How to stay competitive when Elon Musk and Peter Thiel are gunning for you

Matt Gillin, the guy you’re about to meet, started a business and very quickly had two big competitors—people who you already know. Elon Musk and Peter Thiel.

And both of those guys came gunning for him.

The way he dealt with that onslaught and the way he created his company allowed him to build something that he eventually sold for $220M in 2008.

The company he founded was Ecount, which provided pre-paid programs for corporations looking for a simple solution to deliver payments and he is currently the CEO of Relay Network.

Matt Gillin

Matt Gillin

Relay Network

Matt Gillin is the founder of Ecount, which provided pre-paid programs for corporations looking for a simple solution to deliver payments and is currently the CEO of Relay Network.


Full Interview Transcript

Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of It’s the home of the ambitious upstart and the place where I interview entrepreneurs about how they built their businesses. I do these interviews for an audience of entrepreneurs who are learning from my guests, who are building their companies, and very often as you’ve noticed lately, coming back here and talking about how they built their businesses too.

Well, Matt Gillin, the guy who you’re about to meet here today, started a business and very quickly had two big competitors, people who you already know. Elon Musk started looking at his site, and Peter Thiel, from a different direction, and both of those guys came gunning for him. The way he dealt with that onslaught and the way he created his company allowed him to build something that he eventually sold for $220 million to Citigroup in 2008.

The company he founded was Ecount, which provided prepaid programs for corporations looking for a simple, convenient, and cost-effective way to deliver payments. So for example, if you bought a phone and the phone company wanted to give you a rebate back, they might send you a prepaid card that they have because of Ecount. Today, he’s running his latest startup. It’s called Relay Network. It’s a private, secure messaging platform for businesses. I’ll give you an example of how that’s used too.

For example, if I have a loan with Citizens Bank and I want to ask them a question, well I can just text message them privately, and Citizens will actually know who I am and they could message me back securely. I want to ask him about how he built up Ecount, and also see why the guy who built up this really successful company is able to continue to grow. Or was it just a one-business thing?

This interview was sponsored by two great companies that you probably have heard me talk about a lot, because my audience keeps signing up for them. The first will help you find your next great developer. It’s called Toptal. The second will help you and your team actually close more sales. Pipedrive is their name. I’ll tell you more about those guys later. But first, I’ve got to welcome Matt. Matt, good to have you on here.

Matt: Andrew, thanks for having me. I look forward to it.

Andrew: You’re a guy who, all the way back to when you were nine years old, was in business. In fact, your dad gave you a position. What was the position when you were nine years old? Excuse me, or 13 years old. You had nine brothers and sisters total. Thirteen, what was the position?

Matt: Right. So nine brothers and sisters. My father was an entrepreneur. The culture in that household was, “Anything is possible in business.” So we’re all living in the summertimes down in Avalon, New Jersey, which is a summer town, a beach town. Basically, he bought the property, Avalon Mini-Golf, and he gave every single one of us the opportunity to work there. When you became 13, you could be the manager of Avalon Mini-Golf.

Andrew: Okay.

Matt: It was an incredible experience. I mean, you had a bunch of like 8-year-olds and 12-year-olds working for you that are on the payroll. You learned everything from how to make it fun, how to drive profit. You learned that sometimes people were pulling money out of the drawer to go get a cheesesteak, whoever it might be. But it was a great experience to introduce us to what it’s like to form a business, and we learned a lot of great lessons there.

Andrew: Is there one thing you remember that you did that helped you grow sales, or helped you manage other people? Both are really tough things, even for adults.

Matt: Yeah. Well, the first thing with the people side was you had to make it fun. So literally, 10-year-olds were showing up at 8:00 a.m., opening up the store for people to play mini-golf. Not that many people are showing up between 8:00 and 10:00.

Andrew: No. So what did you do to make it fun for them at 10?

Matt: Well, you give them kind of the purpose. “All right. When you get in from 8:00 to 10:00, people are going to start showing up at 12:00.” We also rented bikes there, “Make sure the bikes are ready. Make sure the cash drawer is ready. Go clean up the course from the night before. Stock the soda machine.” Just various tasks that let them be efficient with their time. But I think most importantly, the biggest thing we learned was you had to make it a quality experience for the customer.

Andrew: Okay.

Matt: That was a great lesson at a young age.

Andrew: But how do you get a 10-year-old to feel like this is fun enough to do, when they don’t even want to get up out of bed sometimes?

Matt: Yeah. Well, the way that you do it is there’s a bunch of other peers their age. All the stuff you do now. You have group meetings. You basically let them see the impact of them doing their job well on their paycheck. So they start to get reinforced on the value of what they’re doing. But it actually became a massive hangout. So you’d come in and all your friends would come work with you. We created this cool environment, like only so many people could work here. So we literally had kids show up there that weren’t even getting paid. They just wanted to get out of the house and do something.

Andrew: Cool. For revenue, I heard about the Slurpee machine. What did you guys do with that?

Matt: That was actually my older brother’s idea. He was the genius. He came up with it. It was a Chilly Willee machine. So people are sitting there, and how do you generate a little bit more income, was you serve up Slurpees. He struck the deal with the vendor and brought the Slurpee machine in, and added incremental revenue for each person that came through.

Andrew: So what I’m wondering is, how does a guy who has this kind of entrepreneurial experience, who’s exposed to it at an early age, who’s pretty much being set up to do it, how does a guy like that end up at what you referred to as a cubicle farm…

Matt: Right.

Andrew: …your first job out of school?

Matt: So the reality is you go through a process within college, and right around the time of your senior year, you figure two things. One is, “I don’t really know what I want to do.” Two is, “I know I need to make some money.” Three is, “I’ve got to get some experience.” So for me coming out of college, I felt like, “What can I do to set me up to get some money and some experience?” One of the big jobs back then was commercial real estate, so I figured, “Ah, this will be great. I have an opportunity to make a lot of money. I can learn some things on the side.”

But as you allude to, literally the first day walking in, I saw this sea of cubicles of people and I just felt like, “No. No, no, no. This cannot be. We have to find a way to…” You’ve got to find something big you can get passionate about, a cause that you could have, where you’re just kind of spinning your wheels.

Andrew: Get out of [inaudible 00:06:06].

Matt: Yeah.

Andrew: I’m looking over your shoulder, and you’ve got an office that to some people could look like a sea of cubicles. I actually can’t tell whether there’s a single cubicle or not, but it looks like there are a lot of people there. What I’m wondering is, what do you do to keep that from feeling like a sea of cubicles to somebody who comes in with a passion, someone who wants to come in and do something fun with their lives, meaningful?

Matt: Great question. So first is, there’s not a single cubicle in the office.

Andrew: Okay.

Matt: Now, it is an open environment. So if I were to tilt this thing down, you would see a stream of young, passionate people working in various areas. But view it as if like the old days, if you went into a library in your college and saw all the desks there. It’s set up like that. So it’s a totally open environment. There are [inaudible 00:06:45] but mostly open. What we do is basically, it’s a very collaborative environment. The problem with the cubicles were they were high and isolated. Our setup is open and engaging for collaboration.

Andrew: Okay. All right. Then, you watch a commercial for GM credit card, which sets you off in a whole new direction with your life. What was the commercial for and what was the vision that you got because of it?

