hard to do either. All right, that’s the basic idea. There are so many other ideas. If you have one, go to HostGator.com/Mixergy. You can start your business within minutes, and if you go to HostGator.com/Mixergy it will take 30% off of your hosting fees. Keep those costs low as you’re building your business, and it’ll be so much easier to turn a profit, HostGator.com/Mixergy. I’m grateful to them for sponsoring.
All right, Harry, back to you. I like our idea, but back to Lob and how you built it up. You were working at Microsoft. You have a job at Microsoft. Do you feel any hesitation at that point about leaving it, and going to start something new?
Harry: Yeah, I think it’s natural to have a little bit of hesitation. It’s a good thing. You want that fear of like, “What if this doesn’t work?” That’s going to encourage you to work that much harder, so definitely.
Andrew: What was the idea that made you say, “I’ve got to do this. I’ve got to go?”
Harry: I think the biggest thing for me, I started off working on a mail project at Microsoft. How crazy is that? How many people think they’re join a tech company and say, “Oh, we’re going to send mail?” Nobody does, but people do it.
Andrew: What was the problem that you guys were working on at Microsoft, around that?
Harry: One of the challenges that we looked at in Microsoft was specifically around deployment. Customers have purchased the latest versions of their product, but they’re not using it today and 90% of the time, it’s because they don’t know they have it. Now the problem is we can’t email people. There’s a bunch of restrictions. They’ve already been emailed too many times about other Microsoft products that they own. You can’t talk to them.
Andrew: How does somebody buy a Microsoft product and not know that they have it?
Harry: Because the company’s buying on behalf of customers.
Andrew: I see, okay.
Harry: They’re buying it for a bunch of different people. They buy and license this. They have the rights. They just don’t know. Just like a lot of folks may not know their school is giving them Office. You could download a personal copy from your school. That school’s already purchased it, but you didn’t know that.
Andrew: And isn’t Microsoft happy about that? Because then the people who don’t know they have it, might end up buying it again? Why does Microsoft care?
Harry: Microsoft cares because they want you on the latest version. They want you to have the best experience. If they’re already sold it, they’re not in the business of seeing how they can generate a couple more fake dollars by repurchasing a product. That’s not good customer practice.
Andrew: I see. All right, so that’s what Microsoft had in mind and you came in to help them send out mail to their customers, to let them know they have their software.
Harry: Exactly. We had a couple of different options. Frankly it was a little vague project. Like, “How can we increase the funnel, knowing that we have these set of qualifiers that we can’t do?” The first thing I thought of is, “We have every single one of this addresses. Why don’t we just mail them stuff?” When they’re coming up for renewal, and when it’s expiring, let’s shoot them a note and say, “This is an option you have available. Here’s what you do.”
So we ran this program for three months, and it was one of the best performing programs that we had around deployment. Singlehandedly increased our numbers, and here’s the thing. I went back to my boss and showed him at the end of the three months, it worked great. He’s like, “This is awesome. Let’s push this across all of the products, all of our customers.” He wants to go everywhere. I’m like, “Okay, great problem. I’m glad it worked. Let’s make this happen.”
Now what ended up happening was I went and talked to literally 15 different print fulfillment partners, and you would imagine any company wants to do business, with a company like Microsoft. It’s a huge company. Nobody would do it, and the people that would do it, followed up saying that it was going to take 9-18 weeks to setup the integration, and they were going to charge you $50,000-100,000 to build a custom, automated, workflow around it. I couldn’t help but think like, “Man, this is something we could do with email in a day. Why is this so hard to do with mail?” That’s where the genesis of Lob started.
Andrew: So you had this idea. Did you immediately know that you were going to quit your job or were you thinking of doing it on the side?
Harry: Definitely not. So I did know I was going to quit my job. At the time, I had learned a lot and Microsoft wasn’t looking for new opportunities, and in the back of my head, I always wanted to start my own company. So I started working on it. I left Microsoft, instead of working on it on the side, along with some other projects that I was thinking about.
Andrew: What were some of the other projects you were kicking around?
Harry: It’s funny you asked that. I had a lot about the email space previously before, things like Mail Chimp derivatives, marketing automation, a lot of ideas that there that I played around with. But ultimately I felt like there were just so many options that are out there today and they were all good. There’s nothing wrong with Mail Chimp. It’s a great product. I couldn’t identify the real problem, and so I started thinking about it. I was like, “Mail is a problem,” and when I started doing research I realized that the options are ouch, they were really bad, and I felt like it wasn’t that much harder to build something, tremendously better.
So I started working on it. We spent a couple of weekends, startup weekends. We spent time talking to customers at Hackathons and we asked them, “Would you ever use this?” A lot of folks went, “This is awesome. I would love to have this. I do this by hand.” We had a customer before they started using Lob, literally write 1,000 checks into their Bill Pay automatically under computer and send them out individually and he’s like, “It was a nightmare.”
Andrew: I actually just typed in letter API into Google and I came up with a bunch of options. So didn’t those companies exist?
