Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and the premiere interview site for real entrepreneurs who want to dig in deep into how businesses around them have been built. One of the things that amazes me about business is that there are incredibly successful companies all around us and we don’t even notice that they’re there. For example, you get stuff in the mail all the time, right? We all do. But you probably didn’t notice that the postage on most of the stuff that you get comes from a company called Endicia. I actually learned how to pronounce them just a few moments ago. Incredible company, they do over … well, about $1.6 billion in postage a year, and like I said, I never heard of them before I started researching them for this interview even though they’ve been all around us. Today we’re going to find how the company was built.
Amine Khechfe is the co-founder of Endicia which offers online shipping solutions. I invited him here to talk about how he built his business. And this whole interview is, well, I don’t know if I’d even call it a sponsorship but it’s brought to you by a good friend of mine and a past interviewee who runs a podcast called The Art of Charm Podcast, and I’ll tell you more about them later. But, first, I want to welcome Amine. Welcome.
Amine: Thank you. Appreciate being on the show.
Andrew: Hey, does it get you that you’ve built up so much, such a big business, and I can’t even pronounce the name. I feel embarrassed that I can’t. But do you feel like … well, how does it make you feel as the founder, the father of this business?
Amine: You know, it’s pretty exciting for us but it’s really funny you mentioned about pronouncing the name. I think our head of marketing always looks at us and says, “How did you guys come up with that name? Couldn’t you have come up with something like easier?” No, and we’re three engineers, we’re really focused on building solutions for the customers, and the name of the company was like the last thing we did. We had no money to get a marketing firm to come up with a name. But that’s what we enjoy doing, just building stuff and solving problems, real-life problems for folks that use our products.
Andrew: And, frankly, if you’re going to focus on something, it makes much more sense to focus on the product and the people who you work with than it does to focus on the name. Before you launched this business that we’re going to be talking about today, you ran a company called PSI Associates. It was you and your two co-founders, Harry and Scott. And what were you doing for the U. S. Postal Service at the time?
Amine: So the three of us, Harry was our professor at Stanford and we got together in the mid ’80s, and were an early management consulting firm. So we started by being hired by entities to solve problems for them, and we got slowly into software. And the Postal Service was one of our clients, and we did engineering software for them to start, and then we got into office automation. From there we were automating these contracts, believe it or not, great looking forms. And when we were done we had to go typewrite an envelope to put them in. So we figured that didn’t look as professional. So we developed a little product to print envelopes.
So in the late ’80s, before we even had the concept of postage, we started printing envelopes and started putting a nice logo on there. The last thing we had we realized what was missing was the stamp. We still had to go over to a meter or put a stamp on it. So we put out our first patents of, “Hey, we can use this personal computer to print a postage stamp.” It took us about nine years to have the Postal Service approve it, and in the meantime we started developing software that printed envelopes. And then did presort mailings like the bulk mail, and allowed people to do mailings and marketing mail. And by the time we got approved in ’99-2000, the whole concept in envelopes wasn’t as important because the internet came around and we’re doing emails.
And so we went and looked at the people at the Post Office, what were they doing? They were standing in line to get tracking numbers. These are the eBay sellers now. eBay comes to life right in the late ’90s, and those are the folks that really had a value for us. Everybody else’s stamps was nice, it was cute, but it wasn’t what people were really having pains solving. So being engineers we wanted to solve the problem. So within about a year we discovered three things that people had pain doing. One is getting a tracking number. Two was paying for online insurance. And three was doing these international forms. So within about a year or two of launching our system, we automated those and really started catering to these online sellers who were running these small businesses selling online.
Andrew: In the nine years between when you came up with the idea and when you got approval for it, you were a software company, it sounds like.
Amine: Yes, we were 100% software. We had both our management consulting business where clients would hire us to help them in some level of automation, more custom development, or problem solving. And then we had our direct mail software which was our first time having a shrink-wrap product, and we’d sell it to small businesses that wanted to do direct mail, and that’s what kept us in business, allowed us to make some money where all is cash flow positive, never took outside loans.
Andrew: You mean until the sale of the business, never took outside loans, I’m sorry, never took funding.
Amine: We never took outside funding. Had a line of credit, never used it. Hadn’t touched the bank account a lot. Tightened the belt every now and then like any small business does. But at the time we started Endicia we were 20-25 people. By 2000 about 22 people, I think.
Andrew: What kind of revenues were you doing before you got into this, into Endicia?
Amine: In 2000 we’re probably were about one and a half million to two million, depending on the year. Y2K was very good for us since we were a management consultant. We were hired to help a lot of companies solve the Y2K problem. That was part of what helped us fund Endicia. A lot of the work we got in ’98, ’99, 2000, 2001, our management consulting was at its peak. I think we peaked at around 2.2 million or something like that. And then it took us three years maybe to get Endicia to cash flow positive by itself, but in general we always were cash flow positive as an entity. So we kept our management consulting going, our product going enough to be able to get Endicia out there.
