What big media taught Lin Dai about running a startup

Today’s guest is an entrepreneur who came from a part of the world and in a time when entrepreneurship was actually not encouraged. In fact in some ways it was an insult to say that you were entrepreneurial and capitalist minded.

Throughout the years he kind of got closer and closer to being an entrepreneur and then he hit on this idea through a co-founder. You guys are going to think the idea is absolutely brilliant.

The app that he came up with is called Hooch. You pay them ten bucks a month and they let you have one drink every single day at some high-end bars in your area. It’s doing phenomenally well. But he had a hard start, especially because it’s alcohol and investors don’t want to get close to alcohol.

I’m going to find out how he came up with this idea, how he got his first users, how he’s expanding beyond this, where his revenues are, and why he was scared of entrepreneurship.

Lin Dai

Lin Dai

Hooch

Lin Dai is the founder of Hooch, a subscription-based app that gets you one “free” drink every day of the month.

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Full Interview Transcript

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. I do it for an audience of real entrepreneurs. In fact, many of the people you see me interview have said, “Hey, I listened to these interviews while I was building my company. I built a company. And now I get to come back and tell my story.” And I consider that the circle of Mixergy. I’m hoping every single person who listens to me has that kind of experience here today.

And today’s guest is an entrepreneur who came from a part of the world in a time when entrepreneurship was actually not encouraged. In fact in some ways it was an insult to say that you were entrepreneurial and capitalist minded. And still he was. He felt like this is who he was from the beginning and we’ll talk about how that expressed itself back then. Throughout the years he kind of got closer and closer and closer to being an entrepreneur and then whammo, he hit on this idea through co-founder, that I think you guys are going to think is just absolutely brilliant.

The app that he came up with is called Hooch. You pay them just under ten bucks a month and they let you have one drink every single day at some high end really cool bars in your area. And it’s phenomenally, it’s doing phenomenally well. But he had a hard start, especially because it’s alcohol and a lot of businesses, a lot of investors don’t want to get close to alcohol.

So I’m going to find out how he came up with this idea, how he got his first users, how he’s expanding beyond this, where his revenues are, and why he was scared off of entrepreneurship, what that experience was early on and then how he got back into it.

This whole interview is sponsored by two phenomenal companies. The first will help you hire your next phenomenal developer, it’s called Toptal, and since I’m using the word phenomenal over and over, I’m going to say the second one will host your website phenomenally well, it’s called HostGator, but I’ll talk about both those later.

Lin Dai, co-founder of Hooch, good to have you here. No way, did I just lose you? There we go.

Lin: You lost me for a second.

Andrew: There we go. It froze. Good, I’m glad that you’re back. So good to have you on here. Since you’re back, I don’t know what happened our connection there for a second, let’s talk about revenue. How much revenue do you guys do in the last year?

Lin: Yeah, we’re doing over a little over $2 million ARR. We are growing kind of 3x 4x every year.

Andrew: $2 million annual recurring revenue.

Lin: Correct.

Andrew: That means, in the last 12 months, you guys have put in $2 million? I think you mean run rate, right?

Lin:Run rate, correct.

Andrew:$2 million meaning, if you take last month’s revenue, multiply by 12, you end up with $2 million, right?

Lin: Correct.

Andrew: Okay. And it is a recurring revenue model.

Lin: It is and we had over 24 month straight growth and it is a recurring revenue model.

Andrew: And it started out with this thing that I described, which is just under 10 bucks a month, we’ll rounded up here, but about 10 bucks a month gets people one drink a day at popular bars, or not popular but exclusive, interesting bars.

Now you guys launched this new service, Hooch Black, how much is that and what does somebody get for that?

Lin: Yeah, absolutely. So Regular Hooch is a membership that’s $10 a month and you receive about 30 free cocktails every month and that’s about $400 to $500 worth of value every month. So the new Hooch Black membership is $295 a year, which breaks out down to about $25 a month. And in addition to all the great cocktails, 365 cocktails a year that you can enjoy, you get access to a few more things, so a travel perks. We have a private in-app booking engine that give you access to deals at over 100,000 top hotels, at about 20% to 60% better rate than Expedia.

So the hotel industry really publish their rate publicly and they, for the most part, 90% of hotel sign deals with Expedia, contracts with Expedia that says they can’t publish any rate lower to the public than what they show on Expedia because Expedia has buying power. And we’re able to offer since Hooch Black is a private membership organization, we can offer it to our member what’s called unpublished rates. So those could be as low as $170, $180 at the W-Hotel in San Francisco or New York and could be as low as $20 to $30 for a four to five star hotel in Las Vegas. So really incredible deals and it’s a live search engine that we’ve built in.

There are additional, also for Hooch Black members you have additional dining perks. So at hundreds of restaurants across dozens of cities, you’ll get all a priority reservation at top restaurants such as Tao or STK. And with your reservation as a Hooch Black member, you may get a round of free champagne or a round of cocktails for your entire table or sometimes such as Mr. C or STK you even get a 20% off your entire bill.

Andrew: Okay. So, I get it. What I’m curious about is, and I want to know how you built it up, but one more question about how it works now and then we’ll build up to how you got here, the model. These restaurants, you don’t have to pay them for the drinks, they give the drinks away for free, do they pay you to be included or are they just doing it for free?

Jeff: Yeah. So it’s a free promotion for the restaurant. So the restaurant doesn’t pay us and we also don’t pay the restaurant. So when I was starting this app we kind of observed this unique phenomenon. There’s two things very interesting about this model. One is, I saw that everybody likes a free drink. Doesn’t matter if you’re rich or poor in New York when you go to a club or a bar sometimes the door person would give you a paper ticket that looks like a Chuck E. Cheese, so I . . .

Andrew: You know what? Well, let’s save it because I want to build that into the story. But the bottom line is there is no payment. You get paid by the by the customer and then you don’t have to pay for the drinks. And I know that they sometimes pay you for promotional featuring within the app, right? That’s the model.

Jeff: Right. Correct. For the most part the bar gives away a drink in order to keep driving customers into the door. So we are a free marketing service for the bars.

Andrew: All right. Let’s go back to this thing that I said in the intro, which was you grew up in a country where entrepreneurship was not encouraged, I can’t believe it for somebody like you. This is Shanghai in the ’80s. What was it like in Shanghai in the ’80s?

Jeff: Very different. You know, I grew up in Shanghai. I lived there until I was 12 I was a very kind of studious student. You study, you study, you study. And the education system in China is quite amazing but obviously they’re not teaching anyone about capitalism. And I kind of somehow naturally gravitated towards that for no reason that my family can discern but I used to sell like candy to my classmates and I would buy kind of like Starburst and a whole bag of them for maybe $1 and sell each piece for a quarter each. So which is like you’re not supposed to do that. I remember one of my aunt would use to call me I have capitalistic tendency. And that was not meant as a compliment.

You know, when my family moved to the U.S. my father was a professor at Arizona State University. So we moved and I kind of fell in love with a couple of things in the United States. Number one, they took me to Disneyland on the first week I landed. So I was like, “Wow.” It didn’t matter how much money you have, in China you can’t buy this level of happiness, that was kind of like my 12 year old mind. And the second thing was just the ability for me to choose my own classes in junior high and high school. So I had an opportunity to kind of participate in kind of computer classes and also intro to business class in my freshman year in high school. Elective curriculum is not a thing in China at all. So that really opened my eyes and doors because prior to that if you ask what I want to do when I grow up, I will say, “I want to be a chemistry professor.” Because that’s what my father was, it was the only thing I know. And then after I kind of started taking business classes, so I really found that that was something that I can be passionate about.

