Andrew: Hey, before we get started, these three messages. First, when you’re facing a tough business problem, like, “How do I get customers? Where do you go?” Have you noticed that when you do a Google search for those kind of issues, you end up with a poorly-written, link-bait article?
Well, with Mixergy’s premium membership, proven entrepreneurs turn on their computers and teach you their techniques for getting customers, or press, or new employees, or anything else that you need to be an incredible entrepreneur who leaves a mark on the world. Mixergy.com/premium, check it out.
Next, when we needed to learn how to build Mixergy’s membership site, do you know who we trusted? This dude, Noah Fleming. If you want to learn how to create a compelling membership site, I recommend going to membershipblackbox.com. I’m a member of it, and I recommend it to you. Membershipblackbox.com.
Finally, after you sponsored hundreds of Mixergy interviews, if I ask you, who is Scott Edward Walker, what would you say? The answer, of course, is, he’s the lawyer that specializes in helping start-up founders. I’ve known Scott for years, and I have privately recommended him whenever a founder asked me for a lawyer. Scott Edward Walker, of Walker Corporate Law. Here’s your program.
Hi, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart, and you’re about to watch the kind of interview that I think defines the work here at Mixergy. So many places where everyone will cheer on a successful entrepreneur, and half-listen to what he did, but, really, what they’re looking for is, I don’t know what. They’re looking for a movie version of what it takes to build a business.
One of the reasons why I wanted to do Mixergy is to talk, yes, to those successful entrepreneurs, and really deconstruct what they did, but, more importantly, to do something that you don’t really see much in books, and in the Wall Street Journal, and other publications. Which is, a reverence for, and an understanding of, why an entrepreneur failed, why a business didn’t work. And, whenever I have an entrepreneur who’s willing to come on and talk openly about it, I cherish that opportunity, like I am this interview right here. The question that I’m looking to answer here is, what does a founder learn from launching and shutting down an unsuccessful start-up?
Chad Etzel is the founder of Notifo, a simple and affordable way to add notifications to a web app or project. I invited him here to talk about what happened with that business. Chad, thank you.
Chad: Yes, thank you very much for having me on, and hopefully I’ll be back again to talk about a success in the future. [laughs]
Andrew: Have you seen how many entrepreneurs who I’ve interviewed here will talk about those low periods, where things just didn’t work out, and then they come back.
Chad: Oh, yes.
Andrew: And so I’m looking forward to having you back on here. So, let’s understand what happened. But, first, you wrote these four words on your blog. You said, “My start-up is dead.”
Andrew: Tell me how you felt at that point, and what led to that decision?
Chad: At the point that I published that article, when I announced that things were dead, I was feeling so many emotions. I think, in the post itself, I said I felt sad, I felt excited, I felt angry, I felt relief. It had sort of been a long time coming. For at least a month or so, I kind of saw the end of the line coming, and nothing was going to turn it around before, basically, the company ran out of money, and I was running out of money, and there was nothing left to do. So, I was sad it was ending, but I was halfway relieved that I was admitting it and moving on to something else. So, that was the, sort of, gamut of emotions that, sort of, was coming over me as I was telling the world, you know. At that point, it was just over.
Andrew: You know, there are two feelings that I’d like to ask you about, and then we’ll go back in time and hear the whole narrative of the story. But, there’s the before you announced, and the after you announced story. Let’s talk about the before you announced. I’ve talked to entrepreneurs here who have told me that, at their low moments, one of them said he drank in the shower.
Andrew: Another said that he was, this was, Mark Jeffries told me that, at one point, he just wanted to sleep, and he said the only time he was happy was when he slept. I think I remember saying in the shower, “I’m so depressed,” to myself, at, like, the low moment. What about you? Do you have that one incident that captures how you felt at that low moment before you made the announcement?
Chad: That was actually not the lowest moment for me. So, we can talk about that during the whole story.
Andrew: When was the lowest moment for you?
Chad: The lowest moment was during about a year prior to that, when we were trying to raise money, and just the whole situation that entailed, and all the meetings, and all the ‘no’s,’ and all the push back. And, basically, I was only happy when I was sleeping, and I just didn’t want to get out of bed for about two weeks.
But, right before I announced the shutdown of Notifo, mostly it was fear, I remember feeling fear, because I was afraid. I had put so much effort into this start-up, and I had brought, you know, some friends and family on board, they were my angel investors, and I had written articles and been very public about what I was doing, and everybody was kind of cheering me on. And then I was going to say, “Well, it didn’t work out. I failed, it’s going away,” and I was afraid I would get this huge backlash of, “Oh, you failed, you’re terrible. I can’t believe this is happening” or, people would hate me, or I would lose whatever respect I had gained out here. And I was just afraid to admit it, but there was no other choice. It was either, you know, just come out and say it, or transitioning to something new, and just pretend that, you know, nothing ever happened, and just sort of answer questions when they came up, like, “Hey, what happened? I thought you were doing this.” And I don’t like to hide things very much, and I don’t like to, you know, put on a front or fake things when I don’t have to, and so it’s just easier to say, here’s what’s up, and, you know, this is how it is. But, mostly I was afraid of what I thought would be a big backlash.
Andrew: And what was the response? After you said, “My start-up is dead.” You said, “I give up. I’m done.” You said all this stuff publicly. What happened afterwards?
Chad: I was actually very surprised at the response. Mostly from the comments on Hacker News, where the post was, and actually lots of e-mails that came in to me personally, that were very encouraging, and said, you know, “You’re going to go on to do great things. I’ve watched your story. I’m, you know, excited to watch what you’re going to do.” And I was just overwhelmed by the positive feedback, and some of the negative. In fact, I don’t even know if I got any negative feedback for saying that. And I think I may have earned a little more respect for coming out and saying, it’s over, I’m done, and here’s why. Because it’s sort of rare for that to happen.
And, in fact, what I was happiest about was that, when I shut it down, I made sure to contact all the people that were customers first and say, here’s what’s going on, it’s shutting down, here’s why, and really lay it out. And then announce it publicly, so it wasn’t sort of out of nowhere, out of left field. Oh, I’m shutting down, goodbye, everything’s gone. And, I’d seen that happen so many times, and, there, I saw people get backlash, and be upset, and I wanted to defuse all that and make sure that I didn’t go down that route, gave people fair warning and information. And I actually got complimented on the way in which I communicated the end of the company. So, I felt really good about that.
Andrew: And I could understand people just saying, look, I’m so tired. I can’t even deal with the emotion of expressing it publicly. And then, with the sympathy that I get from people, or whatever happens, or the backlash that happens. I understand them just washing their hands of it and walking away. But, of course, your way is a lot more honorable, it’s a lot braver. And I’m glad that there’s this kind of response in our world, the world of entrepreneurship, the world . . .
Andrew: . . . especially of tech, and frankly in the U.S., I hear in other countries it’s not that way. But I want, one of my reasons why, one of my reasons for doing this kind of interview, and asking successful entrepreneurs, too, about their setbacks, is to just be open about it, and to not allow us to ever feel insecure or ashamed of it. I remember once in college, I was studying business with a friend of mine. He said, “You see that guy over there? His father went bankrupt once.” And he looked at us like, “I feel so bad for him, but also that guy’s an idiot. He’s such a, like, you think . . .” You see how proud he is of himself? ‘I’m going to take him down a few notches just by telling you what happened to his dad in the past. And I was thinking, what damage are you doing to yourself? What kind of risks are you not going to be comfortable taking, because you’ll never want anybody to talk about you the way that you just talked about that person. Because you don’t understand that taking a risk is why that guy’s father was down, and now he’s more successful than you, and he’s paying for his own, for his kids’ education at the school. So let’s go back now and hear how it all happened. What was the original idea for the business?
Chad: So we’ll even go back a little bit before that. So when I graduated school I went to work for Cisco Systems in North Carolina, they have a second head quarters there. My family’s all in the southeast. My wife grew up in the southeast and she was still going to school there and so I stayed in the southeast instead of moving to San Jose where their actual head quarters are. I worked there for three years. I loved it. It was great. I still have friends that work there.
After the third year I started reading all these essays by Paul Grimm and reading about the Silicon Valley way of life and sort of got bit by this bug. And I had been working on a lot of side projects at home and I thought okay, I’m going to see what’s up with this whole start-up thing. And I had a friend that worked at IBM who went to interview at Twitter and got a job and I said, “Hey, I should go try that, too”. So I basically took a couple of days off of work and came out to San Francisco and interviewed and didn’t get an offer. And at that point I said, “Okay, well I’ll just try my own thing”.
