How Mark Goldenson brought therapy online

The guy you’re about to meet in today’s interview started an online therapy business, which years ago I would have said, “Who wants to do that? That seems a little bit impersonal.”

But over the years I realized that therapy stinks. Every therapist that I’ve been to in person was either crappy or good, but I don’t have the time to see them because they’re so good that I can’t get on their calendar. I’ve tried online therapy and I’ve had bad experiences with bad companies.

I’m especially interested in Mark’s business and how he build it. He’ll tell me about the challenges trying to get therapy online and trying to get people, like me, to understand it. And how he was able to sell it.

Mark Goldenson is the founder of Breakthrough.com, an online therapy service. It has since been acquired by MDLIVE.

Mark Goldenson

Mark Goldenson

Breakthrough

Mark Goldenson is the founder of Breakthrough.com, an online therapy service.

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Full Interview Transcript

Andrew: Hey there freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. And when I say freedom fighters, it goes back to when I was living in Argentina and I saw everyone admire Che Guevara as the freedom fighter. But meanwhile, it’s the entrepreneurs who are building software that really gave inspiration to people in Argentina at the time. They were going to free them from what was going on in local government that wouldn’t allow them to work or bring in money from outside countries. And these entrepreneurs just kept coming up with ideas for how to bring Argentines into the rest of the world. I said, “These entrepreneurs whom I’m interviewing, these are the real freedom fighters. That’s who should be admired.”

And one of the things that I did when I moved to the U.S. and came here to San Francisco was invest in a fund started by one of my past interviewees, it’s called the Hustle Fund. Look, I’m even wearing a watch right now that they sent me. It’s founded by Eric Bahn. I’m not an investor. The only reason I did is because I love Eric Bahn. And you know what? The thing about Eric is he’s got just freaking great people around him. If he never returned my money, it’s still the best investment I made because he does these get-to-togethers with his LPs, people like me, and they are just . . . I don’t know what it is about Eric, he just draws fantastic people around him. And one of the people that I met at one of his events is the guy you’re about to meet in today’s interview. His name is Mark Goldenson.

Eric Bahn is the guy who introduced us. Mark Goldenson, and as we were talking, I got to know what he did before among other things. He started this online therapy business, which years ago I would have said, “Who wants to do that? That seems a little bit impersonal.” But over the years I realized that therapy stinks. Every therapist that I’ve been to in person was either crappy or good, but I don’t have the time to see them because they’re so good that I can’t get on their calendar and I’m busy. I can’t drive out to go see them. And I’ve tried online therapy, and, man, it’s a good format. I’ve had bad experiences with bad companies, but I recognized that this is the format, the way where you can actually get matched up with the right therapist, where you can communicate with them in a way that’s more natural and without all the hassles of having to drive out and park and do all those other things.

So I was especially interested in Mark’s business and then he told me how he build it. He told me about the challenges trying to get therapy online and trying to get people to understand it, like me, and how he sold it. And I said, “Dude, Mark, I love you. Can we please do an interview an interview on Mixergy?” And he seemed a little hesitant and I pushed a little bit because we’re friends of Eric’s. I think he said yes, maybe there are other reasons, and so here he is. Mark Goldenson is the founder of Breakthrough.com. He build into the largest online therapy service. He got it acquired by MDLIVE. Today, he’s got something called VentureKit where he wants to publish free startup guides that help founders get things done and he’s the guy who had a few exits and a few experiences that give him the credibility to actually put this together.

The first guide is on “How to Create a Pitch Deck slide by slide,” and it has 60 examples. I invited him here to talk about his business, how build it, how he sold it, and it’s thanks we can do this, thanks to two sponsors. The first is the company that’s renting me my office space. I wish I could turn my camera and show you this whole beautiful environment. But I’ll tell you more about him later. It’s called Regus and the second is a company that will help you do email marketing right, meaning treat people right via email, close more sales, and do it within intelligence that you didn’t know was possible. It’s called ActiveCampaign. I’ll tell you more about those later. First, Mark, welcome.

Mark: Yeah. Thanks for having me.

Andrew: Mark, what did you sell the business for? How much was it acquired for?

Mark: Firstly, I can’t say. But it was a nice win for our investors. We raised $6 million overall from Social Capital, First Round Capital. Yup.

Andrew: Fair to say you more than 3X their money?

Mark: We’ll see because MDLIVE is not yet public, but they may be going public in the next few years. Telemedicine has been growing and they and Teladoc in number one and number two players. Yeah.

Andrew: It’s weird that’s called telemedicine. Tele is like the remote. It’s not about telephone necessarily, right? We’re talking about the ability to like take a picture of a rash that I have and have a doctor give me feedback and maybe even tell me . . . maybe prescribe medicine. Am I right?

Mark: Right. Tele means more remote in this case. But we were focused on live video help because the insurers they [feel welcomed 00:04:35]. They feel like video is the closest replication of in-person therapy, and that’s the one that they’re mostly likely to reimburse and that was our key distinction that we were getting the insurers to reimburse.

Andrew: Yeah. I had no idea that you guys existed and that insurers would actually reimburse that because they don’t reimburse the therapists that I go see live in person.

Mark: Right.

Andrew: So that was impressive. The other thing that was impressive was a number of customers that you’ve had. How many did you have?

Mark: So we had signed 35 insurance companies that covered over 10 million people. And most online therapy companies that had come before us had understandably not signed the insurance companies because they can be challenging to sign, challenging to work with. But what we saw when I first started the company is that 88% of mental health spending goes through a public or private insure. So only 12% is out of the pocket. And if you want to build a large company, a meaningful company that reaches a lot of people, my belief was that you had to sign the insurance companies.

So we took on the big challenge of signing them, and it took two and half years to sign our first one. It was Blue Shield of California. We needed to make the company work and only $1 million in funding. But once we did, we had two million people covered through Blue Shield and Blue Shield was also bringing their therapist and some of their marketing muscle to [tie and went breakthrough 00:05:52] and then we were able to sign Aetna and Magellan and some Medicaid agencies and to grow from there.

Andrew: And you had a thousand therapists, all 50 states. How many monthly users?

Mark: Honestly, you know, I don’t’ remember.

Andrew: I have a number here, 30,000 monthly users. Fair?

Mark: That at least what it sounds . . . in terms of the visitors, that sounds right. But it’s been a few years, so I don’t want to mislead you. But it was the largest online service.

Andrew: I appreciate that. And what’s this deal that you had with Walgreens?

Mark: So Walgreens started highlighting our service. They get, I think, something a million or two visitors a day, and they wanted to get more into telemedicine. And may you have seen kiosks where people can come in and get their blood pressure. So they’re nice portal for people to learn about online therapy and to be able to get that care from wherever they are, including home or work.

Andrew: Meanwhile, you mentioned First Round was an investor in Breakthrough. They were also an investor in your previous company, weren’t they? In PlayCafe?

Mark: Yes. Yes.

Andrew: And what happened to PlayCafe financial? We’ll talk about what it was in a moment. But what happened to it financially?

Mark: So PlayCafe we raised $1 million from First Round in some angel investors. It was an online game show network. The insight was I love games and old game shows, and it’s a highly profitable type of programming. It’s . . .

Andrew: Why? You know what? First of all, why do you like it? I know my dad watches “Wheel of Fortune” every chance he gets and “Jeopardy.” And my wife loves the “Jeopardy,” if it’s on anywhere she’ll jump on it. I understand the appeal. What it is for you that appealed to you as a viewer?