Andrew: You were in Carnegie Mellon University when you and two other friends decided to found your first company. It was called Kiwibox. What was Kiwibox?

Lin: Yeah. So Kiwibox is kind of the first distributed publishing magazine, online magazine for teenagers, with a big kind of social network component built in for teens. You know, even though back then the word social network was not even invented. We built a publishing system that basically millions of teens are part of and they are contributing articles and they’re sharing articles and grouping them into a weekly magazine for other teens to read. We had about 2 million teens on the website. And that was about pretty much like 90 some percent of every teen that was online at that point. So it was quite a phenomenon. We built a really organic business that just grew a lot.

Andrew: I’m looking at an early screenshot of it from Wikipedia. And it looks like this group of people who were going to the prom were on the home page. There was a post about Johnny Depp, the star, I guess it’s Sleepy Hollow, it’s a little hard to read. You guys were offering Kiwi points. You were offering a post-board. You did a bunch of different things here that were really pioneers. You did fairly well in this space, where was . . . I forget how many, you guys had . . . where is that Wikipedia article? Kiwibox. Yeah, you had a huge audience. Anyway, then you raised some money from whom and what happened with that?

Lin: Yeah. So we grew organically for a while kind of the backstory of this was we were me and my partners were actually building the software behind everything. We were building a CMS system that we thought we could sell to major publishers and magazine companies. And we were a little naive as college students, and we built a pretty cool system. So the idea was if you are a magazine company your editors or writers you don’t need to actually learn how to code HTML, so in 1999 you kind of had to know how to code HTML to put up a website. So we’re all like, “This is just a database. You copy and paste your content here, you format it and you publish it.” You know, as a demo we recruited English majors at Carnegie Mellon and wrote up a bunch of story about Backstreet Boys and whatever teen content there is as a teen magazine demo. And that kind of organically took off as we were trying to sell the software.

Andrew: So your whole vision was not to create this site but was to create the CMS, the content management system behind it and it just happened that the site took off.

Lin: It happened that the site took off and we literally kind of, I sat to my partners down and I was like, “Look, I think the play here is we’re a content company and we’re not a software company.” Right? Because we actually sucked at selling it to magazine companies. And a magazine company wanted to offer us like $30,000 for the software when we were trying to sell it for $150,000.

So, but the content idea took off. We grew, we kind of work on it organically for a while and then we had a lot of VC interest. And then one of the VCs was a European VC fund that came in and really kind of put a great deal on the table and we really want to kind of take the company to the next level. But we were a little bit naive about the type of deal to sign. It’s our first kind of actual institutional deal. So we were a little naive in basically thinking that like we saw eye to eye with the team that came to us. So we signed a deal that in all our expectation that it will go really well. But kind of the market took a downturn and the U.S. subsidiary team of our VC all got fired. So the apparent . . .

Andrew: So all the people you liked, who you signed the deal with, all disappeared.

Lin: They disappeared. They got booted off the board. I was the last remaining board member. So the European company came in and replaced the entire board. And I was a college founder mentality. I was like, “What? This is my company, you can’t run it without my approval or me.” Right? So I got very confrontational with the new board who was like very concerned about how to recoup their investment and I feel like they didn’t see the long-term vision and didn’t share the long-term vision as we got into this deal with.

And that, later as I learned was not good to not get into a confrontational stage with your board, your company is kind of a baby I say, right? And then it grows as you take more investment. Now it becomes a teenager and now at some point it’s a young adult. It’s its own entity, has its own social security number for actual, as an entity. So any one person is not the beginning or end of the company, so.

Andrew: But you know didn’t that because the term founder seems to imply a lot of power. In reality, the term founder isn’t even a legal term, it’s not like CEO or secretary or CFO, it’s just a title. In fact, I’ve seen people give it to like the fifth hired at a company, the person who’s just there in exchange for reducing their salary I’ll call you a founder.

All right, so you were, bottom line, you weren’t as important as you thought you would be. You were booted out of the company and as a result you end up staying away from entrepreneurship for a little bit. Instead, you go on to work for big media companies just to kind of fast forward through this, like MTV, a casting director there, Alloy Media, is there any one of these that taught you a lot that you’re bringing some of what you learned there to entrepreneurship?

Lin: Yeah, I definitely really appreciate my time spent at Alloy. So Alloy Media is a team media company that at one point owned a lot of great intellectual property such as Gossip Girls, Vampire Diaries. And I really worked under a CEO who’s tremendous, Matt Diamond, who really had a vision and who was really open to kind of self-starters. So it’s a big media company that was traded for hundreds of millions of dollars publicly. And actually the funny part was Kiwibox actually competed with Alloy for quite a while. And Matt was really open to hearing my ideas on how to kind of take Alloy to the next level. And, yeah. So I had a chance to really work on a lot of different digital mergers and acquisitions, allow the build out of the digital erotizing network at the beginning of all sorts of video content and branded entertainment.

So we were pretty early on a lot of the cutting edge media and what’s kind of the YouTube ecosystem and everything today. And had an opportunity because the CEO really let me kind of take the reins and work a lot on that.

Andrew: Sorry. So, I think we just lost audio for a second. So, Kiwibox, you ended it in about 2008. Right? And five years you spent working for bigger media companies.

Lin: Yes.

Andrew: And then you told our producer, “I needed to inch my way back to entrepreneurship.” And the way that you did that was what?

Lin: I joined a mobile video startup out of Toronto. So they were building something really interesting. They were one of my clients and they basically had an early predecessor to what eventually Instagram video started doing. So they had this app were teens or young adults can take videos of their smartphone and share it with anybody in their network. So I was like, “Maybe this video thing, this on mobile is going to go somewhere. So I want to take a shot at this.” So I became their, not the founder but became the chief marketing officer. And we did have some really cool things very early on. We were one of the very first kind of celebrity influencer deals with the Kardashian family that netted the company tens of millions of users, not only in the U.S. but also into the . . .

Andrew: Wait, what did you guys do with the Kardashian family?

Lin: So, everybody in the Kardashian family from Kim to mom to Scott Disick were kind of paid influencers. They were exclusively using the Keek app to video anything for a year.

Andrew: So you guys paid them for a year to go. Wow. Okay.

Lin: Yes, but that was at a time wherein they may not be that bankable yet. This was when kind of after Kim’s Hydroxycut deal and before Gap and everything else. So we were kind of one of the first digital companies to really embrace the Kardashian family because they’re truly influencers. So that was great. And actually from kind of the data we saw we felt from a very early age, we knew Kylie Jenner was potentially the most influential out of the entire clan.

Andrew: Because?

Lin: Because the teen audience on our platform that were following her just really that engagement was super-high every time she post a new video. So she was just kind of connecting to audience in a different way. I think Kendall was a little more kind of aspirational, you look up to her but you don’t feel like you are her or she is your best friend. Kylie had that kind of very kind of down to earth appeal to everyone else. So, which was interesting.

Andrew: And this was your doing, right? You’re the one who brought that partnership together?