Harry: Those companies did exist, but just because companies exist doesn’t mean there’s an opportunity. I think what you’ll see is that these are API’s. They weren’t built from the perspective of a developer. It was always a mailing company that decided, “We heard of this new concept in API. Maybe we’ll add one and see if people use it.” Well, I come from a development background. Folks on our team are all engineers. We understand the tools that engineers actually know how to work with. So we created what we would use ourselves, if we wanted to send mail. I think that’s how we differentiate ourselves, from a lot of the folks that are out there today.
Andrew: I see. So you had the idea. What’s the first version look like?
Harry: The first version, it was called PrintBox.com. Not very many people know this. So I’ll clue you in and in our heads, we hadn’t even wrapped around that it was just going to be mail. We thought it was going to be print, and posters, and everything, and it’s expanded quite a bit since then. But the first version was really simple. It was just the API. It was literally a landing page that said, “You can send mail now,” and you just basically uploaded a PDF and an address.
That’s all it really was. No further functionality beyond that, and even two months into working on the product, it hadn’t changed that much. I think the basic mistake people make early on is they spend a ton of time trying to come up with this perfect website and idea, and product, and really the most important thing in the beginning is establishing that you have customers who want what you’re building. So we spent a lot of time talking to people and building very little. We didn’t build up any of the backend of the product, until almost over a year and a half, like months after we raised the seed money.
Andrew: Nothing, but a landing page for the first year. You have customers presumably coming in, though.
Harry: We built what customers could see. But in the back, we started off with just me and my co-founder literally printing stuff out of my printer at home. That was the automated print, and we’d patch them into envelopes, and mail it out and we did that for months.
Andrew: Get out.
Harry: Until it got unmanageable and then we got Task Rabbit to help us. So we didn’t have time to automate the backend.
Andrew: Wow, so when someone was sending you data, they were sending it through some kind of basic API that would just spit it into a spreadsheet, I’m guessing and from the spreadsheet you’d print it?
Harry: We didn’t even have it spit into a spreadsheet. It just went straight into our database, and then we wrote SQL queries, every single day and checked them.
Andrew: Get out. This is you and Leore?
Harry: Yes.
Andrew: How do you know Leore?
Harry: We know each other from school, so we went to school together at Amherst in Michigan.
Andrew: And you just contacted him and said, “I’ve got this idea. Let’s get together on it?”
Harry: Well, I got lucky and he was kind enough to move to Seattle. So he previously had spent time on Wall Street. He did a startup back to Michigan, and then ended up at AWS, over in Seattle. So when he moved here, I already know him so we hooked up and we started talking about some of these different projects, and this is one of the ideas that came on our plate that we started working on together.
Andrew: Was there a second best idea?
Harry: There was a second idea, but it was definitely not second best. I felt like this one was the best one by a long shot.
Andrew: By the way I was just checking up on what I thought. So I said earlier I just put a Gravity Form which is just a form plug-in for WordPress, and that would send the data over to you. In my head, I just assumed that Zapier would make the connection. You sign up for Zapier.com. They take data out of one place, and put it somewhere else. And now I checked it and you guys are on Zapier. That means I could… this whole idea that I came up with, really would work and I could send a postcard. I could send a print. I don’t want to get too carried away with this. But I love Zapier. It’s such a good service. It makes stuff like yours which otherwise, I think, would be a little bit inaccessible to new developers or non-developers, it suddenly makes it accessible.
Harry: Absolutely.
Andrew: All right, so you guys had this webpage up for about a year and a lot of it was being done manually. At what point did you say it’s time to actually write this code?
Harry: I think when it came down to it and we needed to write the backend, it was because we just couldn’t keep doing what we were doing. I can’t spend half my days sending letters.
Andrew: Is that intentional that you decided to go until you couldn’t do it manually before you actually coded it?
Harry: It was intentional, and the biggest learning, we had in going through Y Combinator and the early growth phases is that you can’t waste time building things you don’t know people want, and customers say that they want stuff all the time. Now if you ask them to pay you for it, it’s a completely different story. So we want to make sure that customers are paying us for this product, before we spent the time pitching to vendors, pitching to providers and trying to actually build out the backend of our service, so that it was usable and automated. It’s not worth the time to automate it, if you don’t have the business there to begin with.
Andrew: I’m wondering how you got all those customers, the ones who were sending you more business than you can handle, and so you had to create an automated system, for handling it. How did you get those first customers?
Harry: We culled email. That’s the nature of the beast. When you’re starting off a business everyone thinks that it’s easy to pass the test like, “Oh, I put it in Hacker News and it took off.” When we launched on TechLaunch, I think we got 50 signups that day which is a ton, but not a single one of those converted to paying customers. Ultimately the important thing, when you’re thinking about building and getting your first couple customers is identifying what is the biggest problem that your product is solving, and figuring out who are those customers, and then just emailing them. Because if you’re really solving a problem, and their hairs on fire, they don’t care if you’re pouring water on their head, if it’s Gatorade or whatever it is, as long as it cools them down and stops them from burning down, they’re happy.
