Dwolla’s Founder: From Selling Speakers On His Couch To Moving $1 Mil A Month

As a high school student, Ben Milne say on his couch till he wore a deep groove in it and sold speakers online. He says his promotion strategy in the early days was answer audiophiles’ questions on message boards and link them to his online speaker store, Elemental Designs.

Listen to the full interview to hear how he got his first customers, how he celebrated his first million and why he decided to sell the company.

To follow that up, he created Dwolla, which is like PayPal without the fees. Though it just recently went national, the company is already doing $1 million a month in transactions. You’ll hear in the interview how Ben is growing the company.

Ben Milne

Ben Milne


Ben Milne is the founder of Dwolla, which provides a free web based software platform which allows users to send, receive, and request funds from any other user. Dwolla’s maximum transaction cost is 25 cents per transaction. (bio by CrunchBase photo by Silicon Prairie News)



Full Interview Transcript

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Andrew: Hey everyone. It’s Andrew Warner. I am the founder of Mixergy.com,

home of the ambitious upstart and the place where you come to listen

to successful entrepreneurs talk about how they built their business and

teach you what they learned along the way and feed you so much information

that you can go out there, build your own company and hopefully do what

today’s guest is doing which is share what your learned along the way, fire

other people up, and teach them from your experiences.

So joining me today is Ben Milne. He is the founder of Dwolla, which is pretty much

like PayPal but without the fees. My focus of this interview, though, won’t

be on Dwolla. I want to hear about the business he started before it,

including Elemental Designs which averaged apparently well over a million

dollars in sales. And according to someone who I met recently, Ben did you

have a lawn mowing company on steroids? What does that mean?

Ben: When I was like 14, I guess I figured out that I can get paid about

$25 an hour to mow yards. So, I started employing my friends by the time I

got to high school to mow yards. So I guess that was kind of my first

endeavor, but to me it was a way not to work at Walmart at the time.

Andrew: That’s awesome. How many friends did you have working

for you?

Ben: When things were ramping up, the most I ever had kind of helping me

out and working for me were two people. We had more yards because we

overbooked, and we couldn’t finish them all. So I’d give them x amount of

dollars to come out there and help me and they were happy to do that. They

weren’t doing anything anyway and I guess that was pretty decent money for

all of us.

Andrew: OK. I want to find out about that. I want to find out about the other

businesses. I want to find out about Elemental Designs. But people are going

to be curious about what Dwolla is. I gave them that little snapshot, like,

PayPal but without the fees, but can you give us a use case of how

someone can use and interact with Dwolla.

Ben: The reason Dwolla was created was that my old company, as we kind of

scaled, to be honest. When we built my old company, I didn’t know what to

really do with it. So I, just kind of started looking at overhead.

Interchange fees were actually starting to cost us quite a bit of money. So

the whole reason Dwolla was created was that, my old company, we wanted to

get paid by through our website but we didn’t want to pay credit card fees.

So we started going out of the marketplace and doing research, and we

couldn’t find what we wanted so we pitched a bank and thankfully they said,

“Okay. Well, here’s a rulebook on how we do electronic transactions.” So we

kind of built something around that. The initial application was so web

merchants to accept payment through websites. Now it’s kind of become

something that has a lot of activity with mobile phones. And with the next

iteration, retail merchants paying with mobile phones on our network as

well as consumers in a peer-to-peer type environment. One other application

that we see being really successful for us is business to business

transactions, say between five and ten thousand dollar transactions where

they just don’t want to cut a check. They just use Dwolla because it’s so


Andrew: And then how does the money eventually get into the account?

Ben: Dwolla is so cheap because it doesn’t use plastic networks. The way we

look at it, the money comes out of your bank account, at the end of the day

to pay a plastic card anyway, so why not just sync up directly with it. So

basically, all the money that goes into Dwolla goes through your bank

account, your checkings, your savings. When it leaves Dwolla, it goes to

another checking or savings account or it could be spent in the ecosystem,

kind of like a PayPal model

Andrew: I see. But, it can just go from one bank account to another,

without being sent anywhere else?

Ben: Yeah. Absolutely. We have this teeny-tiny feature called automatic

withdrawal. When money hits your account, it acts like a sweep account and

sends it to your bank account.

Andrew: Can you say what revenues you guys are doing right now?

Ben: No, not right now. We’re still very early. Transaction volume?

Andrew: Yeah, how about that?

Ben: We’re at about a million a month at transaction volume.

Andrew: A million dollars a month being passed on Dwolla.

Ben: Uh-huh.

Andrew: And how long have you guys been in business?

Ben: The platform itself has been around for two and a half years. We

launched in what I call a public beta, which is to say that we were live in

Iowa and California for about a year. Then we launched December 1st

nationally, which is where we saw an uptake in user and transactions, where

the platform really started to grow. Honestly, it’s not a technology thing,

but more of a regulatory thing. We spent about a year wrapping our head

around how to deal with that. We had some really strategic investors come

in. It was a huge play for us and really did great for us.

Andrew: Let me ask you something. One of the things that’s really standing

out to me as we’re talking, it’s probably superficial and maybe I shouldn’t

be paying attention to it but I can’t help it, you got this look to you.

You’re wearing a T-shirt. You’re wearing a wool hat even though you’re

inside the office. I would expect the guy who is going to be handling money

to be wearing a collared shirt, maybe a tie, maybe a jacket.

Ben: I have a tie, but every time I wear it to the bank they wonder where

my T-shirt is. You know. No, I think that this business is about

reliability, about honesty, just like every other business. And I think one

of the advantages to being in Des Moines, Iowa and being close to Omaha as

well and we have a really strong emphasis on payments. At the end of the

day, a lot of the people we are working with, our financial institutions

and payment experts, care about the product and not what kind of watch I’m

wearing. So, thankfully we’ve been fortunate to meet some really awesome


Andrew: What kind of watch are you wearing?

Ben: None today. I’ve got my iPhone. Why would I need a watch, right?

Andrew: All right. So you’ve had this lawn mowing business. In

fact, why don’t I just jump right into Elemental Designs? What was

Elemental Designs

Ben: Elemental Designs was basically, love the analogy, Dell but with

speakers. Right? So we wanted to . . .

Andrew: Just what with speakers, sorry?