Lin: Well, I mean, there was a whole team, marketing team that had that but . . .

Andrew: But whose idea was it?

Lin: You know, that was kind of me, our U.S. based CEO, we were kind of brainstorming on how to really bring this video app that was largely unknown in the U.S. to everyone. And it was a little bit of a gamble to kind of go after the Kardashians but it was well worth it. The company later got taken public on the Toronto Stock Exchange and it grew to about 75 million users under our watch. So that was a great story, so.

Andrew: I guess, you know what? Maybe I’m reading too much into this but it feels like you went from being a guy on the outside to then working within big media, Emmis Communications, Alloy, VH1, MTV, right? I guess MTV was earlier. And as a result it feels to me like you got closer with the celebrity world and understood their power where a lot of people coming out of Carnegie Mellon University would have laughed it off. You seem to understand it, or maybe I’m just drawing too many conclusions from the little facts I have. Why do you think?

Lin: Yeah, I will say end of the day I’m still a nerd. I’m very data driven so I’m pretty good at picking up what works and what doesn’t, right? So kind of from, obviously if you ask any of my classmates at Carnegie Mellon, nobody would’ve thought like I would have anything to do in the celebrity world.

But from very early on, on Kiwibox we just saw the power of . . . any time we put up a piece of content about Backstreet Boys or you say Britney Spears, that was the amount of engagement we had so I thought that was interesting. That was like the celebrity had like power on the internet digitally in a way we never really understood in 1999, right?

So when we moved the company to New York we actively and we actually seek out different partnerships with record labels and I actually accidentally stumble upon a partnership with MTV when I was . . . because remember TRL when thousands of teens will be at Times Square screaming at the studio. I was walking by one day and I saw somebody that looks like he’s in charge. So I went to speak to him and he was a casting director. So I was kind of asking about his job and he was looking to . . . his job is to bring audience, teen audience to these shows. And he was casting for a show, a private concert for Britney Spears and I told him I run this teen social network with about 2 million teens on there, we can probably send out a message. So we drove so many people to the taping that MTV wanted a partnership with us.

So that’s kind of being at the right time at the right place. But also not afraid to ask the question, right? So we can literally roll up to somebody that I never met before and talk them up and introduce myself. So that’s kind of being entrepreneurial a little bit.

Andrew: I see. All right. Let me take a moment to talk about my first sponsor and then I want to understand why you ended up leaving that company after you were doing so well.

The company is called Toptal. Have you hired from Toptal? Do you know Toptal yet?

Lin: I haven’t but this sounds like a great company.

Andrew: Well, I was sitting at dinner with this guy named Drew, Drew Gorham and he happened to be using Toptal too. He ran a company called the App Factory. I said, “What’s the App Factory?” He says, “What I do is I create apps for other companies, they hire me and my team to create it.” I said, “How big is your team?” He goes, “Really Andrew?” I felt, “Yeah, how big is your team?” And he goes, “Actually I don’t have anyone really on my team.” I said, “Then how are you building all these apps?”

He says, “All right, here’s how I work. I’ll be open with you.” He says, “What I do is when I get a client I go to a Toptal, I hire the developers from Toptal. I know many get phenomenal developers from there. Those Toptal developers can get my email address like @hisdomain.com so they can interact with clients and represent him well.” But he says, “I don’t do any of it, I just guide them. I get the business. And these guys go and build the apps for me.” I said, “That’s phenomenal. Can I talk about it?” And he said, “I don’t know.”

So I banked it. I thought about it. I said, “This is phenomenal that there are agencies out there that, actually I’ve heard of, enhanced their developer crew by hiring from Toptal whenever they have a client who needs a specialty that they don’t have in-house.” I never heard of an agency that was built all on Toptal but apparently Drew and a few others are doing it.

It took me a little while and then I finally got permission to talk about it. So I’m bringing it up right here to tell you guys. There’s a good chance that if you’re saying, “I don’t hire from Toptal, I hire from an agency.” There’s a good chance that those developers actually seem like they work for the agency but actually work for Toptal. There’s also a good chance that if you’re competing with an agency and it feels like, “Man, they could do everything, how can we not do it?” It’s a good chance that they’re hiring from Toptal. That way they get top level quality people. They could scale up fast with them and get them started on a project fast.

All right. So Lin, for you and anyone else who’s listening to me, I know you’re not creating an agency on the side but I think it’s a good resource for you to know about. For you and everyone listening to me, I urge you to not just go to toptal.com when you want to hire but go to the special URL where everybody who’s listening to the sound of my voice and their friends can get up to 80, not up to, get exactly 80 hours of Toptal developer credit when you pay for your first 80 hours. And that’s in addition to a no-risk trial period of up to two weeks. That’s top as in top of your head, tal as in talent. T-O-P-T-A-L.com/mixergy.

All right. It shows by the way, Lin, that I can keep secrets. If somebody tells me, “Don’t say it.” I say, “All right, I won’t tell them.” But as I told you before the interview started, once it’s in an interview I don’t edit, just go with it.

Lin: Sounds good.

Andrew: So you were doing great, you built up the business to 75 million users, you guys went public, you had a great role there, why did you leave?

Lin: Yeah. You know, I got until the point where I was a little bored. The company got taken public, I had a big team, and the team’s doing well. And on one hand I was a little antsy and on the other hand I kind of come to the understanding and the conclusion that just this is ultimately not my company, right? So I was a very well paid executive and the learnings were great, the kind of interaction with all the influencers and all the early influencers we worked with was great. And I was like, “Okay, maybe this mobile thing is here to stay. Maybe I should come up with another idea and actually found a new company.”

Andrew: Why does being the founder, why does being the owner, why does being the creator, why does any of that matter to you?

Lin: Yeah, it’s about kind of take all my lessons for the last 15 years. You know, being with two really great startups and being with another three like really amazing major media companies and take all the lessons and have an idea. If I was to build a company, here are the things I would like to avoid, right, here that things are really slow the company down or slow me down. And here I’m at a point where I think I can kind of distill those lessons and understand my own weaknesses and try to build a team.

You know, number one it’s about kind of being able to kind of build a team and people that’s likeminded and be able to work with you. As the company get really big, that’s getting harder and harder to do. So at a bigger company there’s a lot of politics and there’s a lot of time wasted putting out fires.

Andrew: And that’s another thing I heard that bothered you. You did not want to be a manager, you did not set out in business to be a manager. You as a kid dreamt of selling candy, not managing a bunch of other people who were cogs in someone else’s machine. But the part about politics in a company, you were in a publicly traded company. Talk about that, what is it like to manage people at that level? What are some of the challenges that you dealt with?

Lin: Yeah ,I established a relationship with people where they are either your subordinates or other C-level colleagues. So they really tell you obviously with how they feel, right? So everybody kind of, as a company gets bigger, there are some hidden agenda that takes a little polling to get out. All right? So . . .

Andrew: Like, what? What’s a part of their hidden agenda?

Lin: You know, I walk in the situation where I have a lot of technical background so even though my title on the company wasn’t secure or anything. You know, the CEO really valued my opinion on technical matters and we had a tech team turn over, a leadership turnover, we were actively looking for outside CTO to come in while there are internal really great engineers or really great like managers, I really was angling for the job.

