Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. I’m smiling because I’ve got in my office here as I do this interview Brian Boll and he’s been sitting heads down working on his laptop while I’ve been working, but as soon as I said, “Hey there, freedom fighters . . .” It must have sounded familiar, huh? He suddenly looked up at me.
Joining me today is an entrepreneur who did it. He bootstrapped. He hustled. He worked. He built. He sold. He made phone calls, dealt with all kinds of crises, including a major one and then he sold. And usually when we talk about the struggle of entrepreneurship, we talk about it because there’s a pot at the end of that rainbow.
There’s a goal here. This guy hit that goal. He finally got to retirement. He went off and–well, he’ll tell you what he did. Then he got bored. Bored. Imagine that. Everything we’re working to achieve ends up being boring. I want to find out why and more importantly for me is what did he do to build a company that was so successful that he could sell it, that he was able to sell it and allow himself to do just about anything he wanted with his life.
Today’s guest is John Carder. The company that I was talking about is called Client Shop. It’s a San Diego online matchmaker that connects consumers looking for loans with banks. He currently runs a new company. It’s called Empyr. It allows any app maker to give their users access to local business offers, like 10 percent cash back. It pays the app maker when one of their users buys from those merchants. So, we’ll talk to him about why he’s doing that and his plans for world domination with that. I think that is the phrase that you used with me, isn’t it, John? World domination.
John: Hence the map behind me, yeah?
Andrew: I love that. All right. And my two sponsors are–if you’re looking for a hosting company, later on I’ll tell you why you’ve got to check out and sign up for HostGator. And if you’re looking to close sales, there’s software that John’s been considering for his company that I’ve been using at Mixergy. It’s called Pipedrive, but I’ll tell you more about them later. First, I’ve got to welcome John. Good to have you here.
John: Thanks. Thanks for having me.
Andrew: John, you went off to this island and you got bored. But before you tell me why it was boring, help me understand or help me feel that this whole journey was worthwhile. What was fun about having sold your company? And then we’ll get to what was boring and then we’ll understand how you built it, but what was fun about it?
John: Well, don’t get me wrong. It’s amazing to sell your company. I’ll never forget the first day that I looked at my bank statement and I saw all those extra zeroes. It’s like I almost cried like tears of joy.
Andrew: How much money was in the bank?
John: Millions upon millions of dollars. We’re not allowed to say what we sold it for as part of the agreement. But enough where, like you said, I could basically do whatever I wanted to. That first day was amazing. That first week was incredible.
As we were talking about earlier, there’s about a three-month transition period that I helped them with. Then I was like, “That’s it. After these three months, I’m off. I’m going to go travel the world.” I had this whole extravagant plan because I love to surf. I was going to just go surf all over the world and basically drink all day and surf all day and just live the good life.
So, I invited a whole bunch of my friends out to Indonesia. We ended up going surfing in the Mentawai Islands, which is this incredibly amazing place. I’d always dreamed of going. We had this epic two weeks of surfing with all my buddies. I was 27 at the time, 26, something like that.
So all my buddies were in their 20s as well. We had this incredible surf trip. It was probably some of the best two weeks of my life because I had no stress, no pressure, total relief from all the craziness that is being an entrepreneur. I was surrounded by friends and good waves. And then they all had to go back to work after the two-week period because they’ve got normal jobs.
So, I was out in Indonesia by myself. I purposefully went to this resort that was very rural. It had no electricity, no internet. It had no pool. It didn’t even have–like the resort was like half-built. So, it was just one person that would drop off like fish and rice every day for every meal, always the same. If there was no surf, there was literally nothing to do. That’s where the–you can call it boredom, but really that’s where the epiphany set in. I’m sitting there on the beach. I’ve already decompressed for like three months helping the company transition. It was only like four hours a day.
So that wasn’t hard. It’s a lot of decompression in that three months. Then two weeks of amazing vacation doing everything I always wanted to do, which was surf and hang out with friends. And then I didn’t have any stimulus. I was able to really just sit and think about life and about what I want to do with life.
Money was no longer on my mind. Nothing was on my mind. That clarity I was able to achieve here was eye-opening to me because what I learned is I actually, in spite of all the crap you go through as an entrepreneur and the beatings you take and the endless sleepless nights that just seem like you’re never going to make it, you’re never going to survive.
You’re always staring into that abyss of death. There are also these incredible highs that come when you do succeed at different levels along the way. Those kinds of highs and lows are really an exciting way to live. Also, the impact that you end up making at the end of the day is so rewarding that ultimately that was the aha moment. It’s like the life of entrepreneur is actually way better than surfing and drinking all day.
Andrew: Really?
John: Even if I have all my friends around. The highs and lows of surfing and drinking all day are like this. You’re like, “Woohoo, I got good waves. There’s no wave. Oh, they’ve got beer. Oh, they’re out of beer.” It’s fun. It’s cool, traveling, meeting new people. A life of an entrepreneur is like, “Oh my gosh, I’ve got the greatest idea. I’m going to be a billionaire. Oh my gosh, it’s all going to fail.”
These highs and lows are so much more dramatic and so much more exciting. You can’t get any better than that. Plus, as you’re learning and growing as an entrepreneur, that’s incredibly fulfilling as well. You’re not learning and growing that much when you’re traveling. You’re getting cultured and that’s great. But you’re learning at a wicked fast pace and growing at a wicked fast pace as an entrepreneur. There’s just nothing that compares.
That’s when I changed my mind and said, “I don’t want to travel the world. I want to get back to work.” I’m building a company.” I did a little bit more traveling. I went to Africa and surfed Jeffreys Bay, which is a big spot down there and did some diving with sharks and all kinds of fun, crazy stuff. But then I was back to work.
Andrew: Your big entrepreneurship adventure started not with Client Shop, the company that we’ll spend some time talking about here, but started at a swap meet. I grew up in New York. I’ve never in my life seen a swap meet. What happens at a swap meet that turns you onto this new business idea?
John: Well, first off, you’re not missing too much. It’s basically everyone selling their wares, but the wares are usually either second hand or just low quality.
Andrew: Okay.
John: But I used to work at the swap meet. My job in college was to pass out fliers for a hamburger spot across the street to try to attract swap meet people to go there and buy a burger. It was while I was sitting at the swap meet watching people go in. I always had this entrepreneur bug. I had small little businesses when I was a kid. I noticed all these women with babies and pregnant women were going in the swap meet but nobody was selling anything related to baby products. So, that was my big aha idea, I thought, at the time. It was actually a horrible idea.
Andrew: Why? You tried it. What didn’t work about it?
John: First off, I didn’t have good pricing for my product. I literally found like a truck driving down the street and it said, “Wholesale Products: Come buy from us.” I went into this creepy warehouse and bought a bunch of baby products for probably like 10-20 percent less than a grocery store, but in some cases like probably more expensive than Costco. So, I didn’t have a good pricing structure. I went in there and started selling baby products. Nobody was expecting to buy baby products, so a lot of the moms already had their diapers or their baby food for the week. It ended up flopping completely.