Andrew: How’d you find these people who were on fire.
Harry: What’s that?
Andrew: How’d you find these people who were on fire?
Harry: Yeah, absolutely. So there are a couple of communities we obviously used. Hacker News was a big one for us, to get started. Reddit was really useful, as well.
Andrew: But before all those places, it sounds like you were just cold emailing people.
Harry: Yeah. Well, beyond that, we went to Hackathons. We went to startup sessions and we solicited feedback, and tried to get these guys to use our product.
Andrew: And this is all in the beginning before you had your software fully working? You were going on Hacker… Let’s break it down. Do you remember where you got your first customer?
Harry: Our first customer was gotten from a Hackathon in Seattle, before we even had a pitch.
Andrew: So Hackathon is a place where developers just come together to work on software together to create their own software. How do you meet somebody in there and say, “Hey, I’m working on this thing called Lob?”
Harry: The main thing is you just walk up and ask them what they’re working on and then I’d say, “Have you thought about being able to send a check? If you could do this through a service, would you want it? Would you pay for it?” And they’d say, “Yes,” and we’d say, “Oh, we could do that for you.”
Andrew: So who was this person at the Hackathon? I kind of think of people at Hackathons as not yet being… their businesses aren’t at a place where they could pay for stuff like this.
Harry: Yeah, and here’s the thing. They’re targeting their customers, as a service. They’re definitely small. They’re all aspiring entrepreneurs, and I wish every single of them is going to be really successful. But they’re smart too, and they’re charging their customers to say, “Hey, if you could pay $1 to mail a check, would you do it?” Their customer said, “Yes,” so therefore they needed a way to automate it, and they don’t want to do it themselves in the beginning.
Andrew: I see. So this is just its new software that they’re working on, new products and you showed them how to integrate Lob into it, or I guess was it called PrintBox at the time?
Harry: It was, yes.
Andrew: So you showed them how to integrate it. I’m on PrintBox.com. You guys didn’t own that.
Harry: No, we didn’t own the domain. We thought that we could get it later on, but he never ended up selling it. But we ended up with Lob instead.
Andrew: I like Lob. Three letters, L-O-B. What’d it cost you to get that?
Harry: We had an interesting structure to it, actually. I think the structure’s more important than dollar amount.
Andrew: I’m seeing that so much now. The structure’s different. It’s not as easy as just emailing and saying, “Can I buy it?” What was your structure?
Harry: We did email and just ended up finding the guy. To be honest, we went through a couple of different name ideas, and I was not happy with our name. I was just scouring domain name forms, in my free time watching TV. I think it was page 54 of some random, domain name form. They had one of those really old-school page bb forms, so you had to make an account. The only way you can message someone is private message on this form. I’m just wading through a pile of really awful domain names, and all of a sudden, this one pops up. “Super-premium domain name, Lob.com” I’m like, “Wow. That’s way too good to be true,” and it was six months’ old.
I was, “There’s no contact. Let me private message the guy” and this forum was one post and it’s clearly this one. Maybe he’ll get back to me. It turns out, lucky enough, he did get back to me. He was part of YC community. I told him exactly what we were trying to do and I was like, “Look. I’m not a broker. I just wanted to use it for business.” He was like, “That’s great.”
We talked a little bit about the business. He liked the idea. He was like, “I’d be happy to sell it to you,” and I think he wanted… I don’t remember how much he wanted, at the time. But I think it was around $50,000 or so, and we didn’t have that money at the time. So we were like, ” We can’t do this. We had little enough money that we got from YC, maybe I’ll just give you $10,000, and we’ll write an agreement saying, ‘If we ever raise seed money, you’ll get it immediately. If not at the end of one year, you get it back,’ so worst case scenario is you made $10,000 for a year, no big deal.'”
Andrew: I’ve seen that done. I forget who it was, but another interviewee said the same thing. You basically buy an option to buy it. You say $10,000 bucks, and if I could afford to buy it in the next few months, I’d buy it from you, for whatever price we agree, if not, you keep my $10,000.
Harry: Exactly.
Andrew: Ah, that’s a beautiful structure, so by then you already had…
Harry: [inaudible]
Andrew: Sorry?
Harry: It’s a win/win for both of parties, which is the nice part.
Andrew: By then you already had your Y Combinator funding, but you didn’t have more than that. Do you remember who it was and what company he had, the founder of Lob?
Harry: Who I bought my domain name from?
Andrew: Yeah.
Harry: The guy’s name is Jon Wheatley. He’s doing great. We still keep up-to-date with his projects. He was one of the founders of DailyBooth, back in the day and today he has this really cool Mod Notebooks, as well as some other. He had some betting companies, a great entrepreneur. I love following his stuff, and I’m pretty sure I’m going to be buying myself a notebook pretty soon because I just went through one of mine.
Andrew: His Twitter account is just @jon, isn’t it?