And we know like we’re about to take the company public and we really get a caliber of CTO that there really is not kind of internal hire, right? Or internal promotion. So that was challenging to kind of keep everybody motivated. How do you do that while not have your top developer feel demotivated or demoralized and unappreciated?

So that was kind of a really interesting challenge. So things like that.

Andrew: Okay. All right, and you still didn’t leave, you were just kicking around different ideas. You were thinking about them. What are some of the ideas that you were kicking around on your journey to Hooch?

Lin: So, actually really excitedly, one of the ideas, after many years I was kicking around and abandoned for a while I was able to build back into Hooch Black as part of the hotel offerings, so.

Andrew: You knew that hotels would give lower prices to anyone who was a member. If it wasn’t visible on the internet, they would be willing to do it.

Lin: Yeah. I know there was a couple of loopholes. You know, I know kind of for a hotels to, we know a hotel already have unpublished prices. So and we know they, basically the way to display that on the internet so far was either a super last minute time limited deal, so that gets them out of the obligation to Expedia sometimes.

And the other way is how Hotwire does it, right? So you basically search and they say, like, “Hey, we found a five star hotel that matched the description. We can’t tell you the name of the hotel or where it is. It’s kind of in your area, it’s $170. Just trust us and give us money.” So that’s a terrible experience.

So there is this other third way, which is just erect a paywall and consumers behind the paywall, kind of a membership organization can access these deals. But really up until two to three years ago, that was not the common behavior, right? You don’t go onto a website log-in and pay a subscription to any website search engine. It really is the advent of the app and a subscription apps that really made this all possible. You know there are always been private membership organizations that you pay and you can pick up the phone and call a concierge and they’ll find. And that also a terrible experience. Because who wants to call somebody for a hotel anymore? You just want to see all the options, right? So that was one of the ideas I was thinking about. And then . . .

Andrew: So you just you knew that if you can find a way to hide it behind a paywall you can offer these lower prices but all the ways to hide it behind a paywall felt clunky and just uncomfortable, like call up our concierge and you’ll get the prices. That’s no good. Pay for this membership and you’ll get the prices. I know people do that. That wasn’t good. So you just kept that in the back of your head.

Lin: Yeah. And the second idea of how was because of my time spend at MTV I know the casting industry is also kind of primed for destruction. I was talking to my casting director friends and they were still doing the same thing they did 10 years ago or 15 years ago. That was basically e-mail based casting, they keep everybody’s photo as attachments and it’s just a terrible, terrible way to organize everything. So that was interesting and they . . .

Andrew: Why did you give up on that one? You know, I ultimately decided on Hooch because my two cofounders, they already kind of were incubating this idea a little bit. They brought me in. I was kind of advising them and at the same time on that summer, the summer of 2015 I was getting married. So me and some of my best guy friends went on my bachelor weekend trip onto Miami where I was telling everyone that, “Hey, I’m thinking about leaving my company, Keek as the CMO, and I want to start my own company. Here’s the three ideas I’m struggling with on which one.” And everybody’s like, “Go for the one-drink a day idea. That’s the one that you can explain to everyone will understand, that’s the winner.” So I was, “Are you sure?” Everybody was like, “Yeah, definitely.” So.

Andrew: I like that you’re talking about that on your bachelor party weekend.

Lin: Sure, yeah, we’re nerds so we can’t help it.

So I got married, I think a few weeks later and then on my honeymoon I told my wife that I was going to leave my very well-paid public company CMO job to focus on the drinking app because that’s the winner.

Andrew: What’d she say? I imagine that in retrospect it sounds rough but I imagine she must have been supportive.

Lin: Yeah. You know, she just very recently said, “For good times or bad.” She’s just sticking with me. So she was very supportive. She’s actually incredibly supportive and she basically said, “You’re very smart. I’m sure we will figure this out.” So she gave me permission to kind of quit. And I quit very shortly and I was the first one to kind of amongst my partners to work on this full time.

Andrew: You know, there’s a Chinese actress with the same name as you, Lin Dai, Do you know?

Lin: Yes.

Andrew: Right? Made a ton of movies.

Lin: Yeah. She was basically the Marilyn Monroe of the Hong Kong film industry around probably a little bit older era, kind of a lot of black and white famous Hong Kong [film 00:35:17].

Andrew: Yeah. “Cinderella and Her Little Angels,” “The Kingdom and the Beauty,” “Spring Is In the Air.” It just makes searching for you and like hunting down private information hard.

Lin: Yeah, the slight difference is actually in Chinese you say the last name first. So my name is actually Dai Lin. So her name in Chinese is actually Lin Dai. So it’s slightly different but in America since I grew up here it’s . . .

Andrew: Why did you do it that way? Why did you flip it?

Lin: You know, I think that’s just I went to junior high and high school in Arizona. So that’s just like, “What’s your first name and what’s your family name?” Right? So. And they actually thank goodness my first name is so easy to pronounce versus it could be really worse. A lot worse, my [crosstalk 00:36:11], you know.

Andrew: Mine was Khalili, when we came to the U.S., for some reason it was Halili, H-A-L-I-L-I. I don’t know why but it bothered my dad that it was H-A-L-I-L-I, it should have been K and he went through and he never does any paperwork, he hates to do all that. He wanted to change to it K-H-A-L-I-L-I. I was like, “Who cares? Why would that bother you of all the things?”

All right. So, you had this idea. Let’s talk about what I skipped over before, the idea came to your co-founder because he was working as a doorman, right?

Lin: Yes.

Andrew: And he saw this paper thing that I cut you off in the beginning of the interview as you were describing. How did that whole paper thing work? What was that?

Lin: Yeah. So it’s a New York thing to start, so it’s called a drink ticket. So the idea if you know somebody and you go to a club or a bar, the doorman or the owner or the manager will slip you like a few tickets and there sometimes they’re just like Chuck E. Cheese kind of type of raffle tickets. You then exchange that ticket, you give that to the bartender. The bartender basically just pour you a drink.

And we just saw that like some of my wealthiest hedge fund friends are just so excited to get that ticket and they wait for a drink. It’s not because they don’t have money for a drink, it’s receiving a free drink is really aspirational experience. Like that feels like you are in the know, you are being taken care of, you are a superior than the people are paying full price. So we’re like, “Oh, that’s interesting. It’s a discount that’s not perceived as a discount.”

And the second aspect of this is just like understanding the economics of a bar, I mean, a bar can have volume, order a wholesale bottles of Grey Goose for less than $20 a liter. So you can make 26 one and half ounces pour out about one bottle. So that means you can make 26 drinks and then sell them for . . .

Andrew: And they charge at least ten bucks for it, more like 15 to 20.

Lin: Yes. At slightly more higher end places it’s 15 to 20, in cities like New York and San Francisco, for sure.

Andrew: So you said, how many, 26 pours out of that?

Lin: Yeah, 26 one and half ounces pours per liter.

Andrew: Okay, so let’s say it’s $15 per that’s $390.

Lin: Yeah, it’s 1,400% to 1,500% markup. It’s the largest wholesale to retail markup on any legal product there is.

Andrew: It’s huge. And so you said, “Hey, look, these bars don’t have to pay anything really for this one drink.” And the other realization was, once someone comes in for one drink.