In fact, I lost money the first weekend. It was only a $40 entrance fee. I lost money the first weekend. By the second weekend I was basically out of money. I had been funding this whole operation with two credit cards that I got from college. So, I had a couple thousand bucks. I wasn’t passing out fliers anymore. So, I wasn’t making that income. I was basically running out of money very quickly on a rather dumb idea.
Andrew: And then a friend of yours had a suggestion that was a little bit smarter, a small twist that was dramatically better.
John: That’s right. I think along the way as an entrepreneur, you run into things that happen where you get these lucky gifts from the universe that sort of keep you on track. So, one of my friends was a website designer. He built websites and ended up telling me, “You’ve got to sell this stuff on the internet.”
This was back in like ’99, 2000 and the internet is really hot. But for me, I was totally clueless. My parents were sort of lower middle class, not a lot of money. They sent me to college, believe it or not, with a typewriter. A typewriter with a digital screen–so, it wasn’t like full old school, the kind that like flows back and forth. So, you could see your typing, but I didn’t have a computer.
Andrew: By then, by the way, everyone seemed to have a computer. We’re not talking about the 70s or the 80s.
John: Yeah. This is the 90s.
Andrew: Interesting.
John: I was a little bit behind the curve there. I never went to the library where I could have got computers. So, ultimately I trusted my buddy. I’d heard of the internet. I knew what it was. I’d used it before, but I just wasn’t an avid user. I wasn’t very knowledgeable. So, I said, “Great, let’s build a website.” So, the name of the little bench at the swap meet was called Baby’s Heaven. And so, my buddy Dan was like, “I got this.”
So, the problem with Dan building my website was that Dan also was in a heavy metal band. So, he loves purple and black. So, he builds this Baby’s Heaven. I kid you not–the whole back is black with like hints of purple and then the big gold gate, it says “Enter” and the letters look like Metallica. I’m like, “This is not going to sell baby products. This is like what are you going to find in this Baby Heaven. The whole marketing thing was way off.
We got the website live. I think he actually took my last $300 from the credit cards and I gave that to him to build the website. And then we launched it and again, disaster struck. I wasn’t selling any baby products, probably because it looked horrible site-wise. But I didn’t know how to generate traffic. That was new to me. So, another friend of mine said, “I can teach you some of the things of internet, how to market yourself on the internet.”
I think it’s a small lesson, but one of those things that was really helpful to me was I told everyone what I was doing. All of my friends knew what I was doing. Everybody that ever came in contact with me knew what I was doing. Most of them couldn’t help me, but occasionally I ran into somebody that could. This friend of mine was like, “You’ve got to figure out how to go and partner with like similar sites where moms would go but don’t sell diapers like you do. So, they’re not competitive but they have a similar audience. I said, “Okay.”
Not knowing any better, I reached out to Huggies. Huggies is this giant corporation. I’m like, “Hey, can you guys link to me because I sell baby products.” Huggies only sells diapers by the truckload, so moms can’t go there and buy them. They actually responded and they were like, “Yeah, sure, send us a banner.”
So, being the idiot that I was, I go to my website and I’m like, “What’s a banner? They want this thing called a banner.” He’s like, “Okay, cool, yeah, I’ll draw that up for you.” He designs a banner. I give it to Huggies. They put it up for free, which is crazy. This is kind of ’99, 2000 internet.
The next day–actually, when they put it up, even just a couple hours later, we got our first online order. I’ll never forget that moment. It was incredible. I was running through the streets yelling with excitement. That’s one of those highs I talk about that I’ll never forget was so exiting. All that hard work finally was starting to pay off.
Andrew: And you were just selling baby supplies and I guess shipping them from your house, right?
John: Yeah. I had a storage unit by my house about 15 minutes away. I would drive there every day, package all the baby products up and slap a label on it and ship it out via UPS all over the country. I was doing all of that myself for quite a while, all the shipping, all the marketing, all the everything.
Andrew: I heard that–I forget which article. I read so many articles about you. You said that what you were trying to do was just make money in the early part of your life, that you just wanted to find a way to do that. Why did you want to make money so badly that you got into baby supplies when you weren’t a guy who was a father yet?
John: Yeah. I think we’ve already talked about the epiphany when I realized I wanted to continue working and build products to make an impact. I had an epiphany a little bit earlier in life. First off, I came from a home that obviously wasn’t very rich. I’m going to school with a typewriter. My parents struggled with money to the point where it did cause issues at home, not dramatic issues.
Andrew: Be open. What’s one issue that was caused because of money?
John: Just like my mom might go and spend some money on something nice for herself and my dad would get pretty upset because we’re barely making ends meet. We’re barely covering the rent. I just remember being really tight on anything. Ultimately I wanted to not have to struggle with money. It was one of those things. Like I said, it wasn’t overly dramatic, but just enough to say, “I’d really like to make money so I don’t have to deal with that.”
But the most important shift for me to really hone in and focus on money actually happened when I was surfing one day when I was a teenager. So, I think I was like a junior in high school and I was surfing. So, we lived inland about 30 minutes from the beach in Orange County. So, I would drive to Huntington Beach. I was out there one day surfing or maybe it was Newport Beach.
There was like this lull where there was no waves. So, I was just sitting there not doing anything and I turned back to the shore and I just look and there are mansions–big, gorgeous, $10 million, $20 million mansions–as far as the eye can see in both directions. It dawned on me there are mansions at every beach everywhere you go to and million-dollar homes everywhere.
What are these people doing? What are they doing that I’m not doing or my parents aren’t doing that enables them to live on the beach in these multi-million homes. Not knowing any better, I just kind of assumed that they all started their own business. That just seemed to me like the best way to make money. A lot of them, now I know as I’m older, a lot of them are high-level corporate, but there are also a lot of entrepreneurs in that mix.
So, that was really the initial motivation. I want a house on the beach and I want to be wealthy, so I’ve got to start my own business and I want to be like one of these millions of people who already have a house on the beach. It seems so abundant that if all those people can do it, I surely could do it too.
Andrew: Especially in Orange County. It feels like everybody’s wealthy.
John: Yeah, exactly.
Andrew: They probably are. To not be wealthy surrounded by those people, that must have been tough, huh?
John: It was interesting. It was eye-opening.
Andrew: Was it a little frustrating?
John: It was frustrating but also motivating. And also, like one of the things is important, as an entrepreneur you are driven and ambitious and motivated and money comes into play there. But ultimately, it was the wrong motivation. It got me started, but it got me started in the wrong direction. If I could redo it all over again, I would focus on impact first. I’d probably be further along in my career rather than focusing on money.
I think money is a bad motivator, but it is a motivator nonetheless. It’s not necessarily a bad motivator. It’s just not as good of a motivator as an altruistic mission like, “I want to make a positive impact in the world using the skills and talents that I have.” I think that is so much better reason to wake up than–
Andrew: Why?
John: Because intrinsic motivators like that are–they just don’t fade away. Money, the benefits of money and materialism fade pretty quickly. So, let’s say I bought you a Lamborghini today. You’d be like, “Hell yeah. This Lamborghini is so sick. I’m having the best time ever driving it.
But I can pretty much guarantee you that your excitement level with slowly deteriorate over time. The next year you’re driving it, not quite as cool. Year five, it’s starting to show holes. It’s got some scratches on the side. You’re probably thinking about a different car. In year ten, that thing’s gone completely.
