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Here’s the program.
Hey everyone it’s Andrew Warner I’m the founder of mixergy.com home of the ambitious upstart, and today I’ve got with me a guest who was so popular the first time he was here on Mixergy that I invited him back. The guest is Jason Cohen, he’s the founder of Smart Bear Software the makers of the peer code review tool Code Collaborator, and the first time he was on here we talked about how he launched the company, bootstrapped it, built it up, how he sold it, and that’s the interview that was just so great that I said ‘how do I find a way to get this guy back on here so can have more enthusiastic viewers of Mixergy?’ He also blogs about startups at asmartbear.com and he’s a mentor at Capital Factory which is an early-stage accelorator program for tech start-ups. Here’s a stat that will explain to you about why I asked him here to interview him about how to increase conversions. 50% of the people who get a demo of his software (at Smart Bear Software) end up buying. That’s 50%, one out of two people who get the demo end up being customers. Did I get that right?
Interviewee: Yeah, that’s right.
Andrew: Wow. So I want to know how you do that and more importantly I want to know how people in our audience can do that. I though maybe we could start with why – why trial instead of just getting people to buy right away.
Interviewee: Well nowadays I think people are trained that they’re allowed to have a trial. They’re trained that they’re allowed to try something for free and see if they want it before they plunk down their credit card and I appreciate that with stuff like the Itunes store that’s not true, you don’t get to try it. I also think that people don’t like that. So if you don’t have a free trial you’re just throwing up the barrier. Now, there’s an argument that the people who open their wallet anyway are going to be the higher quality people that you want your spend time. Their pain will be more acute, they probably have the money and so on. I agree with that, but for example, the software that we’re selling is collaborative – it takes more than one person for it to be useful. So imagine someone at a company like Adobe, who’s one of our customers. Imagine them going through the Adobe purchasing process for one or two seats of our software before they can see if they wanted it. That’s never ever going to happen. It’s really hard to go through that. So I would say the more difficult your software is to install or if your customers are at a place where purchasing is hard you can’t possibly expect them to do that before they even know what it is or they’ve just seen screenshots. On the other hand something that’s kind of popular now is you run the credit card first and then you say ‘but we have a, whatever, 30 day money-back guarantee’. Again, if you were inundated with people using your stuff, and trialing your stuff, and you can’t even keep up with the tech support and most people are full of it and aren’t really going to buy and are wasting your time, then I get that technique. So Three Second Signals is exactly in that category. They have such good lead-generation, in-bound stuff, they don’t need to muck around with free trials and besides there’s Freemium style as well which is kind of the same thing. But that’s not he situation most start-up founders are in. Most of them ‘Oh my God, someone came to my website and downloaded. Sweet! I hope someone does that tomorrow too’. And if that’s the case, which it usually is, I don’t see how you can throw up barriers like, ‘oh and you throw in a credit card’…
Well now you’re going from one to zero onto most things, and that’s just not acceptable. You know, you can’t stem the tide of potential users with that. So it’s a pretty significant barrier. Especially if your company’s been—even if you’re just an average person to whip out your credit card before you’re even allowed to see what it is.
Andrew: I see, alright, and we’ll actually later on in the conversation going to be talking about feedback, how to get it, and the importance of it, how to do it right, and I could understand that if you’re giving away your software, you can get better feedback that will improve the paid version of the software too. So if we’re going to offer a trial, what’s the best way to present it?
Interviewee: Well, I mean, of course it depends on the type of customer, so for example, if you have a web app, and you’re selling to end users, then the simplest possible thing is definitely the right thing. No credit cards, log in using Facebook or something, ‘cause everyone’s got Facebook now and so forth. You know, nothing new, nothing they haven’t seen before. Grease it in. On the other hand, if it’s marketing to the other end of the extreme, we’re selling five and six figure software packages to larger companies, logging in with Facebook is maybe even a deterrent, because maybe they don’t have the—or they don’t want to, certainly the company doesn’t have it. That’s all crap. And so, instead…of course making it easy to download it, if you have to download it and try it is obviously key, but I would say the thing is to keep the line of communication is open after that trial has started. Because what happens is people download, or they log in, and if you’re LUCKY, 5% of them ever come back and do anything: talk to tech support, god forbid actually purchase the thing. But like the vast, vast majority will never, ever talk to you again. And to me, that’s kind of the low-hanging-fruit part of this equation. It’s what is going on to where this person said they found you, they clicked on your ad word, or they saw…[gap in audio?]…article or they looked at your homepage; that was kind of cool. They looked at your screenshots; that’s sort of interesting. They looked at your pricing page; that’s in my realm. Then they went to the download, you know “should I download it or should I sign in or do I want to?” They went through that process, and they looked at your tool, and, you know, they used it or didn’t use it, and then they left. That’s a lot of stuff for them to do. That’s a lot of investment made in you to then leave. And to me, that’s really interesting, and to me, that’s where a lot of low-hanging fruit is. And getting that conversion rate from—the conversion rate of just them talking to you at all—from 5% to 10%, or to 15%, that can really transform your bottom-line revenue because you can capture the reasons they left. Because the reasons are everything from “I couldn’t get it installed,” “I could install but I couldn’t figure out how to do the thing I was trying to do,” “I signed up but there were some menu items, I didn’t know what it was so I left,” or “I did try to use it, but it…I didn’t realize that it did what I wanted because I didn’t find it,” or maybe it all works out and the budget’s just not right, or whatever. It could be many things, of course. Those are just some obvious examples, but you will never know. So how are you supposed to fix it? And in lee-generation (?) like trying to get people to hit your website in the first place, it’s now ingrained in us. We got to do A/B tests, we need measurability, metrics, and we have to surface that all the time, and we need to constantly drive those forward and etcetera. Of course. But at this stage, the stage where that worked, they came in, and now you’re trying to get them to…you’re just trying to figure out what’s going on here. I feel like we lack that completely and that people don’t talk about it that much. So you have people talking about user experience, user interfaces, trying not to confuse people, and that’s fine…what are you doing for the number of people who are coming in right now and abandoning, even though they showed all this interest. I think that’s where some juicy fruit is.