Lin: Yeah. You never just have one drink. You always have more and you’re rarely drinking by yourself. You’re bringing additional customers through the door. So we’re tracking on average our customers are spending about an hour 20 minutes per visit to the bar and they’re spending additional $30 to $40 per check. So for one dollar of marketing, the bar can get 30 to 40 times return for that. So it’s kind of a no-brainer.

Andrew: And so he said that this could be the thing, he started building it. How far along did he get before you decided to join in after that? After your friends?

Lin: Yeah, he showed me a prototype. And we were friends for many, many years. And he showed me a prototype, I actually was like, “Wow, this was a pretty well-built app. Let me try to find out which app developer he used. Maybe I can recruit him for one of my two other projects.” But the more kind of we talked and I just got I fell in love with the idea and like I got sucked into it more. And after kind of meeting both co-founders, we kind of thought that my skillset really complemented theirs, right? So one is from the nightlife industry, one is a performance marketing and user acquisition expert and I’ve been operating digital companies for quite a while. So the three of us just got together.

And the first thing is I made everybody write a check to the company. So we said, “We need to rebuild the app, a commercial version of the app. We had to go to a design studio to do that. I’ll negotiate a very favorable rate but we all need to put in a little bit of money ourselves.” So we did that. So I know everybody is committed.

And then the second thing is, I just quit my job, first one to do this full time . . .

Andrew: Because you wanted them, did you need the money or did you want their commitment?

Lin: I want their commitment. So I wanted their commitment. Obviously we could go out and start raising money immediately because we already had a prototype but I want to make sure I’m getting in bed with cofounders that are as committed as me because I . . .

Andrew: Was it called Hooch at the time?

Lin: Yeah. So, it was called Hooch. You know, that’s a genius of a [image 00:41:26]. So it’s a prohibition term for illegal whiskey, it has that kind of speak easy and a little bit bad type of a feel.

Andrew: And a bit of it in the know. I remember going to my first speakeasies in New York and it was like, “You have to go underground essentially, go to a back door, that there’s a dude sitting there and you tell him that you know it’s a thing. And then he finally lets you in.” It’s a thing.

Lin: Exactly. It’s a private cocktail society. That was our branding right out of the gate. So it’s like everything else in New York, the more you say, “It’s private and it’s not for you.” Everybody wants in, so.

Andrew: All right, let me talk about my sponsor and then we’ll get into how you built this up and then how you raised money from people like Russell Simmons and others despite the difficulty.

But my sponsor is a company called HostGator. And I noticed by the way that Hooch, you guys still host I think on WordPress, I’m looking at an early version of your website. It’s just basic WordPress. That’s been the thing the 30% of all websites are built on. And you know what? For WordPress hosting you don’t have to pay an arm and a leg, you just want to get WordPress hosting by someone who can do it right and get out of your way so you can build your business up. Let me see how on it. Yeah, you still to this day use WordPress. Let me see what theme you guys are using. I always like to do that. The theme is called Avada. So all this stuff super simple, even high end companies like yours are using WordPress to host their websites.

So the question then is, if you can get your website hosted by WordPress, who are you going to hire? Who are you going to get to do this? And the company that I recommend is HostGator. I went with them because they’ve been around forever. How many interviewees have I talked to who said, “Then my hosting company went down, then my hosting company went out of business, then my hosting company.” All these issues. You should not have to think about it. Think about your business, your product, your customers. Not think about, “Will my website be up not today, not in 2018.”

And so that’s why I recommend going with HostGator, a company that’s been around forever. If anyone out there is looking for a hosting company for their idea, I urge you to sign up, not just for HostGator’s simple plan, I get no extra money if you guys sign up for a basic or next level up, but Lin, I’m going to tell you why I’m going to suggest they get the baby plan. It offers unlimited domains. I was just interviewing a guy named Devin Zander, who had a ton of ideas, dozens, literally dozens of ideas. He was going to do this SEO when he was into that, marketing, he was going to do this other thing, which is e-commerce, all these different ideas. They worked. But there were a lot of them and some of them were just kind of blah.

How do you get to try all these ideas really fast? How do you experiment really fast? Well, he told me that he signed up, back when he was building his company with HostGator and one of the nice things about HostGator is they will, if you sign up for their baby plan, which is just like $3.98 a month, you can have unlimited domain’s, means you have an idea, fire up a domain. See if it works. Put it out there. If it doesn’t, you just move on. If it does, you can build on it.

That’s why so many people who I’ve interviewed have used HostGator. In fact, Devin now has a huge mega-success with SMAR7 Apps, it’s e-commerce apps. I think, I don’t know how many millions he’s doing with this app company.

All right. But it all started with HostGator. If you’re out there and you want to get started go to hostgator.com/mixergy. You’ll get a super low rate and you’ll get tagged as one of my people. Every sponsor always takes really good care of my people. Or if you hate your hosting company, bring your hosting over to HostGator, they will help you move. They’ll make it simple and they’ll host you write, hostgator.com/mixergy, super low price and 45-day money back guarantee to make sure that you are absolutely thrilled with their service.

All right. You know, since you say everyone likes a free drink, do you have any experience with HostGator? I saw you were about to say something.

Lin: Yeah. No, I was saying and it’s amazing how far we come on kind of a managed hosting services, right? I mean, I remember my first company, we literally were like building racks and racks of server. That took away so much energy and time. It’s so much better now that like pretty much anybody can like you said, for $3 to $4 you can get your business up and running. I mean, we were spending hundreds of thousands of dollars and like wasting days and days just to get our company up and running.

Andrew: You go to those colocation facilities where it’s like military bases with their security. You go and you racked up your own servers?

Lin: Yes, yes, we did. So we had we’re processing kind of millions and millions of users and that was . . . AWS wasn’t around and there was really no efficient way to do this other than actually just kind of a lease or buy your own equipment and do it, right?

Andrew: You got to team to quit or to go in and put money into the business. You quit your job. You needed a little bit of money. You went to friends and family. Which friends and family did you know they were able to . . . when I saw an angel list I didn’t see the list of people, but I saw that you raised your seed fund was 1.25, right?

Lin:Yeah.

Andrew:How did you get 1.25 from friends and family?

Lin: You know, it kind of just snowballed. We had some young people that we know in New York that love technology and love to go out. So those are people we hit up first, those are friends that are basically we’ll tell them . . .

Andrew: Because they have good jobs and they were able to put up like $25,000, is that the kind of thing?

Lin: Yeah, yeah. So it started out like kind of $25,000, $50,000 from our kind of investment banker friends, who was very enthusiastic about this. I mean, like put into context, some of our friends will go out to like clubs like Marquee and Tao and they may spend $50,000 one night on table and bottle services.

Andrew: Why? Because they’re taking clients out?

Lin: Clients out or friends out or just having a great night with . . .

Andrew: $50,000?

Lin: That’s kind of the genius of Noah and Jason from Tao Group that kind of started this trend of kind of in cities like New York and L.A. and Vegas. It’s at clubs, it’s table bottle service, right?

So it’s also a super high margin product. So it’s one bottle of Grey Goose like we said that cost less than $20. You give everybody, you serve that at a couch for a group of friends and you can charge $500, $600 per bottle for that, so.

Andrew: I’ve seen that. But then how do you get to $50,000. This is Jason Strauss, I didn’t know, he was the guy who innovated all this?