Harry: Yeah.
Andrew: That’s pretty cool, and it looks like his website is, Need/Want. This guy does have good domain names. I think it’s the right Jon. I’m pulling him up right now. All right, so all of your customers came that way in the beginning, just you going into events like that. Tell me what you did on Hacker News.
Harry: Hacker News we started, I think our first Hacker News was Ask HN. We made a little Ask HN, “Would you want to send mail through an API?” And surprisingly it makes the front page. People are, “Yes, yes, yes. We want to do it,” and people started talking about all the different options that were available, and basically no one was really happy with anything.
That was affirmed that just actually there might be something here. Then we showed them our tagline and we said, “This is what we’re building.” We showed them exactly what we were building and people were like, “This is awesome.” So we got a bunch of really eager early adopters. That was the important customer feedback we needed to get, to help find out what the product, would eventually become.
Andrew: Do you remember some of the feedback that you got early on?
Harry: I think that one of the crazy pieces of feedback… and you get some interesting stuff … the one that really struck me as a little odd, but makes sense in hindsight. There was a huge list of people who were like, “Why should we trust you? We’re going to give you these documents. You don’t have an About page. How do I know you’re not just taking my money and running with it?”
At the time, I was like, “This is such a ridiculous ass. Who cares. whether there’s an About page or not? Either it works or it doesn’t.” But I would say, “I trust myself and not everyone trusts someone random.” So we ended up putting up an About page, and it’s funny because the About page is one of the most visited pages on our websites today.
Andrew: You know what on mine, too. It’s amazing how much of a difference just having an About page makes. By the way Jon’s website, Need/Want.com, it’s beautiful. His stuff is beautiful. I didn’t realize that he was partnered up with Marshall Haas, who’s a Mixergy fan, from a long time ago. Marshall’s been emailing me for years saying, “Here’s my latest project. Here’s the next thing I’m working on,” and it wasn’t until I got to this page that I realized, I recognize these projects. They’re working together. They are really creative guys.
Harry: [inaudible]
Andrew: Sorry?
Harry: I think the [inaudible 00:30:18] company and I believe the other one’s Mod Notebooks.
Andrew: Right, Mod Notebooks, I think they have the notebooks that you also can digitize easily, the SmartBedding. They’re all over the place with their ideas, but they’re such creative guys. I’ve got to catch up with Marshall, and see what he’s up to. So you’re continuing to get customers like that. Tell me what the best source of customers, before you had real money when you were still in hustle mode.
Harry: Yeah, the best source of customers, and this is more about creating a repeatable sales process. It’s about identifying where you already have customers. So a big space for us is food and beverage. We have a ton of customers in that space. Once we got one, we knew that likely everybody else was doing something similar [inaudible 00:31:05]. So you just go out and cold email. I think that’s the key for sales. It’s about creating something that’s repeatable. Not about where you find all these customers. You know who they are. You just need to come up with the names, and the emails, and grind through the hard work that it takes to get them.
Andrew: I’m seeing you, and you’re clearly very excited. By the way you’ve seen me before the interview started doing this, so the camera can pick up my complexion. Do it yourself because something happened on your camera, and it just went weird. There you go. There, that’s a lesson for everyone who’s at home listening. I think what’s happening is your facing a window and as the lighting changes from outside, the coloring changes.
Harry: Well, there you go.
Andrew: Yeah, the answer is, this way Skype can pick up or your webcam can pick up on your complexion, and adjust the color accordingly. That’s what I do. I forget what question I was going to ask you. I know what it is, the excitement level. Nobody gets up and says, “I’m excited about direct mail.” There’s something that you found about it that makes it exciting for you, and the reason I want to pursue this line of questioning is because we are told to pursue our passions and nothing but our passions. But there’s an underlying passion to your business that doesn’t have anything to do with paper, trees, or even frankly API calls. What is that? What’s that inner passion that gets you so fired up about Lob?
Harry: What gets me excited is that we’re making it easier for businesses to operate. That’s one. But two, I also like the physical component of it. As much as I love stuff that’s online, I also like seeing real, physical, sheets of paper, mail. It’s tangible and that really brings it home for me. Because I know my grandma is never going to see some of the stuff that’s online. So at the very least, if I can show her something that’s real, she can understand it. So what I like about the space that we’re working on staying with, what gets me excited, is that companies can now operate better because of Lob. They can be better companies, and beyond that, we’re able to do control of the physical world things, through a visual media, and that’s something that’s relatively new.
Andrew: I also feel like it’s… I was hesitating because I was imaging how to say this. But maybe the best way to say it is that I get excited about playing this, or it’s relaxing for me to play this game called Conquest on my phone. The developer hasn’t touched it in a long time, but there’s something just kind of challenging about playing this Risk-like game on my phone. I feel like business is also a game, in that way. That I may not be excited so much about moving these little pieces on that little screen, but I’m excited about the mechanics of the game. I’m excited about the sport of it. Do you feel the same way about Lob?
