Understanding churn and how to reduce it

Sometimes it feels like everybody in the entrepreneur and the SaaS space, including myself, asks “How do you get more customers?

Well today’s guest noticed that and said, “Why aren’t we paying attention to how many customers are leaving?” So he came up with a software that will not only help you realize that you’re losing paying users, but also help you reduce churn and learn from it. We’re going to find out how he built his company, whether it’s profitable or just a quixotic mission.

Matt Moody is the founder of Bellwethr, which helps companies reduce churn and increase revenue.

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Matt Moody

Matt Moody

Bellwethr

Matt Moody is the founder of Bellwethr, which helps companies reduce churn and increase revenue.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I am the founder of Mixergy. Oh, I’ve been told not to touch the mic. Matt, can you hear it if I touch the mic? I wonder if the audience could.

Matt: Oh, just a touch.

Andrew: Touch. That’s what . . . Because I was banging it. Let me move the mic and see. You can’t feel that, can you?

Matt: No. Smooth.

Andrew: I still might want something to protect it. If even one person said they heard a sound, I want to stop it. All right. That’s how obsessive I am. The guy who you just heard is Matt Moody. He created this line of drinks that I want to find out about. It feels a little bit wrong, but I know it’s not. I want to find out a little bit about that. And I want to find out about the company that he’s working on right now.

Matt Moody is the founder of Bellwethr. You know everybody, it feels like, in the entrepreneur and the SaaS space, talks about, “How do you get more customers? Nothing wrong with that, I want more customers. Believe it, I really do. I want more listeners. I want more downloads. I want more subscribers.” There’s lots of people who are talking about it. Matt stepped back and said, “Hey, you know what? Once you get them as customers, you’ve worked hard, you got the landing pages, you got everything. You worked hard, you got them in there, you created the content. They’re there. Do you notice that a lot of them are actually leaving?”

Yeah, churn. Churn is very high for companies. And as I noticed in my company, it’s pretty invisible. Because there’s no incentive for Stripe to send me updates and tell me, “Look at all the people who’ve cancelled.” There’s no incentive on most people’s part to say, “Look at your cancellation rate.” And frankly, I’ll be honest with you, the couple of companies that I signed up for that did tell me about churn, I had to unsubscribe because they would tell me about churn but giving me nothing to do about it. So why do I want to beat myself up?

So Matt came up with a software that will, not just, like, help you realize that churn, you know, losing paid members is a problem, but will help you reduce churn and learn from it. We’re going to find out how he built his company, whether it’s profitable or just a quixotic mission. And we’re going to find out about his last companies include that relaxing company. That’s the one that actually created the drink that I’m talking about. Right, Matt?

Matt: Yep, that’s correct.

Andrew: We could do it thanks to two phenomenal sponsors. Matt, you know about one of them. It is called ClickFunnels. I freaking love ClickFunnels. I got no problem with getting more leads, getting more sales. ClickFunnels does it beautifully. I’ll talk about that. And then the second sponsor is brand new for me. It’s called RingCentral. If you need a company-wide phone number so your people aren’t using their own personal cell phones, I’ll tell you why RingCentral is the one to go with. But first, Matt, good to have here.

Matt: Thank you. Thanks for having me.

Andrew: What’s your revenue, Matt? How big’s the company right now?

Matt: Oh, we’ll be at about a million this year.

Andrew: Okay. Any outside funding? I know you were considering it a little bit.

Matt: Yeah. Yeah, we closed on our seed round back in May.

Andrew: Okay. How much?

Matt: Two-point five million.

Andrew: All right. Give me an example of what you guys do that’s so amazing. And then we’ll go back in time, get to know you, and how you built up the company. I want to learn from how you built it.

Matt:: Yeah. Yeah. So we built underneath, we built, like, it’s a machine learning framework that uses reinforcement learning. It’s more of an automation-based version of machine learning. So we . . .

Andrew: See, once you talk about that, you freak me out. And I think, “All right, it’s either Hocus Pocus or it’s just too complicated.” But talk about problem and solution and then I’ll understand why this makes sense.

Matt: Yep, absolutely. So our beachhead product is called Retention Engine. And the idea is that we want to deliver an experience that’s tailored to a customer, really, at the point when they decide they want to cancel. So, when you click that Cancel button, understand that right now, there’s sort of two schools of thought. There’s the hostage holding, where we make it really painful. And we have to jump on the phone and call somebody that probably don’t want to talk to. And then on the flip side, and there’s a surrender approach, where we are, you know, just clicking a button and it’s over, which is nice on the consumer side. That’s great. Makes it nice and easy to get out of something.

And so what we want to do is we want to take in data. We want to find out, a), what went wrong. So we ask, you know, in our system, it captures that piece of information, what’s going wrong. And then what we want to do is we want to try to resolve that for the customer. But we want to do it in a way that isn’t hostage holding, that isn’t making it super painful. So the way we do it is that we enable the business to come up with all the different solutions or ways that they would come about resolving somebody who wants to leave. And we want to figure out in which scenario and which customer, which of those actions or which of those offers is most likely to result in a customer continuing on with the business.

Andrew: So the hostage holding is a good example of “The Wall Street Journal.” I’ve had “The Wall Street Journal” subscription now for years. I know that I can cancel online, they say it’s too much of a security risk to let people cancel online, even though I can put my credit card online. I can’t email them in. I can’t call. I did try calling them, I don’t know why, but I couldn’t get through to a person. I just said, “All right, maybe I’ll find an article next month,” and I stay subscribed. That’s the hostage holding. I’m basically, I don’t know how to cancel and I’ve accepted my situation with “The Wall Street Journal.” The other side is just cancel and let them go. And the problem with that is what? If somebody just has a cancel subscription button?

Matt: So the biggest problem is that you don’t know what went wrong. So you as the business, I mean, when somebody’s leaving, then, you know, obviously, that’s not great. It’s something that we kind of just sit in denial with most of the time. But the problem is that, it’s not necessarily . . . I mean, it’s a bad thing right then but it also . . . I mean, they’re telling you what’s going wrong and what you need to fix. And so . . .

Andrew: So what’s an example of something that a customer could understand how to fix and then they’d be okay with it?

Matt: Yeah. So, I mean, the one that everybody kind of assumes is the biggest one is like, “Hey, you know, price. Just too much money for me right now.” But you can find that out. Now, what we found is that that is not the number one reason most people leave. Most of the time it comes involved with some sort of support or just usage. Maybe they’re just not using something anymore. In which case, there are other things that the business could do in order to make the product more, you know, kind of look at, like, daily active users or how often somebody is using a membership or something along those lines.

Andrew: So, if what they say is, “I’m actually not using this much.” One thing you could do is tell them, “Here are the other features that we have. Now that you know them, would you be more likely to stay or do you want to stay for a bit?” So that’s one of the things, Matt, that you guys offer at Bellwethr.

Matt: Yeah.

Andrew: The other is you just want to learn, in general, that if somebody’s not using the software for a certain amount of time, we’ve noticed they cancel. Let’s start making sure that people are using it. That’s what you’re taking from it. Okay.

Matt: Yeah, exactly. Exactly.

Andrew: You also let people pause subscriptions. So, if I’m in a subscription, I’m not happy with it, maybe instead of canceling, I just pause because I’m having a busy month or busy couple of months and that’s why I don’t want any of this. Got it. I understand with Audible, I didn’t know this until recently. With Audible, if I cancelled my subscription, they will say, “Hey, will you stick around if we give you a free month, and I could just hit a button, and get a free month, and stick with Audible?”

Matt: Yes. Yeah.

Andrew: That’s a thing? I mean . . .

Matt: Yeah. And you can do it repeatedly. There’s no, like, lock on that. I . . .

Andrew: So, then, aren’t you worried that somebody’s going to do the same thing with you guys.