Mark: I love puzzles. I love challenging my mind and I find it . . . it’s inherently fun for me but I also find like it makes my mind more flexible. So crossword puzzles and acrostics board games. And so on TV you get to enjoy this challenge. So whether it’s “Wheel of Fortune” or “Jeopardy,” some of them are for an older audience, some of them are pretty younger audience. But my frustration was you can’t actually win prizes, you can’t actually be a player in the game, right? You’re watching someone on TV and with the . . . excuse me. Getting over a cold. With the advent of the internet and live streaming, now we saw the potential to make everyone a player similar to video games on the Xbox. But anybody win prizes or call the studio or submit questions, talk with the host, talk with each other. So that was the vision of PlayCafe. And with this $1 million we put out shows for about two to four hours a day. If anybody who is familiar with HQ Trivia, it’s a fast growing app on mobile.

Andrew: It’s taken the world by storm. I had to stop it because they’ll ping you a few times a day when they go live, and it’s live trivia questions. The guys is a game show host talking on video to you. He asks you a question, you pick from multiple choice answers, and you’re all competing against everyone else there and there’s a real prize, I think it’s like a $1,000 in cash, nothing huge, and it’s divided by all the people who win. And it’s just been doing phenomenal. That’s what you did.

Mark: It’s a very, very similar. We were doing it in 2007 about a month after the first iPhone came out. So broadband . . .

Andrew: Was it web or mobile at the time?

Mark: It was only web. We wanted to go to mobile but the challenge was that internet access was not great at supporting video at the time. YouTube, I think, was only maybe a year or two old at that point. So we started with . . .

Andrew: So it’s roughly around the time that Mark Cuban was saying that live video would never work online and he was a guy from Broadcast.com who was saying that.

Mark: Yeah.

Andrew: And this is where you went in saying, “I think I could do it.”

Mark: Right. And I think that, honestly . . . PlayCafe failed and we’ll get to that. But I think if we had maybe just on an audio version or scaled back our video and [vision some 00:09:38], it’s possible that we could have built something like HQ Trivia 10 years ago. I actually reached to the founder of HQ and I said, “I love what you’re doing.” I think they’re actually executing better than we did. It makes sense for it to be on mobile. Our shows are something like 2 hours, theirs is only 15 minutes. We focused a bit more on the dialogue between the host. We had live hosts that were interacting, they were charismatic and great to watch. But HQ is more focused on the questions and the prices and giving people a small window with which they can play with other people.

So I think their execution has been better. But it’s funny to see the vision. And I told friends and some of our investors. I thought, “It seemed like a good idea of why is it that we didn’t work.” And it’s interesting that before HQ Trivia, it’s hard to think of any show that was distributed to the web or mobile that was live and that was popular. That the internet was still mainly used as a distribution channel for content that was on TV. Like you’re watching the Super Bowl or the Olympic . . .

Andrew: Oh, you’re saying anything that’s live was not really doing that well online. HQ is the first real breakout hit of live online TV.

Mark: I think so. I mean, what else can we think of that started on the internet and that has a measure of interactivity. There really isn’t anything that I can think of and I thought that was weird. For PlayCafe about 40% of our visitors were not even playing the game. They were just watching the host. And so I thought, “One thesis was maybe we were overestimating how many actually wanted an interactive game.” Because I like interactivity. I don’t like to just watch sports. I like to play sports. But maybe people wanted more of a lean back experience.

Andrew: And the reason, by the way, that you’re saying that this is the cheapest or the most economical, I forget the phrase you use, type of content to create is because all it takes is a host who’s dressed up and some prizes, and often, the prizes on television are donated by someone. All right. I get it. I get what you’re doing with this. It didn’t work out. You gave back a significant amount of money, whatever was left. I’m wondering then, when you went back to first around, were they open to it. Did they say, “Okay, welcome back into the full mark. I guess we’re happy to do it,” or was it awkward?

Mark: No. I mean, to their credit, we gave $300,000 of the $1 million we raised to investors. And some of them actually wanted us to keep going, but 18 months we just didn’t see an avenue to scale the number of users to venture returns. And we were one of the most popular shows at the time on like “Justin.tv,” on “Livestream” But if you only have . . .

Andrew: How do people compete and respond on “Justin.tv” and “Livestream” and all those other live video platforms?

Mark: We actually worked with Justin and they were happy to embed an interactive player on the “Justin.tv” website. I’m super thankful for that. But then this is back when they were doing main live stream and had not yet pivoted to “Twitch.” And I remember thinking at the time when they pivoted to “Twitch,” I thought, “Who’s actually gonna watch people play video games?” People play video games for interactivity, and it turns the answer is tens and millions of people a day will watch.

Andrew: I know.

Mark: And they were eventually acquired for a $1 billion. So kudos to them for having that insight. And I’ve actually have since enjoyed some “Twitch” streams to my own surprise because even though you’re not playing the game, you’re watching a charismatic host, you’re watching interactivity, you’re learning about how to play a game better, there might be music playing in the background. There are several things that are going on there that I didn’t realize until I actually tried the experience. So I think, you know, First Round was supportive. And when we returned money back and then I started my next venture, they then invested in Breakthrough. And I think they’re [investing stage 00:13:13] investors.

Andrew: Sorry to interrupt. There is so much I want to cover with you and I think I just got over, you go there, which will probably happen a lot in this interview. I know you talked to our producer and we asked you before the interview where the idea came from. I’m still not clear about it. What you’ve said is that you and your cofounder have backgrounds in medicine, therapy, psychology. But a lot of people have that kind of background. First of all, I didn’t realize that you had that in your background. I don’t think I saw it on your LinkedIn profile. But second, just having the background in it doesn’t make you realize this could work online and here is how we could do it. Where did you come up with the idea?

Mark: Right. So my background is I came out in ’97 Bay Area to go to Stanford. And the reason was I wanted to study Lucid Dreaming, dreaming while knowing you’re dreaming, so conscious dreaming. It’s where you have full social . . . first of all, full physical experience of what’s going on in your dream. And anybody who’s had lucid dreams can attest to this that you can eat things and taste them and you can fly through clouds and you can have dream sex and feel everything. But there are no physical or social constraints. And this isn’t something theoretical and non-proven like, say, astral projection. We know from our lab research from thousands of people across the world who have attested this is an actual experience. I’ve it myself.

And I learned about it in high school from a book that I got called “Exploring the World of Lucid Dreaming.” It’s by Dr. Stephen LaBerge. And I thought, “People need to know about this. We need to know about it. We need to know about what is the brain activation associated with lucid dreaming? How can we make it easier to induce? Because it is a learnable skill but it takes time. You have to typically keep a dream journal, find what patterns are on your dreams, improve your dream recall. So I wanted to come out to Stanford to study with Dr. LaBerge to study the neuroscience of lucid dreaming because that’s where he was. So I came in and worked four years on the psychophysiology general science of lucid dreaming, typically, using EEG and fMRI brain imaging to understand that.

So what I came to conclusion of is, it’s indeed a fascinating field. But research is lonely and slow and hard and I believed it was going to take another 5 to 10 years of research minimum to get to what I really wanted to get to which was this universal lucid dream induction method. So instead the dotcom boom was happening around Stanford around 2000, 2001. And so I got pulled into a startup and from there my career detoured more into entrepreneurship. I realized I really loved building teams and companies. I started this [squash team 00:15:47] on campus and I actually cofounded an online marketplace with Eric Bahn’s cofounder, Elizabeth Yin. That’s how I came to know Elizabeth. She and I started a Craigslist for Stanford called the Stanford Bazaar with the insight being that a lot of trade on college campuses is hyperlocal on Craigslist not optimized to that. Stanford eventually acquired the Bazaar and we thought, “Can we scale this to 10,000 colleges?”