Ben: Dell but with speakers. We basically took speakers and sold them

online as direct as possible from the manufacturer. So, I read your story

about the Jay Crug Returns [SP], and that hit home. I loved music, so

that’s why I wanted to be in a company that funded speakers. I thought that

was fantastic, but I was a terrible musician. So, I funded that company by

selling all my instruments on eBay. I sold a couple saxophones and guitars

and that’s how I got my money. Basically, the whole premise was we wanted

speakers to work in a smaller box in your car. You know subwoofers take up

big boxes so, we came up with the idea to sell speakers that work in a

smaller box. And that idea went from 1200 to a million in revenue over

about four years without outside funding. Once we built it, we didn’t know

what to do with it, so we kind of spent three years in entrepreneurial

purgatory; I didn’t know what to do with my life. And, I eventually sold

the company and started with Dwolla.

Andrew: So the three years of not knowing what to do with your life, you were

still running the business and owning the business?

Ben: Yeah. I was definitely still running it, but it was at the point where

it was self-sustained. I was working like two or three hours a day. I wasn’t

really creating anymore. When I was building it, you know the idea was you

want a white house, a couple foreign cars, yada yada yada. You gotta mow

the yard and keep putting gas in the cars. It was just very boring.

Andrew: What car did you end up driving?

Ben: Well at the time, I guess I ended up acquiring a Scion, a BMW, and a

Lexus just because they seemed like fast, nerdy and I don’t know an around-

town car. I just didn’t know what to do with the money. Then I just

realized what I wanted to do with my life was keep building so I sold the

company and moved onto the next one.

Andrew: What’s the funnest thing that you bought?

Ben: A CNC machine. I bought a 6000 pound machine that cuts wood and

metal. Basically we moved a lot of our cabinet production from overseas to

a warehouse in Newton, Iowa. Just the ability to go from cad, to product,

to paint booth, to out the door. We went from buying 12 speakers from a

company in Omaha to bringing in a container a month to saying, ‘This is

dumb.’ and just making it in Iowa. So we really turned into a manufacturing

company, from a distribution company and at that point it just became a

what do we to do with it. At the time I had absolutely no knowledge of

venture money, what real strategic relationships could get me in terms of

distribution. I was very naive and had no idea. Start up an entrepreneur,

you have no idea and just jump in.

Andrew: I gotta dig into this. This is going to be great. You sell your

equipment on eBay. I want to go in and find every bit of information here.

You sell your equipment on eBay. How much did you get for your equipment?

Ben: I got about $1,200 bucks. I bought 10 speakers, and then sold the

speakers before I got them so just kept turning it over hand over fist.

Andrew: Where did you find the speakers and where did you sell them?

Ben: I bought them from a company called Resonace with a brand name called

Digital Designs, in Oklahoma. Then, we sold them basically through forums.

Kind of like old school social networks were VB boards. When it came to

acoustics and speakers, everyone was on forums. In order to sell 10

speakers, that wasn’t a big deal. But that got me to eat hot dogs for a

week, man, that was awesome.

Andrew: Can you just go into the forums and say, “I bought these speakers.

Buy them from me?” Or did you have to respond to someone else’s question

and in the sig file have a link to your speakers or what was the deal?

Ben: You know the way I did it originally was I acted like resource as much

as humanly possible. So if you had questions, I did my best to answer your

questions and put the name of my company and my signature.

Andrew: So 10 speakers sold from the little line in the sig file after your


Ben: I would say the biggest thing I would get is questions about the

speakers. Once people realize that maybe I could be resource, they started

asking questions about the speakers that were there and then I would just

answer emails. It’s amazing how many company’s actually lose sales because

they don’t answer emails. And, in my case, the only reason I sold them was

because I answered emails.

Andrew: And so were you selling them in an email or were you selling them

on the forums based on your email responsiveness and your connection to the


Ben: I would say that I got my initial hook to the conversation on the

forums but I would sell them through email. Then we built the website so

they were buying them online.

Andrew: Any scam?

Ben: I think back then there was a fine line. Just like now, you can’t go

into a tech blog and say, “You’re talking about PayPal. How about you check

out Dwolla?” You can’t do that. There is something about a certain line you

have to be aware of. Thankfully back then, I had been selling speakers for

a few years. Before I started that company, I used to, are you familiar

with what drop shipping is?

Andrew: Yup.

Ben: Basically I built a website for a guy and he was letting me buy

speakers out of a shop in California and he was drop shipping them to my

customers. So I was selling speakers over the internet out of my bedroom.

Through doing this, I kind of built this small network of people that were

OK with me roaming around their boards and taking care of people. I kind of

already had a client base to build off of. Thankfully, you know how it is,

you get closer to the source, the bigger your margins get. The more money I

could put into other things, more speakers, more lines and things start to


Andrew: What was the next step after the first forum sales?

Ben: I think the first step was celebration and beer of some type.

Andrew: Uh-huh.

Ben: And then shortly after, we just ordered more speakers. It got to a

point where the 10 speakers turned into a semi-truck coming up once every

two weeks . . .

Andrew: How do you go from that? If I brush over that, then my audience is

going to be pissed. The first few customers are so tough to get. I

understand the first ten in a forum. Anyone can move ten with a little bit

of effort, maybe a lot of effort. But to go from there to a truck is a big

step. What do you do next?

Ben: After you get the truck?

Andrew: No. Before you get the truck. What do you do after you go to the

forums? Were you selling a truck load of speakers through forums just by

responding? You did?

Ben: Pretty much. I spent about 20 hours a day sitting on those stupid

forums. They aren’t dumb but I just spent so much of my life on these

forums I remember specifically part of my couch was dipped in because I

always sat in the same spot and I killed Mountain-Dew for 20 hours at a

time and just sat there and answered questions. I mean I understood that if

I acted as a resource, I got traffic. And, if I got traffic I would

eventually have a conversion and I would have sales. So, as we had

conversion and sales and happy customers, it started compounding. The

numbers we were working with weren’t really all that big. Ten really isn’t

a lot, especially if you sell two at a time, or six at a time, or five at a

time. Then, 10 or 20, and if you can really work hard on making those

customers happy, it doesn’t really become hard to sell a higher volume

until you start thinking, “Well, how do I move 500, how do I move a 1000,

how do I move 5,000?” That’s where I think it really got difficult for us.

