Valuing creativity over profit

There is one proven method I’ve noticed from interviewing successful founders. It’s a process that starts with understanding a customer’s pain and then addressing that pain.

That’s what today’s guest did. He started a consulting company, found a problem his clients had and then found a way to solve it on a repeatable basis.

Boom—he launched his company and it took off.

But then the internet imploded.

We’re going to hear the story of how he found his customer’s pain, how the market screwed him over, and how he recovered from it.

Alistair Croll is the cofounder of Coradiant, which provided web performance management.

Alistair Croll

Alistair Croll

Coradiant

Alistair Croll is the cofounder of Coradiant, which provided web performance management.

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Full Interview Transcript

Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy, where you probably know I’ve done over a thousand interviews. The reason you know it is because I kind of show off about that number a lot.

Well, the reason that I’ve done all these interviews, the reason I started is because I wanted to understand what allowed successful companies to grow. Where do they even find their ideas? How did they know what to build? How’d they know how to sell it? I wanted to figure it out. What I discovered was there is no single method, but there is one method I’ve noticed a lot in my interviews. That’s a process that starts by understanding a customer pain and then addressing that pain.

Well, one way to do that is to do consulting, to actually do the work for your potential customers, see the pain firsthand by doing the work and experiencing it yourself and then creating a product that solves it. That’s what today’s guest did. He started a consulting company, found a problem that his clients had, found a way to solve it on a repeatable basis and then boom, he launched his company and it took off. Then boom, the internet imploded and he had to do something to figure things out.

It worked out well for him. He sold his company. We’re going to hear the story of how he launched it, how he found his customers’ pain, how the market kind of screwed him over and how he recovered from it. And his name is Alistair Croll. He is the founder of Coradiant. They provide web application performance management products. I say provide, but he sold the company and we’ll find out about the sale.

Here’s the way he helped me understand what his business did. He said look, web analytics shows you what people did. His company showed you whether what you want them to do was even possible. Like, for example, if you want to improve your conversion rate by 10%, his company would have told you maybe that’s possible because your site just keeps crashing, because your page isn’t even loading. That’s what his software did.

He’s also the author of “Lean Analytics: How to Use Data to Build a Better Startup Faster.” He was the creator of Year One Labs, a Montreal accelerator that he ran for a year. So we’ve got a lot to talk about here. He’s also a guy who’s curious and a fan of Mixergy. He wants to understand how I’ve done these interviews without going nuts. I’ll talk to him about some of my process if we have time during this interview.

This whole thing is sponsored by two great companies. The first will do your books right and you really do need to have your numbers done right. It’s called Bench. I’ll tell you more about why you need to go to Bench.co/Mixergy later. The second will help you hire a great developer and Alistair will tell you that great developers will make or break your business. That company is called Toptal. I’ll tell you more about them later.

First, Alistair, big question, you know the way I work here–you sold your business, how much did you sell it for?

Alistair: I think the official number was never disclosed, but reports said it was between $120 million and $160 million and that’s a pretty accurate range.

Andrew: Fair to say that after that you bought yourself a few boats, a plane, a mansion, something?

Alistair: No. We’d be sitting on my yacht having this interview if that were the case. As I will explain, we had a lot of ups and downs and some very supportive investors, but essentially we started the company. I think it’s important to note that you said the word Alistair in that introduction a lot, which I appreciate, but every one of these things, I was a cofounder or I was part of an amazing team. So all of these things have been team efforts.

Andrew: You know what? I thought you were going to correct the way I pronounce your name for a second. I jumped to the wrong conclusion. I always say the word founder because you’re right, a lot of times people are cofounders and I feel like that’s the safest one. Even a cofounder is a founder. You’re right. There were a lot of other people. I read the Wikipedia entry about the way you built up the business. Let’s understand about this reboot and the whole thing.

Why don’t we go back and get a sense of your mindset? You’re a guy who’s always been a creator. In fact, you told our producer about this napkin dental floss thing you did in school.

Alistair: Napkin dental floss sounds weird. Yeah. Ever since I was a little kid, I’ve always loved to like build things that other people could take and could create a new life around them. When I was very young, I think my first ever business lesson, my dad was studying medicine in Florida and the education system there was bad at the time.

My parents are originally British, so they sort of cashed in his life savings and sent me off to boarding school for a couple of years, which I loved. But I was an 8-year old kid on the playground in England, the quirky shorts and the silly little tie. I probably have pictures somewhere. I used to start games. One of the ones that really took off is we would all make parachutes. We’d use like string or dental floss and some napkins and a stone or whatever.

The game was to see who could make their parachute stay aloft the longest. There’s a natural tension. The heavier the parachute, the further you could throw it. The lighter it is, the more it stays up. It took off to the point that I was like a [inaudible 00:04:50], an 8-year old kid, but everyone in the school was playing this game, even the older kids. I thought that was my first lesson, “Wow, this is really neat that a good idea that’s easily accessible and has sort of simple play around it can take off.”

And then one of the kids in the school, I think his dad was like a captain in the Saudi Air Force or something crazy like that. He came back after spring break with this like engineered silk parachute and it was perfect and of course nobody could touch him. I remember that was my second business lesson was if you have a good enough idea, someone will commercialize it to the point that it becomes an uncompetitive environment.

So I remember at age eight thinking there’s something important about this idea of build a thing that catches on, but then recognize that at some point it will be commercialized.

Andrew: Kind of what happened. Let’s get into the business side of your story. Before the internet was big, people used to connect with each other using computers, they used to use bulletin boards to connect with each other, right? You actually created one of those bulletin boards. What did you create and how did it work? This was the beginning of the whole thing.

Alistair: I had an Apple II and a 300 baud modem. That’s pretty much a telegraph these days. My cofounder for Coradiant, Eric Packman, who’s one of my best friends, he and I built this BBS and people would dial in and leave comments and emails. I would stay up, fuel on Doritos and Coca-Cola for an entire weekend, changing the way the thing worked. I was fascinated by how a change to the editor or change to how it worked would produce different behaviors in the users.

So I actually had a bunch of users who would complain, “Why do you have Mary on? She’s awful. Why do you have Bob on? He’s a jerk.” So I made a change where each person could say who they followed. Then you’d get on and see only posts from those people. Occasionally, Mary would be mentioned in a post by Bill. You’d go, “Who’s this Mary person?” So you’d add her. I remember writing some code that printed out on my old dot matrix printer to see who were the sort of super nodes.

So 10 years later, I’d be Zuckerberg. But just changing the way that behaved changed the nature of discourse. There’s something amazing–this is what drives a lot of creators–there’s something amazing about building something and then imbuing it with actual people to see where it goes. Any product or service is a combination of what you’ve made plus the sort of emergent behavior of the market on that thing.

Andrew: You never tried to commercialize it, charge people to get access, none of that?

Alistair: No. I was 12 at the time. We never did. In fact, Eric set up–I think Eric is still my friend because I told him about the internet when we were 16, which shows you how old I am–but Eric set up a small ISP at his place. To this day, he does amazing things with technology. So it paid off 100-fold.

