Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com.
I do interviews for an audience of real entrepreneurs, you know, people who are building stuff, who are really out there creating companies, which is why they like me to get into detailed, detailed, detailed questions. This isn’t for the couch potato wantrepreneur who just wants to hear about how you finally quit your job and started a business. That’s not the exciting part here. The exciting parts are the details of how an entrepreneur built his business.
Wait until you get a load of the nerve on this guy and what he did. Before I tell you about him, I have to tell you about someone who came right here to the office. I’m pointing that way because through the wall is where we have our scotch nights. There was an entrepreneur who I interviewed who came here for scotch night and he said that he’s now at a place where he’s really stretching his cash flow with this new business that he started. It’s doing well. He knows that every new customer based on lifetime value of customers is going to produce money for him, but he’s spending a lot of money acquiring new customers.
Another entrepreneur who I also interviewed was sitting there and he said, “What are you going to do about it? What are you thinking?” They were going back and forth about it thinking of options and the guy who’s stretching his finances said, “The other option is I could just mortgage my house, but I’m not sure I want to mortgage my house.” The other guy said, “You should mortgage your house.”
They were going really back and forth in kind of heated way, both of them in strong opinions because this is a man’s life and future on the line and he’s not sure how much he wants to take a risk. Should he get funding? Should he risk it all? Should he risk his wife’s home on this new idea that could just go fall apart?
The reason I bring this is up is because that’s a big issue for entrepreneurs. That’s a big decision for us to make. Joining me today is a guy who made that decision for himself, for his life. He decided he was going to take a risk. The risk seems easy when you just kind of talk about it at a cocktail party years after the fact, but when you’re going through it, it’s a big challenge.
Listen to the nerve of this entrepreneur with his idea. He had this idea that maybe you wouldn’t want to go to a therapist’s office when you have an issue. Maybe in the world today, you don’t want to drive out and sit on a therapist’s couch and just talk, maybe you want to use your phone, use technology to talk to your therapist.
It’s the kind of an idea that if you talked to an investor, they might have sent him to a therapist. They might have said, “No, this doesn’t work,” and all these other issues. But he didn’t. He bootstrapped it. He risked his family’s livelihood, his personal livelihood, his family’s finances and he built up his business.
What I want to understand here in this interview is a little bit about the nerve involved in it, a little bit about the decision making process, a little bit about how he got his customers and also about how he ended up with a real big hit on his hands, one that he ended up selling. His name is Alon Matas and he is the founder of BetterHelp, which is the world’s largest online counseling platform.
This interview is sponsored by two companies. The first is going to help you find your next developer. It’s called Toptal, but I’ll tell you about them later. The second sponsor is HostGator, which as you can tell from the name, it’s an alligator that will help you host your website, but I’ll tell you more about them later.
First, Alon, welcome.
Alon: Hi. Thank you for having me.
Andrew: I was looking at you as I made that introduction and at times you felt like a little bit of pride and at times you winced.
Alon: Yeah. Bootstrapping, a lot of entrepreneurs ask me about bootstrapping and whether it was the right decision and should they do that. There’s no real answer for that. It worked for me. It could have failed the same way that it worked and then it would be kind of a disaster. I think it’s a very personal choice. It’s also based on the specific venture.
Andrew: You did raise money before. So it’s not like you didn’t have any experience raising money.
Alon: Yes.
Andrew: Here’s the topic that my team here–when someone on the team suggest a guest, I say, “Also suggest a headline. Let me know where you think the audience is going to care about it.” Here’s the headline they suggested for you. They said, “Alon Matas–how his horrible failure led to the creation of BetterHelp.” You’re smiling as you hear that.
Alon: Yeah.
Andrew: It’s because the previous company was–I don’t know that I would call it a horrible failure. Would you?
Alon: No. I don’t think it’s a horrible failure. Generally a startup should be returning at least 10X to its investors. So if you haven’t done this, it is almost a failure by definition. By that definition it was a failure. I think a lot of startups have failed much more miserably. We definitely didn’t fulfill potential. We didn’t become the hit we thought we would. Investors didn’t take 10X on their investment.
Andrew: There was also some interpersonal turmoil in you and in the company. Can you talk a little bit about the company turmoil towards the end?
Alon: Sure. So I founded the company around 2007, spent five years building this company. So obviously I was extremely emotionally invested. This was my third company. So it wasn’t a new experience for me. But it was by far the biggest one and the one that raised the most money and had the highest stakes. It went well, which actually made it more difficult because when you have an idea that fails, you move on to the next idea.
But when you have something that actually works and the revenue picks up and the company becomes profitable and successful and something in its internal structure around investors and board and the way that it was built up in its backend.
Andrew: I don’t expect you to be fully open with me without a scotch in your hand and another five in your stomach, but if you can just describe a little bit, maybe one example of the inner turmoil in the company, it would give a sense of what you were facing over–we’re talking about MediaBoost, right?
Alon: Yeah.
Andrew: So give me one description of one specific issue.
Alon: I think the biggest challenge was we had four investors which were extremely different from one another and wanted different things pretty much from the get-go, which is partly my fault because I knew they were not aligned, but as an entrepreneur, someone is offering you money, especially those years that were difficult to raise money, then you don’t ask too many questions and you make that mix and you hope for the best.
That’s the advice I was told, that it’s better not to start a company wrong because if you feel it’s wrong, it’s probably going to be wrong. So there was a lot of conflict around the board table. We had four investors on the board and me, which is not an idea situation.
Andrew: What did one group of investors want to do and another–actually, what did MediaBoost do?
Alon: So MediaBoost started as a technology company for online advertisers trying to help online advertisers in optimizing their campaigns. At some point, instead of selling technology, we actually used this technology for performance-based advertising. So we sold the technology to ourselves in order to play in the affiliate marketing/performance marketing game and help publishers or advertisers to promote their products, where we took the risk. We were actually doing the advertising.
Andrew: Okay.
Alon: Which is a model that works, I think, extremely well for different lifestyle businesses and a lot of my friends are affiliate marketers and are doing great. It’s great to have a profitable, growing business. It’s not a good model for VC-backed business. We did have two VCs, two non-VCs or half VC. So it’s a very challenging mix for a company that is not a good fit for VC in general, which also led us later to some issues with a follow up.
I was very frustrated because I had seen a lot of companies with almost zero revenue raise money easily, especially around 2010-2011. When we were nice revenues, growing quickly, profitable at times depending on how we structured this, still struggling to raise money, that was the feedback I got from VCs here when we raised money that was back in Israel.
Then I moved here and obviously one of the reasons I moved here was to raise money from Silicon Valley VCs and they pushed back and said, “It’s a great business. I’d love to be an owner and take part in the business, but this is not a VC business.” In hindsight I think they were right.
Andrew: So they didn’t get a 10x return. Did you personally end up making money at the end of it?
Alon: Not really.
Andrew: Is that why you started going to therapy?
Alon: I actually didn’t go to therapy. But I was definitely thinking about it and I don’t know if I had clinical depression or feeling really, really down, but I definitely thought, “I need some help.” This is a very stressful situation that I hadn’t experienced before to that extent.
Andrew: When you say that it might have been clinical depression, you weren’t sure, what did you do that in retrospect makes you think that you might have been clinically depressed? Did you sleep all day? Did you think about cutting yourself?
Alon: No, nothing like that. But I’m a workaholic, like everyone who knows me. The first time in my life, I wasn’t looking forward to going to work.