Matt: Well, and that’s really where our machine learning framework that looks underneath that, that sits underneath, and what it does is that it figures out what’s going to work scenario. And then we also have the ability to control that and make sure that it can’t be gamed. Now, there’s gaming on a couple levels. There’s gaming on, you know, me, Matt, I go to cancel something, and then I just realized, “Hey, I got a discount that one time, so I’m just going to keep [from there 00:07:24].” What we end up doing is basically making that dynamic. And we cover that use case. But then we also cover on, you know, the . . . I tell my friend, “Hey, you can go to Audible like we just did right now.” And if Audible was a customer of ours, then we wouldn’t be able to . . . it would be tailored to that specific user and not . . .

Andrew: You would know who the person’s friend was and that their friend got a. .. Is that right? And that their friend got a pause or a free month and they can’t get a free month? You guys do that?

Matt: Well, so what it will do is that it’s based on the context that gets passed into the data. We call it context just because it’s more fitting. It’s a little less ambiguous than just data, in general. And so what we’ll do is that we . . . That context comes in, we figure out which action or which available option is most likely to result in a positive outcome. We also let the business wait those on the backend so that they can say like, “Hey, I don’t want to give out gold bricks all the time. Because obviously, that would be not so great for the business.” So they can kind of wait the system in order to basically cover for options that are maybe a little cheaper, something that is, you know, you may want us to resolve it, but maybe it’s not giving away or maybe it’s, you know, a smaller discount. That sort of thing.

Andrew: Okay. I’m getting it. So, when I hear machine learning, I feel like it’s just a term that impresses people. And then maybe it’s less complicated than that. It might just be more like the . . . It seems like it’s simpler than the term machine learning would lead us to believe, right? It’s . . .

Matt: It’s much simpler.

Andrew: Much simpler. It’s a business saying, “Hey, Andrew just got a discount once, or maybe you got a free month twice. Let’s not give him a free month the third time.” Andrew’s business may not want to give everyone who cancels automatic free month the way that Audible does. Make it a little mysterious, do one out of three people gets a free month if they stick around. The other two people, you can offer a pause or you can say, “Did you know we have all these things, etc.,” right? That’s the way you guys operate? And that’s how you grew . . .

Matt: That’s the way . . . Yeah.

Andrew: That’s how you grew this thing to about a million dollars a year in sales, right, charging businesses when?

Matt: Yeah. So we charge businesses that . . . The retention engine, the one that focuses on that last experience, when somebody clicks that Cancel button, that’s our core product, that’s our entry point. And then we also have additional ones that focus on different events in the life cycle. So we’ve all kind of experienced, you know, the free trial and they try to get us to upgrade to the next tier. We have one that focuses on what should be done, you know, for each unique customer based on how they’re using things, what action should be taken here by the business, in order to get that customer, you know, to the next tier. And we do that in a smarter way where it’s tailored, and not just, a), the person logged in, so email blast them or send them a text message. We can tie in sort of struck . . . you know, we call it Intelligent Automation.

Andrew: Got it. And the way you charge is based on number of customers. Anyone who has less than 1,000 customers is going to get the retention engine, I think software for about 100 bucks, right?

Matt: Yes. Yeah. So we say 10,000 and under, then we’ll do it about $100 a month, and then it kind of scales up from there. And there’s some additional packages that they can pick up on.

Andrew: Yeah I feel like you guys could be charging much more 10,000 for only $100?

Matt: Our investors would love . . . They love hearing that.

Andrew: I think, at some point, you’re going to decide, “Wait, we really are underpricing.” You can take a look at your competitors, the ones who are even just giving analysis, never mind, like, no recovery. They’re charging more. I pay for one of your competitors based on recovery. You know, if someone’s credit card doesn’t work out, they recover and then they charge me a percentage of what they recover if they can get that back. All right. Let’s understand how you got here. You were actually a guy who’s started a drink company called Mary Jane’s Relaxing Soda.

Matt: Yes.

Andrew: What was that? I heard about that. I think it’s because of the fricking name because Mary Jane is weed. And so you come out with this thing called Mary Jane’s Relaxing Soda, and it feels like an indication of where things are going in the world. But also this guy took it a little too far. In reality, what was it? What was Mary Jane’s Relaxing Soda?

Matt: Yeah, so, well, I started it in 2008. So this is before all the legalization and the [inaudible 00:11:27]. There was no . . . You couldn’t put marijuana in it or cannabis in it. And what I did was . . . Before that, I was a product developer for a supplement company, and that was the 2008 period. And so . . .

Andrew: For a software company?

Matt: For a supplement company:

Andrew: Oh, supplement company. Got it. This is Corr-Jensen labs?

Matt: Yeah, correct. So I was a product developer there. You know, around 2008, things were not going so well in the economy.

Andrew: I remember.

Matt: I knew nobody needed . . . You know, there wasn’t a giant need for a lot of new things. So developing new products wasn’t exactly [required 00:12:04], neither were my services. And so, at that point, I decided, “Hey, I know a little bit about this realm,” and so I basically made, you know, a few things up and had my friends try it. And one of my friends said, “Hey, feels like I just smoked a joint.” So that was . . . That . . .

Andrew: I think I just lost your audio there for a second. I see you hit mute. You okay?

Matt: Yeah. Yeah, my phone synced up for some reason on my computer so . . .

Andrew: And then it started to take over. Got it. So you said, “Hey, you know what? I found this thing that’s going to work.” The thing was kava, am I right?

Matt: Correct.

Andrew: What is kava?

Matt: So kava is a root. It’s a root from a plant that’s grown in the South Pacific Islands. And it’s been around for ages. It’s sort of a traditional drink there. Tastes not great. But it definitely will give you a buzz, but it doesn’t have the side effects of alcohol. And so what I did was basically use kava root extract, mixed it up, gave it to some friends, and that was really the birth of it was that they felt like, “Hey, that was fun.” And, you know, you didn’t have quite the side effects of alcohol. And so that was it.

Andrew: And you invested how much money in it?

Matt: Well, at the time, I only had about $10,000 so that was it. I put every last drop into it.

Andrew: And so, once you get the mixture, who do you take it to, to create the can? How do you get it canned? How do you make it in mass quantities? And then where are you selling it?

Matt: Yeah, so basically what I did was, you can use, like . . . they’re called flavor houses. And so I used to source a flavor house, source the bottles, sourced, you know, virtually all the little elements of it, even the bottling. And then all the ingredients. You send it off to the flavor house and they basically will come up with the different flavors and try to make it taste okay. Because, again, it doesn’t taste . . . The raw ingredient kava is not exactly the most tasty thing, overall. I mean, it looks like dirt.

Andrew: That’s what I’ve heard. I’ve heard. Does it? It looks pretty nice in this Wikipedia entry. It looks like a nice green plant. But you’re saying once it’s in the drink, it looks like dirt. I’ve heard people say it tastes awful. And so the flavor house made it taste a little bit better. They added some sugar to it. Am I right?

Matt: A lot.

Andrew: A lot of sugar.

Matt: A lot of sugar.

Andrew: I was actually afraid of, like, turning you off by saying a lot of sugar, that maybe you’d say, “Andrew, quit knocking on my drink.”

Matt: Oh, no, no. And I don’t know. So the drink is actually . . . Like, it’s dormant now. Like, we didn’t end up raising nearly enough money. So we went back in 2010 on that one.

Andrew: Okay. So there’s a couple of years of doing this. You got a bunch of press for it, right?

Matt: Yes, tons.

Andrew: How did it work out for you?

Matt: The name, the name worked.

Andrew: The name did work. I’m looking here in “LA Weekly” article. “It’s a weed in a bottle. Mary Jane’s Relaxing Soda.” It’s like, “How are you not going to go and click that and see what this thing is? If it’s in a store, you’re curious enough to try it. I get it.