As a quick note, my company is called Solve for Interesting. By company, I mean me. There’s a reason for that, which is there’s a famous author named Herbert Simon, an economist from the ’70s and he had this great line. Someone said, “We live in an information economy.” He said, “No, you’re wrong. Economies are driven by whatever is scarce.” What’s scarce is often the means of production. So you have the steam age or the industrial age, the land. So you have the agrarian age.

I think Simon said information is abundant. What is scarce is that which information consumes, which is your attention. So we live in an attention economy. You look at everything from recent electoral events to the popularity and value of Facebook, where the average American spends 60 minutes a day of their life connecting to Facebook.

So I’ve always found that, when we live in an attention economy, what do we pay attention to? We pay attention to that which is interesting. So all of my life, the things that have worked for me have been not solving for risk or for fame or for profit, but solving for interesting.

Andrew: I also noticed this about you. One of the reasons why I liked to know about what people did before they started this big business that I’m interviewing them about is because I think it gives me a sense of what they value as human beings. You seem to, in these two stories, show that you value creation more than money. I asked you whether you made money with this BBS and you said, basically what, you were 14, 12 years old at the time? I forget the exact number. You said, “I was too young.”

To me, I was never too young to make money. Maybe it’s because I grew up in New York. Maybe that’s because of who I am. I’m sensing that one of the reasons you didn’t end up on the yacht is because you weren’t so money hungry with this business we’re about to talk about and instead, you wanted to create something. I could see your eyes light up when we talk about the creation of it, not in the same way I see other people’s eyes light up about how they could charge an extra 10%. Am I right? Am I playing amateur psychologist?

Alistair: I think that–thanks for the therapy session–you’re right. I’ve always seen profit, customer growth, whatever, as an outgrowth of the creative act, that if you build the right thing and people are passionate about it, it will grow itself, right? In the Lean Startup, Eric talks about the three engines of growth–stickiness, which is keep people coming back, virality, which is getting them to tell their friends, or revenue, which is make money and use the money to hire a sales force.

I’ve always thought the first two are more noble somehow because they’re more inherent, whereas if you make some money and spend it on promoting other products or services, it doesn’t seem quite as genuine. I don’t know if that’s a–that’s a probably naïve and I’m Canadian, so it’s probably socialist.

Andrew: But look at what you’ve built. You did make it. I would have thought by now you’d be–let’s go on with the story–I would have thought by now you’d be filthy rich.

Alistair: That would be nice.

Andrew: I would like to be filthier richer.

Alistair: So there is a term–I’m going to swear, so you can bleep it out.

Andrew: No, go for it.

Alistair: Everyone has heard the term fuck you money.

Andrew: Yes.

Alistair: I’d like to have–and I think I have ask me nicely money–just like I get to choose what I work on. I still have to work. I’m working 20 hours a day sometimes, and I’m always launching new things, but I’m doing them and the results happen. They just happen downstream. I started a conference called Bitnorth–

Andrew: Sorry. Let me stick with the story. I’m going to get to Bitnorth too. There’s so much I want to pack in. But I want to continue with this story just to give people a sense of how you got here, how you got to Bitnorth. You mentioned Eric a little while ago. My follow up to that would have been you and Eric ended up starting a consulting company, right?

Alistair: Right.

Andrew: 1997.

Alistair: Called Networkshop.

Andrew: Called what?

Alistair: Networkshop.

Andrew: Networkshop. That’s where you guys started doing some consulting.

Alistair: Right.

Andrew: What kind of consulting work did you guys take on?

Alistair: I think our first day was pulling cables under a desk for someone. It was just like anybody that needed–that’s why the name was so vague–networking and workshop. It was anybody that needed help with something.

Andrew: Okay.

Alistair: So we started that and then we quickly realized that sort of pulling cables, grunt work was less interesting. I started getting a lot of requests too, like write technical whitepapers for vendors and all kinds of things. So all of that sort of bootstrapped the company. We gradually added people, but it was still a consulting business helping people to run websites effectively.

Andrew: B2B?

Alistair: Yeah, it was almost all B2B. Yeah.

Andrew: Business to business. Then you said to our producer, “Look, what we kept doing was looking for something that was repeatable.”

Alistair: Right.

Andrew: How did you find that thing that was repeatable?

Alistair: The challenge is a law firm is repeatable. People go to court. People get sued. But it’s not necessarily scalable.

Andrew: Okay.

Alistair: So repeatability is one part of the business because that tells you there’s going to be enough money to fuel your business. Scalability is where you can grow revenues or customer base more than you have to grow employees and processes. So we were looking for something that was both repeatable and scalable.

So we started out building servers for people. People would ask us, “I have this website and I’d really like to connect it to the internet.” We’d say, “Yeah, that’s great. You just need half a million dollars’ worth of gear.” They said, “What?” We’re like, “You need two load balancers and two firewalls and two switches and two routers.” They go, “Wow, that’s a lot.”

We noticed this pattern of this disconnect between what the vendors were selling, which was a 100 Mb router or a 100 Mb load balancer–back then, that was a lot–and the average website, which had 1 Mb. So, I’m a marketing guy. I did a marketing degree. One of the oldest rules in marketing is this idea of bulk breaking and assortment. A grocery store breaks bulk, meaning they buy a ton of bananas and they sell you a couple. It also assorts things. So you can get some bananas and apples and carrots in the same place.

What we realized was that if we could figure out how to bulk break the networking equipment you needed to stand up a website reliably, we could sell it and make money.

Andrew: And would you bulk break it by doing it as a service for them?

Alistair: Yes.

Andrew: They’re essentially charging you to use this equipment that you put together and you make available to them. So, you don’t have to keep putting them together every time you get a new client.

Alistair: Yes. Today I could just summarize this by saying cloud computing.

Andrew: I see.

Alistair: But we weren’t doing the servers. We were doing everything else. So I would sell you 1 or 2 or 5 Mb of the load balancer and the switch and the router. Once I have enough customers sharing that resource, I’m making money every month because they don’t want to buy the hardware, so they’re paying a monthly fee.

Andrew: I see. Okay. Do you remember the first client you got for that?

Alistair: Yeah. Actually the first real client we got was great. It was a company called Recruitsoft, which was later called Taleo. Taleo was eventually acquired by Oracle for $2.8 billion. But going back to me not being greedy, they showed up and said, “We’d like to give you shares instead of paying us.” We said, “No, give us money. We want money.” So I met the CEO of Recruitsoft a couple years ago and he’s like, “Yeah, you have bad judgment.” I’m like, “Hey, we’re both here, right?”

But Recruitsoft was a good anchor customer for us. We started with seven or eight customers on one of these racks. The industry name for this kind of service was a managed service provider. At the time, there was LoudCloud, which was Marc Andreessen’s company. There was SiteSmith and there was us, Coradiant, doing this stuff.

We showed investors the economics of one of these stacks. When you have five or six customers, that thing just becomes a money making machine. They all said, “Yeah, let’s invest in this.” I was really fortunate because I think one of the things–a lot of people talk about privilege in startups–one of the things that’s not obvious is the team you’re able to build.

I went to war with a CFO, Thanos, who was a chartered financial accountant who had worked for one of the big banks with a guy named John, who was the head of operations for UUNET in Canada, with Eric, who’s like a 3Com fellow at 27, with Cary, who knew all about sales and customer support. I walked in, if an investor said, “Can you show me a different projection?” I’d be like, “Hey, Thanos,” and Thanos was like, “Yeah, I’ve already run those.” We discount the amount of privilege that comes from having a team like that.

