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 for an audience of people who are trying to change the world. I know that sounds a little ridiculous. It sounds cliché, but I do believe that it’s possible.
And today’s guest is kind of smiling because I’m going to guess, Eric, why you’re kind of smiling at that because I feel like you’re looking around at the world of the internet and saying, “Hey, you know what? We were supposed to change the world, and for a little while there we did change the world. And then what do we do? Create a better social network? We just changed the social networking landscape.” And then the people who do say they’re changing the world with Internet of Things where my lock can lock itself, my oven can cook by itself if I just shout at my speaker device. You’re looking at that and going these are easy problems to solve. And they may not even be problems. Nobody had a problem of, “I’m in the bedroom and I can’t turn on my oven. Why do we need an internet if . . . ” You are, right?
Eric: I’m laughing. You’re dead on.
Andrew: Meanwhile, Eric Simone is actually working on real problems that in many ways are going to seem less exciting to you, but are more sophisticated and have more impact and his goal is to have much more impact than he’s had so far still. Eric Simone is the founder of ClearBlade. Here’s what ClearBlade does. It’s an edge computing software company that enables enterprise to engineer and run secure, real-time scalable Internet of Things applications.
If you’re looking for funding, every one of the keywords in there would excite people right now, Eric. But I know that you’re not just jamming it in there because of that. You’re somebody who was actually trying to create a much simpler business and then ended up with one that is much bigger vision than you expected. We’re going to talk about how he did this, how he’s doing right now, thanks to two phenomenal sponsors. The first, whether you’re looking to do Internet of Things, devices, or anything else in software development, you’ve got to hire the best of the best people from Toptal. And the second when you’re looking to publish your website or move it to a better hosting company, go to HostGator. I’ll talk about those later. First, Eric, good to see you.
Eric: Nice to see you.
Andrew: What’s an example of a ridiculous Internet of Things thing that you’re seeing that’s making you go, “These guys just don’t get it”?
Eric: I think all the hype around Alexa and voice input.
Andrew: Really? But I love my . . . I’m not going to say the word. Why is that overhyped? Don’t hold back on me. I’m not saying this just to shut you down. I want to draw you out. Why?
Eric: It’s an input mechanism. So voice commands or voice commands, it ain’t that big of a deal. That’s not Internet of Things. That’s an input to some application that could then provide Internet of Things functionality. So, like you said, that if I want to use a voice command to turn on an oven from my bedroom, big deal, right? Am I changing the world by doing that or am I allowing my mom to bake cookies a little bit easier?
Andrew: Got it. All right. Let’s talk about something I said in the beginning that you’re working on engineering problems that aren’t as sexy but have more impact. Give me an example of one maybe in the railroad space.
Eric: So class one rail, there’s seven class one rails in North America.
Andrew: What do you mean, class one rail?
Eric: Big freight rails. So there are seven that are in Canada and the U.S. that provide most of the products that we get. So they’re shipping goods and core minerals and things like that. And a great indicator of how the economy is doing if you look at freight loads. This is the backbone of our country and many other countries and it’s that aging infrastructure. Right? So one of those examples is railroad crossings.
Eric: So one of the rails that we work with has over 25,000 crossings today in operation. And those crossings can be dangerous there. We all recognize the lights and the gates and the bells when they come down. Sometimes those don’t activate or sometimes they activate when there’s no train coming.
Andrew: Wait, hang on. I get . . . They activate, no train coming, fine. There’s an issue with that. But you’re telling me that a train can come rushing down to track and there’s no indication that it’s coming other than it’s screaming?
Eric: Yeah. Why do you think they still have the whistles that they blow?
Andrew: Really? Just in case it doesn’t . . .
Eric: [inaudible 00:04:08]. Yeah.
Andrew: So how often is this happening? Is this like a rare once every five years type of thing?
Eric: No, no. It happens more than the rail companies would like to admit. But in all honesty, their number one focus is on rail safety, and they take it very seriously.
Andrew: Okay. And so you see this as, look, there’s technology that has been around, the whole railroad system has been around, you told me before we started, 150 years. You’re saying, “I want to modernize it.” Talk about how Internet of Things modernizes it.
Eric: So you’ve got existing infrastructure today. So, to me, Internet of Things is not just new, but it’s taking what is already out there existing today and modernizing it, exactly what we just said. So instead of just having maybe a signal that goes up every month that says, “Hey, look, I’m still operational,” or to be honest what’s mostly done today is they send a union labor worker out to go inspect the gate once a week and make sure things are working properly.
Andrew: And you do what instead?
Eric: So, instead, we can use software that monitors that gate in real-time all the time and that will send up alerts and notifications that says, “Hey, look, this light is starting to go out or this gate is moving slower, so predictively we need to make sure that we maintain this before something fails.”
Eric: As opposed to knowing it’s failed, and then possibly having an accident occur.
Andrew: Okay. Eric, tell me this. I know that you’ve been around in the internet for a while. We talked before the interview started, I had the sense that you felt like . . . Well, you told me. You watched in the early days of the internet people building these amazing things and you getting no attention and not doing . . . I’m wondering if when you see us get excited about an oven that turns on from our bedroom because we shouted at our speaker, do you look at that and go, “Oh, why aren’t they paying attention to what I’m doing? I’m having real impact. I’m saving your kid’s life potentially here.” Do you feel that on a personal level?
Eric: I do. I do. But I also get why that’s what people understand because most of us don’t understand the inner workings of the railways, right? Most of us don’t understand what goes on an HVAC in a building. So it starts from the consumer stuff, but look, I mean, how many times have you been frustrated trying to get all your devices in your house to communicate? And how many vendors are asking you to buy their devices to hook everything up? It’s frustrating. To me, it’s a low-hanging fruit based on the bigger things that are happening out there with IoT.
Andrew: I don’t mean to distract from the conversation, but one of my big frustrations is I put one of these smart plugs on all my computers here at the office so that when I’m away if I need to reboot the computer, I could do it. It doesn’t work on Apple’s product. It does work on the Alexa’s product. I’m not bringing my Alexa device with me when I travel, so it’s not a huge deal. It’s not driving me . . . But it’s still kind of weird that I still have now three different platforms that I’ve got to contend with. All right. Can you talk about how much you sold your first company for? This is Compete Incorporated.