Andrew: What was your idea when it was just postage? You weren’t trying to essentially copy a stamp and print it out on an envelope. What was your solution for that?
Amine: Our real solution was to be able to print an envelope in one swoop, because in the past you had to do two or three operations to get an envelope out in the mail. So really our concept was, a) instead of doing two steps or three steps you can do it in one step.
Andrew: As long as you’re printing on the envelope anyway, you’re printing the address, you might as well print the postage. But what did your postage look like? It didn’t look like these, right?
Amine: No, exactly. It was a black bar code, pretty ugly actually. But it had all the encryption. Our first prototype back in ’89, ’90, ’91, ’92 had a little bit of a stamp with some numbers around it. But as we evolved it, and as encryption got better, and then we got smarter about all digital, eventually it became this basically what they call a two-dimensional bar code which is just intense black and white rectangular-looking thing. So it wasn’t pretty.
Andrew: What was on it? Because what you were trying to do is create something that would tell the Postal Service this has been paid for and it’s okay you can deliver it, but keep someone like me from taking it to his copier and make a copy of it and then put it on an envelope and get a free ride. What was the solution for doing that?
Amine: That’s a great point. So the key thing, like you said, the fraud. You always have to protect this from fraud. And postage is actually treated … if you go look at some old historic text it is currency. So you’re printing money so, of course, the security we have to adhere to is tougher than banks. Our internal security here is amazing. For a company that’s in software our security levels are pretty intense. So you had to have the features of a stamp, i.e. the money part of it, but then you also had to have the security that tied it to a personal or a company or an account. You had to have enough to inform them how much postage was in there. It had a stale date so you have to use within a certain amount of time, and you also had to identify the manufacturer almost because they have to tie it back to the old machines that used to be used, so there’s a manufacturer ID.
So all the information about the person, the mail piece and the stamp had to be embedded some in the bar code, some in what we call human-readable to identify all the aspects of the customer, and part of the recipient, and that’s what makes the magic so it’s unique. It’s tied to the address. You can’t just copy one piece without the address, so it makes it much more unique. Serialized, every piece has a unique number in the whole world. So it’s really … think about …
Andrew: That’s what you guys invented internally.
Amine: It’s the serialization where everyone is unique in the world.
Andrew: And did the Postal Service need to have their own reading device or own bar code reading device that you gave them in order to read this? Or was it integrated in with what they already had?
Amine: It’s a bit of both. They had to build some new readers, but they helped set up this thing. We had some proposals and then they vetted it over several years. Eventually we came to a common understanding. They published a spec pretty much at that point, and we had to adhere to it. And then they had the readers that created … Certain people could have certain levels of readers which decrypted the bar code. Some were people that could read just, as it’s called, the human-readable part. But they had readers and they had to program them so they could read our bar codes.
Andrew: There was a startup here in San Francisco called, I think, Outbox that would drive to people’s mailboxes, pick up their mail, scan them, and then make that mail available to them online. And the Post Office didn’t want to work with them, and so now they’re gone. It seems like with an idea like this it’s all in the Post Office’s hands. Does the USPS want to work with you or not? How did you get them to say yes? How did you get them to start working with you back then?
Amine: So it’s funny, when we started, I remember the first trip we went out to Washington, D.C. and presented the concept. We were seven people in the company at the time. We thought we were pretty smart going out. Of course, people don’t realize the Postal Service is a $65 billion company. It’s like a Fortune 100 company. And so they didn’t take us very seriously, but they at least talked to us and they gave us some advice to work with some of the bigger companies. And then really the more we worked on it the more we had to prove a concept, they eventually created a group to review this. You know, it always needs something sometimes to create a difference.
Back in the early ’90s there was a scandal where the Congress had … It used to be that they gave congressmen stamps, literally stamps to do mailings. And there was a scandal where a couple of representatives were actually arrested where they were cashing in their stamps. Because stamps were currency our concept of a serialized stamp gave them that added thought, “Wait a minute. This could solve this problem.” So we did a proof of concept with them, and that really helped bridge it, because now all of a sudden it wasn’t just this is a cute idea as far as they were concerned. They said, “We already solved this, we have these meters.”
Now it became, “Wow, hold on. You could solve a bigger problem for us. We can track every piece that’s created now.” We gave them an idea of a centralized system, those days it was dial-up, there was no internet then. We literally created these bulletin boards that if you wanted to print a stamp, behind the scenes of a dial-up bulletin board, and bring back a unique number to create the stamp. That concept, that proof of concept really succeeded well, and that got us on the road to several years worth of then writing specifications to finally accept the standard.
Andrew: I see. You’re saying that when things get desperate people are willing to look for alternatives. If not for that scandal, you might not have been able to do it. Or you would have needed another scandal?
Amine: Maybe not a scandal. Sometimes a changing event, like having the internet. Some disruptive force, a little bit of disruption sometimes. And some people do it for a positive reason. Some people to prevent a negative. We had a nice concurrence of both. Early on the concept came with a disruption saying that, “Okay, we need to track this money. We can’t just hand it out.” And then the flip side is, now you suddenly have this internet coming in, the media of communication was there, and people selling online, they needed help. So the two together really bought a very nice … a couple of different incidents that helped us gel this together.
