Andrew: Three messages before we get started.
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Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and the place you come to listen to successful founders tell you their stories, teach you what they learned along the way so that you can do what today’s guest is doing. Come back here and share your story with others after you build your successful business.
A question for this interview is: whose app got rejected by Apple and built a multimillion dollar app business anyway. Patrick Hankinson is the co-founder of Tether, an application that allows you to have a full internet connection on your laptop anywhere using your smart phone’s data plan. Awesome idea.
When I saw that Apple rejected his app after letting the app into the store for just a few hours, I sent him a note and I said, “Patrick, would you be willing to come on here and talk about that experience and talk about how you built your business.’ He said, ‘No.’, and then he said, ‘No.’ when I asked him again. And then he finally said, ‘Andrew it’s time. We can do this interview.’ I appreciate you coming here, Patrick and doing it.
Patrick: Thanks for having me.
Andrew: We’ll talk about Apple in a moment. First I want people to hear the whole story. Apple is just that little piece of a much bigger story that I think the rest of the tech industry doesn’t know. My goal is to learn that story and see how you built up this business. It wasn’t always like this. Can you tell the audience, before we get into this huge success story, what was it like before when you were pumping gas?
Patrick: My dad was an entrepreneur. My grandfather was an entrepreneur. His father was an entrepreneur. So, when I was 12, I really wanted to get out there and start making some money, so I started working at my dad’s gas station pumping gas. I can remember this one point where and employee came in late, and my dad had to ask him to start coming in on time. They got into an argument. And I remember thinking to myself that I don’t want to be the guy who shows up to a job with the boss that tells me what to do. I want to be the boss. That’s when I as 12 years old. I guess I got bitten by the bug early on.
Andrew: Then it eventually worked out. There was something that you wanted for about ten years that you got. Can you tell the audience about it? Then we’ll figure out how you earned it.
Patrick: Sure. When I was ten years old, I remember I used to have a little toy Porsche. When I grew up I always wanted a Porsche 911. Last year I was finally fortunate enough to finally get that.
Andrew: Congratulations.
Patrick: Thanks. I still get a smile every time I drive it.
Andrew: Where did you take it for its inaugural drive?
Patrick: I took it down the highway and got it up to about 100 kilometers an hour in a couple of minutes and that felt pretty good.
Andrew: Tether is the mobile app that I use on my smart phone to connect it to my computer. Then I have internet access anywhere as long as my smart phone has internet access and has Tether, I get internet access on my computer. True?
Patrick: Exactly. That’s exactly what we were building.
Andrew: How much revenue are you guys doing this year?
Patrick: This year, we’re still on track to do over $1,000,000 in profit. Our revenue has declined a little bit, I don’t want to give this impression that our sales keep going up and up and up. Right now, we’re facing a huge shift in our industry where the technology that we’ve built has started to be embedded on devices like Androids and Blackberrys, so we’ve had to look at other opportunities and try to scale that up.
Andrew: I see. You and I talked before the interview about how you’re not going to reveal your sales numbers for Apple. Right?
Patrick: Correct.
Andrew: Usually, I would ask you that in the interview. I would say, ‘What are your sales figures for Apple for the 20 or so hours that you are in the app store?’ I’d give you an opportunity to say, ‘no’ in front of the audience, but sometimes even when I agree with the interviewee that he’s not going to give his sales numbers. If I ask him that question, fully knowing that he’s supposed to say, ‘Andrew, I don’t feel comfortable. That’s what we agreed to before’, they’ll let it rip. But in your case because it’s such a difficult delicate situation, I want to be extra sure that you don’t accidentally say, so I’m telling the audience that you agreed not to say it. I’m asking instead can you say why you can’t reveal the sales figures.
Patrick: At this stage, we don’t feel comfortable. We don’t want to upset anybody or put any pressure on Apple or any of the carriers. We’re still trying to work with Apple instead of against them.
Andrew: How many devices are you on right now?
Patrick: We’re installed about 500,000 devices.
Andrew: Wow. 500,000 devices are walking around. Tether, people are connecting it. Connecting their smart phones to their computers and getting internet access because of Tether. Let’s go back to what you were doing just before this idea came to you. What were you up to?
Patrick: I had dropped out of university. It was not for me. I was invited to Ottawa to work at the startup called 2Peer. It was basically a peer to peer social network. The reason that I took that opportunity was that I wanted to learn from another entrepreneur who has been there and done that. He owned an internet service provider in Ottawa that he sold for x million dollars. At the time that sounded really good. I wanted to learn from somebody, so I went up to Ottawa and took that job. On the side I was also working on my own stuff. I had this little program that I was selling, called yourpixelscript[SP], so I don’t know if you’ve ever heard of the million dollar home page?
Andrew: I have, but for people who don’t know the million dollar home page, can you describe it quickly for them before you explain what you did based off of that idea?
Patrick: Sure. There was this guy from the UK who started this website called the million dollar homepage. He basically had this big grid on his website where you could by a 10×10 pixel for $100. His goal was to raise a million dollars.
Andrew: He was going to sell a million of those for a buck a pop and earn a million dollars.