And that wasn’t until, at least, four years after that.

Andrew: Okay. But at what point do you get a website in order to sell? Do you

do it before the forum starts? Do you do it after the first few sales?

Ben: No. The way we did it was we built it the second we had a brand name.

The second we had named it, we had a website.

Andrew: Before or after you started selling?

Ben: Absolutely before.

Andrew: So you come up with the idea, you build the website really quickly.

You start making sales in the forums. What does that first website look


Ben: Bad. Really ugly. I think the way we had it was we had a logo and we

took shots of what our initial prototypes were, which looked like widget

prototypes. A few things were photoshopped but at the end of the day we

went and had a local sticker shop build stickers for us and stuck them on

the speakers trying to make them look legit. Then we shrunk the pictures

down small enough so they still look good. And, that’s what we had. That’s

really what we built our first sales off of; that and the specifications

that were out so people knew what to do with the speakers.

Andrew: So Ben, when you say that you were creating prototypes, you weren’t

really reselling someone else’s speakers. You were reselling them, but

adding something to them and adjusting them a little bit? Do I understand

that right?

Ben: Yeah. The first ones we did were what you consider an OEM or a private

label line. They had slight modifications from their ‘house’ products. What

that moved into over a three or four year period was we started doing a

tremendous amount of tooling, overseas and things like that, to where our

products were build solely from our own tools and our own designs. So we

went from house parts to proprietary-owned parts.

Andrew: What was your twist in the beginning before you started creating

your own speakers from scratch essentially?

Ben: I think it was that I stayed up later and answered emails faster than

my competition.

Andrew: Was there anything different about the speakers that you sold?

Ben: They worked in smaller boxes but we had competitors pop up and say,

“Well, our’s work in smaller boxes.” A lot of it was we offered a

tremendous value for the amount of money that you were paying and once we

had a customer base, people were comfortable buying from us. From there, it

all became about customer service. You can buy speakers everywhere. I think

the average consumer doesn’t know a lot about speakers or speaker-

technology. It all comes to, “Who do I trust? Who gets my attention? Who’s

going to take care of me?” We really concentration heavily on, after we had

a good product, working on having a good customer service side. We

struggled with that a lot when we had our growth spurt from about 50,000 a

year to almost a million fairly quickly and without a very big staff.

During that, we had some parts where we didn’t manage customer service very

well and we learned from those very quickly.

Andrew: I’m going to come back to customer service because I could

understand that if you do that wrong you lose everything that built up to

the point where you have all those customers.

Ben: Absolutely.

Andrew: Sticking with the product development, the first product was

essentially someone else’s product with your label stuck on it. What was

the next step in the evolution of the product?

Ben: Continuing to evolve, we got a little bit more money. We wanted to

take the product and make it more ours, make more parts that are ours and

utilizing more things that aren’t off the shelf. For speakers, that meant

custom coils, slight modifications of some things like suspensions, which

are soft materials that you could get from vendors in the United States or

China. So, we really started customizing small parts that were semi-low

cost to customize. Then, as we did that, we got some more money and started

customizing the harder-to-pay-for parts that were more expensive and over

time I think we almost invested half a million in parts tooling to where

they have one of the largest parts tooling catalogues of any speaker

company in the U.S. Their revenues earned aren’t similar to those big

companies, but they have a ton of parts.

Andrew: So the original adjustments, the original customizations, how much

of them were based on what you could do and how much of them were based on

what customers were demanding or what you thought you say in the market.

Ben: Customers didn’t really demand a lot of customization. Customers

themselves, did not. We, ourselves, as a company wanted to differentiate

ourselves from other people as our image became something that customers

recognized as much as the parts. I think that for us, that was a little bit

of marketing. Those new parts gave us better performance, which in turn

allowed us even more marketing and allowed us to make our customers

happier. You didn’t have customers popping up and saying, “You need to make

a new cone, because it needs to be black instead of silver.” They just

didn’t do that.

Andrew: So it was just you saying, “This is what we like to create. Because

we can do it or because we want it or because we think this is the

direction of our company?” How did you decide what to fix? There is just so

much. Part of the problem you have as an entrepreneur is you have this big

vision of what you want to see out there in the world. There is so much you

want to do. For many entrepreneurs they just end up doing nothing because

until they get it perfect, they can’t get it started. For others, it’s I

don’t even know what to do or where to begin and that’s what keeps them

from getting started. You knew what to do. I’m wondering how you decided,

how did you know what to adjust first and what to leave until later?

Ben: I think, to steal a term from Venture Hacks, at that point in time it

was my own monomaniacal vision and there wasn’t a lot of people saying ‘You

can’t do this. Stop.’ For me it was, we can build this. We can build this.

It was like playing with Legos, it was like I could just build more stuff.

So, I just kept building more stuff.

Andrew: I see.

Ben: A lot of it was built around what I wanted to do or being excited

about a new technology. At the time I wasn’t necessarily concerned about

401(k) plans or anything else. I just wanted to build more stuff. So, I think

that’s what really drove it. I just wanted to build more cool stuff. If I

had made more money, then that would mean I would get to build more cool

stuff. So that’s all I did. Then, I hit a point where I wanted to do a

project like I talked about and needed to build something else.

Andrew: How much was the building stuff was going in your home and how much

was going on somewhere else?

Ben: Initially, all of it was going on somewhere else. In my home, we

didn’t really have an office until my kitchen and basement were filled with

sound materials and big brown boxes. We got nervous because we had these

big trucks pulling up and I had three or four friends helping me move brown

boxes into cars to go take them to FedEx boxes so we didn’t have to pay

for pick ups. That’s what kind of drove us to get an office. But we didn’t

really actually start making our own stuff until we were about four or five

years in where we recognized that the suppliers we were utilizing were

really getting everything from Asia anyway and a lot of the problems we had

hitting shipment dates was due to them not managing their distribution

channel very well. So, I got on a plane and went to Asia, spent 3 weeks,

and we started doing business with our suppliers.

Andrew: So when you say in the earlier day that you were slapping a sticker

on someone else’s speaker and adjusting the suspension, I think you said

the word coils, that wasn’t happening by you directly. You were shipping

your sticker to whoever was going to drop ship your speakers. They attach a

speaker and sent it out. They made the modifications you requested.

