Andrew: Two messages before we get started. First, based on what you’re about to hear in this interview. If you ever find yourself saying, “I would like to do interviews like Andrew does”, well then I’m going to tell you I want to help. All you have to do is go to any page on Mixergy and just like this, type in interview your heroes and you’ll be taken to this page which has a video of the course where I teach my process in detail.
On this page you’ll also see scripts that I use to recruit guests and so much more that can help you. All you have to do is go to Mixergypremium.com and you’ll see it there.
Second, this interview is sponsored like just about every other interview on Mixergy by Scott Edward Walker of Walker Corporate Law. Scott is a lawyer that has helped out the startup community for years. I’ve known him for years, but you do not have to take my word for it. You can just scroll down on his web page and you’ll see all the testimonials from people who you know and respect, Walker Corporate Law.com.
Let’s get started. Hey there freedom fighters. My name is Andrew Warner and I am the founder of Mixergy.com, home of the ambitious upstart. And I have to tell you very, very openly sometimes when I watch people build multi-million dollar online by teaching there is a part of me that says, “Maybe I should do it”. But then there’s another part of me that just pops in that goes, “Who are you to teach anything, you’re not the world’s expert. There’s someone else that’s so much better than you.”
And usually at that point there’s a vision of that someone else that comes into my mind. And so I hesitate. Do you ever feel that way? If you do, I think this interview will be especially helpful to you because of the process that today’s guest took to build his company. Eric Bahn founded BeattheGMAT, a site that helps people prep for the test. Before he ever took the GMAT he launched his business. He did it as a way of talking publicly and being held accountable as he learned and prepped for his test. Throughout that process and afterwards he bootstrapped and sold a profitable business. I invited him here to talk about how he did it. Eric, welcome.
Eric: Thanks, Andrew. And I have to say, you’re already a great teacher to startup guys like me. I think you are already there.
Andrew: I appreciate that. And you and I were talking before we started about how you were one of the first people to buy a course that I created. I think the maybe the first one about how to interview. What made you want to take that?
Eric: So at the time I was in a place in my business where we starting to do a lot more video content. And I wasn’t really that happy with the quality of the videos that we were producing. So I’ve always been of fan of Mixergy and checked the site pretty regularly, And when I saw that you were putting together a course that basically explained how you do these videos every day I immediately pulled out my money and gave it to you.
A little funny story, I discovered it during a four hour layover in Dubai, waiting for my flight to India and totally jet lagged, but when I started watching your two hour course at 2:30 in the morning, it kept me wired in a way and awake during that entire layover. I was so jazzed because it’s such a tactical course. So for those of you who are listening and out there it’s definitely worth checking out. It’s been a very valuable course for me and my business. I think we produced over 250 videos to date by using some of those techniques.
Andrew: Well, I’m proud to have been even a small part of that. It’s called, “Interview your Heroes”. It’s the first one that I ever put out and it’s on the site. And sometimes I look out on the internet and I see people using exactly what I did and what I talked about there, and I think maybe I’m creating these imitators but I know that’s a weak thought. The more proud thought that comes over me is, “Hey maybe I can teach something. Maybe it does work what I’m talking about” and it definitely does. I’ve seen it for other people and it just encourages me to keep going.
There’s something more meaningful in me, Eric, than teaching people how to interview or doing interviews and so if this process of teaching people how I do that works I think once that more meaningful part comes out I can make that work too. I’m just starting to get all in my head. I’m having a hard time expressing it. Anyway, what I’ll say is thank you for saying that and I’ll move on with your story. And the part that I thought that we can really start with is the ATM Story.
Eric: Yeah, I think I do.
Andrew: What happened there?
Eric: So this was actually the day that I closed the sale of our business. Last October 20, 2012. And I remember that I needed to get $40 from the ATM. I didn’t have any cash on me for a haircut. When I looked at my receipts, I saw many, many zeros that had not been there. I realized that the wire had gone through. So for a guy who has consistently had less than 1,000 bucks in his checking account, it was quite startling, actually. I still have that receipt. It really kind of floored me when I saw that.
Andrew: Where is that receipt now?
Eric: So I’m going to reveal a little bit of a secret. So behind me actually is a BeattheGMAT sign. It’s actually one of our first logos when the company was getting formed. I had it framed. I’m a little bit of a sentimental guy. I have taped that receipt actually, to the back of the frame. So, hopefully I’m not revealing too much, in case you guys are trying to break into my house a little bit later.
Andrew: How many zeros in that receipt?
Eric: So, unfortunately I can’t reveal specifically how many zeros. Right now I’m under confidentiality still, with my company. But it was a lot, and it was more than I’ve ever seen. I will say this — it was enough to get me financial independence, which is pretty much the greatest thing that you can buy.
Andrew: Why? What are you able to do now, that you couldn’t do before? How did your life change?
Eric: You know, I think that fundamentally my life didn’t change that much. So, this is one thing that was kind of interesting when you sell your business. It’s a little bit anti-climatic in some sense. I mean, I still drive the same Honda Accord 2005. Our quality of life has not significantly changed. It was already pretty good, I’d say. I’d eat out when I wanted, and my wife and I enjoy an occasional vacation. But the thing that changed was, I guess, the psychology around my outlook of life.
I think that now I’m in a position where if I want, I could take a lot more risks. And in terms of being more picky about the projects that I want to work on, or just even having the freedom of knowing that if I needed to take some time off — you know, focus on family or focus on photography, one of my originating passions — I could do that, and come back and work on whatever projects are available at that point.
I think part of it also is a little bit of just gaining a little bit more swagger in my step, in the sense that I feel a little bit more validated, if I go after projects. I’ve already been proven that the skills I have learned so far have been successful, and hopefully I can take those to do other ventures, too.
Andrew: All right. This is a really exciting story, because of the way you launch, we’re going to talk about the Blog Spot launch that you did, the Open Source Forum that you built up, too; the way you didn’t end up getting funding, and what you did to fund the business instead. And we’ll talk about how you built up your community. But before you ever did this, before BeattheGMAT was something called “Mass Appeal Games.” What is Mass Appeal Games, and what happened to it?
Eric: Yeah, so just a quick timeline check. I actually did start BeattheGMAT before Mass Appeal Games, but Mass Appeal Games was a project that happened before I went full-time on BeattheGMAT. So, BeattheGMAT was a side project for many years.
Andrew: And you were in to it for the whole time you were doing both of these projects?
Eric: That’s right. There was one point where I was running three businesses — a terrible idea, actually. But Mass Appeal Games was a very interesting failure. Maybe I shouldn’t even really call it failure, because I learned so much from it. This was an exercise of pure greed. So what happened was back in let’s call it 2008 or so, it was the Wild West in terms of the Facebook platform just coming out. And folks were creating these very, very simple games on the Facebook platform that created tremendous virality.
You could go from zero to a million users overnight. And amazing amounts of money through micro-transactions, like purchasing virtual goods, in this case maybe small weapons in Mafia wars, or a purple cow in Farmville. And my reaction that was, “Hey. Why don’t I get some smart guys together, and let’s just go after the pie.” Here’s a problem, though. I am not passionate about games at all. I don’t play video games in that game or in any sense. The reason why I entered that space was purely out of the greed of seeing some opportunity there that I could grab a piece of. And as a result, I think that drove probably the majority…[laughs] It was probably the primary driver of our failure, because I didn’t have the instincts to develop a really fun game. My heart wasn’t really in it, either. My passions are more around education, not around micro-transactions.