Eric: Sure. We sold it in May of 2000 for 63 million to a company called Perficient.
Andrew: Wow. And what percentage of the business did you still own at that time?
Eric: Roughly 30%.
Andrew: Thirty . . . Impressive. What did you do after that, like, personally, before we get into like the change your . . . On a personal level how did your life change?
Eric: Well, I ended up working for Perficient for a while because the dot-com kind of slowed down, stopped, and then we work together to survive on the NASDAQ. They’re doing wonderfully right now. And then I took a few years off and helped my wife open a woman’s clothing store. I did some film and I did some improv comedy for fun.
Eric: Yes. So I was good at burning through the money that I had made.
Andrew: Did you burn through all of it?
Eric: No. Well, I invested in a lot of things.
Andrew: Bad investments? Are you the type of person who . . . Paul Graham has this great blog post where he says you think you’re going to lose your money by hookers and blow. That’s not the way he said it. It’s really bad financial decisions that masquerade as good ones where you lose your money fast because you’re believing that it’s good decisions.
Eric: Yeah. I think that’s very fair.
Andrew: That’s what happened.
Eric: But I also hit some big ones too. I mean, I was the first check in a company in Austin called Bazaarvoice that went public in 2012 and I made a bunch more money. And then props to Brett Hurt for making that company grow.
Andrew: Overall you did well. You were . . .
Eric: Overall did well. Yeah. But at the end of the day, I think . . . So I’ll be honest with you. What happened with me was the money that I earned from that I was grateful and it was really a team effort. And it went away and came back in weird ways because the dot-com and you talked about stock and options, and I won’t get into the details. But I felt like what ended up coming back to me was like Monopoly money and I felt like I owed it to put it back to work, put it out there in the community. And there’s a lot of people in my opinion that talk a big game about putting money to work and I actually did it. And yeah, some of those things didn’t work out but some did. And I think that’s the fun of doing what we do as entrepreneurs. I think risk is a big part of our personalities.
Andrew: I told you I looked at the Wayback Machine for 2007 on clearblade.com. What I saw was one of the most like basic most boring launch sites I’ve ever seen. It’s basically your email address, phone number, direct line to you, and you’re saying . . . And it’s a press release saying “Ascendant Technology, a leading provider of SOA, portal and business integration solutions, today announced a strategic partnership with . . . ” Basically, what you’re saying is, we are doing consulting services, utilizing IBM’s best of breed rational suite of software products. This is . . . It’s similar to what you had before, right? Before you started a consulting company that did what?
Eric: It was basically supporting IBM products. I used to work for IBM back in Chicago, and I was a tech nerd salesperson. Every time I would sell software, I’d be the guy doing the work. And so we built the company to do that. And IBM built affinity services. And we had success with that and I basically went back to my friends at IBM and said, “Let’s go do it again.”
Andrew: At the very first, the first business Compete Incorporated was, IBM would make the sale. And would they hand over the business to you, Eric, or would you go after it and say, “I’ll take care of what you just bought”?
Eric: Actually, we would make the sale for IBM. So we would take their products and work usually jointly with IBM or separately, and then we would wrap our services around the products to make them successful.
Andrew: Got it. Okay. All right. And then you said, “I’m going to start the same thing again.” Before we get to the same thing again, what was it like helping your wife with her business?
Eric: It was wonderful. Talk about . . . Listen, she ran that store for 10 years, we called it Girl Next Door. And have you ever see the old “Seinfeld” where George finds the keys to the secret castle of beautiful women everywhere and he’s . . .
Andrew: Yes. Until he gets pushed out and life is great.
Eric: He gets pushed up. Basically, I lived that life with my wife. She’s a wonderful woman. And it was . . . After I got done with my gig, I told her, “You take first chair and I’ll take second chair and I’ll follow your dream.” And I had a blast, for four years going to LA fashion shows and New York and pretending to fit in with that crowd. And actually . . .
Andrew: George never fit in. Did you feel like you didn’t fit in? I’m sorry to interrupt.
Eric: Great question. No, actually, I felt like I fit it. It was actually very fun. And it was . . . I think it was . . . It was a family affair. We had started it just before we got pregnant and started having kids. So our world changed right after that. But I’ll tell you what it really did for me. It got me connected to the Austin community way more than I was when I was in just the tech world. I got to know, it’s funny, mostly the wives of some very successful people around Austin. And I was . . . Where I didn’t fit in was those parties where I was the retail guy that didn’t quite fit in with the tech world even though that’s where I came from. So it was fun.
Andrew: Did you find yourself constantly dropping into conversations, “I had a tech company that I sold”?
Eric: Yeah, yeah, yeah. [inaudible 00:12:05]. Yeah, yeah, yeah. But I also would sit there and go, “But I’m telling you what I like with my world today buying clothes and going to fashion shows.” What I didn’t like, in all honesty, no offense, to my wife was looking at the financial part of that, because it’s a very, very hard business. And we were doing it at a time, look, the internet is really just starting to get going with e-commerce and retail and you’re starting to see the small box boutiques go away because it’s a very hard business if you play it straight up, which we did. I think one of the ways to make money in that business is to hide some things from the government and do cash under the table and I just had too much else going on to play that game. It’s stupid.
Andrew: I get it. Okay. And so you were starting to say, “We want to do the same thing again,” because . . . How different was it going to be then from what you did before when you launched ClearBlade as a consulting company?
Eric: Great question. I’ll tell you what really prompted it. It was two things. One, after four years with Girl Next Door to my wife, my wife was saying, “Why don’t you go back to doing what you used to do because I’ve got this.” Meaning, it was better for us to not work together and live together at the same time. Two, all my investments that we talked about earlier, I started seeing bad news in 2007. And I think what we didn’t know, what I didn’t know was 2008 was coming. So I saw precursor. So fear is a great motivator.