So I left my job which was another emotional roller-coaster but the people they were very supportive. And one of the reasons that I ultimately decided to go and was confirmed was when I told my coworkers, they were sad I was going but they were also sort of jealous and they told me, “There was a lot of times I wish I had started my own company” but now they were older and had kids and families and they said, “But I can’t do it now and I always regret not trying it”.
I didn’t want to go through my life saying I wish I had and never had done it. So I thought okay now is the time. I can afford to try whatever I need to and then fail if that’s what happens and then start over. So I left the job and started a company from my house in North Carolina. Just bootstrapped. It was a Twitter related product and I launched it and it was profitable but it wasn’t paying enough to cover my mortgage payment and so I was trying to figure out how do I make this better, do I need to do something different.
And for some cash I was contracting with Twitter, actually. They reached out to me later and said “Hey we could use some developer support, do you want to man the mailing lists, and you’ll be an employee basically and we’ll pay for it”. And that turned out to more full time than I was looking for, I couldn’t even work on my own projects at that point.
So after the three-month contract I said “Okay, I’m done with that” and then I said “Oh, now what”. And one of my friends said, “Oh you should apply to Y Combinator, it seems like it’s right up your alley”, and I said, “What is that?” I had no idea what it was or anything so I looked it up and I researched it, and I had another idea in the back of my head just floating around and that’s what I applied with. I got an interview and I got accepted in as a single founder which I later found out was a rare thing. I didn’t even know that there was a whole issue around co-founder, single founder. It was just all sort of weird.
So the original, original idea that I started Y Combinator with was another Twitter related thing revolving around these hashtag chats that happen every week. They’re scheduled like clockwork and there’s dozens of them. There are probably about 100 now. And I had written a website called TweetGrid that a lot of people used to do these hashtag chats. It was not ever designed for that. It was just designed to be a search dashboard where you could watch a lot of searches come in at real time. But people were using it for these chats.
I thought, what if I make a site that’s actually dedicated to this use case and that’s what I went in and applied for, pitched Y Combinator with, and they accepted it and I got in. And then before YC even started in January I decided that maybe not the best thing, it would be a really sort of low margin, maybe like add driven. I’d have to do a lot of ad sales and things like that. Maybe, I really shouldn’t go after that. So I ended up changing ideas several times during YC until I ultimately hit upon the idea for Notifo in about week six.
Andrew: Oh. Why do you think week six of this three month project?
Chad: That’s half way though.
Andrew: Why do you think Paul Graham and the team at Y Combinator brought you in even though they tend, they do prefer companies started by two founders, why did they take you in? And they want a project that would sustain. What was it about you?
Chad: I’m still not exactly sure. I did ask at one point. I finally got up the courage to ask him, why did you let me in? This seems so opposite to what you talk about. And he said during the interview, you seemed like you knew what you were talking about. You were confident and answered the questions and had domain knowledge. Because I was basically pitching this Twitter idea and I had been playing with the Twitter API for almost two and a half years before that.
So I knew what the users were like. I knew what the use cases were like. I knew what technology I would need to use. So I felt, I guess I was able to navigate the interview pretty well and they were convinced somehow. But definitely on day one, when I got there, they said you need a co-founder and so they weren’t happy to just let me ride out my tenure as a single founder. They were definitely proponents of having multiple founders. But I think that was a large reason.
Andrew: I’ve talked to several Y Combinator backed entrepreneurs who said that between the time that they were accepted and the time that the program started, they would go and talk to Paul Graham and the team there. They would start to basically build and to interact with Y Combinator. Did you do any of that or was it day one you come in and they say find a co-founder and you start exploring your idea?
Chad: Oh, yeah. It definitely started way before the batch start. So officially, the batch starts basically the morning after the interviews, when they announce all the teams that are accepted. So everybody meets and they say OK. Well here’s when the dinners start, but actually you start now. Start building now and you have opportunities to have office hours and talk with a team and get feedback and do all that stuff. Time is of the essence, basically. You have a ticking clock before demo day and every day before demo day is worth way more than every day after demo day.
So they basically say start working now. So I think every team starts working immediately after they get accepted. They’re always working anyway, even beforehand but you don’t just sit on your laurels after interviews and say oh, I’ll just wait until we start having dinners and then we’ll get started.
Andrew: All right. So of course, Y Combinator funds you, helps accelerates your idea, helps up until demo day, helps you create and express what the idea is. Demo day they help put you in front of investors. You get investors and hopefully you continue to build this company and make their share of the business and also their belief in you pay off.
Andrew: And so, let me see if I get this. I’m on your website, by the way, or at least I was before we started, and I saw just a list of different products that you’ve created. Everything from SecureShirts.com, 100% Hack Proof Apparel, to let’s see what we’ve got here, AFK247 used for various secretive projects, Shout Key, a temporary URL shortener. (?), Twitter mentions pushed to your phone. PickAFight.com, a vote for top picks on (?). You seem like a very entrepreneurial person. Were you always an entrepreneurial person or is it just when you got to this city that something about it made you say, I’ve got to launch businesses too?
Chad: I definitely think it’s been for most of my life. Almost everybody in my family is either an entrepreneur or a leader at their company. Both of my grandfathers ran businesses. My dad is a president of a privately held firm and now on the board of directors at a bank. My uncle is the CEO of the family business. My other uncle started his own M and A firm after Bear Stearns went bankrupt. So it’s all over my family.
Andrew: So what do you get out of coming from a family of entrepreneurs?
Chad: You get a lot of lessons. It’s great. They’re obviously all open to talking about their business and how they run it, how they manage it, their ideas, what they’ve been through. Their stories are all interesting. My dad especially, since I spent most time with him talking about things like this. But the other thing is, sort of in the back of your head, you seem to wonder is this my destiny? Is this the path I should go down? It runs in my genes, so I should be able to do this, right?
And so, we have family reunions every so often and since a lot of my family runs their own businesses or leaders, they’re all pretty free to travel or meet up whenever and it just seems like a really nice perk, that you can do things on your own time. And when I have to say “Oh I have to see when I can get off work” or if I can take vacation. It feels a little odd to say that when we’re all going to meet up.
Andrew: And is that the life you have now?
Chad: It is the life I have right now. Yeah.
Andrew: You’re working at Twilio as a senior software engineer.
Andrew: All right, so you get in. In a short period of time you have to find a co-founder. It’s like a shot gun wedding almost. How do you find a co-founder and connect with him?
Chad: It was kind of awkward because I was coming from the east coast. I knew absolutely nobody out here and the network of [??] alum is so vast that there are usually at least a few people that aren’t working on something currently. Either their start-ups had succeeded and they moved on and left the acquirer or their thing failed as well and their just looking for something to do. And so I said “that’s great, I’m not opposed to having a co-founder but I don’t know anybody” and so they said “okay we can solve that” and set me up on several co-founder blind dates which is definitely as awkward as that sounds. So I met with a lot of people; worked with them, talked with them, had a lot of coffees.
And there were one or two that I really liked and wanted to work with and one that I was really excited about. He ended up taking an offer at Facebook. So that didn’t quite work out. So ultimately it was getting to be about three weeks before demo day and I still hadn’t really matched up with somebody so I said “okay I can either concentrate on finding a co-founder or launching the product” and I think launching the product was a little more important at that time so I said “no more dates please, let me just launch and then I’ll worry about this afterwards”. They said “Okay, all right”.
Andrew: So how’d you come up with the idea?
Chad: It was sort of, it stemmed from a personal problem that I had with using my iPhone. It was that I was getting all these notifications from apps and the way that the notification system worked was that if you get more than one at a time before checking your phone the last one wins, so all the previous ones that came in got clobbered and there was no history, no way to see the notifications you got. So if I got a text message from my wife and then Facebook sent me a notification saying so-and-so added you as a friend, I would take out my phone and that’s what I would see, the Facebook message, and I wouldn’t notice that I had missed a message from my wife.
And so that was a little annoying. She would get annoyed and then I would get annoyed. Anyway, it was a big mess and so I thought there has to be a better way for this and with everybody sort of arguing about the app ecosystem and whether the app store’s better or whether the future with HTML 5 web apps. That debate was raging back then and still sort of is but with web apps there was no way for them to use some native pieces of the phone like the camera or more specifically, notifications. And notifications are a great way to draw your audience or your users back into your app or back into your website which is why all these websites send e-mail reminders that do the exact same thing.
And so I thought hmm, maybe I can solve this problem and open up a platform for any app, any web app, any project, any business, for personal use, anything can send either yourself or a bunch of users notifications, that that would be a really powerful tool. It was sort of a marketing or retention tool for business to reach people on their mobile phones, where more and more people were spending more and more time.