Andrew: That’s it? That’s depression for you?
Alon: For everyone who knows me–
Andrew: Did you cry?
Alon: Excuse me?
Andrew: Did you cry?
Alon: I don’t think so. It was like several years ago, but I don’t think–
Andrew: Did you obsess mentally about how you failed or how you want to kill someone who caused you to fail?
Alon: I was definitely dreaming about–well, dreaming about work is definitely pretty standard–but I was dreaming not the best dreams and not the optimistic dreams. I had a lot of responsibility. We had around 20 employees. We had investors that we wanted to please and I felt a lot of pressure.
Also, I felt like we’re failing for the wrong reasons. It wasn’t the company was not successful or not making money or not proving that the concept was true, it’s just we kind of failed ourselves. I got to a point where 80% of my time was not about product or building the team or marketing it. It was about putting out fires that are completely internal trying to make peace between two board members or two investors or between me and an investor and trying to make this whole thing work that was completely regarding what was happening in the company.
I remember a conversation I had with a board member. One of the arguments we had, I told him, “I’m speaking with you much more than I’m speaking with my head of engineering over the last couple months. That’s a problem.” He said, “No, I don’t agree. You need to speak with me. I’m your board member. I’m sort of your boss. You need to speak with me.”
That was a big issue that the board and investors thought I need to be more attentive to the politics around the company, which maybe may have been true, but I wasn’t really inclined to do that. I am in essence a product guy with a lot of technical roots. I’m a product guy and I love marketing and I love to build a team.
Andrew: I see. I see how this wouldn’t necessarily lead you to want to cut yourself. But still, it’s a depressing situation to get you to want to go into work every day like this. It’s your company. You can’t disappear from it. You just have to suffer from it. You guys eventually sold it. You didn’t make much money. Your investors at least got their money back and a little return, not anywhere near 10X.
You were going through a funk. My team says that part of that funk or that funk itself is what led you to come up with this idea for therapy in your phone. Where did the idea come from? How did that funk lead you to create BetterHelp?
Alon: So after I was–basically it was a conjunction of something methodological that I was looking for and I had my personal feelings. I was looking for a marketplace. All my previous startups were kind of marketplaces connected people looking for something with providers providing this thing. What I didn’t want to–kind of the marketplace I wanted to build is a marketplace where the actual service is part of the marketplace, it’s not just a matching marketplace.
Andrew: What’s the difference? A matching marketplace is what versus this service marketplace?
Alon: So a matching marketplace is, for example, Airbnb. So on Airbnb, I found a guy with the home I wanted to stay in, I go there, I stay there–all the transaction, it’s maybe going through the website. But the website is not involved in that
Andrew: I see. The experience is staying at an Airbnb home. With eBay, the experience is getting the product in the mail. The marketplace facilitates the experience.
Alon: Yes.
Andrew: You wanted to the marketplace–
Alon: It just makes the matching. If you take oDesk, for example–oDesk’s model is yes, we match you with a freelancer, but also the whole work process and everything that’s done is done on the platform itself. So the platform is involved in what’s happening. You can see that more and more in marketplaces like that. Uber might be somewhere in between because it matches you with your driver, but also it manages the billing of the ride and everything that happens in the ride. So you have a lot of things in the middle.
What I didn’t want to replicate was what I had before, which are marketplaces–for example, at MediaBoost, one of the biggest verticals were the local services. So you’re looking for a painter or a plumber or a mover. But what we did, when we did hundreds of thousands of moving leads, but basically when we connected you with the mover, that’s it. We’re out of the picture. Now, it’s up to you and a mover to facilitate the transaction. I wanted something that’s actually the transaction or the service itself is part of the marketplace.
Andrew: I see.
Alon: The second thing I wanted is something where it’s really mass demand. So I’m not based on people with intention. I think this is very important in performance marketing in general. My DNA is performance marketing. So you have kind of products which are very intent-based. I mentioned moving, so it’s a great example. If you’re not going to move, I’m not going to convince you that I’m going to connect you with a great mover because it’s completely irrelevant for you. So I need you to be actually with some kind of intent.
The other extreme is weight loss or dating, where 40% of the people are looking to lose weight and 20% are looking for a date. So it’s a much more mass market. I don’t need you to be expressing intent right now to do a transaction. If I market this to the mass audience, if I put up a banner somewhere for a dating service, I have a 20% chance of actually hitting, where I’m putting a moving banner, I have 0.2% because a guy moves every 5 years.
The third thing I want is something that actually brings some good to the world and some value. After five years in ad tech–ad tech is a great business. It makes tons of money. You deal with the smartest people. It’s very technical, which I love. But as you sometimes say, if you’re really, really good, you’re probably not creating any damage, but you’re naturally adding a lot of [inaudible 00:16:24]. So I kind of wanted to do something that brings some good to the world and people actually want to use the product, not shoving it through marketing.
Andrew: I see.
Alon: So I was looking for these and I looked at some ideas and some options. At the same time, I felt like for the first time in my life, I need someone to talk to, I need someone to help me professional with the stress and maybe the impression I got out of the events in my first company. So that was where the idea was kind of created of doing a counseling marketplace. The counseling itself is part of the platform. It’s actually conducted over the platform. It’s not a matching service and it’s doing tons of good for the world.
Andrew: What I’m curious about still is why were you so intent on having a marketplace where the action happened in the marketplace as opposed to being a matchmaker and letting the magic happen afterwards. There’s a logic to that that I want a little bit more clarification on.
Alon: I think it’s much more defensible. It also creates tons of opportunities for making a service that does not exist. When you match–Airbnb is an example. I think it’s an amazing company. But it’s naturally creating something that wasn’t there before. I could have made an arrangement with you to give you my house and you pay me money. People did that on a very small scale.
It opened the connectivity of that and scaled this. But the actual service is not really online. I think it’s much more interesting to do something that the actual service is online. It opens a lot more opportunities to create something that wasn’t there before.
Andrew: I see. I think maybe a better example might be TaskRabbit, where I go to TaskRabbit and I say, “I need somebody to go and water my lawn tomorrow afternoon.” They will match me with someone else who will do it for me. Because the action happens outside of their service, I could basically get that person’s phone number and cut a deal with them where I’ll pay them directly and have them come in.
Alon: Or you can approach somebody on Craigslist or you ask a friend. It’s definitely very valuable marketplaces because finding the person is a huge pain point. But the service itself is naturally aligned. There are a lot of services where you ask yourself, “Is it really a tech company? Is it a logistics company?”
Andrew: Is it a better–
Alon: Instacart, DoorDash–great companies, but where does the line cross between a tech company and a logistics company with an app. Is Domino’s Pizza tech company because they have an app where I can order pizza?
Andrew: Okay. Let me take a moment here to talk about my sponsor and then I want to come back and talk about this crazy way that you started that’s actually not crazy at all. It makes a lot of sense–the crazy first version that’s brilliant and everyone should learn from it.
But my first sponsor here is a company called Toptal. Alon, you said that you’ve heard of Toptal. You’ve actually talk to them.
Alon: Yeah.
Andrew: Let me tell anyone who doesn’t know what it is. Toptal looked at the world and realized, “Hey, wait a minute, just like Mark Andreessen, said, software is eating the world. Every part of the world is going to be affected by and changed by software.” That problem is that most people don’t have the right developers to build the software for them. Now, some people do. They have some great developers, but they always need more. And most of us don’t have any great developers around us.