Andrew: So, give me an example of how you missed something, because I feel like you’re smart enough. Maybe you’re not fully passionate, but the environment was growing so quickly, the platform was growing so quickly, the platform was growing so quickly, that maybe it would’ve helped hide the fact that you didn’t know enough.
Eric: Yeah, I mean I don’t want to undercount the fact, too, the rest of my team, I had five other teammates that were working on this, and they were all incredibly smart, too. What I find in the work that I do, and I find this among a lot of my peers, too, and this isn’t universal, that when you can tie together a personal passion, or major interest that you have in your life, or a problem that you’re dying to solve, with some sort of venture or business that’s trying to solve that problem you tend to do better work.
For me, I just didn’t have that fire inside of me to develop that passion, understand the absolute nuances that it takes to create a viral game. As the lead product manager I think I was certainly responsible in large part for that shortfall.
Andrew: I see.
Eric: So, the lesson that I learned there was it’s not enough always to go into business only for the money, because there are going to be really hard times. If you’re just chasing money that may not be enough to carry you through. That was certainly the case for us. We had to shut our doors after 18 months.
Andrew: Wow. And at the same time, then, you were building BeattheGMAT and…
Eric: …Yeah. We certainly were. That was a time where the site suffered quite a bit. The BeattheGMAT site at that point was quite cashflow positive and was funding much of the development for Mass Appeal Games. But, we were ignoring the community for a year, a year and a half. As a result, that created a lot more problems downstream for us in our history. Because we allowed some competitors to come in and innovate really quickly in our space. When we were able to refocus our energy back into BeattheGMAT we found that it was a much more competitive environment.
Andrew: I’m going to come back and ask you about the innovation that happened and how people could out innovate you in this space.
Eric: Yeah.
Andrew: But, the original idea came from you wanting to go to business school, and you decided if you were going to take the test that you needed to get there, you might as well do what?
Eric: Yeah, get the MBA. That’s what people were telling me. How the story begins is back in 2005 I was sitting in my dorm room. I was clutching a piece of paper which was my Master’s degree in sociology. It was at that moment I realized, oh my gosh, I think I’m imminently unemployable. I didn’t do computer science, I didn’t do econ. A lot of peers in Silicon Valley, I went to college out here, were quite well on the engineering path and doing really neat things.
So I did what everyone told me to do, which was to get an MBA or at least pursue one. Funny story, I actually never ended up getting an MBA. We can talk about that in a bit, too. I decided to prepare for the GMAT test. That’s the entrance exam that’s required for MBA programs worldwide. The problem was I didn’t have any money. So, I couldn’t pay the 1,500 dollars to buy a course which is usually the typical rate.
I just got some library books, a few books from the bookstore, and I decided wouldn’t it be cool if I just posted my study log of how I prepare for the GMAT from day 1 through day 60 and maybe someday someone could find it. It was a very dry blog. It was hosted on Blogspot. Every day I just wrote down what I studied. That was really…
Andrew: …Didn’t it even include page numbers?
Eric: That’s right. I’d include things like, opened this book, do problems 27 through 80. I provided some editorial comment on the lessons that I was learning for the given day.
Andrew: Okay.
Eric: So, a very kind of not extraordinary beginning. At the time only my girlfriend, who’s now my wife, was reading the blog, maybe my parents. Somehow, a community started to develop with no outbound word of mouth on my part.
Andrew: Was it a community when it was on Blogspot?
Eric: It didn’t start as a community, but it began to become a community. As I started to prepare for the journey I think the story somehow got picked up by other folks who had maybe similar circumstances to my own who are self-studiers. People were starting to e-mail me, starting to comment on my blog posts more and more.
Towards the end of my prep I was actually fielding between 50 and 100 e- mails a day from folks around the world who also wanted some advice on their prep. I realized towards the end that I developed a little bit of an expert brand around self-studying.
Andrew: By the end, you mean when you were selling the company?
Eric: No, by the end of when I finished preparing for the GMAT test.
Andrew: Okay. So, how did it help you in your test to have gone through this process?
Eric: I’m someone who’s a big fan of public shaming. What I mean by that is if I’m going to be accountable for something that’s important in my life at a given time, I like to actually make it as quick as possible, so that the people who I care about most, and maybe even some strangers, will hold me accountable if I slip. So for me, it was very important to prepare for the tests every day just a little bit, and not fall off the wagon. And why I thought that blogging would just be the ultimate public forum to keep me going in my prep.
Andrew: At what point did you move from blog spot at Blogger to your own site?
Eric: Yeah, so what happened was, I found this amazing deal. It was $4, and I can get six months of hosting as well as my own domain name. And this was about a year after I’d finished studying for the test, but still the emails were coming, from people who were preparing for the test. And frankly, what happened was, I was just getting really tired of answering all these emails.
I clearly had a very intelligent community and I thought, “Hey, if the person who’s good at math could help the person who’s good at verbal and vice versa, maybe we can form some sort of online study structure, where I don’t have to be the main bottleneck.” So, I took advantage of that $4 deal. I found beatthegmat.com was still available at that point. And ever since then actually, we’ve been cash flow positive.
Andrew: So, as a guy who saw this great opportunity on the Facebook platform, which was really taking off and making heroes out of entrepreneurs, did you look at BeattheGMAT and say, “This is too small time?” It’s just on a Google blog, it’s just this little tiny site that you pay $4 for every six months to run it, or for the first six months. Did you feel like it was too small?
Eric: So, I think the thought never really crossed my mind until very, very late in surety of the business, maybe only in the last year too. The reason why is this. When I started the blog, when I started to form a little bit later, I never had any intention of turning this into a business. This business has happened completely out of serendipity, and accident.
I mean, the community sort of grew organically. I had a lot of passion in this space. One thing I didn’t mention was, I had a little bit of a test prep background myself during college. I taught some classes for the SAT and LSTAT’s, and always been someone who’s been really, oddly enough, passionate about standardized tests. I love them.
Andrew: I used to love them too, because it’s so clear what you have to do. You don’t know what the questions are going to be, but you do know what you need to do to prep. You do know what you need to do, the day of. Not everything in life is that clear.
Eric: Well, to add a little bit of a different take on that, Andrew, which is the reason why I love them is that they’re inherently a bit ridiculous in the sense that it’s impossible to standardize intelligence by any means across the globe. So, a lot of these tests which are tested worldwide, the audiences that they serve are going to be inherently different with regard to access to resources.
You know, for us in the First World let’s say in the United States, perhaps we have more in disposable income to pop by a $15,000 course. But that could be a very different story for a colleague across the globe. And you’re right, actually, that these intelligence tests which they were originally deemed to be in the 1950’s and such, are ultimately preparable. You can do great, if you have the right resources. And that was actually a really big reason why…
Andrew: What do you mean by “the right resources?” You just had books and a website. What kind of great resources did you have?
Eric: I had books and a website. I had internet access. You know, there are many places in the world where you cannot access…you can’t even get your hands on the GMAT prep book. I have some community members here based in Africa and parts of South East Asia, who say that they go to their villages’ internet cafe one hour a day, which is the maximum limit, to log on to BeattheGMAT, and access the resources that we’re providing for free. And you know, for us that’s sort of like you and I have almost like access to all the steroids and whatever in this grand race, whereas we’re competing with other folks that have a lot less.