Andrew: At the top of the interview I said that you were responsible for 1.6 billion in postage. That came from San Jose Mercury News. Is that number right?
Amine: You could tell that’s a good level history.
Andrew: It is.
Amine: I remember the article you’re talking about. Last year, so we finished 2014 with just around 2.5 billion in postage, and about 605 million parcels. We finished 2013 with about 500 million parcels and about 2.2 billion in postage. So we are the largest postal service partner in number of parcels. If you want to compare, I believe in 2013 Amazon total, did about 608 million parcels. We did 500. It was 608 total. But postal alone in North America, we’re about 2.4 X that.
Andrew: Wow, 2.0 X.
Amine: Amazon.com’s postal volume.
Andrew: Oh, I see. Right, because they use other services like On-Trac, etc.
Amine: Exactly, yes. Good point.
Andrew: I see. You know what, before I continue with the story, I would imagine that someone who started a business, that’s now doing over $2 billion in sales would be wearing a top hat and monocle and would be doing this interview outside his jet. Am I imagining too much here?
Amine: Ah, you confuse the two and a half billion in postage with our revenue, right?
Andrew: Ah, right. So what kind of margins do you have?
Amine: So the way it’s structured is we process the postage, but mostly we don’t handle the postage. It goes directly into the Postal Service’s accounts, and we make money on the services we provide around the postage. So our revenue is, I mean, there was a press release about a month ago, a little under a month ago, that called out our 2014 revenue as closer to 60 million, 59.9 to be exact was the public. Normally we do not release public information. There was a reason why that was made public,and so it’s about 59 million in 2014.
Andrew: Why was that made public?
Amine: Today we are part of Newell Rubbermaid group of companies, and we announced, actually two weeks ago, that we’re divesting from Newell Rubbermaid and we’re being acquired by a company called Stamps.com.
Andrew: I see. So what you’re saying is that the postage money goes directly to the U.S. Postal Service. It’s all those other things like the ability to track. Actually what else does your revenue comes from? Your profit.
Amine: So our customers tend to pay us a service fee, a monthly fee, very similar to a lot of Software as a Service companies to use our service. We also sell some supplies. We also have parcel insurance. We also have, in some cases, transaction fees for people who license our technology, and so that in aggregate drives our business.
Andrew: I see. And that’s similar to Stamps.com, right?
Amine: Not so. We have different focus points in a way. So where we may focus on shipping, they have a strong focus on mailing.
Andrew: I see, okay. I mean, in the sense that they also do a monthly fee and then you get the postage through their service.
Amine: So with the Postal Service, postage and even traditional postage meters have pretty much done very similar things in the sense that postage being treated in a certain manner. And then the companies that provide that service innovating around that to provide a value to their customers, and for that value we charge our service.
Amine: So postage meter, whether you’re a shipping service. And, again, you see a lot of companies, Software as a Service companies also throughout the commerce chain charging whether it’s monthly fees, it’s transaction fees. You look at the different music streaming services, right? You can either buy music one at a time or you can pay a monthly fee and stream a certain amount of music. So that’s another way to look at it. Sometimes you do one at a time. Sometimes you’re charging a monthly fee.
Andrew: So I get the idea and I see the opportunity and I get how the USPS who’s willing to work with you, but that doesn’t mean that life is easy at that point. You still have to get customers. How did you get your first customers?
Amine: That’s a great point. Yeah, you’re exactly right. It’s nice you have a product but how do people hear about you? So for us in ’99-2000 when we started launching our system, again, we focused on online sellers, people who were selling the product online, and all of a sudden, “Oh, my God, I’ve got to ship it to them now.” And they were typically being a smaller online seller they would either go to one of these postal outlets or a Post Office and ship it. And so, for us, we saw an opportunity there. As we started catering for those customers, we would go on the online forums and answer questions for people who were having problems shipping, how do I pack something, how do I get it from A to B, how do I weigh it.
And as we answered questions by just submitting our name, people started learning about us and started using our software. And then we basically created a great fan base. It was an amazing, amazing phenomenon back in 2000 as people started saying, “Oh, my God, I saved a trip.” “Oh, my God, I don’t have to … I’m driving my kid, my kid falls asleep in the car. I’m going to the Post Office, I have to wait outside,” or, “I can only go two times a week. Now I can go every day because I don’t have to stay in a line. I just can drop it off. I can drop it at the dock, a postman can pick it up.” So we started having a great fan base, and they really marketed for us. We were very fortunate in that we sold …
Andrew: Because you got into forums and started answering questions. What were some of these forums?
Amine: I remember distinctly the one that really helped us a lot was the packaging and shipping forum on eBay. That one still exists but it was a lot of those early entrepreneurs or I call the part-time mom that was selling a few things online, and time was valuable. And so we would answer a few questions and guide people. Harry actually did. Harry worked, being my co-founder, my professor from Stanford, really had a following and he was very neutral. He answered questions and signed his name. I remember once he went on vacation, I tried to answer a couple of questions. It was, “Hey, who are you? You’re not Harry.” And so he really did a fantastic job and it was great for us. So we have customers since then that really championed what we do.