Andrew: Yeah.

Alistair: I don’t think I realized it. I was in my 20s. It was an amazing army to bring to war.

Andrew: Yeah, you don’t realize it until you deal with people who are lesser than that and really eager.

Alistair: Exactly.

Andrew: You can see their eagerness. You don’t want to say, “Sorry, this sucks,” because they put in a lot of hard work, but they just don’t have this special something, that magic that makes their work really incredible.

Alistair: Exactly.

Andrew: I get it. That’s the team you were able to work with. Is it fair to say that–did you build it after you had a handful of customers or did you start to put this together and then go after customers one at a time?

Alistair: It was totally emergent. In fact, we paid for all the–I told you I was writing whitepapers. We would write a whitepaper for Altion and then they’d pay us in switches and we’d build that. So, we were really–

Andrew: I see. Then you had the whole infrastructure. You sold it to one customer, then another. Who did the sales?

Alistair: Initially it was all of us. Cary Goldwax, who was based in Montreal did some of it. We had contacts in Canada. Then as soon as we got financing, we brought on a formal sales team to sell the service.

Andrew: I see. Then at what point did you raise money?

Alistair: So this is an interesting story. We had all the money lined up ready to go. We closed it. It was the biggest series A round in Canadian history. It was a $20 million series A, which back in ’99 was a lot of money. We closed it–I think the actual close happened in January of 2001, but it was right after the bubble had burst. So, all of a sudden, the VCs are going, “What have we done?”

One of the things that inured us to that was like if all the startups are running out of money and we’re a service that allows them to pay as they go, we actually look good if the startups look like their purse strings are getting tight. But we look horrible when the startups vanish.

Andrew: Yeah. So you raised that money at that point? Actually, before we get into the startups vanishing or not. You mentioned you had these phenomenal people around you, which is what allowed you to build this business in the first place, raise the most money–was it in all of Canada, you said?

Alistair: Yeah. It was the biggest series A in Canadian history.

Andrew: The biggest series A in Canada. I saw that on your Wikipedia page and then I started following the links to find out more about it. The reason you were able to do that, the reason you were able to relaunch your business is because you had such phenomenal people around you. I think that’s a good opportunity for me to talk about my sponsor, Toptal.

I say all the time that you need the best developers that you can find, right? When it comes to coffee, everyone is so into the most fussy coffee you can get. Who gives a rat’s ass? I’ll take the worst coffee. When it comes to people, that’s when you want the best because they can help come up with better ideas than you ever could. The problem is we’re too busy thinking right now about, “How do I find the cheapest? How do I find the most available?” No. You want to find the best you possibly can.

That’s why I like the team at Toptal, because they’re really nice guys, but they’re also kind of pricks. What I mean by nice, they will take care of you really beautifully. They’re pricks when it comes to picking the right developers. They will, to the nicest people out there, say, “Sorry, you can’t work here.” We’re talking about out of every 100 people who applied to work to be developers in the Toptal network, 97 get rejected and 97 of those people, many of them are really solid, good people.

But that’s the way Toptal wants it. They want the best of the best. They are really very particular that way. They’re particular in a lot of different ways. Their founder, I had him over for dinner once. He told me every pixel on the site he has to be aware of before it gets published. That’s just the way they are right down to the bone. You want that when you want to hire developers.

So, look, if you’re out there and you’re looking to hire developers, go to Toptal. One of the first things they’re going to do is set up a phone call with you. Then they get on a call. They understand your business, what you’re trying to do. You can tell them what you’re looking for–part-time, full-time, a whole team of people, one project, long-term commitment, whatever you want.

They will find that person who is perfect for you. They’ll match you up like a yenta, like in the old movie, to make sure that here’s love. If there is love, if you think this person will really rock it for you, you can hire them and often start within a day or two. If not, they’ll find somebody else for you.

Because the company was started by a Mixergy fan, they’re offering something to Mixergy listeners that they’re not offering to anybody else. I’m going to read it exactly. I want to make sure that I’m like legally saying this right. Mixergy listeners will get 80 hours of Toptal developer credit when they pay for their first 80 hours in addition to a no risk trial period of up to two weeks.

These guys are fan-freaking-tastic. They do that. They also now do design and they also will have MBAs for you for those times where you need somebody to handle the business side of the business. Really, go check out Toptal.com/Mixergy, top as in top of the mountain, tal as in talent, Toptal.com/Mixergy.

You then raise this money. Come back to your story.

Alistair: I want to talk about talent for a minute.

Andrew: You do? Tell me.

Alistair: We had a founding team that was good, but you’re absolutely right. There were three or four coders in our company who were 10x everybody else. Everyone talks about a 10x coder and they talk about full stack developers and things like that. The reality is someone that can hold in their head the tension between the financial demands of starting a company, the consumer demands of like what’s the core thing you want to be able to do and the engineering demands of building robust architecture the first time rather than acquiring some kind of technical debt, that’s a really hard thing to do and we were incredibly lucky.

Andrew: How did you find these people?

Alistair: Part of it is we had a big network. Part of it is we were started in Montreal, Canada, which has crazy development talent. Google and Microsoft just pumped a bunch of money into this thing called Element.AI. People like Yann LeCun, the founders of AI at Facebook and other places all came from Montreal. So, there’s this really good talent pool that nobody knew about. Many of them spoke French. If you live in Quebec, you speak both languages.

We had access to this incredible talent pool. At the time, Eric and I had both gone and worked for 3Com in California and moved home. So, we kind of created this microcosm of California culture. When you have this pool of untapped talent and this thousand-square foot office that feels like it’s in the Bay Area, people just gravitated there.

We had a few people who found these emerging technologies–there’s a Java framework called Sandstorm that’s massively concurrent. Nobody had heard of this stuff. These guys would put it to work. We literally had competitors and potential partners and acquirers tell us they didn’t think we could do what we said we’d do. We’d show them the servers and show them the numbers and they’d go, “I still don’t believe it.”

When you’ve engineered something so good it produces cognitive dissonance in your competitors, then you’ve found the right kind of talent. It’s great to hear that people don’t settle because someone may be a great developer, but they may not be the right developer to take to that 10x and that’s huge.

Andrew: You and I before we started were talking about how today–do you think that’s in Panama right now?

Alistair: Panama is a side topic. I’m running a conference there called Pandemonio in a couple weeks. What I think is interesting about Panama is it’s like Dubai or Hong Kong, but for Latin America. They’re building a massive new airport, a convention center, 60% of all Central American traffic comes out of Panama City. I met with the head of the electrical utility. They just ran 88 lambdas of fiber. That’s 88 times 100 GBs of fiber on top of the phone poles. They have 75-story Philippe Starck buildings. It’s not what anyone thinks. It’s US plugs. It’s US currency. Easy visas, direct flights.

So we’re betting that Panama will be the next Hong Kong or Dubai or Singapore. So we’re running this conference there. It’s the same thing with Coradiant. In many cases, when you’re doing a startup, if people keep telling you they don’t need it but you know the thing is necessary and you’ve built robust technology, that means that when it finally happens, you will be far ahead. So you’ll have a lot more capacity and performance.