Andrew: No question that it’s not fair that there are people who are disadvantaged. I just mean, there’s very little in life that’s so cut and dried. You know, this interview, I don’t know 100 percent if I prepared for it right. Is the question that I wanted to ask you the perfect question about ATM to get people excited? Or is the one that I ended up going with about when we started chatting about our background, was that right?
There is no clear right or wrong, but with an SAT or with a GMAT or other standardized tests, there’s a clear right or wrong. There’s a clear way to prep. And is it a clear evaluation of your intelligence? I don’t think so. But I do take comfort from the clarity of the right and wrong that comes from that.
Eric: Yeah, and there is even something . . . and I actually agree with your points there, too. So I do think there’s something in the process of preparing. It’s a real good indicator actually of how you are going to be as a student, and how you prepare for the test. So as a proxy in terms of your preparedness
I think it’s pretty good. But the original thesis that a standardized test could measure intelligence and (?) intelligence, I think that’s completely been debunked. And to the credit of (?) the test makers throughout the world today I don’t think they’re trying to position their tests as intelligence tests anymore.
Andrew: All right. So here you are, a guy who’s learning this publicly who is building a site. You’re starting to bring in revenue through Ad Words, right?
Eric: Yeah, that’s right.
Andrew: (?) It’s called Ad Sense. When it’s passed on the site.
Eric: Yeah.
Andrew: So you’re basically, maybe not breaking even, but maybe making a little bit of money, but you’re not flush.
Eric: Right.
Andrew: And then I see a post from 2006 on Ramit (?) blog where you basically say, “A few months ago I launched forums.” Except you wouldn’t even let him call it just forums; at the time you said I launched a community. And you explained the thought process behind it. But once you launched it how did it do? Was it active, was it doing well, or did it become one of those, you know, just another forum with hardly any action on it?
Eric: Yeah, so Ramit, by the way a great mutual friend of ours, he was one of the guys that tried to convince me not to spend any time on this project.
Andrew: Why?
Eric: Well sure, some of the things that you mentioned earlier in this interview, which is the long-term size of this market is pretty small. There are only 250,000 GMAT test takers every year. It’s a tiny, tiny community, so how do you make money off that? And we found our way, but it hasn’t been of course the easiest, and the scale by which we have grown hasn’t been the same size as Facebook, which also started at the same time as (?) roughly.
To answer your question about how we started, you know, I thought that I could just flip a switch, turn on the discussion forums and a community would start talking. But I learned that I was absolutely wrong about that. Interacting with someone, or interacting with a site via blog (? Cons) is very different from interacting with a site through a discussion forums.
Andrew: What the difference?
Eric: The main difference is that there’s actually a lot more steps typically in how a discussion forum is structured, and you have to register user accounts. There is a little bit of an odd usability issue of, you know, being able to be comfortable, picking threads, scrolling through threads, finding the reply button. It seems to be a bit of a cleaner interaction story when you’re just hitting reply to a blog comments.
Andrew: Yeah.
Eric: So you know, we had to train that community to do that. But really the way that the community was able to hit that critical mass and that was a concept I was always obsessed with, which was the idea that we would have a community that’s large enough and active enough where if I had to go away suddenly the community itself would still grow and thrive and just continue to flourish. It took about I’d say a good year and a half for us to achieve that critical mass, and the way that we did it was actually through three principles, actually.
Andrew: (?)
Eric: The first was high-quality content. If you, Andrew, wrote a post on my discussion forum I would personally respond to it in a very very thorough manner. So the first value is, you know, you’re going to get a response from me, and it’s going to be a great response.
The second principle was speed. So I never made this public, but for about a year I would try to answer every single forum post within one hour. And the problem with that is that I soon discovered that when America wakes up and goes to sleep India and China then wakes up and goes . . . it’s a 24- hour cycle.
Andrew: Yep.
Eric: So what I did was I programmed some phone alarms that would go off every time a new forum post was entered in my site. I tried to drop whatever I was doing, run to a computer and answer that forum post. So it took me about a year of doing that before we got to some sizeable growth.
And then the third and final principle actually to me was the most important, which was what I call be a hippie. So what I mean by that is at the time there was a prevalence of business school related communities that had highly negative community members, you know, where it was very common to thrash other members who were trying to get some honest advice about their profile, their competitiveness, and getting into these higher education programs. I was absolutely sick of it. I thought that it was a misrepresentation of what real MBA students were, of students seeking higher education in general.
So be a hippie to me was as soon as someone shows even the faintest hint of becoming a troll, or someone who’s a negative energy in the community, we would immediately ban them without any warning. They’d just be gone from our site.
That was one component of it. The second is my own persona when the site actually became, I don’t know how to describe, maybe effervescent. I’m someone who actually is a grammar Nazi, and I hate using emoticons and multiple exclamation points. But, I found that I use those and leverage those as tools within my community when I communicate to others. Because I wanted to set the tone within our community as someone who’s absolutely encouraging, caring, always excited about having you in the site.
It had tremendous secondary effects of making the rest of the community really effervescent and friendly. I don’t participate in the community that much any more, but to this day we still have an incredibly friendly and encouraging community. It was really through those three principles, then just working at it for about a year and a half where we were finally able to get to that point where the site was just growing by itself.
Andrew: I’m looking here through my research as we’re talking. I don’t know where I saw it, but at some point very early on you also asked people who were experienced with the GMAT to come into the message boards, to be there, to help answer questions. How did you get them to participate?
Eric: A lot of things happened once we hit that critical mass point.
Andrew: This was before or after the critical mass?
Eric: This was right around the point where we hit that inflection where the site was starting to take off. Recruiting experts became very, very easy. We have a very great value prop here in terms of how we run our business.
We don’t charge students directly on our site. All the resources you find on BeattheGMAT are free. Who we do charge, though, are test prep companies, business schools, admissions professionals and coaches. What they find is that by participating in our site and providing free advice, lots and lots of free advice, it becomes a lead channel for them.
So, if I’m coaching some people in our discussion forums, this young man Andrew, and Andrew will very likely be impressed by the expert, say it’s me, he may reach out to me and ask for one on one tutoring. One on one tutoring is a great business. You can get thousands and thousands of dollars just from a single client. There are many, many experts on our site today who are admissions people, GMAT companies, who are building pretty good empires themselves just getting BeattheGMAT leads into their business.
Andrew: Did you make that offer to them, that pitch to them, when you brought them into the group?
Eric: Yeah. What I was ultimately trying to do was accelerate the critical mass of our site. The way I saw that was going to happen was if we could get a ton of experts on the site who are providing tons of free content and free advice, not just me but maybe like a hundred other people, then it’s going to be really enticing for someone who’s preparing for the test to join our community and start to participate.
That was the first thing that I was trying to solve for. Then, it just so happened, through a lot of experimentation and discussion with the experts, hey, you know, there’s huge value back to you. If you participate a lot and devote many hours a week to our site you’re going to make money. You can actually measure that down to the cent.