Andrew: You also had an affiliate program. If somebody who was a customer of yours referred another customer, they’d get a month free. Were those effective back then?
Amine: For us, as the word of mouth, whether it be directly online or via the affiliate program was extremely popular. Even a few years in I think we measured that 15% of our customers were coming via the affiliate program. And it was simple in those days, if somebody referred another customer, as the customer signed up, that account number of the person who referred them, then we get them a free month, and they were just as happy to help us. It really made a difference for us because back to the point I made earlier we didn’t have outside funding. By the time we got our product approved, because we had to go through these labs to get your product approved and the security reviewed, by the time we went to that we had no money left. So the fan base was just fantastic and got us through it.
Andrew: Let me do a quick message here for my sponsor, and then I want to come back and follow up with how you grew the business from there. And the sponsor is actually a friend of mine, a past interviewee. He runs a podcast that is highly addictive but in a good way. What he does is he brings entrepreneurs, artists, thinkers, leaders, authors, all around interesting people to talk about relationships, attraction, life-hacking and success in general. The podcast is called The Art of Charm and it teaches all kind of things like influence and persuasion. If you want to check him out, go to ArtofCharmpodcast.com. It’s run by Jordan Harbinger, a past Mixergy interviewee. And frankly, if you’re on iTunes or if you use whatever your favorite podcast player is, just type in The Art of Charm in there and you’ll see his podcast. If you’re looking for really thoughtful, well-done interviews by a person who does this professionally because he takes it seriously, check out ArtofCharmpodcast.com and I’ll give you that URL again, TheArtofCharmpodcast.com. Jordan, congratulations on the podcast doing so well.
You’ve mentioned a few times that you came close to the end. You came close to zero money in the bank account. What was the lowest point?
Amine: I’m not sure. I would say we had to watch it. We were careful because it was … We started small and didn’t have any outside … So there was a point I remember about seven, eight months, second year of Endicia where the three founders didn’t draw a salary, and we always were very company first, end of the year we’d draw a salary if we had to, and really we were careful that way. I can’t say we ever came to the point of … We did have some soul searching like you would any small business, but we never hit … We were just careful. We were conservative. We didn’t overspend and really focused on creating solutions and features and innovations continuously for the customers because they were the ones who really marketed on our behalf.
Andrew: Give me an example of how conservative you were with money. And I’ll give you an example of something that I heard from an entrepreneur recently. The founder of Oversee.net once saw someone order scissors, and said, “Wait, what are you doing ordering scissors? I’ve got one for you.” So he saved money by not having one of his people buy scissors online, and he brought in this really rusted old pair of scissors that he had at home, but they worked just fine. He wanted to keep his company lean and Oversee.net did incredibly well because of that. Do you have an example of something like that that you guys did to keep yourselves going?
Amine: I think the not drawing salary, but that’s probably not down to the scissors. We basically got to some points about rent for a while. We kind of had to negotiate our rent down, I remember. I’m trying to think of something. Yeah, we got really cozy in the space because being in Palo Alto, it’s not a low-rent district, and so I know that we got really cozy, shoulder to shoulder in certain cases. You know what, one really fun one was in 2000, given the fact the dotcom, 2001 the dotcom was going down. We bought a lot of our servers from eBay, so we were eBay’s best customer, too. So I remember a lot of our hardware buying it that way. What else did we have? I bet you I have something. I’m trying to think of anything that was …
Andrew: That never felt especially painful though. If it did, then you’d remember it. If it was so horrible that you thought …
Amine: We always had fun. I always joked that with Harry, Scott and I, if we were selling tomatoes we’d have hada good time. It was like when you trust people and you really have a good time together, and you’re working your 20-hour days, but you really trust the folks and you have a good idea and you’re enjoying it. So a lot of those pain points were just … we were used to not having to go … We didn’t have to change our chairs or our desk. I’m at a table for the longest, probably the first five, six years. It was just a big table. I didn’t need a desk, and then when I did get a desk, I’ve kept it. It’s just normal.
Andrew: How did you connect with your two co-founders?
Amine: So my last class at Stanford, Harry was my professor, and I already had a job, and I took a class with him. And the first lecture he was looking for a TA, a teacher assistant, to grade and help him with the homeworks. And because I was a last quarter grad student, and half this class were undergrads and I had done about eight out of 12 weeks, I had worked in that field, and so I applied to be the TA. And he comes up and he says, “This is really weird. You can’t be the student and grade your homeworks.” I’m like, “Yeah, but actually here’s what I’ve done, here’s my resume, and I have some experience in the field. And this part of the class is new to me.”
