Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com. It is, of course, home of the ambitious startup.
And I’m really excited to have today’s guest on. This is a guy who for years has started things like MicroConf, Micropreneur Academy. “Start Small, Stay Small,” I think was the name of one of his books. He’s just plugging away, doing his bootstrap thing from his house. I think this is the first time I’ve ever interviewed him from an office. And his stuff is high quality. The people who he interacts with love him and have life-changing experiences because of him, and he didn’t raise millions of dollars. No, he didn’t, as far as I know, get on TechCrunch even once.
Now he’s built this thing that’s just phenomenal, and I’ll tell you about it within the interview. It’s called Drip. He sold it to Leadpages. When I was at Leadpages’ conference last week, I asked someone, “Is this real, or am I getting snowed here? I don’t think I’d get snowed by Rob, but am I getting carried away because I like him?” The guy goes, “No.” Someone with knowledge of the sale said this is a life-changing amount of money. Rob is very humble, very quiet, but look at what he’s done. So I invited him here to talk about what he’s done.
The company that he created and sold is called Drip. I’m especially excited to have it on the scene because I think marketing automation just sucks. We have products like Infusionsoft, that we spend a ton of money on, that have a ton of features that complicate so much for so many people that it’s not at all unusual to say, “I’m going to hire people to just manage this piece of software for me so that when someone orders, I don’t accidentally send them an offer to buy again at a discount.”
So what he created with Drip is marketing automation that just works. It actually knows who’s ready to buy, who hasn’t understood about the product and needs a little bit more email information about it, etc. And we’re going to find out how he did it.
It’s all thanks to two great sponsors. The first is called HostGator. It will host your website right, and the second will actually help you close sales. It’s called Pipedrive.
Rob Walling, good to have you on here.
Rob: Thank you, sir. It’s good to be back.
Andrew: Do you remember the sale price? What did you get? Did you get a check? Did you get a wire?
Rob: It was a wire.
Andrew: A wire? Do you remember it coming in?
Rob: I absolutely do. I was actually at a strings camp, a cello and violin camp with my kids up in Oregon, and I was like signing docs on my phone and the instructor was giving me the stink eye because you were supposed to be paying attention to your kids. But it was like the deal was closing on a Friday during the summer. And then Derrick, who’s my technical cofounder, basically–I was kind of checking the bank balance. I was busy doing whatever, and then he just texted me a screenshot and he said, “That’s a lot of zeroes, sir. Congratulations.” It was such a virtual high five moment.
Andrew: Yeah.
Rob: It was cool.
Andrew: The most you’ve ever seen in your life?
Rob: Indeed.
Andrew: How much did you sell for?
Rob: I’m under NDA. I’m not able to give terms of the agreement.
Andrew: Did you sell for cash or stock? Leadpages is a phenomenal company.
Rob: Yeah. Also not able to say that. We had 5 potential acquirers over the course of about 18 months that approached us. So it was definitely the deal that we wanted, if that makes sense. Derrick and I, we weren’t open to selling at terms. We were growing. We were profitable, and it didn’t make sense. It wasn’t a bargain basement deal if that makes sense.
Andrew: Rob, I remember seeing Drip on people’s websites. It was this little box that would pop up in the bottom right corner of the site that would offer something in exchange for an email. What I wonder is, at the time, did you know you were going to take on Infusionsoft and who else is out there doing this? Marketo seems like too …
Rob: HubSpot, Marketo, Pardot, any of the email aspects of them.
Andrew: Did you know you were going to take them on, or was your plan to create an easier email capture? You tell me.
Rob: Boy, I had no idea we were going to take them on. It was to create easy email capture. This is before LeadBoxes. This is before SumoMe and OptinMonster. This was when it took us two or three days of development to get a little email opt-in widget. Then we decided not to … We didn’t really want to be frontend for like MailChimp and other things, so we just built autoresponders. That’s all Drip was last time I came on Mixergy. It was pretty much just an email capture box, autoresponders and broadcast. It was like a subset of what MailChimp or AWeber could do.
Andrew: And frankly, if all it was, was an email capture box, it wouldn’t have sold for this much. It wouldn’t have had this much impact. I’m curious about the evolution. How did you know this was a problem? How did you tackle the problem without over-complicating it the way frankly some of your more funded, richer competitors did? I want to know how you just stayed in touch with what your customers wanted, because I understand that was a challenge for you.
But let’s go back a little before that, just to get a sense of how you got here. You were running a couple of other businesses before, right?
Rob: Yeah. I had HitTail, which was a SaaS app that I sold. It was actually just about a year ago now, and I’ve run a number of software products since really 2005. I’ve probably had between close to 10 little products doing a few thousand dollars a month.
Andrew: You told our producer that … Well, you gave her a list of the different products you worked on, and then you said they’re half-baked ideas. What made those previous half-baked compared to Drip?
Rob: Yeah. Early on some stuff I launched, like before 2005, it was solutions in search of a problem. There was no customer development or customer validation. I didn’t do any pre-sales. I often was trying to do B2C stuff, like marketplaces, just the crazy stuff that you see in Inc. Magazine and Entrepreneur. It didn’t really start clicking with me until I started doing B2B and then eventually moved on to recurring. I realized it was hard to grow one-time sales.
Andrew: I’ll say that this is what you told the producer you learned from all those different experiences. You had a bunch of different sites and companies. You said, “I learned two things. One is I need to reach a reachable market that wants what I have and has the money to pay for it.” When you say reachable market, what’s an example of a non-reachable market that you targeted in the past?
Rob: I’ve tried to target folks who are mostly offline, like construction companies. There was another one. What was it? It was in 2003 or something and I was trying to target people who are into personal finance. They were online, but I didn’t know how to reach them. I didn’t have budget since I was bootstrapping. I was unable to reach them even though they may be reachable through these days through social media or through content marketing.
But this is back in the day where you can buy AdWords or you can get someone to blog about you. I’m trying to think of what else. There were like three online marketing channels in 2003. So a lot of the consumer niches, I guess SEO was another one. But a lot of the consumer niches that I was going after were just impossible to reach, whereas businesses are so much easier to get a hold of and the sale price is higher, so you don’t need as many folks to hear about you.
Andrew: I was talking to someone about the difference between a business customer and a consumer. The example I gave was there was an app that I wanted to get from the App Store and it was $8.99, $8.99 for the app and I said, “Let me think about it.” But at Mixergy, if there is something that costs $25 a month and my assistant emails me to say, “Can we spend $25 a month,” I go, “Why are you wasting my time with that decision? Just spend the $25 and we’ll figure it out after you use it.” And that’s the difference. That’s why you want someone who has the money to pay for it and the willingness too.
Rob: Right. There’s so much less price sensitivity with B2B customers, and they tend to be less demanding, less support, easier to reach, the whole deal.
Andrew: One of the companies you acquired you mentioned was HitTail. What did HitTail do?
Rob: HitTail was a SaaS app. It’s still around. It’s a long tail keyword tool. So you can get a Google … You can get suggestions for keywords that you should target in Google in essence, and it’s different than other keyword tools because you actually install a little snippet of JavaScript on your website, or it used to be that way, and now I think it actually goes through Webmaster Tools. It looks at your existing traffic and your existing keywords, and it does analysis on those and it says which of them you’re already ranking for but that you can probably rank for a lot easier.
Andrew: I see. It’s interesting you bought it. I had a conversation yesterday at lunch with Wil Schroter, who runs Startups.co. He bought a bunch of different companies. Zirtual might be the most popular one, the virtual assistant company, but he also bought LaunchRock and others. He recommended that he look into buying a few companies too to grow Mixergy. I asked him why, why buy it as opposed to growing it. He believes that there’s some lightning there. It’s really hard to catch fire in the beginning, so you might as well buy someone who has. I’m wondering why did you buy it instead of recreating HitTail?