Lin: Noah Tepperberg and Jason Strauss innovated, really took table and bottle service to when they open the club Marquee. So you can also buy high-end champagne. Jay Z owns a champagne company called Ace of Spades and that could run you $10,000 per bottle.

Andrew: But, how much money does a person make that they could spend $50,000 just with friends?

Lin: You know, it’s the high-end consumer experience, right? So you are at a club and you are maybe enjoying your favorite DJ and you’re bringing a group of people out. It could be clients. It could be a girl you’d really like to impress. You know, I was actually in China after many, many years I went back. The kind of capitalism it’s just an indication of kind of a little bit of the access you can buy and the excess of capitalism, right? In China literally, I mean, I’ve never seen this before but in the U.S., at least, when you go to a great club and you’re ordering bottles and you and your friends are trying to finish it, you’re trying to get your money worth, right?

In China at the big clubs if somebody at the table next to you bought 10 bottles of champagne to put it on the table, you’re going to order 15 bottles of champagne, even though you are not a champagne drinker. So, I mean, I literally, they don’t even put it on ice because they don’t intend to drink it at all. They are just buying it to show off.

Andrew: Just to show that they can. So let me ask you this, I know that you were in Toronto around, just before you started Hooch, so you weren’t fully connected, but when you had friends of friends of friends who could spend $20,000, $30,000 $50,000 in a night and you working in a regular job, does this feel like, “What’s wrong with me?” Do you feel like you need like you need to get yourself in gear? How do you feel about it?

Lin: You know, it’s really interesting. So I think American education system actually never truly prepare you for the job or understand what a job truly is. I never knew, I thought finance, which Carnegie Mellon had a really great finance track, I thought finance meant accounting, right? So I was, “Well, I don’t want to do that. So I want to be entrepreneur.” Which at the end of the day is far more rewarding because you are actually creating . . . I hear my finance friends complain about how they’re not creating any actual tangible substance. They just take one thing and trade it for another.

But in New York it’s largely finance based. And I have a lot of great friends who are great people. They are under a lot of pressure in work. They like to blow off steam. And sometimes they rightly deserve so to be there.

Andrew: So you didn’t say to yourself, “These guys are so much better than me or better off than I am. I have to go and fight to get to that level.” You just said, “You know what? They have a high pressure job, they need to blow off steam. They don’t get to leave a legacy or product behind the way that I’ve gotten to. Let them have their thing. I’m happy with my thing.” That’s the way you thought.

Lin: Yeah, absolutely. I mean, for every $10,000 or $100,000 kind of bankers that make $1 million a year there is like Steve and Steve Jobs and there is Elon Musk, and who do you really want to be at the end of the day, right? I aspired to really create something and maybe build a business and that can really leave the impact versus just kind of trading security instruments in and out.

Andrew: Okay. So, you’re seeing these people, you’re raising money from them, you start to refresh the look of the app, you publish, how did you get people to download this and understand that this was a real thing worth putting their money for? Because I know it’s only 10 bucks a month, but people are super cheap.

Lin: Yeah, absolutely. The first time we actually got press, it was organic press. We were beta testing the app and Time Out magazine got their hands on a copy of the beta without us pitching them and they wrote the article calling us, “Hooch the best drinking app in New York.” So we were actually kind of faced with a dilemma to actually we got this great piece of press that was because a [crosstalk 00:53:32].

Andrew: They call you one of five best drinking apps, right?

Lin: Correct. And we were listed as number one, so.

Andrew: Number one on the list, yes.

Lin: Number one on the list. So, we made the quick decision to go live out of the beta and into a publicly downloadable.

Andrew: Just because of this. Now, I’m looking at the article right now. You told our producer about it, we hunted it down, it’s not that hard to hunt down but I’ve got it here in front of me. It’s a blurb. It’s two sentences. That was enough to rock your end, two sentences and the photo at the top, was your photo for the app. I’m recognizing now that I had some experience with it, right?

Lin: Yeah, absolutely.

Andrew: No, no, no. The photo at the top, I take it back, it was minibar. So it’s just two sentences, two sentences rocked your world enough that you got more downloads, more customers and enough for you to just say, “Let’s get out of beta and go launch.”

Lin: Yeah. You know, we we’ve been kind of internally struggling a little bit on like because there’s always the next tweak, right? To make a little bit better. So we got to a point where I had to make a decision as the CEO just to say, like, “We need to launch.” Right? So this is a better opportunity than any to actually get this out into the real world, in the hands of real consumers who can definitely tell us a lot more about it’s about iteration of the product you can’t . . .

Andrew: It’s not so much that this got such a flood of people that you had to launch, it was more like, “Hey, guys, we were looking for an activity to just get ourselves kicked off. This is a good one, they’ve announced us. Let’s go out of beta and live up to the announcement.”

Lin: Yeah, absolutely. So we wanted to get real world feedback, that’s the main thing, right? So it was kind of like we can sit in a lab and dream up scenarios of how people would use this, it’s nothing that is better than actually getting the hands of a few hundred customers and see their reaction. So the . . .

Andrew: And this all happened, this just happened. It wasn’t that you pitched them. Who was it? Dan Dao, it wasn’t that you pitched Dan Dao, you guys weren’t buddies or anything.

Lin: No, no. Dan actually somebody actually from Time Out reached out to us to say like, “Hey, this article just went live. And then you are in the print version next week.” So we were like, “All right, let’s just go live with the app.”

We quickly learned a lot. And then decided that, “Hey, we need to actually be serious with our PR effort.” So we by the end of the year had a PR firm, and by January we got coverage in [inaudible 00:55:05] and launched in LA and then got coverage in LA Times.

So that was a huge boost. And we got a ton of downloads from the LA Times’ article. And then by March we decided that we were going to stop by South by Southwest to see what’s shaking. And luckily some of my past contacts within Austin at the same time we were able to kind of get our Rick Ross, Buster Rhymes and Ludicrous to stop by kind of three nights at events that were hosting at one of our Hooch venues, pop-up venues in Austin, so.

Andrew: How?

Lin: You know, artists were in town already. So we kind of cut, and nobody believed how little we pay for the artist to stop by, and we had, obviously I had a relationship and pulled some favorites, but they’re in town already, we didn’t have to fly them in.

Andrew: So you pay to get them to come in but you still needed friends and favors to do.

Lin: Absolutely, I mean, we probably ended up paying each of the artists about like less than 10% of what they normally would charge for an appearance.

Andrew: So we’re talking a single figure thousands of dollars to get them to come in.

Lin: Yes, absolutely. And then they saw the consumer excitement about Hooch because we gave away a free drinks to everybody, right? So like at South by Southwest we just we just gave everyone attending South by a free version of the app. So everybody was just like buzzing about Hooch and they were getting free drinks at the club. So the artist kind of voluntarily got on the mic and start performing. So we were just kind of paying them to stop by. They end up doing kind of 40 minute sets. So it was tremendous.

And then we participated in a startup pitch competition that Anheuser-Busch was hosting, so we thought it was a really well fit pitch competition for a drinking app [inaudible 00:57:09] to be in a star competition by [inaudible 00:57:14] beer company in the world and out of a few hundred companies we actually end up winning that pitch competition. So it was tremendous validation that the alcohol industry really took this seriously.

