Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses. And I flew to Sydney, Australia as part of my seven marathons on seven continents goal this year. Did I tell you that?
Matt: No, you didn’t.
Andrew: My goal is to run a marathon on every continent this year. And so I said, “Where do I go in Australia?” And everyone said Sydney is the place for entrepreneurship. There is no marathon that’s going on the day that I’m available, so I’m just going to, like a madman, run 26.2 miles. Strava will make sure that I’m doing it right. And I’ve really been looking forward to interviewing you. To be honest, you made it very easy when you said yes. I was prepared to, like, come back at you and say, “Here’s why you should do it and not.” And you said, “Okay, Andrew, here, I can do it.”
For those of you who are listening, it’s Matt Barrie. He is the founder of freelancer.com. And the reason that I’ve been looking to have you say yes is I know your company. I’ve used your company. I’ve known you for a long time. I didn’t even know how impressive of a person you are. You’ve got a personality and a look to you. You photograph well. So there are other people who talk about you. But for me, the geeky part is the most interesting. You built out this freelance marketplace. You didn’t come in first, but you grew really big. And you understood that this was where the world was going long before the rest of the industry did. And I know, because I went back and looked at old articles. It’s not like a thing that you say retroactively.
So I’m curious about how you built up Freelancer. I was going to say it’s a marketplace for hiring freelancers. But as you told me before we got started, there’s so much more to it than that. So we’ll talk about what that is. And whether, frankly, would you be bigger if you were not here in Australia, even though it’s beautiful to be in Sydney?
We’ll talk about all that thanks to two phenomenal sponsors. The first will host anyone’s website, right? It’s called HostGator. And the second is a great way to send out email marketing, but they don’t want to call them an email marketing company. It’s called ActiveCampaign. I’ll tell you and everyone about them in a moment. Matt, good to see you here beyond freelancer.com. Actually, you know what? Let’s talk numbers first. How big is the marketplace?
Matt: So we’re the largest in the world by numbers of users and number of projects posted. So there’s 33 million users on the website from all around the world, 247 countries, regions, and territories.
Andrew: When you say 33 million people, you mean listing themselves or being like me, also hiring, or is it a combination of the two?
Matt: Combination of the two. So you can either post projects or you can work as a freelancer, and we just call them registered users. So it’s really every country in the world. We have people in the Vatican. People in Antarctica use the website. And 15 million projects being posted. And any type of work you can possibly think of, you can get it done with freelancers. So things like, “Build me a website,” “Design for me a logo,” right through to astrophysics, aerospace engineering, genetic engineering, biotechnology, manufacturing. NASA uses us, Airbus uses us, and so forth, so, U.S. Department of Energy.
Andrew: And the revenue total is how much?
Matt: Last calendar year, it was about . . . $741 million went through the bank accounts, in terms of turnover, and $52, $53 million in revenue.
Andrew: To you. And then what about net? That’s the part that I wasn’t able to find out. What’s the net?
Matt: We’re running to break even, is the probability.
Andrew: Break even. Why aren’t you guys bigger? I looked at the market cap. I was so sure. I saw an old article from like six years ago saying that you were going to be the first Australian tech billionaire. I was so sure you hit it. I looked at the market cap. It’s like $350 million. Why?
Matt: Well, I mean, it’s a listed company, so the share prices go up, share prices go down. I do think it’s actually incredibly cheap at the moment. That’s why, you know, I’ve been buying stock back, you know. At times, we’ve been valued at the sort of multiples that you see in the private, you know, Silicon Valley style venture financings. We were at, you know, 50 times revenue at one point, and we came onto the market. But, you know, they go up and down.
A lot of the activity on the stock market is really trend following. So something will become hot in, like, cannabis, tech, or what have you, or lithium, and the market will run hard, and they’ll kind of come off again. So, you know, I think the price should be higher. But at the end of the day, it all comes down to just printing good numbers and getting good results, and the market will kind of adjust itself.
Andrew: Do you feel like you are public because you’re Australian? Do you feel like you’re undervalued because it’s an Australian company? Even though I always thought of you guys as a Silicon Valley company.
Matt: No, I don’t think that’s true. In fact, there’s times where, you know, we were at one point $1 billion U.S. dollar market capitalization, back in 2013. And that was kind of way above, I think, what you’d get in the venture space. And not just that, but you’ve also got to remember that we have the advantage of being . . . when you’re listed, you have this very, you know, one class of shares. And so it’s kind of interesting. This whole thing about unicorns in the Valley, you know, companies over $1 billion market capitalization, I mean, that’s all manufactured. Right? That’s not reality. Right? These companies would not get valuations anywhere near that in the listed space. And they’re manufactured through things like liquidation preference and ratchets. And, you know, it’s kind of interesting. I could talk about it in a little detail, if you want to hear about it.
But, you know, you find a company that’s doing about $20 million in revenue year on year, that’s growing about 40%. And if you do a scatter plot of enterprise value-to-sales by revenue growth rate, on publicly listed peers, you’ll tend to find there’s a somewhat linear relationship for a segment of the curve, where if you’re growing 40% year on year, you get about 10 times valuation in terms of your enterprise value-to-sales. So basically, you take your revenue, multiply 10, and so forth. And so typically, on the public market, it’s a company doing $20 million a year in revenue, growing 40% year on year. It’s about $200 million valuation you’d get on the public market.
Visa comes along, says, “Hey, would you like to be a unicorn? I’ll write you a check. I’ll give you $100 million.” The founder goes, “Yeah, I’d love to be a unicorn.” Okay, but there’s a catch. Their liquidation preference is at two times preferred liquidation preference there. Which basically means that if the company sells at any point down the line, the valuation of that company’s worth $200 million. So the first $200 million goes to the venture capitalists, or my friends [inaudible 00:06:01].
Andrew: Ah, got it. Yeah.
Matt: So what actually happens is the founders swap their equity for a call option, effectively, in the stock. The founder gets their marquee valuation of $1 billion, but the actual fact is when the company sells, it’s going to be over $200 million to see a cent. And the investor’s got his doubts on limited, because he knows in the public markets that’s the valuation it would achieve. So, anyway, the point being is that, “Yes, we could probably get a much higher valuation in the private markets, that would come with some baggage around preferred shares.” But, you know, I’m pretty happy with where we are. You know, we don’t need to raise money. And if anything, I’m buying my shares back about it. So.
Andrew: So here’s what I’m going to ask you about. I’m going to ask you a little bit about your background, your childhood. I’m going to ask you a little bit about this Sensory Networks thing, and what you said on the way out the door, to find out if it really is what I heard you said. And then about Freelancer, how you launched it, how you built it, why so many acquisitions. Warrior Forum is one of them. I didn’t realize that. Escrow, I did know that, and so on.
But I told you before we started that I heard that you were not a great student in school. You were a little mischievous, and then you started to work hard. And you said, “Who told you that?” I found it in my notes here. It’s an article Bryan . . . Is it Gensler?
Andrew: Is he an old friend of yours? You know him.
Matt: He was the guy that taught the entire school. So . . .
Andrew: Super bright guy, from what I understand.
Matt: Yeah, I think he’s at Harvard or something now. He’s like a professor in astrophysics. I mean, that guy’s a genius. Yeah. So, yeah, that would be talking about high school. I don’t know. I got the fourth highest scholarship to a pretty well-respected school here in Australia. And I don’t know. We’re talking about, you know, 1985 here, so this is a long time ago. It was a different concept, in terms, I think, how . . . I came from an American school in Indonesia. And I think it was a little bit . . . The whole concept, for example, of how you go about studying and so forth took me a while to kind of grasp. And so, I guess, in the early years, in high school, I didn’t do so well. But towards the end, I kind of improved and kind of grew.
Andrew: The reason I’m asking is not because I care about the lives of high school kids. It’s because I’m trying to get a sense of who you are. And it seems to me that there’s a sense . . . What I was doing is I was reading people’s analysis of your childhood, was getting a sense of who you are. And it seemed like once the competitive spirit in you latched onto school, you went off. Am I right, in armchair, like, psychologist approach to your articles?
Matt: I don’t know. Maybe.
Andrew: I’ll give you a sense of who I was as a kid. I sucked at school, because none of it made sense to me. They forced me to go into art classes, which I didn’t care about. There was music class in high school. I didn’t care about it. Give me heavy metal music and don’t ask me to analyze it, and I’ll be happy. But don’t make me sit down and try to analyze. What I did love, though, there was a bunch of people who were businesspeople, who didn’t care about anything, not even manners. They didn’t even know what fork, or how to wipe their faces while they were eating, but they were creative in this one space, and they got to build incredible companies. And I couldn’t stop reading about them.
Harry Helmsley, if you go walk down New York, you see buildings with Helmsley on it. He wasn’t like the nicest looking guy, or the guy who knew anything about art. He was the guy who could sit outside of a building and count how many people were walking past it, look at the light bulbs and see how many watts. That type of thing I connected with. That’s what drew me to entrepreneurship. Do you have anything like that in your childhood, something that made Matt who he is today, and care about the stuff that he cares about today?