So I went back to my friends and I was considering joining my old partners in their business and trying to figure out what I should do. And thank goodness, I’ve got good friends who said, “Hey, look, you know what you’re doing, go back and do what used to do because you were good at it.” So they gave me the confidence to go do that. And a good friend of mine that worked at IBM, basically came back to me and said, “I got the same problem that we had in 1994 when you did the first one. I’ve got . . . I need support for my products. Can you go do it again?” And so these things all kind of converged and I said, “Well, let’s just do what I did before. We made that one work, so let’s make this one work.”
Andrew: And where did you get your first clients?
Eric: Great question. Gosh, I’m trying to think back on. It was a lot harder in 2008 than it was in ’94 to start a business. My first clients were government clients that we got through my connections at IBM, but it was slow going. And we were really working on selling a product from IBM that was new but had a long history based on the stuff we did before and it just wasn’t very sexy if I can put it straight. It just was . . .
Andrew: Was it hard for you to go back to that?
Eric: It was a little bit. It was comfortable, but the world had changed since then. I found IBM harder to deal with than I felt in the early ’90s. Maybe I was less tolerant. But it was much more of a struggle and it just felt like as opposed to having a wind at my back in ’94, ’95, ’96, everything I felt like I was pushing uphill wind in my face. It was really difficult.
Andrew: All right. Let me talk about my first sponsor and then we’ll get back in and find out how you made this work and then what happened when you saw this other company. My first sponsor is a company called Toptal. Eric, you should know about these guys when you’re looking to hire. The beauty of Toptal is, you could just go to them and say, “Look, here’s how we work. Here’s what we’re looking for. Find somebody who’s done that.”
Like, imagine, Eric, if you decided, “I actually do want to get into the light bulb business for the home. My guys are too busy. My team has got too much going on.” You go to Toptal and say, “I need somebody who can connect the light bulb to the home to Apple’s Siri device.” They will go and find somebody who’s done that using the technology that you’re looking for, someone who’s amazing at it. They introduce you to one or two people. If you like them, you can hire either one of them and get started within days. If you don’t like them, nothing lost. If you start working with them and they’re not the best of the best, we’re talking about, really, the best of the best developers in the world, you don’t even have to pay if you use this special URL I’m about to give you. Are you still a deal person?
Eric: Yes, very much so.
Andrew: You are? Like how? What’s an example of a deal before I finished this ad?
Eric: In terms of like investing or in terms of . . .
Andrew: Anything. Are you still like the type of person who’s looking for deals? I interviewed this one guy did phenomenally well. He will only buy his winter clothes in the summer, summer clothes in the winter just because he still cares about deals.
Eric: Yeah. No. So when it comes to saving money, no, I’m not good at that.
Andrew: You’re not.
Eric: What I’m good at . . . But I love making things work for everyone involved. So I’m kind of a win-win business guy.
Andrew: Yeah. That’s a unique thing. Most people feel like, “Oh, if I could just get this working and the person will accept it, then maybe we can find something for them in the future.” All right. Let me close out this ad by saying if you, Eric, want a win-win situation for you, for Toptal and for the developers who you hire from them, go to this special URL where you’re going to get 80 hours of Toptal developer credit when you pay for your first 80 hours, in addition to a no-risk trial period of up to two weeks. If at the end of the period, you’re not 100% satisfied, you will not be billed. Many of my past interviewees, Hiten Shah, and so many others have hired from Toptal. Everyone here should be too. Go to toptal.com/mixergy. That’s toptal.com/mixergy. The thing that I understand is, I interviewed Tikhon, Tikhon Bernstam from Parse, the founder. Is that the company that you saw and were . . .
Andrew: It is. I interviewed him about seven years ago. What did . . . Talk about what he did and why it drew your eye?
Eric: I’ll tell you. It was a combination of two things. One, the mobile space was starting to blow up, obviously. And I had . . . I’m sitting here doing this IBM stuff and I’m grinding away and I’m seeing companies in Austin, one of them called Chaotic Moon, a good friend of mine now, Ben Lamm, killing it in his first year and I’m like, “Why are we not doing mobile? We need to be pushing to mobile.” So I pushed my entire team to do mobile and we were supporting an IBM product for mobile so we kind of shifted to a company IBM bought back in 2012 called Worklight. And we did a big project at a big insurance company called Liberty Mutual out in Boston. And my CTO who’s probably one of the most brilliant people I’ve ever worked with was on that project and he told me how bad the IBM product was. He said, “It’s absolute crap, Eric.”
Andrew: What was it supposed to do and what made it so bad?
Eric: It was supposed to make building mobile apps very easy.
Andrew: What part? Not the frontend development, it’s what happened . . . What was it?
Eric: It was the backend and the frontend. And so this product was the new wave and we said, “Look, we’re going to jump into this new era of IBM because we know IBM and we know mobile is the future.” And this guy, Aaron, who came out of IBM never said a bad word about anything IBM in his life. And I called him and said, “Tell me all the great things about this because we need to help IBM to sell it.” And he said, “I don’t know what you want from me. It’s the worst product I’ve ever used in my entire life.”
Eric: And so that’s called out of the frying pan into the fire, fear, right? Not only did we bet in IBM and it’s been a struggle, but we bet now in a new era of IBM that’s even worse. At the same time Parse is getting a lot of press, right? And we were using Parse in a different way with a different customer. And my CTO, Aaron, was telling me how much he liked it. And then lightning hits back in 2013 when Parse gets bought by Facebook, right?
Andrew: And just to be clear, what Parse does is, I remember what Tikhon told me, it was people create their app. What happened to the data that gets put in their app? How does . . . Well, how would you describe it, actually?
Eric: Basically, it’s the backend to any mobile app. So it’s the way mobile apps work today. It gets stored in the cloud, right? So when I’m sharing data, when I need to push updates to the app, when I need to run processing, Parse was a pioneer in creating an API which is application programming interface to a mobile app.
Eric: And they did it with a much different way than companies like IBM were doing it or companies like Kone are doing it today with this big heavy toolkit stuff.
Andrew: Okay. I interrupted, you were saying you saw Facebook acquire them.
