How to build a startup with no VC funding

I have a New York Times article on my screen that says investors pumped $1.87 billion in education tech companies in 2014.

Where does the Times get that number? From a company called CB Insights.

The same happens with the Wall Street Journal and other publications.

It feels like CB insights is this giant firm that’s been around forever. But it hasn’t been.

Today’s guest founded in 2008.

Anand Sanwal the Founder of CB Insights, it’s Bloomberg for private companies.

Anand Sanwal

Anand Sanwal

CB Insights

Anand Sanwal is the CEO and Co-Founder of CB Insights which is a National Science Foundation-backed data-as-a-service company.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. This is a place where I’ve done over 1,000 deeply researched interviews with entrepreneurs about how they built their companies so that we can hear their stories, get to know them and see, frankly, how much we can learn from them that we can apply to our companies.

I’ve got a tab here in Google Chrome on my screen. It’s a New York Times article that says that investors pumped $1.8 billion into education tech companies in 2014. The interesting thing about that article is where they got that number, a company called CB Insights. Often, when you read in the Times or the Wall Street Journal data about startups or venture capital, you’ll see that they get their data from CB Insights.

Well, it feels to me sometimes like CB Insights is this giant firm that’s been around forever, but it hasn’t been. Today’s guest founded it in 2008. I invited him here to talk about how he came up with the idea, how he developed it, how he evolved it and how he grew it into this huge company that businesses that we depend on for reputable data like The New York Times, the Wall Street Journal and hundreds of other publications all turn to.

Anand Sanwal is the founder of CB Insights. It’s like Bloomberg for private companies. I invited him here, as I said, to hear how he did it.

But this whole interview is sponsored by HostGator. As you listen to this interview or so many of my other interviews, you’re probably going to come up with a great idea of your own. The first thing you should do is just put it out there, see what happens with it. And how fast can you get it up there? Well, if you go to HostGator.com/Mixergy, you can get it up there in minutes and it won’t cost you much.

HostGator is incredibly inexpensive, incredibly reliable. And as you grow, if you have any trouble, if you need to talk to tech support, they have a phone number you can dial and talk to a real human being who will be there listening, caring helping you out. HostGator.com–go to it. Hugely dependable and I’m really grateful to them for sponsoring Mixergy.

Anand, welcome.

Anand: Thanks, Andrew. Thanks for having me.

Andrew: I’m looking at the Wall Street Journal and I’m really impressed. Has your mom seen any of these Wall Street Journal articles? Has your family seen them?

Anand: Yeah. Absolutely. It was one of the first things we did. When we got our first mention, I sent it to my parents. I think they were worried, like what was I doing, why I left a good job that was paying me well and that was very safe and corporate and established. So, that was kind of like, “Hey, Mom, I’m not just goofing off and we’re doing something that’s valuable here.” So, yeah, that was a good feeling. Now, I send here–I’m going to be sending her this.

Andrew: Good.

Anand: So now the bar has been raised, but I still try to send her things from time to time that will show her that I’m actually doing something meaningful.

Andrew: You really are. And hey, Mom. The job that you had was at Amex?

Anand: Yeah. I was at American Express for seven years.

Andrew: What did you do there?

Anand: I was in their venture capital group to start, venture capital M&A, so kind of a big part of why we started CBI was the dissatisfaction with products we had to use in that role. And then right before I left I ran a $50 million innovation fund at American Express–again, similar kind of idea, trying to track private companies.

Andrew: Why was American Express trying to track private companies? What were they trying to do with that data?

Anand: Big companies aren’t necessarily always very good at innovating. So, they’re looking at these young private upstarts as either acquisition targets, investment targets, as potential threats, so tracking them becomes really important, understanding where the world is going.

Andrew: Oh, really? They’re looking to see, “Who can come after us and what are they coming after us with?”

Anand: Yeah. Exactly.

Andrew: So, you were looking online. You were using Dow Jones?

Anand: Dow Jones, Thompson, we used a product called Capital IQ, which is owned by S&P.

Andrew: Give me an example of something you were trying to do that all these great resources, many of them have been around for decades, that they weren’t able to do. What’s one example of a problem you had that they couldn’t solve?

Anand: Yeah. So, my boss at the time came in and said, “Hey, listen, we need to understand all the payment startups that are out there that have received funding.” Pretty innocuous question–I should, with a couple of clicks, be able to get an answer to that. We went to these databases. The data was different across them. Then we did a quick Google search and saw a bunch of things that weren’t in there.

So, you’re paying a lot of money and you’re not even able to use the product for what you intended to use it for. But I also don’t want to go into a meeting and look foolish, right? I don’t want to go into a meeting and someone says, “Well, you missed this company.”

So, that level of discomfort with what they had was sort of an initial driver of what we were doing. And then to be honest, they sort of had this UI from 1983. We thought people are used to a better kind of experience now. We could solve that. So, better data coupled with usability were sort of the first two tenets of what we were trying to build.

Andrew: I get that. And frankly, I get paranoid with that too. Before sitting down before an interview, I’m always worried, “Did I miss one funding round? Did I miss one piece of information that someone forgot to add to the page on CrunchBase?”

Anand: Yeah.

Andrew: And you miss that one piece of information and all the other work that you’ve done feels like it didn’t happen or loses credibility.

Anand: Yeah. We sell to a lot of biz dev and sales people now, right? And the last thing you want to do is call somebody up who’s a prospect and say, “Congrats on your funding round,” and they say, “What are you talking about?” No matter how good your product or service is, you’re kind of dead at that point to them. So, yeah, that’s the problem we’re trying to solve.

Andrew: I always wondered what CB Insights stood for. I always assumed it was the names of the two cofounders. But in researching this interview, I discovered it stood for something else. What was that?

Anand: Yeah. We started off as ChubbyBrain. I had bought a bunch of domain names a while ago, thinking sell them or monetize them, and ChubbyBrain was amongst them. Yeah. We launched as ChubbyBrain. We went to go sell to an investment bank in our early days and their feedback was, “We love your product, but we will never buy something called ChubbyBrain.” And our edgy internet entrepreneur kind of credo that we had sort of went by the wayside when we knew we could make some revenue. So, we grew up at that point and become CB Insights.

Andrew: Smart. How many domains did you own?

Anand: A little over 200.

Andrew: 200? You really are entrepreneurial. You’re the kid like me who used to sell stuff in elementary school. What did you sell?

Anand: So, I was a paperboy. That was probably my first job. I wasn’t very good at being a paperboy. Then I had some success in high school selling candy out of my locker. So, we figured out–I guess it was some predecessor to Costco where you’d get cheap candy. We’d sell it. We’d make money. I think it was also forbidden fruit in school to have candy. So, I think the risk of people buying candy from us was also another allure. So, that was one of the first successful entrepreneurial endeavors, I’ll be it on the small scale.

Andrew: Did they shut you down?

Anand: Yeah, eventually we got shut down. In college, I used to throw parties. So, I used to rent clubs and things and promote and made pretty good money basically selling tickets. So yeah, a lot of smaller enterprises, but good lessons for sure.

Andrew: You know, I laughed at being shut down, but it’s a story that we hear a lot. A kid will express his entrepreneurial creativity and the system just doesn’t know what to do with it, so they shut you down. I understand them saying, “Hey, you know what? Candy isn’t really allowed here. But let’s redirect your energy towards something that is. How about you sell something like books or notebooks and see if you could do that?” They would do that if you drew on the wrong place, if you drew on your textbook, they might say, “How about drawing on a canvas?”

But you were entrepreneurial. Was your dad entrepreneurial? I heard that grew up with him making calls to China and India at 2:00 a.m. Why was he making those calls?