Matt: Look, I think it came down to a question of . . . You kind of have to go through a mindset, and understanding that you’re learning something for the sake of improving yourself. And once that light bulb goes off, that you improve dramatically at anything you’re studying. Right? I think a lot of people, when they go to school, they think it’s a bit of a chore. You know, they’re forced to learn something and they can’t really connect the dots between making themselves a better version of themselves. And I think that . . .
Andrew: But you did.
Matt: I think the light bulb moment was probably, you know, understanding that, “You want to learn this because it makes you a better person.”
Andrew: And was there a class that made you a better person? Besides writing classes, I can’t think of many. For me, anyway, I mean.
Matt: I think it’s a rich tapestry of different things that, I think, contributed. You know, there were some moments that were kind of interesting. For example, one of my first classes at Stanford, when I went there. I did a master’s in electrical engineering in 1997. And, you know, I didn’t actually originally intend on going to Stanford. I actually intended to go do a PhD in robotics at MIT. And I had a reference for the Fulbright scholarship from Rodney Brooks, who was like the head of the department. But for some bizarre reason, the reference didn’t get in.
So I kind of got accepted to Stanford, which kind of put me in a bit of a tailspin. Stanford obviously had a great reputation. But, you know, to an Australian graduate of a bachelor’s program, it didn’t really have the reputation it has now, because the dot-com boom hadn’t really happened. Right? So I thought, “Okay, I’ll go. My plan B, I guess I’ll go to this university, etc.”
Andrew: Stanford was your plan B.
Matt: Yeah, it was my plan B.
Matt: Because back then, no one was really talking, at least in Australia, was talking about going and starting a company, and being an entrepreneur. The pinnacle of technology was basically being a professor. And so I thought, “Okay, well I’ve got to be a professor then.”
Andrew: Because you love technology for the sake of technology. And if it meant being a professor as a way to channel that energy, do it. If it was entrepreneurship . . . Got it. Okay.
Matt: Yeah. These big companies existed. Right? The big technology companies existed, but you couldn’t really connect the dots between . . . Who created those companies? Right? The light bulb hadn’t gone off that it’s actually people like you or I that go create these companies. I just thought they existed. Right? So then I went to Stanford. And one of the first classes I did was called Technology Entrepreneurship, and there was 40 people in the class. The way it worked is one person was the CEO, one person is the CTO, one person was the VP of Marketing, one person is the Head of Sales. And you write a business plan, and you pitch, basically, investors, and VCs, and so on, entrepreneurs at the end. And every week, someone comes in to talk to you about, you know, raising money, or negotiation, or doing a company culture, or what have you.
And in the very, very first class, actually, this guy called Ken Hall came in, and he said, “Look, I did this class four years ago, in 1994 or so.” He goes, “I was an electrical engineer doing my MBA,” you know. And in his class, Yahoo started, Excite started, etc. So, of course, everyone starts paying a bit more attention. And he said, “I didn’t know what I was going to do.” And some guy approached me, because everyone wants to know what happens to the class, because so many companies come out of it. Real companies come out of it.
So a guy said to me, “Can you do a business plan for me? I’ll pay you $1,000.” And the guy said, “Okay, what’s it about?” And he said, “It’s for a mail order battery business.” And you’ve got to remember, back in 1994, everyone had a spare battery for their laptop or a spare battery for their phone before Steve Jobs turned the phone into a hardware subscription, and you can’t replace the battery so easily. And he said, “That’s kind of boring,” right, “I want to do something creative really,” what have you. But by week two you’ve got to come up with your idea and lock it in, and he didn’t have that locked in. So he said, “Okay, what I’ll do is I’ll take the $1,000 dollars from this guy. I’ll pay my teammates $100 each. I’ll pocket $700 for myself, and I’ll do this plan.”
And to cut a long story short, at the end of the class, the guy came to me and said, “What do you think about this mail order battery business?” He goes, “I love it.” He’s already spent a whole quarter on it. And so he was pretty enthusiastic, because it was his plan. He said, “How about I finance you, and you get into it for real. How much money do you need?” And he said, “Okay, well, $50-grand, and I’ll give you half the company.” And he said, “No, no, wait. Give me $50-grand and I’ll give you 25% of the company.” And the guy said, “No problem.” Anyway, long . . .
Andrew: You mean this student was now, who just worked on this business plan, was being offered money to go and create this mail order battery business. Okay.
Matt: That’s right. So then that company became 1800battery.com. He walked into the class, and this is the first class I did on campus pretty much. And he said, “That company’s now worth $75 million. I’m willing to fund four teams here a quarter-million dollars each, and my investor will fund four more teams a quarter-million dollars each. Come up with the idea for real.” Of course, the whole class is like, “Jesus Christ. What’s going on here?”
And then that’s when things really started to click about, “You could actually go and start these companies yourself. And, you know, it’s people like you that do it. And if not you, who else is going to do it?” Right? So what is fascinating about that particular class is it’s 40 people in my year. It was 1997. Subsequently, today, 2019, the 40 people in that class, the sum total of market capitalization that’s been created from those 40 people alone is over, I think, $200 billion. Right? So one of the PayPal founders was there.
Andrew: Wow, really? Which one was in your class?
Matt: Ken Howery. He actually came to me and said, “You’re studying security. Can you look at the software? It’s for sending money to your friends with a PalmPilot. Can you take a look at it?” And I said to him, “Look, there’s no security in this whatsoever. Aren’t you worried about people ripping you off?” He said, “It’s for sharing money with your friends. So if they’re going to rip you off, they probably shouldn’t be your friend.” I said, “This idea’s silly. It’s not going to go anywhere.” Of course, next thing you know, Confinity merged with x.com, Elon Musk and Peter Thiel, and next thing you know it’s PayPal.
Andrew: So that’s what got you open to this new way of applying your engineering passion. How soon after did you start Sensory Networks? I know it was 2002. How long after . . . ?
Matt: Two-thousand-one, September 12th, 2001, we agreed to start the company, which is the day after September 11th. My friend who was in New York said, “I don’t want to live here anymore. Can I go back home instead of coming with you?” That was sometime afterward. So, I mean, it was an amazing time. It was 1998 in Silicon Valley. Things were going crazy. I mean, the Google guys were there. I started using the Google website because I took pity on them, because it was all hosted as google.stanford.edu. And it loaded a bit faster, because it didn’t have the banner ads at the top of the page.
So all these companies are being created, all these things were happening, and it was just crazy times. So I worked in the Valley very briefly for . . . I had an option, which was to go start a company with one of my classmates, a guy called Munjal Shah, who’s actually been a very successful entrepreneur in his own right, or go and join this sure thing, which is a security company that had been started by these rockstars in cryptography. So instead of going off with Munjal, I went off and joined this other company. Munjal went off and raised, I think, $40 million a month later to do andale.com, which was aggregated auctioning on Yahoo.
And so I joined this company called Veriguard, which became Securify. I think I was the eighth employee. And it sold, I think, nine months later for $64 million. And it had no revenue, no plan, no real clue what it was doing. And we thought it was too low. And then that was bought by Kroll, which is one of the world’s largest investigation intelligence companies, which was a very interesting time, the sort of work we did for them. We basically became the cybersecurity division of this massive private sector, CIA. And then around 2000, I came back to Australia and decided to work in venture capital very briefly, which I think is a very soul-destroying thing to work in, particularly as a young, idealistic entrepreneur.
Andrew: Why? I would have thought that would open your eyes up to all kinds of possibilities, the way that being in that Stanford class did. Because you see all these people come in with nothing and end up with something big.
Matt: It’s the complete opposite. It’s soul-destroying. And the reason why is you meet entrepreneurs every day. And, you know, six, seven times a day you might meet some entrepreneurs. You’re getting sent 50 business plans, you know, a day. You read through them, “Yeah, this is interesting. That’s interesting.” They come and they meet you, and you fund two per year. So you’re constantly disappointing entrepreneurs, every day just meeting people who are really excited about their business.
And you don’t really want to say no. And as a junior in a venture capital firm, you don’t really have the power to do anything. The two deals you do per year have nothing to do with the things that you screen. Someone rings up and says, “Do you want to do a co-investment with me in this particular company?” So you’re just constantly upsetting entrepreneurs. Every time you go to an event, they go, “Oh, he’s the asshole VC that’s not going to fund my company,” sort of thing.
Andrew: Yeah, or, “He didn’t . . . ”
Matt: Or, “Didn’t,” or, “Passed,” or, “He’s stupid because he didn’t understand it.”
Andrew: You spent less than a year there. Sensory Networks. Is it true that on your way out, you said to the VCs . . . I think you called them arseholes, which we never use. I don’t know what the difference is between that and A-hole. But I think you called them that, and you also said, “Thanks for the $30 million MBA.” Am I right about that?
Matt: I don’t think I said arseholes to their face. I certainly said many things, not to their face. Yeah, I said, “Yeah this is my $30 million MBA, and I’ll walk.”
Andrew: Meaning their $30 million they invested in your company. It’s like, “Thanks for giving me the $30 million, and also teaching me a lesson about how not to do business again.”
Matt: In a way, yeah.
Andrew: Got it. Okay. So let’s go back then, in happier times. The idea came from where?