Eric: Yeah. So this is . . . Gosh, it was . . . I think it’s April. I should know the date, like, 22nd of 2013 or something like that. I was happy to be in San Francisco with my IBM friend, first 50th birthday. And I don’t know if you’ve ever experienced this or any of your listeners, but sometimes when you’re in business, there’s something that hits you over the head that is so strong you can’t ignore it. This was the event. Parse gets bought, I think on a Thursday, and I woke up that Friday morning and I see Parse acquired by Facebook for 85 million. And I’m like, “Holy crap.” And I called some friends of mine in Austin, I said, “You know a bit more about Parse, I looked at buying. What were their revenues in 2012?” And they were not a lot much.
So I did the math. Forty-two and a half X multiple for that purchase. And that’s why I went, “Ding, ding, ding. We need to do something like this. Not just for cloud-only, not just for Facebook because my customers are big enterprise customers like big insurance companies.” And we talked about rail and other things. “Those customers aren’t going to do this or store their data in someone else’s cloud especially Facebook’s. So who’s building functionality like this that can apply anywhere, meaning, behind their firewall be running any cloud, their private clouds, basically portable software, as opposed to tethered software to a cloud vendor?”
Andrew: You were looking into who’s doing this, you understood what you needed to do. You told our producer, Brian Benson, “I like to jump before I plan.” And it seems like the first thing you did was just scale down. First of all, talk about this planning versus doing approach that you’ve got, Eric.
Eric: Probably, I’m not risk-averse. And really, when you see something, so in this case, this is a . . . To me, this is pattern recognition. I grew up my whole career out of college working at IBM and technology companies and I saw things. I worked on mainframe systems for air traffic control. I worked on hospital systems. And one thing I learned in that time is old systems don’t die, they slowly fade away. So whatever software you provide better be portable enough to interact with these things. And so you marry that view of the world with what Parse was doing which is very innovative, and I’m saying, “Who’s providing this same type of functionality but that can work with this other part of the world which is going to be there for decades and decades?”
Eric: So the risk part of me said, “One, we were in trouble anyway.” The first half of 2012 was great, and the second half was absolute disaster because something had changed within IBM, within the stuff we were focusing on. It was not going to go any further than it was. So we were either just going to eke out an existence of a nice small little software company. We weren’t going to get what we did back in 2000, that was not going to happen. And me and the people that are part of this company weren’t going to just kind of limp along. So we had to make a hard decision to say, “We’re going to do this.” I at the time thought we could transform all of our consultants into software engineers. That was my misbelief. My CTO said, “Eric, we can’t just turn on a dime and say, let’s go do this.” So we had to retool the entire company.
Andrew: It looks like it took about three years. I was going through the archive. It did. Three years, 2015 suddenly your whole site changes. The backend . . . Here’s what the headline says, “The Backend Platform to Power Your Apps.” And that’s the focus. And where before, as I looked at the history of the company, I would see IBM’s logo really big, now it’s still on the site, but it’s tiny on the bottom sitting right next to the Rackspace logo.
Eric: Oh, yeah.
Andrew: That’s the difference in the transformation. You were profitable before you made this change, right?
Eric: We were. That was our best year ever, 2012.
Andrew: How hard is it to let people go when you’re profitable instead of saying, “I’m someone who sticks with things, I’ll just stick with it”?
Eric: Really hard. Extremely hard, especially since a lot of these people not only have they worked for me before, a lot of these are personal friends and still are. But also, one thing I knew is you can’t just bury your head in the sand and pretend everything is okay. You’ve got to make a move. And we had already tried, right? We had already been changing from this other part of IBM to mobile. That was failing. I had already saw our revenues declining. I already saw our billable hours decline. We were already knew that things were tough, and we kept trying to put a brave face on it.
And then once this event happened, I actually think was a blessing, obviously, for the company because we’re still here and thriving, but also for the people that were going through it. And while it was difficult at the time, I’ll tell you one thing that I may be . . . I’m pretty straight up. I may not always sugarcoat things, but I think people respect the fact that you deal with them straight up, you say, “This is going to happen. Let’s go find homes for all of you as best as I can, but we’ve got to ramp the company down and change who we are.”
Andrew: Wow. And there was no outside impetus, no outside advisor person who told you to do this. I know I need that.
Eric: No, there wasn’t . . .
Eric: There wasn’t at this point. It was me calling Aaron who’s one of the key people that stuck through this and him . . . And I’ll give Aaron a lot of credit. He goes, “Eric, you’re absolutely crazy.” And I said, “That’s probably true, but let’s research it.” And he took three months when I took 30 seconds to really kind of be convinced. But one thing I know about guys like Aaron and people in my business is, you give them a mission and you say, “Go do this.” They are way smarter than I am. So I think one of the things that I do well is team building and motivate and that vision changes, but you got to let them guide what we’re going to go do. And that’s really, I think one of the best things we did was let Aaron and engineering go figure out what this is, and that’s how we shifted away just from mobile into Internet of Things because he made really good decisions.
Andrew: Who is Zach Dell?
Eric: Who is Zach Dell?
Andrew: Zach Dell.
Eric: That is Michael Dell’s youngest son.
Andrew: Okay. And what was your relationship with him?
Eric: Zach had a startup called Thread. And it was a mobile app for, big surprise, dating. But his mobile app was focused on college students. So Zach, when he came up with this project, was a senior in high school. Very, very smart kid. I like Zach a lot. Very, very thoughtful. And his dad is kind of a pretty successful entrepreneur himself. But Zach did this on his own with his dad’s . . . Not really his helped but his dad’s blessing because he went and raised his own money.
And I get introduced to Zach through someone I knew at Capital Factory in Austin, Texas, a guy named Lander Coronado and who joined him and said, “Hey, we’re building this app. We’re looking for investors.” And so I kind of did a . . . I did a kind of . . . Not a bait and switch. That’s not the right way to put it. I invested in my own technology. I invested in Zach’s company, but I also convinced Zach and Lander to use my software as the backend, as the first really our very first customer.
Andrew: Got it. I was doing a little bit of research on him. I didn’t know anything about him. Apparently, he’s a guy who was playing with stock simulators by the time he was 12, reading books about Warren Buffett. You wouldn’t think he was connected to Michael Dell the way that he was aspiring to be someone like Michael Dell. And so you invested in his company and got him as a first customer. What did you do and what happened with that relationship?