So two days later he came back and he said, “You know what, you are the most qualified person.” So one of the things we immediately thought about we both think outside the box. He always thought I was insane enough to apply to be TA for the class I was in, and he was the same in accepting it. So really we kicked it off that way, hit it off from that get-go. And then Scott had been a student of his the year before. Once I graduated I went to work for about 10 months away on the East Coast, and he called me like five, six months later and said, “Hey, do you remember when you were a student and we’re doing some of these?” He made do projects instead of tests, so I had these extra projects to really learn. So I did about twice as much work as any other student.
Andrew: I see, so if you’re going to grade people’s tests you couldn’t do your own, and instead of taking a test you’d do projects. Is that how it worked?
Amine: Well, he made me do the tests but he wouldn’t give me the solutions.
Amine: So when I graded everybody, if I made a mistake on the grading I had 35 kids to answer to, plus then I had these practical projects to do, so Scott was doing something for a client. I had to do it a different way. So the three of us got to know each other really well, and we enjoyed our company. And then as this company was going to launch, he calls me back, of course, it’s snowing on the East Coast. He wades through about a foot of snow, and says, “Hey, do you want to come back to sunny California?” So I came back less than a year later, and we’ve been together since 1987.
Andrew: What was the class?
Amine: It was solar energy.
Andrew: Solar energy.
Amine: Yeah, how’s that for a software, right?
Andrew: Yeah, how did you end up then with software if solar energy as the background?
Amine: So we started with energy simulations. We were hired by clients to do energy analysis on buildings, and then the Navy and the Post Office hired us to do energy analysis and savings on buildings. And we transitioned from there, drawing software for engineers which became office automation software. It was really within about a 24-month period. You know, energy was not a good field to be in about a year after graduation. We realized we may not have picked the best people but being small business, at that time we had a low. I remember six months after joining we literally came into the office one day, had nothing to do, so went and watched a baseball game. It was the low point, we just decided we’re not sure what to do, let’s go watch a baseball game. We went to Oakland, we watched the A’s, and we’re deciding do we write each other’s resume and help each other. We scrambled for a bit and figured it out. We had no health insurance. None of the stuff we did at the time, it would’ve been ’88 by then when we had our low point. That was pre-Endicia, of course.
Andrew: So what got you to continue? It was discovering a source of revenue?
Amine: Basically, like I said, we enjoyed each other, so we enjoyed working together. So that was number one. We wanted to try and figure out something together. We had a couple of clients that weren’t keeping us fully engaged. So we decided, “Let’s go and get some management consulting clients and be ready to sort of aim a bit lower, and just get going and get our name out there.” And that’s what we did. We went and we looked. We weren’t sales people, so the three of us were engineers, so it wasn’t natural for us to go look for a business. We learned that. You learn humility and you learn to go out and look for business and we did. And so we were able to get a couple of other consulting clients which helped us sort of get some revenue going, and we built on that. We were always great at solving problems and we could understand our customer’s pain points and then built something to help them outside the box.
Andrew: How did you understand a customer’s pain points? What was your process for that?
Amine: You know that’s funny. Probably no process. Really it’s sit in their shoes. So even now with Endicia, early on we go pack boxes with customers because when you really do what they do you start understanding it. So being that we’re engineers we started working with engineers and seeing all the manual steps they would take. So in our case one of the innovations that got us more into software was we had been through some software to automate our bid process, to prepare a bid. Now we worked with a couple of entities that they would want to cycle back, and we’d get back to them in a couple of hours. And this was circa ’80s when automation wasn’t really in, and they’re really automating HR and Finance, not engineering, not public works.
And so we’d get back to them, and they’d say, “How did you do that?” It takes us four days to review what you just sent. And we showed some software that we had built for ourselves, and they say, “Can we use that?” So quickly they started valuing us for our software skills and not our engineering skills. That was the transformation.
Andrew: Interesting. And what about Harry’s cookies? How did they help you with the customers?
Amine: Oh, boy. So Harry’s cookies, that was way back. So a couple of stories. We always have a sweet tooth, the three of us always had a sweet tooth. I don’t know if you know the history but Mrs. Fields started here in Palo Alto. I think her husband was at grad school at Stanford. So we’d walk down and get Mrs. Fields cookies, so and so. But Harry in grad school, I think the story is, it’s his roommate’s mom or something had some recipe and he perfected it. And so he had just gotten a house and got an industrial oven. We all helped him. But it’s big, real big. So he started baking cookies. And try one after another he started making really good cookies.
So starting ’88 or so, we had this thing where we take cookies to meetings. And now we can’t stop. We go to people without cookies, there was a point we had a full … we used to send it at Christmas. When we were management consultants, we’ve had four or five clients. So come Christmastime we did four or five little tin boxes, we’d just wrap them and mailed them to people. That was small. But about four or five years after Endicia started, we realized this was insane because we were spending four days baking cookies, we had like a production line, sending cookies …
Andrew: At Harry’s house, on his industrial oven?
Amine: Yes, and I think last year half our marketing team went up to his house, making cookies, bringing them back down, driving them back down to our shipping room that had a whole production line ready. So we sent it to all our field sales people once. We’ve sent it to clients. So even when we go to Europe now, we’ve got to carry cookies. I was in D.C. two weeks ago, we carried six cans of cookies with us on the plane.