In fact, today we have probably a little bit less than a hundred experts who are active on our site. The folks who are the most active, in our leader board right now on the bottom of our site, they tell me all the time that they hate to go on vacation, because they don’t want to lose the brand, reputation, and their leaderboard stat ranking by going to Hawaii for a week. So, they just continue to work and provide lots and lots of free content to our community.
Andrew: So, if someone’s listening to us and says they want to create a community, or if I, Andrew, want to create a community based on what I’ve learned from you, would it make sense for us to bring in experts and say, we’ve got this…Are you getting an alert?
Eric: Oh, no, excuse me. I just closed it, yeah.
Andrew: Would it make sense for us to do that, too? To bring in experts and say, you will get business if you answer questions, we will help you raise your profile with this audience?
Eric: I think that’s a pretty good way to go, but there’s a step before that that’s really important. The step before is you need to demonstrate that you have the traffic and you actually have a vibrant community. In order to pull that off it’s just pure grit, doing a lot of work yourself serving as that expert. A lot of times you have to be driven just from the passion of the business you’re trying to build, because it’s grueling. It’s not very easy work.
Andrew: What about this thing that you’re, and I’m going to say one other thing that you did to get people to come to your site, but what about this idea that you’re not the expert? You’re a guy that took the test. You didn’t even graduate as you said.
Eric: Yeah, I didn’t get an MBA. I did finish the GMAT test, I actually did take it. Here’s the thing though is we need to sort of define what expert actually means. I don’t have to be someone who knows everything about algebra or geometry or whatever subjects are tested on the GMAT test. What I’m an expert at was understanding how to build a strong, and effective self-study plan to prepare, and succeed on the GMAT test.
So this is the must niche area of expertise I have just based on solving from my own needs in the past. What did I need to do to prepare for the GMAT test? That’s what I’m an expert at. I can’t really even tell you, I probably can’t even do any of simple kind of probability questions anymore that’s tested on the GMAT. In that one specific area I do know what I’m talking about.
Andrew: And as you went through that public study period where you blogged, and talked about it, and learned it, and shared.
Eric: That, that definitely was the main reason that I built that brand, but the second one was just because I made it public. The shear fact that this is a public experience and that you can see me starting from someone who had zero knowledge of the test to becoming very, very proficient in that subject matter, and in the test, From day zero to day sixty. I’m kind of one of those guys that you see on the infomercials for P90X who started that and now has a six pack, and you can see my journey every step of the way. So that sort of has been the enabling factor for me to build some expertise, or have that brand as an expert.
Andrew: That’s encouraging. I got to tell you that one of the things that I do for my guests to make sure that my guests are telling me the truth is I go back in time, and I see did what they say happen? Was there any, if they’re talking about 2006 are there any contemporary articles from 2006 where what they’re telling me today is the same as what they said back then. I watch your world. I see it, and I didn’t just pick 2006 out of the air. I see that the interview you did with Urleet[sp] was in 2006, and you guys are both new into the publishing space back then.
Eric: That’s right.
Andrew: All right, so here’s another thing that you told Jeremy Weiss in an incredible pre-interview that he did with you. You said that you would bring people from outside into your site by doing what? Do you know what I’m talking about?
It was some kind of, you would somehow overhear a conversation about the GMAT, and you would chime in, and bring people over to your site. How would you do that?
Eric: Are you talking about in real life?
Andrew: I don’t know, you tell me. Was it in real life or did you have Google alerts set up so that if someone talked about the GMAT you would go and get them?
Eric: In the early days there was a lot of hand to hand combat. I mean, it was just straight up guerilla warfare where if I saw someone who I could talk to who was struggling on a problem that I knew I could solve through having them join our community, I would personally recruit them, and that happened through a lot of channels. That’s part of the reason I’m struggling to answer this.
One of the ways that this happened was in the early days when I was doing the blog I was still living on campus at college, so I had the opportunity to talk to people who were graduating, discuss whether they’re going to get their MBA degrees, or not and just let them know that I had this blog on Blog Spot that they could check out.
A little bit later on though, the hand to hand combat happened both online as well as offline, so I would sometimes I would read other people’s blogs, as well. One of the things I’m very proud of is kind of a small legacy in the internet is the {??] blog is one of the first {??] in terms of the day to day study blog, but since then there have been thousands that spawned from it.
As soon as I discovered {??] blogs, and I did have Google alerts for that too, I would start to comment on those sites. I would start to engage in those readers and invite them to either share their experiences to our community, or even just start to directly participate.
One of the articles I recently saw from Paul Graham one of your former interview subjects from the founder of Y Combinator was titled, “Do Things That Don’t Scale.” I’m sort of paraphrasing. [??]
Andrew: I think you might have it exactly right.
Eric: Yeah, so I read it just a couple of weeks ago, but his whole point is in the early days, you know don’t worry about setting up systems that will get you from zero to a million people. It’s all about getting those users, one by one. So, I knew inherently that when I programmed alarms to wake up at 3:00 to answer some guys request from India, that I wouldn’t be able to do that forever. I would probably end up dropping over and dying, because it was really exhausting. However, it was effective because I knew that I was solving for that person’s experience, really, really well.
And my bet was that by solving that guys post, or that girls problem really well on MyCommunity. They are going to tell 12, 15, 20 other people when they’re ready to prepare for the GMAT test. You know, so that was kind of the thinking around, that this Gorilla Warfare is going to pay off at some point. Because I am banking on the idea that delivering a great experience will deliver a great word of mouth that I don’t even need to work for, at that point.
Andrew: Now, I hear what you are saying and still I think about this past Saturday that I was at this party, and when people asked me what I did, I didn’t want to say Mixergy, I didn’t want to talk to them about this. Because I thought, what’s the best thing that’s going to happen, I end up with another five viewers on my site. Is there a benefit to doing that? If you count up all the people that you’ve met, would it be that dramatic an impact on your traffic?
Eric: So, a couple things, first of all you should never be shy that you run Mixergy, that is something that you should absolutely be proud of. I mean, I’ve seen the earliest work that you’ve produced and you’ve come a very long way, so that’s the one thing. The second thing though, is measuring success has to be a little bit different than educational space. So is it worth it?
So I gain, let’s say that I can talk to five to ten people each week, which is probably the right number, through these unscaleable channels. I still do this, to convince them to come visit the site. I am not that interested in having them hand me over money indirectly. You know, it’s great that they’re growing my traffic, and that’s inherently valuable, but there is something a little more exiting around our venture, in BeattheGMAT which is, I can help five to ten people a week to get better resources, to help them achieve their dreams for graduate education.
So what is that worth my time? I think absolutely yes, because helping someone to achieve their dreams in an education, that is something that’s been taken for granted a lot, I think in the United States, is this Access Education. Elsewhere in the world it is a little harder to obtain. And any part that my team and I can do to help those folks becomes successful, that is a huge win. You know, that is one of the things I liked most about the BeattheGMAT project was, that I never thought that there is a single, there is not a single day in this venture where I thought that I could fail.
If I had to close up shop today, five years ago, eight years ago it would have been totally cool, because I knew for a fact that at least I had a chance to help a couple thousand people. And then it became a couple tens of thousands of people, then it became hundreds, of thousands, and now it’s millions of people. So regardless of whether it created a great liquidity for me, the [??] mission is the thing that really kept us going and made us very proud.