So Toptal said, “What does the world look like today?” What the world looks like today, if you need a great developer, you go back to your high school friends and see if any one of them became a great developer. You talk to your friends in your network and you see if anyone knows a good developer or you start placing ads and you start to hunt down to see if you can find a good developer or you go to a headhunter and you pay a lot of money and hope that they can find you a great developer.
That’s a really highly friction, highly old fashioned way of doing business. Every one of these techniques could have happened years ago. They said, “What if there was a new way to do it, one that was faster, one that was more responsive to customer needs?”
So they said, “You know, we’re going to put together a network of great developers. By great developers, we mean people who pass a series of tests, people who their peers think are good developers, people who won’t just do what the client wants but can help the client think through what the product is, people who could pass Google’s freaking mind test but aren’t willing to go and sit in Mountain View.”
They put that network together. So today, when a client comes to them and says, “I have this project. I need something built. What do you say?” Toptal can say, “Tell me more about the project. Tell me more about what you’re trying to build. Tell me more about how you work. What are you guys? Do you guys use Slack? Do you use email? Do you prefer to do phone calls? Tell me about all of it. What language do you code in? How does this fit in? Is this a one-time project? Is this a long-term commitment you want someone for? Is it just a few hours every week? What is it?”
And then they go to their network and they find that right person and they match you up and they say, “Here, have a conversation, talk.” If it’s a good fit, you can get started within a day or two often.
That’s the way Toptal works. If you’re looking for a developer, go check out not Toptal.com. That’s a great site. But Toptal.com/Mixergy will give you 80 free hours of developer time when you pay for 80. Think about that–80 free hours of developer time. Good developers will crush it in that time.
And they’ve got a two-week risk-free period where if you’re not happy, if you’re not enthused, if you don’t believe that everything Toptal said in their initial phone call with you actually worked out, well, then you don’t have to pay. Don’t worry, they will still pay the developer because they’re good people.
They’re backed by Andreessen Horowitz. They have incredible clients and so many people in the Mixergy audience have signed up for them and have had good experiences that they keep buying new ads for me, which is why I was able to do this whole thing from memory, Alon. I used to in the beginning of these reads, I used to look at notes and say, “Do I have the promise right? Is this okay?” If I get one thing off, I now promise someone something that Toptal has to deliver.
Anyway, they’re really happy with the ads because so many people are happy with the service they’ve gotten from Toptal. If you’re looking for your next developer, whether you have a team or not, go check out Toptal.com/Mixergy and if you, like many other people in the Mixergy audience want an intro from me to my guy over at Toptal, just email me. I’m just Andrew@Mixergy.com.
Alon, our team here said to you, “Okay, you found your idea. What is the first thing that you did to build it out?” You said, “I wanted to prove that this service can actually be used by real people who are going to pay cash money for it or credit card money for it.” Why were you so eager to prove this out before you took the next step?
Alon: Because basically everybody I talked to said that it won’t work. There was a huge assumption–what we built here, again, it’s not taking something that’s done offline and creating an efficient marketplace around it that Airbnb or Uber did. We actually created a service that wasn’t there before. The big question was would people want to have therapy over text-based communication without sitting in the therapist’s office, without being on the therapist’s couch and also without a scheduled session time.
The BetterHelp is very different from traditional counseling. There isn’t a 45 minutes a week that you speak to the therapist. You write to the therapist whenever you want. The therapist replies to you within a reasonable time and you have this dialogue where you build rapport.
Andrew: The same therapist or you guys pick the therapist for me?
Alon: Same therapist.
Andrew: I see. So I’m at work right now. I have a horrible interview. I think I can do a lot better. I can reach into my phone and text and my person will be there for me?
Alon: Yes, exactly. So either through the phone or through a desktop computer or through the app. Every person is different. Sometimes it’s like you said, I need to vent after something that’s happened. Sometimes it’s more goal-based. So you have this issue of, say, social anxiety that you want to resolve. So you have more goals and process.
So counseling itself, it’s very different from one person to another, different from one counselor to another. We have over 1,000 counselors within the system that work with BetterHelp. So each one of them is also very different.
Andrew: So you were thinking, “This is a little bit out there. Let’s make sure before I start building it out that I’m not making a huge mistake.” That’s why you wanted to test out to see if people were willing to pay for it before you coded. What did you do to test to make sure that people are willing to pay?
Alon: We made a really, really basic, very basic experience, basically a landing page and one therapist and a very simple way of communicating. What we wanted to see is are people liking it but liking it in the measurable way, which is not just saying, “I like it,” but swiping a credit card, which for us was important not just from a business point of view.
Think of different business models. We weren’t sure about the business model back then, but does this really bring value. This is the ultimate proof that something brings value if someone is willing to pay for that. So we built this pretty much very barebones–
Andrew: A landing page?
Alon: Yes, a landing page, a therapist that can pick up so you’re just wasting your time, but there wasn’t a marketplace. There wasn’t really a system. There wasn’t a management around it.
Andrew: And you’re also experienced in buying online ads from your previous business. So you started buying ads, sending them over to the landing page, seeing if people would actually pay by credit card. If they paid by credit card, what happened?
Alon: So they would start interacting with one therapist that we had.
Andrew: Okay. Why did you even bother with that? Why didn’t you say, “Let’s just see if they put a credit card in and then we’ll accept it as a winning result, but give them their money back. We’re not even charging their credit card. Apologize and say we don’t have any more people now?”
Alon: For a very, very short time, we actually had this mini-experience just to see, “Can we buy to the ads? Will people go to the landing page? Do they do something on the landing page?” Especially when you deal with a topic like that, you don’t want to pull people into this experience without actually providing a service because it’s not an afterthought. Someone that opens up on a platform likes this and talks about these issues, you don’t want to disappoint them.
Andrew: I see.
Alon: We see it now because one of the things we do when you sign up now is we make you go through a very extensive questionnaire, over 20 questions. One of the reasons we do that is we want to screen people that we think are naturally a good fit for online counseling. A lot of times it’s people with acute crisis, people that are suicidal, people that probably that are not–we don’t feel like online counseling is a good fit for them.
So we actually reject a lot of people that want to sign up to BetterHelp, want to pay us money, want to use our service and we tell them, “We don’t think this is right for you. You should go to a traditional therapist.”
Andrew: I see.
Alon: This is our hate mail. If you look at reviews in the App Store, this is really almost the only reason why people say bad things about us is because we didn’t let them sign up. But we still do that. It’s one of the things beyond being a business and scaling the business, you need to be very careful. You need to be very sincere in what you’re doing because you’re dealing with actual people involved in situations and they’re not coming to you because they’re happy. The last thing you want to make them is less happy than they can be. We’re trying to be very honest in what we do.
Andrew: You started buying ads, sent it to the landing page, took credit cards, sent people to the one therapist that you had. I’m assuming then that you knew this thing was working because your ads were paying off. It wasn’t just about making your money back, I’m assuming. It was about knowing the kinds of ads you bought and the kinds of people you reach were diverse enough that you could get a diverse enough customer base like you wanted. Is that true or am I over-thinking it?
Alon: In retrospect, actually, I think we did the test wrong. My background–and also, Danny, my cofounder that joined me and we started together–is with search-based advertising. When you do things that are intent-based, I mentioned it earlier, like moving van, you go to people who search for something. So if someone is searching for a moving company, you target them. The way we started this, because we’re Google guys and we spent tens of millions of dollars on Google over three companies, then we went to Google.