Andrew: Craigslist acquired it?

Mark: No, no, Stanford acquired it.

Andrew: Oh, Stanford, okay. It’s all right.

Mark: But we just didn’t see a way to solve the two sided network effect of a marketplace 10,000 times. If we had the insight of the social network back in 2001, like many people, we would have started Facebook, but we didn’t have an insight. So getting to why Breakthrough, I since stayed aware of mental health and wellness and psychology. After PlayCafe stopped I thought, “Where else could live video be applied?” Because I’ve gained some [extra piece 00:16:47] in it about how do you maximize bandwidth, minimized jitter, make it a reliable experience even though the technology back in 2007 was not stellar. We had Adobe Flash which is since unfortunately being phased out, and therapy seemed like an obvious application that one in four Americans have mental illness. Therapy has been shown to be as effective as antidepressants was significant, no real side effects. Excuse me.

Andrew: Try to grab a drink of water.

Mark: I’m okay actually. It’s just post infectious [inaudible 00:17:23]. So I was excited about it and I knew about the main challenges in the mental health system. The four ones that I believed that we could work on were the high cost that it costs about $1,000 per course of treatment. Low access, 90 million people live in areas that are underserved by mental health professionals. The average town that has 25,000 people or less have zero psychiatrists, 75% of them have zero psychiatrists. So if you’re . . .

Andrew: No, I’m getting all these data thought, but to me, I didn’t understand watching people playing video games online either. Emmett Shear understood it because he was doing it and he got it. I didn’t understand therapy for a long time happening via video either. How did you get that that made sense?

Mark: Yeah. I think like a lot of people, even back then, I had done video chats just like we’re doing now and it felt that you can establish a rapport. You can have a fluid conversation . . .

Andrew: But you didn’t talk to a therapist or anything this way?

Mark: Oh, no, I did. I mean, I talk to therapists in person and through live video . . .

Andrew: Wait your therapists used to do live video with them?

Mark: No, no, as part of the market discovery.

Andrew: This is part of discovery. So you . . .

Mark: So I spent about four months analyzing the market. Talking with patients like my therapist to get a sense of would both sides adopt this and I became convinced from those interviews that they would. There were actually fewer skeptics than I anticipated. I think it would have been hard if were starting in the late ’90s or 2000 like a few companies did. And I actually talked with the founders of those companies back then and a few became advisors to understand what has changed. And back in the late ’90s, 2000, people were hesitant to put a credit card in a form or to date online. And now in 2007, there was more openness, and there was more openness from the insurers. We started in 2009 to do that.

Andrew: You talked to insurers also. You would have conversations with them and say, “Are you open to this?” And then they said, “Yes,” if what?

Mark: So it solves a few problems for them. One is they actually want to increase access to good providers. So one insurer is a major one, United Health. It has over 100,000 therapists in their network. And I said, “Well, you must be glad to have a therapist network so large.” And he said, “Well, actually, we would actually prefer to reduce it in size a bit.” Because of the reasons it’s so large is they have these proximity requirements where a therapist, they had to have a therapist within a certain range of where a patient is. And if it’s like, say, I don’t know what it is, 25, 50 miles, and if they don’t have that, then they’re out of compliance and they can be sued by the state regulator or they can get fees.

Andrew: Oh, I see.

Mark: So they have to take on therapists that they’re not as experienced and they know frankly are not as good as some other therapists to meet those proximity requirements. So we eventually, with United Health, went to the state regulator in California and said, “If United Health were to offer Breakthrough, would it satisfy these proximity requirements? So someone could be a patient in all the way top of Northern California and talking with a therapist in the bottom of Southern California, would that meet the requirement?” And the regulator came back and said, “Yes, it would.” So now what that allows United Health to do is actually shrink their network a bit, increase the average therapist quality, and they like that. It also, if you can get to patients to when their symptoms are mild to moderate, then you can address the issue faster, potentially, and reduce the catastrophic costs, the hospitalizations, the long-term medications that really cost the insurer and cost the patient as well.

Andrew: Okay.

Mark: You can also do better matching because there’s evidence that the number one driver of outcomes in therapy is what’s called the therapeutic alliance. And this basically is how much trusts the therapist and vice versa. And the analogy I use, it’s a little crude but it’s like dating where you meet someone who really gets you. And if you have a much wider pool of therapists to choose from, ideally, all over the country, all over the world, you’re more likely to find that match to open up, to get someone who uses the technique and the communication . . .

Andrew: Yeah. And frankly, how do people find therapists right now? They go to ask their friends. I got really close friends who “Star Wars.” I’m not a “Star Wars” buff. I haven’t seen many of those movies. They’re not bad people, but we have different tastes, same thing with therapists, and that’s just a bad way to find a therapist. All right. I get that. Let me take a moment talk about my sponsor and then I’m going to come back and I want to ask you a follow-up questions of something that you said that just I’ve got to . . . it’s a simple question, but it’s really important. And the sponsor is a company called Regus. Do you know Regus?

Mark: I do actually. I think I used their office once.

Andrew: I’ve been renting from Regus ever since I went to Argentina. I decided my wife and I lived together. I can’t work out of the house and have her there. I need my own space. I love her, but, you know, it’s kind of awkward when she’s hanging out and I’m not hanging out with her because I want to sit at the office. So I got an office space from Regus and one of the things that I noticed was I started focusing more on work and I started getting more in the work mindset once I was there, and it’s not just any old office, it’s because Regus is just meant for freaking business.

A lot of these co-working spaces are meant for hanging out and making you feel comfortable. I don’t want to feel comfortable. I want to feel like everything around me is ready for me to get work done, including making sure my coffee is ready, making there’s a receptionist ready if someone wants to drop something off and I don’t have a lot of visitors but I do have someone dropping things off from time to time. And that’s what Regus does. They are all over the world. What’s the most exotic country that you’ve gone to? Let’s see if we can find Regus over there.

Mark: New Zealand.

Andrew: New Zealand . . . okay, that’s much further but I bet they’re going to have Regus in New Zealand. So let’s see, Regus. Every time I go somewhere . . . there we go, regus.co.nz. They’ve got plenty of space in New Zealand. And the reason that that’s important to me is because when I go to foreign countries, sometimes what I want to do is sit and just work for a little bit and the coffee shops have bad internet or I’m not sure if there’s theft or I need to be in a quite space to work. I know, I’m with Regus. They’re going to give me a desk. I’m going to sit there. I’m going to have internet. And frankly, almost always, the same username and password for Wi-Fi. So I just open my computer, it’s just like being at home and I get work done. I was in Argentina, I had a questions about where I should take my wife on a date since I was living there and I wasn’t sure.

I went to a receptionist. I said, “Hey, where should I take my wife?” Great. She recommends a place and my wife loved it. I had to send something up by mail. I know I should be an adult and be able to send out something by mail. I hate it. What I do now is I just take thing to receptionist and I say, “Can you please send this? Here is the address that it goes to.” And they send it for me. This is great. I get to focus on business, the work that’s important to me. And unlike other . . . first of all, they’re the biggest as far as I know. The biggest co-working company out there, which means they’re everywhere. Any place I go they have it. They’re really super professional. I have my own quite space. You know, my own office, four walls and a door. It’s great.