Andrew: I get that. And you know what, what I ended up doing is I did end up talking about, not Mixergy but this other project that I’m doing with the Mixergy community about meditation, and about shutting out those, the inner doubt. And the reason I did it was not to send people to a site, I don’t actually have a website to send them to. But I wanted to see how strangers who didn’t know me would understand the message?
Am I communicating it well? Something that Mike Delponte told me, of Soma, the water pitcher that he created. He said, I just needed a way, a place to test my explanation of what’s special about this product, and see what excites people. And in that sense it really helped. Did you find that. too?
Eric: Absolutely, so I love talking about BeattheGMAT, for the first, well the thing I love about is so much is that 99 percent of the people that I meet in daily life cannot relate to the site at all. So, you know, most of my friends are not NBA’s, and most of the people I talk to on a day to day basis, are not seeking NBA education. But, the opportunity to just explain what we do, why I’m passionate, and just try to see if I can get them passionate too about the idea.
It’s really rewarding because you never know when they have a relative, or another friend who can use a little bit of advice, and you know we can be there for that community, with that community. So I just love pitching to people who have no idea, and try to get them excited about the GMAT. I mean, what an interesting challenge that is right?
Andrew: What do you say to someone who doesn’t care about the GMAT, to get them excited about it?
Eric: So, I don’t talk about the test specifically, I don’t even talk about the NBA degree, specifically either. What I try to talk about is the fellowship that you’re going to find in our community, where there’s a rare place on the Internet where everyone’s kind to you. No matter what stage you are in your maturity or your preparedness for the test, for your MBA admissions, you can go there and know that you’re going to get a respectful and very, very friendly response to any question that you have. Today, the average response time for a BeattheGMAT question that comes into our discussion community is five minutes. That’s a lot better than the one hour I was even trying to achieve myself back in the day.
Andrew: Wow.
Eric: That’s something I think gets people excited, knowing that, hey this maybe is not relevant to me but it’s cool to see that on the Internet you can find communities that behave well, that are respectful to one another. It’s not like the YouTube community or other places that you might find which are for more vitriolic in terms of their tone. I think that gets them excited.
Andrew: I’m checking it out right now as we’re talking. Of course, I see if I check the description of your site on even Google it says, a GMAT and MBA community featuring free GMAT forums. But, even going back to an e-mail that you sent me two, three years ago where you said what your company does. You said, we’re relaunching an MBA social network…
Eric: …Yeah…
Andrew: …it was never about beating the GMAT. It was never about just the test. It was always about the community.
Eric: That’s right, yeah. I’m surprised you still have that e-mail. I actually do not remember sending it to you, though.
Andrew: Yeah, I’ve got e-mails from you going all the way back. I won’t read them because anything personal would be personal.
Eric: Yeah.
Andrew: The very first e-mail exchange that we had is from 2010.
Eric: Wow, okay. I’ve been a fan for a long time, Andrew.
Andrew: I appreciate it, and I can see even in my e-mails to you I think there are a few exclamation points when I was looking at your site.
Eric: Yeah.
Andrew: So, somewhere around the time that you and I talked, I guess it was even before that, 2009, you launched a social network. You wanted to redesign it and you needed to fund it. Did you even try going out to get investors to invest in the business?
Eric: Not really. What I mean by that is we did have some inbound interest, especially in the last couple of years, from folks who said if you needed any seed investment we’d have it available for you. So, we knew that the capital was accessible to us.
But, you know, we are very proud of our bootstrapping legacy and wanted to do whatever was possible to keep BeattheGMAT privately held so that we could ultimately control our own destinies, too. What we did was, yeah, back in 2009 we wanted to relaunch as a social network, not just a discussion forum but a place where you could create some real substantive bonds with fellow applicants as well as administrators at schools, students, and so forth.
The way that we pulled that off was what I call pitching vaporware. We needed about 100,000 to 150,000 dollars in order to pull off this big redesign. What we did was we invested in a designer, paid him 5,000 bucks, to create some mock-ups of key parts of the site and the user experience.
When we went to some potential clients to whom we would sell this to we basically said, production’s already happening, development’s under way. And if you want to be part of the launch and have the privilege of being there from day one you’re going to have to pay us six months in advance, all cash, all up front. We were able to close…
Andrew: …What were they paying for?
Eric: What were they paying for? We were seeking out service providers for GMAT prep and admissions consulting, people who are in the pre-admissions stage we wanted to say, and they wanted to have access to some of the new marketing products that we were planning for them. So, it was a combination of advertising, lead gen, lots and lots of branding for the sites.
It’s actually been the same business model we’ve been running for the last five years, and it’s been working really well. The clients loved it. They loved the concept. We got the money and then we started to build. We had to pretty much deliver something within three or four months, and we were able to do so and pull off a really successful launch.
Andrew: What about there? Did you feel like a fraud at that point?
Eric: Not at all. Maybe we were being slightly hyperbolic by saying production was underway. But, we were doing a lot of work already assuming that the cash was in hand.
I’m a product manager. I kind of consider myself a product manager. I was already drafting the user experience, the requirements. I was sort of mocking out the flow of what the site was going to look like. While we didn’t have any developers coding it, yet I was already confident that we were going to make it happen. Here’s the other thing, too, which is I didn’t see this as a huge gamble. Meaning if we got the money I did not think that we were not going to deliver.
The confidence, I think, also was manifested in my pitch. That was something I never questioned. I knew the exact scope of what this project had to be and that we were going to deliver it, so I felt very good about pitching. Monetizing, then building.
Andrew: How long did it take you to actually relaunch the site?
Eric: About three or four months. That was when we got our first launch. We did another bit of tweaking, I think, about two or three months after that. It was a real iterative process, but towards the end of that full sixth month we had the final site that really lasted us for quite some time, actually for another good two years before we did another relaunch.
Andrew: One of the first things I do when I move to a new city is I don’t worry about much. I actually enjoy having a brand new environment. The thing that worries me is, will I be able to get health insurance. Because I run my own company. I have to find my own health insurance.
I don’t have the patience to deal with those bureaucrats, and for random reasons they can turn you down. Or, they can stalk you if they decide that they love you, and keep trying to pitch you. So, as an entrepreneur, a guy who’s running his own business, no outside funding, doing this for years, what did you do about health insurance?
Eric: Health insurance was probably the single largest source of stress in my life as an entrepreneur.
Andrew: Really?
Eric: Yeah. When I started my career back in 2005, BeattheGMAT was a side project. I was working at a large tech company for three and a half years. They put me in Arizona at the call center as part of this rotational program – also an experience. But, I went camping one day in the desert and came back from the trip having contracted a very, very rare lung disease. I had to fight for my life for about eight years with this disease. I later learned it only had a 15 percent survival rate. It was a very, very tough time. Because I was uninsurable, absolutely uninsurable.
Andrew: Because, after that, they won’t pick you up.
Eric: No, not at all. I have a pre-existing condition. Fortunately, I had COBRA for a period of time. I also had my wife’s insurance, too, through her employer and her COBRA as a result. But, it was really just managing a variety of…COBRA, by the way, for your listeners, it’s the health insurance you can extend from your company by paying the full premium month to month, usually for about 12 to 18 months, depending on the state that you had. It’s incredibly expensive. For me, I was paying…
Andrew: …Because you’re paying the corporate rate as an individual.