Andrew: Wow. I heard the French Post Office expects his cookies.
Amine: You know, the cookie, we do. We take them with us to trade shows, international trade shows. It’s become like part of the brand.
Andrew: You know, when I heard that I thought, “Maybe I should be doing something like that,” because sending cookies from Etsy is a really nice touch. Someone handmade them and shipped them out. But making it yourself, but imagine a person that’s listening to us got a cookie from me that I made myself at home, that would feel special. It would feel very handmade in this world where everything seems to come off of some real industrial assembly line.
Amine: You know, you’re absolutely right. I think you’ve reminded me now, we need to send you some cookies.
Andrew: But it does sound like it could get a little out of control and people could start to feel insulted if I don’t do it. I love the personal touch, I’m worried about the dangers.
Amine: We have had problems. We’ve gotten people call us, “Did we do anything wrong?” “No, we just couldn’t make as many cookies this year.” So we have been told that and we’re sensitive to that, so we’re reminded sometimes if somebody didn’t get cookies in one year. We have told some people some years it hasn’t been a good year for you, so no cookies. So we had some fun with it.
Andrew: Had there been a sale that you feel it didn’t make the sale but it helped get the sale?
Amine: You know, I always think like when you want to call it a sale, it’s relationship building, right? The product and object is one thing, but when you build relationships with people it’s really on a personal level. And I think the cookie, to your point, what you said about when you make it yourself the value isn’t in the ingredients anymore, it’s really in the caring, the feeling that you have when making cookies, or making anything, right? You mentioned Etsy, a great example where, yes, the materials may cost you $2 but the love in it that’s another thing.
And so I would say building relationships really go a long way. You mentioned the French Post Office. Obviously our friends at the U. S. Postal Service, it’s different when you walk in with something you have made and you share it. It really builds, makes the mood, the atmosphere very different. If we go visit a customer and bring cookies with us, it changes the discussion. And, yes, I think it does bring in business, but it really is to build that relationship. Well, we have fun. Why we come to work every day is we enjoy it. We solve customer problems and then we connect with people on a personal level, and cookies tend to put the stamp of approval on that.
Andrew: What happened when you guys were small and people weren’t taking you seriously and you couldn’t get business because you were so tiny? You told our producers that that was one of the biggest challenges to running Endicia.
Amine: Yes, we’ve about 10,000, 20,000, 30,000 customers at the time, but we took ourselves pretty seriously. We thought, “Okay, we’re a real company now. We’ve got several million dollars a year in revenue.” But to get those bigger deals, big companies like to work with Fortune 500 companies, and we were not that, and we did not have a $100 million in raised funds or anything like that. And so we’d get to the point where we knew we had the only technology, the best technology, this solution, but when it’d come down to it we couldn’t make that last cut because we were under $10 million in revenue, or we’re under 100 employees. Whether we’d say, “Well, you know, we may not stable, we’ve been cash flow positive for 10 years.”
But that was frustrating because when you look at it you thought you had the solution. Nobody else would have a solution. But they would take you out and they would reduce the solution to match somebody who may have had better funding. So, yeah, that was definitely one of the moments that we looked at it. And as people are proud of our product and seeing it in the hands of customers, some larger entities didn’t take us seriously.
Andrew: So how do you close a sale? Are you just saying you couldn’t get it because of that?
Amine: We had one case where we didn’t get it, but mostly when we did get over the objection, it was about really demonstrating our ability. Putting in the hand of users as opposed to what I would call purchasing managers, right? You get back and you say, “Let’s solve this problem,” and really solving the problem was really what made the difference. And so by getting a customer to use it was really how we would get over that.
Andrew: We talked about how you got customers through word of mouth. We talked about how you got customers through the affiliate program and the free month that you gave your existing customers. What else worked especially well for bringing in new business?
Amine: We’ve always gone to trade shows, really getting ourselves close to customers, closer to customers, closer to influencers, I would say.
Andrew: Who’s a customer of yours that can be big enough to be worth going to a trade show for?
Amine: Well, some trade shows really are smaller customer trade shows. For example, for several years eBay had a trade show where online sellers would go to.
Andrew: I see, and so you would get to talk to a lot of eBay online sellers, all at once.
Amine: Well, what we do a lot is we also present at conferences. So I might run a seminar for an hour, or a topic that we talked about. So that tends to get a lot of people involved. We like to present sometimes with a joint customer. Really going back to everything centers on the customer, you’ll see on our website we do a lot of customer testimonials. So if you do to Endicia.com and you look at the customer testimonials, those are a lot of fun because you can really … if you could step in the shoes of a customer … So let’s say, this customer sells leather goods, and you’re somebody who sells leather goods or apparel, you can relate to that customer. When you read their story then you could say, “I could solve that same problem,” or, “Yes, wow, I never thought I could solve this. Back to your initial point, “I never heard of these guys. Be great if I could use a solution that this similar type customer used.”