Matt: So it’s the 1992 election, a major theme about election. I’m watching the debate, and the debate back then was a little more civil than the debates we see today. But they were talking about education, education, education. So it’s on my mind. I watch this commercial for the GM credit card, which is for every $1 that you spend on a credit card, we will put money aside for a GM car. It was a brilliant idea, because it got people thinking about buying their car before they ever went and [narrowed] them into GM. But I thought, “Well, whoa. What if every time people in America spend on a credit card, money could go to the long-term education of their kids?”

So when I first had my child and I started spending, which I have to do, they would put money aside for the kid’s education. That was like the spark. I learned two things from that. Number one is, it’s really fun to get passionate about something. Number two is, all I had to do was take the leap. From the moment I had the idea, I started to research it. Once I did that, I was already in business for myself. I didn’t realize it, but I was already taking the steps necessary to move forward with that concept.

Andrew: Matt, if I had an idea like that, I would think, “This is such a great idea, but it’s hard as an entrepreneur to do it, because…

Matt: Right.

Andrew: …I have to deal with banks, because I have to deal with all this other promotion. GM is advertising on television. I can’t compete with that. This is an established industry.” Without noticing that I’m doing it, I might dismiss it.

Matt: Yes.

Andrew: You started doing research. What did you find out that allowed you to not quickly dismiss it like I did?

Matt: Right. Well, the first thing, and this is a really great question, Andrew, which is the biggest tendency for people is to see all the things of why it can’t get done.

Andrew: It’s not like I’d be standing there saying, “I can’t get it done. I can’t get it done.” If I said that, then I’d be very clear that I was going in the wrong direction and not thinking the way I want to think. It’s just like this implied wall that you don’t even notice is there. It’s just assumed to be there.

Matt: Yeah.

Andrew: So you didn’t have that in your way?

Matt: Well, you did, but there’s always a solution to one of the challenges. Now, you can’t kid yourself. Ultimately, that particular idea, we never took to market.

Andrew: Why not? What did you find that allowed you to see the banking world as more accessible than it is to me, and what did you find that made you say, “This is not the right move?”

Matt: The biggest thing that we found at the end of the day was not competition. Number one is the banking industry unto themselves are very slow movers. Particularly, when a 24-year-old shows up and tries to [inaudible 00:09:32]…

Andrew: Yep. You actually showed up. You started making phone calls. You started talking to them.

Matt: Oh, yeah. I started making phone calls.

Andrew: Okay.

Matt: I have a great story there too. But I showed up, but the biggest reason why I didn’t do it was there wasn’t going to be enough money to make it meaningful to pay for an education. So the payoff to the end user wasn’t going to add up to enough.

Andrew: I see. Because you might be able to get two or three percentage points. Is that right? Or even less?

Matt: Exactly. What happened was those points that they give you are only really worth so much. When I started to add it up, I needed to get money from other sources. So then I’m thinking, “Oh, well maybe we get tax-deferred,” and then I’ve got to look into the tax-deferred. As you started to think about it, you needed too many players to come in to make it successful for what I thought. So the money wasn’t going to add up. One of the most important things of any entrepreneur is to always [build] a solution, but also be smart enough to know when you need to pivot or take another stand.

Andrew: You said that there’s a good story around there. By the way, I’ve spent so much of this morning sitting outdoors here in San Francisco with a cup of coffee, just getting lost in your stories. So usually, if someone would say, “I have a story,” I would think, “This is going to derail us.” But what is the story? I’ve got to hear it.

Matt: Well, this is actually great. So Peter Lynch… Do you know who Peter Lynch is from Fidelity?

Andrew: Yep. Uh-huh.

Matt: Guru. So I’m thinking, “I’m 24 years old. I believe in this idea. I’m going to Fidelity. Whatever way I can, I’m going to talk to Peter Lynch. If Peter Lynch endorses it, I’m in.”

Andrew: Okay.

Matt: I was looking for the path of least resistance. So how is a 24-year-old get a meeting with Peter Lynch? It’s impossible. Lo and behold, I find a friend of the family, knows Peter Lynch, does some work for Peter Lynch. She gets me set up, where Peter Lynch is doing a magazine spread and they needed to show him in the middle of a meeting. They thought, “Okay. If Matt wants to come in and pitch Peter Lynch while they’re doing the magazine spread, Peter will listen to him because he’ll make it look like he’s engaged.” But [it was] the back of my head in this magazine spread, and I’m really pitching this guy, an entrepreneur, the idea of a lifetime trying to get him to buy into the concept. So that’s how I got [inaudible 00:11:34].

Andrew: I see. Was he at all interested?

Matt: He was interested. He was interested. But another lesson there was, Peter Lynch, he’s interested, but it doesn’t consume his every way of thinking. He’s about investments and I’m in here talking about using a credit card for low dollar amounts. He was interested in the fact that, “Okay. Here’s a young guy giving an idea.” But it wasn’t going to move the needle for him.

Andrew: I see. Wasn’t Peter Lynch the guy who famously said, “Invest in what you know and what you’re personally passionate about?” Right?

Matt: Exactly. Right. [inaudible 00:12:03]

Andrew: It makes so much sense. Then, you discovered CampusONE. I think we had the founder of CampusONE here on Mixergy, a longtime supporter of Mixergy. What did that inspire in you?

Matt: So to tie the two together, when we came up with this GM card, education in America card idea, I started to talk to all these financial institutions, and one of them offered me a job. He’s like, “Look. You want to be entrepreneurial. I need someone to come in and come up with ideas that we can executive and put some dollars behind.” So I took a job with the company in Florida. So the first lesson there is, because I chased that dream down, I ended up with a job that was paying me 5x what I was making the year before…

Andrew: I see.

Matt: …and allowing me to be very… Literally, I was getting paid to go pull in ideas and pitch them to the company, and them ultimately executed on. The idea we came up with was card-related. It was around a campus idea. So every student who goes to a college campus gets an ID card. What if we could put the banking card and the ID card together? The banks would be psyched, because they could bid on it and get access to all the students.

Andrew: I see. Actually, it wasn’t CampusONE. It was a similar company. I can’t think, but I was starting to search as we were talking to see what was the correct company. This was an idea that other people had had. Was it your own original idea when you came up with it here?

Matt: So pretty much. Now, like everything, once you start to do research, you’re cobbling together. A lot of people are doing what’s called the CampusONE card, your laundry, your door access, your library, putting value that you can only use on campus.

Andrew: Right.

Matt: What we were doing was saying, “Okay. Based on that concept, what if we could use it off-campus and leverage the banking network…”

Andrew: I see.

Matt: “…and similar to the other ideas that you see later on, get the banks to pay for it?” That was the big… Then, what we learned there was this idea of the campus was really an aggregated base of valuable customers. If we could use the aggregation of the base, the campus and the card, to bring them together, then you would cut out all your marketing costs and you would get a higher percentage of students, which then you could have through the lifetime of the relationship. That was the big idea.

Andrew: Matt, one of the things that I heard for years is that real entrepreneurs don’t get jobs. That they just have it in their system to be entrepreneurial. But what I’m finding the more I do these interviews is that by getting a job, entrepreneurs often get an understanding of the industry that they end up in. Like for you, I don’t know that you would’ve been able to do what you did later on if you hadn’t had this experience, to think through a business idea like you did here, to think and understand how the banking industry works so you can get into it.

Matt: Right.

Andrew: Am I right, or am I just reading too much into it?

Matt: So Andrew, you know there’s this great thing that everyone wants on the internet, which is Steve Jobs talking to the Stanford students.

Andrew: Yep.