We actually were successful because if someone is looking for “online counseling,” we were one of the only solutions for online counseling and we had a good pitch and a great landing page. But in all truth, I don’t think that was really important because intent in online counseling is not big. Not a lot of people are looking for online counseling. What made BetterHelp big is when people who were not looking online counseling but just seeing our ads and seeing that there is a solution out there got interested. So unintended traffic was actually much more important that intended traffic.
Andrew: Right.
Alon: But we knew Google, so we went to Google and it was doing good, but in hindsight, I don’t think that really mattered because there’s so much you can bring from people looking for online counseling. It’s much more important–if you’re more like a dating site or weight loss site where everybody needs you or a huge population needs you, even if they’re not actively looking for it right now.
Andrew: I see. So then how did you know that you had a hit here?
Alon: Definitely it was a close call of time. We kept asking ourselves, “Do the unit economics work? What is going to be the lifetime value? How big can it be?” It definitely wasn’t an overnight success. We didn’t launch and then a day later we knew it’s going to successful. It had some good signs.
It had some bad signs. We knew we weren’t optimized. This is something that maybe our experience was very useful because we had the confidence that we could optimize it and make it better, both in bringing in users and the user experience and retention. We knew even though it was not working and it was not profitable from day one, we knew we could get it there and we could scale this.
I think it took us six to eight months until we knew, “Okay, this is a real business. We’re still not sure it’s going to be the next Google, but it’s definitely something that’s going to work.”
Andrew: Okay. I want to move on with the story because there’s so much that I have to ask you and fit into the next half-hour or so. The next thing I’m curious about is once you knew you wanted to launch this business, who built that first version of the app?
Alon: So I got help from a guy back home, back home in Israel that I really wanted to work with. He built like the very basic first version. I’m a coder in my past, but I haven’t coded for ten years or more. So I had this thought, “Should I go back to coding now?” I said, “No, I don’t have patience for it.” It would go great until the first bug and then I will get frustrated.
Andrew: How did you pay him to build it for you? What was the pay structure?
Alon: So we paid him with some equity and some cash and took the risk.
Andrew: To create the first version of the app?
Alon: To create I would say the prototype version of the service. It wasn’t an app back then.
Andrew: It was a webpage?
Alon: It was all web.
Andrew: It was all web back then.
Alon: It wasn’t even working on a mobile site.
Andrew: Did you create wireframes? By the way, I’m asking you all these details because that scotch night that I told you about, there was a guy in the audience who came in who raised about a quarter-million dollars, had someone build an app for him–it was a friend, same as you–gave the guy a percentage of his business and gave him somewhere between $100,000 and $200,000 and the app isn’t done. We were all talking about what he should do next and where he started and where he could have gone a little different.
Surprisingly, this guy didn’t understand what a wireframe was. Someone at the table said, “You should just have created the wireframes and given that to the developer and tell him what you wanted instead of asking the developer to think through this whole thing and this whole product as you have it out of your mind into an app.” So what I’m wondering is what kind of guidance did you give your developer?
Alon: I’m a product guy. I’m a product guy and I do wireframes. This is the most fun part of the job for me is to create wireframes.
Andrew: What did you create your wireframes in?
Alon: Balsamiq.
Andrew: Balsamiq?
Alon: Yes.
Andrew: Okay. You get into Balsamiq. You start laying it out. Do you do any customer testing? Do you show it to them and say, “Hey, what do you think of this? Does this make sense?”
Alon: No. I think when you go–unlike when you go to an enterprise solution, when you go to a consumer market, it doesn’t really make sense to ask a bunch of people what they think because you get it very distorted. So my approach is yes, we’re all about testing everything and everything experience is tested, but when you come up with a new idea for something completely new, there is no point in asking people. I did make the mistake of asking therapists, actually.
Andrew: Therapists–why was that a mistake?
Alon: Again, even on the therapist’s side, it’s a consumer market. You go to thousands of therapists. It’s really not important if you have two therapists that hate you. You have tens of thousands of therapists and some would love you. Some would think it’s a great solution. Realistically, you can’t ask 100 therapists or even 50. So you don’t get anything that is statistically significant. You get a very anecdotal point of view.
Andrew: So I’ve heard in these interviews that it’s okay if you don’t have a statistically significant number, that if you start to talk to five or six people who all have the same issues and all have the same needs and the same backgrounds, you’re going to start to see a lot of similarities in what they’re looking for. And you didn’t find that.
Alon: It’s more what question you ask. There’s a lot of value in talking to therapists. There was a lot of value in understanding the market and understanding some ethical considerations and regulatory things and how they think and how they work. But the question that I think you should not ask when you go to a consumer market is, “Would you use it?” Maybe get the qualitative information on why he would use it or not use it. But not try to say, “Okay, I spoke with six therapists. Four said that they would not use it. One said that he would and one is unsure.”
Andrew: I see.
Alon: This is kind of irrelevant, first of all, because you don’t have consumer confidence and second because it doesn’t really matter. Even if only 10% of the therapist population loves you, you have tens of thousands of therapists, you don’t need more. So I wouldn’t try to quantify–this should be looked at as field research, not try to put into an Excel. Same thing with users.
Andrew: Did you get anything of value talking to the therapists?
Alon: Yes. I learned some things about how they think and what are they being taught and some previous experiences they had.
Andrew: Is there anything specific that helped inform the way you created the product?
Alon: From speaking with therapists, not really.
Andrew: Not really. Okay.
Alon: It gave kind of a landscape. But building the product was based on my thought of really how I would want the product to be used. Generally speaking, every time we speak about marketplace, there is always someone, “Hey, there is a chicken and egg problem. How you bring this before you bring that?” I want to say that it’s a fake problem. In every marketplace where you have someone who is paying for the service and someone who is being paid for the service, the challenge is to bring the person who paid for the service.
So the challenge to bring users and consumers and make them happy is really the challenge that we focus on. We care a lot about our therapists. We have great relationships with our therapists. Actually tonight, we have a meet up. A first face to face meet up where we gather therapists from around California to finally meet them face to face. We value their feedback a lot.
Andrew: For product decisions, it wasn’t the right way to go.
Alon: Yes. The product is meant to satisfy the customer. The customer is the person who’s getting counseling.
Andrew: We asked you in the pre-interview, “What was your biggest challenge?” You said, “The biggest challenge was not having money. We decided not to raise money.” Why at this point did you not to raise money? You had experience raising money. You had experience buying ads. You knew that this was on the right track and this could be big enough to give a 10x return to investors. Why not?
Alon: I think a lot of it was for the wrong reasons. It was basically after my previous experience when we raised millions of dollars, it eventually failed the company in a way and made me miserable. I was kind of pushing back on that and said, “Let’s just try to bootstrap and prove it right.”
I think also bootstrapping and not having invested in the board really lets you focus the company on the problem and the service and you’re not trying to do things to satisfy someone and to look good. You just need to look good to yourself. I remember at the previous company how over half the decisions were based on how this would help us next round how would we make the board feel better. How we can make me look good to my investors, which is really the wrong reason to do anything. But it’s very natural.
Andrew: I can see how that would be a distraction.
Alon: Yeah.
Andrew: All right. Let me go back to marketing. Now you have your product built by a friend of yours you pay some money to and you give some equity to. You have some market research that tells you what’s going to work kind of. You have wireframes that you feel good about. You have therapists who are on board and ready to actually use the app. It’s time for you to start bringing people in. Where did you do your first ad buys and how did the real ad buys compare to your tests?