Andrew: Rosario Dawson is an actress, and among other things, she became an investor of yours after meeting you at some . . . I have too many freaking tabs at this point in the interview. But she came to some charity event the you guys hosted. She met you. She understood the app. She invested. I’m wondering, what are these events that you put on? Who do you invite to them? How do you use them to grow your business?

Lin: Yeah. So, we try to get involved with anything that really kind of targets the young professional millennials that like to go out, right? So there was a Christmas charity event in L.A. and we were kind of in prelaunch mode in L.A. so we want to get the name out, so we supported the event and we made Santa hats with the word Hooch. I think we like literally painted ourselves with glitter and gave it to all the celebrities that came. And Scott Eastwood and Rosario Dawson were at the event and they actually jumped behind the bar and start serving everybody free drinks. So that was really kind of the first interaction we had.

Andrew: Right, but because it’s an event for charity, she feels like she could jump behind the bar and support the charity. It’s not like she’s supporting Hooch. But because you’re connected, I see. All right.

Lin:Absolutely. So, I actually didn’t. I wasn’t at the event. I didn’t meet her until maybe over more than a year later when we were reconnected and were talking about opportunity for her to kind of participate and invest in the company, so.

Andrew: How did you connect with her then again?

Lin: So after South by Southwest we got a lot of press in inbound inquiry from different VCs. We ended up working with Blue Scorpion Investments, which is a VC firm in New York to put together our second round. And they actually have a great network of celebrity investors. You know, one of the two partners were kind of a creative director at Diesel and Rebel before and had a lot of great celebrity contacts and he was like suggesting some of the people we should reach out to and he brought up Rosario. And I was like, actually Rosario already kind of knowingly or unknowingly was one of our first celebrity photos was with her. So he put us in touch. And she’s a pleasure to work with. And she’s just an activist, an entrepreneur, and she’s speaks at a lot of conferences out that we actually speak at.

Andrew: All right. Let me close it out then since we brought up investors with the difficulty you had raising money. You told our producer, “Look, I never talked about this but I’d be up for talking to Andrew about, not just the trouble of raising money, but also what I had to do to break free of that.” What was the trouble? Talk about the issue with Hooch raising money.

Lin: Yeah, as you know, I had two pretty successful starts before. And we raised tens of millions of dollars. We end up taking the company public and returning the investor a lot of money. So I thought this was a no-brainer, right? So I look at Hooch as a data platform where we have a lot of data based on this subscription model and we share it with the alcohol companies and really help them solve a lot of marketing and targeting problems that they face.

So what I didn’t realize is in the VC community, once we got out of the friends and family route, once we got out of the my banker friend who spends $50,000 a night at a club, we we’re seriously, we’re approaching institutional investors, a lot of major VC funds actually have had charterers in their rules that they cannot invest in any project in the vice category, right? So that’s gambling, drinking, pornography, and cannabis.

Andrew: I like how you linked in with pornography.

Lin: Yes, so, which is like really shockingly we’re talking about a behavior is a drinking behavior like two out of three unmarried Americans partake, right? So it just had such a negative connotation. And then some of the funds, even if they don’t have a clear distinction in their charter for that they cannot invest in any drinking company, it’s just such a risk, right? So why risk an early stage investment of a few hundred thousand dollars when your major kind of LPs are the Ohio teachers association, they may have question you about the morality of investing in this company.

So I never knew that before. So that kind of knocked out about one third of the kind of the target list that just cannot directly make an invest in an alcohol based business.

So after really getting an understanding of that we really kind of just worked harder. I mean, we just closed our first price round that was $5 million out of $15 million pre $20 million post valuation. And that was I literally probably if you see the spreadsheet of people I actually emailed and talked to on a one to one basis, not just mass emails, it’s a 300 people list.

Andrew: 300 people? Just because of that? Just because of these restrictions of people? By the way, this is not public yet, that you just close that round. I don’t see it anywhere online.

Lin: It’s not. It’s not.

Andrew: It’d be public by the time that this interview is published, but okay.

Lin: Right.

Andrew: Wow. So then, who you raise this money from?

Lin: So Rosario is one of the investors in this most recent round.

Andrew: She’s not a big investor in the round.

Lin: She’s not, so it’s lead by . . .

Andrew: So the first round was seed, friends and family. The second round was that firm that you just mentioned, Blue Scorpion Investments.

Lin: Blue Scorpion Investments.

Andrew: They have such a non-traditional startup background. I think one of the guys is from Credit Suisse, the other one had a creative agency company, used to work at Red Bull, right?

Lin: Yeah, absolutely. So that’s actually what we really loved it about them that they’re not traditional VCs. And as I talk I have very kind of love and hate relationship with prior VCs that [inaudible 01:03:59] company before.

Andrew: Who booted you out of your own company. Yes.

Lin: So we really saw eye to eye with kind of the creative vision of the company. And our VCs are actually true partners in our company and they gave a lot of great feedback and they’re very readily openly introduce us to their entire network. I never see VC do that, right? So because hedge funds and VCs they make their money on taking on 2% and 20% carry on the money.

Andrew: I don’t know man, I found that now at this point a lot of them are there because of the relationships they could open up for you.

Lin: Yeah, it’s very refreshing because they directly introduced a high caliber people like Len Blavatnik who’s the 24 wealthiest billionaire on the Forbes list and Chris Burch, Tory Burch’s ex-husband and co-founder. And they all kind of fell in love with Hooch and separately wrote personal checks into the company. So that was our last.

Andrew: And it seems like that’s where their money comes from that they have worked with. I see Jamison Ernst, one of the two founders of principles of the company, he worked with Forbes 400 billionaires and celebrities and helped them, I think with their investments, they both have investment banking backgrounds. And as a result of the people whose money they managed, they were able to raise money for their fund and also make instructions to you. Am I understanding is right?

Lin: Yeah. You know, they have a very unique LP of list which is really the who’s and who kind of celebrities and other industries. So we thought, “Hey Hooch is really a lifestyle brand. It makes sense to take money from celebrities who is going to freely promote us for free or more or less.” So we had Maxwell and All American Rejects, all these great celebrity that just organically post about us because there are so enthusiastic of . . .

Andrew: Because their investors . . . I see. So what did you say to them that got them to feel comfortable with you?

Lin: You know, with Blue Scorpion Investments, so they actually they reach out to me and I didn’t take a meeting for quite a few weeks. So after they heard about the South by Southwest success and one of my friends knows them and showed them what we were doing, so yeah, so they were kind of looking at consumer space. And they really believe in the succession motto and we’re very kind of a unique concept in kind of 2016 when we first start talking, so.

Andrew: I could see that. They also invested Quip the toothbrush by subscription campaign.

All right, and then you were starting to say you raised five point, what? $5 million recently?

Lin: We raised $5 million recently.

Andrew: Five from whom?

Lin: From mostly institutional investors and some celebrities and some strategics. We’re probably going to announce that in about two weeks, the actual list.

Andrew: So I understand we put together a spreadsheet, let me understand, how do you get 2 to 300, or I guess is more than 300 companies on the spreadsheet, how did you decide how to call them, how to structure it? What was your process there?

Lin: It was really referrals, right? So we reach out to kind of people, existing investors and other investors that can really introduce it to. It’s not about the round you’re raising now, it’s about the value of the investor who can bring you the next round.