Ben: Yeah. Initially the process we went through was we would make the

modifications, and then we’d get this flat of speakers, which had nothing

on it. So we’d go down the street and get stickers made. The first speakers

that we shipped, I didn’t have boxes so we had to go to U-Haul and I cut

the boxes inside out. I got packing peanuts from somewhere else and I used

to drive around Cedar Falls, where I started the company, and pick up free

packing peanuts by the dumpsters so I had something to package the speakers

with. Then we’d ship them out.

Andrew: So they’d come to your house, though? And then from your house

you’d take them out to UPS and drive them directly and then you’d ship

them out?

Ben: Yeah. We’d package them in the house. So just imagine a living room

with packing peanuts and tape, just people putting things in boxes. And

then my friends would come, when it was too much to fit into my car, and

help me drive it to UPS or FedEx, and we’d just stack all of it and leave.

And we’d do that everyday.

Andrew: All right. How about another step along the evolutionary path here?

You can only reach so many people from that couch that has the groove from

your butt sitting there, working endlessly. You have to go to the next

level in marketing and getting more customers. What is that next step?

Ben: For us, I think that was curating our client base. Things like direct

mail and newsletters. What we found was that our clients actually did

care. We could actually build a culture around innovating

new products and what was different about them and then it became cool to

have what’s next. It was really cool for us. When our containers showed up

or when we finished a new product, everyone in the company was totally

geeking out and having a great time. We found out that just by informing

our client base, they would also become heavily engaged in that excitement.

So we tried to be extremely religious in keeping our customers informed

about what we were doing and engaging them in product development. A lot of

times that meant developing products that they did want. Maybe not parts so

much, but products in general they want. We could do pre-orders so we could

break even or even make money on a $40,000 or $50,000 parts order before we

even had to pay the full bill, which was really helpful and helped us grow

a lot.

Andrew: How would you do that? How would you talk to the customers and

create the product with them and sell it to them before you even created


Ben: Say that we sold a speaker and we knew that they were always buying

component speakers to always put it together, because we’d see it in

everybody’s signature. So we’d go out and ask everyone what they would want

for a component speaker set, or this two speaker set. And a lot of times

they say they want this and this. Maybe we’d compromise and say, “What if

it did this? If we threw this on top, would that be cool? Would you guys

like that? What if it was 30% cheaper than the current product?” You’d

always almost get an instant, “Yes, I love that.” Or a “No, don’t do that.”

And if they love it, we’d figure it out and put a pre-order for maybe three

or four hundred parts and basically try to sell them before we had to pay

for the parts, ship them out and if people were happy we’d just keep

building more and more.

Andrew: What if you were starting to sell something and you couldn’t get

enough sales to make it worthwhile? Would you give money back?

Ben: We did. Sold it as fast as humanly possible. Just got it out and

turned it into cash and back into new parts.

Andrew: If you are trying to sell a product before you have it and you get

enough customers to make a profit, great. But what if you’re not getting

enough orders, what do you do with the orders that do come in? Do you say,

‘Sorry we’re not going to build it?’ Or do you just create less of the


Ben: If you set a shipping date, then you build it. If you can’t sell

enough, you either get better at sales or you get rid of it. It’s just like

anything else. If you make a poor choice, you get out. That’s really what

we tried to do, but anytime we committed to producing a product, it was on

us as a company. Morally, ethically, however you want to describe it, if we

said we were going to ship this thing, we are going to ship it. And if we have

a loss on it, we’re still going to be build trust overtime with our

consumers because early adopters are still going to get what they paid for

and if as a company we can’t support it anymore, then we got to get out. We

did that have that happen more than once. It wasn’t so bad that we had to

let people go or we couldn’t pay rent. Those actually ended up going well

because we brought so many new customers from a low-cost product that all

of a sudden we had the ability to build trust with another 500 people over

a 5-day period. It ended up being good marketing just recognizing that we

had to get these out of here.

Andrew: What else do I want to know here? How did you talk to you customer?

Was it on the message boards that I see on your site to this day or was it

by email, back and forth individually? How did you get a sense from them

what they wanted you to build?

Ben: What we did was however you wanted to ask questions that was how we

answered them. So, the message board was one place. Some people feel more

comfortable posting on a message board because they want third party

feedback, not just from the company. Some people are more comfortable with

telephone support because they want a human voice and are calling someone

in Iowa. They just want to know that. I think the biggest one for Elemental

Designs that I carried into Dwolla was Live Support. Just the ability that

if I have a question, I can click a button and get a chat window to someone

who knows what they were talking about, that was huge to us. We did that seven or eight years ago before it was a popular thing on the market and I think

almost instantly we saw an uptake in sales and we never turned it off or

looked back.

Andrew: So if somebody wants feedback they can just click on support and

get someone live to give them some feedback. There we go, I see it on your

site right now. A chat box.

Ben: Yup. And if your on Dwolla’s site . . . oh he’s on launch.

Andrew: Okay. Well, I do see it on the site. I see the little pop-up that

comes up and if he’s there he can respond and if not we can send him an

e-mail. I see, all right then. You said earlier that if you can’t move it,

then you have to get better at sales. What did you learn about what it

takes to get better at sales online?

Ben: That’s a good question. To tell you the truth?

Andrew: I mean more that that . . . some of us are telling the trust a little

bit better than others.

Ben: If you can’t sell it, then just say, “We’re clearing these out. They

are 30% off. We couldn’t sell them so we’re going to discount them and they

gotta move. And when they move this is what we’re going to do with the money.”

I think that people get excited about a good deal but they also know that

somebody is not buying a Porsche with this clearance sale and that’s good.

It’s going back to the company. If you can be honest with what you’re

doing, I think it helps the engagement with consumers. In terms of getting

better with sales, just because we chose to sell something didn’t mean it

would sell. There were times where it just a dumb idea and get out. There

were times where we said to our customers, “We aren’t selling enough of

these and we need to get out of it.” Thankfully, that worked, and we had

very strict rules, especially about margins. If we put ourselves in a

margins perspective where we couldn’t afford to clear it out, that’s

probably not a product we’d get into. For us, a 25% margin just was not big

enough because if we had to discount to get out, you’re dead. So we’d

always pre-plan our production around, “Could we discount this and get

out?” and that was always a consideration when going into new production.