Andrew: When you say they don’t need it, you mean they don’t need it yet. You know they don’t need it today, but they will in the future.

Alistair: Right. By the time it’s obvious, it’s sort of like Amazon. By the time it was obvious the Kindle should be made, Amazon had built an online bookstore that you could order books from, whereas Barnes & Noble waited too late.

Andrew: How do you know if maybe you’re too early?

Alistair: Well, too early is like being wrong, only more expensive. This is a challenge. This is the fundamental tension of why it’s called venture capital. You’re making a bet that this vision you have is going to become true. It’s this weird sort of yin and yang of, “I’m wrong. I’m lying to myself. I’m delusional,” combined with, “I’m absolutely right. Everyone is going to need it.” That makes founders sound like lunatics half the time.

Andrew: You seem to have been with Coradiant right at the right time. You knew where the world was going. It was starting to go your way. You were starting to get customers right from the beginning as you built up the hardware if I understand it right. And then we talked about how you raised money. After the market went south, meaning a lot of companies were no longer able to raise money themselves, so then they started to cut back and then as you said, they started to go out of business. How did that impact your business?

Alistair: Badly. So we had 130-something employees. We were selling these recurring services, but two problems happened that are side effects of the market crash. The first is a lot of talent was available on the market and willing to work for less. A lot of hardware was available on eBay for pennies on the dollar. So our value proposition of, “We’ll run it for you cheaply,” doesn’t work anymore because you can buy the thing yourself. We would have been out of business except that we built something magical to make our lives easier that it turns out everyone else needed.

Andrew: Was this idea that I highlighted at the intro actually effective for you? You do consulting to understand the problem they have, that you can solve repeatedly and with scale and then you built it. Was that thing effective for you or did it not work?

Alistair: It worked very well. I do a lot of work with startups in the B2C world, Lean Startup, they say, “Oh, that works fine.” But in B2B, they say, “I can’t use Lean Startup for B2B. That doesn’t work.” The reality is the best way to test an idea–let’s say you have a new security device, a new kind of firewall–is to go find ten customers who look like consulting customers, do the thing for the ten of them, give them all the same thing.

You’ll get some pushback. The places where the customers say, “No, you have to customize it for me,” that’s where your intellectual property is going to come from. If you build a firewall but there’s 10% consulting work for each installation, well that 10% is what the customer is going to have to configure in a UI or with some kind of machine learning algorithm.

So consulting is not only a good way to find initial demand and flagship customers, it’s also a really good way to test whether the product you’re going to build is repeatable enough to stand on its own or whether it’s too far off ad you need to–your IP is going to come from the stuff you can do automatically and the others have to do by hand.

Andrew: Do you happen to know of other companies that have done that, that have started through consulting like that?

Alistair: I’ve seen a lot of them. There are some big examples. The founder of Omniture, the name escapes me right now, but he’s done that where he went out and built out a bunch of analytics stuff and now is taking the covers off it. Even Cisco, their initial routers were host software and then they started to commercialize it and put it into products. I think it happens a lot of software, where you want to sell software first.

But certainly one of the things you see today with professional services companies is it happens a lot in the security field and things like that–as things become commonplace, as the marketplace needs sort of standardize, the problem is that early on in a market, the customers don’t know what to call the thing yet, so you kind of have to wait for them to come up with a name. It’s almost like the zeitgeist of the market realizes this is a thing, like a load balancer, a switcher, a router or a mobile phone. Then you go and deploy that.

Andrew: How high did the revenue get before the whole thing collapsed?

Alistair: It was in the hundreds of thousands a month recurring revenue, which is great. We were definitely focusing on a recurring revenue subscription model

Andrew: Okay. Then the market collapsed. People were able to find this stuff cheap on eBay. I remember those days. You said, “Holy crap. We need to figure this out.” What did you do?

Alistair: Well, we had built one piece of this rack of stuff ourselves. The problem when you’re running someone else’s website and helping them manage it is to know when it’s broken. There are three ways you can do that. You can go see if the servers are okay, like is my CPU pegged on a server? That’s pretty easy. You can go ping a site yourself. You could test it once every five minutes and see if it’s up. Pretty easy.

The hard part is to know whether actual users are having problems. To do this, it’s called real user monitoring. We built this thing that would look at every transaction on the wire, actually sniff the wire. So, you didn’t change your website at all and it would look at every request and every response and it would build those into web pages and build those pages into sessions, so you’d be able to say, “Hey, look, the log in page is horrible for all Firefox users from Boston today,” which is transformative, right?

When you come in to work and it says, “Server 10 is broken on the login page when people use this post parameter,” you’re like, “I’m going to forward this to engineering,” as opposed to just wondering why you’re not making sales.

Andrew: Did you build this for yourselves first?

Alistair: Yes.

Andrew: Why did you build it for yourself fist?

Alistair: Because we were trying to run websites for other people and we didn’t want to keep throwing bodies at the problem. So we had to build our team tools that would help them identify the problems quickly.

Andrew: What did the problem look like when you saw it internally? You’re just managing their site. Why would that even be on it?

Alistair: Right. They call us and go, “Things are down,” or the load balancer would report that it was out of capacity or we’d run a test and we’d find out that some server’s CPU was high and we’d go look why and realize there was some code on the site that was using up all the CPU that someone had to fix. So the chasing of that sort of hairball of problems and disentangling that hairball was huge. There’s no arbiter. There’s nothing better than the actual user experience. There’s no substitute for that, right?

Andrew: I see. You can’t just sit down and say, “I’m going to test every single webpage or even create software that . . .”

Alistair: To test every webpage would hammer the site and then it would go down, right?

Andrew: Right.

Alistair: Pages are dynamic. So there’s no such thing as every webpage. It’s different for every user.

Andrew: Right, especially since you said search parameters, then there’s infinite possibility there. So even if you found a problem, by the time you found it, the problem was so big that it was impact that site and maybe taking it down, am I right?

Alistair: Or it was so transient that it happens once every now and then with a certain combination of this browser and a user on a mobile network and so on. You don’t know. So you need to actually. We actually build what today would be called AI, machine learning, to do pattern matching and say, “Hey, we’ve noticed this pattern, that 94% of all your problems can be explained by this server, this browser, this webpage.

Andrew: I see. So essentially you’re doing the same thing again. First, you do consulting and you find the problem for your customer and you build a solution for it. Now, you’re taking on their problems again internally by managing their websites. You’re finding problems, really deep pain points instead of suffering through them, you say, “We’ve got to build a solution. You build a solution for yourself.” How do you then take it out to other people?

Alistair: So the amazing thing about Coradiant is that it was a consulting business, a software as a service business and a hardware business, which is weird.

Andrew: You stayed a consulting company too?

Alistair: We did professional services. The box we built, which was called TrueSight, was an appliance that you slid into a rack. It just worked. The fact that you didn’t have to go to engineering and get the marketing department to sign off on JavaScript and stuff, you just plugged it in and it showed you, “Hey, look, this is a problem,” it was transformative because traditionally, the people in operations had no visibility into what the developers were doing or what marketing wanted. This gave them a tremendous amount of visibility they didn’t have before. So, we made an appliance. That’s how we did it.

Andrew: An appliance?

Alistair: Yeah.