Andrew: This is 2010 according to Crunchbase in the middle of 2009, Boxcar had already been out and Boxcar does pretty much what Notifo did and does. Did you know about them at the time, and what were you thinking about being in a space with them?
Chad: I did know about Boxcar. Originally, it was another guy that started it in Kansas, and originally it was just push notifications for mentions on Twitter. That was all it did at the very beginning. And then over time he added more services to the app, but originally it was only for consumer site notifications, so it was only for, like if you installed the app you would set up the notifications you wanted from Facebook or Twitter or Github or whatever services, e-mail, and it would come to you. It wasn’t a platform where outside services could send notifications to other people. So, it was all about inbound notifications, only for yourself, at the time.
Andrew: I remember that. OK.
Chad: Yep. And so, I definitely knew about the app, but I was coming from a different angle, where I was exposing an API, that other people could use to send messages to other people. And so, I knew we were going to be in the same space, but it wasn’t directly related, or, like, a clone, and I thought it was going to be, you know, different enough and compete.
And then, when I launched, he quickly released his API he had been working on, but hadn’t launched yet, to allow third parties to send notifications. And, we actually met up and talked with each other in March, late March of 2010, right after I launched. He was out here for the iPadDevCamp at the PayPal headquarters. And he said, “Hey, we should meet up and talk.” And I said, “OK, sure, let’s talk.” [laughs] And, so, that was an interesting meeting, but . . .
Andrew: What are you thinking about when you have this meeting with your competitor? I noticed that a lot of companies do this. Like Olark, the founder of Olark, it seems to me like he’s just best friends with everyone who he competes with, just based on the number of conversations that he has with competitors in his space. I was talking to Codecademy’s founder, Zack, he happened to be in town, we went out to dinner. And he was telling me, basically, he seems to be on a first-name basis with every competitor of his who’s also doing educational programming. What are you feeling when you’re in that space, now that you can take some distance from it?
Chad: I actually still find that really strange. Like, I’m not of that mindset, like, “Oh, I’m going to go hobnob with all my competitors, and we’re going to pretend like we’re all best friends.” Now, I don’t know if they’re pretending, or they actually are really close, or, I don’t know how that works. But, to me, it seems sort of odd to be talking with your competitors all the time. Because I like to guard my information, and what am I going to talk about? We’re just going to talk about the weather, and not talk about, you know, I’m not going to share numbers, and they’re not going to share numbers, and, I don’t think, it just seems kind of strange.
So, I was very apprehensive going to meet with Jonathan, is the guy that wrote Boxcar. I was sort of apprehensive, but I didn’t really know what else to do. You know, I was still a single founder at that point, he was a single founder, and I thought, well, maybe there’s something we can talk about. And so we met, and he actually suggested that we join up. And it was something that I heavily considered, and after talking with my advisers and thinking it over, it didn’t seem like it was going to work out that that would be a good deal, and so . . .
Andrew: What was the connection that he proposed?
Chad: He just proposed that we merge, basically. That we, you know, form a two-person team. And I forget the specifics of, you know, whether we keep, I think he wanted to keep the Boxcar app, and I would just come on and, like, transition my users over and something like that. But, we would become a two-person team working on a platform, basically, roll the Notifo platform into Boxcar, and . . .
Andrew: So he would’ve been your co-founder . . .
Andrew: . . . essentially.
Andrew: Why did your adviser say no?
Chad: Well, there were two major reasons. And it was definitely, like, nothing personal against Jonathan, and we’ve met up since, when he comes into town, just to chat. But, one, was that he was staying in Kansas and wasn’t willing to relocate for whatever reasons. And I didn’t really know him that well. That was the first time we’d ever met, first time we talked. And, so, I was going to be out here in Silicon Valley, he was going to be in Kansas, so we’d be working remotely, and we didn’t really know each other that well, and when I was talking about this with the YC partner, specifically they said those were two huge red flags.
Andrew: I see.
Chad: The working remotely and not knowing the person well. Maybe if one of those was different, it would be a different situation, but since both were the case, definitely don’t do this. And, so, I wrote back and told him that, you know, I decided this is not the route that I want to take, but, you know, we’re going to, now we’re going to be mortal enemies, basically.
Chad: So. [laughs] And we definitely became competitors in that space.
Andrew: I’m going to come back and ask about what that competition was like. But, let’s stay with this point in the story just a little bit longer, because I’m curious about what Y Combinator gave you, beyond money. They gave you, what, $15,000 per founder, right?
Chad: Yeah, it depends. So, in my case it was $14,000.
Andrew: So, beyond money, what are they giving you, or how did they help you shape the product that you launched on demo day?
Chad: They definitely give a lot of feedback. So, there’s weekly meetings, you can have scheduled office hours with partners, and go in and show them, basically, demo. Every meeting is basically a mini demo day. Where, you show them what you’re working on, you can tell them about user feedback, they give you feedback, and that can help you shape your direction. And, of course, they have past experiences that they can draw from and say, oh, well, you know, this is similar to another product that we’ve seen, and you should, you know.
Andrew: Do you remember specifically one change that they made that improved the product or changed the direction that you were going in?
Chad: Well, off the top of my head, I can’t think of one specific thing.
Andrew: That’s OK. I’m sure it’ll come to you after the interview.
Chad: Yeah. If I think of something . . . [??]
Andrew: Before we continue the story, now, looking back at what we know so far, under the lessons learned category, what would you put? What would you say that, if you had to do it again, you would have done differently?
Chad: . . . [??]
Andrew: Just at this point in the story, and then we’ll continue, after launch.
Chad: Oh, at this point in the story. Let’s see, wow.
Andrew: Would you say you need a co-founder, this early in the stage, or else you’re in trouble? Would you say that, well, you tell me.
Chad: At this point, I was still fine being a single founder. So, being a single founder definitely bit me at least twice, really hard, over the course of the story. At this point, it hadn’t been an issue yet. So, that wasn’t a problem. I was being super-productive, just whaling away at coding and getting feedback and iterating and things like that, and so I don’t think that was hindering me. If there was something I had to change, at that point, nothing really, a lot of the hindsight comes later on in the story. But at that point there was nothing that I had learned that I would have changed so far.
Andrew: If you notice my head go down, it’s because, if we could say, the hindsight comes later on, I want to write it down and make sure that we hit it. I want to find out how not having a co-founder bit you twice, as you said.
Chad: Yes. [laughs]
Andrew: I want to find out about Boxcar. But, so far, so good. Everything’s going well, you’re launching on demo day. Did you raise $200,000 when you launched?
Chad: Yes. Essentially, we raised about $200,000, in a friends and family angel round, sort of, after the month following demo day. So, on demo day you pitch to, you know, a hundred different VC’s and angel investors over the course of two days, and you exchange a lot of business cards and you make a lot of meetings. And, so, I met with, talked to, your angel investors, with VC’s, with all sorts of people. And, with those investors, I got a lot of push back. This was the first time that being a single founder bit me. Definitely, it’s true that investors don’t really feel comfortable backing single-founder companies. Mostly because, what it felt like to me was, it feels like you’re giving money to a guy, and he could just run off with it to Jamaica and just disappear.
Chad: And, also, there’s the hit-by-a-bus problem. Like, if I’m working on this product, and it’s only me, and then I, you know, jump off a cliff, or get hit by a bus, then it’s all gone. There’s nobody else around to pick up the pieces and solve the problem.
Chad: So, that’s two major drawbacks. So, I met with a lot of people, had a lot of discussions, got a lot of feedback on the product. And several people were like, ‘Yeah, this is a great idea, but we’re sort of uncomfortable with your singleness,’ and some people wanted, like, more user base, more growth, before they were super-interested. So, that’s how it bit me the first time. But, I have a lot of family that are very supportive, and, like I said, they’re entrepreneurs, and they understand what it’s like to go through this, and several of them have been successful in their own right, and so they were willing to give me a chance and fund me with some money. And, also, a few of the YC partners also were part of that round, that backed me with their own personal money . . .
Chad: . . . past the YC investment, which, I was very honored and impressed. But, also, that was sort of like, ‘Oh, great, they believe in me so much, and even as a single founder,’ that, like, ‘Now I have to be successful or I’m going to, you know, let them down, or prove them wrong,’ or whatever.
Andrew: Which are the ones that believed in you?
Chad: So, it was actually Paul Graham, and Jessica, and Harj. So, it was actually Harj’s first angel investment. [laughs]
Andrew: All right. In the long run, I’m sure it’ll pay off for him.
Chad: Yes, I hope so.
Andrew: They back entrepreneurs who’ve gone through the program, they back them again, and, frankly, they invest in so many, knowing that some will work out great, and some won’t.