Matt: Well, yeah. So, I mean, we did . . . I mean, at the time we got it . . . You know, really, I mean, we were doing great. Right out of the gate, we got it into some 7-Eleven stores. We got it into Whole Foods. And we were doing . . . I mean, we were selling quite a bit. We were hitting all of our goals. But again, that was sort of, like, a horrible time of year and a horrible economy. And so it just didn’t end up working well and we didn’t end up raising nearly enough money to kind of keep that going.

Andrew: How did you feel after closing it down? Depressed, sad, happy?

Matt: Oh, yeah, it was rough. I mean, I say that it was rough, but I feel like I learned . . . I mean, I learned so much from running a business that I got [inaudible 00:15:58] really fast. So I started my follow-up to that one about a week later.

Andrew: Oh, really?

Matt: Yeah. Yeah. And that one ended up going better.

Andrew: And the idea for that came from the conversations you had with people when you were trying to raise money for Mary Jane?

Matt: Yeah. Well, so I went and did the tour up and down the coast, the one, you know, up and through California, and would go into angel pitch sessions. And, you know, I kind of watched the people that were walking in with software products, a little higher margin than the lower margin soft drink business. And because I had a background in software development, then I thought, “Well, I should probably be using that skill, maybe a little more.” And so I did so. And the next one worked much better.

Andrew: What was the idea for the next one?

Matt: Well, one of the things I noticed . . . So after everything kind of went down, we never took on any debt with Mary Jane. So it wasn’t like . . . we didn’t go bankrupt or anything, we just stopped making it because we didn’t have enough money to keep producing. So I basically moved back to . . . I was in California at the time, when I moved back to Kansas where I’m from, and just realized that, you know, local media, there wasn’t really much going on in that space. And so I basically built a hyper-local news network and ran it literally for about six months was growing revenue and got an acquisition offer. And, again, I had no money because I spent it all on the soft drink company. So I took the first offer that came around.

Andrew: How much was it for? It wasn’t a huge windfall, but it was a hit.

Matt: Yeah, no, I mean, it ended up being quite a bit because I took a royalty on it on the profits, and then got stock in the next company so it ended up paying off a couple million.

Andrew: This is, you sold to Eagle Communications, the regional telecommunications company?

Matt: Correct.

Andrew: And they wanted to buy you because?

Matt: They had no, like, online presence. You know, I was operating in smaller, like . . . So sub-hundred thousand population cities or towns, I guess. And, you know, in a lot of those places, there’s not a lot of really solid . . . I mean, there’s some better tools now but back in 2000, that was 2010, there just wasn’t that much out there. And so I built one that was pretty slick. And it made sort of the reporting really efficient, which was the reason why it was of interest.

Andrew: What made you . . . So I’m on the site right now. One of your sites was hayspost.com. And I see at the upper left that it’s owned by Eagle Communication, I think it says up there, Eagle TV. That’s them? That company?

Matt: Yeah. Yeah.

Andrew: So the new [story 00:18:46] . . . Sorry?

Matt: I won’t take any credit over how I . . .

Andrew: It’s been years. I get it.

Matt: Yes, it’s been years.

Andrew: But I still want to understand what’s the appeal here. So we’ve got something like there’s new election equipment debuting in Ellis County, paper ballots are returning, police catch a registered Kansas offender on the late-night bicycle ride. How are you getting traffic for something like this? Was this all like a Facebook thing or what were you doing?

Matt: Back then, that was really the trick is just integrating with Facebook. And then a lot of the news that’s now, it’s been even further automated, where there’s not really a whole lot of reporting done on it. But back then, what I did was I tied in, what was Google Maps and some Google Maps APIs. And what I basically did was also connect it to a police scanner. And so automated, like, when, like, the audio waves picked up, then it would basically record that. Then I would just basically go in and log that into let’s call it a Google Fusion Table. And that would connect . . . I’d get the map on it. And so people could go in there and just look, and see the map of, like, when they heard sirens or something, they could see, you know, what was going on in that area. And it happened all within, you know, a few minutes of that going across the scanner.

Andrew: Wow. And so the ads was just straight-up ads. Is that what it is? Because it doesn’t like ads actually pay off. I’m looking here on the site. Pumpkin spice and steam something, goal 50 . . . Oh, I see this is their internet speed that’s available from the company that bought you guys. Then I see Whiskey Creek wood fire grill. That’s a local place . . . That’s all it was. It just displays ads?

Matt: It was all display ads, at the time, which, you know, around 2010, there was still a little bit of cash in that. You know, I think Facebook’s pretty much taken over that side of the business.

Andrew: Wow. And so, within six months, you sold this business. It got less press, gave you less, like, credibility and badassery. But still, that’s the business it sold and that’s the business that made you money.

Matt: Yes.

Andrew: Wow, we. All right. Let me take a moment to talk about my first sponsor, and then we’ll get back into the story. So, Matt, a few days ago I recorded an interview with a guy named Daniel Ramsey. One of the interesting things about him is he does his outsourcing virtual assistant and other services. And he said, “Look, if you fill out a form on my site, someone’s going to call you up.”

So, you know me, I’m filling out the fricking form. Let’s see if somebody calls me up. Sure enough, I get a phone call coming in directly to me. And I talked to the guy for a little bit. And then I say, “I’m sorry, I’ve got something else going on right here. I’ve got an interview. I’m going to have to talk later.” He says, “How about if I call you back?” I said, “Sure.” He goes, “When?” “Forty-five minutes.” He goes, “Sure. Great.” And sure enough, the interview was done. A few minutes later, I get a follow-up phone call from him.

Now, Daniel was smiling the whole time as I did the RingCentral ad here on Mixergy. Because he said that’s what he uses, RingCentral. His people all over the world have RingCentral on their phones. We expect that somebody fills out a form, let’s give them a magical email that will automatically convert them into a customer. What Daniel realized was, let’s give them a phone. And it could connect to their computers if they’re on a desktop and connect to their mobile phones if that’s what they want, and let’s send them a message.

And since RingCentral integrates with all these different apps, they gave me a whole link to the App Store. If there’s an app out there, they will integrate with it. I think I can say fairly certainly. And so, as soon as I fill out a form, boom, they get an alert saying, “Call Andrew.” Andrew gets a phone call. If Andrew doesn’t respond to the phone call, I think one of the things that Daniel smiled and told me was, “We’ll send you a text message because maybe you’re not picking up phones and we’ll follow up with you a few times.”

Now, all that can happen with RingCentral. And if I call them back and the person is on the other line, it goes to voicemail and then it goes to their team so they could respond. If I text them, it goes to their team. I say all this because I signed up for RingCentral just before I talked to Daniel. I’m amazed by all the features.

If anyone out there has got a team of people they want to experiment, how about calling your customers as soon as they buy or as soon as they fill out a form, and seeing if a human being can answer questions and do a demo or do whatever it takes to close the sale instead of a set of emails. I think you’ll be amazed by it. And if you want a set of phone number, excuse me, one phone number, if you want for the whole company, in addition to you also get us a new phone number for everyone on the team, if you want all that, you can sign up for RingCentral.

I did. I actually signed up and now I’m getting video conferencing, which is what Matt and I are using right here to communicate with each other. I get fax, which I’m never going to use. I get text messages, which I love because I want my assistant to help me go through my text messaging via text is going out of control on my phone. I get all that and so much more.

If you want to sign up, I’m going to give you guys a URL where you can get it as low as $19.99 per month, and they’re going to give you a discount on their already low prices. In addition, you will not have to pay a penny until 2020. It’s ringcentral.com/mixergy. We’ll get that to you. That’s R-I . . . They actually told me to spell it. And I think they know that I talk to fricking fast, Matt. R-I-N-G, that’s RingCentral, ringcentral.com/mixergy. Go check them out. You will not have to pay anything until 2020. Wow. I love that service. And I’m frankly just using it for me and my assistant. I want her to help me with my text messages. Do you get a lot of text messages, Matt?

