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All right, let’s get started.
Hi, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Over 600 entrepreneurs have come here to tell the story of how they built their businesses, share their experiences, both positive and negative, so that you can learn from their experiences and build your own successful company and come back here and do what they do, which is share your story and teach others.
The big question for this interview is: how does a founder turn 10,000 Euros-worth of server equipment into a company that sells itself for millions. Antonio Ferreira is the founder of Esoterica, the first ISP in Portugal. I invited him here to tell the story of how he built and sold the company, and to find out about his latest company, LunaCloud. LunaCloud, which is a cloud provider which aims to bring simplicity to the world of cloud services. Antonio, how’d I do with your last name? What’s the right pronunciation?
Antonio: OK, in Portuguese you would say Ferreira.
Andrew: Ferreira. I didn’t get it. The important thing is that I’ve got it from you on tape and the reason that I think it’s important is as someone who has introduced now hundreds of people I often will go back and watch video tapes of them saying their last names so that I can try to get the pronunciation right. Hopefully I’ve helped someone who’s going to introduce you on stage with the correct pronunciation.
Antonio: So, Antonio Ferreira. That’s the name.
Andrew: There you go, for all the people who are going to be introducing Antonio. All right, you sold the business. What happened afterwards? There was this little joke that you and your friend used to tell. You and your friend used to tell each other that actually it became a reality. What was that?
Antonio: Actually, in school we used to say to each other, “One day we’ll go to lunch in Paris,” like it’s an impossible thing to do. And actually, we ended up doing exactly that, which was a great time. We ended up having lunch at the [inaudible] restaurant called, Les Ambassador in Paris. We took a plane, went there for lunch and then came back to Portugal. It was great.
Andrew: So, you flew out there just to have this 5-star lunch and flew back?
Antonio: Yeah, we spent a huge amount of money having lunch, of course, but we did it for the fun. And because we remembered at school saying that, you know, going to lunch in Paris is the thing you will never do in your life. And we just did it.
Andrew: What a way to celebrate one of the big accomplishments in business. Before we get into the story, I want to drive home that this wasn’t an easy business to build. It was great that you sold it, and I love that you were able to go and celebrate in style in Paris. But can you tell us about those eight hours? Actually, can you tell us about the time before? I’m trying to introduce it by reading specifically off my notes, but I think it’s better if you tell it directly.
Antonio: Yeah, well, when we started the business I was at the university. It was in my fourth year at the university. I was connected to the Internet. Actually, my university was connected to a place in Switzerland called CERN. That’s where the worldwide web was invented, by the way. And my other four partners were also at their own universities and connected to the Internet. So we thought this is a great business. However, you know, this was not easy, like you said. We started the business. I can tell you more about that later. But at some point we were owing people money, working for no salaries, and waking up late at night because we had a page from a server going down. And raining, going in the pajama to the server room just to connect it again. It was not easy times.
Andrew: And the eight hours a day actually that I read from my notes, isn’t your eight hours a day. This is your friends who are same age as you. They went to work at banks, they went to work for big organizations and they didn’t have to work as hard as you, they made more money then you, and they were living. I had a similar lifestyle. I was building my first company in New York. My friends went to work on Wall Street or at the big management consulting firms. They led a posh life. If they had to stay at work I think it was after 6 p.m. a town car would be waiting downstairs to take them home. You know, we wouldn’t end the day at 6 p.m. They, god forbid, if they ever did would have to be driven home in comfort. It was really painful for me to go through that. What were you thinking? Did you doubt yourself at the time? Did you say I must be crazy or was it empowering?
Antonio: Well, yeah at sometimes I thought that. Because the usual way was you get out of university with a good degree and you go work for a known company and make some money and work eight hours a day. And I actually remember one of my friends working at the bank, exactly those were eight hours a day, making a lot more money then I was doing. And going home not really worrying about his business, if he had to work the next day. And at some point when I was owing money to some people and working, not eight but sixteen hours a day, and by the way and loving it. You know I wondered, am I doing the right thing? Is this going to have an end at some point? Am I going to make some money, is this going to make a profit? I had those doubts, yes.
Andrew: And so why did you stick with it even though you had those doubts?
Antonio: I think ultimately if you do what you like to do I think it’s easier. I really enjoyed, I loved what I was doing. And I thought, you know, that this had a purpose. And whenever I had a customer connecting to our company, connecting to it through the internet, you know whenever customers talked to us we thought we’re really doing the right thing. Because I was enjoying, you know, doing it, seeing the world wide web grow. You know, seeing the new websites. This was easier for us. Actually not having a family, not having a house to pay, not having kids to grow, it was a time that it was possible. I don’t think I could do it again now under the same conditions.
Andrew: You started 1994 by. How many people did you end up having? How many customers did you end up having at your ISP?
Antonio: Well, when we sold the company we had about 15, 20,000 customers, around that number. And our revenues at the time were, so it’s five years after we started, about $5 million dollars a year on revenues.
Andrew : Wow.
Antonio: It was good business at that point.
Andrew: Did you ever get any outside funding or was it all you and your ten thousand in servers?
Antonio: Well the first year, only has 10,000 Euros at the start. Then we borrowed some money from friends and we had a little bit more, not much more, after a year we realized that we didn’t have enough to keep going. Because in this business, this is capital intensive business, we had to grow by investing a lot more. And when we grow we have to invest again. So this is a scale, this was a scale business. So at some point we had to find someone willing to put money. So we went to banks, of course, the first option. And banks were looking at us, what’s that, the internet? What’s your background, a student? You know, no money for you. Okay, thanks Mr. Bank. So at one event we found a guy, he was a lawyer, he was older than us. A guy in his 40’s or something. And of course he was, he knew that the internet was a big thing in the world. So we met him and we told him about this business and finally he agreed on financing us. So he bought 51% of the business for about $300,000 at the time. This was money not for us, but for the business itself.