Andrew: Then you go back to your board and you say, “Look, I know we’ve been doing this thing. We’re helping people get their websites up. We’re selling it on a monthly recurring basis and we’re up to hundreds of thousands. We were before eBay came a long–before the cheaper stuff went on eBay. I think we need to shift our whole business. We’re going to sell an appliance, one-time revenue every time we sell it, no recurring from these clients.”

Alistair: Different sales force, everything, yeah.

Andrew: And your investors said, “Thanks for saving the company?”

Alistair: It was not that simple.

Andrew: What did they say?

Alistair: So, we shrank the company down to about 20 people. One of the worst days of my life, we laid off about 60 people in one day.

Andrew: 60?

Alistair: You’re laying off people who have laid off their staff that day. It was awful. But we had to do it. I have people, friends, who at the time were furious and now are like, “Yeah, I understand.” But they didn’t understand at the time. It was really tough. We went to the board and said, “We have this thing we can offer as a service and that’s a more complicated thing. We tried to offer it as a service, but the reality is doing it as a service, nobody wants to take their web traffic and ship it up to some servers in Canada, that’s not going to happen.” So, we said, “This has to be an appliance that stands alone and goes in the network.”

First, the board was like, “We can’t do this. We can’t change the engine on the ship even though the ship’s already been converted from a car so you can fly. Forget it.” Eventually, we had enough customers supporting it. Frankly, we had a few investors who really believed in us. The problem, as I’ve described, it sounds pretty obvious. You should want to know what’s happening on your website. We recapitalized the company.

Andrew: What does it mean to recapitalize the company?

Alistair: So, in a short version, not using our numbers, but for example, imagine I had 20 shares of the company and the investors put in $20 million in the company. Now the investor gets $1 million and I get one share. Then you put in more capital or you create a very large option pool. So, the initial company we built and the $20 million we closed was essentially one company. Then there was a certain amount of sort of, “Yeah, you get some goodwill because that showed us what to build, but now you’re all employees at this new company with the new shares and you will invest them over time and get options.” So everybody writes the money off.

So our investors basically think they’re already said, “We’re not going to make our money,” and then they wrote off like 90% of their investment. Then a few years later, they get the money back, like, “Wow, we didn’t expect that.” It was a long time coming, but the fact that we actually pulled a–full credit to people like Ali and Brett and the executive team at that point.

We had a lot of changes. We moved the corporate headquarters to San Diego. Our chairman, Brett Helm, put in the initial $1 million. I’d worked with him on a previous company. He became the chairman of the company and eventually it was sold. That rollercoaster took a lot of faith on the part of both the founding team and the executives and the investors. But also everybody sort of had to hold their nose and go, “Yeah, we’re going to do this thing.”

Andrew: They had to because you and Eric Packman said, “If you guys don’t, we have to leave. We can’t be here.”

Alistair: Yeah. Basically Eric and I started working on the appliance a couple of months before we had permission to do so. Then they said, “Well, what do we want to do?” We said, “We want to build this appliance.” They said, “You can’t do that.” We said, “Either we don’t go into the office today and no one else goes in either and they’re done. Or we go in and we gain two months on this product. So, your call.” It was a little bit of an ultimatum. There was a little bit of a standoff.

But in the end, it turned out to be the right thing to do. It was a hard thing to do. Mike Chuli, who we had gone and recruited as president and CEO had a background in services from Boston recognized we needed to do this, but he also had to change the entire sales team because you’re not selling services anymore. You’re selling physical devices, so it’s a different kind of sales person.

Andrew: I think it’s impressive that you weren’t so depressed at the time like other people that you didn’t just give up on this and say, “I’m going to get back. . .” I don’t know what you would have gone back to.

Alistair: We would have gone and built something new.

Andrew: There are people who went back into finance. There are people who went back and lived an easy life in retail, something random. Why didn’t you get depressed?

Alistair: Well, first of all, having a cofounder is amazing. So Eric and I, we had incredible solidarity–same shares, same compensation all the way through. So we were able to sort of talk each other off the ledge. I think the other thing is we felt a tremendous obligation to build this thing because we knew it was useful. We had used it ourselves to solve problems. So it was like, “Why don’t other people understand how useful this is?”

But it took me years to learn how to say to you analytics shows you what people did, we show you if they can do it. Like, it took me years just to learn how to say that. That’s partly the market being ready to understand the sentence and partly me understanding how to simplify it. So, had we known we should have built this thing in 2000, we could have taken a quarter of the money and we would be sitting on my yacht. But that’s not how you learn.

Andrew: I see. All right. Actually, before I continue with the story, you’ve got to tell people about this whole soldering experience when you guys were putting this together at the hotel?

Alistair: Yeah. So we launched the product at Interop, which is a big networking trade show that I used to run conferences with. We won best of show the day after we launched. It was amazing. It was like all these years of toil and people like us and it was very Sally Field, “You really like me.”

But the truth is the evening before we did this, I was at a wine bar at the Rio Hotel with a bunch of investors and prospects running up a $3,000 bill. Eric was in his hotel room with a soldering iron putting the face plate on the box we were bringing. It was that early stage. The front of the box even has a little indent and everyone says, “That’s really need for cable management.” It’s not for cable management it’s because that’s the only way we can get the Ethernet ports to fit. It’s a total fiction.

The reality of like Eric’s in the thing soldering and I’m schmoozing customers. That’s the nature of the game. The hustle doesn’t go away. You just have to know when you should be able to step on the gas like that. Eric came in looking like he’d been fumigated. He was just stinking. I think he had to disconnect the hotel fire alarm and stuff. I won’t say what hotel we were in.

Andrew: All right. Before we continue with the story, I’ve got to tell you about a time that I played Space Invaders because it’s going to help my sponsor, help explain why people need to check them out.

I took my two and a half-year old to go bowl. On the way over, we found this old videogame. For a quarter, you can actually play Space Invaders. What can I get for a quarter these days? Nothing. I happened to have a quarter in my pocket. I don’t know why. I always get rid of these things. But I had it. I put it in the game and said, “Check it out. This is Space Invaders. This is what games used to be.” He was like playing with the joystick, not really getting it. I start to shove him aside and then I show him, “Here’s how you shoot those invaders. You’ve got to kill them.”

Then I see the points up. I go, “I’ve got to get more points.” So I start moving the joystick, which only I think goes–I forget how Space Invaders goes. Side to side, I think, is all you get to go until the thing comes and picks you up and takes you into space. I’m shooting everything in sight and watching the points go up and I’m pushing my two and a half year old who I was trying to introduce to this game, I’m pushing him aside so I can shoot more of these freaking Space Invaders.

I realized why. It’s because in the upper right quarter of Space Invaders is the points. I wanted to get more freaking points. I wanted to get more points so badly that I pushed this kid aside that I loved so much. The reason I’m talking about that is because business is like that too. If you know what your points are, how much you make every month, where it’s coming from, how much you spend every month.

I was going to say lose, but ideally you don’t loss every month. If you know those points, you’re so much more driven to find expenses to cut. Every time that I go through my expenses, somebody whack–that was a loud noise–somebody gets whacked. Some crazy expense that somebody added in the company to Mixergy’s credit card gets whacked where I call up myself or email myself to get a refund.