It happens with nice houses on the beach. I finally realized that dream. It was amazing and I’d look out at the beach every day and go, “Look at how amazing this view is.” I did that for the first three months and then six months later I was looking out maybe once a week. I noticed like two years after I moved in like, I barely looked out at the view, which is crappy on my part. I should appreciate it and continue to appreciate it and I do, but it loses a lot of its excitement. So, that’s why money is a motivator.
Andrew: Shouldn’t you then raise the bar and say, “Okay, I dreamt of a house on the beach. Now I’d like to have a town on the beach somewhere and that’s what I’m going to work for?”
John: And I think the same thing would happen. I’d get a town on the beach and then I’d be like…
Andrew: Raise it up again.
John: It motivates you. But I’m saying if you can find something deep down inside that you feel passionate about beyond money and materialism, I think you’ll do even better. I think Elon Musk is a great example of that, right? That guy works freakishly hard. He’s like trying to save humanity. So, his reason to get out of bed in the morning is better than ours. If you’re focused on money and he’s focused on saving humanity, he’s going to push himself harder.
You know what else is cool about that? He’s going to push all of his employees harder. They’re going to work harder and he’s going to be able to attract better talent. So, I just think having a good mission behind your business, beyond just money is a competitive advantage. It’s a smart way to think about your business and why you’re doing it.
Andrew: That makes sense. So, baby heaven started growing and you added according to what you said to our producer office supplies and other stuff?
John: Yeah.
Andrew: Why would you add office supplies to a site for babies?
John: I was just like super ambitious. It was funny because like back in those days, this was ’99-2000–so, I started learning about internet marketing, like pay per click marketing and affiliate marketing. Back in those days, there were not a lot of people doing it. This was when Overture was called GoTo before it sold to Google. Google didn’t even have a pay per click marketing program.
So, we were doing stuff that was really effective internet marketing wise that Amazon was clueless about. Most of the ecommerce people weren’t even doing. So, we were like “Oh, this is–we’re so good at internet marketing. Let’s expand the product range. Let’s not just do baby products. Let’s do clothing and CDs and music.”
Andrew: I see. It was Wired Heaven, Baby Heaven, Office Heaven–that’s what you had.
John: Yeah.
Andrew: Where were you buying this stuff?
John: All kinds of places. There were a lot of drop shipping options. There still are today. So, our music was all drop ship. We were selling CDs. Our baby products were mostly drop shipped. We didn’t really warehouse too much, although I do have one funny story. So, we sold electronics like big screen TVs and like speaker systems.
There was this guy up in Orange County that we bought them from. I’m spacing on his name. But it was like Crazy Abe or something like that. He had these crazy commercials, “I’m crazy. Buy my electronics.” So, we were buying our stuff from him. The guy literally was crazy, like mafia-style crazy.
So, we were buying them from everybody, all kinds of mix of people, anybody that would sell us a product. They would be drop-shipped. All we needed was the image and the description and the price and then we would throw it on the website and then we would market the crap out of it–
Andrew: What would you do to market it so well back then?
John: Mostly cost per click campaigns.
Andrew: Okay.
John: So, like 7Search and Overture, which was GoTo. You’re going back in the days where there used to be a lot of these CPC engines and Yahoo wasn’t doing it yet and Google wasn’t doing it yet. Microsoft wasn’t doing it yet. So, these underground CPC engines. You were buying traffic for one penny a click, which was crazy, right? You convert at 10 percent. You’re looking at $0.10 for a sale.
Andrew: Every new item that you would have would give you another set of opportunities to buy clicks at $0.01 per click to bring traffic to the whole site.
John: That’s exactly right. Every product is a set of 10 to a couple hundred keywords.
Andrew: What did you sell the business for?
John: Not much I would chalk that one up as a failure, basically.
Andrew: Why?
John: We sold it for enough to pay out the employees and I got a little bit left over, but not much, in the thousands of dollars, basically. The reason that one failed–it taught me a very valuable lesson that I’ve used ever since then–we were really good at marketing. So, we were getting all these products on board and marketing the crap out of them and generating a lot of revenue.
What I wasn’t good at and what I wasn’t paying attention to was customer service. So, we had my girlfriend at the time–we’re no longer together–she was a very passionate woman. She was from Spain, very fiery, Latin lover-type, can get a little crazy. So, she was our customer service person, so she was working for free. I was like, “Yeah, you handle customer service.”
So, imagine a pregnant woman upset because her crib arrived broken from UPS calling my girlfriend who really doesn’t care that much, yelling at my girlfriend, “My crib is broken. I need a crib here immediately because my baby is due in a couple weeks.” She would be like, “Don’t you talk to me like that. You don’t talk to me like that. We’ll get you a crib when we can get you a crib.”
They would start fighting and yelling and like I saw her like hang up on people and I was just like, “This is not good. Keep marketing. Keep marketing. More customers.” I never took the time to really focus on customer service and taking care of your customers. Such an obvious thing to do, right? I was like 19 or 20 at the time.
Andrew: It’s ironic because your site had these Zappos ads, a company known for their customer support. But was it just customer support? I imagine if you’re buying ads at $0.01 a click, you’re selling cribs for $200 to $300, it seems like an easy thing to make a profit on, even if you piss off some customers, there are so many others that you’re going to get from search engines.
John: Yeah. First off, I was ambitiously adding new products all the time. There are costs associated with that, employee costs and stuff like that. So, we would go like profitable, not profitable, profitable not profitable like month by month, like we were kind of like constantly up and down in terms of profitability. Our revenue was growing like crazy. We grew to $2 million in revenue in less than two years in like 18 months.
So, all that stuff, we were growing fast, but we weren’t necessarily profitable because we kept reinvesting it. What happened was if you don’t treat your customers right, they can do what’s called a chargeback. That just means they go to the back and say, “Give me my money back. I couldn’t get my money back from the company. Maybe they don’t want to deal with the company, so they just go straight to the bank.
As soon as you get over 1 percent on chargebacks, the bank can hold what’s called a reserve. We ran into that problem, we got over 1 percent because of our horrible customer service and the bank started holding a chargeback. And they wanted to hold about a month’s worth revenue, which was almost $200,000. And at the time, my bank account was literally just floating profitable, negative, profitable, negative, sometimes multiple times a day. I had so many overdraft charges in those bootstrapping days.
Andrew: You told our producer you had $12,000 in overdraft fees when you sold the company.
John: That’s right. At $30 a pop, that’s how many times we went negative and profitable. If we had slowed our growth, we probably wouldn’t have had that problem, but I was just Mr. Ambition back then and kept trying to add more products, do more marketing, yadda, yadda. But the chargeback thing ultimately killed us because I didn’t have $200,000 in the bank.
So, what would happen is orders would come in and then we couldn’t ship them because we would never receive that money. Then we’d have even more people upset. So, we kind of had to sell it like very quickly to one of our competitors, who then took on the burden–they had their own merchant account. So, they didn’t need ours. They took all the customers on. And I think it worked our good for them and not great for us.