Matt: Well, this was a solution looking for a problem. Right? So it was the completely wrong way to build a company. So what had happened was I’d been approached by my former professor from Sydney University to build a company with him. Well, actually for funding originally. And he presented, when I was working as a VC, he presented this plan which was more of a technical plan rather than a business plan. I said, “You need to turn this into a proper business plan. And I’ll leave the firm, and I’ll help you go start this business.”
Andrew: Because why?
Matt: Because I wanted to build a company rather than . . .
Andrew: Okay. What was it about this business plan that you liked?
Matt: The credentials of the professor were very strong. It was for audio and video transcoding, so basically connecting up the mobile phone network with Voice over IP, and so forth, about producing these network appliances. And, you know, you could understand that Voice over IP was being rolled out all across the world at the time, so it was a hot market, and so they could do this efficiently. And so I thought it had some real intellectual property depth to it, and some good credibility from the founding team. So I left and started this business. And I said, naively, that, “I’ll raise the money in six weeks,” and I actually did. Through luck and sheer naivety, it happened.
And I remember the first day at work, I started work and one of the guys came up to me and said, “Hey, there’s a conference in Helsinki on audio and video transcoding. You should go.” And I just had this moment of reality hit me, which was, “I’d really love Helsinki, but I have absolutely no interest in audio-video protocols. Why did I start a company in this space?” And I did what a lot of entrepreneurs do, which is try and start a company just for the sake of starting a company. Whatever the company is, I just start it. Right? It wasn’t actually something I was passionate about getting out of bed in the morning every day and actually doing.
And so then I left fairly quickly, and I thought, “Okay, I’ve got to do something in a space that I want to do a company.” And so I thought, “Okay, I’ll do something in security.” Network security, because it was what I studied at Stanford, one of the subjects I studied. And I also worked in that startup owned by Kroll. So I thought, “I’ll do that.” And I thought, “Okay, I want to do chip design,” because I’d studied that. I’d never built a chip before, but I kind of wanted to do something in that space. So it led to hardware security, and trying to build whatever. So kind of working backwards, rather than actually trying to figure out, “Was there actually a market for this?” So September 12th, 2001, and my friend who was living in New York, Nic de Jong, who used to work for me at Kroll, said, “I want to leave New York.” I said, “Okay. Well, come back and we’ll start this company.”
So the problem was that everything . . . We ended up producing great technology. It was doing gigabit pattern-matching on network traffic, so you could look for viruses, and spam, and things like that. We thought we were late to market, but it was in a world where there was no gigabit networks deployed, so the market size was marginal. Just about every failure you could probably have in a company, we had. We had great engineers, and we had great technology, yet product market fit was all wrong, way too early for the market. We took money from investors that, you know, were not very competent in managing money, or managing companies, and created conflict on the first day, pretty much, of work. And it was just a hard slog. And, really, through just sheer persistence and willpower, the company survived for a long period of time. In fact, ultimately, it sold to Intel. But, you know, it was really a solution looking for a problem, rather than actually the other way around.
Andrew: Okay. All right. I want to know about freelancer.com. That’s why I invited you here. Let me talk about my first sponsor, and then we’ll go into where the idea came from. First sponsor, a company called ActiveCampaign. Do you know ActiveCampaign?
Matt: No, I don’t.
Andrew: There are freelancers on your network that are actually managing people’s ActiveCampaign right now, this second.
Matt: I’m sure there are.
Andrew: I saw you beam with pride. But that’s true. It is true. So here’s the thing with ActiveCampaign. They know that people are going to need to do email marketing, but the problem is most people do email marketing like this. They add a bunch of people to their email list, then they fire off the same message to everybody. Now, for you, for example, somebody who is more likely to look for a freelancing job probably doesn’t want to hire someone, probably. Imagine if you could, just based on what sections of the site they were on, you could start sending them different messages.
So if they’re looking for a freelancer job, you might give them tips on how to get a freelancing job on your platform. If they’re on your platform already and they haven’t done enough, you might know that they haven’t done enough and send them an email message that says, “Hey, here’s how you can get more gigs with us. Here’s how you can learn.” Right? And so on. Message them based on who they are and what they’ve done on your site. And they don’t have to fill out a survey to do that. They just have to be on your site. And because you put a single piece of code on your site, ActiveCampaign knows what they’re doing, and you then can start writing messages based on who they are. That’s what it’s about. Usually, that stuff is really tough. You probably use a high-end software program for that, don’t you? Do you know what you use?
Matt: We have our own.
Andrew: You could talk about, like, the competitor. It’s okay. Do you remember who you use?
Matt: We do our own.
Andrew: Oh, Duran, that’s a name of a company?
Matt: No, we do our own.
Andrew: Oh, you do your own. Of course, yeah. There you go. That makes your sentence. I’ve never heard of that. I thought maybe these guys were like a Marketo or something. Yeah, most big companies do that. The problem is, for smaller businesses, it’s too expensive, too hard to create your own, manage your own, and so on. ActiveCampaign said, “We’re going to make it so simple that even a CEO could do it himself.” And if he hired a virtual assistant, that virtual assistant will be able to work through a set of processes and make it work.
All right. For anyone who’s listening to us who wants this goodness, go to activecampaign.com/mixergy. Here’s what they’re going to get there. Number one, they’re going to get to try it for free. Free is great. Number two, second month is also going to be free. Number three, they have consultants who will get on two different calls with you and make sure you’re using every one of these features. Matt, you’re about ready to switch over, aren’t you? Finally, if you’re already on your own email system, they will migrate you for free. All you have to do is go to activecampaign.com/mixergy. All right. They don’t like that I say email marketing, because they do more than email. They do text message, etc. But it’s simpler that way.
Andrew: Is it true that the idea for freelancer.com came because you were helping your mom with her website, or is that really marketing?
Matt: That’s true, actually.
Andrew: It is?
Matt: Yeah. So what happened was, so, I walked out of Sensory. And it’s one of those dark moments you have on an entrepreneur’s journey where, you know, you tried really hard to make a company work. At that point, it was only doing about $2.5 million in revenue, and I’d been running it for about six years. And I think we’d sucked down about $30 million in venture capital. And, you know, I was like, “What do I do now?” Right? And you kind of want to start another business again, because I think fundamentally you realize, as an entrepreneur, you pretty quickly become unemployable, at least for other people. And so you’ve got to start another company.
But then I was like, “Okay, all the people I know, they’re very good.” I’ve hired them at this previous company, and I feel bad. It hasn’t really worked. I set everything on fire, so why would they join me in a second company? And, you know, I was like, “What do I do?” I thought, “Gee, I kind of want to start a company and just not hire anyone.” Right? And, you know, obviously, the VCs had kind of turned against me because I’d left. Kind of one of those businesses, I think, that can consume a venture capitalist’s life having to manage it out, and trying to figure out how to get an exit. And a lot of VCs just sometimes get consumed by these businesses that just become, you know, just go on forever, “Will they actually be able to list it or get acquired?”
Andrew: You’re saying you didn’t like that. You didn’t like the idea of, as soon as you get on, you have to start thinking about how to get off?
Matt: Well, that was actually a big wake-up call, actually, the first time I got terms. It had a clause in there saying that within five years, they’re going to appoint a corporate advisor, whether or not the company’s doing well, to sell. And that’s a reality check. But the point was I hadn’t really set the world on fire. And I was like, “What do I do now?” And so I started just trading stocks. You know, base metal mining was booming. I did pretty well for a while.
But at some point, I realized I had to kind of start a company. I thought, “Maybe I’ll just kind of do a few things on the side while I’m doing that.” And I told my mom, in like 1995, “You should build a website.” I knew if she did, she would have been one of the e-commerce pioneers. She kind of imports and wholesales arts, crafts, textiles, glues, paints, and so forth. So it comes around to 2007, and I said, “I’ll help you build your website.” So I helped her build her website. I didn’t realize she had 10,000 products with no photos, no descriptions.
Andrew: How was she selling 10,000 products?
Matt: People just call up on the phone and ask what you’ve got, and she’d say, “I’ve got this.” Then she kind of had this catalog that she kind of photocopied many, many, many times.
Andrew: Of her things.
Andrew: What kind of people would call her? And how would they know to find her?
Matt: Just all sorts of shops. Yeah. I have no idea how that business . . .
Andrew: Okay, wow. I see. She was basically not a wholesaler, because . . . She was, of crafts. Okay. And you said, “We can get this online, and then you’ll see all the different products that she has.” And you say, “Okay, I’m not going to sit and do this.”
Matt: So I helped her build her website. Obviously, there’s a lot of data entry involved. At one point, I created a directory of all these shops. And I needed someone to fill in, you know, the name of the shop, address of the shop, phone number of the shop, email address, and so forth. And I was trying to get a brother, or a sister, or a friend of mine to kind of do the work. And I said, “I’ll pay you $2 per row, and maybe we’ll start with 1,000 rows, so $2,000 of work. You can do it at home, on a computer, in your own time.” And when I was a kid, I would have loved to do a job like that. Right? It’s like, “Wow, you could make a bit of money working at home on my own time.”