Matt: Yeah, I think I did actually while we were talking, so I hope it wasn’t annoying.

Andrew: It didn’t come up. I didn’t notice it. I’m now at unread text messages. Let me see today, 155. And I worked on it the other day. It’s out of control. Now, some of them are just, like, random text messages from services, like here’s the code to log into the website. I don’t mark it as unread and so it goes in and I just need for . . . And then somewhere in there is a customer who says, “I’m having trouble or I want to buy,” I can’t find it. That’s why I want my assistant to be able to go through my text messages and say, “Andrew, there’s a customer we’re responding right now.”

All right, that’s enough of that. After you sold, I know you stayed for six years but did you take, like, a moment and say, “I did it. I worked hard. I did it.”

Matt: No, not really.

Andrew: No. Did you buy anything for yourself? Did you buy . . . ? It seems like all anyone ever buys is a new computer.

Matt: That’s about all I bought.

Andrew: Not even a house, a car?

Matt: Well, I mean, I got married and had kids. So I guess that’s where all of the money went.

Andrew: That’s expensive. All right. Did you treat yourself to a full-time nanny?

Matt: No.

Andrew: No. Wow. You know, what my friends here are doing in San Francisco, the overnight nanny because waking up in the middle of night is a chore. They are getting a woman to come stay with them. And then, like, if the baby wakes up in the middle night, give the baby some milk. Help the baby go back sleep. Keep the parents happy.

Matt: Oh my God, that’s smart. I wish I had that. But we’re done with that. And we didn’t do that.

Andrew: So how old are you kids now?

Matt: We have three, we have [inaudible 00:25:31], we have for one.

Andrew: What is it? What are their ages?

Matt: Ten, four, and one.

Andrew: Wow. Okay. So the one-year-old is past is actually walking around. You’re fine. Still diapers, but not, like, middle of the night ever change.

Matt: No. Not [inaudible 00:25:45] stuff.

Andrew: So what was it like to work for this company for six years?

Matt: I mean, you know, I think a lot of times everybody kind of was like, “Oh, you know, you’re just looking to get out.” Especially in . . . Like, I mean, most people don’t have great sort of thoughts when it comes to telecoms, but it was a great experience. I learned a lot. And so I have nothing but positive things to say about it. I mean, ultimately, for me, I like being able to kind of have more control over my life and my career. So it was never going to be a fit and in the long-term, but in . . . And I actually ended up spending . . . I stayed longer than what I expected.

Andrew: I imagine. Six years is unusual. Where were you supposed to stay there for, four years?

Matt: For four years. But then I . . . Yeah, the funny thing was that along the way, you know, I sort of went home, and I said, “Hey, I have another idea.” They said, “We’re not really interested. So, if you want to do another side, feel free.” So I did that one, ran that one for, again, it was almost about six months. And then they just asked me for a status update. And I told him how much money it was making. And so they said, “Hey, let’s just acquire that one.” So we worked out a deal on that one.

Andrew: What was that side business? I don’t see it in your LinkedIn.

Matt: Yeah, it was in marketing automation. It was never really because I was still at the company that I never liked it. I just kind of set it up. And basically, I had the landing page that would collect leads. And it was just a tool to automate marketing campaigns.

Andrew: What did it do beyond the landing page?

Matt: So the landing page was basically just a lead capture. And then, like, I built a little console where they could go in there and they would automatically, you know, do all their Facebook and Google Ads really easy.

Andrew: Based on the email addresses so you can start targeting ads, is that what this is?

Matt: On their website. So just going back to their website and just automated between the website and then into the ads. And this is back in . . . I mean, there’s a ton of tools that will do that sort of thing now, but that one was back in 2014. Yeah, 2014.

Andrew: Was the ads being targeted to people who hit the landing page or people who gave their email address on the landing page?

Matt: Oh, well, the landing page was basically like my landing page. So I put up a landing page and just said, like, “Hey, if you want this stuff automated, then . . . ” And so I basically just slapped up a landing page. And then people would sign up. And then I basically would just sell them on, “Hey, we’ll connect your website and we’ll just automate the ads. We’ll just automatically go from your website into your Facebook ads and your Google ads.

Andrew: Got it. It was a way of creating automatic ads without a human being doing it.

Matt: Yes.

Andrew: Okay. All right. And you created that. Did you get any customers for it?

Matt: Yeah, I think at the time, we had almost 30 customers. And, you know, they were paying anywhere from $500 to $1000 a month.

Andrew: Wow. Yeah. That’s impressive as a side business. Were you always entrepreneurial? I’m looking at my notes on you. I don’t see any small businesses as a kid. I don’t see a guy who had to keep creating companies and lemonade stands.

Matt: I mean, I think I did the lemonade stand but I think most of it’s probably due to a healthy disdain for authority. That’s what I like to think of it as.

Andrew: But then how did you save for six years at Eagle? What did you learn from them that kept you there? I’m looking at Eagle. By the way, this is not like an unusual company. We all have an Eagle in our world, right? For me, it’s Comcast. For other people, it’s Time Warner. I don’t know if it’s still called Time Warner. They did internet, television, and phone service for business and residential, right? That’s it. It’s just like that whole package. So what did you learn from them?

Matt: I think I learned . . . Well, okay. So a lot of what I learned was just one of the cool things about that company was that it’s an employee-owned company, which is actually pretty unusual . . .

Andrew: Yes, that is.

Matt: . . . where basically everybody that’s working there has stock and it’s not, like, a publicly-traded thing. So it’s privately held. And I had some respect for the people in charge there. I felt like I wasn’t . . . While I’m not so great with authority, I felt like they were smart enough guys that I wasn’t too concerned. And then I had a couple of them that, you know, when I got pretty frustrated by the bureaucracy that happens in larger organizations.

Andrew: So what’s one thing that you learned? Is there something that just sticks with you that makes you say, “All right, that is something that I wouldn’t have learned if I went to business school. That is something that I’m now using in my business.” I remember talking to the founder of Genius, it was called Rap Genius at the time. It’s a site that lets you annotate. At first, it was just rap lyrics. And then it’s anything on the internet.

He said,” Look, I work for a big company. ” One of the things that I realized is people don’t have allegiances for big companies the way that we do when we think about startups. And so everything was set up, not with an individual in mind, but with that position in mind so that if the person in that position left, there is no mess. It just goes, the email address gets transferred to the next person who does I don’t know what product management, though the access to all these sites automatically gets transferred over and he said, “You know what? I know I’m running a smaller company, but I like to think that way, that people can be moved out without it being a big corrupting force in our business.”

And so, as he thinks through different parts of his sight from code to email management, he is thinking, “What if I needed to transfer this to somebody else tomorrow? How much of a pain in the neck is that going to be?” Do you work stuff like that?

Matt: That’s a funny one because I would say that’s things that I struggled with when I started there, was like, “Hey, we’re, this guy might leave or she’s threatened to leave.” And they’re like, “Okay.” I mean, very much less likely to deal and I would have been like,” Okay, I’m going to go spend the time and the effort.” And so I would agree with that, that, you know . . . I mean, there’s some cases where, you know, somebody’s really made themselves a linchpin in the business and those hurt. But I think those are actually fewer and farther between than what a lot of times, at least that’s what, you know, less than what I will . . . So, yeah, I’d agree with that one. That’s interesting.

Andrew: The other thing that seems to have come up was, you learn from working in telecom that churn is important. Nobody talks about churn, right? There’s a guy who’s, like, great at landing pages. There’s a guy who’s great at SEO. There’s a woman who’s going to help you design the pages and the A/B tests that you need in order to get more people to sign up. I can’t think of a single person who is known as the churn person, right? We don’t talk about it much. That’s where you learned it. You saw that churn was an issue. Why was churn an issue for Eagle? Is there a lot of competition where they play?