That’s the point. If your books are in order, it becomes like playing Space Invaders or anything else. You get addicted to increasing the right points and you want to destroy all those expense points. That’s why I recommend over and over that people hire Bench. The reason that I like Bench is they get your points in order. They show you how much your expenses are, where you spend your money, how much your revenue is.

The reason they can’t do it right is because these guys have phenomenal software that will go suck in your data from whatever freaking place. We all have our revenues and expenses in all these different diverse places now, right? Their software will get it in their system. Their software will start to categorize it based on the way it categorized in a path.

So, you know, what’s an ad expense and what’s a contractor expense. Sometimes you then goes and buys ads for you. That should be considered ads. Other times you pay a contractor to do work for you, software will do all of that and then human beings go in to make sure that your books are actually done right, to add a little bit of nuances that goes with understand that actually this contractor this week did something other than advertising or whatever that happens to be for you.

So what you want is this kind of system that works software and human beings obsessively on your books and these guys are freaking obsessive. I like obsessive people, to make sure you know your points so you can improve them.

What most people do is they just say, “I have a sense of it because I look at my Stripe account and I see what my revenues are. I know I’m keeping my expenses down because I’m not buying ads.” No. You want more precise data and you want it fast. If Space Invaders said, “Come back April 15th and I’ll tell you what your points are,” my kid would be playing it. But because they gave me instant results, I knew what I needed to do.

If you’re out there and your books are okay, shame on you. You’ve got to get them right. Go to Bench.co/Mixergy. Sign up. If your books are in disarray, don’t feel guilty. I am telling you, entrepreneurs feel guilty about this all the time. Jerry Colonna, the guy who used to run–do you know Jerry Colonna? What was it called? It was called Flatiron, the VC firm back in the day. Now he’s a business coach. He talks to entrepreneurs a lot.

One of the things I heard him talk to an entrepreneur about, the entrepreneur raised a lot of money, felt guilty because he didn’t do his books and just kept ignoring them because the guilt kept building up. He said, “You’ve got to get past this guilt. Forget about the guilt so that you can get to the results. So, if you’re out there and your books are in disarray, stop feeling guilty. I’m giving you permission to stop feeling guilty.

Go to Bench.co/Mixergy and they will do your books right–Bench.co–no one’s at .com anymore–Bench.co/Mixergy. I’m a little embarrassed that I’m a .com. And I’m grateful to them for sponsoring.

How did you get customers for this thing when you couldn’t explain it?

Alistair: Yeah. So, initially, we hired sales people who had good networks. We’d go find the people who owned the load balancer and the operations people. That was a good start. They tended not to have a lot of political clout in the organization. So, they’d want to buy it and then there bosses would say why. Eventually, we added features that would show you where this user was coming from and what their name was and so on.

Then all of a sudden, marketing cared. When someone calls support and says it’s Bob and you say, “Hang on a sec, Bob. I see the seven pages you just went to,” and you’re on this page now and I see you went to this important page twice. Like we had a customer that was celebrating the fact that their time on site was going up. Then they looked at it and realized that it was going up because the pages were so slow that people were on the site for longer. That’s not a good thing, right?

Andrew: That is such a good example, though. You’re right. You look at time on site increasing and you think, “People must love the site. They’re spending so much time with us.” You don’t realize, “Oh no, they’re spending so much time with it because the site is so slow.” Got it.

Alistair: In some cases, they’re on your support page. You’re like, “Hey, more pages per visit.” It’s a horrible thing. So, we started with operations. The real turning point for us was two or three really big brands–Fidelity, LinkedIn and Salesforce were the big three–bought our biggest product. It was a $100,000 product. It was a big piece of hardware. All of a sudden, my sales pitch is, “They’ve got one. Would you like one?” That made a difference.

I think the ability to go in, in 15 minutes–we used to have a very cocky approach to sales. One of the things I did is rather than packaging the thing in a plane brown box, we put it in a really nice box with like two-color printing on it and all this. We’d always send a new unit out for a proof of concept. The customer, I remember being in this room with a customer–I used to go on a lot of sales calls–the competition sales engineer was there too.

The customers receiving these two boxes in the shipping center area, the competitor pulls out like a road case and takes their product out or whatever. We pull out this brand new box. The competitor, because he’s an idiot, looks at the customer and goes, “I guess he got lucky. He got a new one.” I look at the customer and go, “Everyone gets a new one. They never send it back.” Like that’s the end of the sale, right?

So dumb stuff like putting your product in new packaging–and if one came back, they very seldom did, but if one came back, we’d use it in QA and dev tests and stuff. But that moment, how are you going to recover from that as a sales person?

Andrew: How did you know how to sell? This whole process is selling. It took me a long time, frankly, even to know how to get guests on Mixergy. If anyone wants to know how we sell at Mixergy, they can go to Mixergy.com/HowISell to see our process. It took me a long time, years, to get that process down. How did you when you were coming from a system that worked to having to reinvent not just the product but the sales system? How did you reinvent it?

Alistair: So most of the credit for that goes to Mike Chuli and a guy named Allen Schweitzer who did inside sales, so a lot of inside sales, a lot of traditional dialing for dollars.

Andrew: You hired one person who was good at doing inside sales and you said, “I need you to do this for me?”

Alistair: No. I hired four people and then in the end, one of them was good at inside sales.

Andrew: I see. They each went off in their own directions doing sales the way that–

Alistair: No. We fired the first three. It’s very hard to find someone who’s good.

Andrew: But when you hired them, did you give them a process?

Alistair: Somewhat. We did a lot of sales training. One of the things that I think–this is a really good B2B sales lesson–we had a lot of sales people who were throwing any lead they could into our funnel. We went to a sales training and I said, “I’m going to give you guys one criteria for whether you can talk to a customer.” They’re like, “What do you mean?”

I said, “The first meeting you have with them, ask them if they can touch their load balancer.” They said, “What do you mean?” I said, “It’s a piece of physical equipment they need to have because we plug in front of it. If they’re using Amazon Web Services or they’re co-located with a hosting provider, they can’t touch the load balancer, pay for the coffee and leave.”

The sales force is like, “But three quarters of my funnel is going to go away if I do that.” I’m like, “Yeah, go close the other quarter.” Guess what? They close the other quarter. So, having a really surgical set of criteria that you can use to define exactly who your customer is, especially in the early stage where you can’t afford a lot of sales cycles and sales friction, having a really specific customer you can just nail down and go after with specific criteria is huge.

Andrew: I see. Wow. I think to me creating the product is damn impressive, but being able to sell it before you can point to Salesforce and say Salesforce is using it is phenomenal. It took you how many years to get that system really dialed in?

Alistair: We launched the appliance in ’04. I would say by ’07, we had it dialed in.

Andrew: That’s actually really good to know. Then you ended up with how much in sales before you sold?

Alistair: I don’t know the numbers, but it was millions. Things were going well. In the hardware market like that, you actually sell a piece of a hardware and then you sell 15% to 20% a year service and support contracts, so over time you start to ramp up the professional services side of things.

Andrew: Then why did you sell the business?

Alistair: We were looking for an exit. It was the right thing to do.

Andrew: Why were you looking for an exit?

Alistair: Ten years is a long time. Honestly, at that point, it wasn’t my business.