Rob: Yeah. I’ve been asked that a lot. There are a couple really strong reasons for it. One is that going from zero to product market fit is 18 months, even with funding, maybe a year. It’s like do you want to spend that much time of just toiling away. Even when you’re really smart … you look at David Cancel with Drift right now. He’s really smart. He’s like a five-time founder. But you can’t shortcut that. You can do it a little faster, but you can’t get there in two months. Almost no one does it. So it’s to shortcut the process.
It’s also if you launch 10 startups, how many of them are going to work, even get to that point of product market fit, whereas if you buy something, you have a pretty good representation that it is actually working. If they have 100 paying customers or 200 paying customers, you know it provides value for someone and you kind of just need to put stuff behind it. For me it’s a shortcut.
Andrew: So, if you have 100 to 200 customers, it means that it’s working for them. Now when you acquire it you have to figure out: Can I get more people like them? Is that it?
Rob: Yeah. That’s the idea. You need to look at churn. Customer number is not the only thing to look at. But if people are sticking around and not churning super-fast and you can see some easy wins, oftentimes you’ll look and be like, “These guys underpriced it. So all I need to do is double pricing.” You grandfather everybody else in, but moving forward, I know that I can grow this business twice as fast, or if you happen to have a really good SEO or AdWords and you see a big open green field in there, they’re not taking advantage of it.
There are typically some easy wins with acquisitions, especially when it’s kind of a solo developer or a couple developers who have built it because they don’t know the levers that can easily grow a business.
Andrew: You know what? The talk that I gave at Converted 2016, the conference last week that I mentioned, was about how to send messages, how to reach your customers using messaging like Facebook Messenger, the way that we do with email. The company that I talked about was called ManyChat, created by developers. That guy is charging $10 a month, speaking of undercharging.
Rob: Right.
Andrew: And $10 a month, what I realized when I talked to someone else about why he’s not growing the list of people who he’s reaching with Messenger, he said, “This guy probably can’t reach more. I’m worried that he won’t be able to scale.” What I learned from that was when you’re charging $10 a month, people underappreciate you. They think that you’re not big enough yet. I don’t see how that guy can make money with it. I hadn’t thought about that.
Rob: I totally agree. Even if he’s gotten pretty popular and has hundreds of customers, think about how little revenue that actually is. So that would be an easy lever if you were to swoop in and buy it, double pricing, triple pricing, just tier the pricing, make it per user. There are a bunch of different things that you can do.
Andrew: Yeah. I can see that. So you bought it. You said that there were some bugs in it, and basically you told our producer it was in rehab. I want to spend a little time on HitTail because this is basically your venture capitalist. This company is what funded Drip.
Rob: That’s right. Yeah. So it had been going down every few months. It was having outages. It was kind of just on its last leg. It was written in classic ASP, which was kind of a really old technology that people stopped using in 2001. So this is 2011, when I’m buying it, and it was like buying a gutted house with kind of a bad foundation. I fixed a ton of bugs. I just dug into it, and I think I worked like 60-hour weeks or maybe a month and fixed a bunch of stuff and moved it over to new servers and then rehabbed it and started the marketing from then on. It took me about three or four months of pretty hard focus on it.
I had the luxury of doing that because I had these other small businesses throwing off enough that I could live on, as well as I run MicroConf which makes a little bit of money and FounderCafe and such. So I do have other revenue streams. So I have the ability to focus on this pretty hard, get it done.
Andrew: FounderCafe is what Micropreneur Academy used to be.
Rob: That’s right.
Andrew: It evolved into FounderCafe because you told me before we started it’s more about the community than it is about anything else.
Rob: That’s right.
Andrew: That’s where it is. You grew revenue from what, $1,000 a month, $2,000 you told our producer to how much over …
Rob: Yeah. It was I think around $1,500 to $2,000 when I bought it, and I wound up getting it up to between $25,000 … It probably got up to $30,000 at one point, but there were some one-time sales in there. So it was pretty consistent for a while at $25,000 a month. And it was really … The nice part is it was just me with a couple contractors. There was a big–I wouldn’t say life-changing, but it was the first time where it was like, “Whoa, I have more money than I necessarily need right now to live on.”
Andrew: Here’s the thing. First of all, that’s super exciting and hard to get to. And second, I had drinks with a developer here in San Francisco, who got a job offer from Apple, from Google and from Facebook. This is peanuts compared to what he’s getting, and you just recreated this whole thing. You’re a one-man team.
So the thing about entrepreneurship that gets me sometimes is that we just don’t earn as much as we’re worth, as much as other people, and we take on so many more risks. This was a big win. To get to $25,000 a month is huge. It means that you’ve figured it out and then you can build on it. But man, it’s always good to just remember we think of these guys that get jobs as suckers, but in reality, they’re pretty smart too.
Rob: Yeah. There’s definitely some money to be had for the right skill sets.
Andrew: And speaking of Google, Google then came and pounded you and what happened?
Rob: Yeah, Google did a couple things over the course of a year. Remember when “not provided” happened and they like stopped providing keywords? That almost decimated HitTail. It was a pretty scary thought of like, “I’m going to lose this revenue stream because Google doesn’t want to give keywords anymore.” So I had to wire it up into Google Webmaster Tools and basically work around it. But it took a month or so of doing that, and the business was starting to have some issues at that point.
Then they kept changing the way … They didn’t have the right API to get this data out, and so they kept changing it every couple months and I’d have to like rewrite pieces of it. It was frustrating relying on them when they weren’t really … They’re just not paying attention to little guys that they’re stomping on.
Andrew: Yeah. Did it decimate your revenue? Were you able to recover?
Rob: I was able to recover. Yeah. HitTail always had a lot more churn than I wanted to. It was a low price point, started at $10, and then it had tiers up. It’s not a requirement. If you think about a long tail keyword tool, it’s like, “This is good while I’m doing keyword research,” and then people would use it for three, four, five months and cancel.
We did have a customer base that stuck around. It needed constant market to stay up at $25,000, otherwise the churn would eat it alive over the course of extended amount of time. But being able to keep the technology doing what it was supposed to was a big win, because then I was able to keep the value of the business because then I was able to use that revenue to essentially fund Drip and then later after Drip was taking off, I don’t have time to do HitTail and I eventually sold it through a broker and it was a good deal.
Andrew: Through a broker. I want to ask you about that broker. I also want to ask you about the broker you used for Drip, which is curious to me because you had acquirers. Why go to a broker once you have acquirers? I thought brokers are supposed to help you find them. I want to understand, again, as I said before, how you figure out what this product was supposed to be and evolved it. But first, a quick message about my first sponsor. It’s called Pipedrive.
I use Pipedrive to book guests like Rob Walling here on Mixergy. My organization used to be really scattered. We tried so many different CRMs, so many different spreadsheets, so many different approaches. Then we finally said let’s go with Pipedrive. What I like about them is they force you to think through what your steps are to close a deal, and for us a deal isn’t a sale. It’s having Rob right here on Mixergy. It forced us to get clear on what our steps were. Then once we got clear on it, everyone on our team could collaborate.
So I have my virtual assistant who finds potential guests and adds them to column one. We have someone else go in and confirm: Do we really want this guest? Then we send you an email, and then if Rob doesn’t respond to that first email request and someone else follows up and we know that Rob didn’t respond because his card in Pipedrive will go red. Every potential guest has a card in Pipedrive. We’re all shearing our guests towards the end goal, and that’s what I love about Pipedrive. If you are out there selling anything, you should be much more organized.