Matt: What he talks about is, in hindsight, looking back and connecting the dots. The reality is, Zuckerberg just doesn’t wake up and he’s Zuckerberg. He had to be there in that moment, and he had to get these ideas. He had to see… You have to get influenced by what’s in front of you. The great entrepreneurs, you just need to be able to take in what’s going on in your environment. A great place to do that is to get into an industry, start learning. So there’s some luck involved. For me, I never intended to be in payments. But I see this commercial, I do the research on it, and next thing you know I’m like this innovative payments guru and I didn’t even have a credit card at the time.

But you were staying ahead of the curve. But I became passionate about it. But payments led to everything we’re doing now, because payments are just electronic delivery of information back and forth among various entities. That started to spark another whole interest pre-internet.

Andrew: Was the next big idea that, “Look. Email is allowing people to pass data back and forth, like what they did this morning or ‘Will you meet me later today?’ type emails. What if it can also send money that way?”

Matt: Yeah. So a couple things happened. I left the company that I went to and worked, and we had a nice run there. My partner and I decided… We started to pay attention to, what happened at that period of time is the internet was exploding. Email was exploding. Do you remember back in the day, what it was like to have something delivered to you from someone from another country, and it popped up and there’s a legal document? It was revolutionary, and as you started to think about that you’re like, “Wait a minute. What if I could deliver money that easily?” Because the internet was just a network. Email was just a network, and then the wheels really got started and that got us thinking about this whole new idea, which was incredibly exciting for us.

Andrew: What was that idea, and what’s the first step you took to launch it?

Matt: So the idea took on multiple forms, and I’ll try to shrink it down. But the first idea was, “I can deliver money to anyone in the world that they can access and use it to spend it online anywhere.” All we were going to do there is if you looked at the banking system at the time, you applied for a credit card or a bank account. You fill out a bunch of information, and then they’d set it up for you and you deposited funds in. Our idea was, online every day at Amazon, people are swiping a card which takes value.

So what if we take the swipe of the card online to take $50 off your credit card, and then load it in this stored value, and then email it to someone else who could then download it to their credit card? Or we evolved to get a virtual card of ours. So we literally invented and patented the virtual Visa, the virtual MasterCards. That was our concept.

Andrew: The original idea was, if my mom sends me money…

Matt: Yes.

Andrew: …she gets money taken out of her credit card, and I get like a refund on my credit card for a purchase I never made. Am I right?

Matt: Yes.

Andrew: Which, by the way, is brilliant. Now, I didn’t think you could just refund someone money without… I mean, I can’t do it now, but…

Matt: [You’re right.] But here’s the beauty of it. We didn’t let that get in the way. We literally had MasterCard and Visas like, “What the hell are these guys doing that’s [so healthy]?” They came down like, “Matt, you’re very innovative. We can’t do this. It’s going to break our system.” So there was a lot of, “Okay,” so we had to evolve. But we didn’t let that… Sometimes they say, “Ignorance is bliss.”

Andrew: Yep.

Matt: We went full forward. Now, we had to tweak that model. But we didn’t let it get in the way early on.

Andrew: Which is such a brilliant solution. I had Sam Altman on here. This is the guy who’s now running Y Combinator. He said he had an idea for a GPS-enabled app, and he said there was no GPS on phones. He didn’t let it stop him. He said, “You know what? There’s this whole 911 thing that the phone companies have to add to their phones. I’m going to tap into the location-based services tied into 911.”

Matt: Right.

Andrew: The phone company said, “We don’t know how to do it. We can’t, because it’s meant for 911.” He says, “I’ll build it for you.” Not only did he build it, he ended up selling it back to them and making more money from that probably than he did from the original idea. The thing that’s really interesting that you were able to do that, what I’m wondering is how did you even get away with doing five of those offers, let alone… What did you do, hundreds?

Matt: Yeah. We did hundreds of thousands. We literally struck a deal…

Andrew: Hundreds of thousands of dollars where you’re just giving refunds?

Matt: We struck a deal with Microsoft and AOL that we were their virtual certificate. So how did we get around it? Well, we had a little side business, a consulting business, which got us to be very friendly with the banks. Therefore, we leveraged that relationship to get it set up. It wasn’t until we started doing enough volume to anyone that the big entities really saw that, “Wait a minute. This could be a problem. We may lose some control here. Let’s go reign these guys in.

Andrew: I see.

Matt: But we leveraged relationships.

Andrew: All right. I want to come back and see how that evolved into the business that ended up being Ecount, which you sold. But first, I have to quickly tell people about a piece of software called Pipedrive.

Matt: Yep.

Andrew: I’ve got to tell you, Matt, I talked a while back to one of my listeners and I said, “What’s your problem?” He says, “I’m not closing enough sales, because people aren’t taking me seriously. I’m too small.” I said, “Let me see what email you’re sending out,” and he showed me one. I said, “All right. That’s not bad.” I said, “How many of these are you sending?” He goes, “I send out dozens of these every week.” I said, “Go to your Sent file,” because I used screen sharing, “Go to your Sent file. Show me.” It turned out he sent four.

Matt: Right.

Andrew: In his mind, he sent a lot because it might have taken a lot of time to send those four, and in his mind a lot of people rejected him. One of the reasons why he wasn’t succeeding was he just wasn’t sending enough of those emails out trying to reach out to potential customers. I recommended he sign up for Pipedrive. One of the reasons I recommended that is with Pipedrive, there’s accountability there. Pipedrive is software that enables people to grow their sales. It’s CRM for salespeople, and what it does is it gives you a report on how many people you pitched each day…

Matt: Right.

Andrew: …how many people you added to your system each day, how many of those people you moved, how many of those people you reminded to follow up with you. Such great software for closing sales. If you’re listening to me and you’re doing one-on-one sales, whether that happens via email or phone call, or text messaging, or anything else, it doesn’t matter, you need software that will help organize your sales system and keep you accountable, so that you know at the end of the week, did you really send out dozens or just four different emails out.

Matt: Right.

Andrew: Frankly, if you sent out dozens and you’re not getting any responses, then you know the first step in your process needs to be improved. Maybe you need a better email, and you can test that and get more data on it. Or maybe you’ve sent it out and you’ve gotten responses, but they didn’t result in phone calls. Well, now you have to improve what you do in your follow-up process. Pipedrive will help you with all of that. I think it’s really tough for me to describe it in two minutes here.

So instead, what I’m going to do is I’m going to give anyone who’s listening to me 60 days to try the software out. Even if you don’t use it, you owe it to yourself to get smarter about how sales can be done right. Just get a new idea on how sales can be done. Here it is. Go to this URL and you’ll get two free months, It’s “Pipe,” as in pipeline, “drive,” as in your driving people to that end goal.

So then, you’re told, “No. This is not going to work out.” By the way, this idea as I first heard it does seem a lot like PayPal.

Matt: Yeah.

Andrew: It was, right? You were just saying, “We’re going to enable payments.” As a result of that, is that why you ended up with these two guys, Elon Musk and Peter Thiel?

Matt: Yeah.

Andrew: What happened with Elon Musk and Peter Thiel?

Matt: This story is unbelievable. So here we are. We’ve invested a lot of money that we made in the side consulting business to build this product, and we know that we’re spot on. We know that this is revolutionary, because it’s insane. Send money anywhere to anyone, and within seconds they can [drop in] the card. So we’re so psyched about it, and we’re starting to talk to people about raising money. The word must’ve got out to these people out in the west coast that we were not familiar with.