Andrew: All right. So, it bites you in the butt, you’re starting to recognize that you need a co-founder. Is this when you go out and get a co-founder?
Chad: Actually I was still so busy meeting with people that it wasn’t really on my mind. It’s sort of like when you’re trying to date or find a girlfriend, you’re actively looking and nothing works out and then you say, ‘Forget it, I’m just going to be a bachelor for a while,’ and then somebody comes out of nowhere.
That’s exactly what happened with me. I had had a friend at school, at Georgia Tech, named Paul [XXX] and he’s well known in the blogosphere, he’s a big tech blogger and he was working in Atlanta on his own start up and it was not really working out and he was looking for a change of pace. So he went to South x Southwest in 2010 and everybody there said, “You’ve got to move out to San Francisco. You’ve just got to come out here. This is where the action is.”
Two weeks later he packed up everything in his little Mini Cooper and drove across the country and showed up. I saw him tweeting about it and I said, “You’re coming out to San Francisco? Let’s meet up.” When he got to town he had a little drink up where people came and met and I showed up and we started talking.
Then we met a few times afterward and I told him what was going on; he was looking for something to do, he was interviewing with other start ups, with other big companies and then we started talking. I said, “Hey, I need a co-founder, you need something to do, let’s talk about if this is interesting.” Eventually it worked out great that he wanted to join and so we co-founded in June of 2010.
Andrew: How do you get users now?
Chad: That was part of one of the problems that Notifo had. It was basically a chicken and egg product. On the one hand you have users and consumers that are receiving information, notifications and other side you have businesses, projects, corporations, companies that are sending their information. You have the receivers and the senders. If there’s nobody sending then, there’s no reason to sign up and receive anything. If there’s nobody out there to receive information, there’s no reason to sign up to send information. It was a very weird problem that we had. What we tried to do to solve that was to build our own consumer facing services that we ran in house to get people to sign up and install the app.
The first one we made was Pushly which launched with Notifo, it came out at the exact same time so there was a reason on day one to sign up which did exactly the same thing Boxcar did basically which was to push your mentions from Twitter. At that time there were lots of other apps that did the same thing. It just was another way to get your notifications, your mentions on twitter pushed to your phone. We came up with several of these little in house apps to get users to sign up and then we could go to companies and say, ‘Hey, we have this install base now you can reach them.’
Andrew: If someone was using Pushly in order to get notifications, they would also have to install Notifo?
Andrew: Why didn’t you say, “We’ll get you to install Notifo and we’ll alert you about the accounts that you already have. So if you already have twitter and someone messages you on Twitter we’ll give you an alert about that. If you have Facebook and someone does something to you on Facebook, a poke or whatever, we’ll send you that.” Why did you decide to create separate apps that would send out these notifications ?
Chad: That’s a good question, actually. We did that deliberately. We actually thought about should we have these things live inside the app or should we have separate services that people have to integrate? We did it deliberately, the separate services, so that people would be used to the idea of hooking up their different accounts across the web with this mobile app. So there wasn’t this dissonance about, “Oh, I automatically get notifications in Notifo about these things. Why do I have to go add things a different way for different sites?”
We just wanted everything to be the same interaction for each service that you were using. There were some problems with that because it is sort of confusing. That’s part of the hindsight that I had was we should have included maybe some of these other services as options natively in the app, to just enable in app, instead of having users go off to another website to enable it. It’s very confusing. I came from a web app world where you are on the web and interact there.
And this was my first real mobile app that I had ever written and so I was still kind of in the mindset of, oh the mobile app is just sort of an extension of using the web, whereas now that’s really not the case. All the mobile apps you see now are just self-contained experiences. Everything you need to do, you’re able to do in the app. And that was one of the flaws that I think (?) had, was that we didn’t solve that problem from the start.
Andrew: You know, I remember that as I used the product. If I wanted to add a service, I think, I couldn’t do it on my phone. I’d have to go to my desktop and I would have to add it. And yeah, that was a tough way to interact with the product.
Chad: Yeah and that’s definitely a place where Boxcar had it right. They had all the services that they offer right in the app. So definitely kudos for that. It’s definitely the right approach.
Andrew: So you launch (?) and (?). What was the response?
Chad: It was pretty positive from the feedback we got. We got a lot of constructive criticism about things that were lacking. It was definitely very bare bones at the start, just to get something out. I was worried about whether the app would even be live on demo day or not, with the whole Apple review policies and things like that. So I basically wrote the bare minimum app to get it to work and it was rough but it worked and people that liked it really liked it. We just fed off of the feedback and came up with some more services and started approaching different other services to use it.
Andrew: You know, it occurs to me that one of the reasons why you were brought into a Y Combinator and they invested in you is that you just seem to know everything about the Twitter platform. You are the guy when it came to Twitter. Twitter turned to you when it came to the platform and the exact opposite happened in the world where you decided to build your product. You weren’t as familiar with iPhone apps, partially because they weren’t in existence for a very long time when you launched and partially because you came from a different world, from the web world.
Andrew: So can you talk about that? Was that an issue or is it something you pick up as you go along?
Chad: I think that may have been an issue, that I wasn’t really a domain expert in the mobile world at that point. I had spent so much time working on web apps and in the web world and with Twitter and all that stuff that I was ready for a change and a new challenge and something like a policy or a rule that I have when I’m doing side projects or working on anything is that I want to learn something new every time I do a project that I don’t already know how to do. So that on the next project, I have more and more things to build off of and do something more ambitious.
And so with this project, the new thing was writing a mobile app and learning about the iPhone and eventually learning about Android and learning new things. I had come from an embedded systems background from school and from working at Cisco and working on a mobile device was squarely in that realm and I really like it, but it was a new system to learn. And so the challenge was what really excited me about learning something new. But that also may have been a hindrance, that I didn’t know as much as I probably should have to really be successful in that world at that point.
Andrew: Sometime after that, you launched Blog Fire.
Andrew: And I looked at the Hacker News comments where you introduced it and people said does this mean that (?) is done and your response, and you responded it seemed like to everything on that community, you said (?) itself is still running and there’s a core group of users that love it, but it is almost too technical of a product to really get big the way I wanted. What made you realize that? How’d you come to that conclusion?
Chad: Yes. So after, I think, when did I launch Blog Fire? That was definitely, it’s hazy now because in 2011 I went on this spree of launching a whole bunch of different mobile apps.
Andrew: OK. Why?
Chad: Well, that’s part of the reason I launched Blog Fire is, so when I realized that (?) was maybe not going to succeed the way that I thought or that it was too technical was, when we were trying to raise money, raise around in, it was October, November of 2010, and the investment market was really hot and everybody was seeming to raise these crazy amounts of money at crazy valuations and so, sort of the word went out. If you need to raise money, do it now because it’s a great environment and it should be pretty easy. Well, I’ve now learned, one of the tidbits I’ve learned is that if anybody says this will be easy, that’s completely a lie.
Andrew: About anything, not just fundraising, but especially about fundraising.
Chad: Yeah. Especially about fundraising. It’s only easy for a certain few. It may be easier than previous but it’s still really hard. So, and this gets back to the lowest point in the whole process, was we, Paul (?), my co-founder, not Paul Graham. Paul and I decided, OK. We raised a small round but it’s not going to last us forever and if we want to build a company and hire people, we need to raise a good chunk.
And so we went out looking for a big seed round or a small BC round and we got featured on angel lists. We knew the guys that worked there. Paul was friends with them so we got featured and all the stars aligned. All the intros we needed from YC, everything was like, if you’re going to raise money, here’s all the intros and information and stuff you need to do it. And so nothing happened. Like we had hundreds of phone calls with different people we got introed to on angel list and through YC and we ended up having 40 or so in person meetings and just no after no after no after no. We got one person to say yes but we definitely did not raise nearly as much as we had planned on.
And I remember feeling just so defeated, like everybody’s raising money left and right. I can’t even raise a dime. I must be an idiot. We’re failing. This is so stupid. My product’s dumb. You know? I had all the self-doubt and I just stayed in bed for about two weeks and felt terrible.
Andrew: Why? Why couldn’t you raise money at a time when it seemed like, well, to some people, it was so easy? And with such great backing?
Chad: I’m still not entirely sure. I mean, there are definitely reasons that I think contributed to it, so definitely one of the questions that everybody brought up was this chicken and egg problem and how do we solve it. And we didn’t have a solid answer, or an answer that they felt was sufficient. We said oh, we’re bringing out new features to raise the consumer side so we added user to user messaging and (?) so that users could talk to each other. And so that would help bring up that side and we were writing more in house services. But that didn’t really seem to satisfy people.