Eric: That’s right. For me, individually, I was paying about 700 to 800 dollars a month just for myself. As an entrepreneur, at times where I did not pay myself for six months, spending 800 dollars was actually at times a decision between should I buy these kinds of groceries or should I buy the canned goods then pay my health insurance.
Andrew: What do you do when COBRA expires?
Eric: You’re pretty much screwed. Maybe Obamacare is going to change that. That’s one of the things to look out for…
Andrew: …That’s probably true.
Eric: I don’t really know too much of the details yet, but hopefully that’ll improve things. The way that we were able to solve for that is we had a very brief lapse, after we started juggling COBRAs, where we didn’t have health insurance. At that point our business was large enough where we could get enough employees as full-time members so that we could buy new group insurance. So that I would not be judged as an individual, but the company as a group would pay in. That’s how were we ultimately able to get coverage, it was just hiring people so we could get the group rates.
Man, was it stressful. Not only was it the stress of possibly dying, but it was also the idea that, you know what, I may not be able to see this vision through that I have for this company. And that depressed me so much, thinking that maybe it was time for me to get a big company job where I can sort of have a little bit more flexibility with my time focused on my health, and give up this BeattheGMAT thing. The thought of that scared me more than anything. This idea that I had unfinished business that I could possibly leave behind.
Andrew: You actually were basically taken out for, I think, three months is what you told Jeremy.
Eric: That’s right.
Andrew: How does your business, the one that relied on you for a long time answering e-mail within minutes, excuse me, answering posts within minutes of people putting it up on your site, how does that kind of a business run without you for three months? What did you do to allow it to run?
Eric: Going back to this whole concept of critical mass. The community itself was thriving. So, my participation was not critical from, let’s say, a community health perspective. I didn’t need to participate too much myself to make the site run. The business side, though, making sure our clients were happy and so forth, that was a little bit tough.
I probably didn’t have as much downtime as I would’ve hoped for, in hindsight, during my three months off from work. There’s still a lot of time after watching tons of Netflix and just being on the couch. My mind was fine. My body was a bit sore, but I could still type. So, I was able to do some e-mails here and there.
For the most part I think that none of my clients ever knew that I was sick. I’ve only recently started to tell them about these crazy experiences that my wife and I had, and they’ve been surprised.
You know, it might’ve been also slightly therapeutic to some degree. Because the thing that gets me most excited about my day is coming to work and doing the thing that I love to do, which is building this business. If I didn’t have that then I would be lost in my thoughts about, okay, I’m 25, I didn’t live that long. Am I going to die? It’s very easy for me, I guess, to get a little bit lost if I didn’t have something that really occupied my time like this.
Andrew: You know what, though. One of my past interviewees, Sam Carpenter, who wrote the book “Work the System,” says, if a business can’t run without you it’s not really a business, it’s a job. So did you ever convert it into a business, or was it kind of like Mixergy is still to this day?
Eric: I make it a job. I think that…
Andrew: …You prefer it that way?
Eric: Oh yeah, absolutely. We have gone on vacation for like five weeks at a time, or we’d take three or four weeks off every year, too, to travel. We come back to the business and it’s better than before. Our team is quite large now. We got acquired last year, but there are about 11 or 12 people running the business outside of just me.
I like having the job. Being able to talk to community members on a day to day basis, hear about their hopes and dreams, and hear about what inspires them, it’s just so much fun. I haven’t been bored in the last nine years just being involved.
Andrew: So then, what got you to sell?
Eric: I think what got me to sell was sort of what Ramit said…
Andrew: …What’s that?…
Eric: …which is…Nine years later I kind of got the advice. Back in 2005 when we were both 23 years old he said to me, Eric, don’t do this, because there’s no long term scaling opportunity for this.
I actually think that there are long-term scaling opportunities. But, it’s going to be a very different journey starting from the next 10 years than it was in the last 10 years. In the sense that we’re looking at new opportunities in different education spaces now not just the MBA space, like law, medicine, nursing, other kinds of graduate education protocols.
In order for us to pull that off, though, I do think that it’s going to take more capital. I think it’s going to take a little bit more existing relationships with those kinds of graduate programs that I didn’t have myself. So, on the one hand I thought it was great for business to align myself with a company that had a huge footprint in these different spaces.
The second thing, though, is it was eight, nine years of running this business. We made a lot of sacrifices along the way in terms of our own financial stability. I’m at a place…You know, Andrew, you and I were talking right before this interview about families and when’s the right time to have kids.
My wife and I are pretty much at that point where we’re thinking seriously about having children. It’s important to me as a sort of naturally conservative guy to have some financial liquidity that we can rely on moving forward to provide for my family. So, there was a bit of business, but there’s also personal in terms of liquidity.
Andrew: Do you think Ramit’s site is built to scale, or is it also a job? Ramit doing personal finance where he is the personal finance guru of the site.
Eric: You know, Ramit’s one of my heroes. Because he’s a guy that’s very, very good at working himself out of the job. What I mean by that is no doubt he put in a lot of sweat equity and attention to building the site for many years, especially in the beginning days.
But, he has built such a smart team where he recruits amazing talents to build great products, to do a lot of the writing for him even in some cases, where he can focus on the things that are fun for him which is the occasional blog post, the interviews. But, his team is really, really good now, and does much of Ramit’s work. So I think that he also has a job. I think it has some scaling potential. I think Ramit could have a business that runs without him and just leverages his brand, but he’s also a guy that I think is in it for the hand to hand combat of everyday work. Because he also loves his job.
Andrew: He does seem to. Anyone who sent him an e-mail and got a response within four minutes knows how committed he is.
Eric: It’s scary, yeah.
Andrew: During the sale of the business something happened to your wife.
Eric: Yeah. That is pretty much the scariest moment and also the darkest moment of my life. Things were going great. This was almost exactly a year ago. We were in the process of going through our due diligence. We had negotiated much of the terms of our business.
My wife and I decided to go on a trip with some friends down to River Gorge. We decided to free climb out of it. Because we thought through our own hubris that we were awesome climbers, and we did a lot of rock climbing. My wife ended up falling like 70 feet off a cliff free climbing in her bathing suit. The only thing that saved her was a tiny shrub that was sticking out of the canyon that kind of helped to break her fall that she…
Andrew: …Like in cartoons…
Eric: …Exactly, just like Wile E. Coyote. She was severely injured. She was bedridden for a couple of weeks, too.
This was happening right in the middle of the deal. I had to go back to the deal makers on the other side. I said, hey, listen, this happened, I’ve just got to take care of personal business and step away.
To the credit of the company that I’m with now, Hobsons, they were so cool about it. They were just amazing in terms of saying, no problem at all. We’ll try to do as much work as possible on our side. You don’t worry about it, just come back when you’re ready.
Then I was a caretaker for about three or four weeks for my wife. I don’t know if you’ve been in a position of being a caretaker before, Andrew, but I have so much respect for people who can do this for extended periods of time. You are doing laundry all the time. You are cooking all the time. You are cleaning and changing bandages all the time.
Simple things like remembering to shower, remembering to eat, remembering to sleep yourself, just very basic human needs you absolutely throw out the door and lose complete track of. It’s very easy for people to just lose it. Fortunately, I’m blessed with some wonderful friends and family who were able to check in on me, remind me to eat, sleep, and shower…
Andrew: …You have family here?