But they, unlike others, they’re not about hanging out. They’re about getting stuff done. If anyone out there wants space from Regus, frankly, you can just go to regus.com/mixergy. They’ll take you for a walk around one of their spaces. They will show you what they have. And if it’s not a quite fit, it’s not a good fit. If it is, you can sign up. But a little beyond that, what I would suggest is, since I’ve had such a personal relationship with them for so long, I’d be happy to introduce you to the person who I work with over there. Just email me, andrew@mixergy.com. I’ve been with them for years, Buenos Aires, Argentina, D.C., San Francisco, and then from there, everywhere I’ve gone where I needed office space, they’ve had it.

All right. The only place that I had a guest who was on . . . he grew up in Moldova. They don’t have office space in Moldova. So if you’re in Moldova, Regus is not there yet. But, who knows, they might be building space there too. All right. Let’s move on. A question I had was how do you get together with regulators? You’re just a guy with an idea. How are regulators in California talking to you when I can’t get the person who taking my taxes to answer a question from the state?

Mark: Right. So this was part of the analysis also of not just were the insurers ready for online therapy, but were the state and federal regulators. So I talked with one or two beforehand, and they were consciously warm to it. So these include the medical boards like the American Psychological Association and American Psychiatric Association. And the psychiatrists in particular were open to it.

Andrew: Forgive me, but how . . . well, the thing I’m wondering is how do you even get to them? Are you just looking them up and you get to the right person and they’re open to you because you’re interested in being in the space?

Mark: Yeah. Regulators typically want startups to reach out to them. They want to have an active conversation. They don’t have to have to crack down on startups they haven’t heard of. And I think that’s true outside of healthcare too. And really was the question, right? Because you really want to bring the regulator awareness of what you’re doing if it’s going to be in the gray area. But, in this case, healthcare, it’s so sensitive and therapy so sensitive. We wanted to make sure we were compliant. So one of the key questions, for example, was around, cross-state practice. So would a regulator or an insurer be okay with a therapist in California talking with the patient in New York? And it turns out that we have a patchwork, a 50-state patchwork of regulations around this. Some states were okay with it, some were not. And we wanted to be a mainstream above the board service that therapists would not worry about whether or not their license was going to get stripped away.

So we made the tough decision early on to take that issue off the table and only let therapists talk to patients in the states where the therapists were licensed. And that let us be compliant everywhere. So if you’re a therapist in California, sure, you can talk to a patient in New York, but you have to get licensed in New York. And then we had a service that would help those therapists get licensed in all 50 states if they wanted, take about 90% of the paperwork, most didn’t go that route, but it was there for them. So basically, the practice was deemed to be wherever the patient was. And that did mean that this vision of being able to talk with anyone in the world had to wait until the regulators caught up with this. So we were going to stay U.S. focused for now. But it still meant that if you were a rural town or you’ve met someone that was in a different party or state or different part of the country and was licensed in your state, you still could meet them and that was still a real win for patients.

Andrew: You guys built the app in 11 weeks. Was it you internally who built or did you get an agency to build it for you?

Mark: No. So we worked with a great development firm called Collective Idea, Daniel Morrison and his team. They had actually built an online therapy service before and that was one of the reasons we went with them. And they helped us build before we launched that TechCrunch Disrupt. It was called TechCrunch50 at the time. But we were racing to get the site ready to demo. We actually didn’t even finalized our name. The domain name we got done closed, you know, like I think about three to five days before the conference, and so we didn’t even know what we were going to call the company. We had signed the contract to acquire Breakthrough.com but we didn’t get the ownership of the domain. And so it was one of those things that you can imagine like what Indiana Jones is like sliding under the door that’s closing and we got in and got the domain just before the launch. The TechCrunch people were not happy . . .

Andrew: You got to tell people how much you paid for that domain.

Mark: What would you guess?

Andrew: I know the number. You say it.

Mark: Okay. So it was for $50,000 and some token equity. It was a small business owner, Terry, who was a great and a fan of psychology. He had the domain since . . . what do you call? The dawn of the internet. And he had a company called Breakthrough Systems but he didn’t really need a domain that was that prominent. And he was interested in the funds for a different project. So we started a conversation and over three or four months he liked what we were doing. He initially wanted $100,000 for the domain. We said, you know, “Terry, there’s something not what we can do but we can do in the vicinity of $50,000 and we can do some equity so that if we win you win.” And eventually, we came to an agreement. We really was happy with it. It was a domain that, I think, fit our brand and signal to all of our stakeholders that we were a serious company.

Andrew: What was could it do when you announced at TechCrunch50? This is back when Jason Calacanis was the MC and co-leader and creator of it. What was it that the app could do?

Mark: Not that much. So it had a therapist [provides 00:30:06]. It was HIPAA compliant. So sorry about the cough.

Andrew: How was it HIPAA compliant?

Mark: So HIPAA is a set of rules on how to protect patient data and so there are a . . . you just simply follow those rules. But there are kind of vague so that can be frustrating for startups. But there are some best practices that we followed and that companies can still follow to be considered compliant. But it’s not a one and moment in time. HIPAA is a more of a process that you have to follow in order to be compliant. But we had messaging, we had phone calls, we had video. When I say not much, like we still had not done a lot of features that we wanted to do like . . . and eventually did, like assessments. Video introductions were popular. So we were talking earlier about matching. Eventually, we filmed video introductions for about a third of the network. So that would let people who were interested in getting therapy get a sense of what the therapist is like. What’s their communication style? Are they more of a tough love or more of a sensitive therapist? Male, female, young, old . . .

Andrew: How did you get all those therapists to be a part of this thing?

Mark: Well, so first we would just cold call. So our first 50 to 100 therapists, we were looking at those that had an online presence. We went to therapists in our network or friends of friends. And then once we started getting insurers, the insurers were excited to share their therapist networks with us because it made their providers, particularly their high experienced ones more available. Until eventually, we had the largest network, to my knowledge, of online therapists.

Andrew: Okay. You had them all in there. I see the TechCrunch post about you guys when you guys were launching. One of the things that they said that was exciting about the company was Obamacare was going to make healthcare available to more people and as a result, more people could potentially sign up. Did that help?

Mark: Yes.

Andrew: It did come through?

Mark: It did. Part of the plan was the Mental Health Parity Act that treated mental healthcare on par with physical healthcare. So before then, sometimes insurers would charge you more for a therapy visit than for a primary care visit. And that would deter people from getting therapy. So Obamacare and the Mental Health Parity Act limited that. But yeah. I mean, it just made insurance more available, and so people were more able to use their insurance to get online care through Breakthrough.

Andrew: Okay. So you’re saying HIPAA compliance was part of it. The ability to chat, meaning text chat with my therapist, that was part of the first version?

Mark: So, no, we only focused on video. There are services now that would let you text chat. I think it’s okay. I think video is by a significant margin the best medium for therapy. It’s just much higher throughput, you greater sense of each other at . . .

Andrew: So you guys didn’t have any chat?

Mark: No, we could have built but we just . . . it’s also something the insurance were not thrilled to reimburse.

Andrew: Okay. Live video was part of it right from the start. So I would see a video menu of people. I could pick the one I want. I could schedule with them using the app. And then once I scheduled, I had a private, in the app, a video connection to that person, even you guys at Breakthrough.com could not listen in. It was just me and my therapist talking. Got it. You launched it. How did you guys do a TechCrunch Disrupt? You didn’t win.