And I just couldn’t find anyone. I’d find them and they’d say, “This job is boring.” I know it’s boring, that’s why I’m paying you to do the work, and that’s why I’m not doing it. They’d tell me, “I’ve got soccer practice,” “I’ve got exams,” “I’ve got this . . . , ” all sorts of excuses. I just couldn’t find anyone. After many, many months I just got frustrated. And I think I typed into Google, “data entry online,” or, “cheap data entry,” or whatever it was. I stumbled across this website called GetAFreelancer. And this website, I was just confused about what was going on there. It had a lot of activity on it. It looked like Craigslist.
Andrew: This is what it looks like. I’ve got a screenshot of it, right?
Matt: Yeah, it looks like Craigslist, designed with leftover paint from the USS Midway. I mean, look at this. It’s just gray.
Andrew: Can I read what this is?
Andrew: Online pharmacy, a place for dogs, Flash intro, simple PHP coding with DB, sign-up list calendar. It’s like these are lists for jobs. But it’s that kind of confusing, but I get it.
Matt: It just looks terrible, right?
Andrew: But let’s just say this. It is functional. If you know what this is, it’s basically like a Craigslist of all these available jobs that you can take on as a freelancer.
Matt: Yeah, so I posted a job, kind of not knowing what would happen. Back then, you paid $5, which got refunded to you when you kind of pick someone.
Andrew: Wait, it got refunded if you picked someone?
Matt: It just kind of stops spam. And I post a job, went to lunch, came back, and I actually forgot that I posted the job. And I went to my email, and all of a sudden there was 74 emails saying, “I’ll do the job.” And I thought, “What on Earth is going on here?” And the first thing I thought was, “There is no way this is real. Right? I can’t find one person to do the job. There can’t be 74 people wanting to do this job, and these can’t be real people.”
So I started looking through, and I saw people were bidding all these different amounts, and they had written copy or whatever. I thought, “Wow, there actually are people there.” Then I looked at the pricing, and I said, “It’s a $2,000 budget,” and I had people bidding $1,000, $500, $400, $300, $200, $100. I thought, “Why is someone bidding $100 on this job when my budget’s $2,000? I can’t find anyone to do it for $2,000 locally. Why would someone do it for $100? This can’t be real.” Right?
And so I looked through, and sure enough there were people there. You know, they might be coming from emerging markets. I grew up in Indonesia, right? It should have clicked straight away. I thought, “Okay, wow.” I didn’t really think about wage differentials. And I hired a team in India, and the job was done in . . . Or was it Vietnam, actually? Vietnam. And the job was done in three days, and it was perfect. And I didn’t have to pay until the job was finished. And I thought to myself, “Holy crap.” I thought, “This changes everything.” First of all, invention is the mother of necessity. Here I am not wanting to hire anyone because I was embarrassed to approach them and try and start a new company. Now, I could hire an army of people with a credit card, and I could start any business I want to. And I thought, “Gee, this solves all my problems. I can use this site to build anything.” Right?
Andrew: Ah, you were thinking of it as a customer who now didn’t have to hire people, didn’t have to deal with investors. You could just pay $200 for somebody in India and have them create it, or Vietnam, and have them create anything for you. Yeah.
Matt: That’s right. So then I thought, “Wow, okay, I should build a business with this. What sort of business should I build?” And then I thought to myself, “I kind of like this website. Why don’t I try and copy it?” Right? So then I started a business called biditout.com.
Andrew: What was it?
Matt: Bid-it-Out-DOT-COM. You could look it up. There’ll be something on the Wayback Machine. And, you know, I download a copy of SocialEngine, which is like a white label Facebook. And I can program, so I kind of hacked together a classifieds module for that. And I was hiring freelancers off GetAFreelancer to copy GetAFreelancer. I was getting, like, design work done, and some marketing work, and so forth. And after a couple weeks, I had a rudimentary website that kind of was getting going. And then like a back of the envelope calculation of how much money I need to raise to start this business.
And back then, it was like 2007, so I was very much in the mindset, you know, “Your Series A needs to be $4 or $5 million. You need to hire 20 engineers,” etc., etc. Then I did a bit of a survey of the space, and there were about a dozen companies. Well, hundreds of little, tiny companies out there. I mean, every second project on GetAFreelancer was, “Copy GetAFreelancer.” And, in fact, GetAFreelancer was a copy of Scriptlance, which later on I bought. And I actually found a project in Scriptlance where GetAFreelancer was actually founded, actually. And I basically . . .
Andrew: This is your site, right?
Matt: Yeah, that’s my site.
Andrew: Look at this. Wow. This is your design too, and everything?
Matt: Yeah, yeah, yeah.
Andrew: Look at this.
Matt: I still look at that site and I think, “Wow, there are still a few things that look quite nice in terms of the helix.”
Andrew: I actually think it looks better than getafreelancer.com. Don’t you think?
Matt: Yeah, I think so as well.
Matt: So then I kind of thought, “Okay, well . . .
Andrew: Sorry. I got to ask you something. It says here, “.NET – 102 Different Jobs.” How many of those are you, typing in jobs just to get some things going? I don’t know how to zoom in, but there it is.
Matt: I don’t know.
Andrew: Is it real? You actually got people to post jobs on your site?
Matt: Yeah, people post jobs on the site.
Andrew: How? How did they find you?
Matt: Gee, what we were doing, we were just . . . I think we were contacting people on GetAFreelancer, saying, “You want to come across to Biditout.com as a clean interface?” Something like that. I can’t remember exactly what we were doing. And then what was happening was I did a survey of the space, and I figured out, you know, there’s hundreds of companies out there. There’s about a dozen that kind of had some sort of traction, but hadn’t really set the world on fire. And I thought, “No one’s going to fund me to be number 13.”
And also, I was really tired. Like, I was broken as an entrepreneur. I spent six years trying to make Sensory work, and hadn’t really gone that far. So I thought, “I just don’t have the patience to make the first million in revenue from zero.” And that zero to one, the first million dollars in revenue, is the hardest million dollars you’ll ever make. It can take forever. Right? Some people spend their entire lifetime, and they still don’t get to $1 million in revenue. So I thought, “Maybe one of these guys will sell to me.” Right? So then I reached out to a bunch of them and I said, “Interested in selling?” And about half a dozen sent me their financials and said, “Yeah, we’re kind of interested.” And GetAFreelancer, ironically, was one of them.
And he had the best stats of all of the sites I looked at, because it had the most traffic. And it had the most traffic because it had the best SEO strategy, and that’s exactly how I found it. I found it with SEO, typed something in. So then I asked how much he wanted, and he wanted less than the $4 million I was planning to raise from scratch. So I thought, “Wow, I can get a head start. It’s doing $1 million in revenue a year.” It had about 500,000 users at the time, and it was about the 5,000th best website in the world. And so, kind of very long story short, I bought the company. It took me a long time to get that closed, because I didn’t have the money. I simultaneously had to go raise money from somewhere to buy a business that I didn’t own.
Andrew: How much?
Matt: I think it was about $2-and-a-half million U.S. dollars.
Andrew: And were you looking for just two-and-a-half, or a little bit more?
Matt: No, no. I didn’t raise any money to operate the business, other than . . .
Andrew: Just to buy it. My understanding was you did go out to investors, and they said, “But you’re the guy who doesn’t like us. Why are we going to give you money? You don’t even like the way we do business. Never mind you don’t like us.” Am I right?
Matt: A little bit worse than that. They wouldn’t even pick up the phone, for the most part.
Andrew: Was your reputation really that bad?
Matt: It’s a very small community here, very, very small.
Andrew: Why didn’t you go back to Silicon Valley? You actually went to Stanford. You had your first job out of school in the Bay Area. Why didn’t you just say, “You know what? I’ll go pick up and go somewhere else”? Do you have kids here?
Matt: No, not that I know of.
Andrew: You didn’t. Right. So then what’s holding you back here?
Matt: I don’t know how anyone can start a business in Silicon Valley. It is so hard to hire people. I have an office in San Francisco now.
Andrew: But you weren’t looking to hire people.
Matt: It’s so expensive. And, you know, people don’t stay for very long. It’s dog eat dog there. I just . . .
Andrew: You just didn’t want that environment.
Matt: I didn’t want the environment.
Andrew: So you said, “It’s not worth it.” Just, by the way, the thing I’ve been saying lately is . . . My kid now is going to kindergarten. The Quaker school on Valencia Street, if you make less than $300,000 they’ll give you financial aid, because you’re not making enough money to send your kid to school. Three-hundred-thousand dollars means you’re not rich enough to send your kid to school.
Matt: There’s more intravenous drug users than there are high school students.
Andrew: And so you were saying, “Look, this is not where I want . . . ” Actually, that’s not off. It’s true. Once kids, I guess, once they’re seven, their parents move them out to East Bay or South Bay. I get it. And you’re saying, “This is not my life. This is not the way that I want to do business.” It actually does make sense. So you kept hunting, hunting, and hunting, until you found this guy who was an entrepreneur like you. You were trying to raise money from him, or get introductions to someone from him?
Matt: So what had happened was I was trying to do, like, a management buy-in. Right? When you look at the classic textbooks on management buy-ins and private equity rights, there’s certain structures, and it doesn’t usually happen where the business is doing $1 million in revenue. Usually, you have businesses doing billions of dollars in revenue.