So we start looking at our server, a week before launch, a very stealth launch, and we start seeing a lot of activity from Palo Alto on the servers. Then, people can come in and play with the products, so they somehow found our product and were sending money back and forth to each other, and you could attach little notes to it. They’re basically mocking us. Like, “We’re going to take over the world with something similar to this.” But they’re sending money and literally they’re learning about how we’re doing it, and I’m convinced that they got some great ideas, which we all get from each other.

But these guys are playing with our platform, sending money back and forth. Then, [inaudible 00:23:24] like, “Who could these guys be?” and I do a little research. I’m like, “Uh-oh. These guys just raised $80 million,” and I start putting two and two together. I’m like, “This may require some later nights and maybe even a pivot.

Andrew: Speaking of money, you went to SoftBank, which was really one of the top investors at the time, and you tried to raise money. You want to tell the story of what happened St. Patrick’s Day, when you met them in New York?

Matt: Yeah. So late ’90s was never a more exciting time to be alive and in business. Anything was possible. So here we are. It’s 2000. We had decided, “We’re not going to run from PayPal. We’re going to compete. So they raised $80 million, whatever it was. I’m going to go raise $50 million,” and we went out and we struck a deal. We had SoftBank, GE Capital, and Chase Capital partners, and SoftBank was driving this whole thing. They said, “Look. You’ve got to meet Masaoshi Son in New York.”

Andrew: Wow.

Matt: Literally, as I’m going there, here he is on the cover of Forbes as the second richest man in the world. He just surpassed Gates or someone, whoever it was at the time, briefly. I get there and I realize I’m running late. I’m trying to get to his hotel, but it’s St. Patrick’s Day, and I cannot get across any of the cross streets. [inaudible 00:24:38]…

Andrew: You can’t hardly do it on a regular day. Yeah.

Matt: No. It’s impossible. So I’ve got my backpack on, I’m going to the most important meeting of my life, and I cannot get across the street. I finally, “Screw it,” I run right through the parade. I get in there. He’s staying at the penthouse of some hotel in New York. I get up there, I’m breathing heavy, I’m sweating. The meeting has already started and I can hear my team talking. I just slide right in and I sit down, and we’ve done the pitch so many times I just start talking. We have a great pitch. I couldn’t stop sweating.

We had this great pitch, and at the end of it he says, “Look. I want to do the full $50 million.” I’m like, “What?” He’s like, “I want to do the full $50 million. He shakes my hand. We’d already done some diligence and what not. We get in the elevator. We don’t say a word. There’s a picture of us in Time Square where we literally think we just hit the lottery, “$50 million from SoftBank. They invested in Yahoo. They invested in all these… We’re there.” The big lesson was, we did a couple more weeks of diligence. It’s a Friday afternoon. “Matt, there’s a couple other things we can work on. Do you want to knock them out? Oh, we can wait until Monday.”

Do you know what happened? Monday came, on Tuesday the market crashed, and lo and behold, we never got the deal done.

Andrew: Because you waited a few extra days?

Matt: Because I waited. Because we didn’t [inaudible 00:25:57]. But the beauty is, as we hear about our story later, we never let that happen again.

Andrew: No.

Matt: Never let it happen again.

Andrew: The opposite actually happened later on. You did end up raising money. How did you end up raising money after that?

Matt: So we went out. You couldn’t raise any money in 2000, at that point. By 2001, we hung on. We really focused on the business, and I ran into an old friend who… Basically, I ran into him at a high school event, where the successful alums were coming back to talk, and I’m like on fumes. He just happened to be the guy co-presenting with me. He had a Philadelphia-based fund, and he ended up giving us about $16 million, and we had enough to go build the business.

Andrew: Sixteen, one-six?

Matt: One six.

Andrew: One six.

Matt: So very far from the $50 million, but more than enough.

Andrew: Further still from the $80 million that your competitors had, the guys who were building up this stuff, that ended up being PayPal that won. You then said, “You know what? The credit card companies aren’t allowing me to do this. These guys are heavily backed and competing with me. There’s another idea here.”

Matt: Right.

Andrew: What was the next idea?

Matt: So the idea was we were already leveraging the payment platform. We had a lot of great people that were focused around it and we said, “Look. PayPal, they’re geniuses. They’ve struck a deal with eBay and they’re bringing in consumers all day long. No one is playing over on the corporate side.” So what we came up with, [which] was an idea, was, “Why don’t we find large volumes of corporate check-based payments that are paper, and we’ll convert them all over to electronic and/or to cards.”

That became the next pivot, which changed our business. Because all types of companies, we found, like the Verizon example you gave. Verizon was doing 40 million rebate checks a year. It was not their core business and it was really costly. Sometimes people didn’t cash them. They had to deal with all that and we said, “Whoa.” So we took like four or five industries where we could go make big pitches, one source, tons of payments and it transformed our company, and then replicate. We did Verizon, we did T-Mobile, we did automotive, we did telecom, and we exploded.

Andrew: So now, instead of trying to get thousands of moms like the one that I described earlier trying to send me money.

Matt: Yes.

Andrew: It’s one big company that’s reaching thousands of customers. You’re saying to them, “A lot of your checks aren’t getting cashed. We’re going to make it easier for your people to get money from you.” I would imagine that they would say, “I know a lot of my checks aren’t getting cashed. That’s why I’m sending out these checks, because people are lazy and I’m making money on it.” How did you overcome that?

Matt: Well, the beauty was, and it was the greatest thing that ever happened to us, the regulators insisted that if they don’t cash the check, you’re giving it to the government.

Andrew: I see. So it eventually gets into one of these found money services, and people find it and give it back?

Matt: Oh, you have to, and then you’ve got to manage the whole process…

Andrew: I see.

Matt: …[and there was fines.] So literally, that became the Holy Grail for us. So we studied up on that and we said, “Look. You’re going to lose [inaudible 00:28:51]. Now if you do it our way, you can delight the customer, you get it there quickly, you’ve got your brand on it, you can redirect them back to spend other stuff with you. You can control it. You can hold the funds in an account until they draw it down, and that became a better economic decision for them. We demonstrated and approved it pretty quick.

Andrew: They get a plastic card that they’re shipping out to their customers? Even at that point, you were doing that?

Matt: Yes.

Andrew: I see.

Matt: Now, we also were leveraging the virtual concepts. We could also deliver it virtually, which by the way is an idea before its time. So if anyone is listening out there, a huge opportunity is to deliver these things virtually. The cards had some benefit to them at the time. But virtual delivery is another huge opportunity.

Andrew: Interesting. So the idea would be something that would go into my Apple Wallet on my phone…

Matt: [No].

Andrew: …and I’d be able to just show it. That doesn’t exist today?

Matt: No.

Andrew: Interesting.

Matt: We were just so ahead of the time with that. But it’s transformative.

Andrew: The first customer, do you remember who that was?

Matt: Yeah. Dell.

Andrew: Dell. How did you get Dell?

Matt: So my brother, Steve, who’s working with me at Relay now is just a great sales guy. Dell wanted to really reward people for buying their products, and they wanted to do something [that] was innovative and cool. Here you go. You’ve got this Dell card, and you deliver it. They also did some of the virtual ones as well, which was really cool. So I sign up for my Dell, I give them my email, and a couple minutes later it pops up, this virtual account. Which at that point wasn’t violating any of the rules, because we then loaded up on a stored value [card], which I said we invented. So you could deliver a Dell-based, it’s like a green card with a 16-digit account number that I could use anywhere and it was really, really cool.