Andrew: I see, you’re saying that a lot of the thought today is in how to get people to the site and how to get people to take some kind of action, to try the software in this case, but once they’ve tried it, we’re saying to the user “okay, you’re probably going to love it so much that you’re going to come back here and buy it from me.” And that’s where we’re wasting…that’s what’s wasting a lot of opportunity.
Interviewee: I think so. I mean, generally speaking, if you spend more money on ad words, if you spend more money on newsletters, you can get a number of people to click through and another number of people to download your stuff, and you should optimize that, etcetera. Okay, we know that. But I know a lot of companies who get hundreds of downloads a day and one purchase a week. In other words, it’s clear that that part of trying to close somebody or trying to sell someone is extremely leaky.
from minute 10 to minute 15
Interviewee: Clear that part of trying to close somebody or trying to sell someone is extremely leaky and traditionally it is difficult to find out why because [xx] because you can see that this was clicked more with getting to the download form it is relatively easy because there is web analytic tools. So it is like we have gotten a lot smarter about the external metrics and the on site metrics getting people driven to a download page but between that download or web app trial and PayPal I think there we don’t have this wide array of tools and techniques and people talking about it. by the way I don’t think you need a lot of tools. I have a lot of suggestions on how to do this which of course I will talk about and almost none of them have to do with any kind of magical tool but I feel that we are neglecting that and now that we are good on the front and relatively good and relatively intelligent about lead generation on the front end, I think it is time to focus on this sort of trial to purchase conversion part of the process.
Andrew: Okay and I see Mike in the audience asking how do you get the users to answer all those questions? We are going to get to that. Alright so let us talk about then what is the first thing. We have gotten them to try what do we do now or actually you are going to tell us what to do before they even get to try right?
Interviewee: Well there are a lot of different things. So since someone just asked how do you get them to talk to you at all. That is a great question so we will start there. so one thing you know that they are looking at your [xx] at some point and then they leave. Let us take the example of a downloaded application. A lot of the people have a help menu and in it there is something that says feedback…and it opens an email client or it is a dialogue box that goes to some kind of contact us webpage and nobody uses that because it is buried in [xx]. you know you see feedback and it is just not what you do when you try software that you don’t like, you don’t go to the feedback link. It is not what happens. You just leave right or most people do. it really doesn’t invites you back. I know one founder you just changed back from feedback to bitch at us. It literally says bitch at us. Just the fact that you are obviously a human being and trying to make a little more obvious that you want the feedback helped but that is still not good enough because it is still buried somewhere right. You need to prompt them. So one of the very typical things that you do with downloaded software trials is you have [xx] screens. Typically you are nagging to say you only have 12 days left and you only have 50 uses left…did you know I am about to watermark whatever you made and stuff like that…the nag screen. So my suggestion is this. Nag screens are fine but you know everyone kind of expects to being nagged to buy the software but they are just starting out and especially if they didn’t want it. the nag is not enough. They are not buying it yet. They really are going to buy probably once that time expires and you know that because if you have done applications like this with large enough scales you know that when you create a new release whatever the trial period is like 2 weeks that is when you get another lump of sales. It is the first day and the last day of the trial that you get your lump of sales. You know they are not really buying in the middle that much. So I say can you use that nag screen as an excuse to get that feedback. So there is a guy and his name is Chris and I forget his last name. I talked to him at South by South West and he used this technique. He put when you quit the application, when you exit, a nag screen pops up and says hey what did you think? Now the person might like that or they might not. They might have quit because they want to uninstall it and it says what do you think and there is a big box and say okay I think it some email but it might be only a web post to a form…I don’t know whatever. He went from knowing nothing about people who were trialing…essentially nothing what they were doing to he got 10 to 20 responses a day just because he nagged them and asked proactively. In your nag screen probably not at the beginning of the app right because they don’t know yet but probably when they quit and that is smarter not just something in the help menu and when you do it you got to act like you mean it not just we want to hear from you…snore. That is what everybody says. The Microsoft says that too but I don’t believe those Vista ads do you? You know actually make it look like you want to hear about it and probe them for it and it works.
Andrew: Okay. Let us talk about before hand and I know that you are a big component of getting people on a mailing list that in order to get people to even take your trial you should get their email address and get them to sign up for the mailing list. Have you done tests to see if…
Andrew: Have you done tests to see if requesting the email address is enough of a barrier that people leave, without a doubt, without even trying?