And when they asked about what are your numbers? What’s your growth look like? Our growth numbers were not what they were expecting and so they just sort of got turned off. They weren’t really sure that this was ever going to get big. It was sort of a self-fulfilling prophecy. We weren’t able to go out and do a lot of the things that we wanted to do with having more money in the bank, and so it ultimately didn’t get that big. I don’t know. It just sort of wound up falling over in the end.
But, at that point, our user growth was not that great. It wasn’t taking off like I thought it would. The people that I thought, the business I thought it would be useful for weren’t really interested in using it until we had a much larger user base than we had and so we were being stifled on that side. I thought, OK. This is almost too technical to be a mainstream product.
We had a lot of developers that loved it. So it was a great developer tool. They would use it to monitor their servers or send them build status alerts. So that was the main use case. It wasn’t from receiving information from other services. It was mostly people sending notifications to themselves.
Andrew: I see. So why not just make it into that kind of a product? Charge a little bit for it but make it into a notification system?
Chad: We could have. I thought about it, definitely thought about what if we charge $5 a month just to send notifications to yourself and have it run like that. The problem is, selling developer tools is really, really hard and developers are notoriously cheap when they’re spending money for doing their own work, especially for a technical tool. And so, if somebody really wanted this for themselves but didn’t want to pay, it’s not that hard to build it yourself and run it yourself. And so, even at $5 a month, if we had 1,000 users, that’s $60,000 a year. And that’s definitely not going to be enough to cover any sort of salaries and that wouldn’t ever…
Andrew: I see.
Chad: …be enough revenue to get big where we could get investment or be worth a lot of money to be required. It would just turn into the best that it could have possibly turned into. Probably was like a nice lifestyle business if we had gotten enough users, entertained them for Paul and
myself but we, the investors would never really get a return on it. We were convinced that this is a start-up, we have investors, we’re going to go big or go home. We weren’t… There this really awkward middle level of success where you can end up where you just sort of slide sideways forever and you can’t really exit from it and you’re doing too well to just call it quits. It’s this really strange middle tier of success in the start-up world.
Andrew: All right. And just soon before that Paul Graham on Hacker News said he integrated Notifo into Hacker News and he said, “Actually, I wouldn’t have integrated Notifo into Hacker News.” He said this in response to someone else’s comment, “I wouldn’t have done it if I didn’t think it deserved it on its own merit. Hacker News is a labor of love for me. I wouldn’t integrate random stuff into it just because founders ask me to.
Out of 172 companies we’ve funded, I’ve only integrated two functionally into Hacker News”, and you were one of those two. So, he loved it and then, you were in The New York Times saying, or this is what The New York Times said about you, “Their second fund raising drive was a flop. While Etzel and Stamatiou quoted dozens of investors, they raised only a small fraction of the intended amount.”
By the way Ari, thank you for doing that research and pulling this quote out. I’m wondering as I read this quote now so far afterwards, why did you talk to The New York Times about the trouble you had raising money? I understand talking to me and teaching our audience and doing it all with the story behind you, but in real time, why tell The New York Times?
Chad: We actually didn’t. [laughs]
Andrew: Oh, really?
Chad: Yes. They reached out to us for comment and we did not respond. Actually, I think Paul replied and said you know, we’re not going to comment. What happened was, Paul has his own blog that he writes and he has a big audience. He wrote an article about start-up fundraising and sort of the lessons we had learned. We were putting a positive spin on our experience and some of the things we learned. It was a good article and we were comfortable putting it out.
But you know, he expressed in the article, we had some trouble and we talked with this many and it didn’t quite work out, but here’s the things we learned from it so that other people don’t go through this. The New York Times basically extracted the text from his article as a quote from us and so that’s how it wound up in the article.
Andrew: I see.
Chad: Yes. So it was a little bit embarrassing. I had some family e-mail me and say, I saw you in the New York Times. I thought, oh my gosh. I can’t believe this is how I get in the newspaper.
Andrew: You know what I would do is I’d take the New York Times logo, put it on my home page and say, as seen in the New York Times.
Chad: Yeah, right.
Andrew: You know, it’s amazing. We love new media and we’re on new media all the time, but you get one little pop in old media and boom, everyone hears about it. You hear about it from your family. I happen to be in this issue of Fast Company. They said something very positive about Mixergy as an educational resource, one of the top ten or something. Tiny little mention, I hear about it all over. The guy who I’m renting office space from here is, he scanned this and printed out a copy of me in there so that I would see it. My friends have e-mailed me. People who I hadn’t seen since I lived in Argentina had contacted me. Just one little pop, boom.
Andrew: I could see how devastating it would be if that pop is a blow.
Chad: Yeah. It was sort of ironic. In our circle out here, nobody reads The New York Times so to them it didn’t really mean anything.
Andrew: I read it, but I don’t read their…[??] I read it, but their text stuff, to me, isn’t as meaningful as, well I don’t know if it’s Tech Crunch anymore, but Hacker News I’d say. All right. So you launch this new thing, new thing basically is an RSS rater. You said in the comments on Hacker News when you announced it, “Look, people don’t use RSS because it’s too complicated. They know that they could some how get content out of websites, but they don’t know how to get it all in one place and do what we do with it on Google Reader. That’s why I came out with this new product which is Blog Fire.” And what happened to that product?
Chad: So one of the bigger quests we had with Notifo was to do RSS notifications. And so we had thought about it and never really integrated it because of the problems of having to sign up for different services and the interaction was strange. I thought, there’s got to be a better way just to have a nice RSS notification app that you can do everything in one place. I took the lessons I learned from Notifo, and what I had learned about, you know, everything should be doable on the phone, and basically made that app, and called it BlogFire.
Chad: So, it was an RSS notification app, and, I thought, OK, this is, like, one of the main feature requests I had, people are going to love it, it’s more consumer-facing related. And I thought, OK, I’ll put ads in it, and maybe have an in-app upgrade to remove the ads, and that’s how I can monetize it. And it ended up not really going anywhere. For some reason, a blog in the Netherlands picked it up when it launched, and it became insanely popular in the Netherlands, and I still have a bunch of users there. But, iAds, which is the ad provider I use, which is Apple’s ad network . . .
Chad: . . . has zero fill rate, almost, for the Netherlands and a lot of international countries. And, so, all these users were using it, but they weren’t getting me any revenue for it. And, in the meantime, I’m paying for a service in the back end called Superfeedr, which is helping me deliver these notifications for the RSS feeds. And so I’m paying to run this, along with the server costs, and I’m getting no income from it. And so, so far it’s been, you know, a net negative, you know.
Andrew: Why didn’t it take off in the U.S.?
Chad: I’m not sure. I tried to get it featured on TechCrunch, on Mashable, with Apple, you know. I tried to reach out to people to get it reviewed, to get any sort of post. And that’s something where I have failed all along, is to get coverage on tech blogs for anything that I’ve ever done. Like, I’ll launch a project and say, “Hey, this is cool,” you know, “Here’s the information.” Black hole. Like, I never, ever hear back from anybody about, you know, telling them about stuff, and I don’t know why, and that’s definitely something that is very useful, I would say.
If you’re going to be a founder, you’re launching a new project, creating relationships with writers or editors, having some sort of personal relationship with the blogs is very, very helpful. Because they will be very kind to you if you are launching something new, etcetera. And that was, at TechCrunch especially, one of the writer’s favorite apps, basically, it seemed like, was Boxcar.
Andrew: I remember that.
Chad: And so, every few weeks, there’d be a new article about Boxcar. And I would write him, you know, write in, and say, you know, ‘Here’s a new feature for Notifo,’ and I would try to get another writer, and he would say, ‘Oh, let’s forward it over here to this guy . . .
Chad: . . . since he’s the Apple expert.’ And it was, you know, it was like, ugh. So, I got stonewalled every time I tried to get information out. So, it’s very advantageous to have a relationship. So, I couldn’t get it featured in the U.S., anything about it. I tried to market it, I tried to use things like Tapjoy for installs, I bought ads on ad networks, mobile ad networks, and that was just a money pit. I mean, you can get users, but they’re not very sticky, and they’re not worth very much, and so . . .
Andrew: Did you talk to anyone who . . . Oh, that’s painful, you’re paying for them, and they’re not sticky, and they’re not worth very much.
Andrew: Did you talk to anyone who did have a hit iPhone app, to figure out what they did? Did you try to implement any of what they did?
Chad: I tried. At that time, I didn’t really have very many friends, or a network of developers that I knew . . .