Andrew: You were basically an employee with good options.

Alistair: I was an employee with good options. It was the right time to do it. The market was ready for it. The acquirer, BMC, needed a strategic product in this space. So, it was good.

Andrew: Do you remember the day when the deal went through?

Alistair: I do. I remember this is an interesting point about acquisitions. Because we were founded in Canada, there was a lot of legal stuff about what intellectual property went to the Canadian or US company at the time. The negotiations were kind of stuck on this one point of how much of a certain piece of code was built at a certain place. I had this spreadsheet from like 2003.

When I was running product and engineering, I had this spreadsheet. It was on a hard drive somewhere and it turns out that just unlocked all of the negotiations. Just that one piece of organizational knowledge was actually central to making the deal happen.

Andrew: You used to keep a spreadsheet of where you coded?

Alistair: Well, how much of each function was coded before it was released. We coded in Canada and released to the US.

Andrew: I see. Wow.

Alistair: So I want to ask you some questions.

Andrew: All right. Let’s switch it around. Ask me anything.

Alistair: One of the reasons I reached out to you is I’m a big fan of your show. I think the system you have is pretty seamless. I have been working on stuff to do with innovation in large organizations as a result of “Lean Analytics,” a lot of people reached out to me and said, “How do we do this in big companies?”

Andrew: Your book.

Alistair: You have nailed down the system. I know you’ve got this thing about how to interview your heroes, which is amazing. But you’ve nailed down the system for screening someone, doing your homework and due diligence, training them on how to get the lighting done properly, every little detail. How long did it take you to find that?

Andrew: You know what? I was going to say it took me years. But just before my first son was born, I said, “This is freaking nuts. I can’t have–I don’t know how my life is going to change after having kids. I have to have everything so dialed in that if it’s all a disaster but I can come in for an hour to record an interview, everything should be in place.” And I started driving my people nuts by saying we have to totally systemize the company.

I put together a little system. At first, it kind of sucked, to be honest. But at least it was a system. So, when something sucked, like if a guest came on and his audio was not good, I had a system to go back in and fix it. So what I did for that was if the audio was not good, I said, “What do I do to solve this not just for this time, but for the future?” And I went back to Acuity Scheduling, which is what we used to book guests and I added a link to one of the reminder emails saying, “Here’s what you need to not suck on camera.”

If a guest didn’t show up, which used to happen, I’d sit here, I’d actually go out of my way to come here and sit on camera and the guest wouldn’t show up and they’d say, “I’m sorry, I forgot. I booked this a long time ago.” I said, “Fuck. This is actually not their fault,” which I used to in the past say they don’t love me enough. There’s a mistake here where people don’t realize how big we are. I’d say, “No, it’s not their fault. It’s my fault. How do I fix it?”

I go, “Fuck it. I’m going to send a reminder an hour before the interview and the day before the interview so they don’t forget.” If they complain that it’s too many reminders, then I remove one, but I wait for the problem.

Alistair: Yeah.

Andrew: So I just kept creating this process. It’s important, I think, to have a process which is barebones at first and then every time there’s a problem, go back and fix and fix and fix it.

Alistair: Were there a couple of interviews you did that were so widely shared they kind of made you as a name?

Andrew: No. There was no like one big one, but there were a bunch of big ones that all together did it. So Seth Godin’s early interview, I’d say, was a good one. Seth Godin is actually a really good example. There are a handful of people that are so widely loved–not just known, loved–that their people will hunt their stuff down anywhere. The reason I use Seth Godin as an example is because he helped me.

But check out how freaking weird this is. There is a list of the best business podcasts on iTunes. I keep striving to get up on that list. Seth Godin has been up on that list for years. He hasn’t updated his freaking podcast I think since 2012. But his people love him so much that there’s always someone new discovering Seth Godin, going and finding this podcast. So, there are a handful of people like that whose fans are so rabid, they’ll find their stuff.

Alistair: It’s the Richard Branson thing too, the brand of it. One of the people I run Startupfest and Resolve with is Andy Nulman, who, by the way, you should talk to Andy. He founded Airborne Media. He also founded Just For Laughs, which is the biggest comedy festival in the world.

Andrew: Okay.

Alistair: He wrote a book on surprise. So I was talking to Andy and he’s like, “The thing about Seth Godin is he’s such a brand that he can put out a 25-pound book that sits on a table and people buy it because they want a 25-pound book on the table. They may never open the book, but they’ll go buy it.”

Andy was giving me a hard time about positioning for Pandemonio. So, we spent an hour on the phone. This is why Andy’s great. We came away with the tagline, “The smartest beach on the planet.” That’s another one of those things that would have taken me three years. Andy’s like, “You can do better than this. Let’s come up with something fun.” Who doesn’t want to be on the smartest beach? I don’t want to be on the dumb beach?

Andrew: I always admire people who can come up with that fast.

Alistair: That’s one of those things I think if you’re trying to find a way to do that stuff, I think sometimes you overthink it in this industry. Sometimes the simple stuff is really good and straightforward. It’s easy to get wrapped around what you know so much.

Andrew: Yeah. I think anyone actually who’s really curious about our process should check out that link I said earlier about selling. It’s Mixergy.com/HowISell. You’ll actually see the software that I use to keep track of our guests and how we move it along.

Alistair: Tell me about the Interview Your Heroes thing.

Andrew: Its’ a course that I teach from time to time. I don’t have it coming up anytime soon, where I walk people through how to do interviews. Every part of my process is so systemized that I can actually pass it on to other people. In fact, this whole thing happened when I took a little bit of time off for my first kid. I kept getting emails from people who said, “How do I set up this mic? How do I set up that?”

I said, “You know what? I see a problem here. I have enough distance.” I was going running a lot in that paternity leave. I had enough distance on my runs to say, “You don’t have to answer it all the time or point to the helpdesk article you’ve created, create a thing. Create a course.” So I created a course where I just took all the systems we have.

Like one of the systems, for example, is I felt that a lot of times guests weren’t being open enough with me and I couldn’t understand why. So I hired a producer of a major interview show and I said, “Listen to my interviews and give me feedback.” He never listened to a single one of my freaking interviews. But he was good at reading the transcripts. So, every week on Monday, we would go through the previous week’s transcripts and he’d say, “Here’s what you did wrong. Here’s what you did right. Here’s how you should think about getting people to open up.”

Because I was in a systems frame of mind, I would write it down in a Google doc and say, “Here’s what I learned. Here’s the system.” Then I gave it to our producers who do pre-interviews. I said, “Here’s how you can use this to get a guest to open up and not just open up, but give us what we need.” That’s like one of the things that I teach.

Alistair: The pre-interview process, I think you do that really well. Having talked to your producer beforehand, there are already two or three conversations beforehand. So, you’re looking for those unusual historical things that kind of humanize it, talking about me making parachutes or whatever.

That’s one of things I’ve really noticed in the difference in the interviews, the one you did with Trina from Infoactive, who I was involved with as an investor and advisor talking about her upbringing and stuff. Everyone’s got a reason they’re a little weird because by definition, a startup is someone who believes the world is not as it should be. So, that kind of person is probably different.