Interviewee: That is a terrific question. So, obviously, if you could collect information from the user before they download, like their email, their name, their company, their phone number and their date of birth and all that crap, clearly the more information you have, you can make the better decisions about marketing. You can reach out to them later and so on, but everyone argues you can’t do that because it’s a barrier. Someone sees a form, and they go, oh my God and they leave. That’s what everyone says. So, at Smart Bear we tried it. We did an A/B test on our download page just like you’re supposed to do, and we made a little form in the form hat, email address, name, company and phone number. They were all optional. All of them were optional. We didn’t say whether they were optional or not. They just were, OK? So, really if you wanted to put garbage or nothing, you actually can. And, of course, we A/B tested this with no form at all blocking you getting to the download page. There was zero change in number of downloads, zero. Now, to be fair, again you have to consider our audience is a B to B audience, right? These are people at a company and also this is a pain. This isn’t a pleasure thing, like this isn’t–I don’t know. I’m trying to get a game on the iPhone where they just want to play the game. They’re not trying to solve a particular pain. They’re not trying to save money. This isn’t a business proposition. So, No. 1, it’s smarter if it’s a business proposition. No. 2, it’s corporate. And so, I could absolutely believe that in other contexts it might be different. So, obviously, the real recommendation is you should, at least, A/B test it. You have no excuse not to test it. Also, how about test just email and that’s it? Just give yourself a hook, right? Or another one that I find incredibly useful is you put a field in there that says how did you hear about us? Now, I’m sure putting this in because we’re talking conversions and this isn’t about conversions, but still we did that, too. We put in an optional “fill in the blank”. Now drop down, “how did you hear about us”, and it was fantastically useful. People filled it in 90 percent of the time. It was incredible. So, that’s not about conversions, but still you have to do that to inform your marketing of the choices. But, anyway, we found people just did it. And so, of course, once you have that, you can ask them “how’s it going” and blah blah blah and revive things. Oh, I forgot about the trial which is all of the time, like half the time people just say, “Yeah, I downloaded and I forgot to get back to it”, and you can just prompt them to get back to it. It’s very easy. Now, another thing is you put a little check box that says, “Do you want to be in our newsletter? Our newsletter has tips and articles and crap, and, of course, you can unsubscribe and we’re really nice people and we won’t send you spam and all the usual crap that people say about newsletters.” And, again, we put this box on there, and I forget the exact number. 70 or 80 percent of people say, “You can send me the newsletter” which I find ridiculous that that large number of people want the damn newsletter. I guess people are accustomed to being able to unsubscribe or block stuff if they don’t want it and I don’t know. I honestly cannot tell you exactly why the rate is so high, but let me tell you why that’s interesting because you hear the usual social media arguments, your newsletters, because you’re staying on top of mine. You know all that already. That’s old news. So, here’s something that I’m sure will surprise you. It sure surprised the crap out of me. So, the Smart Bear newsletter has, I think, 40,000 people subscribed to it, all opted in like this. I assumed that almost all of them are customers because why the hell else would you want a newsletter that comes out every six weeks talking about peer code review. My God, like, you can’t possibly be that interested in it unless you’re a customer, right? It’s got product releases, meet the people that work at Smart Bear. Why would you want to know this if you’re not a customer? OK. So, we did this thing where we called it “five for five”. When we came out with Version 5.0 a year ago, we sent out a message through our newsletter that says: You can buy five seats of our product code collaborator for five bucks. One week only but tell your friends. There’s no limit. I think it was a limit, like, of one per group or something, so people wouldn’t buy a hundred of them, right? So, I figured, you know, maybe we’d get a couple of people forwarding this to friends at other companies or something. 250 people off the newsletter bought it, five for five. And we did a little follow-up to find out who the hell they were. They were all people who read the newsletter normally. Well, aren’t you customers? Well, no, we trialed it and, you know, there was one reason or another that they didn’t buy it. Maybe, they didn’t have a budget. Maybe, they just couldn’t get off their ass. Maybe, the project they were going to do it for stopped.
Interviewee: It is not that they didn’t buy it maybe they didn’t have the budget maybe they just couldn’t get off their ass, maybe the project they were going to do it for stopped…whatever the reason was and when they saw this offer appear in the newsletter they thought oh I can certainly…$25 for anything. I will go ahead and buy it so we have it or some of them said I could have an extended trial period. In other words and infinite time period as long as only 5 people were using it. like it was an excuse to get and infinitely long trial period. Anyway the bottom line is all these people read the newsletter that we are not paying customers and now are paying customers and here is the brilliant part because they are paying customers we do have all of their contact information and permission to talk to them. Like they have to pay us so clearly we have their contact information right. It is totally normal for people of software you bought to send you an email twice a year and just say how is it going right? So with complete permission and there is nothing under handed or bad about it at all, we got a ton of people whom you could call trial users or I don’t know what you want to call it but we got this incredible reaction because we had a newsletter of people on the download form. That is what I am trying to tell you and obviously that is just one example of what you can use a newsletter for but clearly dripping the newsletter into people who haven’t bought. Besides an offer I mean there are plenty of other things like maybe a new release maybe there is a new feature that makes them go that sounds cool and maybe I will try that again. Clearly there are a lot of things that you can do in a newsletter to you know capitalize the attention against stuff you have probably heard already but that one…an interesting offer that gets people to become customers so that you can then talk to but again going back to the caller question how do you get them to talk to you, you know that worked great. So you know the newsletter really makes a big difference and for us did impact on downloads.
Andrew: OK do you think by the way that you can do that on everything? Does that have to be…and if it didn’t impact the downloads of your software could you use it for…how about this; your blog posts are incredibly long and detailed. They are like full on reports. Instead of calling them a blog post could you call some of these longer ones reports and request people’s email address in order to show it to them?
Interviewee: Oh yeah and people do write. They will make state of the Twitter report or they will make a…I had 10 tips on how to increase software conversions or something right and they would say look this is completely free, sign up for the newsletter, and you got it. You can unsubscribe it or whatever but yeah people use that as an excuse to get email. A lot of…not a lot but some bloggers do this even with just content that is not even a special report. They just say that there is a blog and there s a newsletter and you might want to subscribe it to both or you might want to subscribe to one. The newsletter comes out monthly and it has got a couple of things. If that is the level of engagement that you want with me, you should sign up for the newsletter. If you want to hear from me 5 times a week, you should subscribe to the blog and I guess if you want to hear from me 5 times a day you should subscribe to my Twitter feeds or Tumbler or something. I think people already use those things differently. Like clearly a newsletter shouldn’t be too frequent unless you really are a news outlet or something but yeah as a tool to allow people engage with you and the amount of time that they choose, yeah it is clearly good.
Andrew: I was also amazed by photo Jojo that way that they really are blog b but they got my email address instead of getting me to sign up on my Google Reader or trying to remember to get back because they emphasis the email registration. They emphasize it over every other option. It is just really featured there. Alright now I understand that you are sending those 5 for 5 and you are getting them incredible price, $1 per feed of your software and 5 bucks is nothing. I understand that that would work. What you must do with them on the newsletter to increase conversions, to let them to stay in touch, to get them to give you feedback?