Andrew: Because the prepaid cards existed at the time, right? You could buy like a pseudo-credit card with $25 on it…

Matt: Yes.

Andrew: …and give that to your cousin for Christmas.

Matt: Those actually didn’t exist yet. A lot of that came from seeing what people like us were doing. So you couldn’t buy the prepaid card. You could buy a store-bought card, a store-branded card. You couldn’t buy the Visa or MasterCard yet.

Andrew: Oh, that didn’t exist at the time?

Matt: It didn’t exist. So we were really one of the first ones to do it. But our big idea, the breakthrough was that we could take an account and add value to the account. So once we said you couldn’t do it with your credit card anymore, we then created the store value out of necessity. We created the virtual 16 digits. So we would just load up a pool of BINs, and then generate it, and then put the money there and had a [process where] they could spend it anywhere. It was that little process that we patented.

Andrew: How did you do that?

Matt: How did we…

Andrew: Sorry?

Matt: How did we patent it?

Andrew: No. How did you even come up with… What was the process for doing that? Maybe it’s too much for an hour-long interview. But what’s the process that allowed you to suddenly create these…

Matt: [It’s really simple.] Someone comes in, in this case a massive corporation says, “Let me give you $1 million. Send it in $50 increments to these customers.” They give the file. I process it. I then load up… On the virtual one, I’d gather emails, I’d push them a link, and I would grab off my shelf, to make it simple, the 16-digit account number with the value. I would notify my processor that this account number now has $50 on it.

Andrew: I see.

Matt: I’d email it out. You’d claim it, and then you’d get your 16-digit number. Then, when you go online, instead of pulling your credit card out, you just enter this number.

Andrew: Got you. Because Visa and MasterCard allowed you… Which one did you use, Visa or MasterCard?

Matt: We used both.

Andrew: Both. Visa and MasterCard allow you to generate your numbers within a specified range. Is that right?

Matt: Exactly.

Andrew: Got it. Okay.

Matt: Exactly. But the big idea, similar to your Sam Altman idea was, our leverage came from… We leveraged the banking system to give us scale. So you might remember back in the day, there was company called Flooze, and it all failed because they…

Andrew: They created fake currencies.

Matt: They were fake currencies. We learned from that and we said, “We’ve got to leverage the banking system,” which we were able to do. So therefore, I could say, “If you give me $40 million, Verizon,” they can use this as good as cash, but you don’t have the problem of giving it back to the government. So the economics work, and you could see it all came together.

Andrew: I read an article, an interview on with you, where you describe the different ways that you made money from that.

Matt: Right.

Andrew: It was everything… Actually, what would that be?

Matt: Well, you set the program up. You make money on that. You charge them for the plastic. You make money on that. You can make, on the card itself, if you don’t use the card after a period of time, you have breakage on the card, that’s either going to go to the company or that would go to Ecount. So multiple methods for very predictable revenue streams.

Andrew: When your brother got Dell as a customer, do you remember what his process was to even get the right person at Dell? He must’ve gone through, I imagine dozens of phone calls to figure out, first of all, that Dell was one of those companies that could do this, and then to find the right person. What was his process?

Matt: Well, first is classic on the targeting. So remember, we were in the middle of pivoting, so he had to pick a company that had a product that was valuable enough that they would give some reward or payment if you acquired them.

Andrew: I see.

Matt: So that shrunk the list down, and then all he had to do was find the person who’s responsible for the rebates, who’s doing it. Then, he gets to go to them and say, “Hey, you’re Dell. Why would you do the old rebate when you could do the new rebate. Here’s the new rebate.” It leverages all that’s going on. They have such massive budgets, that even to try something different, they’re testing all the time and that was a big learning process for us.

Andrew: I see. How did you convince them that you guys were worthy of trust that people should actually put their money into you?

Matt: Sure. So it’s the company that you keep. So I talked about how did we get AOL and Microsoft to do the virtual ones. We were surrounded by really good people. First of all, you’ve got to make sure that you’re trustworthy. But we were surrounded by big… We had a big bank backing us. We had a big processor behind us. People start looking at that and they’re like, “Oh, they must be trustworthy. They’ve got FDR behind them. They’ve got Bank One behind them.”

Andrew: I see.

Matt: Like these guys don’t enter into partnerships lightly, and that was really helpful for us.

Andrew: Steve Kassin, his book “The Third Wave” argues that this is the future. That entrepreneurs for a while there were able to just go and do whatever they wanted and ask for forgiveness later, instead of permission early. He says, “No, in the future the businesses are going to be so big, they’re going to need partnerships like the ones you’re describing. Otherwise, you don’t have the credibility, you don’t have the ability to really move mountains, and I can see how you did that. You got that company. You then ended up finding out other industries. How did you figure out where the need was. Like the automotive industry I wouldn’t have figured would be a good customer, but you did.

Matt: Yeah. Well, like any things, you’re either really good or you’re really lucky. We got an RFP somehow from an automotive company looking for something completely different, but we thought our solution could work. So we never would’ve gone into automotive, and someone gave us this RFP to respond to and we’re like, “Wow.” We delivered the best response ever for an RFP. It was awesome.

Andrew: How do you make it awesome?

Matt: You make it awesome because you theme the whole thing. You have it delivered on a computer, and when they open it up it explains the difference between virtual and the other thing.

Andrew: Wait. Hang on. You actually sent them a computer, a laptop?

Matt: Yes.

Andrew: Got it. RFPs is “request for proposal.”

Matt: Yes.

Andrew: These are the most boring things out there, and instead of sending the proposal via PDF and email, or even a letter in a folder, you send them an actual computer. They open it up and the whole thing shows up?

Matt: The computer is painted with their logo on it. When they press Go, it shows… What we showed them was we’re completely different than everything else, and we wanted to make sure that the thinkers on their side saw it. So immediately, we cut to the head of the class, and then we showed them something completely different. That’s how we got these other guys to do it. Automotive, their big problem was different than telecom, “I want to get payments out to my sales people to reward them as the manufacturer. They’re not my people. They’re the dealer’s people. How do I stay front and center to reward them to help move product?”

They had a check-based system, fraud, they’d send it to the dealership, people would pocket it. Or put it on a card. Every time they pull that card out, they’re going to remember the manufacturer is paying them. It’s going to reinforce it…

Andrew: I see.

Matt: …and we can do the whole thing for you. So you’d get an email telling you on a Friday, “Hey, Andrew, you have $100 this week. Go put your card in the ATM, there’s $100. I can pull them right out. So it was really cool.

Andrew: All right. Quick break, and then I’m going to come back and talk about this Steve Ballmer story that’s just so outrageous. I actually copied it and sent it to our producer. I said, “This is the kind of thing we need to include at Mixergy. We are story-based and here’s a great example of what we’re looking for. First, I’ve got to tell everyone about a company called Toptal. Have you heard of Toptal, by the way?

Matt: No.

Andrew: Oh, good. Then, I get to open your eyes to this new company. The idea behind Toptal is they realize that the best developers are more than worth… They’re not just a little better than the second best. They’re miles ahead. Some of these guys were working at big companies like Google and Facebook, and others and the problem is that they don’t want to go down to Mountain View. They don’t want to go down to Palo Alto. They don’t want to work in an office. What they want to do is they want to work from anywhere in the world.