Harry: Yeah, I think so. I think you’re not going to find any entrepreneur who says, “I love doing every single little piece of my job.” There are things that are not fun, but its work that you need to do and in order to be successful, if it was easy everybody would do it. If it was fun everyone would do it, but you’ve got to be able to understand, there are the highs and lows and without working really hard, you’re never going to get to the high highs.
Andrew: You said earlier that you want to get feedback from customers, but you also want to understand that unless they’re paying, their feedback is not necessarily worth following. And you had this one example that you told our producer where you had a customer who wanted to do something with mugs. What was his vision for mugs?
Harry: The vision for mugs was they wanted to do mugs on-demand, printing mugs. They send them for some content. We produce it at the time, and mail it out. [Inaudible 00:34:38]. It’s not so much that we don’t value their feedback. We do value their feedback. We just listen to feedback of paying customers, even beyond that. So it’s something we still think about. They basically wanted to send mugs, as sort of a thank you program. Every single time someone completes this task, they’re going to trigger a call at Lob’s API. We’re going to send out a mug and they’re packed. We actually did this.
We spent the time to pull this all together for this customer, and this was very early on when you have just mainly some Task Rabbits sending out letters, not exactly a ton of resources to do this with. And we were so jazzed about the opportunity because it sounded awesome, and even to this day I still think it’s awesome. But you also have to realize that you can’t do too many things at once, and you’ve got to listen to what your customers are willing to pay you for, and that’s the easy way early on to identify whether you’re onto something or not.
Andrew: To do what, to listen to them?
Harry: What we should have asked is like, “We’d love to do mugs. I think that’s a great idea. Are you willing to put that down payment on this, so we can get this up and running for you next week?” Simple question, in hindsight I definitely should have asked that question. But I was, “Great. Let’s go. Let’s run.” So we started doing it, and we wasted a lot of time that could have been better spent somewhere else, and it’s not necessarily wasted time. But it’s time that, early on could have been used to get any customer that would pay us money.
Andrew: And that customer spent how many dollars?
Harry: They spent zero.
Andrew: Zero dollars for all that. You spent over five months, according to my notes here, and then didn’t get a single order from it. You spent over five months working on this thing. The founder of Twitch TV, Emmett Shear told me that, even before talking to customers and getting their feedback, it’s important to segment customers, and figure out which ones you want to listen to or which ones you want to prioritize. Did you do any of that before getting feedback?
Harry: Yeah. So I think I talked a little about it earlier and to Emmett’s point, I completely agree. You want to identify who your target customer is. There are a lot of customers that you could be listening to and you won’t find the time. Some folks are maybe using you for marketing use cases and some places you might be using you for operational use cases. Both of them could send mail, but who’s the people that you want to focus on today? So early on we identified, “We’re going to focus very specifically on just letters, and specifically we want to focus on getting things, like invoices, statements,” so those are the customers who we went after. Over time, we started learning, “What are the bigger categories? What are the ones that we do well in?” and new features cater to those customers. You need to identify who that customer is, what they want, and listen to them, every single day.
Andrew: Let’s talk about it a little bit more concretely and by the way your co-founder’s name is Leore.
Harry: Leore.
Andrew: Oh, Leore. I wanted to make sure I was pronouncing it right. So let’s talk about it in the context of one of the services that you guys offer. I’m looking here at your homepage, and I see simple postcard service, simple letter service. Those are pretty early on. Simple print service, print and mail photos, postage, etc. Which is one that you had to do this kind of customer segmentation, customer conversations, and then you built the product out?
Harry: Yeah, great question. So I think, as the example, we’ll just talk through the genesis of simple area mail.
Andrew: Simple which one, sorry? Area mail, this is deliver a postcard to every address in a targeted area, okay.
Harry: Yeah, so the genesis of that is we had a lot of customers that would come to us and say, “Wow. I would love to send mail. I’m totally a fan of direct mail. It works. I want to do it. I don’t know who to mail to. I want to use your product, but I don’t have an address.” So our default answer up to a certain point of time was, “Well, you guys have to go find it out. We don’t do that.” But being in it a while we started to see trends.
All of these food and beverage companies, all these people who are offering on-demand services, all these people who are offering Lob for customers, they know that their target is geography-based and location-based. They know that every single person here in San Francisco’s going to need food, so they don’t need to be ultra-specific around their target. They obviously have demographics that they care about, but they just want to be able to send mail to specific areas, and they want to be able to do this in an automated fashion.
Imagine if you could do email blasts to segmented customers based on geography all the time. So customers kept asking us for the same thing over and over again. Eventually we decided, “Let’s go do this.” So we got one early [inaudible 00:39:12] customer who basically said he would pay us money. We said, “Okay. We’ll do this for you. Tell us where you want to target. What are the zip codes?” and we did the whole entire thing.
We worked with them for a couple of months, and we’re finally, “What does this look like?” Then we asked them, “We’re going to turn this into a real product in the API” and that’s when we actually started working on the real product, itself. Even today we’re still learning from our customers. It’s a product that we’re learning what customers want to see in the product. We’re adding features to it. We just added demographics.