Andrew: Okay. Isn’t there anything else that you learned about sales? Maybe

the size of the photo impacted your sales? Maybe the way that you wrote

your copy? Maybe the way that you listed your features? Maybe the place you

went to get your customers beyond the message boards? What else did you


Ben: Traditional marketing never worked. I know that it’s probably clear to

a lot of people who want this but magazines ads, sales conferences, yada,

yada, yada. No we never got a return on that stuff, short term or long

term. That might of just been our market but that never worked for us. As

far as the web goes, honestly just having product pictures available of the

real product that don’t suck, helps a lot. Having easy to acquire discounts

is really helpful. If you’re offering a discount on a certain type of

product. As long as you can do all of that on the website without calling

someone to get it, that increases your conversion a great deal. I really

think those are big ones. Just product pictures and so on and so on. I know

it sounds funny but the left-hand menu, minimizing that as much as possible

for us increases sales. Every time we shrunk it down, we increased sales. I

think it’s just because people wanted to click through it at a really high

level. And once we got rid of drop-down menus, sales went up. People hated

the drop-down menus, I guess.

Andrew: By shrinking the left-hand margin, you mean fewer options on the

left hand?

Ben: Uh-huh, exactly.

Andrew: They don’t have to hunt down for the topic that they want. They

click it, one out of six, I think you have six up there right now, I know

it’s not your company but they have six or so up there. You just want to

shrink it and make it easier to find that area.

Ben: Yeah. We used to have 30 with drop-down menus and roll-overs and all

this other stuff. So it was kind of anything you want, you can find it

right away. Once we got rid of that, people really liked it.

Andrew: One thing that stood out to me as I saw the site today, and I know

you said you don’t have control over the site today, but I noticed that

when I went to home page I don’t see a list of the items for sale. What I

think I see is a login page? Let me go over to it right now. I was

wondering why that is. Why is it that I don’t see a set of speakers? Here

is what I see, “Elements Designs News” and links to blog posts and on the

left I see “Chat Now,”, which we talked about, “Home Audio”, “Car Audio”,

“Custom Audio” and so on. Why not pictures right on the home page?

Ben: I think a lot of it is, sorry I had to pull it up as well, for us is

news and serving our existing client base, or at least for me

[inaudible]… engage our existing client base rather than looking for that

new customer. As long as we continued to make our current client base

happy, they’d always just continue to bring us new customers. And always in

that market, a lot of people that came to us, came to us looking for

Elemental Designs products and wanted a home product. They know where to

click for that page. But they wanted a BL6T or something a specific model

number. It meant absolutely nothing to them. So we concentrated on getting

them to the type or product they’re looking for and from there the skews

are almost features so the warehouse knows what product was shipped.

Customers don’t really care that much. At least I don’t believe that they

did. It was over-time, we built recognition for the company, where we had

to learn what was new.

Andrew: So something that you’ve said several times, and I’ve wrote it down

earlier, is repeat customers. I wouldn’t think as the speaker business

having repeat customers. I’m thinking in my life, I don’t buy as many

speakers as real music and audio files, music aficionados and audio files.

Maybe I buy one set of speakers every five years, maybe if you’re five

times the fan I am, maybe you buy one a year? So are there people there who

buy more often?

Ben: Oh yeah. Oh yeah. It’s a very niche market. It’s kind of like, ‘Do you

have 22-inch wheels on your car?’ You don’t strike me as the guy who has 22-

inch rims that are chromed out. Maybe you have three pairs this year. Maybe

our customers had that stuff. If you’re building a big home theatre and

have $50,000 put into this home theatre. You’re always building up and

always building until one day your wife is so angry that you can’t build

anymore. But the amount of iterations and upgrades you go through while

starting at stage 1, which is just two speakers and moving up into a

$50,000 system. We really service everyone within that range, and a lot of

it isn’t even listed on the website. That really became powerful for us,

just supporting that. The type of guy who builds up a $50,000 home theatre

system in his basement, the type of people he hangs out with can also

afford to be the same and if he’s happy with Elemental Designs, maybe they

will be. That kind of referral-based system is really hard to market

yourself into.

Andrew: I see. I didn’t realize there was that kind of community out there,

that they were that passionate about speakers.

Ben: Oh absolutely. It’s interesting. It’s huge.

Andrew: So, when I search for the website, I think the first result I see

on Google is for the forums. The forums seem really big. Am I reading that


Ben: Yes. The forums are definitely a point of a lot of interest. You have

some moderation of some type, but 24 hours a day you can get information

about different product and customer experiences, and so forth. I really

think that opens it up and creates a communication that wouldn’t exist

otherwise. And on the contrary, there is eight years worth of data that has

been curated there. So if you search for different product names,

different company problems, different customer service problems you can

find every major event in the company curetted on those forums there, good

for bad.

Andrew: So how do you do that? How do you get so many people to come to the

forum and participate? It’s hard to get a community up and running. It’s

hard to keep them engaged. And it’s hard to keep them talking to each


Ben: For someone who started the company, I think for me it’s lead by

example. We started putting product releases in one place and started

respecting comments that we got and engaging in conversations that were

started, we were to get more conversations. But if we were to just ignore

them and not answer, people would stop commenting. It’s the same thing as

social media now, where it’s engage, engage, engage. It’s just on a

different platform. And VB just preceded Twitter. It’s just a different

platform, but still all about engagement and just kind of leading by

example. You should be engaging, you should be respecting comments and you

should be staying up late, especially someone who owns a company to let

people know that they can get responses 24 hours a day. And if you can’t

afford to pay somebody, then get out of bed early and do it yourself.

Andrew: Be in there and talk talk talk.

Ben: Exactly.

Andrew: You said there were three years there where you weren’t feeling as

passionate? What was going on there for you?