Patrick: Exactly. He ended up making his million dollars. He got a ton of press. I saw this opportunity where people wanted to buy their own pixel scripts and embed them in their website. I saw a charity that wanted to sell pixel scripts. It was a big fad back then. I had built the script that would allow anybody to do that. I started that when I was about 16 years old, and I was generating anywhere from $30,000 to $50,000 a year on that product alone.
Andrew: From that product. Wow. I’m curious why about why you went to 2Peer. You said that you went there for the education. Did you get that education? You’re a guy who was born with entrepreneurs around you. I feel that you’d feel that you already knew enough? What were you looking for and what did you get?
Patrick: I don’t know. I think at that time I was still thinking really small scale and I didn’t really understand what it took to build a massive business. I just wanted to be around smart people and understand different techniques and ideas and thoughts that they had.
Andrew: I get that. One of the things that I did like going to NYU and studying business there was that any time you did a business class and it talked about financials, they had you do an income statement or balance sheet, etc. It wouldn’t use numbers in the thousands. They used numbers in the millions. That wanted you to get trained right there to start thinking bigger, to start thinking about doing finances for massive companies. To start analyzing stocks of massively successful companies. Tell me how you got that at 2Peer. How did you get that vision for thinking bigger? What did they do to get you to think bigger?
Patrick: I was really hands on with the CEO. When we had ideas, I would present the ideas to him and he would tell me his whole thought process. He would tell me why he thought it was a good idea or why it was a bad idea. He would give me that road map that I could apply to my own ideas. He always made me think a lot bigger. That was definitely what I was trying to get out of it.
Andrew: And on the side, you were doing up to $50,000 a year. How could you stay working for someone else when you’re pulling in so much revenue for yourself?
Patrick: Because, I mean, I guess at that time I didn’t think it was going to be a company that would last forever, like the Pixel Script, I didn’t think that was going to last forever, so I mean, tomorrow something could have happened and it got shut off or anything like that. So I just wanted to have sort of that safety net working for somebody else. And like I said I really wanted to learn from somebody who’s been there and done that.
Andrew: And to someone who is listening to you right now who is saying, should I go get a job and learn how to be an entrepreneur who thinks bigger, what do you say to them based on your experience?
Patrick: I think it really depends where you are, which phase you are. I mean, if you have a really, really, really big idea I personally think that you should go up there and try to raise money now based on what I’ve learned. It was great learning from somebody who’s been there and done that, but, I think the only way to accelerate your learning is by starting a business and getting really involved in it and understanding metrics and understanding how to market your product and where your customers hang out and how to get them all the stuff. I mean, that in itself, nobody will ever teach you that. You have to learn that on your own.
Andrew: Where did the idea for Tether come from?
Patrick: That came from my business partner. He had bought his first Blackberry and he was at the Telestore and he basically asked, can I do this? Can I establish a connection from my Blackberry to my PC? Because I mean, you get internet on your smart phone, it should be possible. And they said, eh, don’t bother with it. It’s a pain in the ass to set up. To start it up you would have to literally go on to, well you’d have to go on Google and search “how to tether your phone.” You would have to get a certain phone number for carrier and then you would have to set up a dial up connection in windows. It was just a huge pain in the ass. And I mean, he brought that up to my brother who’s the main engineer at Tether and we said there’s got to be a simpler way. And we just started doing a little bit of research and started working on a prototype.
Andrew: And are you guys developers yourselves? Were you able to do the prototype yourself?
Patrick: Yeah, so my brother’s basically an electrical engineer so he’s got a background in software development and hardware development. So he was able to essentially build everything we needed to get started and my background is I’m a web developer turned marketer. So I still have skills in web development. But I still know there’s a lot of people up there that are a lot better then me so I let the pros handle it now.
Andrew: Did you just say it now or did you say it in the pre-interview that he was too cheap to buy Blackberry, your brother?
Patrick: Yeah, at the time we were pretty cheap and we didn’t want to buy another Blackberry for him to work on his development. So he actually ended up building his own simulator on his PC, so, just a way to get around it.
Andrew: So you just used this simulator on a PC and I guess there’s a Blackberry simulator that simulated the Black- , well, you built it using a simulator for the PC that simulated the Blackberry experience on the computer, right?
Patrick: Yeah, exactly. So it would just basically how would it handle the connections and everything.
Andrew: I see.
Patrick: Eventually once we started getting beta testers and things like that, we actually bought a Blackberry, so.
Andrew: How effective was it when you took it off the PC and put it on someone’s Blackberry?
Patrick: It was pretty crappy. It’s like a whole different experience, I mean, like when you put it on the Blackberry it’s slow, you’ve got other applications running, the connection limit is a little bit different then what we thought it was. We had a lot of issues there when we first brought it over.
Andrew: OK. How long did it take you to go from putting it on the first Blackberry to getting it to work properly on the first Blackberry?
Patrick: I’m not sure too much on that detail. My brother would know more on that, but, I think it only took him maybe an extra week to get all the bugs and problems worked out that it was actually functional and working properly.
Andrew: OK. And then how did you figure out your revenue model for it?