Mark: Right. I think we were voted the best of our session, but, no, we didn’t win overall, and that was fine. Like we got great press from it. We were able to raise our first seed round in part based on that. But I would still say back then healthcare companies were seeing some skepticism from investors. There are a lot of healthcare IT companies that have not done well. It’s a hard space to penetrate. And so it took us about two and half years to raise our eventual $5 million series A. We had to show more insurers more traction to get there.

Andrew: You raised $900,000 soon after that though from . . . I don’t see it in my screen but Keith Rabois from PayPal, the investor now. He was part of it. Oh, I guess he was COO of Square at the time. You’ve had other people from PayPal. I guess that’s because of your background there. Charles River Ventures. I guess they prefer to go by CRV now. They’re the ones they were also in there. So you had a really good group of people who were investing. Did you get any customers from being on stage there?

Mark: I don’t remember any insurers coming at that point. Really, the main driver of our insurer contract is not me but my cofounder, Julian Cohen.

Andrew: I guess when I say customers I mean clients of the therapists.

Mark: Oh, yeah. I think we’ve got a few. But honestly, the adoption early on was small. This is one of those . . . it was similar, I think, to the stories at Airbnb where there’s a trickle of adoption until you get your awareness out. You build trust. And I’ll admit, it was discouraging at times when the traction was so low.

Andrew: Why did you continue? You’re into live game shows, that didn’t get huge traction. And you said, “It’s time to give back the money.” Why don’t you say the same thing here? “You know what? I’m too early again. I’m an innovator. I’ll wait. I can’t get into this now.” Why did you decide, “I’m going to tough this out?” And it was a tough slog as we’ll discover in a moment.

Mark: I mean, I will admit that thought did go through my mind at times. I believe the product made sense. The market made sense and I was familiar with . . . I love market-placed business models and I knew that it’s a flywheel. You have to push it for a long time sometimes. And particularly, once we could get an insurer, I believed that their access to patients and therapists would be a huge jump in our traffic. And eventually, that was true.

Andrew: What is the flywheel? The flywheel is . . . yeah, describe what flywheel looks like in this situation, the one that you banked your life on at that point.

Mark: Right. So, I mean, a physical flywheel for the people who don’t know, it’s a large wheel and you push it sometimes until it generates electricity or some kind of kinetic energy. And it takes a lot of time. Like you imagine a big bicycle wheel. It takes a lot of time to get those first rotations. So once you get momentum, you can keep the flywheel going a lot. So in our case, we actually had a three sided marketplace between patients, therapists, and insurers. So this creates a strong network effect also where as you get more patients you get more therapists, as you get more therapists you get more patients. And if you get insurers you . . .

Andrew: Let me pause you right there. Why do more therapists bring in more patients? It’s not like they’re advertising on their websites. Come sign up for me on Breakthrough.com, is it?

Mark: They are actually.

Andrew: They were. So they were specifically promoting that the way to connect with them was . . . I see. Got it. Okay.

Mark: Yeah. For a few reasons. So a therapist will sometimes have patients who move and they want to keep that relationship. So they say, “Well, you’re moving to California, I’m still in New York. We can stay in touch through Breakthrough.”

Andrew: Why wouldn’t they just say, “Pay me online and you use skype to connect with me.” You and I are using Skype.

Mark: So the insurers would not reimburse typically for Skype. They were only reimbursing for sessions done Breakthrough because Breakthrough was more specifically HIPAA-compliant. We had assessments that would collect patient quality, a patient data, to give insights into provider quality of before every sessions on Breakthrough after about year two, my cofounder, Julian, had the idea of, “Let’s present a custom assessment to measure how the patient is doing in that moment, and then we can track how the patients are doing.”

Andrew: Oh, I see.

Mark: And that’s powerful because the mental healthcare . . . this has been something that’s been talked about for a while. It’s called Outcome Informed Care. But we were really one of the first to actually do it. Because it can be, especially in person paying to have the paper, track the paper, transcribe it, present it in a graph to patients, and some therapists just don’t do it. Aetna actually tried to pay therapists $10 extra per session to collection this data. But Aetna was going to use in part to rate their providers and the providers were resisting that. But we came and said, “No, we want to collect this data. It’ll help patients know if they’re getting better. It will help insurers to know which patients are getting better or worse. Which providers are good at certain techniques?” This data should exist.

And so we told the therapists, “We’re going to do this. We’ll do it on your behalf but you need to be okay with that, otherwise you can’t be part of the network.” And so that, I think, was a powerful way for therapists to feel like we’re adding value and for the patients to stay on the platform. But, yes, technically, people could’ve gone off the site. I’m sure some did. But for the most part, we saw sessions staying on site.

Andrew: Wow, I had no idea, partially because you told our producer that you guys used to joke that you guys were the antiviral company. And I get the health slant on that, but I thought that there was no viral connection because people didn’t want talk about the app that they used for therapy because they didn’t want to talk about therapy. Okay. So the more clients you have, obviously, I could see therapists being attracted to because they want more work. Now I see more therapists on the network means more clients because they’re telling their potential customers, “Can’t come see me in person. Don’t want us to figure out what my schedule is, just go to Breakthrough.com and sign up for me.” And then you say, “The insurance companies also help with this flywheel which created more momentum for more customers, more clients I should say in your work.” How did the insurance companies help bring in more people?

Mark: They would put in their provider directories that some therapists were active on Breakthrough. They would send marketing to some of their patients via mail or via email. So there was some co-marketing. They were slow at first. Large companies like Aetna, Blue Shield, they have a lot of priorities and helping a startup or working with startup is not always a top priority. But once they started to put out that marketing, we did see a lift in our numbers.

Andrew: I’m wondering why. I thought that health insurance would be happy to take their clients’ money and not ever have to pay any of it out to mental health practitioners, doctors, or anyone because that’s money out of their pocket. They would think, “Great. Sign up. Don’t ever use this. The harder we’ll make it for you to use it the better it is for us.” Why would they want to promote the fact that the people could use their insurance more?

Mark: There are few reasons. On is, we touched on earlier, preventative care. So if a patient gets severe depression, anxiety, PTSD, ADHD, then the patient care becomes more expensive. The risk of hospitalization is higher and that’s more money that the insurer that has to pay out. Or if the condition can be called mild to moderate, it costs a lot less. Some of it is just regulation that they are mandated particularly under Obamacare to deliver certain services. And part of it I think is genuine. The insurers are not always bad guys. They do want to deliver high quality care. They make their higher quality providers more available to reduce cost. But sure. Not every insurer has that insight. They’re also with the separate entity accountable care organization.

So this is where a provider group is paid a lump sum of money upfront and then the insurer is incentivized to keep people healthy at a certain benchmarks, so there are certain benchmarks they’ll measure, and to do it cost efficiently. So they want to minimize the amount they spend, but they still want to keep their patient population healthy. And it turns out that online care is a way to reduce costs. You can have therapists that are in low cost of living areas that are still good meeting patients that are from dense urban areas. Or you don’t have to pay therapists to travel, like if they’re going to ugly senior homes. Usually those therapists are going to be paid for travel time, here you don’t.

Andrew: You know what? This is still up and running. I haven’t been to therapy in a while. I guess, I don’t even need it, but I should still try in case I want it in the future. I just want . . .

Mark: Everybody needs therapy in life.

Andrew: You do?