Alon: Yeah. Another thing I did is bring Danny, who’s someone I hired at my previous company–
Andrew: A cofounder.
Alon: Yeah. He’s an analyst. He’s a numbers guy. I believe in numbers. He’s an exciter. He can developed the real first vision of the service. That was extremely instrumental and pivotal to what we’re doing. I took a bet. I didn’t take someone, a CTO kind of person with full companies, but I had great belief in what he could do and paid off great.
Andrew: Okay.
Alon: Back to your question, yes, we started bringing people, building more and more to the site and learning what people do and doing a lot of tests. Today, it’s kind of obvious. Back then it was not so obvious that you need to test everything. But because of a background in performance marketing, we’re not coming from health, counseling, that sort of background. We come from performance marketing DNA.
So it was really natural for us to look at it as analytical problem and to analyze everything that users do, everything the therapists do, all the interactions and see how we can make it better, how we can make the funnel better, how we can make the retention better–
Andrew: Let me geek out on that in depth for a moment. First I should talk about my sponsor and this email that I got from someone in the audience. Hold on to that and we’re going to come back to the specific tests that you did and what you learned from them.
So Alon, let me tell you about this guy, Joel Randall, from my audience. He emails me this–you ever get these long emails? This one fills up one giant iMac screen with a lot of feedback. This guy is actually–I was going to just dump out of the email after reading two words because I thought, “I’m not going to read this whole thing.” In fact, before I even read two words, I said, “I’m not going to read it.” But the guy is freaking bright. He really understands his stuff. He’s complaining about the way I’m talking about HostGator. So I have to keep on reading.
And as I read, I realize he’s got a good point. He’s saying, “Look, HostGator’s basic program,” which is a really super-inexpensive program, just a couple bucks or a little more than a couple of bucks a months, let’s you host WordPress. But he said, “For most people, managing a WordPress site on your own is good at the beginning, but it’s not great long-term.” Alon, do you have enough experience with WordPress to understand what the issues are?
Alon: Yes. I had some friends that had this small business doing coaching or something like that and a year later, they don’t have a website. They have a Facebook page maybe. It’s like, “Why don’t you just open a website?” “I tried and played with WordPress and it’s too complicated and it breaks down.” There are great, simple solutions out there that just nail it.
Andrew: Yeah. So here’s the thing. The basic WordPress package at HostGator will setup a WordPress site. So you have your own site. You can install your own themes. You can grab themes from them. You can do all the things you want, not just create a blog, but create a real website that’s hosted on WordPress. They do it like that–one-click install. You don’t have to be super-bright. In fact, I’ve seen some dopes do it very easily.
The challenge though is that as you grow, you don’t want to have to update plugins on your own. You know like when your phone will automatically update plugins for you? WordPress doesn’t do that. There’s a reason why WordPress doesn’t do it. Some people prefer the version of the plugin they had before. They don’t want a new version and all that, right?
When you get going fast, you don’t want to have to make all those decisions and upgrades yourself. So Joel is right. Somebody needs to maintain your site–upgrade WordPress for you, upgrade the plugins for you, make sure that the site is protected from malware, all those things.
Well, what he didn’t realize, what most people didn’t realize, what I didn’t realize until a few months ago is that HostGator now has a managed WordPress solution, which means that they will manage your WordPress for you.
If you want to go from just the basic, inexpensive package to the next level up, also inexpensive but it costs a little more package where they manage your WordPress site for you, where they protect you from malware, where they update and upgrade your stuff for you, you just let them know and they’ll upgrade you to the WordPress managed hosting. Their prices are really reasonable on it.
All you have to do is sign up for HostGator by going to HostGator.com/Mixergy. They’ll give you 30% off that basic package so you can get started. But if you want to ever go to WordPress hosting, you should know they have it. You should just ask them and they’ll switch you over to it. It doesn’t cost much.
By the way, I paid hundreds of dollars for managed WordPress hosting in the past. These guys who used to do managed WordPress hosting were like gods in the WordPress community in the sense that if you needed someone to manage your site and you didn’t want to hire your own team, you’d have to pay them and you’d be lucky that you got to pay them dozens of dollars if not hundreds of dollars a month.
And then HostGator said, “We could do this. We could copy the whole freaking thing. We could knock off their business. We can make it work. We can do it inexpensively because we’re HostGator and we have scale here.” So now HostGator has it.
When your friends brag about how they have this great hosting company that does nothing but manage WordPress hosting, tell them about HostGator. HostGator does it really inexpensively and they do a great job of it. They have malware protection from one of the best if not the best companies in the business, which means they will protect you from malware on your website–I’ve had that. It’s very painful.
It’s super-easy. They will even switch you over. I got an email from someone who said, “Andrew, you said that they switched you over. I don’t see it anywhere on their site. So I don’t know how to get my migration done.” I immediately emailed my guy Kyler over HostGator. He said, “I confirm for you 100% we will migrate someone who has WordPress and hates their hosting company and wants a better hosting company.”
So bottom line–you don’t like your hosting company or you haven’t started and you want to get started quickly, HostGator will get you started like that. Listen to this–this is a good mic, right? So on a good mic, let me see actually on the dials what it looks like. My snap barely registers on the dial. Halfway. My voice carries more on the mic.
They’ll move you over and get you started right. Go to HostGator.com/Mixergy. You’ll get a great price from them, great protection, great service and I’m grateful to them for signing up as a sponsor.
So we were at a point where you now had your business up and running, you started buying ads and what you knew at the time that other people didn’t know was test, test, test. In fact, I see you guys used Optimizely, right?
Alon: We used a bunch of tools. Optimizely is one of them.
Andrew: What are some of the tools that I don’t know? I know Optimizely. What else do you have?
Alon: I think at some point we used every tool imaginable. But the usual suspects–Google Analytics and Mixpanel and a lot of in house grown stuff that we used.
Andrew: What did your in house thing do that the off the shelf software couldn’t?
Alon: I think the biggest challenge with Optimizely and a lot of the testing tools out there today is that they’re trying to be very simple to operate and install, which is great for the novice marketer. It’s great if you want to test the color of the button. But when you want to test deeper things that are related to server side stuff–so when you want to test the entire flow, you want to test what are the packages that you offer to the user, you want to test the actual functionality, this is where all of these tools don’t really deliver.
This whole simplistic approach of, “Put a JavaScript code and we’ll change the site for you and you don’t need to mess with the code. So the CTO doesn’t even need to know we’re doing that.” I understand how that’s very lucrative to the marketer, but it doesn’t take you to the highest level of testing that you can do.
So when you want to do things that are more on the server side or to the basic functionality and the core service, this is where the tool that mostly rely on the display layer just don’t work.
Andrew: Okay.
Alon: We still use Optimziely.
Andrew: You still use it. I saw you still use Crazy Egg. You guys use something called media math, which I didn’t know about.
Alon: Probably. Yes.
Andrew: Okay. You’re just saying if it’s out there you’re going to use it.
Alon: I think every month we get another tool into the mix, another tool out of the mix. We’re very technology-oriented in our DNA.
Andrew: But not for the sense of using technologies. It’s for the goal of improving your conversion rates. What’s one thing that you discovered that helped improve your conversion rates that maybe the rest of us can learn from if we’re trying to improve ours?
Alon: I think we broke a few rules. That’s because every product is different. So one of the things you hear a lot in conversion optimization books and conferences and blogs is make it a very, very quick experience for the user. If you ask four fields, can you ask for three? Can you ask for just two? Can you ask nothing at all?