Patrick: At that time, we were basically, me and my business partner we got into a little argument. He wanted to go with a monthly recurring and I wanted to go with a one time fee because from my perspective I didn’t think this business was going to last, like, it’s not going to be a ten-year company or anything like that. So, I mean, if you’re charging somebody five dollars a month, you’ve got to wait ten months before you get the same value as fifty dollars, so. And we didn’t know what our share rate was going to be, so it just seemed a lot easier for us to sort of get all the money up front and go from there. And then we could use that money to scale up our business.
Andrew: And then how did you decide, how did you break the argument and decide which way to go with it?
Patrick: For that, we got into the argument and we basically said OK, we’re going to let our customers decide. We put together a survey and released that to, at the time I think we had 10,000 beta testers, and we basically said would you pay X, Y, & Z as a one time or would you pay X as a monthly recurring? We saw that the majority of the people said that they would definitely buy it at a one time fee. We saw a really small percent say that they would never pay for the monthly fee.
Andrew: I see.
Patrick: Also, we had people that basically said I’ll never pay for this. It should be free, give it to me for free.
Andrew: How big a portion was that?
Patrick: I think that was 10% or so, maybe. From my perspective I think it’s an entrepreneur’s job to figure out how to make money. Once you have revenue coming in you can use that revenue to keep scaling up your business and improving the products for your existing customers. That’s why it was really important to find out our revenue model that early on.
Andrew: But doesn’t the internet want to be free? Doesn’t data and information want to be free?
Patrick: Yeah, well that seems to be the trend but I think it’s harder to scale a business when you’re giving it away for free.
Andrew: What about advertising? Can’t you give it all away for free and then have advertising?
Patrick: You can but if you had 100,000 visitors coming to your website and you were getting $10 CPM that’s really low margins. Whereas if you had that 100,000 and you could convert 2% at $50 a pop you’re talking about much more revenue than advertising dollars.
Andrew: I remember back in the days when I had the Palm Trio and I would connect the Trio to my computer and I’d tether it and get internet access. I couldn’t believe that other people weren’t doing that. Then I realized most people didn’t even know how to get music onto their Trio let alone get the internet to work off their Trio. How did you even know that there was a market out there that could understand and get excited about the possibility of this?
Patrick: Well, at that stage when we had the idea we basically did a little bit of research to see who the competitors were or if there were any competitors. We found this one competitor who we actually ended up acquiring earlier this year. They basically had a post on Crackberry.com, and there were all these people that were basically saying I can’t get this thing to work or it doesn’t work properly on this device. It doesn’t do this, it doesn’t do that.
We basically saw that there were people there that were interested enough to leave negative comments about our competitor’s product. That’s where we kind of came in and basically said well, this is what we’re working on. Is there any interest there? Then we started getting a couple of hundred people signing up to our beta list and then we had about 2,000 people on our beta list. Then Crackberry, we ended up getting the blogs to write about us and we scaled up from 2,000 users all the way up to 10,000 beta users.
Andrew: Most people, I think most entrepreneurs who see that there’s another competitor in the marketplace and people talking about that competitor would say I can’t get in. There’s already another competitor in there. He’s already built the first version. Yeah, people are complaining but he’ll figure that out in time. He has enough of a head start on us that he could improve this product before we even launch ours.
Then they’d walk away and go start another business and miss out, of course, on the success that you’ve gotten so far by sticking around. But back then, without the foresight, without the knowledge that you were going to hit it this big, why didn’t you back out? Why didn’t you say we’ll come up with another idea?
Patrick: I think at that stage we already had a really basic prototype and we just knew it was better. We tried out our competitor’s product and you had to set up proxy settings, you had to do all these other really weird things. We knew our product was basically you take the USB cord and plug it into the side of your computer and you’re connected. To us, we just saw that there was definitely an opportunity to improve the overall product.
To also spin that around, we’ve recently had a competitor come into our space that’s building, essentially, a better product. They’ve got a nicer interface. It’s easier to set up. Now we’re pressing really hard for how do we improve our product so we don’t become our old competitor?
Andrew: I want to come back and ask you about that, especially about design. But something else that you said piqued my curiosity. When you said we’re coming up with this new version you got people to give you feedback and also to sign up to be beta testers. What was it about what you said that got them interested enough to participate in the conversation and to trust you with their email address and to ask to be beta testers? What was that magic thing that they got excited about?
Patrick: That’s a really good question. I’m not 100% sure. It might have been our personal touch. I was in the forums every day if there’s problems or questions I was always answering their forums on CrackBerry’s website. So there was basically this level of trust and at the same time we had posted screen shots of our product and a video demo of our product so then all of a sudden you have people that are like, well wow, this does look like a better product and sort of that trust was built up so I think it was easier for us to convert those into emails for the Beta list.
Andrew: What about the sign-up form at all? What made you say I’m going to collect people’s e-mail addresses at this stage?
Patrick: I think at that stage the whole e-mail capturing process was because at the time there was maybe 15 different Blackberry models, there’s 10 different carriers, there’s a whole bunch of different PC configurations that you could have as possibilities, so we essentially wanted to give out the product as a Beta format to get people to test it so we could understand how does it work with this carrier?