Andrew: He got such a great bargain. You also, he did didn’t he?
Antonio: Yeah, he did. You know what he told us? He told us, you know, look I believe in you. You seem like serious people, you know, talented enough to make this go. But if I ever lose this money I will tell my wife that I just crashed my Aston Martin (?) seven.
Andrew: Can you imagine that? You’re struggling, working nights, and just trying to put a few thousand dollars together in the days before free flowing cash from venture capitalists and angels and frankly in Portugal it was never as free flowing as it is in parts of the US. And this guy is, just, it was just an Aston Martin. It’s either I buy this car, or I help you build this future of the internet in our country.
Antonio: [??] ended up doing the second [??].
Andrew: You also borrowed money from an ex-girlfriend right, or from someone who’s a former girlfriend now?
Antonio: Yes, a former girlfriend, yes. [??] initial 10,000 Euros in the company, but then at some point there was no money and I ended up borrowing about, I think it was around 2,000 Euros from this former girlfriend. I told her look, this is a good business, I will double your money in a years time. Actually I ended up tripling her money in two years. So it was a good deal for her.
Andrew: Tripling her money in two years.
Andrew: It was a great deal for her too.
Antonio: It was.
Andrew: All right, let’s go back and see how this all happened, and then we’ll talk about LunaCloud. In fact, really quickly to help people understand what that logo is over your shoulder. LunaCloud is like what? How do we understand what LunaCloud does? Then we’ll go back in to talking about the ISP you started.
Antonio: Luna-Cloud is my new start up. We will go public in April. It’s basically a cloud provider, we will compete in the same space for people that know, Amazon web services and Rack-Space. Those will be our competitors. So we will provide resources like, compute resources and storage resources to people that will pay to use.
The logo behind me is basically representing the cloud which is a big trend in the industry right now, and the moon you can see is smiling, its a mix between the moon and the cloud.
Andrew: I use Amazon services and Rack-Space. How are you guys different from both of them?
Antonio: Well, one of the things we’ve noticed is that most of the big cloud players are all U.S. companies. We believe there is space for a Euro based company to grab some of the market share. So we will take care of all the differences that exist between European countries, cultural differences, and marketing differences, that’s one.
In terms of [??], I believe that both Amazon and Rack-Space are not doing the best they can. They are not putting the benefit of their skill to the customer. So I’m sure we’ll give a price that is significantly lower than Amazon and Rack-Space. Price will be one of the things too.
Thirdly if you go to the Amazon web services web site it’s really, really confusing. You have to spend a lot of time trying just to understand what they are selling. I believe like Leonardo Da Vinci said once, ‘Simplicity is the ultimate sophistication’. Steve jobs also reiterated that, and I’m a big fan of both of them. So I believe that simplicity will be one of our key differentiators as well.
Andrew: All right, I’m glad you said that by the way, because Amazon is very complicated for me. I mean we use Amazon now, but the first time I went in I said, I just need a place to store all the large files because every time I do an interview it ends up taking a big chunk of my hard drive. I just want to off load it off my hard drive to a safe place that will expand forever so there’s no more limitations like there may be for say like a drop box.
[??] with Amazon, it’s such a big headache and there’s nobody that I can call up and get any support. It was just a lot of trouble and I ended up going with a different solution. So I see what you’re saying, I eventually figured it out, but it took me forever and, I’m glad that someone’s pointing out that, hey, if you can’t figure it out it’s not your problem, it’s probably the providers problem, it’s Amazon’s problem.
Antonio: Yes, they need to make a more simple, but they’re so huge right now, all they care about is conquering the world. They are one of the pioneers of cloud, so we have to thank them for that. However, we believe we can do things differently and grab a very significant part of the market share, at least in Europe, and later on, who knows, the U.S., Latin America, etc.
Andrew: I like that you’re taking on these giants. Let’s go back and tell your success story now so that people can learn from you, and also frankly be inspired by the way I was when I heard your story. Where were you just before? How did you meet the three co-founders that you had in the business, in Esoterica, the ISP that you found, you launched, you sold and that we’re going to focus on in this interview?
Antonio: Actually I was in France for my Computer Science degree. I was at a university called, INSA Lyon which is one of the main engineering universities in France, and I met these guys through the internet. So basically one of them was in Porto [SP], and two of them were in Lisbon.
We didn’t know each other, but we basically shared the same muse [SP] groups, the same bulletin boards, the same mailing lists, and at some point we were discussing over the internet we thought we had more or less the same ideas of starting a business to get people connected to the internet. So later on we decided that we should meet. So this all these chat systems like you know Facebook today are great, but if you don’t meet people face to face things are not the same. So we basically met face to face a couple of months later and we decided that we went along pretty well with each other so we started, you know, let’s start the business.
Andrew: Okay. What message groups by the way were you on? I’m trying to get a sense of who you guys were back then. I remember the days when in news groups you can get to know people and actually build something with them.
Antonio: Yeah, some relation, let me try to think about. It was mainly technical news groups like, I don’t remember the names anymore but something related to programming. You know, world wide web. There were not that many news groups at the time. It was hundreds of news groups. Later on it became tens of thousands of news groups. But actually it was the place to go to exchange ideas in different topics. And we were mainly related to, you know, servers, programming, world wide web, the internet and so on. And knowing Portuguese guys, you know, maybe there were maybe a thousand Portuguese people on the internet at that time, so I know part of them.