Anand: Yeah. So, my dad worked in corporate America for a long time. He worked for a big French chemical company. He kind of realized at some point that if he wasn’t French, he wasn’t going to get promoted. So, he left to start his own company. But really, I would say the epitome of the entrepreneur story–no loans, self-funded, took a mortgage out on the house, everything was up for grabs kind of.

He was trying to setup the manufacturing facility in India and so was making calls at all hours of the night to people overseas to get permits, to get distribution, to do sales, to do everything. So, I think that’s where I sort of saw the grit and the grind of entrepreneurship and learned it sort of first-hand from him. So, it was good to see firsthand, for sure.

Andrew: What do you mean by the grind of entrepreneurship? How did that help shape the way you think about running your business today, the grind?

Anand: Yeah. So, I know there’s a lot of talk about work/life balance and all that good stuff and I believe in it and I have a family. But I think we’re going to win because we outwork everybody else. I really think that’s why we’re going to win. I’d love to work ten hours a week and do really, really well and maybe some people are that naturally innately smart and gifted. I am the guy who’s just going to work really hard. I think the team also has picked up a lot of that and that’s the kind of people we hire.

Andrew: What’s an example that you’ve done that other entrepreneurs might not be willing to do or the wannabe entrepreneurs wouldn’t even know exist as part of the entrepreneurial journey. What’s an example of a way you grind?

Anand: Yeah. Let me think of a good–it’s a great question.

Andrew: I have one that will give you a little bit of time to think of it. We had a horrible, horrible connection when we started here. I couldn’t hear what you said. I said, “This guy is going to be so frustrated he’s going to just want to move on because I’m not doing the interview if I can’t hear him. He’s going to have to do tech support. Most people wouldn’t put up with that.”

You went out and you got one headset. That didn’t work. Then you got another headset that you we have on now and then that headset didn’t’ work. And the reason the headset didn’t work is because you needed to install some software. Again, most people would have given up at the second headset or before. You got the extra headset, you installed your software, you stuck with it and I kept looking at you for a sign of frustration. You were really calm through it all. I think that says a lot.

Anand: Yeah. I look at all of these things, like we’re talking today as an opportunity, a great opportunity. So, you’re making time for me so I’ve got to do what I’ve got to do to make sure it’s worth your time as well. I think the thing we did early on that point–and you mentioned it earlier with the journalists and the media contacts–is when nobody knew who we were, we reached out to a handful of journalist and said, “Here’s some data.”

And the thing we also did was say, “Hey, we’re going to publish this data but we’re going to give it to you pre-release.” So, we didn’t really have anything. But we said, “If there’s interest, we’ll go develop the report on the back end.” So, we ended up getting a bunch of interest, not a bunch, ten people said, “Yeah, I’m interested in writing about this.” We developed a rapport kind of after they said they were interested. Generated the report, got it out there.

And then what ended up happening was they kept coming back to us for more and more data. We’d drop everything for the media. That’s just this one customer. I think that has been something that’s helped us a ton over time. We now have probably close to 500 media folks who regularly talk to us. But a lot of times, not maliciously, they wouldn’t use the data we sent. We spent two days pulling something together and it got cut at the final stages. That’s frustrating, but we knew that this was like an investment.

But we kept doing it. We see somebody wrote about a particular company. We’d reach out and say, “Hey, if you ever cover this company again, we have some data for you.” I think we’ve done a lot of things very manually, very non-tech that are not very scalable but we just put in the time and kept doing them again and again and again. Some of them have yielded some benefits over time.

Andrew: I want to break down how you got so much media, who did it, what was your process initially, how you systemized it so that you can follow up with people properly, but let me go back and understand the data that you were making available to them. The first version of the site was ChubbyBrain. It was built as a Wiki, right?

Anand: Yeah.

Andrew: And the idea was–where initially did you think the data was going to get into this Wiki?

Anand: Yeah. So, initially we thought people would submit the data. It was sort of Wiki meets Yelp, right? So, we thought people want to review private companies. They really don’t. So, that didn’t work. But then in order to build that, we had to seed the database with some data. So, we built some software to gather all this data.

We did a lot of it manually again. I think Jon and I probably did 50,000 articles where like an article came out saying, “So and so raised $10 million from Sequoia,” and we would manually put that into spreadsheets and we did that another 49,999 times. So, we had seeded our database.

Andrew: I see one early post here on the site for Woot, the company that was eventually bought out by Amazon. What you have here is a review of the company. You have their funding. I’m trying to look in–it’s not especially clear. But you show their funding and where they got their funding. You have, as I said, a review of the business. You have the team information. You have funding products and services, competitors, M&A, financials, in the news. That’s all the stuff that you’re hoping to get for them, right?

What you were doing was saying, “We want to get financials. We want to get M&A information. We don’t have it all. We’re creating a Wiki where everyone can add it. Until anyone and everyone gets in there to do it, I will and my cofounder will sit down and we will type into it.” That was the original vision.

Anand: Exactly. That was the original vision.

Andrew: Why do so much? Why not say, “Hey, you know what? We are only going to do financials. We are only going to do funding.” Maybe not funding, other people are covering it. But why do all this information–key people, insider info–why?

Anand: I think it was visions of grandeur as a startup initially. I think we bit off more than we could chew. But what we realized from that is we’re pretty good at getting the data on our own. The wiki aspect didn’t really take off. There wasn’t a whole lot of what’s–we didn’t really answer the question well for users, “What’s in it for me?” If I give you data, what’s the enlightened self-interest? Why does this benefit me? So, we never really answered that question well.

So, when you don’t answer that question well, users aren’t going to show up and stick around. But we then realized we’re good at doing this ourselves, let’s just turn to that and just get the data on our own and turn this into a company that aggregates data better than anybody else.

So, that’s what CB Insights has become. We don’t ask anybody really for data anymore. We do have VCs and private equity guys who submit their data to us because they know that buyers of their companies are using us, but most of it now is just algorithmically gathered by a software we’ve built.

Andrew: It was bootstrapped in those early days?

Anand: It was bootstrapped. Yeah. Since I came out of America Express, we sold research to the hedge fund industry on the credit card industry or hedge fund funds on the credit space. So, for the first two years, we did that concurrently building CBI in the background and then–

Andrew: Tell me more about that. I’m sorry to interrupt, but tell me more. You were going to hedge funds and you were selling them data on the credit card industry as a way of funding CB Insights.

Anand: Absolutely.

Andrew: How did you get that data?

Anand: We would go to old contacts we had in the credit card industry who now worked at American Express and JP Morgan and Barclays and all these other places and once a month we’d do a survey of about 30 or 35 senior people and we’d say, “Hey, what do you think is going to happen in the credit card industry?” Hedge fund folks really valued the sentiment that that survey captured and then they would pay us for it. They’d pay more than I ever thought they would pay. As we were selling it for, I think the lowest was $10,000, $35,000, up to $100,000.

Andrew: And this was just a 35-person survey. Were you emailing it to them or calling them up and asking them the questions?

Anand: We were calling them. So, nobody would like respond to this via email because they were probably telling us thing that their corporate communications folks would get upset about. But we’d send it back to them, the aggregate results. So, the people in the credit card space loved it because it was like, “Hey, what are other people in the industry thinking?” without identifying the other individuals.

Andrew: How did you sell this? How did you even know who to sell it to? How did you find the time to make the sales calls?

Anand: So, we got lucky here. We ran into somebody who said, “We sell research to hedge funds.” We said, “Hey, we have this product. We think you should check it out.” He looked at it–he’s a really smart guy–and said, “This is really interesting. I think you guys are early. I think this will be big in eight months.” This was right when the whole mortgage crisis was going on. He said, “I think this will be big after people forget about mortgages.”

For eight months we tried to sell it on our own and had no hits at all. We emailed all the alumni from–I went to the University of Pennsylvania, so a bunch of hedge fund folks went from there. I found the alumni database, emailed everybody, got some meetings but nobody bought. We were about to shut down the company–this is probably late 2009–

Andrew: This is ChubbyBrain you were about to shut down?