Ben: I think my biggest problem with that company was I always knew what I

wanted in life. I wanted a company that did a million dollars a year and I

had really specific visions about white house, two foreign cars, etc. Then

once I got it, I didn’t really like it all that much. Then I thought what

am I going to do when I’m 30. This just sounds like junk. I did not know a lot

about external financing and distribution agreements and how we can get

into other markets. So, I started traveling a lot and spending a lot of

time in Asia working in a manufacturing facility where I worked on parts

tooling a lot and in that time I learned a lot about myself and that I

wanted to build and it was time for me to move on to a new project. When

building Dwolla, one of my big concerns was . . . I have goals about where I

want to be and what I want to do and I just set them quite a bit higher so when

I reach them, I say, ‘Let’s go build another one. What’s next?’

Andrew: What are the new goals?

Ben: Honestly, I think it’s just to have enough capability to get into

another project. I want to be financially sound. I think financially I’m

just fine right now. But it’d be really great to experience enough growth

and success with Dwolla that I could go into my next project and say, “I

don’t need to get paid. Let’s just build.” Maybe do two or three at the

same time. Say, “I don’t need money. Let’s just build.” I think my goals

have to do with freedom and just build, being around obscenely smart people

who raise my game all the time. It’s not so much about money. It’s just

about freedom. I just want to build.

Andrew: All right. I have got a bunch of notes here that I want to follow up

on. The first is, you said one of your goals was to have a million dollars.

You wanted the house and the car and so on. When you did the first million

dollars, do you remember that day and what it felt like?

Ben: Yeah. I think we all laughed. We had a small office. The

company was four people. I think everybody just felt surreal. That much

money for just a couple guys in the Midwest was just silly money. We were

all so young we really didn’t know what to do. We celebrated and then it

was just, once the celebration wore off, let’s get back to work. Every time

we passed another million, it just became less important. Eventually, it

became about margins and crunching numbers and OK, what did the [??] last

year and how can we extend a line on the bank and yada, yada, yada. What

[??] and how are we going to [??] that? It became more about business and

less about growth and about chasing an ideal, which is where I checked out

a little bit. It felt awesome. I think it felt amazing, but it just didn’t

last that long and it was on to what’s next.

Andrew: I remember calling up CitiBank over and over just to have the

automated system read that big magical number to me, over and over. Did you

do anything like that?

Ben: You know, no. We went out. We celebrated. We probably went to a place

where we had $4 beers and thought it was the greatest thing that ever

happened and everybody went home and the next day we went back to work at

the same time and just kept grinding. That was the extent of it. It was

kind of a similar experience that Dwolla just took it another investment

round. Just kind of seeing the money in the account felt kind of good, but

6 hours after that it was, “Let’s just add three more zeroes to that and

see what happens.” How do we get there and what do we do? It’s all about

growth right now.

Andrew: One more thing that I wrote down that I wanted to come back to

which is customer service. What I found in businesses was that you can’t

get anything done, can’t get anyone to care, can’t get anyone to buy, it

feels like that. It’s not exactly like that. Then, suddenly, everybody

comes in. It’s like famine or feast, that’s exactly it. When that big feast

comes in and everyone is coming to your side and it’s really hard to manage

customer service. Tell me what happened to you in that situation. Let me

identify with the pain and help me to understand how you got over it.

Ben: With my first company or . . .

Andrew: First company and that’s the last set of questions I have on that

company and I’d like to move on. Help me identify with a problem.

Ben: When we first had that first influx of, “Oh my gosh. How are we going

to deal with this?” I’ll come flat out, not all phone calls got answered.

Our response time on email went to garbage. Then we hired and they got

better and we caught up and customers, because we kept them in the [??]

seemed pretty happy with it. We made some mistakes and some things fell

through the cracks but at the end of the day we did everything we could to

remedy the problems. Not everyone was happy, but most people were. There’s

no perfect scenario. It’s not a virtual server system when it comes to

people and phones and [??], you can’t just allocate more resources and have

it all happen instantly, so it’s tough. The way we did it was by throwing

more hours at it. My friends came in an helped. Employees stayed in later.

I worked more.

Andrew: Was there a situation where customer paid but didn’t get his order

because you were so overwhelmed that you couldn’t deal with it?

Ben: Oh yeah. We definitely made mistakes.

Andrew: So how do you fix that?

Ben: You first say, “Could we please ship that out to you and give you a

discount? We are very sorry and this was flat-out our mistake.” Then we

could work towards a lot of automation. Initially, we’d get an order and

print it out on one computer and move it to the back and type it in another

computer and then how much human error is possible? It’s just so much. So

even though we shipped it to apartment 402 but it should’ve gone to

apartment 403 and somebody has a slip of the wrist so we automated that

process a lot to where an order came in it would get automatically routed

through an API to a shipping computer, a label would get printed and

slapped on a box and it’s out the door. Really we just do what we’d want

someone to do for us, and if they are really set on having their money

back, we’d just give it back. You just kind of weather the wrath of how

angry they are ‘cuz frankly you screwed up and you deserve it. There were

times where we deserved it. There’s no complaining about it because we

screwed up and we deserved it.

Andrew: All right. So where did the idea come for Dwolla? Can you tell me a

little bit more about why you decided of all the ideas that this was the

idea that you would follow up on?

Ben: Uh, yeah. The idea for it really came out of Elemental Designs. When

it got to the point where we were doing a million and a half a year in

sales, that’s kind of where we set it as a company if we want to buy another

building or buy more land. How do we want to grow? What do we want to do?

There was enough money that we just stopped growing. We started looking at

overhead. One was freight and one was interchange. That was our two primary

kinds of overhead that were just being paid out to other people, other than

parts. Obviously, I didn’t think I could start a UPS, but I thought maybe

we could figure out this payments thing. We pitched a bank and the bank

surprising said this is how the system works. “This is how’d you’d move

money through us and through the Fed and here’s a big book and if your

system can do this, we’ll let you do what you want.” So we built it and we

went back and said, “Okay, we’re ready to start moving money.” They kept up

their half of the deal so we did. That was about two years ago. But the

whole . . .

Andrew: So you got a bank even though you had no banking experience to move

money to and from it?

Ben: Uh-huh.

Andrew: How did you do that? How did you even get them to listen?

Ben: The first guy who ever loaned us money [skips] it was because of the

person who was the vice president of the bank. Without him we never

would’ve gotten in the door. He was the first guy who basically gave money.