Andrew: All right. So I see how you met the co-founders. How did you guys come up with the idea?
Antonio: Well, we thought you know, being able to send a message to someone on the other side of the world and, you know, this person being able to read it five seconds later was so powerful that we thought, everyone ultimately will be connected to the internet. This is meaningful. This is something really, really powerful. So we thought before any of the business we need to make sure people connect to the internet. So we said, let’s create a pop, a point of access, a point of presence, in Portugal, for people to connect using a local call. So the alternative at the time was, okay I can connect to AOL and Compuserve in the US but I will pay an international call. This was really expensive. I really one of my co-founders, one of my partners, sometimes he spent about four or five hundred dollars a month just to get to connect to AOL. This was the closest thing we could get if we not at university.
Andrew: So what he would do is, I’m sorry by the way, is the mic from your phone, is that what you’re using?
Andrew: It is. When it bounces on your shirt it seems like it makes noise. You can just maybe move the collar a little bit and it will work out okay. I want you to be comfortable.
Antonio: Is it better now?
Andrew: Yeah, that seems to be doing it. So he was paying hundreds of dollars to make a long distance phone call to AOL and then AOL would connect him to the internet.
Antonio: Yes. AOL at the time was a connection to the internet. They also had their own private service, it was a closed network. Later on they became, you know, also an internet access provider in the US. But yes, he was spending a lot of money to get connected. And this was not the way that the mass market would connect because it was too expensive. So the way for the mass market was with local pops, with local calls. So that it was cheap to get connected to the internet.
Andrew: I see. Is there some. Actually, can you tap the mic on your earbuds? Oh yeah it is that okay. I wanted to make sure it was coming in.
Antonio: Is it better?
Andrew: Let’s see, now your volume just went down.
Antonio: Okay, and now.
Andrew: It’s good.
Antonio: Just doing this the right side, okay. This is an iPhone make.
Andrew: It is a great headset.
Andrew: It’s still complicated. Today when you think about setting up a website it’s easy. You just, you know, you use Amazon or you use LunaCloud to run your system. Of in fact you just go to any old hosting and you just run a website. But, and even back then it was fairly easy to run a website. To connect people to the internet wasn’t easy. Why start a business, your first business, as an infrastructure business, as one where you have to evangelize the internet, where you have to reach the smallest population in Portugal and convince them to go online? Where it takes so much money to get started and to keep growing? Why this business?
Antonio: Well, we really thought this was the next big thing after the invention of the wheel. And so, because we believed it so much we thought, you know, this is the way we need to go. Of course, today we would build a business plan, try to get proper financing before. We didn’t do that at the time. We just started and whatever money we had we put into buying new servers or new modems, whatever. But if we wanted an online business, we really had no choice of building an access provider before. So that’s how we started. We ended up only doing that because it was so big and growing so fast.
Andrew: Back then, you told Jeremy the producer that Toyota.com was still available. Cocacola.com wasn’t taken.
Antonio: Yeah, yeah. I remember I missed this business opportunity because lots and lots of domains like Toyota.com, Cocacola.com, they were not taken. So it was as cheap as spending 40 or 50 dollars at the time to raise lots of dot.co domains. Some of them would sell for millions a few years later.
Andrew: You considered getting into that business. Why didn’t you get into that business instead of the internet service provider business, the ISP?
Antonio: Actually when we thought that was a real business. Many people were already in the business. So I remember the dot.com domains not being taken before, but at the time I didn’t thought this was a business. You know, I just thought, I have my own brand, I’ve got to get my own domain. I didn’t think, you know, I can get lots of other domains and then just resell it. But you know, two or three years later a few people discovered that line of business and today it’s still a business for many people.
Andrew: It is. They ended up doing some of them very well with it. You also, you mentioned that you admire Steve Jobs. Did you also create one of those blue boxes like Steve Jobs did that lets you make long distance phone calls? How did you do it?
Antonio: Actually, it was not me directly but one of my partners was a hacker in his soul. And his first way to solve his problem with international calls was to cheat the local exchange with this blue box to make free phone calls to the US. But we couldn’t do that for our customers of course.
Andrew: I see, so for himself he figured out a way to connect to the US for free, use the US internet service providers, connect to the internet, enjoy and have a good time without spending hundreds of dollars.
Antonio: Exactly, exactly.
Andrew: I see. So then that’s not the method that you took to connect people to the internet. What was the method? How do you go about doing this?
Antonio: Well basically we started by not buying but building two servers. Basically these two servers were computers that had the e-mail service and the news group service and our own website. We had a modem that we bought, an expensive modem I remember it was around $2,500 from Motorola. And we bought the second one (?) in UK. Because our internet provider at the time was a company called Demon Internet. So we use the line from Portugal to the UK, that’s 2,000 kilometers, we connected the line to the two modems. The modem was connected to our servers and basically people connecting to our own local modems with a local phone call through this international line, could share an internet access and connection.
Andrew: And that was, how much did that cost you? That was $10,000 in order to build the whole thing?
Antonio: Yeah, in order to be able to do the whole thing. We didn’t have money to by the server so we ended up buying the components, you know, the RAM, the disks, the mother boards, the cases. So we built the servers ourselves and we saved a few thousand dollars with that. But we spent a few days building that as well. But you know, time was cheaper than actual money. So we did it that way. And then the biggest expense after this investment was the lease of the line itself. We only had money to pay for one month of this lease line. So we had to be successful or otherwise we would go bankrupt.