Matt: Yeah. You know, a lot of the . . . I mean, it impacts revenue right away, right? And so KPIs there, yeah, KPIs in the Telecom Space, especially because it’s more established, there’s less, you know, we all have it, you know. But yet, you know, there’s going to be little competitors that come in, competitors that overbuild different areas. And so churn was a metric that they kept an eye on and I was running all the digital operations at the time and so . . .

Andrew: What does digital operation mean?

Matt: Basically, every aspect of the business that happened online that I kind of oversaw.

Andrew: Oh, really? Wow. Okay. All right, so online registrations. That was you getting the whole flow going?

Matt: Yeah, like in charge of their website, all of that, like, basically all of that stuff, then all the media sites. Basically, all the websites, and the backends, and all that stuff.

Andrew: Okay. All right. And so, sorry, you’re starting to say that because you were in that position, you started to notice something?

Matt: Well, I was in that position. So I had access to any data that I wanted. And so I built a machine learning model that was, you know, basically, just identifying the risk of somebody leaving.

Andrew: It was identifying the risk of somebody leaving?

Matt: Yes.

Andrew: What are some factors that would determine that someone is going to leave?

Matt: So, really, what we’re trying to do, like, with machine learning pattern, right, like, and essentially what you end up doing is that, you know, you can find a pattern you. As humans, we don’t need machine learning to say like, “Oh, hey, you know, 90% of the people in that location are exiting.” We don’t need them all for that, right? Yeah, we don’t need machine learning for that.

But, you know, when it starts adding, like, you know, you start looking at the correlation across, like, a lot of different variables to where it’s beyond, you know, two or three dimensions there and it says getting pretty deep, that’s when using a computer, you know, to build a machine learning model that identifies that, “Hey, there’s little bits of correlation across all these little features and all these little data points.” And that’s, in essence, what machine learning does. And that scenario, it’s just a classification of like, “Hey, all this little correlation adds up to this person looking like, you know, the people who left last month or the months before.”

Andrew: Yeah, and I get that then you know what, that is a distinction I need to be aware of. If I understand it right, when it comes to machine learning, we don’t have these quick, easy to explain and understand reasons. It’s not as simple as the machine learning told us that when people are about to move houses, they’re more likely to cancel their service. It’s more like these random factors that don’t seem at all connected and if you look at them would feel mind-bogglingly disconnected and meaningless. It turns out they actually are meaningful. That person is about to leave. Let’s do something for them. What I’m curious about, though, is what kind of data would you have? Is it, like, internet usage that you would have? Would you also look at outside data, like, whether they’re even on Zillow or something?

Matt: Yeah. Yeah. So you’d end up having like, you know, location data. You’d have, you know, tenure. Tenure being, like, one of the most important ones. Like, you’re a customer . . .

Andrew: How long have they been with you?

Matt: Yeah, exactly. That’s one that and what’s interesting about that, one is that that was like an easy trick. Because a lot of times what people do is you just, those are stored as dates in the database. So they signed up on this date, but nobody’s actually converting that and saying, “Okay, here’s how many days they’ve been a customer.” Because that’s actually when it starts getting indicative. You know, a lot of times you’ll sign up for a year contract or something, and so, if you just stored as a date in the database, that isn’t really that helpful. But if you can convert that over to you like, “Hey, today, it’s, you know, 364 days since they signed up, you know, your chance of leaving is considerably higher, you know, over the next two weeks.”

Andrew: Got it. Okay. All right. And I imagine you also know, based on time of year, whether people are more likely to cancel and so on. And so you build that for them. And then you said, maybe I could take it out for other people, you did?

Matt: Yeah, I don’t, I just built it, you know, basically, like one model and showed them and it wasn’t anything that they asked for. They, you know, they were like, you know, machine learning? What are you messing around with that for? But I showed them and they and I just kind of saw the eyes light up. And like, “How did that work? And you didn’t have to you know, how exactly?” So I saw the light bulb kind of turn on and, and then you know, you can do a real quick calculation on turn. You see how many people leave every month. And you think well, if those customers look at the bill, and you know what would happen if they stay down for another year? That is a really, really fast and a heck of a lot faster than you know, what you’re going to be able to grow.

Andrew: Okay, and then you didn’t build it for them though. You built them a model of it, you explained it to them. And then you said, “I’m going to go out and create a new company for this.” And you sold them and they became your first customer. Is that right?

Matt: Yeah. Yeah. Yeah. Well, I showed them you know, that they saw the value in it. And at the point that I was coming up on my vesting period. And so, basically, just said, “Hey, you know, I’m going leave.” I mean, I guess I technically offer . . . I did allow . . . I threw out a, “Hey, if you want this thing, here’s what it’s going to cost.” They declined, but yet still wanted the tool. And so I said, “All right, well, I’m going to go build this on my own.” And they agreed to come on as customer number one. So that was a nice way to start the business in a less risky form.

Andrew: And you said they still wanted to what? They wanted the goal?

Matt: Well, they still wanted the tool.

Andrew: The tool.

Matt: They still wanted to basically the, you know, the risk scoring on icon customers.

Andrew: That’s fantastic. All right, how much did you charge them? What are we talking about enough that you could live on or enough that . . . ?

Matt: Yeah.

Andrew: That’s it. So it was basically now collecting a salary not up to par with what you were making before. But it was enough of a salary that you could continue to build this without worrying about paying the rent from your salary.

Matt: Yeah. Exactly.

Andrew: Wow. Wow, that’s fantastic.

Matt: Yeah, I mean, it was a nice way to start it. I don’t know if my wife would agree with that? That it was a nice way to start because it was considerably less than what I was making before. But yet still plenty enough to live off of.

Andrew: This is a little personal, but you had millions of dollars, though, that you’ve made from your sale to them, right?

Matt: Oh, no, no. So, like, what ended up . . . Well, part of that million came in here as of like, about a month ago, I guess, part of the company sold. So it was . . . I got stock when I was part of the acquisition. I got stock and then I was making royalty over the time that I worked there. So that was another reason why I stayed longer because I kept making the royalties as long as I was there.

Andrew: As long as you were there, you were making money from the sites that you created. Got it. All right. And but it didn’t become a significant thing until about a month ago, you said when you sold?

Matt: When they sold . . .

Andrew: When they sold.

Matt: . . . so it was acquired. And so, you know, I didn’t plan on . . . so that that employee stock part, I got a little bigger piece of that because the acquisition or because they acquired, you know, my previous company, and so I got notification that they had, that they had they themselves had been acquired. And we’re going to be sending out a check.

Andrew: Wow, congratulations. I didn’t know I didn’t see that because it’s not on their website, but I’m taking a look online now. And I see that they were acquired by Mega Broadband. Is that right? Or GTCR?

Matt: Yeah, it’s like that’s private equity. And I think that they then it’s sort of like a new conglomerate of the sort of mid-tier telecommunications broadband providers.

Andrew: Wow. All right. Did you have to cut back once you started doing this?

Matt: Oh, yeah.

Andrew: You did? What’s an example of something you couldn’t do anymore?

Matt: We just don’t travel as much as we used to. We used to travel pretty and go a little more extravagant with the travel. And now we don’t do that quite as much.

Andrew: You know, that’s the thing that I love too. Olivia and I just spent some time in South Africa. I did it because it’s part of my goal of running a marathon all over the world and interviewing entrepreneurs. Because she came with me and she does her research, we ended up at this beautiful space. It just was . . . It was phenomenal. I don’t even know how to describe it.