Anand: This was ChubbyBrain and the hedge fund thing because nobody was buying.

Andrew: And the hedge fund thing. Nobody bought either one.

Anand: Nobody was buying. I was paying two guys who we’d hired out of my own personal savings. I was recently married and it was just not–it was happy wife is happy life and that was definitely not where I was at that point. And the hedge fund thing wasn’t clicking and we were about to shut it down, the whole thing and say, “Let’s just go back to life in corporate American,” and the guy Nick called us and say, “Hey, I think it’s time for your product.” And he started to sort of represent it.

We were the only game in town for the credit card industry. We knew it had a short shelf life. It was while the crisis was going on. So, for the next 18 months, we made hay. That was enough to fund ChubbyBrain and then eventually CB Insights.

Andrew: I’m listening to Barbara Walters’ audiobook, her memoire and she said that one of the reasons she was able to make so many different world leaders and actors and everyone else interesting was because she got a little bit into her personal life. So, I’ve got to ask you. You were just saying that a happy wife is a happy life and things were getting stressful. Can you just add a little color to that? What was going on?

Anand: Yeah. So recently married, I think. My wife new I wanted to do something entrepreneurial but left a very good well-paying job at American Express, kind of climbing the ladder. I think the stress that came from that was she knew I wanted to do this, but the implicit thing that comes with founding a startup and not necessarily taking funding as we chose not to do was there was a big lifestyle degrade, right? It was we didn’t go to restaurants with our friends. We didn’t go on vacation forever. So nothing even fancy, but some of the things that we became accustomed to had to take a really big backseat.

And then more than that, my attention was really on the company. I really didn’t want to go back to corporate America. So I said, “I’m going to do everything in my power to make sure that doesn’t happen.” But that required a level of commitment to the company that is tough. It’s tough at any stage of marriage, but it’s, I think, especially tough in the early days when you’re just starting out and your kind of expect one another to be there.

Andrew: So what did you say to get a little bit more space to figure it out?

Anand: I mean, she has a ton of faith in me, right? I told her when we were thinking of shutting the whole thing down, “Hey, listen, if things don’t recover or get to a point that’s reasonable by x-date, I’ll go back to what it was.” So, she knew that there was a deadline and she knew that I was also like way stressed out. So, we reached that deadline and luckily sort of the threshold that we had set had been surpassed because the hedge fund thing started taking off.

But I think we’ve kept a pretty clear line of communication the entire time. There were never any surprises, right? I’m pretty bad about hiding things in general. When I walk in the door, you know if I had a good day or a bad day. So, even if I was trying to hide it, she would have known. Yeah. We saw things going better. It still took us a while before we took our first vacation, but the trajectory was no longer going down. So, that was a big turning point.

Andrew: So, hedge fund thing started to give you some money, which gives you a little bit of safety and money that you could use to invest in what became CB Insights. You can’t make the Wiki work, but you are really good at creating your own content. So, do you start to put your own content into your own site, into the Wiki?

Anand: Yeah.

Andrew: At ChubbyBrain, you do?

Anand: Yeah. We do.

Andrew: Did you start focusing a little more or was it still going to be all this corporate data about all these startups?

Anand: IT was still going to be that, but we limited it a little more to financings and exits. So, we figured like, “Let’s get really good at that.” And then as we got good at that, we saw people crawling ChubbyBrain. So, we said, “Okay, now people are that interested in this. We had investors reaching out saying, “Hey, can I get an Excel file or can I get the data presented in this way.” So, that’s when we kind of changed course and said, “Okay, we’re not going to make this public anymore. We’ll put it behind a pay wall and we’ll turn into a traditional SaaS kind of software as a service platform.”

So, in February, 2010, we made that transition. We hung the CB Insight shingle out and that’s when we started selling a subscription to the product at a very cheap–I think it was $2,400 a year, like extremely… When I look at our pricing now, it’s like shockingly low.

Andrew: How much would that cost today?

Anand: Right now our average ticket is right around $35,000.

Andrew: $35,000, wow. I see a huge difference. But it makes sense. If it’s a Wiki, you would need it to be public so that people can contribute to it and tell you if you’ve made mistakes. If it’s not a Wiki, you can take that data and keep it private and sell access to it, especially since it’s you guys who are putting it together. You’ve earned the right to charge for it. All right. The data is getting together. Do you remember your first customer?

Anand: Yeah. I do. So, our first customer–I don’t think they’ll be upset with me telling the world this–was Bain Capital Ventures.

Andrew: Okay. How did you get Bain Capital Ventures? That’s an impressive company to have as your first customer.

Anand: Yeah. So, I think a lot of it was the media using our data. I think they saw us. The other really good thing about the space we’re in is that the incumbent players are really, really bad. So, Thompson, Dow Jones, etc. aren’t very good. So, people are always looking for an alternative. These guys gave us a shot, right? I look back at the product they bought. It was not very good compared to what we have today, but they gave us a shot and the benchmark that we were going against was also pretty terrible. So, we were able to win their business in the early days.

Andrew: So, it wasn’t you cold calling and getting through to make a sale. It was you getting press which led to the sale. So, let’s then go and talk about press. Do you remember how you first went about getting press?

Anand: Yeah. So, we would go to Google News and type in a term. It was using “venture capital trends” or something. We’d look at everybody who had written about that topic. We’d go figure out their emails and we’d write to them and say, “Hey, listen, if you’re covering venture capital trends, we have a really great data source. We’d be happy to help you in any stories.” We’d also, if were putting out a report, tell them, “Hey, in a few weeks, we’re putting out a report. Would you like to receive it pre-release? If you would, just don’t publish anything before so and so date and time.”

Andrew: Which came first. Was it, “We have this data source and if you’re doing any report…?”

Anand: Yeah. That was the first thing.

Andrew: That was first. And the idea was they would contact you and say, “We’re going to do a piece on how venture capital has grown in the last two years in Southern California. Do you have any data on that?”

Anand: Exactly.

Andrew: Often you wouldn’t have data, right?

Anand: Yeah. We didn’t have data or we didn’t think it was very credible at times. So, we would go and kind of scrounge around the internet and kind of find it.

Andrew: So then you would become their research staff essentially, going out and finding that data, putting it into your site and saying, “Here’s what we have at CB Insights on this piece that you’re doing,” hand it to them and they give you credit it.

Anand: Exactly. We’d ask for a link back. That was like the key thing. Some publications don’t provide links, but most of them do. We’d say, “Hey, can you link to our homepage?” And then on the homepage, you’d get there and it would say, “Sign up for free trial,” and you’d click the button. That’s what got the machine started, at least.

Andrew: I see. Interesting. Did you do anything to limit yourself to quality sources or sites that could give you links or anything like that or people who are within reach?

Anand: I think part of to some degree, part of what’s worked for us is we didn’t target TechCrunch and all those folks necessarily to start. We targeted lesser known publications. But what we realized over time is that the big publications read some of the smaller folks. So, if we could be the source of record for some of the folks that aren’t household names, the TechCrunch’s and Mashables and other folks of the world read those folks, then eventually we’d get into their orbit.

I can’t say we did it consciously. We just did it because that worked for us. But that ended up working out really well. So, we built some really loyal users of our data and then they ended up being evangelists for us amongst the bigger outlets as well.

Andrew: You know what? That’s exactly what Ryan Holiday says to do when you’re trying to get press. He says go after the smaller ones. They’re easier, then the bigger sites will use them as reference points and it gives you credibility to go after the bigger ones.

So, I guess you lucked into this process. I can’t figure out how you got into it. I’m looking at your past here. You kind of had startup experience, kind of. You worked for Kozmo. I don’t know how many people remember Kozmo, but they used to deliver things like CDs from their own cache to your house or a candy bar for free. This was in the early days of the internet. You didn’t’ get that experience there. What did you do for Kozmo?