Andrew: Can you break that down for me? What’s the process for doing that, for you?
Harry: I think it always starts with identifying a use case and a specific customer. So the first thing we do whenever we think about new product’s use, we find a customer who’s willing to be our beta customer pilot.
Andrew: One customer? So you don’t even call five or seven, to see if all five or seven of them are looking for the same thing. You just say, “I’m going to find one person who could guide me.”
Harry: So the answer is it depends. If it’s one person who’s doing a lot, one might be sufficient. In some cases, it’s better to have a couple. But the main thing is you don’t want to have so many that you can’t really give them a catered experience to understand, and work with them, and get feedback. It’s hard to do that when you’re doing a ton of customers at once. So we try to keep our programs pretty small, and then what we do is we basically ask these guys, “What would you want in your ideal world?” and they tell us, and we go and try to build, exactly what that looks like. We come back to them and say, “Hey, what do you think?” And along the way we learn what is it that they actually want, and we use that to refine sort of what we look at, as the base of the product.
Andrew: How can you understand what they want and not what they think they want?
Harry: Because they’re willing to pay us, so when you know that a customer’s handing you a couple of thousand dollars to build exactly this, if you don’t build exactly what they’re asking for, they’re not going to be happy. So that’s how you know. That’s why the money factor I think it’s important. I think there are a lot of companies out there today that focus on user growth, and I think that’s important, as well. I think it’s easier to build a business where folks are intrinsically paying you because they know there’s value in what you’re delivering. That’s personal, from one day we want to start generating [inaudible 00:41:17]. We want to make money because we know that helps us identify whether we’re on the right track or not.
Andrew: You were an entrepreneur from an early age. You used to go sell computers door-to-door.
Harry: I did, yeah. Those are good days. You could still make money on the [inaudible 00:41:33] then.
Andrew: How would you do it? You would just knock on your neighbor’s doors and say, “I build computers. Can I build one for you?”
Harry: So computers were a new thing back then. No one really knew how to buy them. They were super-expensive. I think they were like, $1,500 to $2,000 at least. People wanted them, but didn’t really know which ones to buy. So I loved this stuff as a kid growing up. I was in high school and it got me super-excited, and my uncle was kind enough to introduce me to what’s called, ODM Showcases. And basically what that means it’s all these manufacturers they come and they have parts that are all OEM. No instruction manuals, no details, it’s just literally parts all over the place. They’re all real parts and they all function.
But they offer them at a steep discount because there’s no instruction on how to do it. So my dad he was an electrical engineer growing up, worked with computer control systems, and he taught me basically how to put this together. So I made one for myself, and then my buddy came over and said, “Dude, this is awesome. I want one, too.” I’d be like, “We’ll, get your mom. See if she’s willing to buy one.” So we started just word of mouth. I was doing it for fun.
I didn’t even think about it as a money thing, until I realized people are all offering to get this, and we’re giving it cheaper. Why don’t we just make a little money off of the top of this, too? That’s really how that got started, and it actually ended up being a really good business to be in. It helped me pay for my first car. It helped me pay for a portion of my college, and that was exciting by me. I wrote it in all my college admission essays.
Andrew: Yeah, that shows the kind of person that they’re accepting into their school is someone who could come up with this idea, have the guts to implement it, and then get some results.
Harry: I think that was more about execution than an idea. I think idea is important, but I think the more important idea is execution.
Andrew: I highlighted that and the guts involved with it. Was I wrong to also say that there are some guts involved in going, and selling when you’re a kid?
Harry: I think so. I was also naïve and sometimes it’s good to be naïve, when you go into a new business.
Andrew: Are you a little naïve now?
Harry: I am a little naïve. I didn’t know anything about mail, when we first went into mail. I’ve learned a lot now.
Andrew: What didn’t you know that seems so basic now?
Harry: I didn’t know that within one class of mail, there are 16 different pricing options under that and they have different requirements, in terms of what you’re allowed to do, how you do a presort. There’s a pre- and a post-sort process, and I didn’t know any of this. That’s such a huge part of the mail business today. There are entire companies created just around one segment of it.
Andrew: Around presorting?
Harry: Yeah, a lot of presort, and they also call it comingle. It’s basically how do you prep the mail for the mail to go out. I didn’t even know there was a process. I thought you just dropped it off at USPS, and when you sent a bunch of mail, you get cheaper discounts. But there’s a good thing about being naïve, too. Because it helps you look at things from an untrained mind.
Because, to me, I was like, “Well, when I create this service, I just want it to be cheaper if you do more. I don’t want you to worry about where your mail is going, what the saturation rate is, what the lock score is.” I don’t know what any of that means, and frankly I don’t care. I just know that if I send more, it should be cheaper. So that’s how we positioned our business. If you send more mail, it gets cheaper. You don’t have to worry about how the postage gets tackled in the backend, and whether you qualify for presort or post-sort, or whether it’s comingled or not. We just do that for you automatically.