Chad: . . . doing iPhone development. And, it’s sort of strange, the community of iPhone, iWest, developers is sort of secretive, sort of, you know, there’s not this open channel of communication about, ‘Oh, this is the secret to having a successful app.’ Because it’s so competitive, and because you can make a lot of money. If you have a hit, you know, you don’t want to share your secrets, if you’ve figured out how to do it. And, so, I didn’t have any really close confidants that I could, you know, talk with about, you know, what are your tips and tricks, who do you talk to, who do you know, and so I didn’t have the connections I probably needed in order to get more publicity behind it.
Andrew: I’ve noticed that. The guys who I’ve interviewed who have hit iPhone apps, they don’t like saying a lot. It’s really tough to get them on, and then there’s certain things that they’ll tell me in private that they won’t say publicly. And, unfortunately, some of the things that some of them say publicly get them really reamed in the comments. When I did an interview with FIPLAB, boy, did the comments go negative on those guys.
Andrew: [laughs] I’ve asked them to help out some people in my audience afterwards, and they were happy about the interview, but I said, ‘I’m not sure we should reveal any more.’
Chad: [laughs] Yeah.
Andrew: Maybe in ten years they’ll come back.
Chad: Especially with Apple being very draconian in some of their ways, like, you don’t even know what things you can say publicly, you know, without getting some kind of backlash.
Chad: It’s always like they’re looking over your shoulder, and, yeah, it’s a very interesting developer community.
Andrew: What else. I’ve got notes here about Boxcar. You said that there are a few things that, later on, you were competitive about, or you’re competitive with them on. What were they?
Chad: Definitely with, like, the Twitter notification. So at the time, we were only able to do mentions, so if somebody tweeted your name you get a notification. But then Twitter released another API in beta, basically, only to a few people that allowed people to get more information, like direct messages or new followers or somebody favorited a tweet.
And Twitter basically gave Notifo and Boxcar that ability at the same time and without either of us knowing that the other had it. And so, on the same day basically, we came out with this announcement they’re like, “Oh, now you can get even more information about your Twitter account so you should use us,” and but we both said it, so it was like, sort of a wash for getting people to move from one to the other. And they kept upgrading their app and adding more features and we had come out with a GitHub integration to get notifications about commits and things like that that developers really loved, and then the next GitHub rev, sorry, Boxcar rev, they had added GitHub into it.
And so we started playing cat and mouse a little bit on features, but I wasn’t too concerned about what they were doing. And in the meantime, he had got a co-founder and now they have a company behind the product. And so, we were just sort of progressing in our own ways where we thought we would do best, but we definitely kept tabs on each other.
Andrew: This is Jonathan George. I guess his co-founder is Connor Hunt.
Chad: I think so, yes.
Andrew: So what did they…they’re still around, they’re still growing. What did they do right that Notifo didn’t?
Chad: They came out very early, and so since they were the first app that did the Twitter notification things, they got a lot of users really fast. And so, they had a large user base that kind of stuck around and continues to use it. And so the first mover advantage was definitely in their favor, I think. The other aspect, where they built all the functionality into the app itself, was definitely the right move. Something that I overlooked and didn’t implement well.
Andrew: The all-in-one, you should get a lot of use out of the app just by using the app on its own. You shouldn’t have to wait till someone else builds the functionality in, that ties to the app, OK. What else did they do?
Chad: They constantly released updates so they’re…they update the app a whole lot which is good. It helps keep the app fresh in people’s minds because they’ll see in the app store that they have an upgrade. And so it’s sort of like a constant reminder that this app is there and improving over time. Whereas, I had built the app pretty solidly and so that it was basically a framework or a foundation that we could build functionality into externally, so that we didn’t have to constantly submit updates and rev the app, which I thought was a great idea because we could, basically, improve the app over time…
Andrew: Without waiting for permission from Apple.
Chad: Yeah, instead of waiting for permission…
Andrew: Why wasn’t that an advantage then?
Chad: I think the users are trained so much to look for updates for apps, that if they don’t see an update come in, they just assume that it’s been abandoned, or that it’s stale, that’s there’s no new functionality. And we would actually get e-mails in to us that said, “Where’s the new version. Why haven’t you updated the app?” And they wouldn’t even say, “You know, here is a feature we want that you can add an update.” They just said, Where is an update?” like any sort of update. And that’s just sort of part of the consumer culture surrounding the app sort of thing, is that people are trained, like, “We want updates. We want to know that things are still being developed and evolving,” and they just look for that.
Andrew: So strange. It should be better to just have an app that constantly updates, that doesn’t require you to download it, that doesn’t go stale. But I get that because, when I see that there’s a new number on that app store icon on my iPhone, I click over to see what treats I have. Which new…which apps that I’m using have just added something new that I didn’t expect and what was that new thing? There is a lot of excitement when one of my favorite apps adds something.
Andrew: All right, what else do I have on my list? Co-founder. You said, “It bit you twice.” The first time was when you went to raise money. The second time?
Chad: The second time was when things were coming to an end. So one big piece of the story that we haven’t talked about yet, and I’m not sure how we are on time, but I’ll just mention that in May of 2011, my co-founder, Paul and I decided to split. So he left the company after almost a year.
Andrew: And this was quiet? You guys didn’t announce it publicly as far as I could tell.
Chad: It was very quiet. I had actually written a post about it and it’s still in my drafts folder waiting to be published at some point because, again, I put sort of a spin on it. Here are some lessons that we learned and things like that. And it was a really important part of the story, of the process for me personally, just because I learned several things about myself and maybe we can get into that if there’s time.
So he left in May and I was back to being a single founder and, at that point, I was looking for what I was going to do next. What am I going to do? And eventually I came up with several ideas for new apps to put out and I was basically looking for any sort of hit I could get in the app store. So I put out that were monetizable. So I was done with the whole free model. I need to make money now or it’s going to be over.
So I put out apps that were paid only. I put out apps that were ad driven. I put out apps that had in app purchases. I tried lots of different monetization models and none of them really ever took off or worked out. So eventually, in September of last year, I said OK. Well, actually it was before that because I announced in September. So basically in August, I said I’m running out of money. This isn’t going to last and I need to have an exit strategy before the money runs out or I’m going to be in real trouble.
So I went to YC and said this is what’s up. My ship is sinking, I need to get out. What can be done? And I met with Paul Graham and he said OK. Well, let me introduce you to some companies that may be interested in acquiring you or doing a talent acquisition or something like that and I was pretty excited about that, right? So like OK, well, this could be great, right? I’ll get introduced to all these people, all these companies, and I may have a soft landing.
There was some timing issues that happened regarding that too, so he was going to introduce me to bigger companies, like really big companies like Google or Facebook or Twitter and then also other sort of bigger YC companies that could afford to do an acquisition, either with just equity or maybe some cash or something. And the timing issue was, all the intros went out at the same time and that was a bad idea because the big mega-corps take forever to respond or go through their process of doing these talks and acquisition, whatever, and basically five other companies, the YC startup companies, responded that day. And said let’s set up meetings. Let’s talk.
They were really anxious to talk with me, which was a great feeling, but now I had this timing dissonance where I had talked with another couple advisors and said if you’re going to go the acquisition route, or try to get offers and negotiate, you need to have all the offers come in at the same time, so that you’re not saying oh, that’s great. Thanks for the offer, but let’s wait two weeks while I’m still talking with this company over here and they’d say forget that and back out.
And so what ended up happening was, the mega-corps never got their act together fast enough and basically, I had interviewed with all these companies and gotten offers and they were all going to fall off the table if I had waited to talk with these other people. In the meantime, while I was talking with the companies saying all right, here’s my situation. What can we do here? They said we really, really want you to work here but it just doesn’t make sense for us to acquire a single person. We’d love to give you a job offer, and they were great job offers, but they never, ever reached that level of acquisition level. And the main reason was the single founderness.
So if there had been a team, if I had, if Paul was still with me and we were still a team, it makes more sense for companies to offer a bigger number to keep a team together instead of if they just give job offers, they risk that the team will split to take job offers at companies that they’d rather work at or whatever.
Andrew: And they wanted you to work together, not on (?), not on your product, but they say we want a team that’s going to come in here and work well together on day one. Not one that we have to train to get to know each other and train in each other habits. I see. So if I understand you right, Chad, what happened was all the requests or all the introductions went out at once.
The Y combinatory companies all responded quickly and they gave you job offers, many of them, but you couldn’t accept it because you were waiting for the big companies. Well those ended up fizzling out or expiring while you were waiting for the big companies. The big companies did finally respond and they said we like you, but if you had a team we’d hire you and so you ended up losing all of them.
Chad: Not quite what happened.