Anand: I launched a bunch of their warehouses. So, we had warehouses in New York, Atlanta, London. So, I was launching the operational infrastructure. And then they eventually sent me to London to launch Kozmo Europe. So, there I was fundraising, signing deals with fundraisers, merchandising, the whole deal.

Andrew: But no press there.

Anand: No press. No.

Andrew: Did Kozmo turn you off to all startups? Is that why you went back to America Express? You said, “This is just a nutty environment. I can’t work with these people.”

Anand: No. I loved Kozmo. I don’t think I ever learned as much as I did in a year there. But I had been at PricewaterhouseCoopers and then Kozmo and sort of graduating late 90s, kind of thought, “Hey, I need some stability on my resume. It doesn’t look very good to have a year here and a year here.” So, thought, “Let me go to Amex.” I always thought of Amex as sort of finishing school–stay there for a couple years. They end up treating you well. So, seven years later, I finally left.

But yeah, I always wanted to go back to the startup thing, not necessarily the same sort of crazy growth treadmill that Kozmo tried to get on. It wasn’t necessarily that I think I was maybe a little burned on. But other than that, I always wanted to go back to startups.

Andrew: All right. So, you’re getting press and then the report comes to you. Did the first report you put out actually exist or was that you testing the waters to see, “Do people even want this report before we create it?”

Anand: Yeah, so smaller things we would test, we’d say, “Hey, listen, we’re looking at this trend. We think there’s some interesting data. Would you be interested in covering this?” If they responded yay, we knew it was. If they didn’t say anything, that was the vote of no confidence. So, smaller things we’d do.

The first report we did was a quarterly VC report. So, we knew that PricewaterhouseCoopers and Thompson put out this report. We knew Dow Jones put out this report. We said we’ll come out with our report a week to two weeks before them and we’ll just make it really detailed and have tons of interesting insights into what’s going on and then we’ll send it to this small but growing list of journalists. I think it was ReadWrite Web back then. They were like the first ones to cover our stuff pretty regularly. It was just confidence building more than anything.

Andrew: You mean internally confidence building?

Anand: Internally, right? You need momentum, right? Revenue is great momentum, but even if it’s not revenue, it’s like, “Hey, people actually are about what you’re doing and they’re finding it useful.” So, that was like a good kick in the pants that, “All right, somebody’s finding it useful.” Then we had other people reach out as a result saying, “Oh, I saw ReadWrite covered this.”

The peers of ReadWrite at the time reached out and said, “How do I get on your list?” So, that started getting things going. Every time we got one of those emails, it was a big rush. It was like, “Oh, TechCrunch reached out. They want to be on the list.” That felt really, really good at the time.

Andrew: Do you remember one of the early reports that didn’t go well that no one wanted so you didn’t create or that you did create and no one wanted?

Anand: No. So, there are a couple of rules we have at CBI. One is when we do a report, we’re going to do it because there’s interest in it and two, the data is always going to be right. So, we’ve been pretty lucky in that when we do a report, it already has interest in it. We’ve pitched some ideas. I think we used to pitch a lot of ideas about, “What’s happening in your state?” And be like, “What’s happening in Ohio venture capital?” And that was just picking a bad market. There aren’t a lot of people in the media in Ohio at that time that cared about venture capital. So, it just fell flat naturally. And that was probably a blessing in disguise because even if it got covered, it would have been covered by one person at a small publication.

Andrew: So, what about that? What if you put it out–actually, let’s not say you put it out. You said you used to test the waters. I understand if no one wants it, don’t create it. If people do want it, do create it. What if it’s somewhere in the middle? What if it’s a little bit of interest so now there are a few people who are counting on it coming out but not so much that it’s actually worth your time to create? How do you push back and say, “Hey, you know this thing that I told you we were doing?” Not going to happen.

Anand: So, if we put it out there and we got a nibble, we did it. We never said, “Oh, sorry, we’re not going to do it for X, Y and Z reason.” We always did it.

Andrew: So, if you came out with Staten Island Venture Capital Report and you came to me, a blogger who happened to cover Staten Island venture capital and I said yes, but nobody else said yes, you would go and put out that report.

Anand: We’d do that. Yeah.

Andrew: Why would you do that?

Anand: You know, we’re competing with these really large companies that will take you to steak dinners and take you to Yankee games and all this great stuff. We have nothing, right? So, the only thing we have is credibility, which we can build with partners in media and we have these potential media partners who don’t like the other guys either because they’re not responsive or they don’t like their data or whatever it is.

So, this is like the one unique value proposition we had. We’re going to be reliable and our data is going to be good. If we don’t deliver on the report we said we’d do, we’ve killed the reliability lever. You never saw the data, so you have no way of assessing.

Andrew: So, if one person said yes, you would do it. So then that tells me you must have been really selective about who you’d turn to when you were trying to figure out whether to create a report. You wouldn’t go to some guy who just setup a WordPress site.

Anand: Yeah. Exactly. So, we’d look for–Google News was our go-to. If we could see you in Google News–Twitter wasn’t what it is today. So, we didn’t have a good way. There weren’t all these great tools out that tell you what the most shared articles are. So, Google News was a big part of it or somebody finding something kind of ad hoc. But it was conscious enough that we knew that we were looking for people who had some modest, at least, amount of reach.

Andrew: All right. Let’s take this example of Staten Island venture capital. You now have to put this report together. You don’t have friends at Staten Island venture capital like you did when you were putting together the credit card report. How do you go about putting something like that together?

Anand: Yeah. We have some data on Staten Island venture capital. We know a couple of deals that had happened.

Andrew: They would just be in your system.

Anand: It would be in the database.

Andrew: How would it be in the database? Who, at the time, went and added that data to your database?

Anand: So, Jon and myself did it initially. So, we did it for the first 50,000.

Andrew: You’re talking about Jonathan Sherry, your cofounder.

Anand: Jonathan Sherry. Yeah.

Andrew: You guys would just be up nights just looking online?

Anand: Manually. We’d like read. We had a list of like 30 different blogs and biz journals that we’d read and every time there was a funding announcement or an exit announcement, we’d put it into a spreadsheet–very structured: company invested in, who were the investors, the amount, the series, all that good stuff. We would have interns who’d help us out. So, we’d get interns during Christmas break or whatever.

Andrew: Just reading blogs, putting it in the spreadsheet. Somebody de-dupes to make sure there is not duplicate information and then the spreadsheet made it into the site how?

Anand: We built a tool to upload a spreadsheet into a SQL database?

Andrew: And then where else? Its’ not just reading blogs. You did more. What else did you get? How else did you get more data?

Anand: It was really mostly reading blogs. And then we’d Google around and say, “Largest deals in Staten Island, top VCs in Staten Island,” we’d look for any sort of breadcrumb that might get us to a link that’s interesting and then we’d follow that to its logical end and any new data we’d put into the spreadsheet. So, just kind of ground and pound–we just kept doing this over and over and over again.

And then over time, we realized there are patterns in all these articles we’re reading. It’s so and so raises from so and so in a series B for $10 million and we said, “Okay, we can automate his.” So, Jon and I are chemical and electrical engineers, respectively, so we can’t do that development ourselves. But we finally started building out a team. So, we got some really great machine learning guys to help us actually algorithmically analyze the stuff.

Andrew: I see. When you’re doing it by hand, you’re starting to notice patterns yourself. You know, we do that too internally. We’re like maniacs about how do we find guests. We found you because you’re a fan of Mixergy and we started talking and that led to this interview. But we have like certain phrases, like, “acquired for,” we will go and search for that like maniacs in different blogs to find a small company that was acquired and no one discovered.