Andrew: How far along were you before you got funding from Y Combinator?
Harry: We were not far along. It was pretty early at the time. We had two or three customers that were paying us between $10 and $100, so basically nothing. This was May of 2013 is when we came into YC. We started working on that in March, and it was a very part time, side thing that we were working on in our free time.
Andrew: Why do you think they accepted you?
Harry: I think YC accepted us, primarily given our background, as well as a little bit of our can-do attitude. I think it goes to the part that they’re not looking for people to be complete experts in a field. They’re looking for people who understand the entrepreneurial mindset. Have tried doing it before, which we both have and understand the most important thing is building something that people want, above all else. I think it’s about being able to execute.
Andrew: What did you get out of being in Y Combinator?
Harry: I think the biggest thing for me was belonging to that community. It’s a great community. I think the partners there are all awesome. Outside of the money and the alums, personally I think the biggest is help for us, as a company going through, it was seeing how fast other companies moved.
Andrew: You mean as you were building in the three months that you were in the Y Combinator Program…?
Harry: There are group office hours where you come and you basically share the progress you’ve made week-to-week, and one of the cool things about that is, it has this social pressure of like, “Wow. All these other folks are doing so much, and they’re getting it done every single week.” So it helps you figure out, where do you want to spend time that’s going to drive the highest impact for your business? Early on the thing that you were most limited on is resources and time. So making sure you’re spending time on the right things is paramount to your success.
Andrew: What’s the structure of these meetings where you guys are showing each other what progress you’ve made in the last week?
Harry: It’s pretty free-flow. You basically go around and people say, “Hey, what did you work on last week? What’s next?” They would ask questions to help say like, “Okay. Well, it’s great that you did that. When are you going to launch? What’s the launch date?”
Andrew: Is that the biggest thing that they drive towards?
Harry: You realize that the most important thing early on is to launch the product, otherwise we can’t get feedback on it.
Andrew: So that is the most important thing that they push you for. So if you come up with… Is that the number one issue that they deal with, getting you to launch faster?
Harry: I don’t know how to answer that question. You can ask Emmett. I’m sure he’ll tell you. But I think early on, launching early is very important because it gets you feedback from customers. Because no one hits a homerun their first try.
Andrew: Emmett is not a partner. I thought he was. I’m now looking at the partner page. You know who I do see that is? Who knows? Maybe this thing’s a little out of…
Harry: [inaudible]
Andrew: Sorry? Is he?
Harry: I think he was a part time partner. It might’ve changed. YC’s constantly changing these days.
Andrew: Hard to say. Kevin Hill’s, the guy that I often contact over there because I fairly loved his company and…
Harry: He’s an investor in Lob as well, and he’s given us…
Andrew: Kevin Hill’s an investor?
Harry: He is, yeah, a lot of good advice…
Andrew: What did you get from Kevin?
Harry: What’s that?
Andrew: What’d you get from Kevin? What piece of advice do you remember?
Harry: I think the biggest thing that he gave us was when you’re creating content on your page, talk to your customers, like they’re humans. So a good example’s our 404 page. It’s a little minor detail, but if you go to lob.com/whatever you get our landing page, and it’s the Larry the Lobster and it’s a little inside joke with some guys at Lob. Lob’s sort of like lobster, a joke on my name a little bit. But it didn’t work and it’s, “Something went wrong. It feels like you’re making a strong emotional connection.”
Andrew: That’s a Kevin Hill addition.
Harry: That’s a Kevin Hill addition, inspired by Kevin Hill.
Andrew: That is what he’s good at. He’s really good at human interface, an interface with the world that feels very human, and speaking of letters. He and his team used to… he told me here on Mixergy I think for the first time that they used to handwrite those letters to people saying, “Thank you.” Not people, to their customers. Kat Manalac is the person who runs their social media at Y Combinator. Do you know Kat at all?
Harry: I do know Kat, yeah.
Andrew: What do you think we can say in this interview that would make Kat go, “I’ve got to tweet this out, and help promote this interview with Harry and Lob?”
Harry: That’s a good question.
Andrew: Saying her name wouldn’t do it, right?
Harry: Probably not. Maybe, but…
Andrew: …. kind of attention. She is the Chief of Staff…
Harry: … get something a little better. I think the thing for me is they want to tweet advice to aspiring entrepreneurs.
Andrew: Advice?
Harry: What could you be doing better? I think launching early is a big one. It’s repeated over and over again, but yet people don’t do it.
Andrew: What is? Oh, launching.
Harry: Launching early.
Andrew: Launch early and so how did you do that? You launched early by just creating a landing page. What am I asking?
Harry: Well, we actually wanted to do the automated piece in the backend. Luckily for us, Y Combinator is like, “Why are you trying to build a backend, when you don’t have customers?” I’m like, “That’s valid.”
Andrew: Well, that came from Y Combinator? That’s not you?