I know that every time I talk about Pipedrive, there’s some nerd with a love for a different CRM who tells me about all the features the other CRM has. Look, I love features too. I don’t care that Pipedrive doesn’t have all the features. I care that they have only the features required to get someone from a stranger to a closed deal, which means being on here. If you need that, you’re going to love Pipedrive. If you need more features, I can tell you about 20 other apps that will give you all the features, but stay focused on sales. You guys use them too, I hear?
Rob: We do. Yeah. We’ve used Pipedrive for quite some time for our sales process. We like them a lot.
Andrew: You mean for getting people to install Drip on their sites?
Rob: Yeah, to start a trial and the to install. So all the way from demo request all the way. We like it for the same reason you do, which is it’s simple. It does what we need, and it’s not so heavyweight like something like Salesforce or whatever.
Andrew: All right. This actually brings up one of your sales techniques that I learned because I happened to have been discovered by one of your people. I’m going to bring it up in a moment. First, let me close out this ad by saying if you want to try Pipedrive — and you should at least try them — go to Pipedrive.com/Mixergy. They’re going to give you two free months, no obligation.
You can totally try this out, experiment with it, see if it grows your sales. If it does, keep it. If it doesn’t, cancel it, and frankly you can email me and say, “Andrew, you’re a dope. This did not work for me.” I’d like to know if I’m a dope. But frankly, not a single person has ever complained about Pipedrive to me. Frankly, my people know if there’s a problem with a company I’m representing, they have to tell me.
Here it is: Pipedrive.com/Mixergy. If you have any problems with them and I’m not representing them well or if you want to brag to me about how well you’re doing, my email address is Andrew@Mixergy.com.
All right. So Rob, I know where you came up with the idea. I’m curious about where you bought Drip.
Rob: I bought HitTail. We built Drip.
Andrew: Oh, you built Drip from scratch.
Rob: Built Drip from scratch. Yeah.
Andrew: And I’m looking at an early version of your site here from Internet Archive, where it says … Where is that? I’m looking at way too many tabs. It was like the ugliest thing I’ve seen, and you design good stuff. It was just basically this one-pager that says here’s what’s coming and if you want it, you should sign up, copyright Numa Group.
Rob: Was it like an envelope with a signup form or something?
Andrew: I think the very first one was like a quick one that said, “Let’s use email and here’s a best practice to create a double-digit jump in your conversion rate. Turn drive by website visitors into customers using the most conversion-focused email platform ever built. Expect 5x to 10x return on your monthly investment. If that math works for you, enter your email below and be notified at launch.” There’s a place for me to enter my email address, and then it says “Copyright 2012, the Numa Group.”
Rob: Cool. That was an early … I like to presell or at least pre-buy commitments and then put up a landing page before we start coding, and that’s what that was. We broke ground on code in December of 2012, and I think that landing page had gone up probably the same day that we committed the first code change.
Andrew: I should have probably said at the top of the interview the URL is GetDrip.com.
Rob: Actually, it’s Drip.co now.
Andrew: Oh, it’s Drip.co.
Rob: Yeah. GetDrip.com will forward over there. But since we moved to Leadpages, Clay Collins is a savvy domain buyer.
Andrew: I don’t know. He’s Leadpages.net. That’s got to really anger him.
Rob: I think people are used to it. Yeah.
Andrew: Did you notice Laura Roeder on stage at that conference say, “Sign up for Meet Edgar.” She is now starting to call it Meet Edgar, where it used to be called Edgar, and the URL was MeetEdgar.com. Did you think of doing something like that?
Rob: It’s actually been a pet peeve of mine, because obviously I couldn’t get Drip.com. It was a squatter and he wanted six figures for it. When we were just starting out as bootstrappers, I just had to get something close. So to get a seven-letter dotcom with my product name in it I thought was a pretty good get. Then people started calling it GetDrip. “Your app is GetDrip.” That was really frustrating for me.
Andrew: Why?
Rob: Just because it wasn’t called GetDrip. Drip, in my opinion, is a pretty elegant product name, so is Edgar, whereas like GetDrip is like a clunky two-word and Get doesn’t add any meeting to it. I was actually glad to change the domain here about four months ago, because now it’s Drip.co and you’re going to have to call it Drip.
Andrew: So I can tell from this that you knew you were going to get into email. To some degree, you were thinking, especially Drip, drip marketing is get the email address, send a handful of messages and then your idea was pass them off to AWeber or to MailChimp or something else?
Rob: So the very first version we built was for HitTail. We’re trying to market HitTail, and I wanted an email capture form on every page of the site, because we got a decent chunk of traffic. It took us two or three days to build that custom on HitTail. I started talking to Derrick, who was a contractor for me at the time, and I said, “Couldn’t we just build this into a little SaaS app?”
I wanted it to be a start small, stay small thing, where it’s like let’s build this, get 10k, 20k, 30k and just have this great lifestyle business. Originally, it was just the email capture widget, and then we sent the auto-responder sequence. We did send email from that.
At one point, some people were trying to use us in conjunction with MailChimp and AWeber, and so we did integrate with them. We would push into MailChimp to keep lists synced. That was kind of a harebrained idea, and by the time we got another six months down the road and we started growing, it was like, “We don’t need those integrations anymore.”
Andrew: Did you do anything to validate that other people needed this?
Rob: Yeah. I talked to … I emailed about 17 founder friends who I thought could be interested in using this. I’d already proven it out on HitTail, and that’s where I got the double-digit jump in your conversion rate. We had seen those results in HitTail by putting up the opt-in widget and then nurturing. We were getting enough ROI from it that, even if we charge $50 a month for this, I think it might be worth it for SaaS apps who know they should be doing email marketing but aren’t.
So I emailed folks, Jeff from Ambassador and Reuben from Bidsketch, Wade from Zapier. These are people that will return my emails, but different people had different thoughts and comments about it. But in essence, I emailed 17 and I think I got 11 yeses in the end who said, “Yes, I will pay you $50 a month if you build it.” That was the commitment. I did not pre-sell, but I got pre-commitments.
Andrew: Wade wouldn’t buy it for his site. Wade would just have someone code it up. My sense is with someone like Wade you were saying, “What do you think of this business?” Is that part of what you were doing?
Rob: No. I actually in the email said, “I’m less interested in your opinion and I’m more interested in hearing would you pay for this.” That’s what I wanted to get to. Wade actually said, “Yes, we have been meaning to do this for a long time.” Again, this is 2012. They do a lot of email marketing now. We were all just coming into it. A lot of startups were just coming into it. So Wade actually did say, “Yeah, if you build that, we’ll use it.” And he did try it out in the early days. It wasn’t differentiated enough for him to commit to it once we actually launched.
Andrew: I see. You had this really good marketing on it where if it popped up on someone’s site, it also said, “Powered by Drip,” or something like that. Was that something that people would remove if they paid?
Rob: Yeah. They could remove … Well, we didn’t have any type of free plans. So, “Powered by Drip,” the link was (a) an affiliate link, and we let people know that so they get affiliate commission if it sells through their site. And then it was at one plan, the $99 or the $149 plan that they could remove that link. To be honest, certain people in the early days requested it at $49 and we would just let them do it. We had very little pushback on that.
Andrew: I’m surprised that there was little pushback. I always feels like that stuff distracts people and frankly, maybe it’s because it distracts me. Whenever something cool pops up, I want to know how did that happen, and if they show me a link, I have to click over and then I’m gone from the site.
I remember at your conference, it was at MicroConf. I was talking to Hiten Shah and I asked him about marketing for apps like yours. I think this might have been before Drip. I don’t remember. He said, “That’s the thing. You get people to put it on their sites for free.” And then there’s a link back to your site. People are going to click on it if they want it. It’s the greatest piece of marketing you can have.