How does it work with this Blackberry model? How does it work with this Windows configuration? That way we just had this way that we could sort of release it in iterations to people that we wanted to get feedback on that certain carrier or that certain Windows operating system.
Andrew: And this was going to be a free Beta period?
Patrick: Yeah, it was free all the way up until we finally launched, so I think it was essentially free for two months or so.
Andrew: And you told them at the end of the Beta period you’re going to have to pay?
Patrick: Yeah.
Andrew: What about the decision about what to put into the app and what to take out? I know that’s a big challenge for entrepreneurs. You’re trying to figure out how to make the next greatest product, but at the same time keep it small enough that you can launch. Was that a big issue for you guys?
Patrick: Not really. We knew what the core functionality should be. Everything else was kind of obsolete, so we wanted the user experience to be fast and easy to use and design friendly. We wanted it to be plug and play essentially where you just plug it in and you’re good to go.
Andrew: OK. So you get people from the forum, you got about 2000 sign-ups from there. You got a few thousand more by going to bloggers. Most people who email bloggers with an app, especially one that already has a competitor in the marketplace don’t get their emails responded to. How did you get a response and get the write-ups that led to the email addresses for Beta testers?
Patrick: At that stage I’d done a ton of research to find all the bloggers in the Blackberry space and I tried to find the actual editor’s emails as much as possible and that was really effective. If you can actually email them directly instead of using a contact form I would highly suggest that.
At that stage what I was doing was I was crafting every email that was basically like we already had this huge traction in the CrackBerry forums, we have 2000 Beta users and then we kind of spun it like, if you don’t post about it somebody else is going to post about, so we wanted to give them this time constraint where they want to be the first people to post about it before all the other blogs started posting about it and it’s old news.
We kind of put this time constraint on posting about us and that actually ended up working really well. I think after I sent out the email to the first blogger within 30 minutes or so he had already posted an article. Another key thing was that we provided everything that they would need in that email. We’d basically say, here’s our URL, here’s our logo, this is how many people we already have, this is when we started, etc. It just made their lives easier to craft up that blog post.
Andrew: And then how did you get the link back to your site in a way that encouraged people to come in and joint the Beta test? I guess you just said, actually, you answer it.
Patrick: Yeah we would just basically just give them a link and say we’d basically say like if you don’t let your audience know at some point this is going to get shut off and they are going to miss the opportunity to Beta test for us.
Andrew: In the article you’d have them post the link. I see. Here’s why I’m stuttering a little bit through this interview. The pre-interview notes on your story are so freaking fantastic that I’m finding myself saying, it’s all in the freaking notes. This is just fantastic. How do I add more to this? But at the same time if I have the notes and I have you sitting right here I should be able to add more.
I should be able to make this story even better than the notes, but the notes are so freaking good it’s too much of a challenge. I’ve got to rise up to it. So you were surprised by the way when you saw the pre-interview process. What did you think of it?
Patrick: It was good. Like I was telling you, it’s great to see that you put that much effort into prescreening and just making sure that there’s some type of structure instead of just randomly having an interview, I guess. To me it’s great that you’re taking the time to allow other entrepreneurs to understand what some of these entrepreneurs are going through and some of the techniques that they’ve used.
Andrew: It’s so critical for me if I’m going to have an hour with you to get as much useful information as possible. I take these interviews really seriously. I think there are a lot of developers out there now who had podcasts. A lot of entrepreneurs who want to have podcasts and interview programs.
And when they get someone on, they just chat. It drives me nuts as a listener to hear one of my favorite developers, instead of talking about how he came up with the idea, how he launched, how he got customers, how he got through the evolutionary cycle, the evolutionary process of the app. To hear them talk about the apple that he’s going to eat on mic because he’s just so crazy and podcasting is such an intimate do what ever you want medium. So look at me, I’m eating an apple, it’s all relaxed here.
It shouldn’t be relaxed. I want you to friggin’ take it seriously. Relax later in the day when you’re sitting on your couch with your feet up on the table. But you have to understand when people are coming to you they’re coming to you with a purpose. They want to learn from you.
I can go on for hours about this. Let the entertainment come from the experts, from the people who are really good at entertaining. Guys who are already on television like Jay Leno and, I can’t even think of who else. The Kardashians. Let them be entertainers. Let us allow people to build new things, to change our lives and change the rest of the world.
All right, tell me about the launch, going back to, going off my rant and going back into the mission of this interview. What was that launch like?
Patrick: The launch was definitely a rollercoaster. The day before we didn’t have a website, like we had our basic landing page but we didn’t have the website built. We didn’t have inter-processing set up. I don’t even think we had the registration code system set up yet or anything like that. So that night I went over to my brother’s house and cracked open a bottle of rum and got to it. And we ended up building the entire website that night with (?) which is great looking back at it. But I didn’t get any sleep that day and the next morning we went into the office and…
Andrew: Actually don’t tell us what happened the next morning when you went into the office. Let me spend a little bit of time on that first night there. How did you build a payment process so quickly?