Andrew: You know where your name does come up? If I get a printer for printing out labels, mailing labels, and it also does postage, they’ll often … like here’s one, DynamoStamps.com. On their website they say they don’t do a Mac app but they allow us to download your app. And so they send you, I imagine, a lot of business. Is that true?
Amine: So we’ve had a relationship with DYMO back in the ’90s. Love their founders, got to meet them in the industry. And then as we started getting into the mailing and shipping world, we did some work with them where we did a joint project that allows their customers, or the users at the printers to print postage. And then, of course, you also mentioned the Mac application. We’re unique, and about two or three years after launching our shipping postage business, we launched a Mac-only application. We live in the Bay Area, Apple is big here, we had definitely a vocal group of customers who wanted Apple-made it. Not just Windows pretending to be Apple-Mac. So we really spent the energy and worked with a great little outfit and we created jointly a Mac application.
And so keeping on that application we sort of have a Mac solution, we have partners. You mentioned DYMO being a partner of ours. We’re both acquired by this same company also so we’re much closer for a long period. But the reality is we have about 250 partners that have integrated us one level or another. We totally believe in reaching out to the partner community and taking our solutions and integrating them with other applications because at the end of the day we want the customer of that application to be able to use our service, without them having to go out of their way to change their work flow.
Andrew: What are some partners that you integrated with?
Amine: So whether they integrated with us or we integrated with them, it works both ways. But some great examples of companies you’d recognize, one of our partners would be something like NetSuite. They’re a great company out here in the Bay Area also and they’ve integrated our shipping application for their NetSuite customers.
Andrew: I see.
Amine: So they’re a good example of a company that would be using us. Several different auction management companies, so those are the traditional. They help eBay sellers list their product online. They help inventory management. They help accounting. So several of those companies integrate our solution also, so that way you’re also listing your product, you’re putting the images, you’re doing inventory, you’re building your customer, and when you get to order it, and say I’m going to go out of that solution and then use our product, you can be inside the solution and print your shipping label.
Andrew: Yeah, it sounds like such an exciting business. You still love it years after having sold it. Why did you decide to sell?
Amine: So in 2007, we talked to what you mentioned earlier about being too small. We were looking to be able to go global, and we didn’t really have the resources for it. You mentioned also DYMO. DYMO had been acquired by Newell Rubbermaid in 2005, so we got approached by Newell Rubbermaid within a year and we decided to join DYMO in being part of the technology portfolio of companies under Newell Rubbermaid. And it was interesting for us, we were able to continue to run the company because we were unique with Newell Rubbermaid, but then be able to use the resources of a multi-billion dollar corporation to get the backing so that we’re no longer too small to get some of the bigger projects, and also to help us go globally. And in both cases we weren’t looking to exit, we were looking to continue to run the business but at the same time it allowed us also some liquidity. And so it was a great opportunity in 2007 to join Newell Rubbermaid. As I’ve mentioned, here it is, eight years later we’re still running the business and having just as much fun.
Andrew: I’m trying to see how much you sold for, but even though I see this old press release from July 18, 2007, it doesn’t say what the sale was for. It looks like the stock went up a little bit on the day of the news, but I still can’t find out even on the NASDAQ site what it sold for. Is it private?
Amine: It was in the annual … when the announcement went out it was private because we’re a small, part of Newell Rubbermaid. But the annual report did have the information on it. So it was, I’m going to say, I know that part was public in 2007 more in the shareholder report annual report end of the year, so it was north of 50 million.
Andrew: North of 50. And you each of the founders owned about a third of the business?
Amine: That was private.
Andrew: That was private.
Amine: [laughs] We were three partners, and a fourth partner joined, how about that?
Andrew: I see, okay. You did well from it. How did you life change after the sale? You on a personal level?
Amine: So we always joke between the partners and myself that we’re simple peasants. Harry still bakes cookies, we still enjoy doing what we do. I think we tried hard not to make a change. Really if anything. I think we still continue to focus on what we do and not let anything change that. Yeah, it’s nice to be comfortable, to know that the kids’ college education is taken care of, stuff like that. But in essence, on a day to day basis, we continue to do what we do and, like I said, eight years later, we’re still doing that and enjoying it. It definitely gave us …
Andrew: Why not treat yourself? Why not say, “You know what, I really worked hard here. We’re almost at the end. I’ve got to go and get a boat, a yacht, a monocle.”
Amine: Yeah, we took an extra vacation.
Andrew: That’s it?
Amine: We travel nicely. I have a little place on the beach, there you go. That was the simple thing, a walk on the beach.
Andrew: A beach in California somewhere.
Amine: Yeah, that was about as simple as much as we’d look at because other than that you get distracted so it was fine.
Andrew: Your dad was an entrepreneur, so this has been in your blood. It’s not like it’s a strange thing to have done this. It was not like you were doing it so you can quit your job and one day get the Lamborghini that all those other guys seem to have. It was a real business choice for you it seems like, right?
Amine: You know I do like cars, being an engineer.
Andrew: I see, okay.