I don’t even know how much it cost. And I started to feel like maybe that’s a mistake. Maybe I should be watching these kinds of expenses a little bit more. It’s a type of thing that if the economy went bad the way that it did when you were starting Mary Jane, we’ll all look back on and go what a mistake we made. I could’ve saved that for now and no one else has any money need to spend.

All right. Let me take a moment talk about my second sponsor. And then I want to come back and understand how you got your second customer and how you figured out the model, how you figured out your business because I think it changed a little bit. And then we’ll talk a little bit about Techstars. My second sponsor is a company called ClickFunnels. What do you know about ClickFunnels, Matt?

Matt: They have a great business.

Andrew: They really do. I’m in awe of their business. Every time I think about them, I have to stop thinking, I wish I owned a piece of it and just think about the business itself. Here’s what I understood about it. I think most people understand, create a landing page looks nice. They have great templates, you collect email addresses, you’re going to get more email addresses from their pages than if you had other pages. I get that. That’s the way I was introduced to them.

What happens once you do that is you end up with a page it’s so easy that you start creating others whenever you need them really fast or more importantly, other people on your team, even virtual assistants who don’t know your company as well and aren’t marketers can easily create landing pages.

But Matt, here’s the part that I got excited about. One of the first things you learn is from ClickFunnels, the team, they say, “Don’t just collect email addresses, try to get a sale even early on.” And I was resistant to it because I said nobody even knows me. They don’t know my product yet. What am I going to start selling them? And then I was persuaded you know, what? I’m going to try to do a little sale, Matt, because if I sell them, if I even show them I have something to sell they’ll understand my business better and won’t be the how is Andrew making money. What is this? Where’s this going? You see I gave him this email, my email address, I got something and by the way, he has something to buy even if I don’t buy it. I know this is what he’s selling. That’s what I was thinking.

And because they make it so easy with ClickFunnels to just drag a box on here to pick take a page from this template. I just put it together. And it looked good. It represented me well. I connected it to Stripe which is what I used to collect credit card payments. That makes it super simple, but I could use other payment processors. And suddenly, people started paying me money. I totally forgot it was so easy to set this up.

I totally forgot about it wasn’t until my bookkeeper automatically set up a new section of revenue that I said, “Hey, wait, I think you made a mistake.” No, turns out we had a new source of revenue. I was jazzed.” And then they have this thing that you could add another checkbox underneath the credit card form that says, “Hey, you just gave me a credit card. Yes, you’ll get the thing that you just want.” But if you check this box, you get this other thing too for a few bucks more, just like that.

Suddenly, I go from being somebody who’s a little hostile to ClickFunnels, let’s be honest because I had other tools and I didn’t think I needed a specialty tool for it. I a little hostile to selling things to people when they just come in to now I’m just like this digital marketer. I’m creating funnels and actually sending over sales and the people who are connected with me have more of a connection to me because they just bought something and so they’re reaching out, they’re follow . . . anyway, I freaking love this company. They don’t even need to buy ads from me for me to tell you guys how much I love them.

In fact, I didn’t. I love them so much. They said, “Andrew, we like your interview style. We know you’re going to be aggressive with our founder. We’re going to pay you to come and do an interview on stage with us.” I said,” You know what? I like you guys so much. You don’t even need to pay me. Let’s just fly out my family. So that they could be with me because I keep every time I take trips away from my family, it’s an issue for them. And let’s just hang out and I’ll do unaggressive interview with you.”

I interviewed the founder. You guys should go listen to it. If you’re listening to me right now, at the end of this interview, go to clickfunnels.com/mixergy you’ll see my interview with the founder. I even to prepare, Matt, I talked to people who hated him. I’m talking too much about this. You’re going to get my templates. You’re going to get a 14 day free trial of ClickFunnels. You get that interview, I got to shut up and get out of this ad already. It’s at clickfunnels.com/mixergy. Clickfunnels.com/mixergy.

My big problem Matt, is I spend too . . . I don’t want to curse. I fricking long on my ads. And this is the problem when I get sponsors that I like and I want to do a good job for them. I want to do a good job for you. I’m going do good job for my audience. I want to do a good job for my sponsors. And I know as a listeners, as a guy who listens to YouTube, long ads are just counterproductive. But I can’t get out of it.

Matt: It’s a good ad though.

Andrew: Was it a good ad?

Matt: It’s a good ad.

Andrew: Good, thanks.

Matt: I think I might have to go do that now too.

Andrew: You will and then you can go listen to the world.

Matt: You got me.

Andrew: Thanks. All right. Are you the kind . . . I’m the type of person I get excited about everything? I’m doing push-ups. All-day long. I take my shirt off and I go to my wife Olivia. “Did you happen to see this?” So look over and go, “What?” I go, “My chest.” Go right, it’s like everything is exciting me in my life. It’s a little bit hard to deal with. Are you like that? You seem like you’re cooler. You’ve got like a Keanu Reeves look and vibe to you don’t need as much like attention as I do. You know, you don’t need to oversell like I do.

Matt: I try to remain pretty even keel.

Andrew: Was that always the way? Were you a cool kid in high school?

Matt: No, God, no. No, I mean . . .

Andrew: What were you like?

Matt: Yeah, I thought about that. My brother and I were talking about, you know, back in the day . . . he’s a football coach. And so we were talking about football back when we were kids. And yeah, I don’t know if my recollection is exactly correct. I felt like I was a lot quieter than what he kind of felt like I was.

Andrew: He felt like you had something going on for you, some Mojo.

Matt: Yeah, he did. Yeah, yeah.

Andrew: When do you feel like you finally figured yourself out, you came into your own?

Matt: Oh, I don’t know that I still . . . I would say, yeah, I don’t know. I may not have yet.

Andrew: We don’t really get it, but we have these . . . I like the title of one of Steve Jobs books, “Becoming,” the whole premise of that book. It was a good book. It was one that the Apple people loved. The whole premise of it was that Steve Jobs was never a thing. At some point, he realized that he had to keep becoming who he wanted to be. And I get that. I don’t fully see it in him. But I do see it in myself. There is this sense of becoming and growing into yourself.

But I also noticed, with these leaps that we make. Like, for me, one of the big leaps was, frankly, once I graduated from school and started my own company, suddenly I had power over myself. Being a kid sucks. You’re always under somebody else’s thumb, under somebody else’s rule. I finally had my own power. And it was sometimes depressing because I screwed it up and I wasn’t making any money and I was, like, a loser at my parents’ house, but I at least had agency. And then it was a period where I suddenly had a team of people working for me. We were making money. And then there was a sense of who I was coming through that.

And then when I lost it all and I found myself, not lost at all actually, thankfully, I lost the company. I felt like I lost my motivation for it. I don’t know what it was, but I do, but it’s too hard to get into. And I discovered my non-work self, go ride bikes, go run, go out at night with people and talk to strangers. I became a little bit . . . Did you have any of those milestone moments for yourself in your life? Let me get to know the Matt Moody behind the business.

Matt: Yeah. Oh, yeah. I mean, I think after Mary Jane’s Relaxing Soda, you know, I had spent all of my money on that one. And so I guess the biggest, you know . . . And, you know, we were getting coverage. It showed of a product placement on an episode of “Entourage.” And so we went from sort of like that, you know, sort of peak to, you know, basically, you know, needed to find a job. And I mean, the . . . Well, and I guess even at the product . . . So the supplement company, when I got laid off there, it was two weeks, two weeks before my son was born. And so not exactly a great thing. I had to go try to find a job, and yeah, that period was probably one of the rougher period.

Andrew: And so then how did you become a better or different person for those experiences for losing Mary Jane, for losing your job?

Matt: Well, I think probably a little bit of, hey, you know, not so much, you know, being impacted by positives and negatives. Trying to look at things a little bit more objectively and not getting . . . You know, I lived beyond my means there for a little while, and that changed. So I’ve learned that repeatedly throughout my life that, you know, hey, that times are good right now, but that doesn’t last forever and just, you know, try to remain a little more balanced.