Somebody basically wrote a paper about Elemental Designs in a college

class. He was the professor. He came into the building and said, “Hey do

you guys need any money?” We didn’t know what to do, and because we could

get it we took it. So we paid it back right away. We borrowed almost what

we had in the bank, and we just paid it right back, which was, “ow much

would they give us if we paid it back really quick?” Through that

relationship, it just grew over a period of three or four years and I got

to know him pretty well and it became a personal relationship. I took it to

him and said, “Would your executive team be willing to hear this?” So I put

a suit on that day and went in and talked to the executive team and made a

pitch. They gave me something and we moved from there.

Andrew: I gotcha. You started off with no outside money. Why were you

willing to start the business without any outside funding.

Ben: I got obsessed with the idea. You mean starting Dwolla without any

outside funding?

Andrew: Yeah. It seems like the kind of business that would need a lot of

funding, that would need a lot of backing, that would need the reputation

benefit that comes from having a good board. Yeah. It seems like the kind

of business that would need a lot of funding, that would need a lot of

backing, that would need the reputation benefit that comes from having a

good board.

Ben: I would say that complete naivety about what I was doing was probably

the reason that I did it. I got a tax return and I felt that I could put

the tax return into this new idea or I could buy a few new plasma TV’s.

Well I put it into the company instead of buying the TV’s and I think that

worked out pretty well. The reason we started with no outside funding

because honestly I didn’t think I needed it, when I started it. I started

Elemental Designs with a thousand bucks, $1,200, and I thought I could start

Dwolla with $5,000. I kind of did but I found that it’s not that easy in the

payments business. I learned what a money transmitter license was six

months after when I read the book “PayPal Wars.” We learned a lot about how

the financial system works simply by doing and by listening when a

regulator calls and says, “Hey man, you can’t do that. You gotta do it this

way.” At this point, we now have access to outside funds. We brought in

some really strategic investors. We got some really smart people at the

table, really great advisory board, great board of directors. We gotten

there over a period of time, but when we started we didn’t know any better.

It was just all about the concept of how we could move money without paying

the credit card companies. That was the whole deal.

Andrew: I’m wondering how you overcame the worry I would have being in the

financial business. The worry that, if you piss off the regulator, you are

potentially committing a crime. Whereas, if you piss someone off who is

shipping or getting a speaker from you, it’s really not that big of a deal.

How do you get past it?

Ben: You accept it. My name is on so much paperwork. You just accept it.

It’s a risk of starting a business. Once you commit to a project, are you

going to walk away just because it’s too risky? It’s your project. I think how

you deal with that long term is by being very adamant about understanding

risk, especially in financial transactions and about how to manage the risk

and bringing in experts in managing certain types of transactions.

Electronic transactions are that new. The way that we are facilitating them

is new. But, one of our investors is called The Member’s Group. The

Member’s Group provides financial services to banks and credit unions, and

services, through them, over two million people. So, what they do as a

specialty, is work on security systems, auditing, processes and things like

that for banks. They’ve been doing that for us since they came in the

investment and did that as part of the due diligence as part of the

investment. We have a lot of security knowledge on that side that’s very

helpful. On the other side, one of our investors is a subsidiary of the

Veridian Group [SP], which is a subsidiary of Veridian Credit Union, which

is about a $1.6 billion credit union here in Iowa, a decent sized

institution. You’ve got over a hundred years of money management knowledge,

of being a depository, of how to manage the regulatory landscape. It’s not

the Wild West here. We’ve got some very adult people paying very close

attention to what we’re doing who have a ton of experience.

Andrew: Hey there was a [??] company that was getting into payments via

Twitter. Now that you’ve been in this industry for a while, two to three

years, do you have a sense of why they didn’t work out? I can’t even think

of their name right now for some reason.

Ben: I don’t know their platform, very well. Twitter and Facebook are

features of our system but we’re not built on simply, “Since we integrate

with Twitter, we’re all going to be millionaires.” We think that you have

certain type of financial exchanges and one is simply with people that you

know. Yes we believe that if we give you the ability to exchange

effortlessly in a financial transaction with people you already know, and

then our platform will be valid. That’s a peer-to-peer transaction and is

not every transaction. It is only a small fact of peer-to-peer

transactions. We think that if you can type the first three letters of

someone’s last name and be able to send them money, much like add them [??]

a friend on Facebook. Would that be valuable to our generation iPhone

adopters, Android users, and people who use tech. We think that would be

valuable. That’s how we really harness Twitter and Facebook as a way to

allow people to engage in the type of transactions that they want to, but

it’s not the only thing we do. It’s just an added feature on top of our

platform. Unfortunately, I don’t know why that company didn’t work out but

we think that the Facebook and Twitter integrations are great for

connecting people.

Andrew: But they are just a small portion of the business. There is a full

business on top of that.

Ben: Yeah. There might be if you can get enough traction in those markets.

We’re still very much a start-up company. We’re still looking for our

primary market adoption that really drives what our company is going to be.

Right now we have entrances into consumer markets, financial institution

markets. We have the spots product. We have a financial institution

product, which is being sold to financial institutions directly. I think

that, which product for us takes off, time will tell. But, I think that one

of them will.

Andrew: How do you keep from investing too much time and too much money in

one of these, essentially, tests?

Ben: One of the beautiful parts about being in Iowa is a million dollars

really takes you far in Iowa. You can do a lot with that money. It lasts a

long time unless you become really foolish with it. Developing new products

becomes something that clients are asking for and as long as you make it

clear that you are willing to develop what they ask for. They will continue

to tell you. They will tell you what sucks and you just have to have enough

confidence in yourself to listen to what they say. I think the things that

we also devote a lot of time to, projects that are in the excess of a week

project, we have a lot of market data suggesting that we should put that

time into it. Even shopping cart plugins. Before we develop for a certain

shopping cart, can we have 20 customers lined up with an x amount of

revenue and a potential take on a conversion of x dollars and payments. We

can do all that stuff ahead of time and I think it’s just us doing our due

diligence about getting caught up. We make a joke of a rat race, sometimes,

where we see our competitor doing this and we one-up them. We become tied

with that one-competitor. Because we’re so isolated here, we can just go on

our own path I think.

Andrew: You mentioned spots and kiosks. We talked about them in the pre-

interview. What are they?

Ben: Spots is basically the world’s first geolocation payments platform.