Chad: I never got as far as negotiating with the big companies, because I was afraid of all the other offers expiring, and it was the other companies that said, “We can’t acquire you.” Some of them couldn’t afford to acquire. Some of them could have but didn’t want to because of the single, and it makes business sense, right, like the least amount of money they can spend to get good talent is good business for them, and so it’s to their advantage to only offer a job-offer-level offer, as opposed to a talent acquisition offer. If they can get away with it, and so, since nobody wanted to move up to that level, than I couldn’t negotiate with the others and say, “Oh, this guy just jumped. What can you respond with?”
It was all in that job offer tier, and so I said, “OK, I can’t wait for these other people, you know it may not even work out,” and especially since I had gotten the feedback from these people that they weren’t interested in one person acquisition, definitely the bigger companies were not going to play ball that way, probably, I thought. Maybe I was wrong, I’m not sure. So I thought, “OK, I’m going to say, cut them off, not even pursue it, and work with the offers I have already on the table.”
So that’s what ended up doing, and I did got through some rounds of negotiations since I had multiple offers, which was advantageous, and I wound up with a really nice offer from Twilio in the end, and that’s the one that I had accepted.
Andrew: Did you think of asking them to buy out the company just so you could have a buyout in your past, and so that you can say, “I didn’t close out this company, I was bought out by another company?”
Chad: I did. I actually asked that and they said, “No.”
Chad: Because of the single [??]. They said, “It just doesn’t make sense for us to buy a single person. We’re sorry, we feel for your investors. We have investors ourselves, and we know what it’s like, but it’s ultimately not our responsibility to make your investors whole if it didn’t work out. And that’s just not something that we’re interested in doing.” And I heard that same story from everybody, because I asked. I said, “Here’s the deal. I have this company. I have investors. I want to make this work for all of us.” And it just never got there.
Andrew: All right, let me point this out to people in the audience who keep telling me to interview startups out there building their companies. First of all, it’s just not within the mission of the site here. I want to interview guys after the story’s been told. I want to interview about the past, and second, here’s why: I’ve been writing down the word “spin” over and over in my notes as we’re talking- I always have a pencil- and of course you have to spin.
When you have a setback as an entrepreneur and the story’s ongoing, you can’t say to the world, in most cases, you can’t go out and say, “Lost my co-founder. We’re now trying to figure out what to do. I have no idea.” You can’t go out to the world and say, “I’m just going to throw different apps out and see what works.” You have to spin it. You have to say, “Well, he’s got other things to do, and we’re focusing on something that’s much bigger and he doesn’t want to be a part of that.” I don’t know what the spin is, but you have to come up with the spin, and you don’t say, “Our first product doesn’t work. That’s why I’m launching all these other ones.”
You might say, “We’re growing. We’re expanding to lots of new apps, and that’s why this company’s successful.” In order to do this, the mission I’ve got here at Mixergy, which is to really learn from how companies do it, I have to do it afterwards. I know that that means that I don’t get as many hits on the site, because people want to know what’s going on today. They want to know about news, and nothing makes it to the top of TechCrunch that had to do with a story that was told five or ten years ago. Excuse me, not TechCrunch, Techmeme, and that’s where the traffic really comes, from telling new stories and breaking news.
So here’s what I wanted to ask next, and first off, all let me say this: usually at this point I would do a plug to Mixergy Premium and I’d tell people why they should buy it, and give them some success stories. Instead what I’m going to do is thank people who are Mixergy Premium members, because if I had to rely on advertising, I would have to be one of these nudniks who has to keep breaking news. I would have to one of these nudniks who, instead of telling a story, has to fling the entrepreneur into a dead pool.
I’d have to be one of these guys who just found a way to poke the world in the eye just so they could watch my website and I could get another hit to sell to an advertiser, which is what would support the site. Thankfully, because we have Mixergy Premium, where members pay for courses and pay to be members of the site, I’m supported by an audience that doesn’t care if I have more hits. I’m supported by an audience that just says, “Is there good quality?”
Boy, do I really appreciate you people for caring about that, and for funding all this. Every time I turn to my research it’s not because I keep pouring more and more money into the site, it’s because you guys say that you care about research, and every time do another course it’s for the same reason. This is a long-winded thank you. I could go on really, frankly, Chad, for an hour here and tell you how grateful I am for the Premium Members for being members. And I probably do that every night to my wife.
Andrew: But now we have a mission. I’ve got to get back on it. Here’s the thing. I’ve been writing some notes here about what you learned, and I don’t have enough, so let’s just spend a little bit of time here focusing on, in hindsight, what did you learn? What can we take away from your story?
Chad: Sure. So, basically, the biggest lesson that I’ve learned, I think, over the course of the last two years, and spending a lot of time with other YC founders, and going to lots of demo days and seeing different companies, and just watching the start-ups here in San Francisco, is that the real money is solving business problems. The real money is solving B2B space problems. So, if you can help a business, that’s making money, make more money, you’re going to make a lot of money.
And, you know, it’s really, really sexy and fun to write consumer apps, or build the next Facebook, or build an app that you know five million people are using on their phones, but the margins are so thin, or you have to rely on advertising or something like that, that you have to do so much volume. It’s a ton of work. Whereas, if you’re solving a business problem, you can have fewer customers, but charge insane amounts of money, what it seems like to a consumer would be an insane amount of money, but to a business is just, you know, business as usual, just write them a check and get it done. That it really seems the meat of revenue potential is in solving business-related problems.
And, so, I’ve been spending a lot of time sort of thinking in the back of my head, you know, what are those sort of problems, and, you know, what if I do something else next time, what would it be that I would focus on? And that’s probably the biggest overall lesson or observation I’ve made while I’ve been out here.
Andrew: What else? What else did you learn about what you could have done differently as you were running Notifo?
Chad: I think, definitely, having a co-founder is a big deal out here, much bigger deal than I thought it was, and, you know, that, I think that’s a religious argument that will rage on in text circles forever. But, I’m fairly convinced that it’s a big deal to have a co-founder out here. Especially when you’re networking, you know, there are more of you to go around. When you’re raising money you can divide the labor. People are more willing to talk with teams of people instead of just one guy.
So, I’ve learned that lesson and I’m pretty convinced. I think there’s a lot to be said for running a lifestyle business, if you’re a single person, or even if you’re a couple people. Especially in the Valley, out here everything is run with VC money, basically, so everybody’s working for a start-up that’s funded. Everybody’s, you know, talking about their investors and all this sort of stuff. And, when you have investors, you know, you’re beholden to them, like you either wind up with nothing, or you have to get big to have a return for the investors. Because that’s their only job, is to make a return on the money that they invest. And so there’s, it seems like there’s all this sort of pressure surrounding.
Raising money is a big deal, you know, getting big is a big deal, exiting is a big deal. But, if you are just a guy in your apartment, and you come up with an idea that, you know, makes a hundred or two hundred thousand dollars a year, you know, that’s not a lot of revenue if you’re building a big company, but for one or two people, that’s a lot of money. And lifestyle businesses are sort of frowned upon out here, just because it’s not glamorous or sexy or you’re not talking about millions and millions of dollars.
But there’s a lot to be said for working on your own schedule, on your own time, you know, on your own project, things that you’re passionate about. And I’m wondering, you know, if my next project will be of that sort, or if I want to do something bigger. So, I think there’s a lot of people out there that are happy doing their own thing, not making millions and millions of dollars, but, you know, the trade-off of working on their own time is worth it.
Andrew: What about this, you were married when you were running the company.
Andrew: Lot of guys who are out in Silicon Valley starting companies seem to be, especially in Y Combinators, seem to be just single guys right out of college, or even skipping college, don’t have wives, don’t have obligations. You talked a little bit about this in the blog post, that you had an obligation. Here, you said, ‘I’m shutting the company down,’ you said, “After critical examination of my physical, mental, emotional and spiritual, not to mention for the sake of my marriage, I’ve decided I cannot continue this way.” Talk about that! Let’s open up about being married and building a business.
Chad: Sure. So, I have to give lots of credit to my wife. She has been my biggest cheerleader, my biggest supporter. Whatever I decided I wanted to do she was behind me 100%. Never pulled me back and said this is crazy, this is stupid, don’t do this, or I can’t believe you’re doing this or anything. So I am incredibly lucky to have that kind of support but, you know in the back of my mind it’s always like am I driving her, my wife’s name is Kim, am I driving Kim crazy? Is she happy that I’m working 28 hours a day and we barely even see each other for a couple weeks? You know, it can be straining and, you know, I want to spend time with my wife.
Andrew: It’s not is it? You knew at the time you were. It was driving her crazy, wasn’t it?