Patrick: Well we just ended up using PayPal’s existing system and that just made our lives a lot easier. At that time (inaudible) processing to them and when the order would come through we’d do all of the order handling, so, we weren’t really that (inaudible) complicated and at this stage we already had source coder doing that other places as well.
Andrew: So the website. We’re used to phones having app stores right now. Were you getting your customers on your site?
Patrick: Nope. Like before we did any of this launching or anything like that, we always wanted to make sure that there was an audience somewhere so that we could basically get to our product and (inaudible) Crackberry, Blackberry cool, all these different places. And we found that we were generating about 70% of our sales directly from our website instead of like Blackberry’s App World or Android Marketplace.
And that still exists today where we have all these advertising campaigns set up all over the web, like Media Boss, that are driving the traffic back to our website and we’re converting those very well. Which I think a lot of developers they thing, well I’ll build this app and I’ll put it on the apple iTunes and I’ll make billions of dollars and just retire.
Andrew: So, were you in the . . . I lost the connection for a moment there. Were you saying that you were in the app store in addition to selling on your site when you launched?
Patrick: We weren’t originally on the Blackberry App World. We were just selling it off our website when we first launched.
Andrew: OK. Why weren’t you in App World?
Patrick: I think at that time there was no such thing as App World. I think they only came out a few months after. But there were all these other channels like Handdango or Handmark or MobyHand that we were using. So there are all these other players that were filling that void at the time.
Andrew: OK, so you stay up all night, you build the payment process, then what happens?
Patrick: So the next day we launched and we got into the office and we sat around and we didn’t hear any orders come in for about three hours, so we thought something was broken or we thought the price was too high. There were a lot of things running through our head. And then all of a sudden we had the first e-mail come in that an order had gone through and then it was like somebody opened up the flood gates or something and we just saw all these orders coming in and within the next 3 days we had sold over $100,000 worth of our product. I ended up making more in those 3 days than I made working an entire year’s salary the year before.
Andrew: $100,000 in sales within 3 days.
Patrick: Correct.
Andrew: How did these people find out about you?
Patrick: Well, these were all the Beta testers that we had on our list and we had already given them a taste of what our product was like and a lot of them were already using it in their lives. We had truck drivers using it, we had real estate agencies using it. We just had a lot of people that were already sort of addicted to using it, so as soon as we told them that we were selling the product it was a pretty easy sell.
Andrew: Did the Beta version get cancelled that day so that people had to buy?
Patrick: Yeah, we cancelled it that same day and we got a few nasty e-mails. I can remember one real estate agent, she was really upset because she was in the middle of a real estate deal and then she found out she couldn’t connect over Tether. I guess something ended up happening that she lost the deal and she was going to sue us for $5000 or something crazy like that, but we never heard back from her. We gave her a free copy I’m pretty sure.
Then at the same time we have other great testimonials like we have this truck driver that goes up and down the east coast and every day he would just call his wife and kids and that’s how they stay connected. Now that he could connect his Blackberry to his computer he could do Skype calls and he could do all of these other things, so there’s some really cool stories in there.
Andrew: When you got that call from the real estate lady why didn’t you second-guess yourself and say hey, you know what, maybe we should keep the free Beta going for another week and let people transition on their own time. Why weren’t you spooked?
Patrick: Because we knew we had to be aggressive about it.
Andrew: Why did you have to be aggressive about it?
Patrick: I think sometimes you do need to be aggressive. You don’t want two or three users dictating how your whole company is going to be run or how certain processes should be executed and things like that. We felt bad for her obviously, but at the same time we gave her fair warning that this was happening.
Andrew: When you launched I know that you were getting sales, but you were also getting a lot of feedback on the product. What did you learn that you didn’t know before the launch? What did you learn about what the product should’ve looked like or about what features should’ve been in there? Did you learn anything?
Patrick: Well, just to touch on that, when we were doing our Beta testing at one point we realized that Blackberry had a connection limit so you could only have like 5 connections opened on your phone at one time so if you were browsing a website and 10 images loaded, only 5 of those images were load and then the 6th image would load after the first image was loaded and it basically would spiral downhill.
It ended up being a huge problem where Blackberry users were complaining that it’s taking so long to load the website, so we almost killed the product right then and there because we basically said it’s going to be exactly like a competitor at the time and we wanted to definitely build a better product.
My brother, being the technical genius that he is, he ended up building a server that would essentially handle all the connections, so you would only have one connection open on the Blackberry and the server itself would handle all of these connections.
Andrew: Your server was going to handle all the connections from all of your customers?
Patrick: Exactly.
Andrew: Forever. Because they were paying your once, but you were still going to do this for them forever?
Patrick: Yeah. It sounds like it was a lot of overhead for us, we were selling our product for $60 and our server costs $50 a month, so we only needed one customer a month to pay for that server.
Andrew: $60 bucks for the app versus $50 for the server.
Patrick: Yeah. At that point too we knew at some point Blackberry would be able to handle more data connections and things like that, which is what’s happening now and now we can basically get rid of that whole infrastructure because the technology has changed so much in 3 years. But just getting back to my point was the reason that we almost killed the product at that stage was because all of a sudden you have everybody’s data going through your proxy server.