Just imagine if you opened a payments application. That application knew

that that merchant location accepted Dwolla. You can just walk in. The cell

phone recognizes where you are at and allows you to engage in a transaction

right inside of it. No tapping, no swiping, no plastic network at all. Just

simply the recognition that this is where I’m at, and just hitting pay.

Andrew: All right so that’s cool. I walk into a sandwich shop. I say I want

a sandwich. They give it to me and I don’t have to take out my credit card

I just pull out Dwolla the iPhone app. It knows I’m at the sandwich shop.

The sandwich shop accepts Dwolla. I hit a button and boom I’m done. I’m in

a room with a buddy of mine. I need to give him $20. Dwolla knows that he’s

in the room with me and he has an account too, right? And I can just hit a

button and give him the money . . .

Ben: Yup. The way it words with people is, one tab is for contacts and one

tab is for spots. We separated those because we feel that one tab is really

specific for a place that you want to buy something from and the other tab is

really a peer-to-peer transaction where I’m sending it to a friend who’s

probably in my contacts list. So, we don’t map where people are at, largely

because it’s a bit of a privacy issue, if we start where phones are at and

not really getting permission for that. But, in that case you would know

that your friend Tom is right here and you would type in T-O and it gives

you Tom’s name and face and click on that and send him money.

Andrew: What about the kiosk? What’s that?

Ben: The kiosk product is really just a window for merchants. Obviously,

one side of that transaction is the consumer can now pay and that’s great.

But how does the merchant know they got paid and how do they do that? We

built a kiosk product that comes in three forms. One is an iOS application

so you can put it on an iTouch, iPad, iPhone that basically is an RSS feed

for payments. You turn it on, you leave it on and it gives you incoming

payments in real time. So basically, I send you money and in that location

it pops up on your phone, you have my name right away. Another one is a web

portal, so if you don’t want to have an Apple device, you log in and leave it

open. The third form is, thanks to our API, if you have an enterprise

deployment-. Just think in theory you had somebody with 10,000 stores of

5,000 stores or 20 stores that wanted to pipe that into a specific point of

sales system, our API can already make all those connections. It just needs

to be implemented. It’s basically just a way to consume incoming payments

and view them and know that you’ve been paid.

Andrew: So right there at the cash register, they see that they’ve been


Ben: I think that would be more of an enterprise deployment, where-. We

don’t really integrate, right now, with cash registers. We wanted to solve

the problem with, if I did get paid, how would the merchant know that they

got paid. So, the iPhone and iTouch applications are for people who have

those big brown old cash registers. Then right in between we have people

who are running Windows or Mac OS point of sale systems where they want to

use the web portal kiosk. And, the other side we have a lot of people

running Aloha and those other systems developed as the enterprise product

where we really would like to integrate long term with somebody like Aloha.

We just made sure that the technology and the API was there to do that on

the front end.

Andrew: Hey, what did you sell Elemental Design for?

Ben: Unfortunately, that is private.

Andrew: Can you give us a sense of what it was sold for? What the value of

the company was?

Ben: The company was doing 1.5 a year when I sold it. From there I had

enough to pay my bills. I don’t have to worry for a while. I’m OK. I

probably wouldn’t be able to live on the 20th floor in New York, but I can

live pretty decently in Iowa and I’m pretty happy with it. As somebody who

spent eight years building a company, or if you spent eight years building

a company, and you find yourself in a position where all you want to do is

work on your next project, what do you really want? And what I really

wanted was the freedom to concentrate on it and not really worry about

money for a while. That’s what I got.

Andrew: So you didn’t have to worry about money and you still don’t.

Ben: Not for a bit. I’m okay there.

Andrew: Why Iowa? Why haven’t you left?

Ben: I kind of joke around sometimes that my beach is a cornfield and I

think Iowa is great. Looking out the window at Iowa, one of the things that

makes me happy is hopping on a four wheeler and taking off for four hours.

I love to travel and I can get on a plane anytime, but I grew up here and

you tend to have ties where you are and I don’t know where life will take

me, but for now Iowa makes me really happy.

Andrew: I was there once for Warren Buffett’s Berkshire Hathaway Annual

meeting. It’s a great city. I was able to run through Omaha and feel

very comfortable in the area. I kind of could figure out my way around pretty

quickly because it’s pretty well laid out.

Ben: Yeah. You can live here really well without . . . it’s a good place to

live. The cost of living here, you can live very well. There is a lot of

opportunity for building companies in the Mid West that hasn’t been

realized yet. You can do a lot here without a tremendous amount of money,

which is to say that a million dollar investment from the right people is

going to get us quite far in Iowa. I also think that that rat race concept,

there isn’t a lot of people doing what we’re doing across the street, so

we’re not really getting locked in with anyone and I think that’s allowing

creativity to run free. Lastly, the community here has really embraced us.

I think a lot because there isn’t a lot of companies doing something

similar what we’re doing and that embracement has helped a lotwith building

features and people being early adopters and you know . . .

Andrew: Also [??] news covered you a lot, big fans of your work and I know

the community there is cheering for you. You know I’ve got this theory.

Tell me if I’m wrong or crazy about this. When I was in Argentina, I saw

that there was entrepreneurs who moved to Argentina for a year or two to

live life on the cheap while they build out their companies. I’m feeling

like the same thing could be done in cities like Nebraska, and in the Mid

West. I feel like there’s parts of the U.S. where you could live on the

cheap and have the language that your used to, have the environment and the

culture that you’re used to but not have all the expenses that go along

with being in the U.S., at least not in Silicon Valley, or in New York or

Boston. What do you think?

Ben: I think that’s very true. I think all those areas have major benefits

and I think for companies here to be successful, we have to find a way to

communicate with and network with companies there. Eventually, we have to

have this network that extends outside of this area, but I do think that

there are a lot of talented people here that want to build companies here and

because of Silicon [??] news, especially, for the first time that companies

here have a voice and a connection with the outside world because they

exist. It makes it so much easier not to get on a plane and not to leave

because there is somebody here telling our story. We don’t have to chase

someone to listen to us when we can stay in our back yard and just build.

Andrew: All right. The website is Dwolla, Dwolla.com, and, Ben, thanks for

doing the interview.

Ben: Hey. Thank you very much for the opportunity, I appreciate it.

Who should we feature on Mixergy? Let us know who you think would make a great interviewee.