Interviewee: Well lots of stuff so what you are doing if you are talking to people who haven’t bought newsletter. The question is what you could do to get them back off their ass and try it again or think about it again or reconsider it or whatever it was that they didn’t buy before. Of course you can also ask them why they didn’t but I am not sure that would work because the stats are so cold at that point as opposed to the previous example that it was in the product where they just experienced with me but here are some things. Any time you have a minor software release, you can talk about the cool new thing that you can now do because that might prompt somebody to go oh that is sounds really neat and maybe I should give it another look. Second thing is a lot of time software has features which are not prominent or obvious if you are a casual user or first time user but they are there and you know perhaps you should reconsider and put those things more foremost but sometimes you just cannot like…
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Interviewee: A lot of times software has features which are not prominent but obvious if you are a casual user or the first time user but they are there and you know perhaps you should reconsider and put those things most foremost but sometimes you just cannot. Like sometimes it just doesn’t make sense to throw that at people’s face but the fact that you can do it. so a great example of Photoshop for example is the cool thing about Photoshop is not that there are layers or that there is this tool, it is that if you use a combination of do this and this pick this filter and then change that and mask the other thing…look at the weird effect that you can make. Like that is kind of part of the cool part of Photoshop. You cannot just make that thing prominent like on the front page you get in the Photoshop it doesn’t make sense but that is part of the fun and interesting thing of Photoshop that gets people to say I want to learn this tool so that I can do that. So in that case that is something that you can put in the newsletter. Look at this tip, not just the tip like you know but something cool like look at this neat effect we are going to tell you how to do this with this tool, don’t you want to be able to do this. So that there is a way you can highlight something really neat and not obvious that makes people go I didn’t realize you could do that…maybe I should look. Another one is a truly compelling customer success story. so not just kind of like a cold kind of case study and not just like a one line testimonial. It was great and saved us a lot of money. Like a good story of you know…they made us outsource this stuff and that really sucked but then we started using this tool and because of these three specific things this happened. It is really neat and I totally recommend that if you have this problem with remote developers then maybe give this a look. Maybe something like that or maybe couple of paragraphs that could…maybe somebody could identify with that especially when it is told from the customer’s point of view and it is not clearly a marketing sell that could maybe encourage people. Another thing that is kind of fun is you can highlight blog posts elsewhere on the internet in your newsletter and that of course gives you kudos with that blog or you can maybe talk about which is a source of free marketing. So that is kind of a nice side effect but also again you know people might be swayed more by someone else’s words than your words and so by doing that maybe you could get people to think about on your topics. So for us we don’t reference bloggers who are talking about our tool that is too sales direct, we find someone who talked about [xx] and how it was really useful where they had this neat technique or they want to talk specifically about how they did it with Ruby and Cucumber tests or something and we highlight that and so the reader might say oh I use ruby and cucumber test. I am going to read this and again since it is not our voice maybe it is more compelling. Again that is a sideways way to sort of develop your social media you know presence a little and connections a little and convince people. The coupon thing like 5 for 5 or something like that I guess that is kind of a [xx] the last thing that….
Andrew: Hang on a second. I guess the video catch up. Well it is catching up on your side. I will save it. Balsamic Val is in the audience. One of the things that I love about Balsamic is they give away their software to people who then end up writing about it and because they got this frees software they get excited about it and they write reviews. I think they consider the software much more than the average Amazon reviewer or the average reviewer in general. So looks like the video caught up and [xx]. sorry go ahead.
Interviewee: Oh yeah we love Balsamic. Yeah so the last thing is just when you are going to make a sales call in a city, you can use that to reach out to a lot of people to say look we are going to be here. If you are going to be here let us know and we will swing by even if it is for 15 minutes just say hello let’s do it. a lot of times when we do that we get a huge response. So we can really make the most of the trip because obviously trips are expensive. They are very valuable but they are expensive so if you can cram a lot of visits and this is a way to develop that and that is pretty heavy.
Andrew: I have heard you say that you should also call up customers and get feedback from them. Have you called up customers in your business?
Interviewee: All the time.
Andrew: How do you do it? you just find somebody who bought, you get their phone number, you give them a ring, and you do what?
Interviewee: Yeah so I mean I usually start with emails because at least our customers usually don’t like the phone. You have to pick the media that you think that is appropriate for your customer’s right. We sell to software developers so obviously they don’t want to talk on the phone and really when I say call up…I don’t like talking on the phone either actually so it is kind of a metaphor for talking to them. It is actually pretty easy. You know imagine that whatever thing you bought…whenever you buy software from a small company you kind of know that. You know it is a small company. If you get an email that says we are actually trying to figure out how to make product better. We have these ideas on a road map, does it sound like that it is going to be useful to you, what things bother you and so on. Same kind of stuff that you expect to get —
Mixergy-Conversion-Jason-Cohen Audio File
Interviewee: Does this sound like it would be useful to you? What things bother you and so on? The same kind of stuff that you would expect to get out of get satisfaction or use your voice but you can use…there’s nothing wrong with those things, of course. But prompting someone to do it, that’s never SPAM. It’s never SPAM for someone really honestly trying to solicit your feedback. And so the people who like to talk are going to talk back. It’s just kind of that simple. It’s…you don’t really need a big excuse. You just say, “We’re trying to collect stuff.” If you want to try to make it a little more exclusive or try to make a…build a story around it, you could say, “We’re trying to build a customer advisory group and so we’re trying to find certain customers who are really interested in giving us feedback. And there’s no commitment. There’s no time commitment or don’t worry. You can say yes and if you feel like never talking to us again, that’s fine. But we would like to invite you into it and what it means is every blank week, we’ll have a webinar or we’ll solicit feedback from you. Sometimes we have surveys.” I don’t know, whatever it is that you want to do. And, “Would you like to be part of our customer advisory group?” Now that sounds pretty neat and exclusive and again, you can say there’s no commitment but the fact that they’re on that list, which maybe you could even publish which is kind of cool – it gives them some reputation plus-plus, is sort of as psychological reason to actually give you feedback and contribute that way.