So we started that process fairly early on and part of the lesson I learned was, you have to focus. If you’re in fund raising mode, you’ve got to spend 90% of your time fundraising. We kind of made the mistake very early on, kind of at the beginning of 2017 I was a part time fund raising. I was spending maybe 25% of my time on this. And then kind of that mistake combined with a third of the VCs I’m talking to who really love the concept but their hands are tied and they cannot invest in alcohol companies.

So that kind of went on to the point where by the summer I was like, “We need to be really serious about this.” So I spoke to my kind of partners. We shifted some of the operational roles and I was starting the summer spending about probably close to a 90% of my time focused on this round.

Andrew: It was a lot of talking to someone, getting referrals, adding them to the spreadsheet. That’s right?

Lin: Yeah. That’s what this was about.

Andrew: And then following up with the . . . sorry, go ahead.

Lin: It’s follow up, follow up, follow up. Right? So that’s the number one thing you need to do is be organized and stay on top. And I hate using kind of an automated mail drift campaigns, so I made a point to kind of personally reach out, write somebody an e-mail that find out something about them and really it’s a whole . . .

Andrew: You personally would look them up, find something about them and then send them a note?

Lin: Yeah, absolutely. Even if those warm intro from one of our existing mastered that so great I look and learn about their background, right, which were linked in, everything you can to compete you can get a pretty good understanding. And really kind of pitch it passionately. I think at the end of the day it . . .

Andrew: In that first e-mail you’re pitching them? In the first e-mail you’re saying, “I’ve got this app, it’s going well, here’s our monthly recurring revenue, I want to see if you’d be a good fit.”?

Lin: No. So, I never volunteer information. I always start with like, “Hey, great to connect.” You know, something flattering about them like, “This is what I learned about you. This is like great, I love to get your advice.” Kind of sometimes it’s great to just not even ask for money. And then share some of the latest press clippings we have.

So that’s one thing that’s great about Hooch is press love to write about us, who doesn’t like to write about free drinks? We’re always kind of coming up with new ways and new offerings. So the positive press definitely helps keep the investors engaged and then always just try to get to that meeting. So it’s not about the deal over an email. It’s really about getting in-person meeting if possible, if not get them on call. So it [inaudible 01:10:50] and when the founder is passionately talking about their company in a way that e-mail doesn’t.

Andrew: And you would have to then fly out and talk to them, how do you avoid people who are just curious and would have you come in and have a meeting with them? How do you avoid wasting your time on the wrong people? We’re just trying to learn.

Lin: I mean, you do end up spending a lot of time with people like that, right? So it’s one of the unfortunate things that you kind of have to just follow through every lead, you kind of can’t rule out the fact they could be a potentially great investor.

You know, that’s another challenge. I think the VC community, in general, is an unspoken rule that they never say no because they don’t want to tell you no and then later you become Uber and they can’t get into a later round. So I think for entrepreneurs we would rather just hear no, right?

So I think we got probably from 10% of the people that actually literally told us exactly why they don’t think this is right for them. And then there’s a large population that just came kind of to this point they’re like very interested in but they didn’t write a check, right? So.

Andrew: I’m looking now at like all the different celebrities who’ve invested. I feel like the Huffington Post did an article about your app and then also how you attracted celebrities. I don’t feel like they went into enough depth about it. But I do see the list of investors from their article, that’s impressive, Shaun White, Russell Simmons, Tyson Ritter, Maxwell, who you mentioned earlier, and then Rosario Dawson, and others. Oh, Rocco DiSpirito, also an investor, the celebrity chef.

Lin: Yes. Rocco actually created a line of a we kind of connected on the idea of if we’re going to do cocktails, let’s do healthier cocktails. Let’s take all the sugars, so he actually created a whole line of healthy drink recipes that we are piloting with the Dream Hotel in Telegroup [SP] now exclusively on the Hooch app.

Andrew: So the only way to get it . . . .that’s a weird thing though, right? It is kind of cool that I get exclusive drinks and I get to show it. For some people going into a bar and showing the Hooch app feels a little bit weird, right?

Lin: Yeah, I think the two challenges we face, and number one is, when people first heard about idea like $10 for 30 drinks, they are like, “It’s too good to be true, what’s the catch?” Right? So there’s no catch because the bar is giving you that free drink. It doesn’t cost me $10 every time you getting a free drink. And the second thing is, just really you got to get over the hump, “Is this real?” Right? So if you try it the first time and the bartender just give you a free drink, you’re like, “Oh, this actually works.” So after that the first time is a little intimidating. So that’s why we kind of event marketing is big for us because when you are in a venue with a lot of other Hooch members there’s like a hundred people all getting free drinks at the same time. Like it’s kind of like a group thing. [crosstalk 01:14:20].

Andrew: And then the bartenders know what to do about it too.

Lin: Yeah, absolutely, so.

Andrew: But it looks like you even have a free trial, right? Am I on the free trial right now?

Lin: You are in the free trial.

Andrew: And it’s going to go on for how long?

Lin: It’s going to go on for until you claim your first drink, so you can try of a free . . .

Andrew: You want me to just try a first drink, you’re doing what you want the bars to do, get someone to have a free drink and then that they’re going pay.

Lin: They can make a decision. Absolutely.

Andrew: And then I was wondering too whether you had to give Apple 30% cut because you’ve got an in-app entire purchase, but you don’t. You let me pay with Apple Pay but you don’t go through the app store. How do you get around that? Is it because it’s food?

Lin: Yeah, because it’s a real world membership. You are actually redeeming drinks and so it’s not an actual digital purchase. So you are actually purchasing. So we can actually we run this to a Stripe. You know, and in the weekend you can use your Apple Pay or any other credit card store payment that you can store with Stripe. So we actually don’t touch your credit card data at all.

Andrew: You guys pick some really, I don’t know about the rest of the country, but I know in San Francisco, I thought I knew a lot of places, I don’t know a lot of these places and they just look phenomenal.

All right. I also think it helps . . .

Lin: Yeah, Mina Gallery [SP] is great. This summer is good.

Andrew: Which place?

Lin: A stable. I think it’s 111 Mina Gallery. That’s a place I know, every time, I don’t know a lot of them multiple places, but every time I am in town that’s definitely one of the places, the first go to I stop by, so.

Andrew: The other big benefit to this is your app looks freaking gorgeous. So it doesn’t look like something, it doesn’t look like Groupon which also had a really nice design, it feels like something exclusive, something Blackheart. I think you nailed it with the design.

All right. For anyone who wants to go try it just go into the app store, search Hooch or go to hooch.co. And more importantly, I’m just fascinated by how you built up this business. And I’m glad that you’re here to talk about it. I’m looking forward to seeing how you guys grow.

And I should thank my two sponsors. Yes, the two companies that helped make this possible. Really, if you need a website hosted get it hosted right, hostgator.com/mixergy. And I always want to know your feedback on my sponsor, so if you have a good experience let me know, if you have a that experience let me know, andrew@mixergy.com.

And the second sponsor is a company that will help you host your website right, it’s called Toptal . . . no way. Company that will help you hire your next great developer, toptal.com/mixergy.

Lin, you’ve stayed on longer than we originally planned. I really appreciate the time. Congratulations and thanks for being here now.

Lin: Yeah, thank you for having me, Andrew.

Andrew: Well, bye. Bye everyone.


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