So if you were logging onto Facebook, your Facebook data is being submitted to our servers and we’re doing all the connections. I mean there are huge privacy concerns there, but it’s really secure because we were running it over Blackberry, which is a really secure device. We just had this perception in our mind that people were just not going to use a product just because of that reason, but then when we launched nobody even noticed.
Nobody cared. Nobody said anything. We had one or two people that noticed, but they would still continue to use the product, they would just be more cautious about what they were doing.
Andrew: Did you tell them? How would they know?
Patrick: It was in our terms of service and our privacy policy as well.
Andrew: What happened to their server the day that you launched?
Patrick: I was at home and was trying to get a few hours of sleep. My brother called me up and said that our server was down. I remember feeling sick to my stomach. It was a pretty crappy feeling, because we thought we might have lost all our sales data, so I had to call our company and find out what was wrong with the server. They said that they were looking into it. I kept calling back. We were down for four hours. We figured we lost $40,000 worth of sales. What it ended up being was a network card had failed on the server, so they had to replace it and then we were back up. But, it was a pretty crappy feeling for a little bit.
Andrew: So, the server that was handling all your customer’s orders and the one that was serving up the pages on their computers off their Blackberries, it was one server doing both.
Patrick: We had the web server and the linker data server. The data server handles all the Blackberries, and the web server would do all the order processing in the website.
Andrew: So it was only the order processing that went down. What about all these bloggers who finally got to write articles about you? They’re sending you traffic and potential customers and suddenly your sites not working. Were they pissed?
Patrick: They’re not pissed. We actually were using that to our advantage. We went back to all the bloggers and said, you sent us so much traffic that our website crashed. They ended up adding a little thing at the bottom of the blog saying, ‘Their website might be down because of all the traffic. Check back soon.’ Just another way to get more press because of the situation.
Andrew: It wasn’t because of the traffic. It was a hardware malfunction, but you spin it and make it work. That’s what entrepreneurship is about sometimes, isn’t it. So, what was the next platform you launched on after Blackberry?
Patrick: At this stage we were still called TetherBerry. Then, around December, Android was taking off like crazy, so we ended working on an Android version. That’s when we rebranded from TetherBerry to Tether.com.
At that stage, we were trying to do the same thing that we did with the Blackberry version, where we would have a beta of the Android version. We’d get a whole bunch of people signed up, then we’d wait a month or so and then release it. A big problem we had with that was that we waited too long. Another competitor came out before we had a chance to launch our product. It ended up backfiring on us that we waited so long to launch the product.
We were trying to replicate the whole building of momentum and building a huge list of users and things like that so we could do e-mails. Our competitor went out and are a multimillion dollar company as well. If we had launched just a little earlier, we would have made us a ton of cash that would have brought us to the next level.
Andrew: Was it just waiting for the marketing to play out that kept you from launching, or were you also taking longer to develop the first version?
Patrick: This time around we were trying to perfect the product. The Blackberry version had a lot of issues when we first launched. But at the same time we had a lot of people who were like, ‘I want to give you money today, so I don’t get shut off tomorrow.’ We wanted to make sure that the Android product was perfect and that really backfired on us. Our Android version is still not perfect. There are ton of manufacturers. They all have different USB drivers. It’s a nightmare to work on the Android USB stuff. At that time we should have launched instead of [??].
Andrew: One of the things that I found is that when you’re building your first product, who cares about perfection. No one knows you, anyway. You can launch anything. The world feels like it’s going to be forgiving. You don’t have a reputation to uphold. But, when you’re on your second product or second business, you want to get it right because the world is waiting to see what you’re going to do next. This is why that I believe some second time entrepreneurs suffer, and I’m wondering if that was what was happening to you. Were you trying to meet expectations that you felt were set by your first product and spooking yourself?
Patrick: We always want to build a good product. I think that everybody should be focusing on building a great product. We weren’t spooked if we blew it. It was more a challenge to us to uphold the quality and make it better and keep continuing our success.
Andrew: OK. All right, let’s get to Apple. I remember when you and I met, about a year ago and change at this point, maybe even longer than that, you told me about Tether. I said great, how do I get it on my iPhone? You said can’t do it. At what point did you decide it’s time for us to create an Apple version, an IOS version?
Patrick: Well, I think maybe six or eight months they revised their app store policy. At one point they basically said you submit it, we have the right to disapprove it. After that they got a lot of flak for that. They had to release this big long document that said if you do this, this, and this your app is fine and you should make it through. That ended up being the case for us where we weren’t violating any of the terms.
We weren’t doing anything crazy or anything like that or trying to hide what our product actually did. It was very clear in the description what the product did. They ended up approving it so we thought that we had played by the rules and we thought that Apple finally had changed their ways as well. We found out that wasn’t really the case.
Andrew: You thought that everything was OK. You then create an IOS version. How long did it take you to do that?
Patrick: It probably took our team about a month or so to build it. We already had all of the PC and Mac software (inaudible) so all we really had to do was build it for the iPhone.
Andrew: Right, you had the computer version. You just needed to build the IOS component of it and then they could talk to each other. Then you get into the app store. Did Apple talk to you before you got into the app store? Did they just screen your product and just put it in there?