Andrew: Do you do that…do you know of a company that does that well?
Interviewee: There are…I know a lot of people who have customer advisory boards which is even more exclusive where they literally fly people in to sit around a table and talk. Now that’s very expensive. It’s very valuable. But obviously if you’re a bootstrap start-up, that’s not the kind of thing you’re going to do. What I would say is that that’s what you’re trying to curate out of things like get satisfaction user voice and they’re good but there’s also noise and it’s kind of hard to distinguish a lot of the noise or people who are talking but how much skin do they really have in it versus people with a little…with one level of sort of commitment to actually helping you make a better product.
Andrew: I see somebody in the audience loves that idea but he’s asking, “How do you keep these vocal customers from making noise about issues that don’t really matter?”
Interviewee: So you can’t…you can’t mute someone. You can’t muzzle somebody, right. So a few ways to deal with it. The 37 Singles way is to say, “Don’t worry. We’re not listening to anything you say anyway.” They exclusively say on the forms, “We’re not listening so you might as well stop talking,” I don’t like that way. That’s a way but it’s pretty arrogant. So one thing to do for sure is to acknowledge what they’re saying, right. Everybody wants to be heard and understood. That’s basic human psychology. So the first thing is to say, “I hear where you’re coming from. I see what you’re saying. I see what…why you said that.” Or maybe you don’t and so that’s one way to start engaging is instead of going immediately to that’s wrong or here’s why we can’t do it to dig with them. “Well why are…why do you want to do that? Why do you suppose that’s the right way? Are there any other ways we could potentially do that?” In other words, stuff that you would do internally in product development, try to do it with them. In other words, try to have them discover for themselves, kind of like the Socratic Method. Walk them through the Socratic Method of can this really work or let’s say the reason that you can’t do it is it would ruin other people’s experience. So can you tell it to them that way? Instead of just saying, “No, we can’t because of other people.” Can you say, “Well look, that’s really an interesting idea but we have this problem. Maybe you can help, right. Maybe you can help,” because see, there’s our users that are like this. And if they say, “Well those people are dumb,” you can say, “Well maybe but they’re our customers so help us out here, right. Maybe they are dumb. Maybe you’re right. But help us out here because we have to keep them happy and we can’t re-train them right.” So that’s kind of the (0:34:09.6 INAUDIBLE). “We totally understand where you’re coming from but we also have this. So what do you think we should do?” In other words, can you throw it back at them to delay the inevitable having to say, “We can’t do it.” I’m not saying that works all the time but I’ve done that a lot and now I’m kind of lucky because our customers are software developers. And so if we get into the nitty-gritty of here’s why this is difficult to implement. Here’s why this is risky. Here’s why this is hard to test. Here’s why this doesn’t work if you scale to this. I’m lucky in that our customers can kind of understand that, right. And so obviously the less savvy your customers are in that, the harder it is for them to wrap their head around it but at least you’re engaging with them in a way that respects them and is trying to still include them. And ultimately you can’t muzzle them but at least you’re sort of misdirecting them or at least making them think about your issues. So they don’t feel like —
Interviewee: So they don’t feel like you’re just dismissing them. That’s really the problem. They’re like, those guys don’t listen. That’s a failure that you can get around.
Andrew: You talked about in one of your blog posts about user voice and get satisfaction as a way of getting feedback. What else are you using to get feedback? What have you seen other people use well?
Interviewee: Well, these forums are a way that a lot of people have used. Again, that’s kind of like–they’re all very, very similar. What’s the line between get satisfaction in traditional forums? One services things, one don’t. They’re both useful in different ways. So, I would say that actual talking one-on-one to people typically by email. It’s not public, but actually that is the highest fidelity way to get feedback and you can clarify things. And also, just the fact that they are willing to interact with you at that level of sort of committing time and energy means that their opinion’s, at least, a little bit more interesting than anonymous postings on public forums or random bitching on Twitter that happens to include your name somewhere so you found it. So, although that’s not very exciting or social or viral or anything like that, I still think that’s actually where a lot of the interesting stuff happens. And I’ll say one other thing about that. Tech support is your front line of talking to customers, many of which are trialing, many of which haven’t bought yet. And that is a huge place to get feedback. The role of tech support is not just to get people unstuck or have people reboot their machine or whatever. It’s also product development. It’s figuring out: what a minute. They have this problem, but what’s the real reason they have this problem. The real reason is because our interface is confusing. The real reason is because the word we use for that in the [?] bar didn’t connect with them. The real reason is because they’re actually trying to do something different, and should we ignore that or should we, maybe, do that different thing, too? In other words, tech support is informing this kind of feedback, or it is a conduit for this kind of feedback. It’s really important, and I think people again neglect that. They think that tech support is just get the ticket closed and get them out of there, but I think it can be much more valuable than that.
Andrew: I see Smart Bear Software has a phone number right on the home page, and I’m seeing a few companies now put that phone number and become accessible. It seems like a very expensive addition to a website, to have a phone number and support it all day long. How effective has it been, and how expensive has it been?
Interviewee: It’s not expensive at all because most people don’t want to use the phone anyway. So, you put it on your website. You automatically get more credibility. You look like a real company, right? And for the people who want to use the phone, you’re set apart of most companies because most of them don’t want to talk to you. The fact is that most people don’t call, and yeah, it’s true sometimes they call and sometimes they just want to talk for an hour about nothing. And you sort of feel bad about hanging up on them, and it wastes a lot of time. That’s true. But kind of the way I look at it is you can always take it down, like you’re afraid that you’re going to be inundated with phone calls from people. You should be so lucky to be inundated with phone calls, right? You’ll learn a lot from whatever the hell’s going on with that. Now, I know if you’re Dell you can’t do that and you do but you have to have a whole system, but you’re not that. So, what exactly are you worried about, that you’ll be talking to customers, potential customers all day long and be able to engage them in whatever you want to talk about? And that’s bad? You want to not do that?