Andrew: You had to sell enough in the first month in order to pay the bills in the first month or else you were done.
Antonio: You know how we did it? We started by doing prepay only. You know for a flat fee. So it was a very good price for people that wanted to spend a lot of time online, but they had to pay this price in advance. So this is how we actually got money from our customers. For a three month service we got 50 Euros per quarter. So but we got the 50 Euros on day one. So with these 50 Euros times I don’t know how many customers, we could buy additional modems and pay for the lease of the lines. Of course we had to provide the service for another three months. But as the customer subscriptions were growing this model, you know, is okay.
Andrew: You know, one thing that I. I’m not sure if. Well here I’ll ask the question. How did you know you could trust these co-founders? A lot of times when I interview entrepreneurs and I ask them how did you meet your co-founder they say things like, we went to school together, we grew up together, I knew him forever, we were best friends. And here you were connecting with people that you only knew online. One of them was capable of cheating the phone system in order to make calls to the US. How do you know that these are people you can trust with half of this vision and half of your business, and, more than half?
Antonio. You know, being young is good because you trust people and we trusted each other because we were young guys. Nowadays we’re much more careful with whom we lay. So, but I think you know we were also lucky because every one of us was, we were nice guys, you know, and we could be trusted. So, I think it was the lack of experience that has gotten us together. And I’m glad about that because I would be much more defensive today. Eventually we found out that we were not the best partners. One of them for example had to leave the company later on, you know. This is the kind of problems that whenever you have a business you end up having problems with your partners.
Andrew: What kind of problems?
Antonio. Well, because we had no sellers at the time, you know, we had to put more or less the same effort into the company. And at some point about a year later we found out that, we realized that one of them was not putting enough effort in the company. Not working as hard, not bringing that much value. So we had to tell him, you know, look, we believe we are providing more than you are so it’s probably better for you to leave. This kind of problems. And later on I also remember, for example, one episode in which we had to build our own CD to sell to people for them to install internet access in their computers. We had two choices at the time. Going with the biggest browser which was Netscape or going with the second runner-up which was Microsoft Explorer. I was you know from the group that, you know we need to go with Microsoft. Because Microsoft eventually will get Explorer right and will dominate the browser market. But some other partners said, you know, Netscape is the open source community, let’s go with them. We ended up choosing Microsoft. We ended up losing one of the partners because of that as well. But I think we took the right choice.
Andrew: Because he just didn’t want to go with what they considered at the time the evil empire.
Antonio: Yes, exactly.
Andrew: I see. And so you lose a partner over that?
Andrew: And does he lose his share in the business.
Antonio: Well, we had divided his shares. This was after the angel investor came so we had a little more room to maneuver. We bought part of it and the angel investor bought the remaining shares. He made a little bit of money, not a lot. But it was okay for him. So he ended up leaving the business, yes.
Andrew: And at the end it was two co-founder who stayed on until the sale.
Antonio: Yeah, and the angel investor, yes.
Andrew: And the angel investor.
Andrew: How much did it cost you to buy your domain, Esoterica.com.
Antonio: It was of course a lot more expensive then today. It was about, I’m not sure if it was about fifty dollars, a hundred dollars, around that per year.
Andrew: Yeah, I think it might have even been seventy five dollars for domain. It’s funny the domain prices went down because of competition and actually, everything went down.
Andrew: Every domain. Everything went down.
Andrew: How did you get your first customers? I know now you’re under the gun, you have to get new customers or else you can’t pay your bills and you go out of business.
Antonio: So, we had friends at the university. We were also users of things called BBS’s, Bulletin Board Systems. These were kind of a local closed networks in which some, you know, some geeks, some friends shared filed or programming tips. So we started spreading the word in university and in this BBS’s, and we ended up having initially a customer a day and then two customers a day and it started like word of mouth. No advertising.
Andrew: And these, I remember these Bulletin Boards. These are bulletin boards where you would upload a file and then you can download two files in exchange.
Antonio: Yeah, things like that. You exchange things with people.
Andrew: And it would be, it wouldn’t necessarily be a file for file but it would be megabyte per megabyte because they wanted to make sure it was all fair. So the people you were courting to go to the internet were people who were going around the rules and sharing files among themselves and these networks, how did you know you could trust them? How did you know that they weren’t going to mess with your system? Was there any concern about that?
Antonio: No, not really. Actually you know, if a customer pays you, you provide the service. If he uses the server under the acceptable use policy that we had at the time, you know, we don’t really care about what he’s doing. The same way a phone company doesn’t care what people are doing with phones, we do not police people. This is the way that it’s still being done by the way. So you know, if he prepaid we didn’t not have to care about getting him off if he doesn’t pay, because it was a prepaid system. So he gets three months. If he doesn’t pay a day later he doesn’t get an additional three months. So it was easy to trust customers.
Andrew: I’ll tell you why I have trust issues around this stuff. Because I shouldn’t have been trusted back then. I remember Prodigy in the US. They were competing with AOL.
Andrew: And they were going to be the internet service provider, not this like gated, this wall garden and the internet but all internet. And I in order to get you go sign on and pay they would, you’d put your disc in. they would dial into the internet. They would bring up a website where you would put your credit card and name in. What I discovered was, me and my brother discovered was, if you just minimize that window, you can open up internet explorer or anything and just go browse the internet all day.
Andrew: And we couldn’t afford the internet in order to run our business. It was only like 20 bucks a month and it was still too much. That’s the way we connected to the internet.