Andrew: I think Trina might have actually made it into the Google doc. I don’t remember if I edited her name out or not because I was trying to share it with people. I forget. That’s one of the things that we–that’s one of the things we keep studying. How do we make it better for them? I always feel bad with pre-interviews. I don’t want to take up your time, but every time I don’t do a pre-interview, the guest sounds rough and awkward and they hate me for like wasting their time with the interview.

Alistair: All the conferences I run, I get on the phone with the keynotes and go through their talk and give them feedback and stuff. If nothing else, it makes them realize that someone is going to be looking at their slides and they better do it. Half the time you get on the call, they’re like, “I hadn’t thought about it yet.” Now you’re thinking about it.

Andrew: Right. As much as they hate to have that deadline that’s earlier than the actual deadline, they appreciate it and they do better because of it and I think they’re grateful for it at the time.

Alistair: Yeah, sure.

Andrew: I wish there were more events that did that, frankly, an event that doesn’t check out what the guests are going to present I think is really going to embarrass themselves.

Alistair: Yeah.

Andrew: So, you’re going to be doing interviews? It seems like you have a lot going on, right?

Alistair: Yeah. I have a lot going on.

Andrew: We didn’t even get to half the stuff that I brought up in the intro, like the “Lean Analytics” book–I remember early on, by the way, Eric Ries, who wrote “The Lean Startup” book and is the father of the whole movement, I asked him, “Who should I interview?” I looked back on my emails to find your Skype name for today and I found an old email where he and I were talking about you and I think I didn’t have you on because I was a little intimidated by what you’d done and I didn’t know how to explain it.

Alistair: “Lean Analytics” is easy. You use data to make a better business faster.

Andrew: That part I get.

Alistair: Figure out the most important metric. That stuff is easy.

Andrew: That part I get. I would have focused on your business like we did today.

Alistair: The trouble with analytics is a lot of people think analytics is about setting up Google Analytics. I had a call with a company I won’t name yesterday and they were like, “We want to know what kind of analyst to hire.” I said, “What’s your business model?” “We don’t know yet.” “Then I can’t tell you what analytics to look at.”

One of the things Ben and I are–Ben Yoskovitz, my coauthor for “Lean Analytics”–we’re very big on you’ve got to first define your business model and the stage you’re at and then you can start thinking about what numbers to measure. People don’t tend to approach it that way. They tend to be like, “Look at all this data I’ve got. What reports should I run?” As opposed to, “What business am I in and how far along am I?”

Andrew: I think you guys did–I think it as on SlideShare–a really good overview with like a billion slides, which I like when I’m going through SlideShare, explaining how you think about analytics, how most people think about it and what mistakes they’re making. I don’t even know how to reference it. But if anyone wants to get a sense of how you work, I would just look for SlideShare and then lean analytics.

Alistair: I think it’s SlideShare.net/LeanAnalytics has a bunch of those. I actually did an hour and a half long training for Google. Google Ventures had me come down. If you just do a Google search for “Lean analytics, Alistair Croll, Google,” you’ll see the hour and a half long video. It’s pretty straightforward.

Andrew: What’s the biggest thing you’ve done since Coradiant?

Alistair: There are lots of them. But I would say Year One Labs. Other than “Lean Analytics,” Year One Labs is a big one.

Andrew: Tell me about Year One Labs. It was different from other accelerators.

Alistair: So I’ve always had a beef with accelerators that say, “Come in for 90 days and we’ll show you how to pitch,” because you don’t actually develop your market, you don’t develop your customers. The whole idea of Lean Startup is this iteration until you find this mythical unicorn called product market fit. So, what we said was bring people in for a longer runway.

In other words, instead of giving them just 90 days, give them a year. Put in $50k, which in Canada, in Montreal, you can get by on $25k a year with a shared apartment and ramen soup if you need to. Within that time, you’ll figure out what you want to build. You don’t even need to know yet. You have an idea, you have a problem. We told our startups, “You’re not allowed to code for a month.” They were like, “What?” Panic.

One of these companies Localmind, the basic idea was to be able to ask strangers a question about a place. So, how would you test that without writing code? So, they did a geo-fence of all the tweets coming out of New York City. They started asking people, “What’s the weather like? Is there Wi-Fi?” One of the biggest risks for their business was not could they code something. These are smart people.

One of the biggest risks was will strangers answer a question? How do you test that? You ask a bunch of annoying New Yorkers–no offense–they’re too busy to answer things. It turns out that like over 90% of people would answer questions like, “Is there coffee nearby? Where’s the best Wi-Fi?” So, they de-risked that. So, giving them time to do stuff like that, to really understand the inherent risks to the business and systematically get rid of them one after another was transformative.

So we only needed one or two successes out of that. Localmind, one of the companies, was acquired by Airbnb and all the investors were like, “This is great. Do it again.” We said, “it was a lot of work. No we won’t.” But it was an amazing learning experience.

Andrew: And you’re actually using the Lean Startup approach that you and Eric have written about to actually launch these businesses.

Alistair: Exactly.

Andrew: The site is no longer up. I went to YearOneLabs.com. It’s linking to BestViva.

Alistair: Yeah. I think the domain is–

Andrew: I see. You just let the domain expire.

Alistair: I think so. I don’t know if we did that on purpose or if we were just very busy. But people said, “When’s the next Year One Labs?” The name Year One was supposed to be the first year of your startup. We may do it again. Raymond Luk, who runs Flow Consulting was the founder of that, then Ben, myself and Ian Ray. So, it was four people who had run accelerators before.

We actually, one of the things we did which was different which I think all startup accelerators should do is instead of like having a normal application process for people, we ran hack-a-thons. If you can come into a hack-a-thon and on a weekend, build a working prototype and explain it, I’ve already vetted your ability to experiment and try new ideas and communicate them properly. So, that was, to me, the best way to identify people who’d be good in a startup environment was people who excelled at hack-a-thons.

Andrew: Yeah. I could see why you’re not doing it. As much as I’d like for you to keep doing it, I can see why you’re not. You guys put in way more work that other people, up front and throughout.

Alistair: This was co-creation. It was really an accelerator.

Andrew: All right. If anyone wants to follow up and get more from you, what’s a good URL to give them?

Alistair: So, my website is SolveForInteresting.com.

Andrew: Okay.

Alistair: I write a lot of stuff on Medium. I’m pretty much ACroll anywhere you go, like Twitter and Medium, whatever. Then this new project I have on corporate innovation and co-creation, which if I can learn from you, may wind up becoming interviews. It is called Tilt the Windmill. It’s a play on Tilting at Windmills. There are a bunch of posts there about how big companies can innovate, which is increasingly–they’re increasingly building things with startups or threatened by startups and trying to do it themselves.

Andrew: All right. You’ve got some interviews on there. I like the one that starts off with you dropping your mic in the intro. I always like those humanizing touches in conversations. All right. Thank you so much for doing this interview.

For anyone who’s listening who doesn’t remember, the two sponsors I’ve promoted are the first one is the company that will help you hire great talent, the kinds of people who could be working in Google but do not want to be in Mountain View. Go to Top as in Top of the Mountain, tal as in talent. That’s Toptal.com/Mixergy. If you want the points of your company to constantly be updating by people who are phenomenal bookkeepers using great software, go check out Bench.co/Mixergy.

All right. Thank you. Thank you all for being a part of Mixergy. Bye, everyone.

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