Andrew: How does it work? You borrow money?
Matt: Well, no. You can get private equity to buy the business, and then you come as the management team, and you get some stock for being the management team that’s incoming. But in those sort of scenarios, you know, you end up with like 5% of the business. Right? And when you go to a venture capitalist and you say, “Look, I’m not trying to start a business from scratch. It’s already doing a million bucks a year. I want to buy it. I want to run it. I want to run it better than the person that’s running it now,” they just can’t get their head around that. It’s just outside the model. All right?
And so the investors I did speak to . . . I had a tough time seeing investors at all. But the ones that I did speak to, they just couldn’t get their head around it. And so then I thought, “I’m a founding team of one.” And that’s very, very, very tough, because psychologically you’ve got to be the one that gets up every morning and go, “I’m going to do this.” Right? And you got all these voices in your head, right, all these voices coming from your friends and your family, you know, “When are you going to start a real company? Don’t screw up this time.”
Andrew: Did you really believe that? Like, that was genuinely in your head.
Matt: They’ll tell me outright. My mom was saying, “Oh, when are you going to get a real job?” You know?
Andrew: How did you get those voices out of your head? How did you stop paying attention to them, and have confidence in yourself after all that?
Matt: You’ve just got to put your blinkers on and just go . . . What I should have mentioned was when the light bulb went off, which was when I posted the job on GetAFreelancer, and I had 74 people, and the job was perfect, and it was done for $100, the first thing I thought to myself was, “Holy crap. This is amazing. I can build a billion dollar business with this.” The second thought I had was, “Wow. The Western world’s in for a hell of a lot of pain, because, you know, people are hungry for work and they’ll do it a lot cheaper.” The third thing I thought was, “Surely this is a big space.” I thought, “This is kind of like eBay for jobs.” I thought, “Why hasn’t eBay done this?” Right? And I thought, you know, “There’s global marketplaces for products that are huge.” Right?
And today, by market capitalization, Amazon, Alibaba, and somewhere down there eBay, surely a global marketplace for services is like this big category that no one’s looked at. And the problem was that it was kind of discombobulating thinking about it, because when you saw that number, it’s like, “Surely people will go and work online, and surely there’ll be a marketplace to hire people. Why hasn’t that happened in 2007?” It hadn’t. There were a bunch of little starts around, but none had really built a big business at that point in time. And I thought, “Surely this is going to be massive, like massive. Why hasn’t anyone seen this before?”
Andrew: And once you see this is going to be that massive and that it makes that much sense, you can’t pay attention to your cousin, or uncle, or friend that says, “Why are you doing . . . ?”
Matt: No. And all I focused on was, every time I kind of thought about how big it could be, I just thought, “Forget about that. It’s too disorientating to think about that.” But I thought, “It’s doing $1 million in revenue. The site looks like crap. Surely I can get $2 million in revenue.” Right? “If I fix this, I fix this, I fix this, I’ll get to two.” And I got to two, and I thought, “Okay, I know I can get to five, because I can fix these other things, and I’ll get to five.” Then I got to 5 and I go, “Surely I can get it to 10.” Right?
Andrew: Let me just say this. So what you ended up doing was you went to someone who was an entrepreneur like you. You talked to him and he said . . . You guys curse in private a lot. This is Simon Clausen. He founded PC Tools. His quote on why he invested was, “Fuck it. Why don’t I just give you the money?” Is that right?
Matt: Something like that, yeah.
Andrew: You know what? I really shouldn’t be cursing, because I know that people are listening to this in the cars with their kids now. But I get it. So he invested how much money?
Matt: The 2.5 to buy it.
Andrew: That’s it. And then you went and you bought it from this dude who was, I guess, in a fishing village or something.
Matt: Yeah, he used to have a fish farm in Vanuatu, a Swedish guy. The GFC had hit, and he thought that the world was, you know, going to collapse. So he went to Vanuatu to live and set up the fish farm, which is a staple food for people to eat.
Andrew: Oh, really? And I should say, GFC, we don’t use that phrase. It’s Global Financial Crisis. It’s like the recession. Got it.
Matt: We call it GFC. So why I knew Simon is because Simon build PC Tools and sold that to Symantec, which was one of the first anti-spyware companies. And we were trying to get his software to load onto our chip when I was at Sensory Networks. So I thought, “He just sold his company in the consumer space. I’m a founding team of one. I entered with some credibility. Maybe he’ll come aboard.” It didn’t actually register in my head he meant all the money at all. In fact, it really surprised. I went, “I’ll go and see quite a few investors with him, and bring him along.”
And most of the time, they were just more interested in him being a limited partner in the fund than they were interested in the opportunity. They go, “Fish farm, what? Venuatu, this site looks terrible. What are you talking about? Will it match a buy-in?” And eventually he just got frustrated and said, “I’ll just give you the money.” Then that’s the only money I raised. I raised $2.5 million to buy the website. Didn’t raise a cent of capital until IPO for operating the business, so I bootstrapped the whole thing. And then on the day that we IPOed it, it hit $1.1 billion U.S. dollars market capitalization.
Andrew: Wow. Do you remember where you were the day that it went public?
Matt: At the stock market.
Andrew: Did you do anything afterwards?
Matt: I’ll tell you what happened, right. So I was there, and we were trying to get our bird on the front of the stock exchange. Because Twitter was IPOing at the same time, and they put their bird out in front of . . . I think it was NYC. And I found the pegs on the outside of the building where you could actually hang a giant banner. ASX wanted to do it, because they want to build a tech sector. Because ASX, Australian Securities Exchange, is actually the fourth largest equity capital market in the world. It’s the same size as NASDAQ, but it’s just in resources rather than tech. So they wanted to start a new sector in tech. And so there was a huge amount of publicity. We’ve got a takeover at the same time from Recruit that had come in out of Japan. And they bought indeed.com and they bought glassdoor.com, and what have you, and they had made an offer for us. And so I said no, turned that down, and that was in the papers.
And we were IPOing at the same time. And I was standing up at the podium, and there a little bell you had to ring. And they said, “Give it a good ring,” because the last person was a little Japanese guy, and he didn’t give it a ring. And I was trying to figure out where the stock price was on the screens behind me, and there’s media cameras everywhere. You know, the issue price was 50 cents, and usually you expect a 15% pop, and so I was kind of looking for 65, 70, 80 cents, whatever the number is. I couldn’t see it. I said, “Where’s the share price?” And they go, “That’s the share price.” It was like 2.50. I’m doing the math in my head, and I go, “Oh, that’s over a billion dollars,” and I rip the cord out of the bell, and I held the cord up. And the media went crazy. And the head of the stock exchange says, “This is what new technology does to old technology.” They then framed that. They sent it to me in a frame with the photo. From now on, every time someone IPOs the company, they kind of give the cord for the bell in a frame to the companies.
Andrew: Really? Oh, wow, that’s actually a good move. So you get to keep it forever, and remember the moment.
Matt: That’s right.
Matt: So, you know.
Andrew: What did you do to celebrate privately, after that?
Matt: Well, the company went and had drinks.
Andrew: That’s everyone that is . . .
Matt: Yeah, it’s a pretty good Justin Bieber moment.
Andrew: The company my wife works for went public, and I went through the whole process. It really is exciting. It’s amazing. You’re on the floor, the place where I saw as a kid. I can’t imagine actually getting to ring the bell for real, being the person doing it. Let me talk about my second sponsor, and then come back and understand. What are some of the first changes that you made to the site? It was working. I’m curious. What did you do to change it?
But first, I’ll talk about my second sponsor. It’s a company called HostGator. Let me ask you this. If you were starting today, Robert Matthew Barrie, what would you start if I gave you nothing, but I said, “Look, everything’s gone. You have no money. You have no reputation. You just have a HostGator hosting company package.” What’s the one thing that you could launch? Would it be another marketplace?
Matt: I like marketplaces, so it probably would be a marketplace.
Andrew: What’s a marketplace that’s a good opportunity for someone who’s listening to us right now, that says, “Andrew told me HostGator. I’ll go get HostGator”? What’s a marketplace that you think they should do? What’s one that’s a good opportunity today?
Matt: I don’t want to tell them the good opportunities. I try and keep them for myself.
Andrew: Really? You’re busy.
Matt: I bought a livestock marketplace the other day.
Andrew: You did?
Matt: Yeah. I bought livestock.com.
Andrew: And what are they doing?
Matt: Sell animals.
Andrew: Interesting. You personally did it?
Matt: I did, yeah. I had someone looking to buy half-a-million dollars’ worth of donkeys, actually, a few weeks ago. It was actually funny.
Andrew: Like, these are real websites where people are buying and selling livestock?
Andrew: I was actually thinking way simpler. I was thinking, “You know what? Just go find one niche on freelancer.com, and create a marketplace of just that one.” So imagine, we were just talking about ActiveCampaign, imagine we just build a whole website that does nothing but ActiveCampaign management, and that’s it. You come to us, and what we do is farm it out to somebody on freelancer.com until we’re big enough that we could hire our own people. You just winked at me.