Eric: I do have some family. I have a sister nearby and her family. My parents are pretty close, too, in LA. I’m in the San Francisco area. That made all the difference…
Andrew: …I can imagine. But, she recovered that quickly?
Eric: It took her a good four to five months I’d say to get back at it. She didn’t break any bones. She really severely lacerated her body in many areas very, very deep. It’s amazing how resilient human bodies are. She could start to get pretty mobile even after two and a half weeks. But, there’s been at least a full year of kind of recovery in terms of the treatments she’s applying to her skin and so forth.
The psychological trauma is pretty strongly felt even today with both of us. I was at the bottom of the cliff watching my wife fall. I always was maybe dismissive of people who say they have post-traumatic stress disorder. I never thought that was a real thing. But, I have nightmares very, very consistently about that fall…
Andrew: …Where you can see her fall, and you…
Eric: …Yeah, for many months. I think I have now re-committed myself to taking those kinds of things much more seriously.
Andrew: I hate to even bring it back to business from that.
Eric: Man, no problem. It’s all related to business. We still had to close the deal, too. At that point, too, it just didn’t seem to matter.
That’s the thing that was kind of interesting I learned, which is when the people you care about most really need you it’s amazing how quickly what stresses you out about your day to day business life and lots of money on the line, it just suddenly doesn’t matter anymore.
A little funny sort of side note, too, in terms of what I learned about myself. There was a period of time where I thought I was a sociopath. Because towards the height of running this company I was only focused on making sure that I was optimizing my business. I was seeing time with friends and family as opportunity cost from working. I started to get a little bit concerned about it, like am I losing my human touch.
But, it took an instant like this to really rapidly remind me that, wow, I do care about these people and I am re-committing myself to caring about them and appreciating them every day. But, I don’t know if you felt that. I know that in one of your previous startups it was super intense, and it’s very easy to lose yourself into just becoming a business guy. Day and night that’s all you think about.
Andrew: I did have to work on it, because you’re right. I saw people as opportunity costs, as distractions from what I needed to do, or as helpers.
Eric: Yeah.
Andrew: I had to work on it. I still, frankly, have some intimacy issues where I can really connect with Olivia and we have a lot of intimacy, but one of my past guests, Nicholas Holland, came in here. We had this real personal conversation. I forget how he said it, but he said, “Andrew, you need to have close friends.” Like, he says to me, are we buds. I go, yeah. He goes, “No we’re not. We don’t know each other that well. You need people who you can get to know really well.”
I thought, I need to actually work on that because it doesn’t come naturally to me. I feel like I know a lot of people. I’m close with a lot of people. I have a lot of people come home for drinks, dinner, et cetera. But I need to work on getting closer.
Eric: Well, here’s a thought for you. This experience with my wife completely defined who…
Andrew: …I’m not about to throw my wife down any cliff if that’s what you’re getting at…
Eric: …Yeah. Just learn from my lesson…
Andrew: …Okay…
Eric: …which is the real friends, I discovered, were the ones who not necessarily just called or e-mailed and said, hey is everything alright. They actually showed up at my doorstep. Then, they let themselves in. When I was going through this crazy caretaking process they didn’t ask to do my laundry, but they did it for me. They cooked meals for me. They’re the ones who didn’t ask for anything. They just showed up and then acted. It reminds me of a quote I read recently, which is like your true friends are the ones that come running towards you in times of crisis.
What I sort of committed to myself is any time that we have friends that need us we’re not going to call them or e-mail them. We’re just going to show up at their door and be there in person until they can get through this. I think that’s my definition of a true friend. That’s something to think about for you, too, Andrew.
Andrew: I get that. I think I need to do…I don’t get opportunities to do it more. Maybe I’m not finding it. But, I have to tell you that one of the things I recognize as I talk in these interviews is I want to get really vulnerable about myself. Because I know when I have private conversations with people in the audience they get really vulnerable with me.
I’m trying to express, be as open about my challenges, my vulnerabilities, as they are with me, so, hopefully, others will see themselves in this. But, I don’t want to make it feel like all I have is these vulnerabilities. In fact, I feel if anything at this stage in my life so comfortable in my own skin, so comfortable…
Eric: …Sure…
Andrew: …expressing myself. Maybe that’s where a lot of this openness comes from.
Eric: Well, I think the vulnerabilities are great to express. too. I mean I don’t think anyone who’s actually seen your interviews define you by vulnerabilities.
In some sense entrepreneurship might be a definition of controlling your vulnerabilities. There’s constant insecurity in terms of skill gaps that you have, questioning yourself, doubting yourself. Unfortunately, sometimes it produces very sad results in the case of Aaron Swartz or Joey Sherman, who you know, unfortunately, had to pass.
What I think is happening though, especially in Silicon Valley and perhaps elsewhere, is a little bit of a realization that we need to act a little bit more human in our day to day lives and feel comfortable…
Andrew: …People don’t…I think another challenge is we go through our own private hells at times. I think all of us do. But, when we look at other people they never look like they’re going through it because they always put on a brave face.
Eric: Yeah.
Andrew: If you even talk to them about the past they are reluctant to say anything openly about their challenges. So, you feel like what is wrong with me. Am I the only one who has this? I don’t know the gay community that well. I imagine when I watch old movies of the gay experience from years ago that gay people must’ve had that feeling, too, that what is wrong with me, am I the only one ike this, why can’t I stop this.
Eric: Yeah.
Andrew: I feel it doesn’t have to be. When we go through this we are not the only ones. When I talk to people in an interview, like Mark Schuster, a guy who’s really confident, who’s personable, when I don’t just talk to him about the confidence and I don’t just talk to him about his business success I think I do the audience a service.
Eric: Yeah.
Andrew: I think I show them here’s a guy who was also vulnerable. Here’s a guy who also thought that he was going through something he could never get out of. When you’re going through it recognize that you’re not alone, that others get through it. I think that’s helpful.
Eric: Yeah. I completely agree with that. One of the lies that I’d like to stop hearing in the Valley is when you ask how’s business going, crushing it.
Andrew: Yes, yes.
Eric: You know, and I’m guilty. I’ve said it before, too, trying to convince myself that I’m crushing it. What I’ve learned is actually, that’s not a very healthy thing to keep contributing back. The truth is, usually I’m not crushing it. Usually, shifts going wrong. [laughs] There’s a lot on my mind, and I’ve…
Andrew: I’ve never…I don’t think you want to say that we should always, when someone says, “How are things going?” we should always say, “Well, I’ve got this headache here.”
Eric: Yeah, sure.
Andrew: And, “I don’t know if I’m going to make it.” I’m just saying there needs to be a space — a space where we can talk about it, a space where we can say, “This is what we’re going through. Anyone else going through it? Okay, great. How do we express it, so we can release it and learn from each other?”
Eric: That’s right. Hopefully, these kinds of interviews are helping. I mean, you do get very personal with the people you interview. So, we’re all human here, right? I mean, there are great times, or really bad times. And I hope that some of these stories I shared today with you, were helpful too.
Andrew: I know they are. I almost want to end it here, because it’s such a touching moment.
Eric: [laughs]
Andrew: I know this is where you want to end it, where you’ve touched someone and left them with a message. But I also want to be complete. And there’s something really important that you said in the notes that unfortunately is going to bring me back to business. But it’s still important.
Eric: Sure.