But I learned an incredibly valuable lesson about taking care of the customer. It seems so simply and so obvious but sometimes you get so focused on the revenue you don’t take as much are to the customer to make sure they’re coming back. Like you said, I was just thinking $0.10 to market to this product and I can sell it. There are plenty of customers out there–
Andrew: It worked out easily. Speaking of, I haven’t focusing on revenue in this interview. I’ve got to talk about my first sponsor, which is Pipedrive.
Pipedrive is software that we use to coordinate our booking process. Every step of our booking process from finding a guest to approving them to pre-interviewing them, the whole thing is laid out neatly in Pipedrive and we work as a team to move people from step one through step ten and get them as you are here to do an interview. That’s what’s beautiful about Pipedrive. It’s not a CRM that’s focused on phone numbers or email addresses. It’s a CRM that’s focused on getting the sale.
Before we started, John, you said that you were considering Pipedrive. What’s the specific thing that you’re considering using Pipedrive for?
John: Yeah. So, we want to beef up our pipeline analytics. Just taking a look at their–
Andrew: Pipeline of what?
John: For sales.
Andrew: Local businesses or app makers?
John: Well, actually both. Good question. So, the app makers or people that own websites, we call them the publishers of these offers. Then we have on the advertiser side, these are local businesses like restaurants and salons and also national businesses like–
Andrew: This is, of course, for Empyr. So, with Pipedrive, what you’d be doing is creating two different pipelines, one for the publishers. One of the business. How would you use Pipedrive to, let’s say, close businesses?
John: I think where I was really excited about it is what it does is it gives me visibility into every single one of my sales reps. We are still a small team. We have about 60 employees. I have to do a lot of the management myself. We don’t have CRO yet who could take over a lot of this. So, I have to do it. It provided reports where I could track the effectiveness of every one of my sellers. That is invaluable. Right now, it’s so hard to do that without something like Pipedrive because they’re like, “Yeah, I’ve got 17 deals in the pipeline and I’m thinking they’re going to close next month. What did you do last week to get those to move forward?” That’s what Pipedrive gives you. It looks like it gives you insight into it. I haven’t used it.
Andrew: It does. It does. You know what? We actually had this one person who was working for us on the Mixergy team who just kept adding great suggestions for people we should be interviewing, finding their email addresses. It just looked like this was the most productive person on the team. I said, “Let me just pull a report.” And I saw yeah, she’s sending the most people into our system, but none of her people are closing.
None of her people end up doing an interview with me. That was a really good indication that we need to not work with her or adjust the way we work with her. Actually I just said, “We don’t need more guests. Let’s just have her stop.” That saved us a lot internal work for no results.
The other thing that I could see how is our pipeline. I just see a visual of where everyone’s potential guests are in our system. Do we have too many people who are booked to do an interview? Do we have too many people who are suggested but haven’t been talked to? All that stuff is really easy to find. Here’s one other thing that was really helpful for us. When we started out, it took us about a year to find someone and get them on the site because we were so uncoordinated.
As we kept improving and improving and improving, we got that down to about 30 days. Today, we’re much higher than that, partially because we’re suggesting so many more people than have time to do interviews, but I’m at least aware of that process. How long are we talking with someone? Is it too much? Is it too little?
All that stuff is available on Pipedrive. If you, John, wants to use it for Empyr or anyone out there wants to use it for their business, I suggest you to go Pipedrive.com/Mixergy. When you do that, you get two free months of Pipedrive, which will allow you to just see can you even use it for your company. Try it out, try closing some sales and see how it works.
It’s even good if you’re using it just for one person who’s trying to make sales because it will hold you accountable. How many potential leads are you putting in the system? Are you really moving them as often as you say you are, meaning make phone calls, move them along to email and try to get them to buy or are you kidding yourself and saying you’re doing a lot of work but in reality you’re not.
Pipedrive is great for individuals and teams. Go check them out at Pipedrive.com/Mixergy.
All right. So, John, you sold the business. You learned a lot from it. It was time for you to start the next company. How did you come up with the idea for Client Shop?
John: So, I actually came up with the idea from an interview I was doing while I was running Baby’s Heaven and eHeaven. Somebody came in and they told me about this mortgage company they looked at, this mortgage website that they worked for where people would fill out a form to get banks to compete for their home loan and they would take that form information and sell it to multiple banks.
It was genius because I was thinking of it in our context, like at Baby’s Heaven, we had to get somebody to come online and buy a product and then we had to ship it and then we had all this customer service. But with their model, it was so beautiful. It was selling information. It wasn’t selling products. So, I knew I could take all that marketing expertise that I gained at the baby company, apply it to this model and possibly have a very profitable big business. Sure enough, that’s kind of what evolved.
Andrew: So what’s the first step that you took to pull this off?
John: So, the first step I did, I had to find the first person to buy my mortgage leads. I knew I could generate them online because I was doing all the internet marketing for the free heaven. So, I just needed somebody to buy them. I actually had a friend who was a mortgage banker. He was the very first person to buy the leads.
And then I setup a website in Dreamweaver. I don’t know anything about coding, nothing about zeroes and ones. But back then you could use Dreamweaver and just drag and drop stuff and just build something. So, I build this really crappy website. It looked like junk. I started generating my first leads and giving them to my buddy.
It’s a crazy story because–and I don’t tell it a lot, but I feel like the entrepreneurs listening would benefit from this–this was a good friend of mine and I started giving him all these leads. He was going to pay me the next month. He was going to pay me the next month. He actually ended up not paying me for three months and I basically ran out of money and got into a very bad situation. It was like the last thing I ever thought would happen on the planet, like my good friend would just not pay me.
Andrew: Why didn’t he pay you?
John: He got greedy. He wanted to keep all the money for himself and just never paid me. He still hasn’t paid me to this day and it destroyed our friendship. It is really quite a bummer.
Andrew: What is his name?
John: Shawn. I’ll leave it at a first-name basis.
Andrew: Really? Can we call him up right now and ask him?
John: No.
Andrew: Let’s address is right now. Let’s just call him up and say, “Look, Shawn, I gave you some leads. Did I misrepresent what I wanted to do with them?” Let’s get this out of the…
John: I’ve talked to him a couple of times. We actually even made up a bit and even went on a trip. He was like one of my best friends growing up. It was painful for me to go through it. I forgave him. I actually even gave him another shot. This sort of gets a little more dramatic and less entrepreneurial. I actually gave him a shot and lent him money to start his own business a few years later and then he never even paid that back either.
So, it’s kind of in the dead zone where I forgave him. I gave him a shot. He has this mentality that if there’s anybody he could screw over, it’s his friends because they’ll forgive him or they don’t matter as much. That’s where his head it. It’s sad but it happened.
Ultimately, I had to survive in spite of not getting paid for three months and paying for all the marketing that generates. I was in another spot where I basically had zero money in the bank. I was living off Top Ramen at the time. I had really been living off Top Ramen for the entire eHeaven experience too because even though we were doing a couple million in the bank, as I was mentioning those overdraft fees.
So, when people say they lived off Top Ramen… I really lived off Top Ramen. I had it every single day for most of my meals if not all my meals. Every once in a while I’d be able to add a hotdog to it. That was a big deal because hotdogs are a lot more experience than the $0.06 Top Ramen.
Andrew: Literally you couldn’t afford a hotdog?