Matt: That’s a good idea. That’s a good idea. Get it to $5 million in revenue, and maybe I’ll buy it.
Andrew: Really? Is that the threshold?
Matt: About that, yeah.
Andrew: All right. We’ve just given people a business model. All right. Oh, wait. What’s a good platform to run a marketplace on, on the cheap, you probably know, today?
Matt: Oh, like off-the-shelf software. I’m not sure.
Andrew: You don’t know. All right.
Matt: But I’m sure you can hire a freelancer on freelancer.com to do it for you.
Andrew: You’re just going to build it, right?
Matt: Yeah, it’s doable.
Andrew: Here’s what you say, “Go copy freelancer.com.” I’m sure, actually, that there’s someone who would be able to do that. Whether it’s that idea, or any other idea, or maybe you already have your website up and running, and you’re looking for a better hosting company, go to hostgator.com/mixergy. I should say the biggest benefit of doing that is they’re not going to get a huge savings. Yeah, it’s a low price, but it’s already a low price with HostGator. They’ll basically be giving me credit for having referred them, which is good for my interviews.
So hostgator.com/mixergy. We’ll get anyone who’s listening to us a lower price than usual, and also be a nice thing to do for me, because it’ll help me with my sponsors. I really want my sponsors to love me. I basically want everyone to love me. You don’t have that. You don’t. You’re comfortable with yourself. Yeah. You see? You don’t even need to answer it. I see you’re comfortable with yourself. All right. What’s the first big change that you made to getafreelancer.com?
Matt: Well, I remember quite vividly, actually, because I had a whole list of things that I thought were not good about the website, mainly around UX and UI. But the one thing that really annoyed me was just the branding. I mean, you’ve got a photo of it here. It was just gray. It looked like Craigslist. I thought, “The problem with the site up front here is it just doesn’t look like a website that someone in a Western world economy would use.” Right? It just didn’t have any color to it. It didn’t have any branding to it, and so forth. So I found a web designer friend of mine, who actually was in New York at the time, Joel Wasserman. I said to him, “Look, can you just design like a skin for this? And I’ll do the programming and kind of load it in. And you do the design.”
I remember at the time, when I bought the business, it had three Ukrainian developer/customer support people, and one customer support person in the Philippines actually. But I remember the Ukrainian developers were telling me, they saw the skin and they said, “Don’t do this. We like the black and white, gray, sort of colors. All these colors hurt my eyes,” I remember them saying. And one of the very first things I did, which I think is good advice for any entrepreneur, is I just built some instrumentation for, like, a dashboard, for how the site works. And this is hourly, this is daily, this is weekly, this is monthly. And I looked at all the key stats as interesting, so how many projects being posted, how many people had signed up.
Then, today, we have 40,000 graphs in real time. Our whole data science infrastructure team, they’ve really taken it to the next level. But at the time, I just kind of had little stats up there. And then this is kind of before A/B testing, but I was basically just eyeballing changes on the graphs as I was trying things. And I remember these Ukrainians, like, “No, don’t change it to this color version of the website. We like it how it is now.” I imagine these guys living in a utilitarian apartment block in some Soviet-era building. And we pushed it live, and the revenue doubled instantly, permanently doubled.
Andrew: Because when somebody came to the site and it didn’t look like a message board, they understood what it was about.
Matt: Yeah, it just looked like something that consumers might want to use.
Andrew: But here’s the difference between biditout.com and getafreelancer.com. BiditOut, at the top, had two clear images. One said, “I’m looking for workers.” And the other is, “I’m looking for work.” Like, very clear, you come to the site and you know what it is. It also looked more like . . . I like how everything was categorized by types of project. I was so sure that what they used was vBulletin to create getafreelancer.com, but they didn’t. It was custom code.
Matt: Completely custom.
Andrew: That’s what I saw. I went to Archive to look it up.
Matt: Completely custom, and written in Ukrainian.
Andrew: Literally. Wow. Okay, so that was a big change. What’s another big change?
Matt: Well, I got rid of a bunch of things. I got rid of the $5 posting fee, because that requires them to enter a credit card before you actually got a chance to experience the site.
Andrew: So it’s free to post.
Matt: Just made it free to post. And then there were some other things that were stupid, like you didn’t have to pay the $5 if you picked a new user. So if you picked a new freelancer that had never done a job before, you got your . . . How did it work again? I think the commission was cheaper, or something or other. It was basically an incentive for you to hire a new freelancer. The problem is that new freelancers are the least experienced. Right?
Andrew: So you don’t get your . . .
Matt: That’s right. Trial projects. All your brand new employers are actually picking brand new freelancers and getting bad experiences. And so I got rid of that as well. So there’s a bunch of things like that, lots of little UI fixes and so forth.
Andrew: It was all you just doing that, on your own.
Andrew: Freelancers for how many years?
Matt: So I granny flat out at the back of my house, and I was by myself. And I remember, actually, in the first week or so, I was kind of walking on the street to get lunch, and I bumped into a friend of mine who used to help me actually years ago with [underage 00:50:14] dance parties. And he’d come back from traveling in Europe. I said, “This is what I’m doing.” He says, “Oh, great. Can I help you out?” I go, “What do you want?” He goes, “Oh, just give me $20 an hour.” So it was the two of us, and he was doing customer support for half a million people, and I was doing the programming with the cats. And every time I would fix something, the revenue went up a little bit. I’ve asked the users what they hated most about the site, what they wanted most to improve. I would fix that, and the revenue went up a little bit. And I keep watching the graphs.
Andrew: You just keep asking them.
Matt: Email them.
Andrew: You send email to individual people saying, “Thanks for being on.” Was it an automated system, or . . . ?
Matt: No, man.
Andrew: Just you sending a message, “Thanks for being on my site.”
Andrew: You know what? I remember I went back to look at how things changed. GetAFreelancer also had an affiliate program.
Matt: Yes, it did. Yeah.
Andrew: You were paying people 50% commissions for sending people over. Was that you or pre-you?
Matt: Well, actually, the affiliate program was completely broken. It was paying out 100% of all revenue. And, oh, God, what were the problems? I remember now. It was paying out 100% of revenue, and it was all the wrong way around. So what was happening was we levied the 10% project fee on freelancers, and we have a 3% fee for employers. And what was happening was someone who referred a freelancer, who would do a job for someone else, the freelancer’s paying the 10% fee. And the affiliate who nominated that freelancer was getting paid the full amount, rather than the person who signed up the employer. So it was paying out the wrong party. It should be paying out the employer who actually got the project posted in the first place, rather than the freelancer who did the job.
Andrew: Actually, I was reading through the description. I thought it said even that you get paid on both sides. So I could refer a freelancer, you could refer a company hiring a freelancer, and we would both get paid.
Matt: No, no. It didn’t work like that. You only got paid out on the person you referred. But the problem is . . .
Andrew: It just wasn’t structured properly.
Matt: It wasn’t structured properly. It was paying out on the wrong incentive. So, and the other thing is it had a gold membership, which was, at the time, I think you paid $9 a month. The commission was zero. Right? So 72% of the money going to the site, had no commission on it. So I was like, “Okay, I’ll change that.”
Andrew: And then, from the beginning, you were thinking rollup?
Matt: So what I realized was that . . . Well, the light bulb that went off in my head was, “Gee, I was going to start a business from scratch and raise $4 million to start from zero. Or, for $2-and-a-half million, I can buy a website and take our competitor.” And, obviously, I had all the financials for all the businesses I had contacted when I bought GetAFreelancer. So I said to myself, “I’ve just got to buy everything, right, and merge it all in.” And where this really got a big boost was, actually, I flew to the States, actually, and I met with Gary Swart, who was the CEO of oDesk at the time.
And I said, “Hi, Gary, how are you going? I’m the new guy on the block. I’m from Australia. I’ve got this company, GetAFreelancer.” He goes, “Oh, yeah, I saw you bought that.” He goes, “Well, we’ll be the first company that goes public. And when we do, we’ll raise $1 billion and we’ll acquire you.” So I get a pat on the head, and a pat on the back. And I walked out, and I thought, “Fuck you.” I’m friends with Gary now. But I said, “Fuck you. I’ll see if I can do this first.”
So as soon as I had a bit of money, I bought number eight, I bought number seven, I bought number six, then I bought number five. I actually ended up buying 15 competitors of Freelancer. And I did that in a way that no one saw it coming. I was lucky with the timing, and I was lucky on the price. I paid an average of 1.5 times revenue, 1.54 times revenue, so I did it super cheap. Everything I’ve bought, I’ve managed to buy it at a fairly good price, just through patience. And it’s actually funny, because the only one that went competitive, actually, was vWorker, RentACoder, which is an American business that Ian Ippolito stated. I think you interviewed him.
Andrew: Yeah, I did.
Matt: I hear he’s a great guy.
Andrew: He was big in the tech community.
Matt: He was. And what was funny is after acquired that, Gary Swart emailed me and said, “Who’s next?” And I replied, and said, “You’re next, Gary.” I said, “You’re next, Gary.” And he replied, “Your money is as good as anyone’s.”
Andrew: This was all with cash?
Matt: Everything was cash.