I think it’s great if what you’re trying to get is a lead. If you want to capture a customer’s information and create a lead, which is what I was doing in a previous company, that’s true. But if ultimately what you want is something that is very high-commitment from the user–in our case, getting into counseling, forge the money part, it’s a paid service and it’s not a cheap service, but getting into counseling and opening up, if he’s not willing to enter five fields instead of four fields, if that’s what stops the user, then probably he’s not going to open up to doing counseling online.
So a lot of the notion of you have to make it a really, really quick and make it one button and he’s in, that didn’t prove right for us
Andrew: But Alon, this is actually really helpful for me to know. So I’m not pushing back because I don’t buy it. I’m pushing back to get more understanding. If you’re saying that having fewer fields gets you more people, isn’t it better to have more people knowing that some of them are going to be the right people and some of them are going to be the wrong people.
A few of the wrong people will still pay for a little bit and walk away and the right people will stay in whether you give them four boxes or eight boxes, so you might as well go for four boxes because then you’ll get all the right people in anyway. You’re paying money for ads to get them in. Why doesn’t it work that way?
Alon: Yeah. These things are not worthless. For example, a lot of the debate around conversion optimization is I can ask you a lot of questions that would help me make a better experience for you. If I know your age, I know your gender, I can have experience for you. But I’m hurting my conversion rate a little bit.
In our case, what we’ve found is having more information maybe hurts the vanity conversion rate of how many users you have, but the number of users that are actually going to be engaged in and work with you and use the service is not practically being impacted. You get a lot of useful information.
In our case, for example, let us have better matches to a therapist. If I know more about you, I can give you a therapist that is a better match for your needs.
Andrew: I see.
Alon: So I prefer to ask you more questions about yourself. I’m definitely losing some people. It doesn’t come without a price. But what we’ve found is we have pretty much the same amount of people who are real potential customer not just [inaudible 00:52:19] and we can give them a better service based on this information on the sign up. I think they also take us more seriously because obviously we’re not trying just to put them in and sign them up and take their email and sign them up and then spam them.
We’re actually trying to filter whether they’re a good match and then give them a good match and good experience. We’re not trying to just push them through the funnel as quickly as possible.
Andrew: That makes sense.
Alon: This is one of the more counterintuitive things we’ve seen. Basically we kind of assume that one of the fun things we do here is we do bets. Like one guy says, “I think this is how we should do it.” One guy says, “This is how we should do it.” We kind of debate and we say, “Okay, let’s put it in a test.” We do bets.
What we found out–everybody here are either extremely experienced or somewhat experienced in marketing with some consumer products background. We are right like around 52% of the time. So if you give it to a monkey to choose what would work, it would pretty much be the same.
Andrew: I see.
Alon: So as much as we know, we don’t know. I think what we really know is what to test and how to test it and when to move on from a test. That’s really what’s important is not to come with good hunches because they usually fail.
Andrew: I have here in my notes that you guys are now doing 10,000 counseling sessions a day.
Alon: Yeah.
Andrew: That means 10,000 times a day, people are connecting with a therapist and working through an issue. How much revenue are you guys bringing in?
Alon: I can’t speak about revenues because now we’re part of a public company and as you know, public companies, every discussion is problematic because it has to be in a certain context.
Andrew: In my Pipedrive–this is the software we use to coordinate to talk about you guys, our guests, to see who we should have on Mixergy and how we can get you on here–somebody under metric wrote $1+ million. Are they making a mistake, $1+ million annually?
Alon: Definitely not.
Andrew: Definitely not making mistake, but…?
Alon: You take the number and see the number of sessions we have and the pricing is pretty transparent. So you can make the math.
Andrew: I thought you guys’ price per month, not per session.
Alon: True. But you can still make these assumptions in a sensible way. Unfortunately, I can’t speak about it.
Andrew: I wonder who it is on the team. I always have a field called metric and another field called article. I wonder who put in under metric $1+ million. You mentioned earlier that all the bad reviews are people who were rejected. I went to a site called Ripoff report. I looked to see what the negative reviews would be. I see here that someone says, “The website clearly states the fee is $35 per week and nowhere does it say that they will bill me $150 in advance. I’ve complained to the Better Business Bureau.”
I see the next person who says, “They have billed me six monthly payments of $140. Since then, I’ve had zero contact with them. Since they bragged about 100 customer satisfaction, let’s see how long it takes them to refund my money that they bilked me for.” What’s the deal here? It looks like people are a little surprised by how much they’re being billed for.
Alon: First of all, we’ve had 400,000 people sign up for the website. So we’re pretty proud that we only have two of these complaints. We’re also certified by the Better Business Bureau.
Andrew: I have more than two. But I don’t think you have a huge percentage by any means.
Alon: No. It’s a fractional percentage. We’re actually rated A by the Better Business Bureau. You wouldn’t find almost any online services, subscription services with an A rating with the Better Business Bureau. So we’re pretty proud of that.
But yes, it’s a subscription service. Sometimes people when they sign up especially in this kind of service, they don’t always read. They don’t always look at all the options. We charge different packages. There is a weekly package. There is a monthly package, which is cheaper, obviously, which is pre-charge for a month, and a quarterly package as well. It’s a subscription service.
The path that we took is we don’t want to meter you. We don’t want to charge you per-session. We think that misses the point that we want to give you as much help as we can whenever you need it. That’s why the model is all you can have.
Andrew: Do you advertise a weekly fee but charge on a monthly basis and collect multiple months at once?
Alon: No. We don’t collect multiple months at once. We tell you, you can either pay, for example, $35 a week–sorry, $45 a week or it can be $35 a week if you commit to a monthly charge and then it’s going to cost you $140. It depends on a lot of parameters and obviously policies change from time to time. I think this is like a year-old comment. So also the pricing has changed since then. But it’s very clear. Like many, many services, you can pay in advance for a longer period of time or you can pay on a weekly basis.
Andrew: I think maybe–could the confusion be that–I see this in your frequently asked questions. You guys say, “Plans start as low as $35 a week. The default option, the most popular one is the monthly plan but you can choose to change that at any time.”
Alon: When you get to where you put your credit card, basically, it’s very obvious what you’re doing and what are your options and what you do.
Andrew: What do you do to increase your retention rate? Churn for these monthly businesses is really high. What do you do? What have you done that’s working?
Alon: So first of all, churn in our business, sometimes we see it as a positive thing. If you came to BetterHelp to address a very specific issue and you worked with a therapist for two months and now you are in a much better place, we’re actually proud that you stay and people do that. When they cancel, we ask them why and they say, “I achieved my goals. If I ever need it, I will definitely go back to BetterHelp.”
We have people that started, stopped and came back. We’re actually happy with it. We’re not–it’s kind of like a dating site. The basics of a dating site, you churn from a dating site because you found your loved one. So we don’t always see churn as a bad thing. We try to see why a churn is happening.
Andrew: How can you tell why a churn happened?
Alon: We basically ask the user. We ask the user, “Why are you cancelling?”
Andrew: When they cancel, so before they cancel, you have that form that asks them why. Okay.
Alon: It’s a very simple form. You have five options or other and put a reason. Sometimes it’s, “I can’t afford it.” And we’ll try to help you with–we have financial aid programs that try to help you in that case.
Andrew: How do you get financial aid programs? You guys do it yourselves?