John: Literally it got to that point where mac and cheese was extra special and that was like $1.50.
Andrew: Why did you continue then? Considering that you’re a smart guy, you worked so hard. Why didn’t you just say maybe this whole entrepreneurship thing is some kind of a pyramid scheme where only a few people at the top end up with mansions by the water?
John: There were definitely a lot of moments where I debated that, where I thought about that very, very intensely. There were some dark days. But also it was very exciting. I didn’t mind living off Top Ramen and not having much because I had this dream.
I was going to make this dream a reality and I was going to survive. I knew I could survive off very little, like $20 a week when you’re living off Top Ramen. So, I knew I didn’t need a lot of money. There was a darkness to it. But there was also this excitement. I don’t have that kind of stress in my life anymore. I have different stresses now.
But I remember that time as being a really exciting time. I remember being like, “I’m an entrepreneur. I’m doing it. I’m going to make this happen.” There was something cool about that, from going from not being an entrepreneur to being an entrepreneur. I just kind of felt like I was a part of this elite club that took this kind of balls to pull it off.
I felt like this was a rite of passage. I didn’t mind paying my dues because I figured that’s what most people did, pay your dues and earn your reward afterward. I was like fired up about being able to be this person. Plus, I sucked at regular jobs. I got fired from everything. I got fired from a gas station I used to work at. I got fired from Taco Bell.
Andrew: What did you at Taco Bell that got you fired?
John: I was late a couple times. I was really good. I was like the guy at the window that took your order and I was making people laugh and being really personable. So, I was killing it on the job, but I just didn’t have the discipline to show up on time. So, I got axed.
Andrew: I tried to work in fast food when I was a teenager. I tried to work at I think it was Burger King or McDonalds and they wouldn’t give me a job because my hair was too long. The guy wanted me to cut my hair and I couldn’t do it.
John: That’s awesome. I had long hair back then too, like past the shoulders.
Andrew: Me too. So, you were also into heavy metal, like your buddy.
John: I was a surfer-stoner looking dude. I had like marijuana split right down the middle, hair long on both sides just really surfing all day long. It was pretty funny.
Andrew: Meanwhile I’m taking a look at a photo of you from Client Shop. You’ve got a nice blue pinstripe suit on. You actually have your hair pointed towards the center. Big watch.
John: That was in the stage–so, that was like a couple years after what we’re talking about now. I thought I needed to look the part. Once we actually had a business and it was making money and growing, we had a nice, fancy office and I wore a suit to work every day. Now I’m back to jeans and a t-shirt.
Andrew: You look good today.
John: It’s cold out, so I’ve got a nice little sweater on.
Andrew: All right. Second sponsorship message–before we do, Brian, you’ve been listening a little bit while you’re working. What do you think of the interview so far?
Brian: I’m trying out Pipedrive right now.
Andrew: Oh, you are? He’s trying out Pipedrive right now. So, it worked.
John: Awesome.
Andrew: Is it interesting to actually be here on the other side? Do you want to come over on the front of the computer and just say hi to everyone?
Brian: Hey, John.
John: Hey, how’s it going?
Brian: It’s pretty well-lit here. He’s got a great setup.
Andrew: Yeah, I think I blinded him earlier when I turned it on. Brian is a guy I should have on. Brian created AppZapper, a really popular Mac app. Are you a Mac guy?
John: I am. I’m on a Mac right now.
Andrew: So, second sponsorship message–let’s see if Brian ends up signing up for these guys–it’s a company called HostGator. The beauty about HostGator is if you have an idea, you can instantly go to HostGator–maybe not instantly, within five minutes–five minutes, go to HostGator and have your site up and running.
Let me ask you this, John, if you had nothing but a HostGator account right now and the kind of ambition that you had when you were eating Top Ramen, what business would you start?
John: You know, my true passion is actually things around human longevity. So, I’d probably start a business that in some way, shape or form helped us live longer, healthier lives.
Andrew: So you only have Top Ramen money and a hosting account. How would you start it when you don’t have enough money to really hire scientists and figure out how to prolong people’s lives? What’s the first step?
John: That’s one of the reasons I’m not doing that quite yet because I’m working my way up to that type of company. My first company would probably be something like my real first company was. I’d find something that I could sell online. I would probably do information. It’s better.
Andrew: Not leads, information.
John: Yeah, leads and information was very good, although that’s a very competitive business. It’s a really good question, what would I do if I started over right now and didn’t have much. I think what I would do is I really would have to look back at my passions. My passion really is human longevity at this point in my life. There probably is a business that could be started without a lot of capital.
Andrew: All right. Actually, I bet there is. One of the things I’ve noticed about doing these interviews is that people will often just start out by writing about the topic they’re interested about and that’s a way to get entry into it. So, you might launch a HostGator hosted website that talked about longevity, that maybe interviewed some people in the space, that wrote about it, that gave you an understanding of it and then brought the right people to you and through those connections you might be able to start your business or learn what it would take to do it.
HostGator is a great way to launch any kind of site. If you want to sell something, if you want to create a forum, a membership site, if you want to do anything on the web, a good place to start is HostGator. They make it really inexpensive and easy for you to start your site. All you have to do is–I’m going to give you a special URL if you want to get a discount. You just go to HostGator.com/Mixergy. When you do, you’re going to see they’re going to give you a low price, 30 percent off what everyone else is paying–sorry, suckers. Should be Mixergy fans.
So you get 30 percent off unmetered disc space and bandwidth, 24/7 support, even on Christmas they are there to give you phone support. They’ve got a 45-day money back guarantee, unlimited email addresses, they even have an offer to give you $100 AdWords and $100 search credit from Bing and Yahoo–really good service. Go to HostGator.com/Mixergy.
So now you’ve got this model. Your buddy basically helped you understand that it worked but didn’t give you enough money. Where did you find the paying customers?
John: So, I started cold calling. I also went out and I found who now is to this day still one of my best friends who actually does pay his bills. I found a buddy of mine who knew how to sell to bigger clients. This was a tricky business in the sense that my customer base was like large mortgage companies. I didn’t have a lot of experience there.
I was able to get a couple of brokers on myself. Then I met this guy. He was this really charismatic, awesome sales guy. And I was like, “Dude, you want to come on and help me bring on the other side of my business. I can market and generate leads,” that was my strength. “You’ve got a strength on bringing in businesses. Let’s work together.”
So he jumped on board. I gave him a nice chunk of equity. I think 10 or 20 percent of the company. He was working for peanuts, not very much salary. He ended up getting Countrywide and some of these really big banks to come on and buy from us. That’s really where I business took off.
For the first few months, I was signing maybe a couple brokers in my boxers at home. Next thing you knew–this is actually a crazy kind of rags to riches turnaround. Just by having even just a handful of brokers–remember, we were able to generate leads for–at $0.01 a click I was able to generate leads for usually less than $1, maybe a couple dollars in the early days.
There was not much competition at all for mortgage leads. I was bidding on like mortgage California, which now is like $20. It was like $0.10 or $0.20 back then. So, it was really good timing. This was like in 2002. So, we went from the baby company living off Top Ramen, eHeaven, which didn’t really sell for very much and I lost money my first couple of months doing this business because my buddy didn’t pay me anything to literally three months later we made our first six-figure net profit in a month.