Andrew: At what point did you add that on to the site?
Interviewee: Immediate. We always had a phone.
Andrew: You had the phone number up even when it was pretty much you, alone?
Interviewee: Yes. But here’s the thing. It doesn’t have to be all around the clock. It says we answer it 9 to 5, 9 to 4 or something Central time. And by the way, sometimes we don’t anyway, and it goes to voice mail. So, just because you have a phone number doesn’t mean you have to answer it at 3 a.m. on a Sunday in your time zone. That’s not true.
Andrew: I see. What’s the craziest call that you got?
Interviewee: I guess the bad ones are someone doesn’t know what we do and is really frustrated because they’re trying to do something completely different. We don’t do it at all, and we’re telling them on the phone. We’re not the [?] you’re looking for. You don’t want to use this software for your problem, and they refuse to hear that. No, no, no, you don’t understand. I’m trying to do this, like no, you’re not listening to me. This isn’t a word processor, you know. It’s just bizarre because you’re just talking past each other, and you cannot convince them that they shouldn’t be talking to you. But they found a human, so God damn it, they’re not going to let go.
Interviewee: …they shouldn’t be talking to you but they found a human so God damnit they’re not going to let go!
Andrew: You know what – because I talk to so many entrepeneurs and so many businesses when I put my phone number online andyone who wants to reach those businesses ends up thinking that I’m somehow associated with them and they call me to talk to them. I’ll give you a great example – back in the early days I had my phone number up and I did an event with the YellowBot – they’re an online yellow-pages company. Anyone who wanted to be in yellowbot.com or had their small business taken out of yellowbot.com couldn’t find a number on their website so they called me. They blamed me for not being able to solve their problems. ‘Why would your number be associated with them if your not connected with them?’ ‘I don’t know, I didn’t even realize my number was’.
Interviewee: That’s funny, but the bottom line is, if you start getting lots of weird phone-calls you just take it down. It’s not that hard, you just stop, right? Get an 800 number so you can redirect it or turn it off if you want, and still have your local number – or nothing. Or use Google Voice. There’s lots and lots of ways of having a kind of throwaway number that you can disconnect if you don’t want to do that anymore.
Andrew: Balsamic Val is saying that ‘I agree 100% that tech-support is often the first sometimes only time customers talk to us. Don’t tell the founder of the company but I like to talk to customers. I can get lonely working from home at an MISV’. I get it, I hate talking on the phone. I’ve got a number from Grasshopper and one of the good things about it is it helps route calls so hopefully you don’t end up with as many calls as if it was just a Google Voice number or a cellphone number. I’m still reluctant to talk. I wish I could talk to my mother by email!
Let me ask you about what you’re doing at Capital Factory. What’s it mean to be a mentor at Capital Factory?
Interviewee: Capital Factory is a seed-stage seed money and mentorship for start-ups. It’s asimilar to Y Combinator and Techstars. In fact at the seed panel at south by south west the representatives were us from Capital Factory and Y Combinator and Techstars. The idea is you get 20 grand in investment money. You get a whole bunch of services that are not crap. A lawyer does all your paper-work, a designer can do your website stuff, you free office space for a while, you get server hosting for a while. Real stuff, real valuable stuff. The big thing is there’s a ten week summer program with 20 mentors like myself. You work one on one with them as well as group meetings and we bring in speakers. There’s a whole pile of stuff where you get to directly interact with people who have done this before. One of the interesting aspects that differentiates this program from some of the other ones is that to become a mentor you have to have created a company yourself, grown it to a millions of dollars, probably sold it (that’s not a requirement, it can still be going but most of them have gone through that process as well. Really dealing with people who have done this before). [Skype connection breaks up here]
Andrew:It’s kind of funky what’s going on with Skype today. It was coming in slow, and then suddenly everything that we’d missed came in at once and it was like you were at double speed. You were just talking who was involved in it as a mentor, and then you moved on to the next bit and I missed that.
Interviewee: Ok sorry. A mentor has to be somebody who started their own company and made millions of dollars at it, probably sold it – not neccessarily so they’ve been there before – I have an MBA so I’m going to tell you how to do business. Also the mentors put up all the money, so we’re literally personally invested in all the companys. Again that gives us an extra… I wouldn’t say it makes us work harder than other people, like everybody wants everyone to succeed of course but it shows we’re really in this. So last year was our first year, was really successful. Some of the companys got funded after the 10 week program which is really fast. This year we have another group of five companys – really excited about them.
Interviewee: … of five companies really excited about them. And some programs starting up in a couple of weeks, but we’ve already made the final selection so this year that’s over. But next year we’re probably going to time our selection process to match Text Star’s [?] and [xx] culminator [?] meaning like the early April time-frame, I believe. Maybe, don’t quote me on that, though. But we want to try to get all the timings aligned.
Andrew: OK. How are you different than on then those two other programs?
Interviewee: Well that’s part of the using our own money and the one on one direct interactions and Amrad Austin, I mean, one of the things is that each of them are in a particular place and don’t accept people from other places. And so just the fact that we’re in Austin is a thing. Also we have a pretty broad range of what kinds of companies we’ll accept. So in other words it’s not true that every company needs to be a potentially $500 million idea. Some of the companies that come in should be funded and should go for something like that. Some of them should never take on funding and should bootstrap. I say bootstrap because taking on a seed amount of money is still bootstrapping, but it should not take on any funding. And don’t need massive exits like that. And they should do that and either become cash machines or sell out for what I think is still really big but small from a [xx] point of view type of exit.