So what Toptal did was they said, “We’re going to put together a database of these best developers that we can find. We’ll actually hire them on. Then, when someone needs to hire a developer, one of these best of the best, they contact us, they tell us what they’re looking for, and we will connect them with one of our developers in our network. That was the Toptal way. It took off so fast. Andreessen Horowitz put a bunch of money into them, and now they’re one of the fastest growing companies themselves in Silicon Valley.

So if anyone out there is looking for a developer and they don’t want to be in Mountain View any more than these great developers want to sit there in Mountain View. All you have to do is contact Toptal. When you do, they will introduce you to a great developer, and they will make sure that it’s the perfect fit and you are happy with them. Past interviewees and past listeners have signed up for them.

So Toptal has given me a great offer for anyone who’s listening. If you’re hiring a developer… Now, they also do designers and other types of professionals. But if you’re looking for the top talent, here’s a great URL that’s going to give you 80 free hours of developer credit when you pay for your first 80 hours. That’s in addition to a no-risk trial period of up to 2 weeks. Where do you get a no-risk trial period when you’re hiring a developer? Nowhere, except at this special URL. Here it is if you’re out there listening. Go to “Top” as in top of the mountain, “tal” as in talent, so What’s the story with Microsoft?

Matt: So we talked a little bit about the early days. We were trying to build this product company, but it wasn’t moving quick enough. So the product we just talked about that competed with PayPal, all that, we were working on it. But prior to that, as I mentioned, we were talking to a lot of these portal companies and we got to Hotmail and we say, “Look. We have this idea, where you can convert your whole base over to your own credit card, calling card.” Mobile didn’t even exist back then. But the idea was to leverage the value of all these users they have.

So as we’re talking to them, they said to us, “Look. That sounds really complicated. Credit cards have a lot of money. Can you help me strike a deal with a credit card company, just a credit card company? Put your idea off on the side here.” We’re like, “Yeah. We can do that,” because were starting. So I’ll never forget. I call up, I send an email out to Sabeer Bhatia. Sabeer Bhatia is a legend now, right? He sold his company to Hotmail for like $400 million and got… He sold Hotmail to Microsoft for $400 million and got a bunch of stock, and the guy is a legend.

So he responds right back. I have this quick conversation with him. The company, I’m struggling. Me and my partner were like, “Oh, we’re going to help him do a credit card deal.” We put the whole thing together. We got them teed up to do a credit card deal with First USA. They get acquired by Microsoft, so all our work is done. Or literally this was going to be the thing that kept us going. Sabeer calls up, “Sorry. We’re acquired.” I said, “Whoa, whoa, whoa. Let me talk to my [inaudible 00:41:19] guy.” So on a handshake, the Microsoft guy said, “All right. See what you can do for us.”

So now, we’re representing Microsoft. This time, we were like two guys out of Conshohocken, which is outside of Philadelphia and we’re [already representing] Microsoft to do the large… So we start flying in CEOs from the major banks. They’re flying them in. We go out to Redmond, and we’re flying these guys in on the private jets and we’re running the whole process. What we’re saying to them is, “For the exclusive right to communicate your bank products all throughout the Microsoft assets,” we pulled the whole story together and put the RFP up, “what are you going to pay us?”

We didn’t really know. It was our first deal. Lo and behold, we start getting these offers, $85 million, $90 million, $25 million, etc., etc. They’re all coming in to our little shop in Philadelphia, and we’re running this process. So what happens was the big banks, the CEO of AmEx, or whatever, who’s buddy is with [Microsoft] said, “What the hell is going on here? Who the hell is this Matt Gillin guy, and why is he running me through a process?” So he calls up Steve Ballmer. Ballmer is like, “What the hell is going on here?” Like, “Whoa, whoa, whoa, whoa. Let these guys [inaudible 00:42:24] information.” He’s like, “I want that information on my desk.”

So we’re scrambling. We get the information to Ballmer. He looks at it and sees we ran a very professional process. You’ve got all the bids right there. What it did was it got him to make a decision that day like, “Yeah. I agree with it all. Choose these guys.” He calls those guys back and he says, “Look. We ran it through the process. You weren’t even close on the bid, and we’re going forward with this.” We just struck gold, because it was a $90 million deal, and we negotiated [inaudible 00:42:51] guaranteed to Microsoft.

Andrew: Wow.

Matt: Ninety million, and we on a handshake had 10%. So they were talking to two guys who had been starving trying to build a product, not well-funded yet, and we had 10% of $90 million. The key thing there was the handshake. So when we went back to get the money, they knocked us down to 3%. But I’ve got news for you, 3% of $90 million was a godsend to these two guys.

Andrew: So then, I imagine there’s a temptation to keep doing deals like that, to say, “Look. Microsoft just did this deal with us.”

Matt: Right.

Andrew: “Can we do similar deals with other platforms, other portals? Why didn’t you get sidetracked?

Matt: We did.

Andrew: You did?

Matt: Well, we didn’t get sidetracked. What we did was we got so efficient at that, now we had the big Microsoft win. So we figured out, same thing, targeting. Who were the likely acquirers of this? It had to be a valuable asset. There’s only about 10 of them. We called all 10, we signed all of them up, and we ran them through the process. That was Amazon, Disney, who had a big portal. Yahoo had already done something. AOL had already done something. We picked all the rest of them and we signed them up. Instead of getting just pure risk, we charge them $250,000 just for our time to run the process and the upside of whatever we negotiate.

Andrew: And a percent?

Matt: Yes. So it was beautiful, and we rolled through those. So we did incredible deals. Same thing now. Look. We’re now representing Amazon. I’ll never forget. I’m sitting in a conference room. I’ve got these guys flying in. It’s me, Jeff Bezos, and these bankers coming in. Again, I’ve only done this like one time before, but I’m replicating the process and Amazon struck a big deal. Then, we did like four or five of them, it totaled about $0.5 billion. But we always treated the banks with respect.

What happened was, we knew that a consulting business like this was short-lived, that we wanted to build a product. We wanted to build something with predictable recurring revenue that we could build and be proud of, and sell. So we had to make the shift, and we didn’t want to get suckered into being consultants.

Andrew: I see. You got millions of dollars, though, from that?

Matt: Yeah.

Andrew: Did that allow you to live for a little bit, or did that go into the product?

Matt: So we put it into the product. It did allow us to live a little bit, but we put it into the product. We’re still at an age where we’re pretty young, and our vision was to build a great technology company and we invested it back in. I also had investors. Remember, we started trying to build a product. We got sidetracked on this, because of the opportunity. But we didn’t want to cheat our investors. We had to go back to the product and start building the product.

Andrew: You said you lost out on an investment, because you didn’t do the work fast enough. You waited until Monday. When it was time to sell, you didn’t make that mistake. Can you talk about that selling experience?

Matt: Yeah. So we got some great advice along the way. One is we learned from our mistake. I’ll never forget it. It doesn’t matter what deal you’re doing, there we are dealing with Citibank, at the time the largest bank in the world. The head of their group, the CEO of their group, “Hey,” the guy’s name was Paul Galant, I said, “Paul, there’s going to be a lot of things going back and forth here. I want to agree on a couple things with you. Number one is I really want to close by this date, no matter what happens. A lot of things are going to come up in the process, and you and I are going to agree right now that whatever they are, of these four things of which the most important was, it’s going to close on this date.”

Because they wanted to close later, and I didn’t want to wait. I didn’t know what was going to happen. So this was the earliest date we [inaudible 00:46:08]. He’s like, “Okay. Okay.” We agreed to two or three other things. So every time we hit a snag in the process with the bankers or the lawyers, I’d say, “You talk to Paul Galant.” Because when you do that with someone, you look them in the eye and say, “Look. We just have to agree to this date,” and he helped true to his word. They wanted to do it in April. Paul and I agreed to March, so we picked up 30 days.