Andrew: $100,000 net profit in a month?
John: That’s right.
Andrew: This was after your friend came in for some equity to help find the bigger clients.
John: That’s right.
Andrew: And that’s what it was. It was you buying cheap ads and selling it to multiple brokers that your buddy found for you.
John: That’s exactly right. That changed the game. That was the most huge–that was the craziest shift ever because I was like, “I don’t have to eat Top Ramen.” I’ll never forget the first time I went to Sizzler. How cheesy is Sizzler? I was so stoked. Sorry. It wasn’t Sizzler. It was Denny’s. I got their $2.99 Grand Slam and I was like, “Woo! I can spend $3 on a meal.”
And then pretty soon I had so much money that I had accumulated I had to file my taxes. My tax guy was like, “You’ve got to buy a big heavy car.” Back in those days, you could by like a 6,000 pound car or whatever it was and you would get a big tax break. So, I bought a Hummer, which is super cheesy. Back then it was cool, now it’s like I don’t even think they exist anymore.
Anyways, I bought the Hummer. I drive home to my parents who live up in Orange County–I’m living in San Diego at this point–is how up in this Hummer. My mom is like, “What is going on? You were just broke three months ago. You were living off Top Ramen. Your company had sold but really kind of failed. We thought you were going to get a real job but now you’re in a Hummer.”
She’s like, “Are you selling drugs?” She was like dead serious. I was like, “No, Mom, I’m not selling drugs.” I tried to explain to her I’m selling leads. She didn’t get it. She thought I sold drugs for the entire four years that I ran that company. She just never really fully believed me.
It’s kind of funny. The only time she actually really truly believed me–she’s a teacher. She’s in the teacher’s lounge and this magazine shows up, Fortune Small Business. They were doing an article on entrepreneurs that sold their company and I just sold the company. They ended up deciding to put my picture on the cover because I was like holding a surfboard and it just kind of all fit well. I didn’t even know I was on the cover. One of her teachers sees it, “Isn’t that your son, John?” She’s like, “Oh my gosh, it is.”
It says on the cover, “Sells his company for millions of dollars,” and she calls me and she’s like so proud and so happy that I’m not selling drugs and it’s a legitimate business that shows up on Fortune Small Business Magazine. It was a drastic change for me and my mom and pretty cool. It looks like it happened over night, but as we just told the story, it was years of Top Ramen and continuing to never give up and then I got that break where everything kind of came together.
Andrew: Why did you have so many different domains at that business? I’m looking at QuoteMe.com, which is a good domain. You told me about earlier–what was the other site?
John: ForLowRates.
Andrew: Why so many domains?
John: So, we started with ForLowRates. Actually, I started with–it was kind of like whatever I could–I wanted to constantly improve. My first domain name really sucked. It was called FederalEquity. It sounded like a government loan. It was $6 or whatever on GoDaddy or something. Then I got ForLowRates, which is a little bit better.
Then we were like–QuoteMe was like in the last year of our four-year run. We really wanted to start doing television ads and branching out our marketing. Pay per clicks, by the way, had completely gone away. Instead of $0.20, it was like $20 per click for some of these mortgage stuff. So, we were looking for new marketing channels. We wanted a brand everybody could remember That’s where we came up with QuoteMe and bought that right towards the end, right before we sold.
Andrew: Were you doing anything else SEO? Were you doing content? From what I can see–actually, were you doing it?
John: Yeah. We were. We were doing pay per click marketing, affiliate marketing, SEO, a lot of distribution partnerships. We were doing it all. It’s really interesting. This just shows how fast the internet evolves. When we started 100 percent of our marketing was pay per click.
When we sold the company, it was less than 5 percent of our marketing came from pay per click. Actually, what we ended up doing–it became so difficult to market mortgage leads on the internet. So competitive. We had like 10, 20 competitors popping up every week because it was so easy to make money in those early days.
We ended up going to a call center in Indonesia to create what we call live transfers. This was back in like 2006. It was a pretty new thing. They would actually call all of our leads that were generated, see if the person is still interested in refinancing, transfer them to a call center we had here in San Diego and then we would transfer them live to a person at Countrywide or something like that. Those live transfers we could sell for $130, $150.
So, we didn’t need to sell it for banks. We only needed to sell it to one. I think we had 150 or 180 employees in India at our peak doing live transfers. That’s where we got most of our revenue generated from. So, we really had to evolve very quickly into different types of marketing and our best marketing challenge ended up being a call center in India.
Andrew: But to get people to that, what would you do, to get people to call that number?
John: So, we had amassed about a million leads. So, we just took those million leads and sent them to the call center for them to call outbound. So, they would take our million leads. They’d been generated over the last four years. They would call the person back and say, “Do you want to re-fi again?”
Back in those days, rates were dropping so fast that if you had re-fi’d two years earlier you could re-fi again and save a bunch of money. So, we were just calling leads that we already amassed. So, we had amassed about a million doing a lot of the marketing stuff, which was pretty crazy.
Andrew: I see. You also did insurance leads and debt leads. Debt leads you guys sold for $33.33 each.
John: Hmm…
Andrew: Is that right?
John: That sounds right. I don’t remember exactly what we sold them for.
Andrew: That’s a lot of money for something that you’re not paying that much to get.
John: Yeah. We sold the mortgage leads for even more. Those were $30 or $40 a pop and we’d sell them to four banks. So, we were usually making $80 to $100 on average. We weren’t always able to sell them to four people. It was a great business model.
Andrew: Does any of this still work today?
John: Not really. It got so competitive and then what happened was in 2006, end of 2006, the whole bottom fell out. The rates went up and the whole crazy 2008 happened right after that. So, really refinancing just kind of shrunk to where maybe 10, 20, 30 percent, maybe 40 percent of where it was at its peak, which was 2005-2006. So, not only did you not have as many people that could buy your leads, but you had the same amount of competition.
So, there was this bloodbath where tons of businesses went out of business. To this day, if you want to do that, like I said, it’s like $20 a click instead of $0.20 and it’s not as big as it used to be. That time has sort of come and passed.
Andrew: You sold before. How did you know that it was time to get out of it?
John: I tend to be a little paranoid with a healthy amount of paranoia. I thought, “This is crazy,” because it was crazy how much money you could make and how many–they were giving loans to anybody, even with horrible credit. In fact, they paid more for bad credit. It just didn’t really add up. So, I was like, “This probably isn’t going last.”
I started to talk to a company that wanted to buy us which actually ended up buying us in 2004, so, two years ahead of–I thought it was going to collapse in 2004. So, I started working on a sale. We didn’t sell until March of 2006. It took us two years to sell. We started working on it when I thought it was all going to collapse.
So, thankfully we were ahead of the curve. I didn’t expect it to take me two years to sell. So, I think that was incredibly valuable lesson learned that it can take that long and to be a little paranoid. We sold in March of 2006. Six months later, the business was doing 40 percent of the revenue it was doing when we sold.
Andrew: You sold the company to Internet Brands, an LA-based business. You had this experience the day that you guys were supposed to sign the paperwork. You go in and what happens? I’m just going to go off camera for a second while you answer. This is pretty painful and we have to hit it. What happened?