We go to data sources like Inc. 500 to see who rose up the Inc. 500, right? And then we add that to our system. Eventually, we do come up with phrases that anyone can use and I can go to a virtual assistant and say, “Here’s what I want you to look for. Here are the sites we trust. I want you to put it in the system. Here’s our check to make sure that data is actually right.” So, you did that and that was the beginning and then you kept growing and growing it.

The best data, though, that I get is when I talk to you or talk to someone else and they say, “You know who no one talks about? It’s my friend or this guy who I met at dinner who’s a real jerk because he’s doing so freaking well but nobody knows about him and he had this big smile on his face at dinner.” How do you get that data into your system or how did you in the early days?

Anand: Yeah. So, that type of data that’s sort of like tribal knowledge is really hard to find. So, we are looking for structured data that’s out there somewhere in the ether, right? So, it’s an SEC filing. It’s in some business publication. It’s in a blog. It’s on Kleiner Perkins’ portfolio page and we look for changes to that every day and see if there’s a new logo that’s been added. So, I think that’s the way we tend to surface all this information on companies that are interesting. We’re tracking financing events.

So, somebody’s who’s just built quietly a company that’s worth a lot of money and been off the grid, we’re not going to capture. That’s going to be hard to find. But if that person gets interviewed and eventually there’s an article saying, “Hey, Andrew’s built this great company up. He’s never taken money, but they’ve just hired their hundredth employee and they’re tracking at $50 million in revenue.” At that point, that company is going to be in our database.

If, however, you’re really just kind of camera, press shy and you just are minting money in this secret lair, we’re not going to find you then.

Andrew: Those are harder. I still think at some point you could get to them because success leaves clues, and I don’t just mean the Tony Robbins way, I mean, for example, what you just brought up. If someone has no funding, but they have 100 employees, that’s a really good indication. Now, how do you know they have 100 employees? Because LinkedIn makes that data available to you. How do you know if they’re hiring a lot? Because they post ads on certain sites and that makes it available.

Is it easy? It’s really hard. But that stuff is out there and I think we could–I can’t, actually, because frankly, it’s too much work for me, but for a company like yours, like CB Insights, you could do that and I can see that coming in.

Anand: Yeah. That’s what we’re doing, actually, the only money we’ve taken is from the National Science Foundation is to solve this exact problem. So, we’re not crawling job boards. We’re looking at web traffic, mobile app data.

Andrew: Tell me about that, actually. National Science Foundation gave you guys money.

Anand: Yeah.

Andrew: They don’t take a share of your business.

Anand: No. It’s a grant.

Andrew: It’s a grant. Why do they want someone to go and uncover data about private companies?

Anand: Yeah. So, we went to them and said, “Listen, when the recession hits, all the banks stop lending to private companies because they don’t understand private companies. So, they just assume that we’re all super risky.” So, we said, “Listen, we think we can provide a more nuanced view into individual private company performance using all this exhaust that’s left on the web. So, we can use social media chatter and hiring and all these other signals and as a result, people will make better decisions about how to deal with private companies.”

And they said, “Okay, that sounds interesting.” They gave us a $150k grant to start and said, “Listen, you have a year. Prove out that there’s something here.” We proved that out. We got another half a million. Then we ended up getting another half a million from them, which is sort of the limit. So, we got in total $1.15 million from the National Science Foundation.

So, if you know Dun & Bradstreet, it’s sort of D&B 2.0. Can you build a more thoughtful real time way of understanding private companies? And that’s where we’re going. It’s going beyond the funding and the M&A data into actual scores of private companies.

Andrew: How do you even know that this money is available?

Anand: So, a friend of mine was a reviewer at the NSF. He’d read the initial applications. We were chatting one day and I said, “We’re working on this really hard problem. At Amex I saw that we never really knew what’s going on with private companies,” and he said, “I don’t’ know if it’s exactly NSF material, but it sounds like a hard problem and they like this kind of stuff. You should try to apply.”

So, we applied. It’s mostly academics who apply. So, the NSF program officer said, “Hey, listen, you guys don’t know how to write a research proposal, but we think it’s interesting what you’re doing. Can you put together a PowerPoint?” We said, “We know PowerPoint.” From our corporate days, we’re good at PowerPoint.

Andrew: Sorry, let me take it back to something more pedestrian than that. I can see once you got your foot in the door, I can see you sliding right in and I understand the result. But the part I don’t understand is the friend part. You’re a guy who’s really busy. You don’t have much time.

How do you stay in touch with your friends so that you guys could help each other out like this? Are you guys going out for drinks? Do you just call your friends randomly and say, “Here’s what I’m working on.” What’s your process for staying in touch and making your relationships pay off like this?

Anand: Yeah. So, this one was just we were getting drinks. He wanted to sell into the hedge fund industry, which we were no longer doing. We were kind of exchanging notes about what we did and seeing if there was anybody I could introduce him to. And then the conversation was really all about, “Hey, how can I help you with a hedge fund stuff we did?” And I think at the end, we were talking about what we were doing and he said, “Hey, this is like a flier. I have no idea if it’s interesting, but give it a shot.” And he made the introduction, then to the NSF person.

So, before we put anything together, we had a call with this person saying, “Hey, we think we can assess private companies using these algorithms,” and that guy was like, “That’s interesting. You should apply.” It was like a ten-minute conversation.

Andrew: I see.

Anand: We put together this very ornate research document that was kind of in this very specific NSF format. And then from there, they called us and said, “Not a very good proposal, but we still think there’s something here,” and they kind of gave us another shot and we ended up getting that first grant.

Andrew: You told our producer, Jeremy Weisz, that I think the first $1.5 million in sales you did, you personally.

Anand: Yeah.

Andrew: Some of it, I can understand, comes to you because your price was really low and because you were in the media. But at some point, you’ve got to go out and start pounding the pavement yourself or working the phones or whatever phrase you want to use. Do you remember what your process was in the beginning where it was just you trying to figure out where the money was going to come in?

Anand: So interestingly, the first one and a half was all inbound.

Andrew: All inbound?

Anand: Yeah.

Andrew: So, all of you just getting in the media?

Anand: Yeah, just getting in the media. We started to put our newsletter out a little more regularly so it started being in people’s consciousness.

Andrew: Okay.

Anand: And people were signing up for our free trial, but we didn’t follow up. We basically let you sign up. We dumped you into the product and said, “Figure it out.” And the product wasn’t super intuitive at that time either. But some people just came to us and said, “We think this is really interesting. How do we pay you?” So, some of it was just that.

Some of it was people writing in saying, “Hey, I want to find data on x, can you help me?” And so I’d setup a call with them and basically do a customer support tutorial and then while I had them, I knew the product really well and I’d say, if you’re a VC, “Are you looking for a deal?” I’d just ask questions and they’d say, “Oh yeah, I can use it for that to and I can use it for that to and whatever else came up.” And then eventually some of those things turned into subscriptions to CB Insights.

Andrew: What share of your business is done by venture capitalists now?

Anand: So, right now we’re kind of a third what we call deal makers–so, the VC folks, M&A and investment bankers. I’d say VCs are probably about half of that, so let’s say 15-16 percent of our total business right now.

Andrew: I see. All right. They’re coming in. You’re closing the sales. We’re talking about $2,000, you said? $2,500 at this point?

Anand: Yeah. So, by this point, we’d already migrated up. So, we were probably $15k-$16k at this point.

Andrew: So, that’s still a lot of customers coming in and a lot of customers signing up.

Anand: Yeah. We were doing well in the beginning. I knew the product. Having worked in VC, I knew the pain point. So, we were just like extremely–I wasn’t the sales guy in the way I always thought of sales guys. I always thought of sales guys as like big watch, slicked back hair, fast talker and I was none of those.