Andrew: No shares in the business.
Matt: No shares, always cash.
Matt: Every time, cash. And I actually had a chance to buy Fiverr at one point. I think it was about $20 million, but I didn’t have the money. I thought it was a bit too expensive. And then just before we went public, I called Gary up and said, “There’s only three of us left, really, in this space. It’s oDesk, Elance, and Freelancer, so us three.” And I said, “I won’t tell you what’s happening, but there’s a business consolidation of the space. We’re the leader in the mass market. You’re leader in the premium market. Elance is stuck in the middle, and we’re eating them from below, and you’re taking the high-end jobs away from them.” And I said, “You should probably have a chat with your board about business consolidation, because it makes more sense for the two of us to combine at some point, rather than anyone with Elance.”
And he went off, and he had his chat with his board. The board said, “Well, Matt’s having the same conversation with Elance he’s having with you. So if you don’t hurry up and buy something, this whole rollup of yours, Gary, is not going to work.” And that spawned the merger of Elance and oDesk into Upwork. They decided to do that rather than engage with me. And, you know, what actually happened was I’d taken the company public, and my market capitalization was $1.1 billion U.S. I had the capacity to do so with equity, or potentially do a fundraising on the public markets and do it. So they merged and they became Upwork.
Andrew: I remember, I interviewed him just before that happened.
Matt: Yeah, yeah. So I almost got that one, almost got it from him.
Andrew: Two people got away. Fiverr, what do you think of Fiverr today?
Matt: They basically do extremely well.
Matt: I think they’re probably one of the best operators in the space.
Andrew: Why? What do you think they’re doing so well?
Matt: They’re just good at execution. I think it’s a good site where people can actually build their brand on the site. I think they’ve done a very good job of doing that. You know, there’s some problems, I think, with the way the business model works. And we’ve tried doing sort of the click-to-buy sort of thing, and it’s been a bit problematic. But I think they’re good operators.
Andrew: What’s the problem with the click-to-buy?
Matt: Well, let’s say I want to get a logo done. Right? I’ve got to browse through all these different designers and all these portfolios to figure out what to do. Well, with us, you post a project, post a contest. You could pay $10. I’ll tell you how much a victim of my own success this contest side of our site is. The other day, my friend went to get some business cards. We’re down at the Grand Prix, and he met a race car driver, and he handed a business card saying, “Race Car Driver/Inventor,” or something or other.
So my friend goes, “I want a business card like this, that says, ‘Philosopher/Entrepreneur.'” So I said, “No problem.” So I got my phone out, and I just went to the Freelancer app, and I posted a job, a contest, sorry, for $10. I had 400 designs for business cards, for $10. And, “I like this. I don’t like this. Change this. Change that,” whatever, like that. It’s unbelievable. And the quality is exceptional for $10. I mean, nowhere else in the world is as liquid as we are for jobs.
Eighty-two percent of jobs get bid on in 60 seconds. And you post a contest for $10, you’ll get hundreds, and hundreds, and hundreds of people submitting entries. So I just think that that’s a superior way of actually getting any visual work done, as opposed to going and browsing through hundreds and hundreds of different people’s portfolios and so forth, and trying to click through and figure out, “Is this person right for me, or that person right for me?”
Andrew: You know what? I get why you bought Escrow. I also interviewed the founder of Escrow, now that I think about it. I knew there was a connection there. That one makes sense. The part that I don’t fully . . . Actually, the other parts of your business I don’t fully understand. Why Warrior Forum?
Matt: Yeah, so we bought that, I think, 2012, was it? You know, at the time, there were seven categories of work that I thought if you win in, you win everything. Right? So web design, we’re the leader in the world for web design that we’ve done. Out of 15 million projects, we’ve done 5 or 6 million web design projects. Nowhere else is as liquid as freelancer.com for getting websites built. And then graphic design, we’re a major player, but it’s quietly fragmented. Copywriting, data entry, mobile phone app development. We’re the number one for mobile phone app development. There’s nowhere else in the world as liquid as we are for mobile phone app development. And internet marketing.
Andrew: Meaning what?
Matt: Like SEO, your email marketing.
Andrew: Oh, got it. So finding someone to manage my email software.
Andrew: Okay, all right. So you were thinking.
Matt: Link building, all that sort of stuff. So then I thought, “Okay,” an opportunity came up for Warrior Forum. And, you know, so I thought, “Maybe that’s a way we can kind of get all the internet marketers.” There’s 1.3 million internet marketers. They’ve got forums. If anything happened in internet marketing, it’s on Warrior Forum, and all the people are there, and all the fields there. And you can go launch your product, and you can use those, you know, million internet marketers to go sell your product for you. So that’s why we bought that.
Andrew: Yeah. I don’t see your name on there at all. I had no idea this happened until I met someone earlier today.
Andrew: And what was the other business, the freight business?
Andrew: Why Freightlancer?
Matt: So the mission of Freelancer is to power the world’s entrepreneurs and commerce. Think of building Amazon on a shoestring budget. So we’ve got the global marketplace for services being freelancer.com, where you can get things built. You’ve got escrow.com, where you can sell things and get them paid for. And we deal with the sale of the most complex and expensive assets in the world. So we sell boats, cars, airplanes, jewelry, gemstones, diamonds. You know, there’s a space station potentially going up in 2021 that’s doing tickets for $10 million a seat. We’re taking deposits for that now. Shipping containers of stuff.
Andrew: On Escrow, because you hold onto the money until the deal goes through. Okay.
Matt: That’s right. That’s right. If you buy or sell anything online, you should only do it through escrow.com, because we’re the most secure payment system in the world from a counterparty risk perspective, because the funds sit in trusts, which is a legal construct. So if you want to buy, you know, some diamonds from overseas, well, how are you going to do it? Right? Do you send the money first? Do you wait until they send the diamonds? What happens if they’re fake? How’s that work? Instead, they send them to us. We put them in escrow, or in trust. Then the goods ship, then you can inspect them, and then we can release the funds when you’re happy. So it’s a phenomenal way to actually buy and sell things that are expensive, or complicated, or valuable. So we have, you know, labor in freelancer.com. We have payments with escrow.com. And we have freight, because many of these things need to ship physically. Right?
Andrew: The things that are being bought and sold using escrow.com.
Matt: Yeah, for example, for example. Plus, we can now layer on 33 million freelancers to help you do metro point-to-point delivery. So the main market at the moment for Freightlancer is sort of mining, construction, industrial. So we ship things like 1,600-ton cranes, bulldozers, you know, mining equipment, and construction equipment, and so forth. But we’ve now layered on top of that 33 million freelancers. I mean, Uber’s only got 2 million drivers, 2 million. We’ve got 33 million freelancers. Probably most of them will drive. Right? So we have a phenomenal network for getting things point to point. So that’s kind of what we’re doing now. Freightlancer has actually got an enterprise version of Freelancer. So we’re actually even loading the whole website now on top of the Freelancer API, and it’ll be driven through the marketplace.
Andrew: Ah, and you’re thinking some of the freelancers are actually going to be doing driving freight?
Matt: Yeah, of course.
Andrew: Because they’re just looking to make money anyway.
Matt: Correct. Yeah.
Andrew: You know what? It’s interesting, actually. I’m going to interview the founder of Airtasker. In preparation for having him here, I talked to someone who worked in a similar business. And he said, “Well, the big question is, ‘Why would somebody do that instead of drive an Uber or something?'” And you’re seeing the same thing in your space, that it’s just another freelancing gig.
Andrew: All right. I’m wondering why you’re doing this interview with me. I talked to Rob Bishop. I don’t know if you know him. He’s the guy who runs [Joycar 01:01:48]. You know him? You know his business?
Matt: Oh, I’ve heard of the business. Yeah.
Andrew: I asked him. Actually, he said, “Andrew, you should know. All the people who are working with you understand, ‘What’s their one thing? Why are they doing this? Why are they buying from you? Why are they doing interviews?’, and so on.” So I want to know from you. Why did you say yes to doing an interview?
Matt: Well, you asked.
Andrew: That was it.
Andrew: What’s in it for you, for doing this?
Matt: I don’t know.
Andrew: Really? You just said yes?
Matt: Maybe someone will use one of my sites.
Andrew: That’s it?
Andrew: All right. Because, you know what? That’s the way I pitched it to you. I said, “All the people in my audience, all entrepreneurs, they should be using you.” All right, another random question.
Andrew: Why cats? You mentioned a cat here in this interview. I read old articles with a reference to cats. What is with cats?
Matt: It’s a joke. I used to have some cats.
Andrew: But no more.
Matt: No, my girlfriend stole two of them.
Andrew: That’s it?
Andrew: All right. Also, here’s another thing. Your girlfriends are staying in your life. They seem to, like, do interviews about you. They’re not upset at you. What is this?
Matt: That interview was years ago, the one you’re referring to, I think.
Andrew: The Sydney Morning Herald.
Andrew: That’s it.
Matt: That interview’s from like two-thousand-and-what, ’11, ’12?
Andrew: Two-thousand-twelve. Great interview, though. In depth, a lot of stuff. Still own a Hummer?
Andrew: You do? What do you do for fun?