Rob: It’s a really good viral loop.
Andrew: Yeah. Hiten was such a good guest at your conference because yeah, he gave a great presentation, but frankly I can find his presentation online for anything. That bastard will sit down with anyone and give his full attention and spend an incredible amount of time and mental energy thinking through their business like your dad wouldn’t think through your business and care the way that Hiten did. This was late at night over tallboy beers. I don’t know how I ended up with tallboy beers at my room with him. Who’s the guy who basically started growth hacking? Sean. . .
Rob: Sean Ellis.
Andrew: Sean Ellis, who was also at the conference. He was just like talking through all these ideas, talking through what Seam could be doing with his business, and he did the same thing. He came in with his little wheely bag, didn’t even go to put it in the room. I introduced him. I said, “This is Hiten Shah,” to some guest of yours. And he sits down for French fries with us. It’s not like he eats French fries. But the guy is such a freaking good guest.
Rob: Yeah. He’s been at every Vegas MicroConf. I think we’ve done six of them, maybe seven, six or seven of them. He’s been to every one of them. He holds office hours now, he and Stelly, they’ll say right after the conference before dinner, “We’re going to be in this room for one hour,” and they’ll get 30 to 40 people peppering him with questions and going over the businesses.
Andrew: I don’t know how he does it, really good answers, really solid direction. How the hell can he keep up with that?
Rob: He’s a smart guy, man. He’s seen a lot.
Andrew: There are tons of smart people in the world. They don’t have time for you. They don’t have time for their kids. You mentioned you were going to some violin, cello event?
Rob: Yeah.
Andrew: It immediately reminded me of Ben Horowitz’s book, “The Hard Thing About Hard Things,” where he goes, “I never saw my kids. Live with it.”
Rob: Yeah.
Andrew: It’s impressive that he does that. All right. So you came up with this thing. You launched it. You doctor a course on Mixergy talking about how to launch it. You gave step-by-step guidance based on what’s worked for you. The big picture though is you reached out to your audience who you had on your mailing list and you started to sell it to them.
Rob: Yeah. I had built a pre-launch mailing list, and I think we wound up with about 3,400 people on the list. If I recall, 500 to 700 were from my audience. So it was doing talks and podcasts, my blog, just kind of mailing lists, all that stuff. And then the other 2,800, 2,700 were from I ran a bunch of Facebook ads to the landing page, went on other podcasts, kind of did a little podcast tour to talk about it, kind of other marketing channels that was being done while Derrick was building this thing in the background, half-time for that matter because he was doing 20 hours a week on HitTail and 20 hours a week building Drip.
Andrew: I didn’t get to talk to Derrick much at the conference. But I got to actually know that he was a real person. I didn’t realize that you had so much help building it. How did you find Derrick?
Rob: So we both lived in Fresno, California. He competed in this code competition called 59 Days of Code, and I was a judge there for five years. He was this little 21, 22-year old kid who just had mad chops, good design skills. He would basically beat everybody else. There were these teams of people that were dedicated to doing it, and he would go in and win the $10,000.
We struck up a friendship, and he was trying to launch some stuff on his own and nothing took hold. And then he was going to be a consultant and build WordPress websites for local businesses. I was like, “No, I need help with HitTail.” This was right as HitTail crested maybe $10k or $15k MRR, and it was when I was like, “I think I can participate early on part-time basically.” That’s how we connected.
Andrew: You mentioned how long it takes to find product market fit. When you were in that wilderness before you figured out product market fit, what did the product look like and why didn’t it fit?
Rob: Yeah. It was just that simple version that was the email capture and the autoresponders and broadcast emails. The reason it didn’t have fit is because it wasn’t differentiated enough. People could cobble that together with other tools and especially like OptinMonster launched maybe six months after we did or I don’t remember. People started to have more options to build this out. It wasn’t different enough from the existing tools, wasn’t powerful enough, I think.
Andrew: How did you know that that’s the problem? You were contacting people, right?
Rob: That’s right. Churn was way too high. I was trying to figure out how do we get churn down in a way that not like certain people try these tactics of, “I’m not going to have a cancellation link in the app.” It wasn’t anything like that. I wanted to figure out truly how do I get people to not churn using features and buy building the product out?
And so I had Andy, who was our support guy and VA, had him email the last hundred people who had h cancelled and ask him why he decided to cancel on them and then he put those into a Google Doc and I looked through them. There were varying answers. One that kept coming back was Drip’s really easy to use. I love the UX, so easy to get set up. But it’s too expensive for what it does. That was the big thing. They said it’s not worth $49 when I can cobble this together with less expensive tools.
Andrew: They specifically said it’s too expensive for what it does.
Rob: Yeah. I saw several like that. That made us start to think … You sit down and someone says that and you think, “Should I lower the price?” And I really didn’t want to. That moving on from HitTail, I did not want another $10, $20, $30 product. I wanted to have $50 be the absolute lowest price point. That was where it was like, “What features can we build to make this thing worth $50 a month? What can we do to justify this cost?”
I call it like aspirational pricing. It’s like I’m aspiring for this app to be $50 a month. What do I need to build? That’s when I started talking … The customers who wrote back and said that, I said, “Okay, what does it need to have to justify that price?”
Andrew: You specifically asked them?
Rob: I did. I probably had 20, 30 conversations, all via email, with both people who had cancelled, who I didn’t know, as well as I had some really good early adopters like Brennan Dunn from Double Your Freelancing, Drew Sanocki, who’s big in the ecommerce space. They were saying things like, “You know, Infusionsoft is really powerful. Have you ever thought about building a subset of their features? Or just even adding automation can really up the game.”
And I was like, “I don’t want to do that. I don’t want to battle these companies that have raised literally nine figures of revenue, like $100+ million. There are a number of them and some of these are $1 billion companies. I don’t want to get in the red water. It’s going to be time-intensive.” It’s going to be a lot of hard work, whereas I was trying to build a little lifestyle business.
Andrew: That’s a big decision to decide. You really were in the lifestyle business business.
Rob: Yeah.
Andrew: When you said, “I’m going to compete against them,” what did it take for you … I’m talking about mindset to shift to get to that?
Rob: Yeah. It was a couple months of. Derrick and I together had to hear it from customer after customer. As it started to take shape and people were explaining what you could do with automation rules, see if someone watched a Wistia video and if they didn’t make it 20 minutes in, then you could pop an event into the system and email them later and say, “Hey, didn’t finish the video.” Just brilliant automation stuff like that, not to mention shopping cart abandonment, just basic having people click a link and be tagged with something and being able to know …
Andrew: It can get nuts.
Rob: It’s super-sophisticated. Once I heard that, I was like, “This is really clever stuff. Is there a way to build it really simply?” I just kept hearing from smart people, who I respected, who I knew were good markets and I had to hear it enough times, 10 to 20 times before I was like, “We just have to build this.” I remember taking a deep breath and telling Derrick like, “We need to build this.” He was like, “No.” But we took the plunge.
Andrew: And what they were saying was, “We want this kind of automation to know when someone’s hit the shopping cart several times and hasn’t bought or clicked every email and hasn’t bought.” But there’s a list of people who do it. Why didn’t they want it from them?
Rob: Because the products were really expensive. They started about $300 a month. Infusionsoft has a $2,000 upfront fee or $1,500 or something. So people didn’t like that. It’s also extremely, from what I’ve heard, hard to use.
Andrew: You’ve never used Infusionsoft?
Rob: I’ve never used Infusionsoft. I’ve seen like video walkthroughs of it from friends of mine. But I’ve never actually clicked around in there. At the time, especially Campaign Builder was buggy. I think you could only use it in Firefox. There was just a laundry list.