If we had not done that, literally hours after the signature, we were hit up with a frivolous patent infringement lawsuit that would’ve not allowed the deal to get done. As you know what happened in that time period, the markets crashed again. It would’ve been the exact same thing over again, and we would never be having this interview. So we sold the company for a huge win, and had we not moved it forward and learned from our previous mistake, it never would’ve gotten done.

Andrew: That makes so much sense to say, “Look. Things are going to come up. Here’s one of the things that we agree with,” so when snags come up, we come back to our goal and we work together to get there.”

Matt: Yes.

Andrew: What I’m wondering is why did you sell? You told… What was it? I think it might have been the, in that article, in that interview. You said that you could either decide to grow the business or sell the business, and you had to figure out whether to reinvest in growth or to sell. I’m wondering why’d you make the decision to sell?

Matt: Well, the biggest reason why we chose to sell… I mean, the beautiful thing about hindsight is you can look back. So that business was really wrapping. So if you look at it, you’ve got to look at your probably for success. Now, you’re talking to guys who’ve been entrepreneurs now for 10 years. We’ve seen the rise and fall of all the internet companies. Here we are now in this second life, this second wind, and we’re sitting back and we’re saying, “What could possibly derail us?” What derailed us last time was completely out of our control, the macro trends of the market.

There were two trends we were worried about, the cycles of markets were starting to get to the end of another cycle, and the second thing was regulatory. Where we like to be startups in early-stage industries, like we are now with Relay, before heavy regulatory, all the barriers to success, and it was starting to get really heavy in the payment space. We felt like we couldn’t control it. So for those two reasons, we decided to [sell] about the things we couldn’t control, which were regulatory, and the overall economy.

Andrew: I see. The economy did go through a tough period, especially the finance sector.

Matt: Well, let me put it to you this way. When Citibank acquired that company, it was an all-cash deal to us. I remember sitting there with my partners, “Maybe we should take some stock, because we can ride the stock up. Eh. It’s too complicated.” When they sold the company to us, the stock was 50. My last day there before I resigned was $1.50, 50 to $1.50.

Andrew: Whoa-y. Wow-y. So look at all the different ways you could’ve died. Look at all the difficult periods along the way. Once you’ve done it, what’s the best part of having sold it? We’ll get into the new business, into Relay Network, in a moment. But what’s the best part of having at least crossed that finish line?

Matt: Well, the most exciting part was here you are, you hear all these stories. Everyone thinks, “Oh, that was an overnight success.” It was every failure before that which set us up to be successful, and to do it with a team of people that really grew up with you along the way. So being able to celebrate as a team a victory like that…

Andrew: How did you celebrate? Ten years, a decade in the making. How did you celebrate?

Matt: That’s a good question. How did we celebrate? It was just a stream… It was like a year of a glow, where everyone you saw won out of this deal, every employee had stock, everyone got big jobs with Citi, everyone got big salaries, everyone was young. I mean, it was just incredible, and it was just sheer gratitude and appreciation. It was cool.

Andrew: So you stuck around Citi for about two years, and then the following year, 2010, you come up with this new business, Relay Network. What was the issue? What was the problem that led you to create it?

Matt: Again, it’s funny because you’re two years at Citi, you’re an entrepreneur at heart, and you want to do something else. Right? So now, with this dilemma. You did really well with the first one. What are you [inaudible 00:50:43]? You want to work that hard? The good thing is you forget how hard it is, so, “Yeah. Let’s do another startup.” We were doing all the macro trends. It had to be mobile. It had to be this, that, and the other. It wasn’t going to be payments, because I didn’t want to compete, but we didn’t know what we were going to do. But I’m sitting in my car one day, and when I left Citi, they had been paying my mobile phone bill for two years.

So I’m using my phone, I’m doing all this stuff, and I haven’t been paying my phone bill. So finally, I get a text message from AT&T. They’re like, “We are going to turn off your phone. Please click here.” I’m like, “Huh.” I click on it, it drives me right into a call center. They know exactly who I am because they identified the mobile number. I give them a credit card. Problem averted. I’m still an AT&T customer today.

Andrew: Okay.

Matt: Now, think about that. I’m like, “Wow. What if every single company was able to deliver that type of experience, where they had a way to get in touch with me. It was secure. I could get the transaction done within 45 seconds. We started to say, “That’s it. That’s the idea.” We call it the “connected customer.” AT&T had the advantage, because they’re a mobile company.

Andrew: So they see my phone number.

Matt: They have your number. They have the right to communicate to you.

Andrew: Right.

Matt: So we became fanatical at trying to give that benefit to every business, because people don’t read their emails. They don’t pick up the phone in their home, and they don’t read the mail. So you’re screwed as a business. Now, if you’re a customer, you’ve got to go get in line, in the queues, or the phone. So the more we looked into it like, “Wow. This could be transformational. What if every business had a private one-to-one connection with their customer, where both sides knew each other and I could avert problems from you before they came, and you could ask me questions when you needed it?” It was all transformative in that way.

Andrew: The first version of it, what did that look like?

Matt: So what we had to do is we had to start testing. The biggest challenge we had was, again, it’s easy for AT&T, because they already have the mobile numbers, and they have the right to use the mobile numbers. Consumers don’t want to get spammed on a text message. So you’ve got to invite them to connect [inaudible 00:52:44]…

Andrew: Heavy regulation there.

Matt: Heavy regulation. We had to, “What’s the best way to get people to turn this thing on? How do we help businesses?” So the first problem we had was we had to help them get connected. So what we tested was, again, we learned the lesson from our previous business, went back to the relationships we had, in this case Citibank, and we said, “Hey, can we run a test with you guys? We’re going to put a sticker on all these debit cards we’ve been doing, 40 million a year, and we’re going to see that when people call in to turn on their card, will they also turn on this new communication platform. That was our thesis. Fifty percent of them did. Now, think about that. Fifty percent of people call to turn on their card. They also turn on and opt in to this new service channel.

Andrew: Okay.

Matt: That was unbelievable..

Andrew: Fifty percent of anything is huge. Fifty percent of people even responding to most phone numbers is huge. But obviously, in order to use their card they have to respond.

Matt: [inaudible 00:53:35] Yes.

Andrew: Yes.

Matt: And psychologically. So then, we started looking, “Okay. Now look where we’re doing our business, banking and healthcare.” Healthcare payers doing membership cards. So we put a sticker on every membership card in health, and we took what we learned at Citibank and we go to health, I’m saying, “I can get you 50% connectivity like that. Trust me.” So they pay me to run that process and now I’ve gotten them the connectivity. By the way, it’s not good enough to have connectivity. You’ve got to have the right tool. “I can deliver you the tool.” That’s how we got going. So the first thing we had to do was we had to prove connectivity, and then once you got connectivity, the tool itself, texting isn’t built for service. It’s just not. So you had to build a tool that allowed them to get stuff done, and that’s what we built.

Andrew: But the first connectivity, you didn’t even build out the tool. You just said, “Can we add this extra question to this process and get people to say yes to it? If they do, then we know that we have their permission. Now, let’s build what they’ve told us they wanted.

Matt: Yes.

Andrew: I see.