Matt: I don’t get much spare time. I occasionally write things. I’ve written a few essays that have got quite popular on the Australian economy, or politics, what have you.
Andrew: That’s your fun?
Andrew: You’re not going hunting or anything, or . . . ?
Matt: No, nothing.
Andrew: Australians don’t go hunting. I don’t go hunting either.
Matt: No hunting.
Andrew: I held a gun once. I didn’t like it. That’s it? Just work, all day?
Matt: Well, it’s a 24-hour, 7-day business, right? And occasionally, on the weekend, socialize or whatever. But yeah, basically work.
Andrew: You looking forward to retiring one day and maybe just do nothing for a bit, go fishing village?
Matt: No, that would be my idea of Hell. I had a good think about it when I had a taker offer. You know, every two days the price was going up by $100 million. And at one point, Simon said, “What do you want to do? Do you want to get a banker and maybe try and auction it off?” And I have this friend of mine who he’s the most frustrating person, because he hasn’t had a job for about a decade. He’s got a job now, but he didn’t have a job for about a decade. And he used to ring me up on a Tuesday morning, and I’d be walking to a meeting or what have you.
He would say, “What are you doing?” I said, “I’m just walking to a meeting.” He says, “Well, it’s Tennis Tuesday. I’ve got two girls in the car. I’ve got some tennis rackets in the back. How about you come play mixed doubles?” I said, “It’s 11:30 on a Tuesday morning. I can’t play tennis now.” Anyway, Thursday would come along and I’d get a phone call, “What are you doing?” I was like, “I’m at work.” It’s like, “It’s Tennis Thursday. Why don’t you come play tennis?” You know, because he obviously doesn’t have a job. He’s living in his mansion down at Point Piper, whatever. He would just ring up his friends constantly, saying, “Hey, come on. Let’s do something. Let’s do something,” because he was bored all day. And I thought, “I would get really, really bored really, really quickly.”
Andrew: You couldn’t do Tennis Tuesday and Tennis Thursday? You’d just do tennis once, and that’s it.
Matt: Yeah, if that.
Andrew: All right. Airtasker is going to be here later today. What do you think of their business? In-person services.
Matt: Yeah, I actually was negotiating to buy them [inaudible 01:04:57] as well.
Andrew: Did I say Eric? I mean Tim, Tim Fung. Sorry.
Matt: Yeah. So, yeah, a long time ago, when I was doing like $200K in revenue, he wanted, I think, $30 million for it. And I said, “Too expensive.” Look, they’ve taken a certain model. I think there’s natural problems with their particular model. I mean, they’re in Australia and they’re trying to launch in London. They’re trying to go city, by city, by city. They’re a local jobs sort of marketplace. The problem with that is that there’s no global liquidity with local jobs. So, just say we’re going to start a business like this from day one. And this is a business like TaskRabbit, for example. I looked at buying TaskRabbit. I had the financials, and I turned it down.
But let’s get going. What do you want to do? Okay, we could do plumbing. We could do pest control. We could do carpentry, dog walking. Let’s do dog walking. Okay, we think maybe the jobs are good, there’s liquidity there. So you’re marketing in, say, San Francisco for dogs, and you’re doing marketing for dog walkers, and you’re hoping that you build a bit of liquidity. You do that. You’ve got some dogs, some dog walkers. They’re walking each other. Then you’re like, “Okay, what do I do next? Do I go to plumbing in San Francisco, and hope that there’s some plumbers that have some dogs? Maybe there’s some adjacency there,” whatever. Or maybe dogs like plumbing. I don’t know. Or then you go, “Okay, I’ve got to go to Los Angeles.” Right? But all the dog walkers in San Francisco don’t help the dogs in Los Angeles, and vice versa. So you’ve got all these little pockets of liquidity everywhere, but no global liquidity.
On freelancer.com, someone can sign up and work for anyone, anywhere in the world, that’s online. Likewise, you can hire someone anywhere in the world. So there’s been lots of businesses that tried doing this, and you’ve literally got to boil the ocean to make it work. So TaskRabbit sucked down $60 million bucks of venture capital, and it’s only got $4 million bucks per city. I think they only ended up with like 35,000 freelancers when I looked at them, and that was it. Right? Because you just have all these little pockets of liquidity. The average job size is a lot smaller. So the average job size for TaskRabbit, at least, was $80.
Andrew: And there’s no repeat business, usually, from what I under?
Matt: Well, it’s hard, because you’ve got disintermediation, because someone’s physically meeting someone in person, and then they kind of want to be paid cash. So the average job size is $80 instead of $205, because it basically correlates to minimum wage in the U.S. times by about 8 hours of work. So you hire someone to be a party staffer. You know, the number one job on TaskRabbit was, “Collect my laundry,” and the number two job was, “Wait for the cable guy.”
Andrew: I thought it was, “Assemble my IKEA furniture.” No.
Matt: No. No, at least at the time I looked at them. So the issue is that it’s small jobs. There’s a lot of disintermediation, because the person’s actually met the person physically. And the next time, they’re not going to go to the marketplace.
Andrew: Just go directly to the person.
Matt: You go directly call them up and pay them, cash in hand sort of thing. Local jobs workers want to be paid cash in hand. Right? Because they don’t have to pay sales taxes, or what have you, and they just want to put it in their pocket. And there’s also a lot of pressure to pay someone in cash when they’re there, because you don’t want to be fiddling around the app. The guy’s like, “Come on, pay me. I want to go,” kind of, whatever. And it’s a kind of stressful situation sometimes, when you’ve got this big, you know, truck driver or what have you kind of wanting to be paid. So it’s problematic. It’ll be interesting to see where they go.
Andrew: Do you think they’re doing well? Is it possible that they’re doing $100 million in transactions a year now? That’s what the Financial Review said.
Matt: Maybe. They’re private, so you don’t see the numbers. I know they raised a whole bunch of money from . . .
Andrew: Sixty-seven million dollars, again, Financial Review, June 2018.
Matt: Yeah, they got it from Channel Seven, a lot of it, in advertising credit. And actually, I think I told Tim when he bought it, “I would have given twice the valuation if you’ll take [Freelancer 01:08:18] advertising credit.”
Andrew: So it’s not even cash. It’s advertising and . . .
Matt: I don’t think all of it was cash. Some of it, I think, was cash. So I think the rest of it was in advertising credit, I think.
Andrew: I’ll ask him about that.
Matt: I was spending about $1 million a month on My Kitchen Rules, which is like a reality TV show for cooking. And, obviously, while you’re pumping that sort of money into the TV, you get a return until the money runs out. So you just hope at the end of the day that you can get to the pot of gold at the end of the rainbow by making sure that every dollar you spend might make over a dollar back. It can be kind of tough to do that with that sort of approach. But we’ll see, see where they go.
Andrew: I like your analysis of it. All right. What’s next for you? Who are you buying? Did you buy my company yet? We’re sitting here, and something’s happening. Just more acquisitions?
Matt: I bought 23 of them. I think 15 or so were direct competitors of Freelancer.
Andrew: I’m going on livestock.com right now to see what you’re . . .
Matt: Yeah, it’s pretty small.
Andrew: You’re buying this personally. Why didn’t you do this as part of Freelancer?
Matt: Oh, because all my engineers are busy. I didn’t want to distract them. I was a bit too embarrassed to tell them I bought it.
Andrew: You’re just running it? You’ve got a guy who does this?
Matt: Yeah, I’ve got this phenomenal service, actually, on Freelancer now, which is called Technical Copilot, which is like a project manager. And they act like a technical co-founder for you.
Andrew: I had no idea. Really?
Matt: Yeah, it’s incredible. So it’s literally just gone live in the last number of months.
Andrew: Is this a freelancer who does this, or your company does it?
Matt: No, our staff. So what they do is they will talk to you, they’ll figure out your dreams and aspirations, they’ll write technical specs, and they’ll build a virtual office for you, and manage the whole project. And so I’ve just got Technical Copilot kind of building this for me. And they’re going, finding staff. They’re getting people to manage the listings, make sure there’s no spam on the site, finding developers, what have you. And it just acts like a technical co-founder.
Andrew: Look at this. I can buy a bull in Texas, Champions Valley. Right on your website, there’s a picture of the bull with the award that they won. Oh, I just made the thing go away. Come on. It’s the iPad. I love it, but sometimes things just go away. You saw it go away. I had it on the screen.
Matt: Yeah, yeah.
Andrew: Wow, congratulations. All right. Thanks so much for being here.
Matt: Thank you for having me.
Andrew: No cats now?
Matt: No cats.
Andrew: No plans on getting cats, because a girlfriend?
Matt: No cats.
Andrew: All right. You’d rather have the girlfriend than the cat. It’s freelancer.com, or warriorforum.com, or livestock.com. There’s so many other websites. I’m glad that I asked you. Thanks for being here. I want to thank the two sponsors who made this interview happen. The first, if you decide to create your own marketplace, bring it to hostgator.com/mixergy. And if you want email marketing done right, go to activecampaign.com/mixergy. So glad that you were able to come here. We’ll get you [when I come 01:10:53] back.
Matt: Great. Thank you.
Andrew: You bet.