Amine: So we’ll put that aside. But dad right now is 83, he goes to the office every day.
Andrew: Really? What did your dad do?
Amine: So dad has a business in the Middle East that does mechanical contracting for commercial. Whether it’s air conditioning, refrigeration, sterilization equipment, kitchens, even for supermarkets. They’ll do the big cases for refrigeration, freezers, etc. So he’s been doing it for a long time. Started his business, I remember as a kid, a typewriter back … a typewriter on the dining room table. He’d give me little errands, probably eight or nine years, he’d give me something. I was like his little courier, I think. So I remember definitely what he was doing.
My first year out of college I worked for a Fortune 500, and when I decided to come back and join Harry in the company, I remember my dad was like, “Look, you’re in this blue chip company, you’re 22 years old, why take this risk? I was like, “Dad, that’s what you did. This is touché.” And my wife was six months away from getting her degree, I figured she’d get her degree, we’d both had degrees. We’ll always have something to fall back on if things didn’t work out. But it was always fun having that ability to stretch and always sort of enjoyed it since. Back to your point, I think it’s in the blood.
Andrew: You know, I had a similar experience with my dad. My dad used to take me to work, and he manufactured women’s clothing, and the last bit of it was putting the label, the care label, on the clothes, and I would be in charge of that sometimes, in charge of the machine that did it. And when I finally left college and wanted to start my own business, my dad said the same thing your dad did, “Why don’t you get a job for yourself? You had this great internship.” I said, “Dad, but you’re an entrepreneur.” I think he was just more worried about me than he was for himself, plus there was all this college to go to waste.
Amine: You know, it’s exactly that. I think it’s every entrepreneur, you look for your kids and you’re like, “I want security,” but you realized that’s not what maybe got you happy. You know another thing, my mom, who, in the Middle East, so growing up in the Middle East. When I was five or six years old we lived in a Middle Eastern country, and as a Middle Eastern woman she was the first from her friends to drive because he was starting a business, couldn’t drive me to school, and I remember her being the only one in her family, the only one amongst her friends who drove. And then she started a women’s clothing store in a Middle Eastern country where there were no women’s clothing stores.
Andrew: Oh, wow.
Amine: And she was unique. She would travel to Europe. The first couple of trips with my dad, then my dad said, “You can do this alone.” She said, “What do you mean travel to Europe alone?” This was in the ’60s and early ’70s. Then she did. She would get the collections, bring them back, and so she had a women’s clothing store for about, I think, about four or five years when I was a kid, and my brother was born. It had to be shut down at some point because of political reasons but she did it for several years. So I think both my parents have always had something going on like that.
Andrew: How proud were they of what you built?
Amine: You know we always talk about it. We’re very close as a family even though the distance is far. So, yeah, it was always a special moment for all of us, so we always get excited. I’m sure you had the conversations and so it’s always a unique thing to be able to share some of those parts of building a business, right? And maintaining it, and managing it, and growing it, and not getting ahead of yourself, and all the other things. I think right now, even my dad’s existing business we’ll talk about his business even, so it’s fun.
Andrew: It is fun. Well, congratulations on everything you’ve built. If people want to connect with you personally, what’s a good way for them to do that?
Amine: I live by email. It’s kind of a sickness.
Andrew: I was going to say it’s not Twitter, it’s not Facebook, it’s email.
Amine: Well, you know, I’ve got a Facebook page, I’ve got a Twitter feed, but really I find my bread and butter remains email, and I have probably one of the easiest email addresses in the world, it’s just the letter A and then @endicia.com.
Andrew: That is really easy. Well, thank you so much for doing this interview. And I’ve got to thank … does Emily Share[SP] work at your company? She’s the person who helped put this together and she was really fantastic. And, boy, she took such good care of you.
Amine: Yeah, yeah, you know, absolutely. She set this up, right, right, right.
Andrew: Not just set this up, but I can see sometimes some of my guests are really in good hands. It was every little detail. She wanted me to make sure that I understood that Harry was the one who baked the cookies, because she just really cared that your story and your company were told well, and I’m just going to thank her here within this interview, and thank you for doing the interview, Amine.
Amine: We have an Emily who works for us who was in the paper today, so I thought you were alluding to that.
Andrew: I see.
Amine: It was front page of the paper, and it was a little story in a local paper about … and I looked at it and it was one of our employees. So that when you said Emily, and her name is Emily, I thought you were referring to her.
Andrew: Got you. I thought there was a little bit of recognition but I thought it in your eyes you’re saying, “Why is he referring to her in this interview? What did she do here?”
Amine: You got me. [laughs]
Andrew: All right, congratulations on your success. Thanks so much for doing this interview. And everyone out there, thank you so much for being a part of it. If you’ve got anything of value here that I urged you to do, find a way to say thank you. No email saying, “Hey, I need you to do this, I need you to do that.” Or, “Would you help me with this?” Just do what I’m about to do right now which is thank you. Thank you for doing this interview.
Amine: Thank you very much. Appreciate it.
Andrew: Thank you all for being a part of it. Bye, everyone.