Mark: Well, need is too strong word, but I think everybody can benefit from therapy. You don’t necessarily have to have a condition. The way I think of it is here’s an expert in personal change. Someone who you can sit down with for an hour who will listen to whatever you want to talk about. And it could be sensitive, it could be not, and they’ll try and help you through something. So I guess the question would be, “Is there anything that you want to improve on personally?” And I think we all do, even whether we recognize it or not. And a good therapist can help you with that.

Andrew: I like to that it’s covered by insurance because otherwise it cost a lot of money to see a therapist. But frankly, the biggest issue for me is, the one I like is Noe Valley. Noe Valley there is not freaking packing. I have to rush over to Noe Valley from here, go find parking, it takes forever, and the guy is such demand at the end of each session we talked about, “When can I see you again?” And then we finally scheduled it and he moved somewhere because he want to make a lifestyle change for it. What the hell? Right.

Let me talk about my second sponsor by asking you about VentureKit. I’m on VentureKit. You’ve created this really incredible post, “How to Create a Pitch Deck.” On the right side of the post, though, is “Subscribe. Get new post by Email.” I think you can be doing a lot better there. Is this appropriate for me to bring up to you and add for ActiveCampaign?

Mark: Got for it.

Andrew: Here’s what I think you should do instead there. What I think you should do on the right is say, “I’m creating more of these kits, enter your email address to get the next kit.” Or, “Enter your email . . . ” maybe you want to write that down a little bit more, pithy way. And then on the very bottom underneath this post that is, dude, you’ve put a lot of work into this. You’re not half ass type of person. On the very bottom of it what I see are comments and there aren’t that many comments on the bottom of it. I would get rid of the freaking comments or if you keep in there, right above the comments, I would say, “My next kit is coming up. Hit this to get it or enter your email address to get my next kit,” and then add them to a mailing list. Now I’m a little partial. It’s okay for you what email software you’re using. What email software? Do you even know?

Mark: MailChimp.

Andrew: MailChimp. Great. I figured it was going to be MailChimp. Why are you using MailChimp?

Mark: It was analysis I did a while ago. I like their price in the . . . we’ve used the product before and seemed to like, but I’m open to all alternatives honestly.

Andrew: Okay. I’m going to try to convince you to use someone else. I don’t think MailChimp is bad. I think for our use in our world, it’s not the best decision and here’s why. What you want to do is you want, eventually as you have more of these kits, to see what are people clicking on? Is there a topic that they’re especially interested in? And if they are, you want to start to target the future messages based on that. What you also are going to want to do is eventually is you’re going to have people joining your mailing list and you’re going to want not to send the next kit that you create but you maybe have the kits that you send out. The first kit that I think every entrepreneur needs to get is . . . and you send that out a day after someone signs up or a moment after they sign up.

The day after that, what you might want to do is say, “Hey, you might even know who I am, maybe you just stumbled on this website. You should get to know who I am. I did this interview with Andrew on Mixergy where you can get a little bit of my background.” Or, “I did this Reddit AMA,” and you link them to that and you keep track of that. And if you see someone has clicked on five of these things about who you are, in that case, or five things that are especially useful, you tag them a certain way and then maybe they’re the ones you offer to do a five-minute consultation with because they’re highly engaged, and they’re the kinds of people who are more likely to want to work with you.

I don’t exactly know what those criteria are, but I want you to pick up from this is ActiveCampaign really inexpensive, feature rich for doing things like dripping content based on when people signed up so they don’t all get the same thing, and what they’ve done both on your website and in email. And this is really phenomenal. If somebody actually has clicked on something and then they get a follow-up email that has something to do with what they clicked on, they feel like it’s a more personal connection and they’re more likely to stay subscribed.

Let’s take a look at what ActiveCampaign costs. ActiveCampaign, usually I’ve been talking about how they have a free trial. Let me see. Where is the . . . you know what? I’ve got into trouble with this in the past. I accidentally misread the price and then I get into trouble with the sponsor and they want me to edit and I don’t edit. Let me see if I can make it work. All right, here. It looks like they have a light version that starts at $9 bucks a month.

So we’re talking about pretty inexpensive tool that even allows you to have three users. And the reason three users are important is you might want an assistant or an intern or someone on your team to help manage it, and you’ve got that with them. All right. Anyone who’s curious about ActiveCampaign should go to a special URL I’m about to give you because not only are you going to get a free trial with ActiveCampaign so you can see whether it’s free or not. You can always dump it if you’re not happy with it. But most people would end up being happy, will then keep it. But you’ll get a free trail, you’re also going to get your second month for free, and you’re going to get two free one-one-one session with experts who will show you how marketing automation, how really customizing the messages you send to people based on what they’ve done on you site, what they’ve bought from you, what they’ve done in emails you’ve send them in the past, how long they’ve been a subscriber, etc. How easy that is.

Those two consultation sessions will set it out for you. And if you are like Mark and many others and you’re with MailChimp or other email providers, they’re really good for the majority of people. But once you get into smart marketing, you need help and you need better software like ActiveCampaign. If you’re with those software and you want to switch, using this URL, they will migrate you for free for a limited time because, frankly, we, I think are sold out for all ads for the rest of the year. So write this down, save it for when you’re ready, activecampaign.com/mixergy. All right. Let’s continue with your . . . how does it feel for you for me to do ads in the middle of an interview? Some of my audience are thinking it’s a little awkward, some people think it’s great because the guest gets to jump in. What do you think? Be open with me, we’re friends.

Mark: I think it’s fine. I understand that, content creators need to turn a revenue. I think the interactivity is good. I think it just comes down to the quality of the product. If you believe in it and if it’s product that the audience is actually interested in, I think it works fine.

Andrew: Yeah. And I think one of the things, I don’t know if I got a chance to say to you, but I almost always say before, if you hate the sponsor I won’t run it, and number two, or number two, if you just like them, bring them up in an interview. And I’ve had that because . . . and I think that helps hold me accountable that I see you. I can’t talk about BS with you there, I’m going to feel like an idiot, right? And if you a negative experience, you can jump in. And all those things help to keep these ads as honest as I can possibly can make them. All right. So now you’ve got this model up and running and it’s time for you to get insurance companies. My wife has been on the insurance company for months too, like repay something. It’s not easy even as a customer. How do you as an outsider, what was your process for convincing all these insurance companies to sign up with you?

Mark: Right. And this is where my cofounder, Julian really worked his abilities. His entire 30th career was as a mental health executive. He was the CEO of Aetna Behavioral, their Mental Health Division. The CMO of United Health, one of the largest insurers. So the opportunity and the challenge is that that market is highly relationship driven and I didn’t really have relationships there. I’m networked in the tech community and product and tech is what I’m good at. So I needed to team up with someone, Julian, who could get these executives in a room and with his experience convince them that this new thing called the internet thing was worth investing in. And he was [exception 00:49:07] with that. It did still take a long time, but we would never have been able, I think, to sign the insurers if it was just me. So one of the tactics, it’s a lot of just good listening and selling, right?

So understanding what was going to motivate different insurers. And as we’ve talked about it, it tends to be lower cost, greater appropriate access, regulatory compliance. There’s some features like the data collection that they were interested in to understand better which providers are good in treating which conditions. And frankly, we were the online game in town that had the level of technology that we had and was willing to work with the insurers. You could even back Google “online therapy” and find out half dozen different fly-by-night players that were trying to charge direct out of the pocket. But as you’ve said, it’s expensive. It was about 100 different dollars. It’s still is per hour if you want to talk to a therapist. There were really no options if you wanted to just to pay you copay of $15, $25 to nothing at all. So for the insurers, we were the main player to work with.