Andrew: I get that. You know, one of the things for me was, I decided I wasn’t going to live off of old money. It had to be money that I was making with my company. And I had to spend it to live life the way that I was. And this was in the early days of Mixergy. And I remember, at one point, leaving my building, having enough money to buy bags to pick up after my dog, but it was still a considerable expense.

And they offered free ones. If you go out through the garbage office or the garbage room, on your way out, you can get a free bag to clean up after your dog. And I picked up one of those free bags to clean up after my dog and I kept thinking myself, “At one point, you’re going to have enough money that this is going to seem silly. Remember, go to the back door, get the free bag to clean up after your dog. It might be a penny but it’s still a penny and remember that you suffered for a while and the money mattered back then, don’t have it not matter when you have it. Remember this spirit. I sometimes forget that but that memory helps hold me accountable. Do you have anything like that? Anything you spend excess money on or held back on?

Matt: I think we hold back on almost every . . . You know, naturally, we’re still in the . . . You know, we’ve raised some money, we’re making money, but it’s still not . . . You know, I don’t pay myself. You know, being in charge, you don’t make nearly as much as when, you know, it’s just a job and you have a salary. Now, the payoff, in the long run, is likely to be a lot bigger. But, you know, in the short run, you know, we’re not where we were before when I was working or when I had, you know, an actual industry job. So we are still pretty tight about everything. And ultimately, what I’ve learned is, you know, I’m just as happy now as I was before, I just don’t stay at nice of hotels.

Andrew: That’s a good thing to remember. Hey, you know what? I do sometimes feel one more thing is going to make me happy. Especially YouTube, sometimes their fricking algorithm will suck me into video devices. Here’s a new drone. Here’s a new selfie stick that will do. And you go, “I think I need it.” And I realized that doesn’t really make happier. It feels like it. Well, all right. Stuff doesn’t make us happier. It’s all like how excited we are about our pecs. That’s what decides how happy our lives will be.

All right, I’m looking at an early version of your website, getting off my pecs and back to you. I feel like you weren’t clear at all about what you were going to do. The earliest version of your website that I can find says, “We offer digital services for business, accelerate your business with data-driven technology services. Is it because you weren’t sure how to communicate with the business-wise or you just weren’t sure what are we going to do yet?

Matt: Yeah, it wasn’t really burning the boats. I wanted to leave things a little open. And you got to put something up. So you could put something up and make it very ambiguous. And now, I’ve learned that, you know, sort of burning the boats is you have to in order to be able to clearly communicate. That was something I learned . . .

Andrew: At some point, you’ve got to realize, “”Here is what we do. Here is what we stand for. I know I’m cutting off and letting go of other options, but that’s what I need to do.”

Matt: Yep, exactly.

Andrew: Got it. You were very proud that you were in Kansas. Why? Why does the website say based in [inaudible 00:52:12]?

Matt: That was probably after too many glasses of wine or something like that.

Andrew: Got it. It was just like everyone’s owning where we are, we’re going to do it too. So you were willing to be a few different things. You were also more . . . You were an agency, not a software company yet, when you first launched, is that right? At least that’s how you billed yourself.

Matt: Yeah, you know, and we had the software tools, but then, you know, the biggest thing that . . . And it’s still one of those things that, you know, a lot of the machine learning stuff is, it’s pretty complex. And so sort of just turning it over. You know, we had that run for a while where we turn it over and people were like, “I have no idea what I’m doing with this.” And so we would, you know, sort of stack a services contract on top of that.

Andrew: You told our producer, “One of the problems we had early on was as soon as I put a model up on the server,” I’m quoting you, “it was already outdated.” What do you mean by that?

Matt: Well, that’s one of the interesting things about building machine learning models is that, you know, you take data, and that data is, you know, your current data. And you would build a model based off of that. You build those patterns in that data. And then what you do is that you take it, and you build the model. And then the model, you throw that on a server. And then what you can do is then you take new data in, and you compare basically the patterns there to see, you know, when, you know, something is looking like one of the patterns from the past where you know the ultimate outcome.

Now, the problem is that once you build that model, that model doesn’t improve anymore. That’s the sort of the end of it. And you have to go back and take in new data and restart the whole process over again. So it’s sort of a continuous, go get the new data, rebuild the model, then, you know, deploy the model, and rinse and repeat constantly.

Andrew: Again, I want to make sure that I’m understanding this because this is a whole new type of software that I’m trying to understand. What you’re saying is, look, if the model was as simple as people who have lived in their homes for seven years and the economy is booming, are likely to leave and cancel us, or if people who’ve lived in a house for seven years, and they signed up for HBO, they’re likely to leave us. Let’s make sure that we catch all those people. That might work for a moment in time, but it doesn’t capture other people and it will change. At some point, HBO will not be a factor because they won’t have “Game of Thrones,” or they will have “Game of Thrones.” And that’s what changes. Am I right?

Matt: Well, yeah. I mean, so you think you’re going to extract the patterns from this historical data, and that’s your model. But there’s more data coming in over here that isn’t involved and isn’t included in this model. So you basically, like as soon as you would train . . . it’s called training a model. As soon as you would train a model and basically find those patterns and deploy it, well, this model doesn’t learn anymore. That’s the end of it. And so you have to go back and basically that one gets dumped, and you got to go back over, and get the new data, and then deploy that one. And then you got to kind of keep doing it regularly.

And that was one of the things that, you know, I realized, “Hey, this is really inefficient. And there’s got to be a better way to where when a, like, new data comes in, that it’s actually . . . ” You know, we can use this model to predict but also to be able to continue to improve it without having to go back and repeat the whole, you know, initial training process.

Andrew: And how did you get the customers that . . . ? Or was this still you working with your previous bosses and learning that?

Matt: Yeah, out of the gate, we just went in and I tried to find other businesses that were exactly like that one that, you know, in different regions.

Andrew: How did that work out?

Matt: We were doing pretty well. I mean, we were growing about as expected. We did about, it’s about $250,000 in the first year.

Andrew: This was because you sold to your old boss and then you called up and said, “Look, this company that you guys know is similar to you. They’ve signed up for this. Would you like to sign up for it too?

Matt: Yep, exactly.

Andrew: And that worked. Okay. All right. And that’s when you’re starting to realize . . .

Matt: Worked somewhat.

Andrew: Okay. All right, quarter-million dollars, first-year sales, big name companies and enough data that you can train your model, that seems like a win. Am I right?

Matt: Yeah. Yeah. I was pretty happy with the growth on that. I mean, obviously, you know, you can always hope for the rocket ship that just takes off right out of the gates and never sort of even hits a plateau. We hit a plateau, you know, eventually.

Andrew: Was it just you at the time?

Matt: Yeah. It was primarily me for the first, let’s say, about seven, eight months.

Andrew: Okay. And then you told our producer, “At around that point, it occurred to me this business is probably going to be a lot bigger than I intended it to be.” What made you realize the full capacity of this business?

Matt: Well, when I figured out how to resolve that inefficiency of the training, you know, process, where I had to go back and train the model again, and then deploy it, and go back and forth constantly. I tested out, you know, a range of different ways to just make that one model updated, you know, to continuously update it. That was really the revelation when I realized just how efficient it was in comparison to the traditional sort of method for doing that. And that was when I felt like, “Maybe I’ve got something here that could be bigger than what I had originally intended.” And that was the big moment. And I started, you know, changing the way we were doing things right about then.

Andrew: And what did that mean. Beyond raising money, what else did you need to change in order to do that?

Matt: Well, that was the big one is that I realized, at that point, that if I’m really going to capture the value that I think I’ve got here, then then I’m probably going to have to get a bigger team. I’m not going to be able to be the lone thing and selling. It’s not going to be like that. I’m going to have to build out an engineering team and build out a sales team. And also, you know, that’s going to require, you know, going out and raising capital.