Andrew: Yes. I had to … So, when I signed up, this was not that long ago. Frankly, I had to go and install Firefox just so I can adjust the campaign. The thing is it’s kind of hellacious. There was this charge on my credit card every month, and every month I’d go through it with my bookkeeper. Then I finally realized it’s the company, the cover your ass company in case something breaks with Infusionsoft. I need somebody who I can contact, who will jump in there and fix it. I paid them just for that. That’s in addition to other people.
The thing is I don’t like Infusionsoft. People ask me, “What do you use?” I know what they’re asking. It’s, “What do you recommend so much you’re using it?” I can tell them I use Infusionsoft, but I can’t recommend it. But I can’t switch easily. It’s a pain in the butt. I don’t even know what some things are getting tagged or where they’re getting tagged. So the fact that Brennan is telling you, “Make my life easier,” doesn’t mean he was willing to switch, that it actually made sense.
Rob: He told me he was willing to switch. Even if he had a lot of stuff built, he said he’d rebuild if we built a good system. There were other people who said that they either … It depends on how far you’re invested. If you’re years into it and building visual campaigns, it is a difficult switch. But if you don’t have a ton of that or you just have a few you can bring over, just bringing subscribers and tags to bring over is pretty simple. There were enough folks who said they would definitely … A lot of people were outgrowing MailChimp, AWeber and didn’t want to go up for Infusionsoft, and they kept asking for a middle ground, like a less expensive, easy to use version.
Andrew: And AWeber is so bad for the stuff. This is not you speaking. I’m going to speak. I like AWeber as a company. The problem that I had with AWeber is they got comfortable. Everybody signed up. We weren’t going to shift over, and they made it so hard to even tag people that if someone bought, I had to put them in a separate list and then when I sent out a marketing campaign, I’d have to say, “Email this whole list but not this other list.”
And again, I was paying for each of those lists and each person on the list. So I was then essentially paying for more than Infusionsoft for way fewer features and a clunkier system. It was really, really a sad experience. Again, it was hard to leave them.
Rob: That’s a bummer. When you get big, it’s hard to change. Your data model and you have hundreds of millions, if not billions of rows in a database. It’s tough to add automation later. I mean MailChimp and AWeber certainly knew that they should add … Campaign Monitor is another one I was thinking of, Constant Contact. I’m sure people were asking them for automation because a lot of people were asking us. But it was easier as a startup to be able to get that stuff in from the start.
Andrew: Okay. Well, ManyChat, which kind of does this stuff for Facebook Messenger, I think they have a hard time communicating the automation sequence. It’s really hard if you’re in Infusionsoft to go in and figure out when someone does this, here’s the next thing that happens and so on. I want to know how you figured that out, because that’s a really complicated process to lay out for people who are new to it.
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The process, Rob, of explaining to someone how marketing automation works is pretty complicated. The process of then explaining to that person how to structure an automation process where if someone doesn’t click, this happens, and if they do click, that happens. How did you design that?
Rob: Do you mean the actual visual builder we built?
Andrew: The visual builder.
Rob: The workflows? What we did was we built these one-off automation rules that allowed people to do it. People would create 40, 50, 60 of them. Pretty soon you don’t even know why people are being tagged or why they’re getting emails. So we were trying to solve that problem. How do we get visibility into all these rules? We realized a visual sequence — we call it a workflow — is the way to link a bunch of rules together and get visibility into it.
So once we realized it was visual, we thought there are other visual builders out there. Infusionsoft is one. I think Agile CRM is another, Active Campaign. There were a few folks who had done it. Then we looked at those and said: “What are the pros and cons of each of them, and how do we build one that tries to be better than all of them?”
Andrew: So you were looking at them and saying, “How do we do it better,” just based on your experience. It wasn’t like laying out suggestions to Brennan Dunn and saying, “You asked for this. Is this the way you want it?”
Rob: No. It wasn’t. I did talk to Brennan and I talked to … There were a bunch of dudes who used Infusionsoft a lot, and I was trying to figure out if there were some major … I did ask them what the major drawbacks to it were and what do they hate about it. There were a bunch of things in terms of being able to build nasty diagrams he can’t read.
So we’re like, “How do we make it impossible to do that?” And having to double-click on every node to see something, how do we make it more readable from the topline view? The left to right scrolling of campaigns is kind of sketchy, so we did vertical scrolling because that’s the web. One at a time we like sussed these things out, whether it was through our screenshots and screencasts we’d seen or through customers giving us their pain points.
Andrew: At what point did you get it so good that Brennan, who’s really known for this stuff, for having a good email experience, what point did you get it so good that Brenna Dunn was willing to trust his email campaign to you?
Rob: I’m trying to think. He had a Drip account, but he was also using Infusionsoft for a while. That was in late 2015, and I think he may have switched over before we launched workflows, but he knew they were coming. I told some people we’re building basically a visual builder. I can’t remember if he switched over in late 2015, or if it was right after we launched workflows, which was January of this year.
Andrew: Okay. January 2016 you launched it, 2015 he might have. 2015, going back in time a little bit, was a tough year for you. You actually told our producer devastating is how you describe it. What happened 2014 that was so devastating?
Rob: Yeah. 2014, the problem was I was taking money out of HitTail, pretty much all the revenue coming out of that was funding Drip. We didn’t have product market fit. So we launched. I felt like I should know how to do this by now. I’ve done it by now. I’ve taught it enough. We should be able to get there fast. I think at the time the most money I had in the bank was $130,000, I think. That was all revenue from all these products I built over a decade.
I said in order to … We just need to move faster. We’re not growing. We’re at $8k MRR with Drip. We need to move faster, so I’m going to hire two more developers. It was Derrick plus two others. That just spiked up payroll above the actual revenue that I had. But I knew I had this $130,000 in the bank, and then March, April was brutal. I basically had a $60,000 tax bill come through that I should have been aware of, but I was totally caught off guard.
I then had some estimated taxes. I had some expenses that came through, a bunch of unexpected stuff that I hadn’t accounted for, and my bank balance dropped from like $130,000 down to I think it was $20k or $30k in the bank. And I’m burning money. It was extremely stressful, all of 2014, probably the toughest year of my entrepreneurial career.
Andrew: What happened with the tax issue? What should we be aware of?
Rob: I just had a lot more … I had more profit the prior year than I had in the year before, and so my estimated taxes were way too low. So my CPA each year asks, “Is next year going to be like this one?” And as it turns out, when HitTail is doing $2,000, $3,000, $4,000 a month, you’re going to pay a lot less taxes than when it’s doing $25,000 a month. I should have told him or at least halfway through the year should have noticed, like “Hey, I’m making twice what I did last year. Should I up these estimated payments?” I didn’t. So then I owed this big bill at the end.
Andrew: Here’s mine. Oh, my Social is on it, so I can’t show it. My accountant sends me these every year, the estimated envelopes with the sheet on it. It’s got my wife’s Social, so I won’t even show it on camera. I always just keep it in the drawer for the whole year, and then I toss it at the April 15th deadline to file taxes.
The reason I do is one of my past interviewees said, “Stop paying the estimated. You’re going to have to pay some penalty. But then you get to play with the money for the year, and you might as well get the penalty.” And frankly, if you lose money, then you don’t have to ask them to give you back your money. I know that’s a little bit dangerous, but that’s what I do, and then in the back of my head I understand how much I have to put away. Now you’re making me realize there’s a real danger to that.
Rob: It can be if you get a $60,000, $70,000, $80,000 tax bill and you’ve counted on money. I wasn’t thinking well enough. I looked at this balance in the bank and thought, “I have this money to grow Drip.” But it actually most of it was spoken for, that was the real problem.