Eric: So Thread was launched . . . Gosh, what year was that? You probably know better than I do. 2014?
Andrew: Let me scroll to the top of this. Yeah, July 2014.
Eric: You got it. So they . . . Mobile apps are hard to build. And one of the things that we did was take . . . Instead of building into what’s on your phone, put the logic up on a server like the cloud, like using our software, and then you can change it on the fly. So what happened was, I convinced them to use our software to write the backend. And my team actually wrote that software with Zach’s team. They did more of the frontend stuff. And then we launched when they launched it at UT and it was a great app. It was fun to do.
Andrew: But the business closed, he ended up going on to Landmark Sports Agency as an intern and right now today, it looks like he’s in private equity.
Eric: Is he? I didn’t know that.
Eric: He went to USC, correct?
Andrew: He went to . . . Let me see. University of Southern California. There it is.
Eric: He did. So what happened to that was that . . . Look, the dating app business is hard and I think a lot of it was Zach was . . . In all honesty, I think Zach was in high school entering college, to great way to . . . Not that Zach Dell probably would have any problem meeting women. He’s a good looking kid, and he’s Zach Dell. But, listen, if I’m going into college and I’ve got the resources to build a mobile app, I think it’s a pretty smart play. I think what he realized was, this is a lot harder than it looks and also what’s the upside of this market. And so eventually, Zach said, “It’s time for me to go pursue something else.” And he wanted to go to USC and do that.
Andrew: Yeah. I see, actually, he’s much younger than I would have expected. I take it back. He finished his time at the Blackstone Group. He’s now working at Sqwatt, which is building low-cost sanitary solutions for the developing world. Interesting.
Andrew: Yeah, right?
Eric: I’ll tell you one of the cool things about Zach because my son at the time . . . Gosh, he was seven or eight. That was my son’s very first investment. So my son put $60 into Thread. Now he lost it, but you know what, that’s what startup investing is.
Andrew: How did he put $60 in? He gave it to you and he got a piece of your piece?
Eric: Yeah. We worked it out because I had a friend who also did the same thing and we . . . Yeah. So credit . . .
Andrew: Is your son into this stuff, into investing and . . . ?
Eric: No. My son is into music. He’s into playing guitar and Led Zeppelin and rock and roll which is . . .
Andrew: Weren’t you into music as a kid?
Eric: I was. I just wasn’t very good at it.
Andrew: Apparently, I thought everyone who was into music as a kid got laid. You were not doing very well with girls from what I understand. Is this too embarrassing to bring up?
Eric: Where do you find this? No, that’s actually true. I was a huge nerd in high school.
Andrew: You were. Did that bother you?
Eric: Oh, very much so. Yeah.
Andrew: It did. Did it propel you? Did it make you work harder, fight harder, be a person who’s different? How?
Eric: Sure did because, look, I was a . . . And for no reason, I had a great home life, everything, just an insecure kid that was small and liked computers. You know, it’s your typical nerd kid story, right?
Eric: And I had lots of girls as friends but I was never the guy that was dateable. Right? And it was one of those things like not for me. And yeah, it totally propelled me. And then once you get into college, I think I just matured later than most.
Andrew: How did it propel you? I know for me it was, “I better work really hard because there’s no substance in me, nothing that’s going to attract anyone.” Obviously, I tried everything else. I even got the nice khakis with a nice blue shirt. Nothing worked. “If that’s not working, I better work really hard and then that will overcome everything else.” What was it for you?
Eric: I think it was just . . . I think like any kid, you just felt like you were different, right? And so, listen, back in when I went to school in the ’80s . . . You’ve watched “Stranger Things,” right?
Andrew: Just the first few episodes, yes. That’s what you’re saying. That’s the experience.
Eric: If you watch “Stranger Things,” I’m one of those kids that plays Dungeons and Dragons in the suburbs of Illinois opposed to Indiana. You’re not the kid that gets the girls.
Andrew: Got it.
Eric: What I did find a love for was computers and I found something there that got me excited and then went and got a degree in that. And then I have, and still to this day, my friends from high school were the guys that dug me out of that kind of insecurity and they made you real, right? And so there’s a drive there. So, yeah. I think you always carry that chip on your shoulder a little bit.
Andrew: All right. I’m going to talk about my . . . It’s kind of weird to go from that to talking about my second sponsor, but I will. My second sponsor is a company called HostGator. If you want to host any websites super simple, super inexpensive, one of the things that I recommend that people do is they find this piece of technology that people aren’t paying enough attention to and start covering it. If for no other reason than just so you understand it, start to get to know people in it, and then maybe you create a company in it.
I can imagine Internet of Things, got really hyped up and now it’s kind of losing its excitement. I would imagine that there’s somebody who’s saying, “I don’t know what to do. I want to research this whole Internet of Things thing and see where it can go and maybe I can find my piece of this business that maybe isn’t sexy like Eric’s business, didn’t touch on the thing that everyone’s going to talk about on TechCrunch tomorrow morning, or maybe it is.” And you end up creating the next August Lock.
I don’t know what it is. But imagine you go to HostGator, you install WordPress with one click, everything you read you blog about, anyone you’re curious about, instead of saying, “I’m kind of curious. What does Eric think?” you reach out to them and say, “Can I write about you from my po . . . ” Now, if you’re just starting out, no one’s going to pay attention, but if you’ve written a few posts on this that are interesting that you’ve covered stuff that’s interesting, you could basically start to reach out to anyone, ask a couple of questions, get it up on your site, get to know them, get to know what they think, learn about the industry, and then boom, an idea will come to you and you’ll say, “Why did nobody think of a self-zipping zipper?” “Alexa, zip my fly. Alexa, zip my jacket.” Boom, and it goes.
I don’t know what it’s going to be. Maybe it’s something like that. And then you jump on that, you create it, you’ve got to built-in audience of people who care who are going to help you build it, or worse things than just getting to know people, writing a site, and then making money from advertising for selling things by referring over to other sites.