Not all the programs have that view; a lot of them want to go big. Also we’re not … we’re a little bit interested in what’s hot, so one of the companies we selected has to do with mobile geo location stuff, because that’s super hot, but that’s not the only criteria. In fact that’s probably the only one that’s in a so-called super hot space that everyone’s talking about. Because we’re, again maybe because we’re less interested in raising money all the time and more interested in just having really quality companies. Another interesting thing just to throw it out there and I wouldn’t necessarily say this is differentiates us actually but interesting fact, generally we’re more interested in the team than the original idea. We’re more interested in the team that we believe can execute stuff and who is introspective, who’ll go out and experiment and say, look we tried this and we failed, so now we’re going to try this. That’s way better than someone who says we’re sure this is going to work; right? So the ability to learn, like, the demonstrable ability to learn and of course, just really good at what they do. You know, innate talent is more important to us than the idea. The ideas can change. In fact, from last year several of the ideas changed quite a bit.
In fact, Spare Foot, the company that not only got funded but is just going absolutely like gangbusters right now. Their idea changed pretty drastically from the beginning of the itinerary program to the end in a good way, because it was all based on not only mentor feedback but them probing things … probing the market and discovering what was … what had traction. We looked at the —
Andrew: What’s the big advice that you have to repeat over and over to entrepreneurs who you’re mentoring?
Interviewee: Well, they are … you hear it nowadays, fail fast. That’s … you hear it so many times it’s boring; right? That’s true but in practice people still really don’t want to let go of their pet ideas. Similarly they don’t want to even go see if their idea is right. So in other words you hear, “Get outside the building” and “You need validated learning” and “You need to talk everyone first” and all of that. You hear that a million times, you read any blogs about start ups, you’ve heard this 800 times, you’re board; right? Nevertheless almost none of the hundreds of applications to Capital Factory this year. Almost none of them said, and I have 10 people who said, they’ll give me money if I build this. Almost zero. So on the one hand I feel like this [xx] has been beat to death; I’m almost board of repeating it. On the other hand I don’t see people doing it. So I guess, got to repeat it again.
Andrew: Interesting. OK. Actually then how do you convince them because when it’s easy when we’re listening to you say this to accept that it’s true. It’s easy when we’re hearing somebody do an interview on Mick Sergei [sp] who says that he fought forever for this one idea and he probably should have let it go six months ago. It’s easy to say, I could see he should’ve really given it up. But when we’re going through it and it’s our own product and it’s our own mission, I think it’s a lot harder. I think then we start to say, well, if only I just tweak it a little bit or maybe you don’t understand what I’m trying to do. Or maybe it’s something else.
Interviewee: Yes, that’s a good point. So here’s what I would say …
Interviewee: The reason that you don’t want to go get the data is: No. 1, you’re afraid of being wrong. And No. 2, it’s the hard, yucky thing that isn’t why you want to go in business anyway. When I say you, I’m thinking you’re probably a technical entrepreneur, you’re the person that’s going to write the code. What you’d rather do all day long is stay in the compiler, write really cool code, maybe talk to customers about code. But that’s probably more fun for you than ad words. It’s definitely more fun for you than accounting. And so, because writing code is what you like and you’re good at and what gets you excited and what you want to work on until two in the morning, then you just automatically do that, even if that’s not best for the business. And it’s not only that it’s not best for it, but also you’re increasing your risk. And so, here’s an analogy that I think if you’re a programmer you can really, like me, you can really get behind. So, if you’re doing a big project, like it’s going to be a six month project, what do you do with all the risky, unknown, undefined stuff? You tackle it first. You don’t spend the first three or four months doing all the stuff that you already know how to do, it’s just a matter of work, you know, and then leave all the really crazy unknown crap for the end. Of course not. The first thing to do to reduce overall project risk is to take the worst undefined, scariest crap you know the least about, has the most warts and you tackle it first so that you can plan the rest of the stuff around it. Right? We all know that. So, to me this is what’s going on with you. Just take one step back and it’s exactly the same thing with your business. And now, the stuff that you know you can do is all the software, all of it. You’re going to a pretty decent program. You know it’s going to work. It’s going to have few enough bugs. You can do that. We all know that. That’s not where the risk is. The risk is that no one is ever going to find out about it. The risk is that no one’s actually going to give you money for it. That’s where the risk in your business is, not whether you can write code. You can. So, what you’re doing is you’re making the same mistake. You’re doing all the easy unrisky stuff at first, and then you’re still going to have to do that other stuff. You’re still going to have to find people to buy it. You’re still going to have to do that. But now, you put it at the end, and now you’re going to waste effort, obviously. So, you’re in the heat of the moment, and you don’t want to do it. No. 1, that’s the macro reason why it’s wrong. So, I liked to hear the argument against that. And No. 2, you quit your day job. You’re burning your savings. You’re putting your reputation on the line. Other people are looking at you to see whether you’re going to succeed. You’re doing all of this stuff. You’re taking on all this stress. You’re working harder than you ever have, all without knowing whether anyone will ever even give you money. That just doesn’t make sense. The only reason why you’re doing this is because you’re afraid of it which is totally valid. It’s totally valid, but I think even if you’re in the moment how can you argue again. So, that’s my argument.
Andrew: How can you do that? How can you find out whether someone will actually give you money for a product before it’s even built? Take Patrick McKenzie, for example. He’s the guy who created bingocardcreator.com. Now, he’s got a new site. I forget what it’s called, but it’s about helping you make appointments or helping the people make appointments with you and keep their appointments. How’s he going to find someone who’s going to pay him for it, or who’s going to tell him that they’d be willing to pay for it? Isn’t it easier to do something and then see if anyone comes and then figure out how to get people to come? No.