Patrick: They did. They wanted a video (inaudible) how the product work and they wanted some feedback on some questions that they had. We answered that as much as we could. They basically said that everything was fine. We actually submitted two versions. They accepted both versions. Again, we thought that we were playing by the rules and we thought that they had changed their ways.
Andrew: Then you’re in the store. People, I saw online, got really excited about it. It was out for, how long was it in the store?
Patrick: We were live for about twenty-odd hours.
Andrew: Then you got pulled. Did Apple explain why they pulled you after you complied, seemed to have complied, with all of their rules? They did a video cast of the process to make sure that they understood your app. Did they explain what happened?
Patrick: Yeah, they said that we were violating one term that essentially that you cannot create a product that creates a burden on the network carriers. Essentially it was you can’t create a product that just downloads a ton of data and has no real purpose. We basically said OK, how can we solve that? We have the ability to throttle the connection. We have the ability to do basically anything like that. They basically said there’s nothing you can do for us to allow you back into the store. That’s where they left us hanging.
Andrew: But shouldn’t they have known that? I mean they did know what the app was doing before they let it in. Even if you read a description of the app, you should know that it potentially could use a lot of data.
Patrick: Yep. That’s my big thing too is I don’t really understand how we got through the whole approval process if they didn’t understand what it was or if it was violating any of their terms. I think what happened was we just got a ton of press. We had PC World writing about us. We had Wired Magazine writing about us. The list goes on and on. We had a ton of press that took down our web servers. At one point we had 15 web servers trying to handle the data connection from all the (inaudible).
Andrew: Does the web traffic still go through your system?
Patrick: Well, yeah, we have a bunch of (inaudible) that allow (inaudible) operation.
Andrew: I’m sorry, the connection is really bad. You’re saying that we’re not using Tether we just happen to have a bad connection. For all I know, I see the server room over here, I don’t even know if it’s the server room, whatever the communication room is here in my office the door is open to it so maybe they’re doing some work on my side. Which would really irritate me if they did it today instead of waiting until the holidays or until the weekend to do it.
What you were saying is the traffic still goes over your servers?
Patrick: Yeah, exactly. We (inaudible).
Andrew: Shoot. OK. I didn’t even catch that. We’ve got a real problem here. Let me see if there’s anything that I missed here that we absolutely have to get in while the connection is still there. The domain, I wrote a note. How much did you pay for tether.com? That’s a great name.
Patrick: We ended buying tether.com and tether.net for $10,000.
Andrew: That’s it? $10,000 for .com and .net?
Patrick: [??] domains up there that you can get at a bargain.
Andrew: Holy crap.
Patrick: [??] for a couple thousand dollars. [??] possible sub domains.
Andrew: All right. Last note that I have here was about design. I remember actually that Ramit Sethi looked at your website, and he said, ‘You know, there’s a lot that you guys could do to improve the design.’ This was a few months ago. I went on your website today, and I see that your design is changed but not dramatically. You didn’t use all the feedback that Ramit gave you on your site. Tell me about design as an issue for you. How do you handle design? What’s going on with it?
Patrick: At that stage of the [??] actually tracking [??] because what was happening is that people were [??] on their Blackberrys, and then they would try to order it from their Blackberries. So, the actual first connection started on the PC, but the actual sale happened on their Blackberrys. That looks like two different connections to us. We couldn’t actually see if we changed the header line. How did that actually effect the conversion? We ended up building a whole infrastructure to handle all that stuff and not [??] conversion on this and the headlines and things like that.
From our testing on other products, we’ve always found that changing headlines are only marginal improvements. If you really want huge improvements, you have to do things like test out your price or build a better product. For us, we found that there’s still a large amount of users that download Tether who can’t get it to work. So, now we’re taking it as an engineering problem to try to solve that issue and get more people using the product. That should increase our sales more than testing a few headlines.
Andrew: We get a lot of e-mails from entrepreneurs who want to know how to figure out their pricing. I know the answer is often test, test, test. In the early days, you couldn’t test. You didn’t have a big enough audience. Or did you? How did you know that $60 was the right price to charge?
Patrick: At that stage we did the survey data, and we asked what was the maximum that you would you be willing to pay for the product. That was pretty bang on. When we ended up redoing our testing recently, we found that it was pretty close.
Andrew: So you just asked people, ‘What’s the maximum you’d be willing to pay?’ and then you charged them?
Patrick: I don’t think that strategy is the best strategy in the world. I would use that cautiously.
Andrew: I think I’ve got everything here. Let me do a quick plug here and then I have to ask you one last question. The plug is for Mixergy Premium. You know how when you have an issue like, let’s say you’re listening to this interview right now, and you’re saying to yourself, ‘I’d like to build my own mobile app, but I’m not a developer.’ The issue is, how do I get developers that will build my app for me.
If you Google it, what you’ll probably find is a whole bunch of link baby crap that somebody put up because they want to earn money off of the advertising. Or you’ll find out that there’s some company out there that wants you to use their outsourcing service and found a way to rank high in search engines for their pages. What you won’t find is a specific step by step process for doing it from somebody credible, because credible people are often too busy to build up these web pages and blogs teaching you how they did it. They have no interest in it.