Antonio: That’s great.
Andrew: And people back then were clever. They were good people but they were also able to get around things. Did you have any issues like that?
Antonio: Well, yeah, eventually we ended up having people bad, you know, send us a credit card number that was a fake one. And they got service for a couple of weeks for free. Things like that. Or sending us fake transfer receipts and we thought we had the money in the bank but then we checked. It wasn’t there. We always have those issues but it was not huge enough for . . .
Andrew: It wasn’t a big issue.
Antonio: Yeah, it wasn’t a big issue.
Andrew: I see. All right. So you get your customers. It’s time for you to grow. What do you do beyond going to those message boards to get new customers? You know, now you’re paying . . . actually, let me ask you this before I let you answer that question. What was break even? How many customers did you say, “If we could get that, we could survive.”
Antonio: I don’t remember. It was something around 500, 1000 customers. Actually, the first year we made, if I remember well, 10,000 Euros on revenues and about 500 Euros profit. It was the first year.
Antonio: We didn’t make a profit in the second year and the third and fourth year. But in the first year we only really spent the money that we had so we had grown not too fast and, but we got enough customers, about 500 to pay our bills. Then when the angel investor (sounds like) came we thought that we needed to put in some marketing on the business. And that’s when we started our first marketing and campaign. It was advertising on magazines and on radio. And basically the message we were telling people is, “Look. We’re not like this public Telco. We’re real specialists. If you talk to us we’ll give you technical support. You’re not talking, you know, to a call center,” because they’d understand. So basically we attracted all the power users, all the geeks, all the technical people that wanted to spend their time on the internet and letting people, you know, knowledgeable people to speak with on the other side of the line. That was the message in our first advertising campaign.
Andrew: All right. And the first, can you tell people about the setup–I’m looking here on my notes–at where the computers were, the first servers. Can you describe that, ‘cuz I think that really shows where you guys started?
Antonio: Yeah, like I told you, so we built the first two servers and we gave them a name because we had to two name servers [??]. The servers, they have an IP address and a name. And the names for our servers were Arthank and Mithlond. You know, for those that know this was named after Lord of the Rings books. The cinema version didn’t take this at the time, on the books. So we built those servers and I remember that we had a table with a computer screen and the server underneath it, and a chair. So the same servers that were providing e-mail service and new service to customers were our work stations so we had to share with work station between us to work a little bit, you know, and to chat with our customers or build some new stuff.
Andrew: Wow. So that would be like me using my computer, my iMac on my desk right now to let my customers access my service and to also do word processing and chat with you.
Antonio: Exactly. So I was using part of the CPU and part of the ram to open word while the customers were reading e-mail and newsgroups on the same server. That’s right.
Andrew: I’m looking here and seeing that, like you said, your first servers were named after characters from Lord of the Rings. Your cofounder was someone who found a back door to the US phone system. You were on bulletin boards. You sound, on paper, very geeky but I’ve got to tell you. I put a jacket on for this interview because I’m looking at the photo that I have of you. You look like a movie star with the tie and everything. You look good here. You look on the Skype photo, you like you’re in GQ magazine. Did you have a transformation? Were you a geek at one point and then you suddenly changed to this? You suddenly became Pierce Brosnan?
Antonio: Actually, my wife likes Pierce Brosnan really well, so that’s a good comparison. No, I was never too geeky in my appearance.
Andrew: I see.
Antonio: Let’s put it that way. So, you know, I like to dress up directly. I use a tie more than I used to now, actually. You know, I like to be well dressed–that’s right.
Andrew: Did that come naturally to you? Were you the cool kid in school?
Antonio: No. But actually, I was a shy kid in school; one of the best students, but you know, always shy, without too many friends, but in some ways admired, if I can say that, because I was doing well in school. At that time, when we are younger, we think we can save the world, transform the world and conquer everything. I didn’t say that to people, but I felt that way.
Andrew: So they looked at you and they felt, this guy is going somewhere. There’s something going on with this person.
Antonio: Well, I hope so. At least I felt that way, you know. I never thought I would not make something. I always thought, I need to do it, and I spent as much time as I could. I am still very perfectionist, and I believe that if you spend enough time doing what you like, and if you put yourself in the customer’s shoes, you know, when you buy a service that’s what you like, I tend to think a lot about that, from that perspective. You end up having success, I think.
Andrew: One way that you put yourself in customer shoes was to come up with a flat rate pricing plan.
Andrew: But it was dangerous. How did you come up with it; what were the dangers? Tell me about that.
Antonio: Well, the danger was, you know, we have all this variable costs to get ourselves connected to the Internet, and we’re only charging a fixed cost. What this means is that, customers who will not use a lot of the Internet, just a few hours a month, we will make a huge profit on them. But if a customer spends five or six hours a day on the Internet we’ll make a huge loss with those customers. So this business model was built on the average customer. We made a bet that the average customer would spend this many hours on the Internet, and we need to make a profit for the average customer. And this turned out to be OK. I remember that that was not the case; that the business model for connecting people to the Internet was not that at the time. The model was to charge a price per minute, or a price for download traffic, or X-dollars for kilobyte or megabyte. I remember on the news groups the CEO of Telco in Portugal telling me, publicly, that your business model doesn’t work. You will go bankrupt in a few months, because you are having variable costs and you’re charging fixed prices. Two or three years later he ended up doing the same thing as we did, because the costs started to become fixed, as well, and this was the model that attracted people to connect to the Internet.