Interviewee: Well, of course, it’s easier to build something first. It’s just the wrong choice. It’s, like, it’s easier for me to not brush my teeth every day, but that doesn’t make it smart just because it’s easier. So, here’s my argument. If you can’t find 10 people who say they’ll buy it – by the way, they don’t have to actually buy it. I didn’t say they have to give you credit cards or purchase orders. Just claim the lie. It’s OK if they don’t actually. But if you can’t even find 10 people who say that they would buy such a thing, then let’s say you did build it. Well, how are you going to find the first 10 customers? Isn’t it the same problem? I mean, the only difference now is you have screens that work instead of screen shots that are mocked up. That’s the only difference except you’ve wasted all of this effort if it’s not true that they want it. So, if you can’t describe it to your target audience in 30 seconds and have them go, “That sounds pretty interesting. Yeah. Let me know when you build that.” If you can’t do that, what makes you think you can do it once it’s built. You’re still going to be at a cocktail party and you’re still going to give your 30 second pitch, and you won’t have your demo handy. And they still need to say, “That sounds really useful” or else you don’t have a product, right? So, there’s no reason why you can’t do 30 second pitches of your idea to people or, maybe, mock-ups or whatever. They’re various prototype things that don’t involve
from minute 55 to hour 1
Interviewee: Second pictures of your idea to people or maybe [xx] or whatever you know there is various like prototype things that are involved in writing the thing. If you can [xx] seconds in such a way that people are interested or you cannot find those people like you say well I don’t know how to find 10 people. OK I get it. if you don’t know how to find 10 people today OK you also have a website that no one has heard of. Now how are you going to find 10 people? It is the same problem and again you might as well address that risk which is the risky part first.
Andrew: Somebody here in the chat, Michael [xx], in the chat put up a website and it is called appointment…oh come on chat — appointmentreminder.org. I see at the very least would you suggest that he calls up the dentist who he hopefully uses and say if I build this is this something that you guys want to pay for or call up the hair salons who might want to use this and ask them that question. Maybe the answer that he will hear back is no we already have a system in place and we just don’t like to use it and that is an interesting answer or maybe they will say absolutely but it has to also interact with the Mac because we all are into Mac. So whatever their issue might be.
Andrew: Sorry a lot of people on the chat room are also asking about single founders. You are a single found right?
Interviewee: That is true.
Andrew: So what is your take today after having gone through yourself on single founders?
Interviewee: In the future, I probably wouldn’t do it again but I also on a different place in my life now where I have a kid and other things where you know I want to share a lot of those burdens regardless. I think you hear things like [xx] more likely for 2 people to succeed. I mean there is no doubt about that. On the plus side there is more people working and it really is double the work with double the people if it has like two super committed founders and there is infinite amount to do in a startup so it is not [xx] there is like completely parallel things to do and that is really valuable. Then help each other when times are bad really helps but every time you hear a story like that you hear another story about [xx] breaking up and [xx] when there is a lot of money involved, it really…that is still bad but a lot of times it is not. A lot of times company dissolves because there were three people and one of them leaves and it is like a 2 legged stool that doesn’t stand and so the company fails because you had a partner. Absolutely happens at least as much time as you hear the success stories where it was a valuable habit. I think the bottom or at the end of the day I don’t think that one or the other is automatically better and I think it is more of a personal choice. For me, I know that yes I am a control freak. No I don’t necessarily work well with others so for me the single founder thing was kind of OK. At the same time, I had mentors that I could lean on so that is pretty nice. So if I didn’t have that then what? So that can change it. so I can say you know somewhat look within and finally I think if you can get a diverse set of founders that is like the person who you really do trust and believe nose deep in the compiler that is pretty powerful [xx] before [xx]. I was part of a three legged stool. There was me as a software guy, Jerry whose idea it was and the salesman and marketing guy, and Michael the double lead guy because his was the hardware. We invented software and it worked really well. It is not like the life was strictly drawn. I went on a ton of sales call and I loved it. it is not that you have titles and you are drawing curtains. Not at all but just that there is someone who may wake up in the morning till they go to sleep at night, they are thinking about a certain set of things at least. It was extremely productive and I am pretty sure that the thing would not have worked had it not been for that. So especially when there is expertise like that in other words two software developer founders versus three software developer founders, you know three is better I suppose but you are not giving yourself a whole lot of more advantage there whereas if you are picking up other’s skills that is super powerful.
Andrew: Brennan in the audience is asking will capital factory accept single founders because he says a lot of similar programs don’t want that?
Interviewee: That is right Paul Graham is very careful about not accepting single founders. We do not have that problem. Single founders are fine. So here are the criteria though. We don’t want there to be a hole in the team in which the hole is so big that we have to fill it before you can even start the 10-week program because then it is a hiring problem and you know hiring is you cannot just decide that you are going to hire a really good person and the next…
Interviewee: You can’t just decide you’re going to hire a really good person in the next two weeks. That’s not going to hire good people, right? You’re don’t get to do that. In fact, one of the companies we picked is a single founder, so there is proof for you that, yes we accept that. It has to be someone who’s an omnibus [sp], or maybe it’s a situation where you don’t need someone to do some of these other things. For example, maybe a product; well a lot of products in my opinion do not require a sales force. Therefore, you don’t need a sales person, that’s not a member of a team we care about. Of course, there are products that do require someone getting in the car and making sales calls, so if we were to accept someone like that, if it were just a single founder and someone who could build stuff and had to be on the road, for example, that wouldn’t work if you didn’t have that team.
Andrew: Alright, well…
Interviewee: It’s harder for a single founder to have all those attributes at once, but again we did it at this year, so there you go.
Andrew: Alright, and that website is just capitolfactory.com, right?
Andrew: And of course if anyone wants to read your blog acemartfair.com [sp?], acemartfair.com [sp?], and thank you for being here Jason. Thanks for doing the interview with me.
Interviewee: It was a bunch of fun, thanks.
Andrew: I hope this won’t be the last one. Guys thanks for watching, this is Andrew. I’ll see you on the website.
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