Matt: That was the key. Again, everything I talked about before then comes out in that example. One, I leveraged the relationship. Two, I did it at scale. Three, they became a paying customer. Then, right off the bat, I had credibility when I went to all my investors. “Hey, Citibank, we ran this test. Here’s what we learned. Here’s how we’re going to apply it.”

Andrew: I see.

Matt: “So we’ll have to raise money.” It was incredible, so really cool. You get that through the hard knocks.

Andrew: You didn’t have to build anything for Citibank, right? They just had the system, didn’t they?

Matt: Well, no.

Andrew: I mean for that first test.

Matt: At the time, these were prepaid cards, so they never did the stickers. So they never had an activation on these cards.

Andrew: Oh, I see. So you needed a sticker…

Matt: That was a little bit of a salesmanship, because we didn’t want to incur all the expense on that. So we had to convince them that there was value in putting the sticker on the card, and there was. There was a fraud value and there were some other values, but the best value is you get a mobile connection.

Andrew: I see.

Matt: Literally, a mobile-y connected customer is worth more. Everyone knows that. So once we got them to believe that, then they were willing to pony up a little bit. Then, we stood up in IVR, literally, here’s at this time a 10-man new company, we went up and got a vendor to stand up in IVR to run the process for them.

Andrew: What’s IVR?

Matt: Oh, sorry. Interactive voice response. So literally, when you dialed the 800 number, that was coming into our system.

Andrew: I see. Okay. On a prepaid card, what are you going to get the customer to do more of? They’ve just gotten a prepaid card from Citibank. Are they adding more value to it?

Matt: Well, let’s think about it. So their clients were my old clients. You have Verizon, Ford, Hyundai, and all these big businesses. The theory is, look, you’re now in the physical world. You’ve got to go to the digital world. Imagine Ford and Verizon. If you could communicate to all your customers mobile-y and they gave you the right to do it, what would you do with it? You could service them better. You could renew them, [on-time] renewal.

Andrew: I see. So it’s not even about the card. It’s about that other relationship that triggered the card.

Matt: The connection.

Andrew: Got it.

Matt: The card is just a [conduit]. Everything is about the connection. Relay is about the connected customer. The idea we got from AT&T is, businesses need to get connected to their customers at a very high rate. The reality is, traditional digital strategies are not working for businesses. They’re not working. The whole old model is, “Come to my website. Pull a bunch of information.” Well, consumers like easy, and that’s too hard. So what they do is they pick up the phone, they get really pissed off, and so you’re not connected to your customer. But what if you were? What if when I buy the product, I get the connection? That’s Relay’s refrain.

So I buy my banking product, I get connected. I buy my insurance product, I get connected. I buy my cable box, I get connected. The connection is the key to solving the service issues. You’ve got to lead with service before you do marketing. All of the investment had been in marketing. People don’t want to get marketed to. They want to be serviced. So now you see this confluence of service and marketing coming together. We call it “experience”. The key to it is a digital connection, and that’s where we win today with Relay.

Andrew: Let me ask you about text messages. The reason that this is so effective is because we don’t get text messages a lot. It’s mostly from our friends, from our family, and occasionally companies like AT&T that we have relationships with.

Matt: Sure.

Andrew: I wonder, do you think that’s going to last? Or is text messaging going to become as crowded as the email inbox?

Matt: Right. Well, first of all, there’s two things. I think the real value there is not just texting, which is valuable. But it’s the connection itself, the ability to deliver out. So email is unresponsive, because it’s crowded. But really unresponsive, because you’re sending junk to me. But the key is, if you’re sending me… So it has to be connectivity. It has to be high engagement, which you get with texting. But the most important ingredient that we’ve learned now is relevancy of the communication. I don’t care if you send it to me in a [Google] email or social, or texting. If it’s relevant to me, relevancy is the winner in the whole…

Andrew: I see.

Matt: Yes. That’s the game. So now that you have the connection, they will not pay attention unless what you communicate is short, concise, and relevant.

Andrew: Okay.

Matt: That’s the winner. So we now advise our clients on this. When we go to a bank, for example, or a big insurance payer, we say, “Look. We’re going to get you connected at a high rate. These,” we call them the “journeys”, “the communications we have to deliver out, and we’re not going to get suckered into non-valuable communications. It has to be relevant to the end user.” So what defines relevancy? Well, if I’m in the middle of, let’s say for example, I just lost my card, a credit card, that’s highly relevant. If I’m a cable customer, I’m about to move, that’s highly relevant, because I don’t want to deal with the pain in the ass of the process. “So can you make it easier for me?” “Yes, we can.” So that’s how we do it.

Andrew: All right. Let me close it out with the final question, which is we asked you in the pre-interview what’s one question we didn’t ask you about and you said it’s about dealing with the same investors the second time around. Why is that important? You got the same ones to come into Relay?

Matt: We did.

Andrew: Okay.

Matt: We got additional ones, as well. But most entrepreneurs, particularly the young entrepreneurs that you’re hoping to help. They’re a little petrified about the venture capitals. First of all, they’re called “venture capital.” [inaudible 00:59:44] you think of like vultures and I don’t know what comes with [them]. You’re usually afraid that they’re going to steel your business. So we had these great ventures partners, NewSpring out of Philadelphia, I told you, picked us up when no one else would. First Round Capital, First Round, Josh Kopelman, Uber, Airbnb, Twitter, the guy is a genius.

Andrew: They weren’t in the first business, were they?

Matt: No. But we brought them in the second time.

Andrew: Yeah, because they weren’t around back then.

Matt: The key is we wanted to get people that you could know and trust. So that was the key. So people I’d worked with before, people that I know, and we brought them into the deal. That way, the terms were right. We knew that they’ve got to make some money on the deal, and they know that it’s got to be fair and reasonable. So we know that in a pinch, these guys will be there for us, and they have been.

Andrew: You also got Independence Health Group?

Matt: Yeah. They were our…

Andrew: [inaudible 01:00:56]

Matt: …first client in healthcare. Literally, health payers, we talked earlier about these incumbent players. They see startups coming in. Well, we’re enabling them to start up technology so they can leapfrog and not get displaced. So they saw the product and they invested heavily. So our first major client wanted to put money on the deal and we let them do it.

Andrew: What an incredible story. I’m so glad that you were here. Before we started, I asked you, “How do I make this a win for you?” Sometimes people say, “Help us get more customers by sending them over to our site, or help us hire people.” You didn’t say any of that. You said, “Andrew, I’ve been through a lot here and I want to share what I’ve learned, and a big win for me is if somebody actually uses this or is helped by it, and how do we make it useful for them?” Boy, did we?

I’m really appreciative that you came in with that attitude, and that you came in here telling us such helpful stories and lessons from your business. Man, I’m so glad that I got to meet you. I didn’t know about you before this. I didn’t know all these stories before. I’m telling you, I sat down at a coffee shop, Working Café, here in San Francisco. Couldn’t put the phone away, because the more I read about you the more I wanted to read more about you. These articles about you are fantastic, even though they’re like five years old. It’s so good.

Matt: [inaudible 01:01:49]

Andrew: Yeah. There’s one from June 2016 that’s really good about Relay. Anyway, I’ve enjoyed hearing your story. I really appreciate you coming here and telling it. Anyone who wants to check out the website, it’s Right?

Matt: Yep.

Andrew: I’ve got so many tabs open here, so I can’t remember. The two sponsors are and I’m grateful to them and to you. Thanks for being here.

Matt: Thank you, Andrew.

Andrew: Thanks.

Matt: Good luck. Thanks.

Andrew: Bye, everyone.

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