Andrew: Man, those were the days when the CEO of a big Telco would get into newsgroups and chat with people.
Antonio: Yes, that doesn’t happen anymore.
Andrew: Weren’t you nervous at the time? Now you’re getting feedback. In retrospect you look back and you say, I was proven right. I know business. I know my business. Trust me in the future. But at the time, weren’t you nervous, saying, this guy knows something. He’s in a smart place.
Antonio: Yeah, we ended up doubting ourselves, questioning whether we were right. But, you know, when we got our customers we noticed that some of them were attracted by this flat rate, but if they were to be paying a variable fee, per minute for example, with the hours they spent on the Internet they would pay less. But they wanted to feel the comfort of not paying more than 50 Euros when they spent more time on the Internet. And this for the customer is simplification, you know. It’s simple for them. ‘I do not worry. I pay 50 Euros–that’s it.’ And this was powerful enough to attract customers.
Andrew: You know, it doesn’t seem rational, but I make the same decision myself. I know that I pay more for unlimited Internet at ATT&T on my cell phone. But I don’t even come close to hitting the second tier. So if I paid second tier, which is lower than the price I pay for unlimited I’d be saving money every month. But I just want to know, no matter what; my fee is capped at, what, $30 a month, or whatever.
Antonio: Yeah, people ultimately want their last symbols.
Antonio: For example, a few years ago I downloaded music from Napster and things like that. But it was so much of a struggle, [??], I never downloaded any music again. It’s so simple to click a button and pay a dollar and get the music. Even if it’s more expensive than the free music the process is so simple that you end up going for the simple process.
Andrew: So, life was good. You were proven right. This big Telco CEO eventually was proven wrong. But you did have some big challenges along the way, including one time that almost broke the company. Do you know the challenge I’m talking about?
Antonio: Oh, yes, I do remember. We had a monitoring system, and it was not the fancy, big-screen on the wall with lights and noise. It was basically a pager, if you know what that is?
Antonio: So, it was a text message sent to a small device that we had on our belts. Basically, we had one server monitoring the other servers, and whenever something was wrong the server would send a text message to the pager. And at some point at 2:00 a.m. we got the page saying, ‘Email down, music down, web down.’ So, everything was down. And because one of us lived about ten minutes away from the office, this guy was very quick to go there. We went into the office building, opened our office door and suddenly nothing was there. So, the ten servers that we had there had disappeared. But, because he was so quick he went around the building and found that the servers were disconnected in some other room. Actually some thieves went there during the night and disconnected everything stole our servers.
Andrew: So, how do you recover from that, because you’ve got customers whose data was on your system, ‘cuz you were doing email at the time, too.
Andrew: And you can barely afford the computers in the first place, and now you have to go and replace them. What do you do?
Antonio: We were very, very lucky. This is the time when you need some luck, you know. And because we found the servers, because we were quick in reacting we took all the servers from the nearby room, connected everything again, and in a couple of hours everything was up and running again.
Andrew: Right. You found the stolen servers, you’re saying, in a nearby office room. The thieves took them, but they didn’t get away with it.
Antonio: Yeah, they had to leave the building through a window, and they couldn’t take the servers with them. But if we had taken an hour, instead of ten minutes to get to the office, you know, sleeping, thinking let’s go tomorrow morning and find out what happened. If we had that view we would be out of business. But because we were quick, we were quick enough to recover the servers before they were taken out of the building.
Andrew: What did you do to keep it from happening again, or if it happened again, to keep it from killing your company?
Antonio: Well, insurance.
Andrew: That only gets you so far. That only covers the hardware, right?
Antonio: Yeah, but we put in a new special door, and eventually a few months later we moved to another building with 24-hour security. So we started worrying more about security and spending a bit more money on that. So, that episode was important to us. We were lucky, but that changed the way we cared about security.
Andrew: At what point, Antonio, did you say to yourself, things are good. We’re in a safe place, we don’t have to worry at night that the whole business will suddenly go out the window with thieves, or that the company won’t make it, be able to pay the rent this month and we’ll be out of business. At what point did you say, life is good?
Antonio: Well, when we started the business we never thought about selling the business. We actually thought, you know, let’s do a good business. But in 1998-1999 we started getting people and companies from all over the world, including Portugal, not only asking us if we wanted to sell the business. And we said, ‘Well it looks like we are in a good position’ The Internet was big thing, and [fans] and investors were trying to buy companies all over the world to form even bigger companies. And we thought, you know, maybe now that we have a chance if we want to sell the business to make some money. Initially we didn’t want to sell the business, but eventually, when we saw the big players coming in we thought either we have lots of millions and we can compete on marketing, expanding the network, and the team, or it’s probably better for us to sell and let someone else worry about it. That’s actually when a weight was taken off my back, and that’s when I sold the business.
Andrew: I see, the only time, or the, that was the, before then you were always nervous someone could take my servers out the window.
Andrew: My business could go under. I see. Wow.
Andrew: How do you live for so many years with that kind of stress? Were you stressed by it?
Antonio: I was but at some point, you know, it’s, um, you get used to it. I believe everyone has stress. It just depends, you know, the level is different but you get used to some level. I’m usually a stressed person. You know, over the years I control it a lot better than I used to but when you are an entrepreneur you worry about your business. You worry about all the details. You worry about things going well. You worry about the customers. You worry about everything. When you work for another company, you may worry about what you do. Sometimes you don’t. Then you get fired. But it’s a different mindset.
Andrew: I want to find out what happened after the sale and also about LunaCloud but Jeremy, our producer who talked to you, wrote down a few stories that I wasn’t able to weave into this interview but I still want to make sure to get including did you create the first Unisys website.