But I just knew the product. So, I could just call them up and say, “Hey, listen, I saw you guys did a deal in X. We have a bunch of data on that category. Let me show you that.” And that just sort of worked. It was very consultative. And then that worked. And then finally in the end of 2013, we hired our first expert sales person.

Andrew: About five years in business, you hire your first sales person.

Anand: Yeah.

Andrew: I’m looking here. Here’s something else in my notes that was a little surprising or I didn’t understand, actually. You said to Jeremy, “Proof of concept slapped us in the face. We went to our payroll provider and they told us they could not give us better pricing because of our rating. It was a four.” What does that mean?

Anand: Yeah. In this goal to assess private companies, I think it was a pain I saw at Amex. It was sort of this abstract thing, “Oh, private companies get screwed.” But I hadn’t felt it firsthand. So, a few years ago we went to a payroll provider to run CBI’s payroll and we asked them for better pricing.

They said, “Hey, you’re a four out of five on some credit scale, which means you’re close to bankrupt.” I said, “Listen, we’re far from it. We’re doing really well. We’re growing quickly.” And I think we were eight or nine employees at that time. They said, “Well, listen, we use this scoring system by so and so big company and there’s nothing more we can do.”

So, what kind of hit me–it sort of made the pain point we were trying to solve very clear to me at that point, which was as a result of this archaic kind of scoring system they were using, basically this guy lost business because we were nine people then, we were going to be 50 people soon. So, he would have made some good money off of us. We ended up wasting time going to find another payroll provider that could give us better terms and we got worse terms from them.

So, that was just kind of on the entrepreneurial journey, sort of the first instance of seeing firsthand the problem we were trying to solve impact us.

Andrew: It seems like you always, through that understanding, broadened who your customer base would be, that at first it was people who were doing M&A and investing in companies in some form and then you started to discover, “Hey, there are all these other groups of people who need data on private companies that’s more accurate than exists on the market today.” When you started out, how did you know how big the market was going to be when you just thought it was going to be people who are dealmakers?

Anand: I don’t think we spent a lot of time thinking about it. I thought my calculus, which wasn’t very good was, “Well, Dow Jones and Thompson have offerings that sell in to VCs and bankers. So, they’re big companies. It must be a big opportunity.”

Andrew: I see.

Anand: And then we realized as we were building that this actually isn’t that big of an opportunity, right? Even if we sell–let’s say generously there are 1,500 active VCs in the world. If we sold all of them a $30k subscription, it’s a very nice business, but it’s not the type of business we’re aiming to go for. But I think a big part of it as we were building was listening and seeing the types of customers signing up.

So, one of the first biz dev groups that signed up was Marketo. So, when Marketo signed up, we talked to them and said, “What are you using us for? We don’t even understand who you guys are?” And they said, “We’re using it to sell to private companies.” And I was like, “Oh, that’s interesting.” And then we got Rackspace and we got a bunch of other folks and said, “Okay, there’s this whole other use case.” And sales is this giant category.

Andrew: Because what they’re trying to do is–Marketo, I imagine, they’re a sales automation system, right?

Anand: Yeah.

Andrew: They’re trying to figure out, “Who is big enough to need us and also fits within the categories of companies that work with us?” is that right?

Anand: Yeah. Exactly. And the way they would do it historically is they’d go read on TechCrunch about a company that got funding and that right after that, they’d call that company. So, the problem with that is that there are 600 other people calling on that company. And two, there’s a bunch of companies that don’t make it to any of these sources. There are ways of getting some of that data before it gets on to the mainstream sources too. So, they were looking for just an edge ultimately, right? They wanted to fill the top of their lead funnel with as many companies as humanly possible and that’s really what we enabled them to do.

Andrew: What percent of your business now is that, sales people?

Anand: So about a third of our customers now are in sales.

Andrew: You said, “So, we stared seeing people like Marketo use us and we called them up.” What is your process for doing it? I don’t think a lot of businesses are even aware of who are buying services from them, let alone have a process for following up and understanding?

Anand: Yeah. So, we do a few things. One, we have online chat, which is like an amazing tool for understanding customers. So, we think of online chat as basically defect reports. We don’t want you to chat with us. But if you’re going to chat with us, you’re probably chatting with us because you’re telling us something’s not working or something’s not as intuitive as it should be or you’re asking a question about how you can use our data in a way that we haven’t thought of. So that’s been really, really useful for us. And then a lot of it is we’ll just reach out to people now and ask questions.

So, I think a lot of our customer discovery is, “What are you trying to do?” And they’ll give us very specific guidelines and we’ll figure out we’re not a great tool for that. But if we get enough people asking us for that, that tells us we should probably build that. So, our entire roadmap–we have some incremental things that we’re trying to do–is all driven by customer questions. And then we have some game changer things that we want to do that are really more driven by our vision for where the space needs to go.

But I think asking questions and being really open to those ideas has been really important for us. We don’t say no to anything. We’ll say, “Yeah, that’s interesting. Let us come back to you. Let’s talk to the dev team and see if we can do it.” We’ll say no a lot after that conversation, but in the beginning, we’re extremely open to feedback and ideas and then if it sounds like its’ just some one-off need that nobody else will ever have, that’s when we’ll say, “Sorry, we can’t do it.”

But if we think it’s interesting, we’ll talk to a few other customers and say, “If we built this, would this make your life easier? Would you get rid of another vendor that you’re using right now and just use us?”

Andrew: That’s an interesting question because your subscription stays the same, but you still need to know do they care about it enough to want us to keep building it up and it’s not just a nice to have that they’ll never look at. And the way you figured that out is by asking, “Will you get rid of another vendor if we add this?”

Anand: Yeah.

Andrew: Great question.

Anand: We want to keep taking more parts of the value chain, right? We want to keep owning more of it. In our business, it’s all about retention. Acquisition is important and sexy, but the way we’re going to build a giant business is by having crazy retention. So, talking to them frequently has been a really key part of that. I think enterprises aren’t used to–that’s who we sell into. They’re not used to vendors actually giving a crap.

So, when somebody makes a recommendation, “Hey, Anand or Jon, can you build this in the product?” And they see it in the next three months or the next six months, you pretty much have a fan for life at that point. So, that’s been really important.

Andrew: I blew past something that you mentioned earlier, but I know it’s important because I’ve talked to your competitors about it and frankly I even see it in my pre-interview notes from your conversation with Jeremy. The newsletter–the newsletter is something that people value more than they value your competitors. It’s free. It’s got a certain attitude to it. The first one you say sucked or wasn’t good. What was in the first one and why wasn’t it good?

Anand: Yeah. So, I think the main thing was I had this view of corporations, that you had to talk to corporations in a certain way, which was be very business-like. So, use very robotic, big words like “leverage” and “synergy” and “value add” and “big win.” So, I thought that was what people in corporations liked to hear. So, the first newsletter just was void of any personality. It was good data and nothing that really made it interesting.

So then kind of we started being a little edgier. And we track Silicon Valley and its brethren and there are a lot of amazing companies and there’s a lot of silly stuff that happens in the Valley. We sort of just said, “We’re going to call a spade a spade,” and when something funny happens, we’ll mention it and we might throw in pop culture references or hip hop references.

Andrew: Do you remember one of the first references that you made that made you feel like, “This is a little dangerous. We could use our credibility if we make reference to Biggie Smalls?”

Anand: Yeah. It was actually Biggie that we made a reference to. It was some lyric of his that we put into a newsletter. I think our concern was it was that and then we actually put out a post saying, “VCs are not good predictors of technology success,” right? So, I remember there was a lot of debate internally because the data basically said that. There was a lot of debate internally like, “Do you really want to say this because these are our potential customers?”

We kind of made the call like, “There’s so much sugarcoated garbage out there.” We have no axe to grind in this whole thing. If there’s good news, we’re going to report great stories. If there’s bad news, we’ll report those and we’ll put it out. And the feedback–one that went kind of viral because it was just provocative, the feedback from VCs was, “Hey, we love that somebody is actually saying this.” They really–

Andrew: They liked it.