Andrew: You said that the MDLIVE was a major player and the other major company was Teladoc. That’s who he’s with now, huh?

Mark: So he was. I think he’s still there or might’ve rest recently. But yeah, he run the entire behavioral division.

Andrew: And behavioral is what?

Mark: Mental health.

Andrew: Mental health. Wow, I see. So all of his background, looking at mobile LinkedIn. First I didn’t have his last name, so I looked up Julian in Breakthrough. There’s apparently a jazz musician named Julian was really popular with Google and he’s got a song name “Breakthrough” and just kept coming up. But now I see it. I’m looking at this LinkedIn profile. I see that he has a lot of experience being on boards, being in these companies. Okay. And it took a couple of years. And at some point in there, you guys had to give people pay cuts. Why did you guys get to a point or when did you get into a point where you had to give your team pay cuts?

Mark: Yeah. So we were going for about two and half years on just $1 million in seed capital. And I sounds like a lot of money but when you have a team of roughly 10, it’s not a lot. And so I’ve been earning [stuff 00:51:08] markets at least for a long time. And we were getting to the point where we had the traction we thought to raise a series A, but it was going to take a bit longer to go to conversations. So I went to my team and said, “I think we can raise a series A. We all know our numbers, but it’s going to take somewhere around three to six months.” And so I said, “The only way we can do this, one of two ways. I can either let some people go and keep the current market [hours 00:51:33], but then that’s going to slow down our growth. Or we all agree to take a cut,” and I forget what it was. It was significant, somewhere 25% to 50%. “But we make an IOU and we put in contract that says, ‘If we raise money, we will back pay you everything that we’ve cut.”

And, you know, it was heartening. Everybody sign on. Nobody left and some our people had families. But I think an advantgae of doing something like what Breakthrough is doing, is you get people who are passionate about the cause. It’s not just another adtech company or virtual game or whatever, people really believed in it. And so they took the pay cut, we closed the funding, we back paid everything that we had not paid out, and it worked out great.

Andrew: Wow. And how long did it take you to pay them back on the IOU?

Mark: I don’t remember. I think it was a few months. It wasn’t like a year.

Andrew: Did you do any other kind of marketing that helped out? So you told me about starting out getting therapists and then therapists helped bring in clients. What else did you do to bring in more clients?

Mark: We tried a few things and some things just didn’t work. Like we tried social medial, didn’t really work. We tried SEM, Search Engine Marketing, it didn’t really work. SEO worked a little but not much. A lot of people are not searching for online therapy. We needed to grow awareness. The methods that tended to work were the insurers and also we had some early evidence that primary care providers would work. So the number one driver of mental health visits is primary care providers. Seventy percent of all antidepressants are prescribed by PCPs.

Andrew: Really?

Mark: Because they don’t really . . . they aren’t as familiar with anti-depressants or psychotropic medications compared to mental health specialists. So the insight here is go to PCPs and say, “Look, one in four patients that come through your door have a mental illness. You’re not going to do therapy with them. You probably rather not prescribe medication for them because you’re not as familiar, it increases your liability. You would want a specialist.” So the majority of visits tend to come from a PCP, how many therapists is a PCP going to know? And what tends to happen is that these PCPs have one or two maybe three therapists, psychiatrists that they refer everyone to. But we know like for the roughly 2000 patients that a PCP is going to see if a quarter, 500 come, it’s unlikely that 1 or 2 therapists are going to be the best fit for all 500 patients.

So our pitch to the PCPs is here’s an entire directory of a thousand therapists all over the country who accept all different insurance companies, all different techniques, genders, ages, experience, techniques, styles. Give your patient access to Breakthrough. Just all you have to do is send them to Breakthrough.com and we’ll take it from there and now we’ll also keep you in the loop. So when a therapists sees one of your patients, those notes can be shared via HIPAA compliance to you, so we can have coordinated care, and it doesn’t cost the PCP anything.

Andrew: And so what was your campaign for reaching out to all those different primary care physicians PCPs?

Mark: Right. So there are certain aggregations of them like conferences, groups that they tend to subscribe to. However, getting the PCPs is hard. They’re the gatekeepers of the healthcare system, so they’re constantly pitched by specialists, by startups. So we really had to try and build those relationships. And we had early evidence that that was working, but by the time that we really wanted to scale that out, the acquisition had already happened. But I would say that it’s piece of advice for healthcare startups. And I think a lot of them know this, that if you really want to drive referrals in a cost effective way, find a way that you can make sense with the PCPs because they’re the gatekeeper.

Andrew: You know what? I’m trying to check out the app and get that feedback on it as we’re talking. And I feel like the app has not been updated as much. Is it still, is Breakthrough.com still up and running?

Mark: I don’t say I haven’t checked it out for a long time, it’s been three years. MDLIVE has been running it, so I don’t know.

Andrew: Why did you sell? It seems like things were finally clicking. You were getting all these insurance companies, getting providers, getting clients.

Mark: Yeah. So two reasons, one I we were getting offers and it had been five and half years. I honestly, personally, was burned out at that time. And the second is we wanted to raise a next round. We had $8 million committed but we wanted to raise around of like 10 to 12, and we were challenged to try and find a lead investor. So this one was frustrating things where you can have your existing investors into this who doesn’t want to come on, but a lead investor doesn’t necessarily want to come on to set the terms and to get on the board. So combination of those factors, we thought it made sense at that point to have the company acquired.

And we did a multiple officers to choose from and I think eventually investors will do okay. But my preference really would have been to be an independent company to grow your merger and just . . . you know, I think there are things that I could have done better, like invest more in marketing and hire more people. Early on, I was taking a lot of jobs. In fact, I was the VP of product, VP of marketing, and the CEO for a while. I tend to like to get into the details, and that’s something I think I would do differently next time if I start another company, is really try and delegate and be a true CEO that’s managing the doers instead of trying to do so much myself.

Andrew: How did you hook up with MDLIVE?

Mark: I don’t remember if we reached out to them. I think we were . . . that the space was small and I think we all knew about each other. So I don’t remember exactly how it went, but we talked with several companies in that space and they eventually made the best offer, so we went with them.

Andrew: Right. And you ended up with equity in MDLIVE and that’s not cash in the way you going to know how well it does this when they go public or when you exit.

Mark: Right.

Andrew: You’re basically now investor, an angel investor there.

Mark: Correct. Yes.

Andrew: You’ve had two other exits, am I right about that?

Mark: Mm-hmm.

Andrew: Stanford Bazaar. We talked about how you sold the Stanford, what was the other one?

Mark: This was Whoosh [SP]. We were building . . .

Andrew: Whoosh!?

Mark: Yes. Yeah, very dotcom. We were building small business storefronts that were backend integrated. So what that means is that back then and still today, if you have a small business, you have a system for attracting inventory, for issuing invoices, for managing your contacts. And back then, a lot of that was done offline, or if it was online it was done on a computer sitting somewhere. And a lot of the companies like Yahoo Stores were coming along, were not integrating with those systems. So if you’re a small business owner, you have like three employees. You may not have an IT worker and you get an order that comes in, if it comes to the website, you want it to go into whatever system you have to track your orders and issue invoices, but a lot of those systems were not integrating with their existing system.