Harry: Oh, we haven’t refined the copy yet. We don’t have the design. We launched with a bootstrap page and some clouds, just a floating cloud, and we had a tagline. It was mostly just text, and we used font awesome for some icons, and that was it.
Andrew: And they accepted you at Y Combinator before you even had a landing page?
Harry: We had a landing page up by then.
Andrew: But that’s it, just the cloud landing page. Did you have customers?
Harry: We did have some customers.
Andrew: Oh, you did, okay. All right, I thought maybe they somehow let you in without, but I interviewed the founder of Lawn Love, and for some reason they rejected him the first time, and he felt like he had to go and prove that he could get in.
Harry: Jeremy’s great. He’s a good guy.
Andrew: Yeah, really good. All right, I think I’ve got everything that I need from this interview, everything that the audience can use. What do you think? How’d it go?
Harry: I hope it went well.
Andrew: Is there something we missed?
Harry: No, I don’t think so. I’d say the biggest thing for me, as just parting words is, “There is a ton of value in direct mail today.” Some of the biggest companies in the world, like let’s just take Prosper and Lending Club…
Andrew: No, if you go to the big companies, we’re all going to feel like it’s out of reach. If you think about a company that’s smaller, do you know of one that’s more of a startup.
Harry: Let’s take Nextdoor, as an example.
Andrew: Nextdoor, okay.
Harry: They’re a smaller company. They grew primarily off the back of direct mail. They send postcards to get people in the neighborhood to sign up.
Andrew: I see. How much does it cost to send a postcard? If we were going to do that, let me see. Lob.com…
Harry: Sending one postcard is $.70, and it gets you down to about $.40 at scale.
Andrew: Seventy cents, so if I just use my system that I just talked about right now. Gravity Form on a WordPress page that goes to Zapier and Zapier sends it to you, and figures out how to get the data to you, cleanly. That would cost me $.70?
Harry: Yeah, that’s it. It’s funny, your idea. A lot of folks had built side projects on that.
Andrew: I know, actually. That’s why I’m thinking there’s got to be a twist to it.
Harry: Well, I think its contact, right? We’ve seen people do greeting cards, and come up with really nice designs, and then charge a really big premium on it, and people like it because it’s unique. It’s special.
Andrew: Do you guys do the greeting cards for me? I just need to give you the image for the cover and the text inside?
Harry: Yeah.
Andrew: Okay. So I probably…
Harry: [inaudible]
Andrew: Sorry?
Harry: We’ll put it in an envelope and mail it off for you, too.
Andrew: That’s interesting. See, that’s where somebody needs to come up with a creative solution, but they don’t need to figure out how to create the greeting card. I don’t see that on your site, though. I see postcards here. I see letter services.
Harry: It’s under the print service.
Andrew: All right, let’s go to simple print service, beautiful. All right, so here’s what you do. You get a WordPress site. All it is, is a greeting card that you come up with that’s really whacky. Let’s see, sizes and pricing. Gravity Form to collect information, so you have the greeting card at the top, a Gravity Form that says, “Your address, your friend’s address and the message you want us to type on the inside.” The person hits submit. The next page is the payment page. Once the person hits submit on that, then it goes into Lob via Zapier because Gravity Forms and Zapier play well together, and then it will cost… let me see how much … $1.40 for each greeting card. But they have to commit to what, 700 minimum?
Harry: They don’t have to.
Andrew: Oh, there’s no minimum, even.
Harry: That’s just one.
Andrew: Ah, so if I do just one, it’s $1.50. I see, if I just do just two, $2.31 for two. I like how it updates in real time. So I just need to charge more than $2, and I know I’m always making a profit on it. All right, this is beautiful. I’m looking forward to see if anyone builds any kind of business like this off it. I will help promote it, if you do.
Harry: Great.
Andrew: I hope I’m not committing to too much. We’ll see. But if you’re doing it using my hosting company which is HostGator.com/Mixergy, I’ll be happy to help promote it. Do you guys have anyone on staff if someone’s using your API and has questions?
Harry: Yeah, absolutely. You can shoot an email to supportlob.com. Any type of WordPress we’ll get around straight to the engineering team. Everything else, you’ll get your question answered. We typically respond within 24 hours.
Andrew: All right, ace is ten. Thanks so much for doing this interview. If you like, if you’re out there listening to this interview and you like anything that you got out of here, you should know that this is just one. Yeah, I happen to be talking a little fast on this one, but I have some where I talk a little bit slower. I have some where I talk even faster. There’s a variety of interviews.
If you want them all, all you have to do is go to your favorite podcast app and type in Mixergy and start subscribing. Every one of them will come directly to you free, as I create them, until I pass out. Between now and then, a lot of good stuff’s going to come your way. Just sign up for free or go to Mixergy.com/podcast. Harry, thanks so much for doing this interview.
Harry: Awesome. Thanks for having me on here.
Andrew: You bet. Joe, thanks for editing it. Everyone else, thanks for being a part of Mixergy. Bye, everyone.