Anand: Most of them liked it. They liked it. Yeah. They were like, “Yeah, we know this but nobody ever says this kind of stuff.” Today in the newsletter we talk about entrepreneurs who think like startups are heroic and courageous and we kind of call them out.

Andrew: Why?

Anand: One, I think most founders are middle class and up, have pretty good educational backgrounds. So, they have fallback plans, right? They have a safety net or they can go get a job. So, I think this narrative of startups as this noble, heroic thing that people do is just a little too self-important, right?

Andrew: I don’t agree with you about that. I’ve got to tell you. It’s okay that we don’t agree. But I have to say–here’s why. I see how deep depression runs. If you have so much to lose and such a big sense of self and then you watch it literally just disappear, really, in the reality, it’s not just a mental thing, you see it disappear, it’s hugely painful. You mentioned the stress that you had with your wife. Other people’s wives and husbands aren’t that understanding and it causes dramatic tension that causes relationships to break up. It’s huge. When you think about why people fight as couples, money is number one.

Losing status for a man in today’s world can be worse than losing money and that sense of devastation that comes from that has deeper impact that you could imagine. I think it’s more than that. I think we ride things all the way to the bottom. You can say to someone who takes $10,000 to Vegas, “Hey, you can always stop when you hit $1,000 and you have $1,000,” but once you get in that game, it’s hard to stop.

Anand: Yeah. It’s hard to stop.

Andrew: You go below that because that’s the mindset that you come in there with. You were not going to let up. How many people were not going to let up and took it too far. There are so many different things. And then the upside I think is really heroic. When I look how many people are now–let’s have a look right now at how many people you’ve employed. How many people now are getting to go home and have a job because of CB Insights? Now, did you save them from a burning fire? No. But if you only have to have saved someone from a burning fire if you’re hero, I think then we’re over estimating what it takes to be heroic. So, I see it. I see the power of it.

Anand: Right. Absolutely.

Andrew: I also understand what you’re going for. You’re trying to counter. You’re trying to be the person that comes up with ideas that are different form what we believe in and I like that you’re challenging us.

Anand: Yeah. So, I think that’s been one of the things–the growth of the newsletter. It went from 25,000 to reach across 78,000 today in the last year has been function of having a viewpoint. I think that’s been the key thing that we’ve learned.

Andrew: What about that? I guess I’m now completely disagreeing with you on that, but I’m not going to lose respect for you or anything. I’m not going to step away from working with you guys, not that we should work together. I guess, is it fair to say that the worry is just overblown too, that you could be controversial and all the things you’re worried would happen are just not going to?

Anand: Yeah. I think we know what is completely over the line, right? We’re not going to cross that line. But I think trying to be everybody’s friend yields nobody really caring about you. I would like people to have an opinion on us. I think that’s the key thing. So, you may not like some of the things we put out, but I want to be in your consciousness.

Andrew: Yeah. Because even if I disagree with you, I know the way it happens. Now, in this case, I’m going to put it out of my mind and think, “That’s interesting. I could have been a little more articulate about what I said, but there are also some ideas that I uncover by pushing back on camera that I should remember and use again,” but if I wasn’t going to interview you and I did read something like that and I disagreed with it, it would be in my head jus echoing because I wouldn’t have an outlet until I talked to someone else and then I’d want it even echoing more in my head because I’d have to sharpen my head for the argument the next time I got it.

And that’s what you go for when you say controversial, not you personally, but that’s what people go for when they say controversial things. They want the headspace. They want that consideration that goes on a lot. It happens much more when someone disagrees than when they do agree.

Anand: Yeah. And I think the other big thing was this example is a little bit of an outlier. Most of our stuff is very data-driven. So, in the case that the VCs aren’t good predictors of tech success, it was looking at the exits over time and saying basically it’s 20 VCs that have all the exits.

So, while everybody talks about investing in billion-dollar companies, the vast majority of you don’t. And it was just like, “Here’s the data.” So, most of it is very data-driven. And it’s sort of indisputable. So, I think that’s the other thing that’s very good, like, “Hey, you guys have this viewpoint, but you’ve proven it out with data.”

Andrew: OkCupid is the model. OkCupid used to put out–

Anand: OkCupid is out model. That’s exactly it. We have a blog post where we say we’re OkCupid for VCs, right? They were the first and then I’d look at guys like HubSpot. They do a really good job. I really like what Noah Kagan does, obviously in a very different space. But there have bunch of content role models that we have. OkCupid by far is like right up top.

Andrew: Sam Yagan, past Mixergy interviewee, talked about that and the model was to say, “We have all this data. People are interacting with our site. They’re finding dates. Let’s find a way to create interesting articles based on that data. What kind of look gets more dates? What kind of person gets more messages?”

One more thing about offending–you used to send out this email that says, “Three reasons you didn’t respond to me. One is I offended you. The second is maybe someone wooed you and the third is you were trapped under a rock.” Who did you send that out to and what was the response?

Anand: So, this is to prospects that I had a really good conversation with that just went cold. So, there are times when you leave a demo and you say, “Every use case they came up with I nailed. We talked about the pricing page.” It looked like this was just going to happen and then they got busy with life and other challenges and ended up not. A couple emails sent, “Let’s do a call to touch base, let’s figure out next steps,” nothing happened.

There’s a point that we reach where we just send this email. It was just sort of out of pure desperation where like nobody is responding. These people who are clearly interested. We can see if they’ve tried to login after their trial. We know they hit a limit. So, we’re like, “Something is just off.” So, I’d send this email, yeah, basically with those three choices, right?

The thing for us is the worst place to be is in limbo. I ideally want you as a customer or two, I just want you to say no. I just don’t want to be in the middle. The middle just requires–like you said in the earlier example, it just requires you to be in my head. I have to start thinking, “Did I screw that up? Did I not follow up? Did I not send them a curated feed that was interesting o them?” If you just said, “No, we decided we’re just going to Google around and not buy a platform.” Fine.

Andrew: That’s helpful because now you know what your competition is.

Anand: Yeah.

Andrew: All right. So, this email, a little bit edgy, a little creative and funny got you the response from people and at least they were able to say no.

Anand: Yeah. And actually, I would say 90 percent of the time, they say, “Sorry, I fell off the map. We’re still really interested. I just got roped into a project. Here’s our procurement guy. Here’s an analyst.” It just gets the ball rolling.

Andrew: I’ve got to ask you more about this. I know we’re really over time here, but I still need to ask you this. I’ve asked you about what your sales process is and you said it’s inbound. Maybe the first 1.5 was starting inbound, but as you’re talking, I’m seeing all these different indicators that you have a system and had it even before you hired people, things like curated feed of articles that you would send people.

That’s not something that you happened to do. That’s a process. “I’m going to get curated feeds of articles that I could send to prospects as a way of warming them up.” This email that you send to them to get them to say yes or no, that’s part of a process. What was your process for getting strangers to buy your service when you told our producer in the beginning it wasn’t’ especially good.

Anand: it wasn’t.

Andrew: What was the process?

Anand: So, I’d say a lot of these developments, Andrew, have been all within the last year. So, what we’ve done now is when you sign up, we send you a drip marketing campaign. It’s really trying to get you back into the platform. And when you onboard, we ask you a few questions, “Are you interested in Silicon Valley and tech?” And sort of get a sense for what you’re interested in. And then the drips are basically all created based on what you say you’re interested in.

So, if you said Silicon Valley tech, we’re not going to send you Massachusetts biotech deals. And we send you a series of emails over the course of the next ten days, each trying to highlight a different facet of CB Insights but that also are very much in line with giving value. So, we don’t ask for the sale a lot. It’s always, “Here’s a free report. Here are some companies that we think would be interesting.”