Andrew: Did you lose money 2014, then?
Rob: I think we did, like Drip as a company?
Andrew: Yeah. You as a person then.
Rob: Yeah. Oh, I was definitely … By the time Drip broke even, I was probably close to $200,000, $150,000, my salary, Derrick’s, the two developers, all the marketing.
Andrew: I see. After your salary it lost money.
Rob: Yeah.
Andrew: So here’s another point I want to make about taxes. I don’t want to get too deep into taxes. We have a course on Mixergy where someone else is going to do a way better job than I can about it. If you lose money after you pay taxes, because you made money the previous year, you can get back some of those taxes.
Rob: Got it. Yeah. I see what you’re saying.
Andrew: Did you get that?
Rob: Overall, including all my revenue … I have money coming in from MicroConf and still from my book that I wrote, so overall I did not …
Andrew: I see.
Rob: So, then you can’t get it back. But Drip was definitely …
Andrew: Getting money back is a super surprising, shocking thing. I remember seeing some of those IRS checks. Not only is it possible, but they didn’t really just put me through the ringer for years before sending it over.
Rob: It’s been years since I’ve gotten any money back from the IRS.
Andrew: Me too. But the fact that it’s possible is really an eye-opener.
Rob: Yeah.
Andrew: I see. So was there any period there where you said, “I have to get out of this. I’ve got kids. I’ve got a life here.” No? You knew that it was going to turn around?
Rob: I was going to brute force it until it turned around. I was in it. That was it. At a certain point I would have completely burned out and flamed out. I don’t know how long it would have taken. But there was just enough hope. It was flat lined at $7k or $8k, and as we started rolling out these automations, it started ticking up. It took us maybe four months to get the automations out, and I could see the revenue going up, at first $1,000 a month, then $2,000, then $4,000, then $5,000.
As soon as that started happening, it was like, “We’re on this thing. The time period where it was really hard was about five or six months, and that was stressful but I’d been through tough times before. And it wasn’t going to bankrupt us. I have enough other income that I was playing the long game on this one.
Andrew: But it did kind of distract from the family. You weren’t fully there.
Rob: 2014 was … yeah.
Andrew: Sherry, your wife, is a therapist, right?
Rob: She is, yeah, a psychologist.
Andrew: Did it help that she was a therapist, or did it make it harder?
Rob: I think it probably helped, because she has so much insight into people and how we work in general. It’s harder for her to kind of have insight into us, meaning me and the kids, because she’s so close to use, but she had good recommendations when she would see me moping around or see me getting really mad. She’d be like, “You need to take a few days off. You really need to figure this out. You need to troubleshoot this. What are you stressed about?” I’d say, “It’s about money.”
She’s like, “Well, how do you fix that? How do you fix it? You’ve been stressed about this for five months. What can you do? Can you borrow from a 401(k)? Can you take out a loan from somebody? Do you have to lay somebody off?” She’s like “You need to fix this. You cannot carry this burden around forever, basically.” I think that’s a good … Psychologists tend to have good self-care, they tend to have good recommendations, and that’s something I tend to need because I burn myself out.
Andrew: Were you able to actually take a vacation with all this on your head?
Rob: We went to Thailand, because I spoke at Dan and Ian’s tropical MBA, the DCBKK. We did go to Thailand for a month. I enjoyed part of it, and I was stressed for part of it is what I’ll say. I definitely have fond memories of it. But I also remember really sitting down and talking to Sherry and being like … That was the moment where I was like, “I’ve got to fix this.” That was October. It had been on and off since March, in essence.
Andrew: I know I’m going to go through this at some point in my life again. I know I’ve been through it horribly. What’s one piece of advice you can leave me with, when I go through that, that period where I can’t stop stressing out, even when I’m on vacation with my family and I can’t enjoy it?
Rob: Yeah. I think the two pieces of information are the two pieces of advice that Sherry gave me. If you don’t have new information, you have to stop thinking about this, like thinking about it doesn’t help. If new information has come up or if you have a new idea or a new plan to fix it, then there’s a reason to think about it.
The second thing she just said you can’t carry this burden around forever. You need to make a change. A lot of people get stuck in certain behavioral patterns or a certain scenario, and it’s like helplessness, “Oh no, this is happening to me.” It’s like this isn’t happening to you. You need to break yourself out of it. It’s not going to fix itself. I think that advice helped me as well.
Andrew: And what did you do to break yourself out of it?
Rob: To be honest, I was considering laying off a developer, which was a really hard decision for me. And as I was thinking about this, revenue started to tick up. I was getting ready to make the move to lay somebody off, which is something I haven’t really talked about in the past, but that’s a tough thing for me. I’m extremely loyal. That’s probably one of my strengths is I’m loyal to people.
So it was a challenge. But revenue started kicking up. The other thing that happened is I think we may have sold tickets to the next MicroConf, and we didn’t have the expenses for another five months and I had the float, however many thousands of dollars. I knew we were starting to grow, so it wasn’t some gamble where I was shoveling money somewhere. It was like this will get me another three months, and then I won’t need to lay him off. I came into just enough cash.
Andrew: It really helped that you had all those other things going, for both revenue purposes and I imagine for mindset too.
Rob: I think the mindset part, I’d prefer to have focus, to be honest. I do like MicroConf because it makes me … I love the event itself. I guess it makes me feel like I’m giving back and having the legacy thing of having everybody hang around. But having other apps, like multiple apps going on was not pleasant. As Drip was starting to grow, I’d have to turn my focus to HitTail and rewrite some piece of it. That was a bit of a bummer.
Andrew: So then awhile back, I went into my inbox and I saw an email from someone who I didn’t recognize who worked at Drip. Essentially it was something like, “I see you use Infusionsoft. Would you like to try something better?” Now, that alone got my attention before I even looked at the sig line to see there was some Drip reference. That was part of your marketing.
Rob: It was, yeah.
Andrew: Was it effective, or am I just going down the wrong path?
Rob: It worked pretty well for us.
Andrew: How did you do that? I talked to you last week about it at the conference, and I was a little bit off but not too far off. What was your process for doing that?
Rob: It was … I’m trying to think if we originally … I think the whole time we used a company called LeadFuze. Full disclosure, I’m now an angel investor in them, but that’s as of two months ago.
Andrew: What’s it called?
Rob: LeadFuze.
Andrew: LeadFuze. Okay.
Rob: But we were using them … maybe 15 months ago we started using them. They were at the time a done for you service, and now they’re purely a SaaS app, the software to do this. But basically they were going to BuiltWith and Datanyze, and they were pulling down Infusionsoft users and then they would craft like a really decently written email. They got responses and people would want to see demos of Drip. You can kind of pitch folks on, “Hey, it’s a lot less expensive. You don’t need a consultant to use it.” It worked. It brought folks over.
Andrew: So Datanyze is a company that I didn’t know about until you told me about. BuiltWith I did know. Basically, if I understand them right, you can say, “What software does Mixergy use?” And it tells you all the different software we use or you can say, “Who uses Infusionsoft? Who uses WordPress?” And then get a list of all those. Then what Datanyze does is it finds the contact information of the right person there, sends out emails to that person, not just one, but a few follow-up emails too. Then once a human being responds, then it goes to someone at your company who follows up and nurtures it. I’m sorry, go ahead.
Rob: That’s what LeadFuze does, exactly. Datanyze is just the data source. I don’t think you can send the emails through them.
Andrew: No. It’s just a way to know who’s using Infusionsoft, etc. There are so many people using Infusionsoft. Were you able to tell them, “I need someone using Infusionsoft, and is this size company?”