Now, this is one idea that I randomly came up with as I’m talking to Eric. I suggest that if you’re listening to me, you probably have an idea, or maybe you’re someone who doesn’t recognize the ideas are swimming through your head. Now you could just let them swim through your head, you can write them down in a journal like a nice little boy and girl, or you could say, “I’m going to sign up for HostGator. And with HostGator, one-click install, I try it out, if it works, it feels good. Great. If it doesn’t, move on.” The best artists don’t paint and draw and doodle in their minds. They paint and draw and doodle on a canvas or paper. When you sign up for HostGator you get that canvas for your ideas.
Go over there to get started or bring your best website hosted on your worst hosting companies platform, hostgator.com/mixergy. They’ll give you the lowest price possible. They’ll tag you as a Mixergy customer, so they will always take care of you. And they got a bunch of features that they are dying for me to tell you about because they’re spending a lot of money on. I’m not going to tell you about them. I’m going to tell you go to hostgator.com/mixergy, read about them. I’m here to set you on the right path. Let them give you all the features you need to get there. Eric, next customer then. I love that. That was one of my best reads.
Eric: I’m going to be honest with you, I’m already going to patent a self-zipping zipper now. I’ll tell my team to start working on it. That’s brilliant. That’s an innovative thing that may add value. I have trouble . . . Actually it’s the button flies that give me more trouble.
Andrew: Yeah. No. I haven’t come up with that. You then moved on and you got other customers. What’s DanCenter?
Eric: Oh my gosh, that’s . . . So that’s my first enterprise customer out in Copenhagen, Denmark.
Eric: DanCenter, this one was significant because we have . . . It’s funny, I’ve always felt like, “This is the one. We’ve made it.” And it was. We were competing head to head with IBM’s product Worklight. So we beat IBM head to head at one of their customers of all places Copenhagen which is right around the corner from Austin, Texas.
Andrew: And basically what they do is . . . I’m on their site right now. Man, I never thought that I’d want to go for vacation in Denmark, but I’m looking at this one house, Danish North Sea right on the sea. Basically, it’s like Airbnb of . . . Am I right?
Eric: You got it.
Andrew: For these three places, Denmark, Norway, Sweden, oh, and Germany, four. That’s what it is. How did that one go? How did that project go?
Eric: That went real well. It was . . . We could have picked an easier one. They were using some really old IBM technology called an AS400 if you ever know what that . . . And we had to integrate with this legacy stuff which is what we’ve always said that we would build. So, out of the gate, we had to go do that. And so DanCenter, basically, is Airbnb or HomeAway if it were founded in 1948.
Andrew: Meaning the houses are 1948 or the technology is?
Eric: The company was founded in 1948.
Andrew: Oh, wow. They’ve been doing it that long?
Eric: Yeah. They’ve been around forever. So they were founded . . . So they’ve been doing this in the Nordics for way longer than we’ve been doing around in the U.S. So you can imagine their technology was out of date, right? Not 1948 out of date, but let’s say 1985 out of date, right? And so when you have existing stuff, you can’t just throw it away and start over. What was happening to them is they started seeing HomeAway and Airbnb eating their lunch, especially Airbnb eating their lunch because of the mobile app. And they . . . So we went from dating to now vacation houses in the Nordics, but same problem.
Andrew: And that one, the business worked, they became an ongoing client, you started taking on other projects. Now I get obsessed with like what it looked like. I’m seeing a version of their site right now from 2004. I got to Google translate that. I’ll do it later. But yeah, look at this. I could have even as far back as 2004 gotten a place by the beach in some country that I can’t even . . . I think this is in Germany by the water. Wow, this is . . . I had no idea this existed. Okay. So you’re starting to get on your way. At some point, though, you switch away from mobile to Internet of Things. Why?
Eric: Because mobile is just . . . Mobile device is just another thing and it really, again, it . . . We are a technology-based company. And Aaron and his team that he had built, and he’s still in Raleigh at this point, he had moved to Austin, started researching this thing called . . . I don’t want to get too nerdy. But MQTT was a protocol for Internet of Things. And he researched back in the early 2014, 2015. And he built it into our product. And I remember calling him saying, “Aaron, why are we doing this? We’re a mobile backend company.” He goes, “Eric, because Internet of Things is the next big thing and a mobile device is just another thing. This is going to propel us into what’s next.” And I said, “Okay.” You got to trust your engineers and trust your big brains in the company.
Andrew: I was looking him up and I saw him on the leadership team of your website, and then when I went back . . . By the way, he’s gotten cooler over the years.
Eric: Yeah. I feel like . . . Also grayer. So I feel like I’m a part of that. But yeah, he . . .
Andrew: Does he still rock in that long hair?
Eric: He still is. He still is.
Andrew: Yeah. He used to have shorter hair, like glasses that was supposed to be cool, but you can see he was a CTO and now he looks like a rock star.
Eric: Yeah, he is a rock star. He is the best I’ve ever seen on getting on stage or in front of a customer and explaining technology but not do it in a condescending way. He has a very good talent for that.
Andrew: And the thing that I noticed when I was looking him up on your site over the years was you also in addition to leadership team, you had advisory board. I heard from your conversation with our producer that the advisory board also helped shaped the fact that you were switching directions.
Eric: Yes. Yeah.
Andrew: One of them was Brett who you mentioned from Bazaarvoice.
Eric: Brett Hurt had been through this with one of his first business called Coremetrics, which ironically sold to IBM. And I didn’t even realize this, but he was one of the ones that advised me as we are transforming from service as a software to say, “Do it quick. Get everyone in the same location. Get rid of your multiple offices and bring them all to Austin.” So he was the one that influenced me to do exactly that. And then the person who’s on my real board today who’s a veteran, and you may bring him up as Jan Lindelow who ran Tivoli for IBM.
Andrew: I did see him on the board. I actually didn’t know anything about him. Corporate advisor, former CEO of Tivoli.
Eric: Yeah. So he worked for a man named Louis Gerstner at IBM. And that’s when . . . So I worked for IBM and not when Jan was there, but to me, that’s like 18 levels above . . . That’s above the clouds. Those are people I’ve never interacted with. And Jan got introduced to me by a friend of mine in Austin and he’s been with us for a long time. And he is my mentor, he is the grand wizard who basically tells me when I’m screwing up and forces me to listen. And I’m stubborn, but he’s beat me in the submission, and he’s very much helped us along this path.