Andrew: You said something about the structure of your business, that if you would have structured it differently, it would have been better for you financially, especially with relation to taxes.
Eric: Oh, yeah.
Andrew: I didn’t fully understand it, and I thought I’d ask you directly.
Eric: So, for those of you who are in the audience watching this right now, [laughs] this is a very big lesson that I learned, which is if you have a choice in terms of how you incorporate, don’t do it as an LLC like I did — which is a very simple and elegant solution, but do it as a C Corp. Do it as a Delaware C Corp.
What happens is this is a concept that I only recently learned about called “Qualified Small Business Stock.” And the way that this works is let’s say that Andrew and I form a company today, a C Corp. We run our business for five years, and then it gets acquired. When we actually report the earnings, let’s say that we make $1 million each, in some States and definitely on the Federal level, you can be completely exempt of taxes.
And the reason why was, this is a law that really got a lot of attention and was placed because during the recession, there was a lot of efforts on behalf of the Government to incentivize people to create businesses, and start to build jobs. And one of the huge exemptions in tax policy was, if we let people become entrepreneurs, and then they build the business over five years and it gets sold and liquidated, then we’re going to let them not pay any taxes at all. And if I had done that when I was in LSE, I didn’t really have a good reason as to why I did that besides that it was just easy, it would have produced a lot more liquidity for me.
Sadly…maybe not so sadly, it’s in the government. I don’t feel too bad about it actually, but it would have been just more personal liquidity.
Andrew: Yeah, and I think you could have done. I’ve seen the good things you’ve done over the years, the scholarships that you started early on. I know you could have done good things with it. If nothing else, I just want to know that this is available. I had no idea. It’s called the “Qualified Small Business Stock?”
Eric: Yeah, QSBS. So, definitely check it out on Google. It’s not talked about enough. But it’s a massive, massive benefit for starting a company today, and doing it the right way through a C Corp.
Andrew: And I think again, because we’re in such a funded world, the issues of funded entrepreneurs are discussed a lot. The issues of unfunded entrepreneurs like what do you do when you have profits, what do you do when you sell your business if you’re a sole proprietor for example? We just don’t talk about it. I’m glad that you started to raise the topic.
There’s one other thing that I promised the audience earlier in the interview. I didn’t want them to think I cut you off because I’m avoiding the topic. I really wrote it down. You said, “You got out innovated,” and I wanted to come back and ask you, how?
Eric: So, when I entered the market with BeattheGMAT in our community, I think one thing that we did really well was, we created a very friendly and encouraging community for one. That’s always been the prevailing value of our site. But the second thing though that we did really well, was we dramatically simplified the user experience, so that it would take you less steps. We were always obsessed with the idea, we should have users take less steps in order to contribute or write or ask a question.
And what started to happen was, this even has a [inaudible] cause innovation, is that some of the other competing communities — believe it or not, there are other competing communities in this small space — they just started to copy our site. And we didn’t care. We thought that our traffic was unassailable. But it really did start to affect our traffic, once we were able to bring our attention back to BeattheGMAT after we closed on our other business. And what we found is that they’d done a great job in copying our user experience and also adding some other really great things through their own pipelines to make engagement easier.
They had much better newsletter strategies and so forth to keep people engaged not just on our site but elsewhere – on mobile and so forth. We were a bit behind. All our fault, too. We had a very large pipeline that worked that we could have accomplished in the year and a half that we decided to try this gaming experiment. It took us probably a year and a half to two years to regain our footing and then control the market again.
Andrew: When you say we, who’s we?
Eric: My team. I have a very interesting team. My wife, I should’ve mentioned this earlier, is actually one of my business partners. As soon as we got married in 2009 we went on our honeymoon, we came back, then she quit her job at Extensor to join me full-time as a professional services and marketing person. Then, the other main business partner that I had, a guy named David, he was my former boss at Intuit. So, when I quit I hired him with me and we went off to the races in running this business together. The three of us were always the core team, but we had always a number of employees and contractors as well.
Andrew: Well, this is such an inspiring story. What I love about it is it’s bootstrapped. It started with nothing but a blog and a person who just wanted to learn and teach what he was learning along the way and then a whole lot of love or hippie style love for your [??]. Do you think a non- techie could build something like this?
Eric: Yeah, absolutely. I mean…
Andrew: …Don’t have to be a developer?
Eric: I almost flunked out of my entry level CS class in college. I don’t have a very good coding background myself. But, we’re in an age where there are some great tools available to allow you to put things on the Web to start online businesses.
Andrew: What did you do with your community platform? What was your community platform?
Eric: WordPress for articles, and our discussion community itself is this platform called phpBB, php bulletin board. It’s a free software you just download and install on a server. All open source, didn’t cost me a dime. The hard part is not really the tools or actually getting the technical knowhow or sufficient technical know how to get up and running. It’s actually being persistent, being experimental, and figuring out how to build an audience.
I don’t think you necessarily have to be an engineer in order to succeed in that. It just takes a lot of experimentation. Yes, for techies and non- techies alike, whoever’s watching this, I really do hope that they can get some inspiration to do it themselves.
Andrew: It is inspiring. If people want to follow up with you and say thank you for doing this interview or share with you what they did based on what they learned, what’s a good way for them to do it?
Eric: I like Twitter. My name is ericbahn, that’s my user name on Twitter. So, let me know what you’re doing. I’d love to…
Andrew: …What are you working on right now? Where is that? Rafael, a guy from CRV, showed me a software that he invested in, I guess. What was it called? Refresh, there it is. Refresh has been popping your name up on my iPhone all day to remind me, or maybe I’m just looking at it all day, to remind me you’re coming on. Here’s what it says: April 30 Eric has been working at Bizdom for four months, his current title is mentor. What is that?
Eric: Yeah. My day job, first of all, is I’m still working on BeattheGMAT as a director of product management. This company called Hobsons, it’s a large education business. I love it there.
But, I have been stepping up my involvement in mentoring other companies. So, Bizdom is one of the accelerators that I’m advising. It’s based in Detroit which is my hometown. I’m lucky enough to go out there once a quarter to talk to some very interesting companies. Passionate people are trying to rebuild Detroit and actually build a vibrant tech hub, and they’re doing a great job out there. I’m involved in that.
I do some work with Venture for America which is sort of like Teach for America. It gets young talented graduates to spend two years of their lives building tech startups in struggling cities.
Also, I advise some really wonderful companies. One in particular that I spend more time with is a company called Webflow. Check out webflow.com. It’s a place that allows you to build mobile friendly, responsive designed sites all through WYSIWYG, just dragging and dropping. It’s a remarkable technology. I think it’s actually going to change the way that people create things on the Web.
So I try to keep busy on the side, too…
Andrew: …I can see. There’s even more that I didn’t talk about. But, we’ll leave it there. If anyone wants to go look it up they can check out your LinkedIn profile which, again, Refresh brought up for me. This is actually really helpful for an interviewer like me, someone who meets a lot of people…
Eric: …It’s pretty cool, too. Yeah, I’m going to have to check that out. That’s really neat.
Andrew: Alright. Thank you all for being a part of this. Eric, thanks for both doing this interview and being a part of the Mixergy community for so long and being like one of my first customers for Mixergy Premium.
Eric: Thanks for the opportunity, Andrew, and keep up the good work.
Andrew: Thanks. Bye, everyone.