John: Sure. So, I’ll give you the story. We go up there because we’re about to basically sign the final paperwork and figure out which employees are going to move up to LA and which we’re going to terminate, some of the final T’s–crossing the T’s and dotting the I’s. We had already been through due diligence for three months with them. They were actually the company that contacted us two years earlier. So, we had known them a long time. This whole process, this was the end.
We go up to their conference room. It’s like the biggest conference room I’d ever seen. They had like lawyers and their CEO and their CFO down at one end and I’m down at the other end. It was all very intimidating. I had never been through anything like this. What they ended up doing was as we’re eating lunch brought up and used that famous tactic of the twelfth hour pullout in the negotiation. They basically said, “We love your business, but it looks like it’s a little rocky lately.”
Our business was going up and down all the time because supply and demand for leads was sort of an ebb and flow type business. They’re like, “yeah, looks a little rocky,” which it always looks that way. They said, “Because of that, our board is feeling a little bit uncomfortable about this acquisition. They’d like us to pull out. But ultimately, I think we can still get the deal done, but the price is going to have to be half.”
Shockingly horrifying thing to sit through, just watching my dream fade away in front of me. I was with my CFO, Frank, who’s’ much more experienced. He had already taken some companies public. I call him my adult supervision. I’m like 26 or 27 at the time. He’s probably 45 or 50.
I look over at him thinking, “I’m freaking out. I wonder what he’s doing.” I see on the side of his head there’s like this tumor growing where his glasses are that’s like beating like his heart beating or something, like literally a bump growing on the side of his head. He is just so stressed, he looks like he’s going to lose it.
I’m like, “Wow, both of us are really kind of overloaded that they just dropped this bomb on us.” I said, “Here’s the deal, guys, we need to talk about this privately.” They’re like, “Sure, no problem,” they start to leave the room. We’re like, “Let’s just not even do it in this room. This could be mic’d.” They’re pulling out some fairly shady tactics. Let’s go down to the car and talk there.
So, I go down to the car. Frank’s freaking out. We call our investment banker who’s like–I’m like, “What do we do?” He’s like, “Sell, half is still a really great deal, money in the bank.” Investment bankers, they just want to get the cash. So, I’m like, “Screw you.” I hang up on him and call my advisors. They’re like, “You’ve got to negotiate. This is a fairly standard tactic. Here are some tips. Here are some tactics. Go for it.” So, they give us some tactics.
Frank, my CFO, he’s got a really good relationship with their CFO and he’s a great negotiator. So, I send him up and I stay in the car. Frank goes up to negotiate. I’m sitting in the car and I kid you not. I look to my right and there is a CD case full of CDs and the title of the CD case is, “Negotiating 101: How to Get in Life What You Negotiate, Not What You Deserve.” I’m like, “Oh my god. This is so perfect.”
Andrew: This is a Chester Karrass book.
John: Yes. That’s right. So, I put in the first CD. “Chapter One…” And it talked about these different elements of negotiating. The first one was something like give up what you don’t care about to get what you do care about. A big piece of this purchase was an earn out. When Frank comes back down, I’m going to talk about getting rid of the earn out and replacing it with cash. That’s a way we can get more of what we want.
Frank comes back down 40 minutes later. I give him this other tactic. He heads back up. We literally do this for hours of going back and forth and negotiating. My battery dies on my car. So, I’m in the middle of listening to it. I’m probably on Chapter Four or Chapter Five, just literally learning negotiation as we’re negotiating.
My battery dies. So I call AAA. They send somebody over. The guy gets out of the car. I’m in the Hummer that I bought earlier. He gets out of the car and he’s like, “Hey, John. My name is Juan. I’m here to help you out.” He’s like, “Man, this is an awesome car you have here.” He’s like, “You’re so young. This is crazy cool.” I’m like, “Leave me alone. I’ve got to get this battery charged so I can learn this next chapter of this negotiating CD.” He’s like, “Okay, cool.”
He’s like working on it. He just goes, “John, I want to show you something.” He pulls me into his car. He shows me this really shitty little six-inch black and white TV, maybe it’s like four-inch. It’s really tiny. He’s like, “I’ve been saving up all my money so I can buy this black and white TV so now I can watch TV when I’m waiting for jobs.” He was so happy and so positive and so excited.
And it just caused me to like reflect on myself. Here I was so stressed, so pissed and I had this big beautiful car. We had a 12-inch TV in there, all color, all nice and fancy. We’re negotiating for millions of dollars and I’m so unhappy. Here’s this guy who’s so happy and he’s very, very little. It was like the universe kind of bitch-slapping me. It made me realize what I had to be thankful for.
Thankfully we had already negotiated and we got to like 90 percent of the original deal. So, Frank comes back down. He’s so stressed. He’s got dark circles. He’s my CFO. He can barely function. I’m like, “Frank, we’re taking the deal. We’re good. Let’s go.” He’s like, “Really?” I’m like, “Yeah.”
So, he calls back up. He tells them. They’re all Celebrating on the phone, we’re all happy and it was one of those amazing nights where me and him drove back form LA back from San Diego and we’re just ecstatic about the whole experience and I told him about the tow truck driver from AAA that really opened my eyes to how fortunate we are. He’s like “You’re right. We are. It was awesome. It was an awesome thing to go through and a good lesson to learn about some of those tactics.
Andrew: Let me understand more about the negotiating tactics you used. The first one you said was give up what you don’t care about for what you do care about. So, did you give up getting money all upfront in exchange for an earn out?
John: The opposite. We gave up the earn out because we didn’t have trust for them anymore. So, we gave up pieces of the earn out. I don’t remember the exact implication of that. Let’s say we had a couple million in earn out and we turn that into a couple million in cash.
Andrew: A lesser amount in cash.
John: Exactly. We had to cut that down a little bit. That’s how somehow the value of the deal ended up 90 percent or 92 percent.
Andrew: What other tactics worked for you in that moment?
John: Yeah. The other one was give up just a little it. In fact, I think this was the first tactic we used, which was give up just a little bit of the negotiation, in the negotiation, show that you’re willing to work with them. So, I sent Frank back up there and it was like instead of 100 percent of the deal, we’ll take 99 percent or 98 percent. It seems silly at the time to give up literally 1 percent, but I think it worked in that it got the negotiation started. They were like, “All right, they’re willing to work with us. That one helped a lot.”
It was quite a while, though, seven or eight years ago so I’m not sure all the tactics we did use. Frank was a big part of it because he’s so smooth. He calls it, “Let’s sharpen our pencils on this.” So, a lot of that was the person delivering the negotiation was also experienced.
Andrew: What does it mean to sharpen your pencils on something?
John: It’s just a term that he uses when basically your price is not good enough for them. “Let’s sharpen our pencils on this…” And he kind of forces you to think about other ways that you can grow it. And we did get creative on several different pieces of different things that we would need to accomplish in order to get some things, like earn out-type stuff. Ultimately it took a lot of back and forth–I think it was like three or four hours or something really long like that. A lot of times you can wear people down by continuing to go back.
And then of course we had the good cop, bad cop, right? Frank was the good cop. He would go up there. “I want to work with you guys, I want to make this happen, but John is down there ready to drive off. He’s ready to leave. He’s so pissed right now.” That worked really, really well. So, I could be the a-hole and he could be the nice guy and together we could get him to where we wanted to get it to.