Alon: Yes, we sponsor it. If you really can’t afford it, you fill out a form that tells a little bit about yourself, why you’re here, what is your financial situation and we’ll sometimes give very deep discounts.
Andrew: Oh, that’s really clever. What about with the others?
Alon: It’s not coming from a business point of view. Basically on these users we’ll not make a lot of money or none at all because we keep paying the counselor the same. We take the discount on ourselves but the counselor doesn’t even know about this. It’s part of our mission. If you came to BetterHelp and you got value out of BetterHelp and you’re at a better place in your life but you just really can’t afford it, we’re not going to be the ones preventing you from getting help.
Andrew: I asked our pre-interviewer to talk to you about the milestones to go from zero to over $1 million in sales. I still don’t fully understand it. What we got was you started running your own ads. That brought in some new people. And then boom, here you are at $1 million. I’m wondering what are some of those steps along the way that gave you big leaps that allowed you to continue to grow?
Alon: There weren’t a lot of big leaps or things that really changed the business a lot. Sometimes we’d do an optimization that would make a big impact. But it wasn’t really a transformational moment.
Andrew: Was it just grinding it out every day?
Alon: Grinding it out.
Andrew: Did social media give you a big leap, going from Google to social?
Alon: It took some time to crack how we work around social media or work through social media and get people engaged through social media channels. That was also gradually evolving. There wasn’t really a moment where it wasn’t working and then it was working.
Andrew: It was just constantly grinding out new formats, new places.
Alon: Yes.
Andrew: I see that one of the places that worked for you is YellowPages.com.
Alon: We advertised also In Yellow Pages. If you’re looking for a therapist, we definitely were going to offer you an online option. Not a huge channel for us, but we’re pretty much all over the place.
Andrew: But it’s not more than 5%?
Alon: No. Yellow Pages by itself is not a huge channel.
Andrew: What about Reviewopedia? I see you guys in there. It comes up a lot. Why is Reviewopedia such a big thing for you?
Alon: I don’t know. I actually never heard of Reviewopedia until–
Andrew: They wrote about you.
Alon: Until they wrote about us and for some reason, Google really liked it and it was very heavily weighted on SEO. I think now we have over 100 reviews there.
Andrew: 111 reviews, four out of five starts.
Alon: Some people raving, some people complaining, which is fine. I think for a completely objective review site, that’s great. I sometimes go to Reviewopedia. We also have our own reviews. If you go to BetterHelp.com/Reviews, you’ll see over 3,000 people that we didn’t pay and that wrote us reviews of how we changed their lives.
That’s really the fun part of this. For someone that came from ad tech, nobody ever thanked me. Nobody told me that we changed their life for the better and they were in a dark spot and now they feel much better. This happens here every day. Now we circle it around. Every day we get four or five of these testimonials. Some of them are really–
Andrew: Do you find your people–I get that, by the way. I don’t want to brush over it. I’m trying to dig in. We’re over time here and I’m trying to get as much information. I’m trying to squeeze as much information out of you as possible, which is what’s going on here. Workable, is that where you guys hire your therapists?
Alon: No. Therapists come to us.
Andrew: What’s the deal? What’s Workable.com? I’ll tell where you this is coming from. This part of the interview is research from a company called SimilarWeb. Do you know SimilarWeb?
Alon: Sure.
Andrew: They’re an Israeli company just like you were. They’re such a freaking fantastic tool that lets you spy on what everyone does. Anyone who’s doing a lot of ad buys, a lot of competition has got to check out these guys at SimilarWeb.
They gave me an account after I interviewed a guy who sold his company to them and I’ve just been hooked because it lets me see where is your traffic coming from. Where’s your traffic going? If you’re in a market where you’re trying to compete with someone else and say, “Where are they getting their traffic?” It’s so helpful to actually see where the traffic is coming from, to see where you, for example, are getting reviews.
Anyway, they’re saying Workable is one place where you’re sending a lot of traffic to. I’m wondering why you would send traffic to a job site?
Alon: I love Workable. Or is a friend and he showed me a very initial version of SimilarWeb. He showed me a very first version of SimilarWeb I think a year before it got launched. I think it really is an awesome tool that will dominate the market and will kick out Alexa and some of these–
Andrew: I think Alexa should be kicked out of a long time. It’s free so people go to it. The thing with SimilarWeb is nobody knows about it. Unless you know about it, unless you’re in the know within a certain group of people–I didn’t know about it.
Alon: Once you go to SimilarWeb, you’re not coming back.
Andrew: Yeah. And they do have a free version. Alexa has a free version that goes into more depth but doesn’t give you as much good information. Anyway, back Workable–what’s the deal here? Why are you sending traffic to Workable?
Alon: Workable is our job posting site. This is where we get our developers.
Andrew: I see. Okay.
Alon: We also use that to facilitate the process of therapists applying to us. I’m not sure if SimilarWeb is so accurate. We don’t get a lot of traffic there. We send traffic there.
Andrew: That’s what I meant. You send traffic there.
Alon: Yeah.
Andrew: It’s the number one place where you send traffic.
Alon: The reason is that we don’t send traffic anywhere else. The only place we send traffic is Workable because if you want to apply to us whether as a developer or a therapist, you do that through Workable. We don’t have any other external links. The only way we monetize the site is through users paying for therapy. So we don’t have any ads–
Andrew: How did you have to change the therapy session in order to get it to work by text?
Alon: So it’s a different experience. It’s definitely a different experience. At first, we had this table comparing traditional therapy with text-based therapy with BetterHelp. Then we realized that it’s kind of useless. You don’t need to see how it’s different. You just need to see whether it’ brings value or not. It has definitely some things that traditional therapy are not great at.
I was in a marriage counseling setup. I remember it felt unnatural to try to cram everything that happened in the week for 45 minutes and then to remember everything, to get all the feedback and if something happens a day later, I need to wait a week. That’s a different experience. I think as a society, we moved more and more into communicating with texts. Think about how many texts we send a day versus how many phone calls.
Andrew: Right. I do many more Skype calls today than I do in person conversations. But as you notice before we started, I had a little bit of a setup to make sure that this conversation over Skype works well. It’s things like you started, which is, “How’s my lighting? Can you hear me okay?”
It’s also another checklist that I have, which is check your pronunciation of your name, make sure I have a good description of your company, make sure that numbers I have are right. This is not the kind of thing that I would do if we talked in person. I would kind of weave it into the conversation later on.
When you go from a format that ordinarily happens in person to one that happens in text, you similarly have to adjust the way the conversation flows. What are some of those adjustments that you made?
Alon: So this is what we hear from therapists. What they tell us is that it’s much quicker to start. So when a new client goes to a therapist, the first three sessions are really about building this connection and making you feel comfortable to open up to the therapist. You’re looking at him and you’re saying something and you see his expression, so it takes some time. What therapists say with text based therapy is the guy comes in figuratively and the first or second message, he’s telling his whole ten years of story.
Sometimes they say it as a good thing because it saves time. You don’t need three sessions to build rapport, which a lot of times actually the biggest drop with traditional therapy is after the first session. People come to the first session and never the second one. Sometimes they say it as a bad thing, like it has to go more gradually. “You can’t just come to me–we barely know each other–and write this whole life story and we need to process that right away.” So it comes with goods and bads. But definitely it’s different and needs adjustment.
Andrew: You’re a systemized guy. What kinds of systems did you put in place to allow all these therapists to work well in this unique environment?
Alon: You mean technically?