Andrew: “Here’s our newsletter that’s especially fun.”

Anand: Yeah. And then towards the tail end of that drip, we’ll say, “Hey, can we get on a demo? It looks like you’ve been coming back. It looks like you’ve been getting value.” Then we get you on a demo. Nobody’s going to spend $35,000 just by putting their credit card down. So, we have to get you on a demo. We have to get you and your colleagues–we open up the trial a bit more, let you play around with it. So, that drip marketing is a big part of what we’ve been kind of perfecting.

Andrew: I see. Where did you learn how to do that? This whole idea of sorting people out, it’s not a natural idea.

Anand: Yeah. I think we’ve benefited a lot because there are a lot of very generous people on the web who share this kind of expertise, people we’ve probably seen on your show. We’ll look at what folks like HubSpot are doing or just people we admire and we’ll pick up elements of what they do that we think are really, really solid and we’ll try to mirror them or replicate them for our circumstances.

So, we borrow shamelessly from other people. I think that’s been a big thing. A lot of people in the online marketing realm who are very, very open about their strategies and things. So, I think often times they have more of a consumer mindset, but I think what we’ve found is a lot of things that work for the consumer space, if we can just turn them a little bit, they work really well for B2B as well.

So, drip marketing was one thing, looking at what’s it called? Shopping cart abandonment. We don’t have that because we don’t have a shopping cart. But if we see you looking at our pricing page and you haven’t taken a demo, that’s the equivalent of abandonment for us.

Andrew: I see. What’s your software that you use to keep track of that?

Anand: What do we use? Our stack is pretty crazy right now.

Andrew: I’m trying to hunt down all the page source. I can see that you guys are using Google Retargeting. I can see all the basic stuff, but I can’t see all the software.

Anand: Intercom is one of the tools that we use, which lets us do in-app messaging really well. So, that’s been really good. Instapage for some of the pages that we spin up. What else do we use? MailChimp. I don’t know how we do that last part with the page retargeting.

Andrew: There are a few that do that. Marketo does that. Infusionsoft does that.

Anand: Part of this is because we’ve been revenue-funded, as we like to say. We’ve built a lot of stuff in-house that probably, looking back, we should have just got a vendor to do for us. But we were so conscious of expense in the beginning.

Andrew: So, it’s easier to code it up than commit to it.

Anand: I think we sort of started to buy specialist software more now that we have a little bit more, we’re not worried about meeting payroll. But back in the day, it was like, “Well, let’s just build it ourselves.’ So, I think a lot of the stuff we do have is pretty homegrown.

Andrew: What’s your revenue now?

Anand: We don’t disclose… We’re in the high single digit millions.

Andrew: High singles. So we’re talking about $5 million to $10 million.

Anand: Yeah.

Andrew: And you’re profitable.

Anand: Yeah, always been.

Andrew: Over $1 million in profit?

Anand: So, we plow it all back into the company.

Andrew: Yeah, of course you do. I guess what I’m wondering is what kind of a cushion do you keep for yourself for stability since you’re basically out there on your own right now.

Anand: Yeah. We can’t hire as quickly as we’d like to right now. So, we probably have a year and a half of burn in the bank. Assuming like nobody renews and we close no new sales and we kept the exact same team, we’d be good for another year and a half. But if we could grow the sales team, we’re going to be at 9. If I could grow it to 20 tomorrow, I’d grow it to 20. If I could grow a content team from 6 to 12 tomorrow, we’d grow it to 12. So, we just can’t hire fast enough right now.

Andrew: So, why aren’t you raising money?

Anand: Yeah. I don’t have religion on this. I left Amex to be my own boss. I like the idea of growing it our way. We get inbound interest relatively frequently. We may do it a little bit down the road. There are a couple of nuggets or couple of elements of the sales process that I really want to nail. I want to make it McDonalds, where you just put this in and this comes out. There are a couple of aspects of it that we’re still not where I think we need to be. Once we get there, then it will be time to potentially raise money because then we can scale this thing to the moon.

Andrew: Yeah. I get what you’re doing. Well, it’s a phenomenal business. It’s so cool to see how much you’ve grown and to hear the story of how you got here. Wait, one more thing–how do you guys use Mixergy? You’ve mentioned that you and people on the team at CB Insights use Mixergy. How do you guys use it?

Anand: I think the big ones are the things that you have around marketing, so people who talk about customer acquisition or media probably are the two kinds of interviews that probably do the best. I think recently you did something about interviewing.

Andrew: Yeah, my interview process.

Anand: Yeah. Some of the guys on the team are experimenting with the idea of a podcast. So, I sent it to them. I said, “If you really want to do this, you need to learn how to interview and you should learn what Andrew does because he’s good at it.” So, I don’t know if it’s a course or video or whatever. I think they’re looking at it and are potentially going to be doing that. But I’d say the customer acquisition marketing things that you guys have are probably the most interesting to us.

Andrew: Like where Jermaine Griggs says that he teaches people how to play piano by ear. He will ask people that come to his site, “What kind of music do you want to play? Do you want to play gospel or rock and rock?” and then drip out different emails based on the style of music they’re into so he can talk to their interest instead of being generic. It seems like you’ve brought those kind of customer marketing techniques.

Anand: I think the other thing we’ve actually learned from you are just your emails. We just did a webinar and you always do that, “In this, you’re going to learn one, two and three.” So, our webinar template was very much modeled after that.

Otherwise, we tend to like get into the weeds on the data a little bit because we’re data geeks and we love that. But what you do when you make it all about the user or the listener, that was sort of the ethos we tried to go for on the webinar. So, I think those emails are interesting. We’ll just forward it around and say, “Hey, look at how they spun this into the benefit,” which is really cool.

Andrew: Yeah. We keep experimenting with ours and it’s really cool to know that you guys are watching it and that you’re listening and you’re getting stuff out of it. I know I’ve gotten into so many conversations about CB Insights. Unlike other businesses, you speak directly to people in the startup, investor, tech scene.

It’s one of those businesses that no one expected to do well because frankly no one knew about you guys in the tech community. You weren’t on the homepage of TechCrunch talking about how you just raised $10 million. You weren’t at all the parties. You’re just a guy who was sitting head down working like mad and built this thing up and it’s really inspiring to see. You built this tool up that so many people in our space now are watching.

Anand: Cool. I appreciate it.

Andrew: All right. Anand, thank you so much for doing this interview.

Anand: Thank you.

Andrew: Congratulations on the success. The website, of course, is CBInsights.com.

Anand: Cool. Thanks, Andrew. Thanks for the time.

Andrew: Thank you all for being a part of it. Bye everyone.


7 thoughts on “How to build a startup with no VC funding – with Anand Sanwal

  1. Samir says:

    What a cool story. Curated data wins. Hey Anand, thanks for sharing your thoughts on Mixergy.

  2. Owen McGab Enaohwo says:

    Andrew and the Mixergy team, this is one of your best interviews so far!

    My favorite soundbite was when Andrew asked Anand why he has not raised money and he dropped some knowledge bomb on us….

    “There are a couple of nuggets or couple of elements of the sales process that I really want to nail. I want to make it McDonalds, where you just put this in and this comes out. There are a couple of aspects of it that we’re still not where I think we need to be. Once we get there, then it will be time to potentially raise money because then we can scale this thing to the moon.”

    Currently, I do not see a better point to raise money than at that point!

  3. Emily Veach says:

    Great takeaway, Owen. Totally biased here, but it was really helpful for me as a CB Insights employee to hear more about our story.

  4. Owen McGab Enaohwo says:

    @emilyveach:disqus that’s awesome.

  5. ashleyharris21 says:

    If you look for extra profit on the side from 50-300 dollars daily for doing an online job on your computer from home for 3-4 hours daily then this may interest you…

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