So we want to come in and say, “We want to integrate with your existing system,” so there is not an offline and online system or two online systems, it’s just one system you use around in your company. So it was a good idea. I still think it is. But we raised $20 million and we made every possible mistake you could possibly make. It was a complete disaster. I was the COO. I had not no idea what I was doing. We had too many founders. We just didn’t execute well. So after a year, I saw it was not going to have the outcome I wanted and I went back to school. I had dropped out of Stanford twice. The first time . . .

Andrew: I saw that in your LinkedIn profile.

Mark: Yeah. The second time for PayPal. But it was a good experience and, you know, I still think it’s actually a good idea for today.

Andrew: PayPal back in 2002, 2004. So this is the kind of question that if I saw your Reddit Live, your Reddit AMA, I would jump in and ask you, but I’ll do it here where it’s a little more awkward but still important. Where is your coming from then? It looks like MDLIVE that you didn’t cash out, PlayCafe you returned the money. Whoosh made a lot of mistake. Where is the money coming from that you’re investing as a limited partner in Hustle Fund?

Mark: Yeah. Also I’m actually no in Hustle Fund, but I am angel investing. So, I mean, it’s just a combination of PayPal and salaries over the years, but I’m not filthy rich. But I am happy to be moving into investing and might be joining a firm in this year.

Andrew: As an investor, don’t you have to have like . . . to be an accredited investor, you have to have a certain amount of money and a certain salary. You’re not making a salary, so it’s a certain amount of money.

Mark: Right.

Andrew: And that’s from PayPal?

Mark: From variety of things.

Andrew: Or is it that you’re not . . . like a lot of people I feel like no one is checking to see if we’re accredited. A lot of people say, “All right, sure, let’s just invest,” right?

Mark: Yeah. No, I mean, and I’m not going to be making a ton of investments as an angel investor, I would want to be . . . you know, I’m going to be raising a final working with larger VC. But yeah, it’s just, you know, I’ve been around that long enough that have been able to be fortunate to acquire capital to do this. But it’s true that I’m not liquid on the MDLIVE stock, so I might be still able to make few more investments.

Andrew: How did you end up with the Hustle Fund cocktail party as a non-investor? I mean, I could have just hang out as a friend of Eric’s?

Mark: Yeah. So Elizabeth is a friend. And as I mentioned, she and I are cofounders long ago and I worked with Elizabeth at 500 Startups where she was a partner and I was in the EIR. So I was able to do some investments and advising out of that as well.

Andrew: So I’m not an LP in any of these funds. Is the way that you’re usually are that you get to hang out with other investors, you get to know the founders of the fund? Is this what’s like? Because this is way better than going to a country club.

Mark: It is pretty exciting, honestly, on the investor end I’ve been a founder for so long to constantly . . . I mean, it’s similar to what you do, right? You get to meet founders, tend to be passionate and sharp, doing interesting things and every now and then you get to help them make their dream be a reality. And I’m really enjoying the investing side so far. I wish I could say yes . . .

Andrew: That’s some really [inaudible 01:01:47].

Mark: Yeah. I wish I could say yes more often. But, you know, it’s just not networking, I feel like the good investors do have to do rigorous analysis of markets and there’s a lot of gray area, there’s a lot of fizziness into which company is going to well. And, you know, I work at the companies that really, no pun intended, broke through in the last 10 years, and I would have missed deals like, say, Twitch, I might have missed Airbnb, maybe I thought differently if I had seen the numbers. But Snapchat I probably would have missed. A lot of these companies it can be hard to figure out what’s really going to get traction. So that’s the challenge. But I would say that the lifestyle, you know, it’s different than a founder. There are lower highs and higher lows, but it’s still a lot of work and so far I’m really enjoying it.

Andrew: Yeah, it does seem like it. I kind of like their philosophy over Hustle Fund where they want data, but I missed the value of what they were saying because, frankly, I didn’t know that you could get such great data and I think that Eric was not a person who is like really good on selling stuff, he’s just very casual, at least he is with me. It wasn’t until I talked to some of their entrepreneurs and I said, “Who cares? They’re getting all this data. What’s the thing?” He goes, “Are you out of your mind? Do you know how much data they now get and how much analysis they can do on behalf of entrepreneur and how they could . . . ?” I had no idea. And then I talked to the intern who’s taking . . . she’s using Zapier to take in data from things like GitHub to understand how fast are these companies are iterating. It’s just . . . these guys are freaking brilliant.

But Eric is too freaking quiet to tell me anything like that. He’s just like a . . . I don’t know. I feel like he’s a bit of savant. Like I’ll tell you where I understood Eric’s brilliance. I invited him and other people who I interviewed to scotch at my house. He says, you know, “I can help actually tell people a little bit about it.” It somehow came out. So I said, “You know what? Sure, anyone can say anything at my house for scotch. Come over.” He brings his specialty glasses that I still have to this day because you smell scotch better with the glasses. He gave me a list beforehand of scotches that I should have because he wanted to make sure that we kept it, like, we had high quality. And then he printed out information about each scotch, and he didn’t just do a scotch tasting, he told people what was in it and he answered and I thought maybe this guy did some research and, you know, this is his way of relating to people. No, we had all these smart people. They had all these questions for him, and the guy pulled out the answers. He understood it. He was fucking brilliant. I’m obviously very much in love with Eric.

Mark: He’s a sharp dude and here is more of a soft side. I like more.

Andrew: Yeah. I tried to live wherever he lives. Where is it? San Carlo? I took my wife into the area. I said, “Look, we should go where Eric lives. She looked around and she said, “There’s not even a Starbucks in here. What’s going on? This is the suburbs of suburbs. We couldn’t do it.” But that’s how much I believe in him. I think what he’s doing somehow I want to be part of it. All right. I wonder, is that illegal for me to say that I . . . of why I decided to work with him? Does this feel like I’m pumping his fund or anything?

Mark: I don’t think so.

Andrew: All right. And if I’m in chains, I’m going to use this as a reference. All right, Mark, in all seriousness, I really enjoyed hanging out with you that night. I enjoyed talking with you. I admire the amount of work that you put into the content that you put out there. The website for anyone who wants to check it out is venturekit.com. I hope that everyone gets to have a chance to talk with you. And frankly, your email address, I’m going to give out. It’s mark@venturekit.com, if anyone wants to talk to an entrepreneur here in the Valley with a lot of experience and a lot of great connections and he’s also, frankly, just a good guy to talk to. Go check it out, go email him. And the two sponsors that I mentioned are the office space where I am, 201 Mission Street. It’s a Regus office. They take good care of me here and they’ll take great care of you.

Go check them out at regus.com/mixergy or contact me andrew@mixergy.com. I’ll introduce you to someone. And whatever city you’re in, there’s a Regus probably and they will give you a tour and you can decide whether you like the office or not. And if nothing else, you just get a sense of how you could be working, even if you don’t sign up. They’ll give you a sense of what’s out there for you and your company. One person operation, multiple people, whatever it is, andrew@mixergy.com.

I’m talking about them a lot, Mark, because I want them to return as the sponsor. And they’re very like a podcast sponsor type of company. So I want to knock their socks off. All right. And the second company is the company that will help you send email out right, it’s called ActiveCampaign. Check them out at activecampaign.com/mixergy. All right. That’s the end of me just promoting stuff. But I’m really proud of these companies and I’m really proud with my relationship with Mark. So I’m linking you guys up to all those things. Mark, thanks so much for being on here.

Mark: Thank you.

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


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