Antonio: Yes, actually the Unisys in Portugal didn’t have a website. Actually they didn’t have a domain. Again, another example. And we needed a new powerful web server. So we met Unisys and we told them, “Look. We build your site. We host it, but you give us, you know, dual processor machine in exchange for payment.” So I personally did Unisys website so I built it using Photoshop and programming HTML and then a couple of months later, we got our first peek dual processor server.
Andrew: So you ever feel like . . . Well, now it’s a point of pride and maybe, and even at the time I’m imagining it was a point of pride but what about the distraction that comes from doing that? A lot of times in business these great opportunities come to us and even though we get paid to do them it feels like, I can’t take a consulting job. I feel focused on building my ISP. Why did you decide to do that? Tell me a little bit about focus and your perspective on it.
Antonio: Well, it’s true that web design and programming is not the same thing that we were doing and in that sense we were out of focus, but eventually they ended up paying something like . . . I don’t remember anymore, but 25,000 Euros for a month’s worth of work. So at some point money speaks louder.
Andrew: I see.
Antonio: So I was thinking out of focus a little bit but it was worth it, but like you said being focused is really, really important. Not being distracted because we get so many curious, so many suggestions from customers, from partners, from suppliers. And we have to think, you know, regularly about what we want to achieve or what can we achieve better than the competition and focus on that. And focusing is a big thing.
Andrew: What’s one thing that you decided not to do that was a temptation back then?
Antonio: Well, actually, web design.
Andrew: Oh, I see, so there was a temptation to keep doing web design for people.
Antonio: Yes, yes, but I thought, you know, web design is about people and hours and spending, and managing projects and programming. It doesn’t scale. You cannot do ten times more. If you do ten times more, you have ten times more people. This is not a scale business and we want to be in a business that can scale.
Antonio: So we opted not doing web design although web design was very popular in 99, 2000. And we took some of those decisions along the way.
Andrew: The other story was in 1999 you organized an internet event in Portugal. Why organize an event if you’re an ISP?
Antonio: Again, out of focus. But we ended up selling that part of the business to a company that organized the event. So we did the first one only because we were so enthusiastic about the internet so we could get in touch with the founder of Alta Vista, with, you know, one of the Yahoo employees and discussion with them, you know, if we do something in Portugal will you come to speak to people? And they said, “Yes.” So we got enthusiastic about it and for us it was also a means of putting our brand more in the mass market because it was a big thing covered by the press. At the end, it ended up being a not so expensive advertising campaign for us, the first organizer of an internet show in Portugal.
Andrew: I see.
Antonio: So we sold it to a company that did this for another four or five years.
Andrew: The founder of Ubuntu, maker of popular operating system.
Antonio: Yeah, that’s a very, very interesting story. Mark Shuttleworth is now known as the founder of the Ubuntu. At the time he was the founder of a company called Soft Consulting. What’s up is they issued web server certificates for us to connect in a secure way to web servers. And he went to the US, you know, visit Microsoft, Netscape and made sure that those browsers recognized Soft Consulting certificates. And then he started looking for representatives around the world. And we became his representative in Portugal. And I personally became responsible for that business. So I have to send Mark my ID card because if I wanted to be trusted he wanted to know me. And I remember him sending an e-mail to me, look, you were born exactly the same day and the same year I was. That’s great. And he sent me a copy of his ID card as well as a complement. And I remember that, you know, we did some business and two years later just a little before we sold our business he sent me an e-mail saying, I just sold my business for $500 million to Verizon and now I’m going to space. He ended up being the second civilian in the world, after an American guy called Dennis Tidsell. He was the first South African and the second civilian in the world to actually buy a ticket and he went to space.
Andrew: So you had a successful startup. It sold. It was one of the big successes of Portugal. But it wasn’t half a billion dollars. It wasn’t sold for half a billion dollars. How do you feel about that? Do you feel competitive? Do you feel yours isn’t worth as much?
Antonio: You know, I feel, the way I feel about that is that in terms of market share and looking at a small company like Portugal with only 10 million people, I think we did really well. My biggest mistake was to think in a very, to think only about Portugal, only about my natural territory. Nowadays when I think about starting a business I don’t think about, you know, just selling to my neighbors. I think about, can I do it in Europe, can I do it in the world. And then what I would like to have done was to launch a worldwide or a global service provider because i think that with the same kind of success rate, of course, it would be worth a lot more. But, we learn. We learn. I’m very proud of what I have done. And just putting more effort and broaden my ambition in my next startup which actually is LunaCloud.
Andrew: LunaCloud. Alright, let me do a quick plug for Mixergy Premium and then I want to ask you what happened afterwards, after the sale. And the plug I’ll tell you in the form of a story. I actually went to brunch with these, with Charo and Sostrie, two people who have a Mixergy Premium membership. And I asked them, what do you do with your premium membership? And they said, well, you know the course that you do on copyrighting? I said, yeah, of course it was one of our first ones. He said, well we took the notes on it, the one that said put a headline this way, express your ideas with a benefit to the reader in mind, the one with social proof. We took that whole checklist and went to a business meeting and we wanted to convince this guy to do business with us. And even though the checklist was for copyrighting text on the internet they said to me, we had it in front of us and as we talked we went through everyone of the checklists items here. We talked with the person’s benefit in mind, we used social proof to convince them to do business with us, and so on. And as a result they were able to persuade. And that’s the whole idea behind Mixergy premium. I bring real entrepreneurs on to teach the one thing that they’re really good at. In this case the copyrighting case was taught by Dane Maxwell, a guy who in his spare time, he’s an entrepreneur who runs Zany.com. But in his spare time he writes out in long form by hand copyrighting that he admires so that he can learn from them. He loves to sell online using text. So I invited him to teach it. But whatever the topic is, we bring an expert on to teach it. We give you just the distilled, clear actionable ideas, and you get to use them. In this case they used them in an innovative way. They took the copyrighting course and they used it in real life. That’s Mixergy Premium. If you want to have similar results to Charo and Sostrie of Funson.com, go to Mixergy.com/premium. Sign up and if you do now when we raise prices the price that is now will be your price forever and you’ll keep learning from these great entrepreneurs who come to me and turn on their computer screen and teach you so that you can get results like Charo and Sostrie did.