Andrew: No, do you have any suggestions for how they can get people to feel comfortable in the first chat? Do have any suggestions for what to do to digest someone’s 50-page manifesto about what’s wrong with the world?
Alon: So a suggestion is really a tricky word. One of the things we’re very careful is not to tell therapists how to work. We’re not therapists. They are the professionals.
Andrew: Do you allow them to pass best practices to each other?
Alon: Best practices in a very general way, things that we know work more online, more semi-technical. But we’re definitely not telling therapists how to do therapy.
Andrew: Do you have a Slack group or some kind of chat where they can help each other out?
Alon: We have a forum.
Andrew: You have a forum?
Alon: We have a therapist forum that’s very, very active. It’s very heated at time.
Andrew: I see. So you let them help each other out. What’s one topic they got heated about?
Alon: I remember one topic was around substance abuse and how tough to be with a client with someone doing therapy that is relapsing. Should you be more comforting or should you be more aggressive? But these are the same discussions therapists have regardless–
Andrew: And you’re encouraging them to do it online. What’s the software that you use for your forum?
Alon: I think that the basic was something called Vanilla Forums. We’ve kind of changed it and tweaked it so much.
Andrew: That it’s your own now.
Alon: Yes.
Andrew: You sold the company?
Alon: Correct.
Andrew: Before you sold it, you told our producer you were putting your family in financial danger. You had a lot of credit card debt. How much credit card debt did you have?
Alon: Six figures.
Andrew: Six figures?
Alon: Yes.
Andrew: Was there one night when you woke up and you thought, “I’m crazy for doing this to my family?”
Alon: No. I’ll tell you why. It’s a subscription service. So basically, you have to spend money now to acquire customers but once you have the lifetime value model, then you have the confidence that would be a return. The problem is that you can’t pay traffic channels with your LTV.
Andrew: Right.
Alon: Surprisingly, sometimes people ask, “Who are your investors?” And I say, “American Express.”
Andrew: That’s what it was?
Alon: Yes.
Andrew: So you have three kids. You went a year and a half with no paycheck. Did you ever have a period there where you said, “This is wrong what I’m doing to my kids?”
Alon: Yes. The third one came right in the process.
Andrew: Take me to that moment in time–the third one comes out. What goes on in your head when you’re thinking that? We’ve got to wrap up here. I’m over time for sure, but I have to ask you that. What goes on in your head at that point?
Alon: Am I being crazy? Is it something that I’m doing that I really love doing or is it really a sound business decision? I really loved it. This was my fourth startup and I loved it more than the three other ones combined. Because of the matter and because we helped people really with the most important things. It was kind of half-business, half-passion. Every time you do that, you say, “Am I doing this because I really love this or is it really the responsible thing to do to my family?”
Andrew: The day you sold your company, do you remember a specific day when you signed the contract, did you see the money in the bank?
Alon: Sure.
Andrew: You did? Do you remember the day you saw the money in the bank?
Alon: I do.
Andrew: What was that like?
Alon: Huge relief, also concern. We were two people making all the decisions. If we’re going to screw it up, it’s going to screw up for ourselves and for our families. Now you’re part of a company that really trusted you, gave you a lot of resources and a lot of faith and you need to prove all of your promises and also what’s going to happen.
You come up with a two-people team–back then it was a 300 or 400 people company, now it’s even much bigger. How am I going to survive this corporate environment? I’m a startup guy. How is it going to be in a corporate environment? Am I going to thrive there? Am I going to be frustrated?
Andrew: So instead of feeling like, “I did it. I made it. All those years of struggle actually paid off,” you were thinking, “Now I can’t let these other guys down?”
Alon: Exactly.
Andrew: That is the life of an entrepreneur.
Alon: Yeah. But the first day is just a relief, especially as you know, acquisitions are tough. The process itself is tough. It took longer than we thought. It took several months. It was ups and downs. It was rocky.
So when it’s done, you’re just happy that you don’t need to speak with lawyers anymore. I was for weeks speaking every day four or five hours a day with lawyers. That’s not fun. This relief of my day to day–we closed on Friday and the fact that I knew, “I’m going to come to the office on Monday and focus on the product, focus on the service and not on…”
Andrew: And not on lawyers.
Alon: On credit card debt or on lawyers–that was great.
Andrew: The closest I could find for how much you sold for was an article that says that you sold to Teladoc in January, 2015 for $4.5 million in cash and stock.
Alon: Again, I can’t comment.
Andrew: You will neither confirm nor–I won’t push anymore. I know you can’t say things, but I just want to read out what I read. And I know that sometimes those numbers are so ridiculous that it almost discredits the rest of my interview. You probably thought I had a lot of substance as I read those other numbers and if this one is off, you might think, “That Andrew doesn’t know any of it.” There’s no way for me to frankly know how much you sold for.
Here’s what I do know. The company that you sold to has not got a market cap of $472 million as of right now, Teladoc. You cashed out. You did really well for yourself, for your family, for your customers. It’s an incredible story, worth the risk.
Alon: Definitely. Thank you very much.
Andrew: Congratulations on doing it. If anyone wants to check it out, the site and the app–I didn’t even get into the great Wall Street Journal article written about you guys, but people can go and check out the product for themselves at BetterHelp.com and in the App Store, both Android and iOS, right?
Alon: Correct. Yes.
Andrew: And if you want to check out my two sponsors, remember, if you want to hire a developer and unlike Alon, you don’t have a good friend who you’ve known for a long time, you can just go to Toptal.com/Mixergy. If you want your website hosted right, whether you have one already and need to start fresh, they will even migrate you if you have one already. Go to HostGator.com/Mixergy.
Look, I went for an hour and 16 minutes and 13 seconds at this point, really in depth, lots of questions about analytics, lots of questions about your process, lots of questions about your software, lots of questions about everything–I think you might need therapy after this. The reason I do it is because I do feel that real entrepreneurs need that kind of depth. The thing is though that in the App Store, I’m noticing in the podcast store that thin interviews do really well, much better than this.
Now, there have been times when I thought, “Maybe I should just ask people seven questions, keep it standard, make my workload light, have more time for lunch and talking to my friends and get up higher in the App Store.” I can’t do that to my audience. So instead what I will ask is if you really believe in this model, take a look at the way that other people in the podcast store are getting tons of reviews, if you really believe in this, help me out by standing for it with a review, just a little thumbs up.
Give it a high rating or even a low rating, but just let me know what you think in there and frankly, a high rating will really go a long way towards making me happy and feeling good about all this work. Thank you so much for being out there listening to me, frankly even if you don’t rate me, I’m grateful. If you do, I’m really grateful. Alon, congratulations and thank you for being on Mixergy.
Alon: Thank you very much.
Andrew: You bet. Bye everyone.
Alon: When is it going to air?
Andrew: We’ve got it scheduled for March unless you want it to go sooner.
Alon: Whenever is fine.
Andrew: I’ll send it to Joe right now.
Alon: Thank you so much. I’m a big fan. One of the most important interviews–there was one with Daily Burn that you did some time ago. It was one of the things I learn a lot. It’s the same type of subscription service and also kind of similar in the audience of people like fitness people for counseling. So that was really one of the things I remember, that interview with Daily Burn.
Andrew: Cool. You mind if I include this in the interview?
Alon: Oh, sure.
Andrew: Joe, please piece this into the interview at the end. Let people hear it.
Alon: All right.
Andrew: Cool. Thanks for being a fan. Thanks for doing this interview.
Alon: All right. Bye-bye.