Chad: I think it was a little bit and she knows me and she knows when I get stressed out or I’m sad or when I was in bed for two weeks she was really concerned for me, but let me go through it and wasn’t upset at me for being sad. And I really appreciated that because it would have made me feel worse. But I knew that she was worried and I don’t want to put that on anybody and I don’t want to make other people stressed out just because I’m stressed out.
And when you’re married it’s a give and take situation and I had taken a lot and she had given so much and I thought okay, this is out of balance for too long and I need to re-balance the equation here. I’m spending more time with her and letting her do things that she wants to do. Taking some trips, spending weekends together and things like that. And so I decided.
Andrew: When you were on these weekends away, could you even think about being on weekends away or were you so busy beating yourself up? What were you thinking?
Chad: No I was always on the clock, always on the clock. Even though we went different places, we even went on a cruise where I was completely offline for five days, I was never mentally clocked out. And she knew that and we would be having dinner or talking about something and I’d get this gaze in my eyes and she’d know that I had sort of checked out from the conversation and she’d draw me back in.
Andrew And being on the clock means what to you? Does it mean coming up with new ideas or does it mean going “Oh no, what would happen if this thing didn’t work out”? What went through your head?
Chad: All of that. It depended on the stage of the business and the timeline. What’s the next thing I can do to help things grow? What’s the next idea? My database is filling up, how am I going to fix it or I have users complaining that this is down, I have to get home to fix it. It was all these different things just running through my mind constantly. There was this pressure to succeed. That’s the goal of any entrepreneur in any business, is to grow and make money and anytime you’re not doing that, at least for me I’m always thinking about how I can turn this around, how can I get it to work. It was always going through my mind.
Andrew: I get that it’s so, it’s tough. I get it. I’m trying to tell some of my stories but I don’t want to take away too much from yours. The one that I will say is even when we were in Argentina and I was trying to make Mixergy work out, we were in the middle of nowhere. Olivia and I didn’t know anyone. She was working from home and I was working long hours from the office because I love working from an office.
Andrew: And looking back, I think what a jerk I was to just say “figure out the city for yourself” or “just stay home in this place where we don’t even speak the language” because I have to hustle and find an entrepreneur to convince that they can trust me to do an interview or convince that they should spend time with me doing an interview even when I don’t have a big audience. I could have been a lot more present but it’s tough. It’s tough to in that moment to stop yourself even though you know that thinking these negative thoughts isn’t going to solve anything. It’s hard to focus.
Chad: It becomes all consuming.
Andrew: You said two weeks you were in bed?
Andrew: You were in bed for two weeks you said?
Chad: Yeah, so I wasn’t. Not the entire two weeks but basically, yeah. I would sleep as long as I could and then get up and basically look forward to the next time that I was tired enough to go back to sleep. I would sit and watch TV and try to think about why things were going wrong, what was wrong with me, what was wrong with the product, what is going wrong, why is this so hard, when on the outside it looked like everybody else was succeeding and there was nobody else sort of feeling this way or admitting feeling that way.
That’s another point I brought up in the post. Everybody has this facade that everything’s great all the time because they have to, like you said with the spin. You can’t ever admit that something is going wrong during the time that you’re going through it and so it’s really easy to convince yourself that you’re the only one going through this and so it felt like, I’m the only person that can’t raise money. I’m a failure. And I just had no motivation.
It’s just so defeating to be told no, no, no, no, no time after time and I was like, I can’t deal with this right now, I just need to relax or space out and I just sort of wanted to hide away from the world basically for a while and that’s what I spent two weeks doing until I felt a little bit better and had some motivation to get back to doing work.
Andrew: All right let me say one last thing and then I would like to hear where you are now and tell people where they can connect with you. There is this photo of Muhammad Ali, and Muhammad Ali is looking over Sonny Liston who is on the floor like this, in the boxing ring, and Muhammad Ali is like yeah I did it. And I see a lot of these guys have the photo up on their wall, and in their minds they are Muhammad Ali to the world. You know like they knock the world down. Don’t mess with them.
When I see it though, I would rather be Sonny Liston, in the ring and on the floor than some jerk that’s got the poster up on his wall just fantasizing about being Muhammad Ali. I want to be in the ring. I will fall on the floor, I will get punched in the face but to be in the ring and to not be on the outside saying what does it feel like to be Muhammad Ali. To not go to bed dreaming that someone invites you into a ring and you get to knock them down, you get to knock down the opponent. That is the life that I want for myself. I will get knocked down.
Sometimes even here at Mixergy I think should I even express what I really feel because what if this thing doesn’t work. I think well I would rather have it not work out and just be in the ring speaking my mind than to be a quiet person who is afraid to express himself, and afraid to stand up, and afraid to really get into that ring. You’re in that ring. I’m in that ring. The person that’s listening to us is in that ring or she better get in there right now because it’s the meaning of life, I mean otherwise there’s no meaning. What’s the point?
Andrew: What’s the point of being in the audience of the world instead of being up on stage? Whatever the stage is, you know it doesn’t have to be in front of a big crowd of people but it means just doing it; Being a part of it.
All right, you are now at a great company. How are things over there?
Chad: Things are going pretty well. Personally this is something that I’m admitting to and being transparent and honest. It’s been four months since I joined and for me it really hasn’t been super easy from working on my own for the last two and a half years to working with a company that’s now 100 people and getting bigger, which is great for them. But the transition for me was very abrupt it seemed like. I closed down [??]. I was out of money personally. The company was out of money. I couldn’t afford to just take a break and just chill out before starting something new. So I went from single founder-ness to day job guy over night and it’s been pretty difficult so far. I’m getting back in the swing of things and my team is great. I love them. And we’re solving some really cool problems. But it still feels.
Andrew: What’s a difficult part about being in there? Do you feel anonymous? Do you feel like you have to be at a certain place, at a certain time? You mentioned early that even when you want a vacation to go see your family, you have to make sure that it’s okay.
Chad: Yeah I think definitely having an agenda is the biggest change. You know having to get into work at a certain time or being there for meetings and then you know that means I have to catch the bus at a certain time because the nearest bus stop to me comes only once every half an hour so if I miss it then I’ll be late. So it means that I have to get up out of bed at a certain hour and I hate setting an alarm clock.
That was the greatest part of working my own company is that I didn’t have to set an alarm and that was like the greatest perk. I could just wake up when my body naturally woke up and then I could get to work and then go to bed when I was tired. But now getting out of bed is like a chore almost. It hurts. So that’s part of the biggest problem. And having meetings all throughout the day is hard if you’re a developer and you need that big chunk of time in the middle of the day to work on things and it’s chopped up by these meetings ever so often.
And I understand there has to be meetings but when you’re in a big company there has to a lot of over communication so that everybody is on the same page and that’s how it works and I get that. And I worked at a big company at Cisco and the same thing there, so this isn’t something brand new to me. It’s just sort of a re-entry into bigger company life.
And so getting back into that mode is taking me longer than I thought it would and so I’m still trying to figure out whether I just need to take a break and chill out for a while and then get back to work or whether it’s something else or whether I have this sort of still dissatisfied taste in my mouth about what happened with (?) or if I’m like jealous of friends that I still have that are working on their own company. It’s this sort of weird mix of emotions that I can’t really explain at the moment.
But I’m definitely happy at (?) and definitely having a paycheck is the greatest part of being there, so that I don’t have to worry about paying my rent every month and the perks there are great. I couldn’t ask for a better company to work for so even feeling like things aren’t perfect is a little bit worrisome. What actually is at the root of this?
Andrew: Well, you’ve got some safe time to think about what to do next and you are at a great company with a lot of smart people. I’m sure part of their concern with you is that you’re going to take one of their people and go start another company on your own or maybe they’ll be happy because (?) seems to be embedded into so many startups in Silicon Valley.
Andrew: So they’d be happy that you take their product and build something with it. I know this isn’t going to be the last time you and I talk. I’m looking forward to the next interview and I hope you and I get to meet at some point in person.
Chad: Yes. Me, too.
Andrew: All right. Thank you one more time, Chad. Thank you for doing this interview. Guys in the audience, thank you for being a part of this. The idea here, it’s not just to put on a show. I’m no showman. Look at me. I barely get out my words sometimes, especially at critical moments.
So I’m no showman and this isn’t really a show, but it’s a place to really understand the whole entrepreneurial process, to learn from other people who have done it and I’m really fortunate that I’ve got an audience that helps support it and I’m fortunate that entrepreneurs in our space get the mission here and are a part of it.
Chad, thank you for being a part of this, and thank you all for watching.
Chad: Thank you.