Rob: No. But we were able to look at how long they had been using it, location, geography. We would prefer US customers for logistical reasons. So we did narrow it down a little bit. I think Infusionsoft says they have 30,000 to 40,000 customers, and I think the Datanyze list is only 8,000 or 10,000. So I’m not sure why they don’t have everybody.
Andrew: Maybe people don’t’ even bother using it after they sign up.
Rob: Right, if they don’t install it. That would be sad.
Andrew: You pay $2,000 to get started. You feel like, “I can’t cancel because then I have to pay again to install it again.” I don’t want to put down Infusionsoft. It’s not the worst piece of software ever. It’s kind of weird, though, that Leadpages bought you, and then I go to the Leadpages conference and who do I see everywhere? Infusionsoft. They sponsored.
Rob: Yeah. Leadpages is still partnered with Infusionsoft. They’ve had a long-running partnership. That’s something Clay, who’s the CEO of Leadpages made pretty clear early on. He’s like, “We are going to own Drip, but they’re still building integrations with all of our competitors and we’re still building integrations with all of Leadpages competitors. The idea was not to make things more closed but actually to try to continue the open approach that they had.
Andrew: I asked someone at your company at Leadpages … We’re going to get to why you sold. I don’t want to spend too much time here, I know we’re close to the end, but I do want to know about the broker and so on you used to close this deal. But I contacted someone at Leadpages, a guy named Adam Hanneman, who’s now doing a lot of the work for Drip. I said, “What the hell is it about Drip?” I said, “I won’t use your name if you tell me it stinks and Rob has good name and it’s too sticky to leave.”
Here’s what he said. He said, “API is real powerful. You can integrate your own software and create customer workflows. I guess Leadpages uses it and so if somebody hits a landing page within 30 days, you can have Drip send out an email.” Oh, I see. I said, “So this is good for getting customers?” “Not just getting customers. We’ve discovered at Leadpages that a customer who actually uses our software is a better customer because they stick with us for a longer period of time. What we do is we email them until they create their first landing page. Then once we do, we send them a different kind of email to market to them to try to get them to creating a landing page after the create a landing page and that’s what it’s helpful for.”
I said, “What made them so good in the early days?” He said, “A woman named Anna Jacobson was your fourth hire.” “What did Anna do?” He said, “She did demos nonstop.” What did demos do for you guys? How did that fit in?” I see you’re smiling. I’ve hit on something, so I’ll pause.
Rob: Yeah. That was a good one.
Andrew: Tell me about Anna and what happened.
Rob: After the three developers and myself, I realized that I don’t enjoy doing demos and video stuff and screen sharing, and I’m not particularly good at it. So our next hire was Anna Jacobson out of Fresno, California. She was just a local woman who was working for a marketing agency doing marketing.
I knew as we upped our game and got into marketing automation, it became pretty obvious that we would be able to close bigger deals. They were people who were willing to pay us $300 to $500 a month, who just wanted to check on the phone or just, “Can you do a quick screen share?” I’m like, “I totally don’t want to do that, but this is worth it.” There were some levers that really made Drip the hockey stick. Launching automation was one, bringing Anna on was another, and then workflows was another.
There were other marketing approaches too, but Anna was solid. And yeah, she just came in and started doing demos, and she did a lot of webinars as well. She would do onboarding calls as well. Again, if someone signs up and they import, 20,000, 30,000, 40,000 subscribers, it’s worth quite a bit of our time to help them be successful with our product, because long term that’s a ton of money for us.
Andrew: I went to Drop.co. I see, Drip.co. And so how do you know for sure, since you’re watching your dollars very carefully at this stage, how do you know for sure that you can actually pay for Anna who’s going to be calling people up and doing demos and so on when there isn’t a direct return on investment the way there might be when you’re signing up for LeadFuze?
Rob: For sure. I think a lot about this stuff. I think I would on a retreat. I go on a retreat just for two days to get away from the family and think about business and personal goals, and I went away that January.
It was January of 2015 and just gave a ton of thought to what does the next 12 months at Drip look like and where are the weaknesses? What can we do? I was already doing a lot of market, but I knew that this medium touch sales. Low touch sales is when they sign up on their own. High touch sales is probably in person demos or flying out to meet them. What is the in between there? I was doing a bunch of screencasts for people.
They would email in and say, “Can I get a demo?” And I would return a one-off screencast for them. Or they would say, “What can Drip do that MailChimp can’t?” And I would just record a screencast. People would see it and they’d lose their minds and be like, “This is exactly what I need.” So I started realizing once they see it, it makes sense. So I had a pretty good hunch that Anna or someone doing demos would work, and it just so happened that Anna became available.
Andrew: All right. Let’s close it out with the sale. By the way, I’m on Drip.co right now. Tim Page is now doing webinars for you.
Rob: Isn’t that cool?
Andrew: Tim Page is like the rock star. Who knew that there was a rock star of the webinar world? Tim is the guy.
Rob: Tim is it. There are a bunch of rock star folks. That’s the thing. Being at Leadpages, the marketing team here, everybody here is super sharp.
Andrew: They really are. They’re so good. They’re so good that I mentioned to them I wanted to do scotch night at their conference. The woman who was my concierge — I had a concierge — said, “Great,” and I said, “I’m a having a hard time about finding Laphroaig.” I’m kind of anal about wanting to do a smoky whiskey.
Meanwhile, we’ve got tons of people coming into my room afterwards. I was eager for them to try all the different whiskeys. Nobody got a chance to taste and really appreciate Laphroaig. It was just all for me. But she bought it for me, had it put in the room, and the hotel dressed up my room nicely so I can have people over with glasses and ice and all that.
Rob: That was cool.
Andrew: That was a good even.
Rob: I tasted Laphroaig. I appreciated it.
Andrew: You did?
Rob: I had one of each.
Andrew: You and Sherry went straight to Laphroaig, which endeared you to me so much more.
Rob: Very good. I like the [inaudible 01:02:18] stuff.
Andrew: And you knew not to swig it. I poured it for a few people at first. One person shot it and another person said, “Do we shoot it?” I go, “No, you don’t shoot this.”
Rob: And don’t add ice to it either.
Andrew: No. Appreciate it for a second. So did you intentionally say, “It’s time for me to sell Drip?”
Rob: No. We were being approached. Even before workflows we were getting every few months I’d get email. About every two weeks I’d get an email from a venture capitalist. That was the irritating part. But the acquisitions were at least interesting. They’re like, “This is not my plan to sell, but at a certain point, you have to rephrase the question of under what circumstances would it make sense to sell?” That’s what I started asking myself, like what are the deal breakers and at what point does it make a lot of sense. There are a total of five companies including Leadpages that approached us.
Andrew: They just happened to approach you?
Rob: Leadpages specifically?
Andrew: All these companies, or did you do anything to put out feelers?
Rob: No. No feelers. It was all people stumbling upon us. By this time, we were top 10 or 12 on the Datanyze marketing automation list. If you go to Datanyze marketing automation, you’ll see I think we’re at 12. They have market share in their whole database. It’s like Infusionsoft and whoever else. I think we were, again, bootstrapped and a year or two into it.
Andrew: And now you’re showing up on their list.
Rob: Yeah. We made it into like a Mashable report that was about the best marketing automation, and we were the recommended on for small business because of the usability and the price. We just started appearing on other people’s radar.
Andrew: That is so cool. I had no idea you could do this. So Datanyze, because they know what software is on whose websites, actually puts together this list and you could see who’s on top. Wow.
Rob: It’s pretty cool.