Andrew: You got into Techstars in addition to the other money you raised, you raise money from them, how did they help shape your business, that accelerator?

Matt: That was the biggest impact to the business because, you know, while, you know, I had started a couple of companies before, I kind of felt like I knew what I was doing. And, you know, I was hesitant to do the incubator. I had heard negative things about incubators. And so I was pretty hesitant. But ultimately, I kind of decided, “Hey, you know, raising money is a little different. I haven’t really . . . I did that with Mary Jane’s and then clearly wasn’t so great at it. I guess we didn’t raise very much. And so I decided, “Hey, it could be beneficial, you know, from that standpoint.” Now, what I found was that it was beneficial sort of all around. It’s been the single greatest factor in kind of us getting to this stage.

Andrew: Because of what? What did they do? It seemed they helped you raise another round of funding. When I’m looking at the press release, you mentioned being at Techstars, am I right that that helped you raise more money?

Matt: Oh, yeah. No, it . . . Well, I would say that was the outcome of their work. I mean, basically what they did was, we broke down all of the things that were incorrect. I mean, they . . .

Andrew: Like what? I’ve heard they’re good at that.

Matt: Because they will . . . I mean, so they call it mentor madness. It’s, like, sort of the internal name. It’s sort of like a . . . Mentor office hours is like the outside term, but the internal mentor madness is the term that was used and basically it’s . . .

Andrew: Yeah, yeah, sorry. Go ahead. What is it?

Matt: Yeah. So, basically, it’s three weeks, all day long, where they bring in people who have the experience in, you know, all the different sides of the business. And you’re basically pitching to them, and they’re breaking you down, and tearing apart, and asking tough questions, and making you think about, you know, things that hadn’t really come across. I mean, the biggest thing that . . . The biggest change for us is that while we kind of had the, you know, “Hey, we can build a model that could continue training and without you having to go back through this rigid, inefficient process,” the problem was that they broke down and really helped me see . . . You know, one of the mentors, sort of asked the question, “Hey, you know, when you provide these risk scores for your customers, you know, what are they doing with it?

Andrew: Oh, yeah.

Matt: And the answer was, “I don’t know.” And then the follow-up question is, “Well, then how does it impact their churn rate. Does it go down?” And the answer was, “Kind of.” And the next question is sort of like, “Don’t you think that’s going to impact your business if the numbers don’t go down in a significant enough way, you know, to pay for that contract?” And it may just start thinking about analytics, in general.

And the idea of, we came with the analogy that, you know, kind of what we were doing was pointing out that their front door is open. It’s nice to know that your front door is open. That’s good. I’d prefer to know my front doors open than to not know. So it’s great. Nothing wrong with the information or the insight there. However, if I don’t do anything, then my front door is going to remain open.

Andrew: And the hardest part, Matt, is I can close my front door. My three year old knows how to close the front door. But if you tell me churn is high, I don’t know what to do. And I get that I’m looking at earlier versions. I get that you made it easy for people to get that data, who’s going to cancel, who’s likely to cancel, lots of different ways. But it does seem like you’re saying, “All right. What you could do is send them an email. What you could do is have somebody call them up. What you could do is . . . ” There are a lot of you could do, don’t you understand all the possibilities. And then you’re saying, because of Techstars and conversations with mentors, you said, “You could do all that. What can we do for you?” That was the big change. What can we do to help you deal with this churn?

Matt: Yes. Yeah, that it needed to be more of an action, more of a, “Hey, we’re going to have this impact.” And instead of just identifying, hey, that’s somebody that’s at risk, we want to say, “Okay, what should be done that’s going to reduce that person’s risk of leaving? And that was the biggest change for us.

Andrew: Got it. And then it seems also like you started to go after smaller companies, in addition to the big companies. So, if I look at your website from even last year, I see big brands like Servicemaster on there. I also see Herbert Hoover Museum. I had no idea that they needed it, that they have churn. At some point, I’m starting to see brands that I’m more familiar with, like Stripe being featured on the site. Is that another thing that you guys did, another change?

Matt: Well, I think we wanted to make it . . . You know, like, right now, we have some self-serve versions of this. And then we also have some enterprise versions of it. You know, at the enterprise, and there’s a lot more customization that needed to happen. So it’s not quite as you know, “Here it is, and take it and run with it.” So that was sort of just building out, you know, the different channels for us.

Andrew: All right. What’s the best part of . . . Actually you know, what? Forget about what you’ve done so far. I’m seeing as I talk to you, there’s so much more that you want to do. Where do you see yourself a year from now? If we’re to do this interview at the end of 2020, what do you see being built into this or if you want to look further?

Matt: You know, 2020, I think we’re building out sort of the suite where we have the three different functions that are . . . You know, we have the underlying, what we call, the engine’s framework. It’s sort of our reinforcement learning framework. And then what we’re doing is we’re building the applications that sit on top of that. And that’s what retention engine is, and what intervention engine and then the wind back engine.

So we kind of see it as, “Hey, we’re going to build out that suite. We’re going to hopefully grow all three of those products.” And then there are host of different problems that, you know, we can see how impactful analytics has been and everywhere that it is. But ultimately, what that does is sort of creates more work for somebody. You know, you’re going to find information and insights, which again, are great, but ultimately, somebody has to go do something with that. And so what we see is, you know, the long tail here is the ability to start taking some of those and tying those into actions and to outcomes. And that becomes more of a full-fledged automation. So we see, you know, dozens of different problems that we could end up applying this technology to.

Andrew: I could almost see . . . Tell me if I’m wrong in this. I could almost see you guys offering data for free. “Here’s your churn. Here’s who just churned for free and then laying on top of it. Now, if you pay, we’ll help you fix that.” Is that . . . ? Do you see that?

Matt: Yeah. There’s a lot of different angles that we’ve looked at as far as providing, you know, the insight level and sort of doing the insights for free and then, you know, tying in the automation with that. And yeah, I mean, we’re trying to remain focused because there’s obviously one of the hardest things with this, is that, you know, we can have a conversation with almost anybody and the answer to, “Hey, will this work for this?” Is undoubtedly yes. But obviously, we’re still pretty small. And so we’re trying to do it in an orderly fashion.

Andrew: All right, the website is its Bellwethr without that final E, right?

Matt: Yeah, you know, it’s got to be techy and drop a vowel.

Andrew: So it’s bellwethr.com. We should also have a link to it in the show notes. I like this business a lot. It’s phenomenal. Now, I understand also what Techstars has done. I feel like Techstars is underrated. They used to be out there talking about themselves a lot more. And then I feel like they’ve gone instead very nichey. Like, they are in smaller cities, they’re connected with other brands. And then almost let the other brands shine instead of them. And so we’re not paying attention to them. But I love hearing stories of what Techstars has done to help make a company better beyond the funding.

Matt: Yes, they are awesome.

Andrew: All right. And I want to thank the two sponsors who made this interview happen. The first, if you need a phone for yourself for text messaging, for anything, for just phone calls from your customers or for your whole team, really go check out RingCentral. They’re available at ringcentral.com/mixergy. And they’ve got an incredible offer for you there. And then if you need a, I’ll sell it as a landing page, but you’ll also understand if you’re listening to me that you can actually also turn people who subscribe into customers. Go check out clickfunnels.com/mixergy. In fact, you know what? I should just say, as a follow up to this interview, listen to one of the best interviews, maybe the best interview I’ve ever done with an entrepreneur at clickfunnels.com/mixergy. I flew over. I did it in person. You get a lot of benefit from it. Matt, thanks for being on here.

Matt: Thank you. Thanks for having me.

Andrew: You bet. And seriously, guys, thank you all for listening. Bye, everyone.

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