Andrew: That’s what I was getting at earlier. I feel like it’s hard to see things and to make big decisions on your own. You need somebody to hit you in the face before the economy or client base or your income statement does. And I can see that he is that person. I hired a finance guy from great background, I hired him from Toptal who all he does is he just goes to my income statement and he says, “Andrew, you don’t see it because you’re too much of an optimist. This thing you’re trying to optimistically see the future of and yes it could,” but you just pointed. Yes.
Eric: You just nailed it, because, again, to do what we do, you have to be an optimist, right?
Eric: And you have to be stubborn, but you also have to listen and you need advisors around you to help you with these things that can see the forest through the trees because you’re too close to it.
Andrew: Right. Right. He just said, “You’re clearly optimistic. It’s been months and I’m going to keep pushing you for months to see it and we’re not going to have any hard feelings if you don’t see it, but we need to get you to see it.” So let’s talk about . . . We’ve talked a lot about successes. 2014 was not an easy year. From what I understand, this is when you were trying to raise money, you decided you weren’t going to do it the traditional way, which . . . Why not?
Eric: Because I wasn’t good at it. I tried.
Andrew: You did. What happened when you tried to raise money?
Eric: So there’s a couple of things. I had success in the past, but that past success wasn’t a company that needed to raise any capital. Right?
Eric: So just because you’ve had success, if you haven’t made those relationships and haven’t made other people money, it’s not that easy just to go hit the . . . I’m going to go raise money button, right?
Andrew: Even if you are investing alongside other investors?
Eric: Yeah. Yeah. No, that’s a great point.
Andrew: Not enough. Okay.
Eric: And I assumed it would be and I was wrong. And also, you got to understand, I was known as something else. I was known as a services business guy. That is not a business you’ve typically invest in because there’s not enough upside. And so for right or for wrong and in a lot of ways, the word around Austin was, “Yeah, I’ll listen to Eric’s deal, but this is a services play trying to be a software play.” And in some ways they were right.
So, also, we were way earlier in this market than I ever imagined, in fact, still are. I constantly am thinking that we are five years further than we should be or the industry is. And when I really look back, wow, it’s amazing that we’re still standing. Just you have to be a street fighter to get through maybe being a visionary or visionary company, but the revenue isn’t there and the customers aren’t buying your stuff yet because the market isn’t there.
Andrew: And that does make it harder. And so what did you do to raise money? I’m kind of looking at your Crunchbase page to get a sense of where it was. It’s not easy to figure out. Well, there’s Chad Barrett, I guess he’s one of the first people.
Eric: Chad is one of a good friend of mine. He’s out of AQUILA Commercial in Austin. Yes. So Chad is an early investor. That’s correct.
Andrew: Okay. And there are a couple of people who came. Chad and I guess Corsa Ventures came in with a convertible note. But you started to bring in some money, and then somebody said, “Hey, maybe you shouldn’t be the guy running this company.” And at the time, you were about to lose your CTO. Am I right?
Eric: Yeah, yeah, yeah.
Andrew: What was going on? Let’s talk a little bit about the challenges.
Eric: Great question. So, one, I’ve talked a lot about Aaron. And Aaron, if he were here, he did make more risk-averse than I am, but that explains almost anybody. And so Aaron moved his family and his small children to Austin, Texas, and suffered through this grueling period of time where we had to transform the company and deal with little or no revenue.
And then I’m raising money, basically, from going to people’s houses and bars and back of the envelope saying, “Hey, I need more cash.” And so I went to everybody that I knew, that knew me, and mostly we raised money because they believed in me and what we were doing. More me, in all honesty. I leveraged my personal friendships to say, “Let’s keep this thing going.” And I would . . . People that know me know that I would rather lose all of my money than someone else’s. And it may be weird, but to me, that’s just karma.
Aaron was right beside me through all this. And I think what was happening was Aaron is a highly marketable individual, and I’m sure he was getting calls from Google and Microsoft and others. And I think was 2014 or so. Yeah. I was worried that he was going to go. And he was honest with me. He’s like, “Look, if things don’t turn around, I’m out.” And I was happy that he was that honest with me. And at that time, that’s when I said, “I better back Aaron up, we get some other technical talent in here.” And so I brought a guy named Steve Manweiler.
Andrew: And so . . . But who was the person who was saying that you maybe shouldn’t be in there at the time?
Eric: Gosh, I don’t remember this.
Andrew: Okay. I thought maybe it was somebody was trying to push you out too and otherwise I wouldn’t have asked.
Eric: Wait a bit. Yeah, yeah, yeah. Well, that was over money stuff. There is. I won’t name the gentleman. But there was a person that was promising to put money in, and yeah, he spent time wooing my CTO and my COO at the time and actually convincing some of my venture partners, “Hey, look, I can take this thing over and Eric can be right by my side.” But eventually it was pretty obvious to me, now Eric can be out. Yeah. I forgot about . . . Those are the dark days. Yeah, yeah, yeah. You’re right.
Andrew: You were bullied as a kid. Did you feel the same sense of bullying right now when this went on?
Eric: Wow. Yes, very much so.
Andrew: You did.
Andrew: And how did it influence the way that you acted?
Eric: It’s funny because I remember going through this, and part of it was, look, fear begets fear, right? So, if someone was injecting this negative energy into my team and to me and there was a part of me that was ready to say, “You know what? Maybe he’s right. Maybe I’ve had enough. Maybe someone else would be better at this.” And it was almost kind of like an easy button to say, “Oh, maybe I can just kind of get out of this and see if he can make something of it and get the stress off my plate.” Right?
So, yeah, there was a point in time where I started doubting myself. And then once my wife actually who I learned to trust implicitly, sniffed bad and a couple of other people said, “This is not a good guy.” And once I figured that out, I flipped . . . I make pretty quick decisions once I’m inspired. I went to a dinner meeting where this individual having a secret meeting with my team and basically pulled the plug on the whole deal. I said, “We’re not going to go with your plan. I appreciate you taking the time, but we’re out.” And so I basically grabbed my company back from this moment.