Andrew: That is impressive. Some people I thought would be on it are not on that list. I definitely see you on there. I’m going to talk to the founder of Bounce Exchange later today. Neil Patel emailed me and said, “Dude, you should have him on.” I said, “I happen to have an opening right now. Let’s make it work.” And I see he’s on that list. So how did you pick Leadpages? Was it just straight up who’s going to pay the most?
Rob: No. There were a bunch of factors. When you’re doing a sale this complicated, when a team is coming with it, it’s more complicated than that. I’ve sold apps for just the technology before, and at that point, you’re looking for the highest price. Given the fact I was probably going to be working with them for a period of time and that I wanted my team to get taken care of and I didn’t want the product shut down, it was like you have to take all this into account during that.
Andrew: Why? You’re talking about providing for your families for years, the rest of their lives. At that point, who cares whether they shut it down or not? It’s their prerogative. They own it. Why not take a little extra?
Rob: You’re just baiting me. Because I’m a product person. You know that. This is part … I never say my products are my babies, because I have real babies and there’s a difference. My products are part of me. Derrick feels the same way. This is something that we’ve grown and nurtured, and thousands of people rely on this to run their businesses. That would be a bad mic drop if I just said, “I’m out of here,” and somebody shut it down.
All those customers, what do they do? Migrate to Infusionsoft or something? It would not be good. Personal brand is tied up in Drip. You’ve got to think long term of what’s my real legacy. If I look 20 years out, it’s probably more about Rob Walling starting a community and getting bootstrappers together and stuff. I was aware of that, and if Drip had been shut down, it would have been this big taint on that reputation.
Andrew: Did you get any shares as an employee of Leadpages? You’re there, right? You’re helping with the transition. You moved there, which tells me you’re going to be there for a bit.
Rob: Moved to Minneapolis, yeah. I have stock options. That’s the standard package.
Andrew: Which frankly I think from Leadpages is a fantastic deal.
Rob: I agree. They’re growing fast.
Andrew: I don’t know what your compensation is over there, but any shares in that company have got to be impressive.
Rob: I think all their rounds have been over-subscripted. It’s kind of a nice benefit to get some ownership as well.
Andrew: So then why hire–and by the way, you mentioned legacy. I’m totally with you. It really hurts me that you can’t go to Grab.com and see what I built. It’s like a whole other thing right now. You can’t go back to MailBits.com, which I had before I see it. It’s gone. You can go back to old internet Archive articles about it and say, “I did exist back then.” That’s kind of a sad way to point to what you’ve done. I’d much rather have something that continues. So I totally get it.
Especially as someone who’s had you on Mixergy several times, I’m really proud now. I’m looking at the site. You’ve been on five times, including the thousandth episode. You’ve taught how to launch a web app. Not only did you launch it, you launched it killer and it kept growing. You taught how to get sales. Look at the headline that we picked for that course, “How to Finally Get More Online Sales in 53 Minutes.” Fifty-three minutes was how long the recording was.
I’m really proud of the content in there. Anyone can go back in there and listen to it and go, “Maybe Andrew’s a jerk, but this guy Rob has substance to it, and at least this jerky Andrew gets people of substance in there.” People should just click on your name with this post and see all of the past times that you’ve been on here. It’s solid stuff and holds up over the years.
So, then why get FE International? You have a reputation. You have these buyers. FE International is to help you sell your company. They often will go and find buyers for you. What do you need from them?
Rob: I hired FE really as an advisor because the folks when you’re–if you’re selling a company, the people on the other side who are acquiring you, they have probably done hundreds of deals. You will do maybe two in your life, maybe three.
I’ve sold several, maybe half a dozen to a dozen small apps that were just technology ranging from $10,000 for the whole thing up to low six figures, but I’ve never done a deal like this where you’re talking a substantial sum of money and all the terms are very complicated and completely custom. There’s no boiler plate. It’s just all these big agreements and then figuring out what terms are correct and usual and acceptable versus things that kind of raise an eyebrow. FE has a couple folks who have been in investment banking.
Let’s say FE didn’t exist. I would have probably tried to get a connection to an investment banker because that’s the people who would represent you. I need somebody on my side who wasn’t a lawyer because I didn’t want all the nitpicking up front until we had the documents and who could just advise me at that process. The total process was 13 months long. The really intense part of the process was five to six months long.
Andrew: Wow. So, I didn’t even know that FE did that. I thought all they did was find people. Is this part of their offering or did you just suggest it?
Rob: I was the first one at this scale. Basically I had already worked with them on HitTail and I’d known Tom Smale, the founder, for a long time and I knew I had worked with one of their brokers named David and I basically asked him, “Have you ever done …” I actually did it at Rhodium Weekend, this conference in Vegas. I said, “So I’m asking for a friend. . .” I totally pulled that one. The employees are going to come with it. Have you guys ever done that? He said FE itself has not but two of used to do this all the time from both sides of the table. Both as acquirers and as sellers, as representatives.
So it kind of made it a no-brainer, because I trust these guys. If I’m getting a cold intro to somebody in New York City who’s going to represent me, (a) I’m a peon compared to the $100 million deals they’re doing. And (b) do I trust I have my best interest? Am I really going to put in the time? I knew this was going to be time intensive. So that was it. I went with him. It went really well.
Andrew: Thomas or Thomas?
Rob: It’s Thomas.
Andrew: I told him last week when I finally got to see him in person the first time, I said, “I had you on Mixergy to teach this course because my research showed you were legitimate. But to be honest, in the back of my head I couldn’t tell, ‘Are you guys real or not.'” It’s only when they started to post sales that they’ve done of people who I knew and respected that I realized this FE International is actually legit. They’re not … I don’t know what I thought they were.
Rob: There were a lot of fly by night brokers even five years ago before FE and Quiet Lights, another one and there are a few others that are more reputable these days. There were a bunch that were so shady, in my opinion they were. Stuff was really suspect.
Andrew: The whole thing could be really super shady.
Rob: Yeah. I’m really glad those guy were on the scene. I think it helps our whole industry to have a secondary market for SaaS apps and WordPress blogs and such.
Andrew: Yeah. I think it was Mike Jones who runs science now. They helped incubate Dollar Shave Club and a bunch of others. He told me privately about some of the stuff that would happen to the brokers too, that the whole thing is shady. People would sell their companies and the guy would not get paid, or the advisor, not the broker. The whole thing was really shady so to have somebody go in and have some reputation helped.
Alright. We definitely went over here. I appreciate the extra time. I appreciate also that after my son’s birth, I had to go back to the hospital with my wife, we contacted you and apologized and you said okay, no problem and you made it work and gave me a second time slot to record this. I appreciate all that.
Rob: For sure.
Andrew: Thank you so much. Anyone who wants to check out your site should go to Drip.co and start calling the company Drip. Do not call it GetDrip.com. It’s a solid product. What I especially like is even if someone does not want to use it, I’ve actually gone to your site just to show how to explain tough concepts because you do such a good job with that landing page.
Even before you sold the company, you were really good with that. So, anyone who wants to go check I touts should check out Drip.co. Do not ask me what I use for my email. I do not recommend. I’m not telling you to go burn it. But just because I use it doesn’t mean I recommend it.
Rob: That’s Infusionsoft, not Drip.
Andrew: Yeah. That’s Infusionsoft. I’m not telling you that I recommend Infusionsoft. I think they’re good people over there, but it’s a little too complicated. And my two sponsors of course are if you want that sales software that we use, the CRM that helps you close sales, it’s called Pipedrive. Go check them out at Pipedrive.com/Mixergy. And the hosting website is HostGator. Check them out at HostGator.com/Mixergy. Thank you for listening and Rob, thanks for being on here again.
Rob: Absolutely.
Andrew: Bye, everyone.