All right. So Antonio, you sold the business and a few good things happened. Can you talk about what, how you celebrated before you talk about how you launched into your next business. Because it wasn’t just sale and then LunaCloud.
Antonio: No, exact, no, at all. Actually I told you about the lunch we had in Paris.
Antonio: That was kind of a, you know, the special event that we did among ourselves. And then I had to buy, I thought, I had to buy myself a present to reward myself for what I’ve done. So I went to Switzerland and I bought myself a $5,000 watch, an IWC, that I liked. That was the first money that I spent that was almost useless but it was a good gift for me. And I also bought my dad a $200 bottle of champagne that he liked because I remember my dad saying at the beginning of the business, and he also remembers that, what’s that internet you fool, don’t start. So this was my way of thanking him because sometimes he brought me to reality and that was also important. He didn’t convince me not to do the business anyway. So, this was the thing that I’ve done. Actually, I was the only founder that after the sale stayed on the business. So I sold the business but stayed because I believed in it and I liked it and this was a lovely world of working to a corporation that was at quarterly in US that we had to put common systems in place to start building process, reporting lines, matrix organizations, a whole new world came to me. And I adapted to it. But anyway, working for someone else is not the same kind of thing as being an entrepreneur so I ended up starting other business, even before LunaCloud. I’ve done a few other things, companies that are still alive outside the tech area. So from time to time I find myself needing to start something new.
Andrew: And so LunaCloud is the thing. You’re going up against these giant’s in this space. You mentioned some of the advantages that you have. You’re going to be simpler to use than Amazon, you’re going to have a lower price that Rackspace. What’s the benefit of being in Europe? You said that that was, that there needs to be a European company for this but doesn’t Amazon have servers in Europe?
Antonio: They’ve got things in the UK, in Ireland, but imagine for example and Italian customer that lives 4,000 kilometers away, or 5,000 kilometers away from the UK. In terms of the network, there is some latency. Of course it’s fast, but for some applications its better to have an Italian node, but Amazon doesn’t have that.
Andrew: I see.
Antonio: Or for the same thing for a French customer or for a Russian customer, for example. Because companies ten to host everything out of the UK. OK, it’s fast for UK customers, it’s OK for French customers, usually it’s not that great for people living in countries far away. So, our model will be to put not a single node in Europe but to put more smaller nodes across Europe so that the user experience is better than what Amazon provides in terms of network latency for example.
Andrew: I see. And for someone who is running an American company whose listening to us now, what’s the advantage to them of using LunaCloud? It’s that they get closer to their customers.
Antonio: Yeah, they can get closer to their customers or if they fear the Patriot Act which enables the US government to ask American companies to bring data about their customers, they can know with the European company. You know, Europe also has laws about that so don’t think too much about that if you’re doing a good business. You shouldn’t worry about that. It’s just proximity to the customers. And the biggest differences, apart from the technical aspect of the thing, is to market not in a global way like say message for everyone, or a local way that is adapted for every market. It’s kind of a local message. Some aspects you need to be global and do the same for everyone but in some aspects you need to be more intelligent and talk the way people are used to in the countries, not only in the same language but charging different currencies and do different channels, work with different partners, go to different events. This is the kind of localization that we’re willing to do.
Andrew: All right, and the website is LunaCloud.com, people can go check it out. Now, if they want to connect with you personally, you’re on Twitter, right? How do they connect with you on Twitter?
Antonio: Yeah, I’m a new user to Twitter but my Twitter ID is Cyber, with a, so C Y B E R A M C F, they can find me on Twitter.
Andrew: A M C what?
Antonio: A M C F.
Andrew: A M C F.
Antonio: So Cyber A M C F, or they can just email me at Antonio@LunaCloud.com if they feel better.
Andrew: What is A M C F.
Antonio: Actually, it’s the initials of my full name.
Andrew: Oh, OK.
Antonio: Antonio Miguel Catano Ferreira.
Andrew: Got it. So he is new on Twitter and if you really want to stand out the only way to do it on Twitter is to talk to someone when they’re brand new on Twitter, otherwise, you’re message will get completely lost in all the other messages he gets.
Antonio: I am finding that.
Andrew: So, yeah, you believe it you’re going to see it. You’ll probably drop out of Twitter in about six months because you’ll be so overwhelmed by Tweets. That’s been my experience. Alright, so it’s Cyber A M C F and frankly, find one way or another if you got any value out of this interview to just go back in and say Antonio, thank you, and connect with him that way. I’m going to be the first person to say it. Antonio, thanks for doing this interview.
Antonio: That was great. Thanks for talking with me and thanks for letting me share my experience with the others.
Andrew: It’s an inspiring story and thank you all for watching.
Antonio: OK. Bye.