Andrew: That does kind of feel like when . . . Is it McFly from “Back to the Future” finally says, “I got to punch that bully,” and he . . . I’m the new person.
Eric: And he’s pretty big dude. I didn’t punch anyone, but verbally I said, “You’re out,” in front of my folks. And I think that was something that probably kept Aaron around and kept the team around and said, “Okay. Eric is back in on this,” because they probably sensed that I was starting to get defeated. Yeah, that’s a great story. Yeah. I’ve almost conveniently forgot that piece.
Andrew: We talked a little bit about the rail industry. How did you discover . . . I don’t want to act like that’s your only industry. Anyone who goes to your website can see that you’re working with lots of different types of companies. But that is a big part of your business. How did you discover them? How did that become a big part of your business?
Eric: That’s a great story. And it’s . . . I’ll tell you, when you’re early in a market, you knock on a lot of doors, right? It’s like, “Hey, look, buy my stuff. Hey, this stuff is great. Look, let’s do a bunch of nerdy demos and get you really excited.” And we happened to get a meeting up at this rail customer up in Fort Worth and they brought us in and we thought we’re going to go in there and sell them software something called Positive Train Control and that is a government mandate to modernize railway for speeds on rails if there are icy, things like that.
Little did we know that the big companies have already built all this. So we go in there and do a two-hour presentation and at the . . . This is a . . . At the end of the presentation, this customer says, “You know what? You guys are interesting. I appreciate your time today.” They open up curtains above their command center where they built all of this. It’s like a NASA center.
Eric: And they go, “Guys, we built all this already. But, you know, we’ll call you.” And I remember driving back from Fort Worth down to Austin with my CTO Aaron, and I said, “They’re never going to call us.” And I’m an optimist. I go, “That was a nice meeting, but they’re never going to call us.” And then 30 days later, they call us to come back up, “We have something to talk to you about.” And that’s how we get in on the railroad crossing stuff.
Andrew: Why? Why did they call you after you were pitching them on something they already built?
Eric: They said something pretty interesting. They said, “You know why you guys are back?” And I said, “I have no idea.” He goes, “Because you didn’t try to sell us. You really seemed like smart guys that know what you’re doing.” And then they laid out, “Here’s our problem. We’ve got some big partners today that aren’t innovating and we feel like your software would work in this use case for railroad crossings.” And that’s how it started.
Andrew: Wow. I don’t want to harp too much on revenue. Why don’t we close out with . . . You’ve had a dramatic growth in revenue. Can you say what last year’s revenue was and what this year’s is?
Eric: Last year was around 1 million revenue and this year, knock on wood, we put some stuff to close, but we’re targeting 5 million.
Andrew: Dramatic increase because?
Eric: Rail has started to expand. Now we’ve gone from one rail customer to four of the top seven. This is . . . It takes time, so you land and expand. You start with pilots and then you roll out more and more software, so it takes time, but we’ve seeded all that. And now we’re seeing expansion in our big ones. And we’ve got some other commercial customers like Rheem. Rheem has been a great customer of ours, and they really signed a deal earlier this year, and they’ve been rolling out quickly. So we’re seeing revenue growth now, and we’re seeing customers buying more after buying the initial product.
Andrew: How’s it feel now?
Eric: It feels good. It feels . . . Well, I’m with my VP of Sales here in California. I was just having this discussion with him from the airport. It feels good but it always feels like that carrot is right there, just can’t quite touch it yet, but it’s right in front of you. It keeps . . .
Andrew: What is the carrot that’s drawing you now? What’s the thing that feel so close?
Eric: Well, so, to me, it’s like, I feel like the market has got this pent up energy where people are talking more about it. A great example is we made a big bet on edge computing a few years ago. And I remember Aaron and I saying, “If we’re wrong on this, we’re out, we’re done.” And then all of a sudden everyone is talking about edge everything, everywhere. And that means different things to different people, but I know we’re in the right space, I know we’ve got the right technology. We have yet to lose a deal head to head to anybody on technology. And you lose for other reasons. Marketing and companies are bigger and budgets go, or people move, but we have not lost the head to head deal on tech.
Andrew: I like the name of the company that you picked. It allows you to keep growing into it and never feels like, “Well, why are they called ibmpartner.com?” No. ClearBlade, it just fits.
Andrew: All right. Congratulations. It has been years in the making. What do you do for fun?
Eric: Well, I go to my kid’s concerts. So my 14-year-old just enter high school, so one of the things I love to do is see him do things on stage that I could never do. I grew up with guitars, friends. I attempted to be a singer, and I was bad at it. But here’s the . . . So here’s a shy kid that originally went to middle school and went through the same stuff I did, but dug out in six months as opposed to six years. So I love doing that. My youngest one plays hockey, so I go to that. And then I’ve got a lot of really good friends and we entertain a lot and spend a lot of time with even the folks at the company. We have a really good culture there. So as much as they may not want to see the CEO all the time, they come over to the backyard and listen to music and drink some margaritas on the weekends, typically.
Andrew: Sounds like fun. Anyone who wants to go check out your site should go to clearblade.com. I want to thank the two sponsors who made this interview happen. The first will help you hire phenomenal developers. It’s called Toptal. The second, if you’re hosting a website, go check out hostgator.com. And then finally, I’ve been doing this really big push to bring on some past entrepreneurs to teach on Mixergy. If you want to see, one of my favorites is this guy, Chris Ronzio, the founder of Trainual. He’s all about how to systemize your company. I said, “Your software is about systemizing. Your consulting company used to help companies systemized. Will you do a course for us on how to systemize?” He said, “Sure.”
I watched it so many times. I love it because he’s talking to you about how to systemize and organize your company. Even if you’re just curious about what our new products look like, go to mixergy.com/more and we’ve got a nice little clip there to give you a sense of what we’re working on. If you just want to follow my journey, it’s a good way to see the progress of the work that we’re doing here, mixergy.com/more. And I’m grateful to Dan and Chris for putting all that together. Eric, thanks so much.
Eric: Andrew, thanks. It’s been a pleasure.
Andrew: Yes. Such a good conversation.
Eric: It is. You asked great questions and you do your homework. It’s wonderful.
Andrew: I do. Yeah. Thanks. And bye.