Andrew: I see a bunch of Chester–how is it pronounced, Karrass?
John: Yeah, Karrass.
Andrew: I see a bunch of his books on Amazon.
John: I think he’s the best guy in teaching negotiation strategies or at least was at the time. There may be some more recent ones. It’s really good. Its’ really straightforward and it’s very tactical. I love tactical stuff. You know exactly what you need to do and there’s no philosophy. It’s like, “Do this and it results in this.”
Andrew: So, Empyr, where we are right now–we’re really over. You have a couple more minutes?
John: Sure.
Andrew: Empyr, the company that you’ve got right now started as MOGL, didn’t it?
John: Yeah. It did.
Andrew: I like the names, MOGL, Empyr. Robber Baron next. What was the original idea behind MOGL?
John: Sure. So the original idea was actually to gamify restaurants. So, Foursquare back in like 2008 had added gamification to Dodgeball, which Dennis Crowley had built earlier and all of a sudden it took off. That was really the magic sauce that made it work. I was fascinated by that. I said, “What else can we gamify out in the world to make another industry explode like that?”
And restaurants seemed like the obvious choice. Everybody goes to restaurants. You’re making choices of which restaurants to go to all the time, but there’s no really great game around it. There’s like buy ten get one free and coupons. So, we’re like this is ripe for disruption. So, that’s where we started.
But along the way, I wanted to make it so you didn’t have to use a coupon. I thought that was so outdated and lame and I didn’t want to make it so it was embarrassing even if you wanted to show your phone. That’s still kind of lame too. So, I’m like we have all the data with Visa, MasterCard and AmEx, why can’t I just tap into that data?
So along the way I formed partnerships with Visa, MasterCard and AmEx and we were able to create a solution that would connect somebody via their credit card or debit card. So, you could walk into a restaurant and buy from them and nobody would know you were earning a reward and you would get 10 or 20 percent cash back right onto your debit or credit card.
So it became this frictionless, seamless way to earn rewards at restaurants. So, we had gamification built into it. We had a competition at each restaurant to see who would spend the most each month. So, fun stuff like that.
We had a charity component where you could donate your cash back to meals. Ultimately where we came to, which is what Empyr is, is we learned that we had actually built a really frictionless, seamless way to connect online consumers to offline businesses and being able to actually track he purchase without consumer having to show their phone or present a coupon or anything like that. The businesses are willing to pay for these consumers.
So, we realized if we turn this into a platform where any app developer, anybody with a website could show these offers, “Get 10 percent cash back at this offline business,” we could actually generate revenue for those apps and those websites because we would give them a percentage of the sale.
So, right now, if you’re an app developer and you tie into the Empyr platform, you’ll get like 2,500 restaurant offers all across the country. If any of your users want to go to that restaurant and get that 20 percent cash back, they would link up a card on your app–and that’s all through our API< really easy--once they link up that card, every time they use that card at participating restaurants, you get 3 percent of the sale. So, I spend $100, you get $3. They just keep doing that. Consumers keep spending money at these restaurants, ultimately app makers will probably make $20 to $30 a year per consumer they get linked up to the program. So, that's what we are today. We're a revenue-generating platform to connect online consumers to offline businesses. It's not just restaurants anymore. We're talking to Whole Foods and Shell and Rite Aid. We're expanding into all the offline categories. Andrew: I see it. There's a pizza place here right near the office that will give me 20 percent off if I'm a member of MOGL. I don't have to do anything there. I just get to go in, buy my pizza, walk out and the money is in my pocket afterwards. John: You can be on a business lunch, nobody would know what you're doing. It adds up pretty quick. I've made over $3,000 in the last few years because we eat out all the time for business lunches. It's cool to actually use your business card. You can link up your business card but you can also link up your personal card. You can earn the cash back on your business card but you can pay it back to your personal card. You get to choose which card you pay back. You can get the cash personally and that's a nice little trick. Andrew: I like that. The website for MOGL is M-O-G-L. The website for Empyr is spelled--what's going on with this computer over here? How do you spell it? It's on my computer and it's frozen. John: It's E-M-P-Y-R. Andrew: Why did you go with a spelling like that? John: A lot cheaper. Andrew: But isn't it a challenge then if we're talking about Empyr people have to remember how to spell Empyr? John: It is a little bit of a challenge. There are a lot of those companies like Lyft and Shyp and companies that are doing that misspelling, I think once you know it, you know it. It also, like I said, it's a lot cheaper, but it's got a little bit of a cool factor too. I kind of like the Empyr. It looks good as a logo. So, it kind of fit our thing. We did the same thing with MOGL, M-O-G-L. At the very, very beginning, it was kind of a pain in the butt, but afterwards, everybody knew it and it created this really cool, hip brand like, "Do you know MOGL?" "Oh yeah, you're supposed to not put the U in it." It's M-O-G-L. You're kind of like in the know. Andrew: It must be lunch time because I keep flipping through the local places to eat. All right. Thank you so much for doing this interview. By the way, I went off camera earlier because my nose is running like crazy. Brian, you've heard me sniffling here. Is it driving you nuts? Not at all? It's driving me nuts. I keep hitting mute on you so the audience and you don't have to deal with that. I'm going to check CrowdMed. They're not a sponsor or anything, but I've just heard when your doctor doesn't solve it you just go to CrowdMed and the crowd can solve what's going on. John: That's pretty dope. Andrew: I signed up there. They'll ask me a couple of questions. I'll go back and respond after this interview. But first, I've got to say thank you to you for doing this interview with me, John. John, you asked to do this interview. Why'd you want to do this interview, by the way? John: I love sharing my story with other entrepreneurs. Hopefully there's some inspiration in it for some people and that is incredibly rewarding. Andrew: What's the other reason? What's in it for you for doing this? You don't have infinite time. Why did you decide that this is helpful for Empyr now for you to do this interview? John: Well, I think there also is some potential publicity but honestly, I get so much benefit from giving back to other entrepreneurs. I remember when I was young and just getting started. I loved hearing stories, especially stories like this one where there's all kinds of crap that goes wrong and then ultimately it has a happy ending. It motivates you when all kinds of crap is going wrong in your life and that for me, to know that I could help an entrepreneur get through a rough time, you can't put a value on that. It's incredibly fulfilling for me. Andrew: All right. Well, thank you for doing that. It really is also fulfilling for me to be able to share that with the audience and frankly to just hear your story. For anyone who's listening who wants to sign up for the software that helps you grow your sales, you've got to check out Pipedrive.com/Mixergy. If you hate your hosting company, you don't have to suffer. You can switch over to HostGator.com/Mixergy. I'm grateful to them. Finally, if you like this interview, please tell your friends about it and urge them to subscribe. In fact, don't just urge. Take action. Take their phones right out of their hands and subscribe them to Mixergy on whatever podcast app they happen to have. If they have an iPhone, they have that podcast app already built into it, so it's easy. Search for it. Let them enjoy and tell me about that too so I can thank you. Thank you all for being here. Thank you, John. John: Thanks, everybody. Andrew: Bye.