The idea behind Mixergy.com is that proven entrepreneurs come here often to do me a favor, sometimes because they want to get in front of my audience. What they do is, they turn on their computers and they walk you through step by step through the process they use to hire somebody to build their mobile app. Do the process of designing it. Do the process of getting feedback. Do the process of getting it in the store. It’s all done step by step on their computer. They walk you through it while you’re looking on. That’s just one topic.
We have several entrepreneurs who have taught it. We also have entrepreneurs teach PR. We teach how to get traffic for your site by building link baby blog posts if that what it takes. Whatever it is that you like to do as an entrepreneur, we’re building a site where real entrepreneurs did it and you can do it too.
That’s the idea behind Mixergy.com/Premium, the premium service that we have. One of the big complaints that I get is that it’s priced so low that people aren’t sure if the value isn’t really there. What I found is that if you price educational products really high, then people have a high perception of its value, so maybe I should increase the price in the future, but for now if you lock in the price today, you’ll get it forever at the current price. Don’t underestimate it based on the price, look at the people who we’ve gotten to teach these courses. Look at the people we’ve gotten to come and do case studies here and base it on that, and if you do I have no doubt that you’re going to love the premium service.
All right, Patrick, I’m always looking by the way for feedback on my pitch, how did I do with this off the cuff pitch for my premium service? You’re a salesman, you know.
Patrick: It was great, you reinforced that there’s lots of great quality. You reinforced that it’s a limited time offer. I think people should definitely go ahead and get a copy. I just bought my copy last night or the day before.
Andrew: I appreciate that you’re a Mixergy.com premium member.
Patrick: Yes, exactly.
Andrew: Wow, thank you. What got you to do it? Was it that you were coming here and you wanted to check out what we were doing?
Patrick: I looked at the premium content and I saw some stuff in there that I was interested in learning, and so I mean 25 bucks a month is not that bad so I decided that I would go ahead and get it.
Andrew: I appreciate it, thank you, and thank you for saying that in the interview. So, final question is this. You told Jeremy that one of the reasons why you wanted to be in business for yourself is that you want to be able to take vacations whenever you wanted to. Basically, you wanted the freedom to do what you wanted to do it. Were you able to take a vacation; were you able to do that?
Patrick: Yes, I ended up doing that, I ended up taking about two months of vacation time. I ended up going to Ottawa to visit my old employer. I went back to Las Vegas, I went to Portland, Oregon and then I ended up staying about a month and a half in the Dominican Republic.
It was really great, I got [??] perspective of what I should be doing, and I decided that’s not really the lifestyle that I wanted to live. I wanted to come back and build something bigger and better so, that’s what I did and that’s what I’m continuing to do. Three months after my vacation I ended up doubling our sales at Tether.
Andrew: You know I started out this program by calling my audience freedom fighters because every time I ask an entrepreneur it feels like what’s the best part of building their business they say it’s the freedom.
The freedom to travel wherever I want to, freedom to come into the office whenever I want to. The freedom to build when I feel passionate about. Would you agree to that, is that the best part of built Tether?
Patrick: Yes, it was nice to have, but for me I’ve always wanted to build something a lot bigger and so I just like business and I want to just keep doing it, and building something really cool, and a lot of other people can build it.
When I try to hire employees, I want employees that have that same drive that some day maybe I can just spin off the company and let them run and take it. That’s been my whole business model so far.
Andrew: I said one more question but I guess I didn’t ask you about Compilr. Can you tell us a little bit about that? Then I’ll tell people how they can connect with you.
Patrick: Compilr is essentially Google documents for developers. It allows developers to write code directly from their web browser. So it can make their lives easier by being able to work on code bases remotely around the world. Our goal is to eventually have every developer writing code through Compilr. We started that back in January 2010 and as of today we have over 75,000 users.
Andrew: 75,000 users on Compilr, wow. That’s for the transcribers. Compilr is C-O-M-P-I-L-R, is how it’s pronounced. All right, at this point in the program, I say thank you to a guest for doing this interview, and I ask the audience that if they got anything out of it they should find a way to say thank you to you.
I just got an e-mail from someone who, I didn’t get his permission to use his name so I won’t use it but I will tell you their story. He did that, he reached out to a guest. He did that, he reached out to a past guest, and said I saw you on Mixergy. I’m really am grateful that you did this interview and I learned a lot.
And this guest, not only gave him feedback on his site and helped him build up his site. But he’s actually going to be spending another half hour with him and help him think through his business.
Good stuff happens when you just reach out and show appreciation and I hope not because you want Patrick to help you out or because there’s something about Tether you need. I hope just because you got something out of it, you’re a human being, you’re part of our community.
That if you got any value, and you reach out to Patrick, who’s at Tether.com, say thank you. And if you do, I think you’ll get to know somebody that I’m really grateful that I’ve gotten to know now for a while. So Patrick, thank you for doing this interview and being here.
Patrick: Yes, thanks for having me.
Andrew: Thank you all for watching.
