Andrew: Hey, before we get started, if you need a web app built, or a mobile app built, who do you call? Check out Kumbia.com. They’ll take your idea from PowerPoint to product in just a few weeks. And when you go to Kumbia.com, I recommend you look at that top tab, the one that says, ‘Work,’ on it, to see their previous work and understand what Kumbia can do for you. From a minimum viable product to a full-blown web app they have you covered. They work in Ruby on Rails for web. They can build an IOS or Android app for mobile. Kumbia.com. And, if you need a phone service, a phone number, who do I recommend? Grasshopper.com, because with Grasshopper.com you can get unlimited extensions. That means that when the caller calls your company they can basically be screened before they come to you. If they’re looking for sales, you direct them to one place. If they’re looking for tech support, to another place. If they’re looking to just get on your blog, maybe they do into the voice mail and you respond to them when you have a chance. Lots of extra features at Grasshopper.com. That’s one of my favorites. Go to Grasshopper.com and understand why the virtual phone system that they create is the one that entrepreneurs love.
Finally, if you need a lawyer, as a tech entrepreneur, you need to talk to Scott Edward Walker of Walker Corporate Law. Why? Because if you go to the high-end law firms they’re going to charge you an arm and a leg and probably expect to take a piece of your business. They want shares in many cases. Or, if you go to the mom and pop law firm, the one that your friend recommends, that lawyer is probably not going to understand the issues that you go through as a tech entrepreneur. I recommend go to the guy who specializes in start-up entrepreneurs, Scott Edward Walker of Walker Corporate Law. Here’s the program.
Hi, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. How does a small, Norwegian startup, that bootstrapped with just $15,000, how does it generate over $100 million in annual sales? Joining me today is Jorn Lyseggen. He is the founder of the Meltwater Group, a software-as-a-service company. It’s offering include Meltwater Buzz, which is a social media monitoring service; and Meltwater Talent, which streamlines the recruiting and hiring process for organizations. Jorn, welcome.
Jorn: Thank you.
Andrew: So, we’re talking about how you have the slash through the O in your name. Why is that? What’s the slash doing in your name, my friend?
Jorn: It’s something called, umlaut, and it’s really a Norwegian letter. So you don’t have that in the English alphabet. But I’m Norwegian; I may not look Norwegian, but I have been living there all my life.
Andrew: Where are you today?
Jorn: I’m actually now based in Palo Alto.
Andrew: OK.
Jorn: So that’s my base. Our headquarters is in San Francisco, but I do travel quite a bit. I travel three out of four weeks, because we have 57 offices across the world.
Andrew: So, I want to spend the next hour or so together, talking about how $15,000 becomes this global company with over $100 million turnover, and everything else that goes into this business. But let me confirm that it is bootstrapped. Did you have any outside funding in any point?
Jorn: No. We have never had any external funding. And we raised any debt either.
Andrew: This is unreal. This an amazing story. All right, I actually kind of feel like when we talk about $100 million plus, that it feels a little hard to wrap their brains around. How long did it take you? Let’s talk about a smaller number. How long did it take you to get to $1 million in revenue?
Jorn: Well, the first year of business we had revenue of approximately half a million dollars.
Andrew: OK.
Jorn: Year two we had revenue of approximately $2 million.
Andrew: Wow!
Jorn: But, the start of the company was actually pretty rocky, ‘cuz we worked with the technology for an entire year, first. And then we were ready to launch. Then we actually partnered with a company that reached out to more than 1,500 companies. And the result of that was pretty negative, because out of those 1,500 companies, there was one company said, ‘Perhaps.’ So, at that time we felt a little shaky, right, ‘cuz we’d worked an entire with this technology. And that was the first feedback. It was a pretty rocky start. So, we had to try and fail, initially, and we had to experiment with everything from the value [proposition] to the sales methodology, and how to reach out the clients. But slowly we were able to secure more clients, one after another, and once we had actually cracked the code, we were able to scale it, and scale it relatively quickly, actually.
Andrew: It seems like a slow start, maybe for a short period of time, but to get to $2 million in revenue from $15,000 investment, and to do that within 24 months, that’s impressive. I gave an example of the products that you create. Maybe you can put a little flesh on this and pick one of the products that you offer–any one of them–and give me a scenario where a customer might use it and tell me how the customer would use it. Then we’ll go back in time to when you launched and figure out how you got there. But I want people to understand the product a little bit better, in a clearer way, than I introduced it.
Jorn: Yeah. So, the first product that we launched was a product called, Meltwater News. And basically what it was, was online news for insights. It basically helped our clients to better understand their competitors, perhaps their key clients, their vendors, or their general industry. And there are very different ways that they actually use the service. In terms of clients, we have everything from Apple, Intel, Coca-cola, McDonalds.
Andrew: How would McDonalds, for example, have used the product? To do what?
Jorn: Exactly how McDonalds used it is, you know, it varies a little bit how much we can share, because some of this is proprietary. I can give you an example of, perhaps, an unusual client and share with and share with you. Because when they set up the office in Hong Kong, that was back in 2006. I was going through the password control, and I hear this guy behind me, he goes, and speaking Swedish. I just turned around because Norwegian/Swedish is basically the same language, right? So I turned around and started speaking with him. And he’s the managing director of a ten- person company. And he actually sells windows, not the software, but the physical windows. And during our conversation we realized that he’s actually a client of Meltwater. So, he’s a ten-man company, so I asked him a little puzzle, ‘So, how do you use Meltwater News?’ And he said, ‘I love your service, because we want the local and regional news. And everyday there are reports about break-ins, burglary, or something being destroyed. We use that as lead generation.’ And that has secured us a lot of business.
Andrew: So, when there’s a break in he’d call up the company and say, hey, do you need new windows? And that’s how your software, your service would pay for itself with him. I love that example. Now I’ve got a sense of it. And that’s just one product, out of how many products you have now? Is it six? Is it nine?
Jorn: We have a total of five products.
Andrew: Five products. OK. All right, so the original idea, what was it?
Jorn: The original idea was really that on the Internet there’s just an enormous amount of information being produced every day. And the challenge of getting to the right information is quite significant. But the value of actually getting on top of the information that’s published every day is just enormous.
Andrew: OK.
Jorn: If you envision yourself driving a car all the way from San Francisco, all the way to San Jose, you drive through the whole of Silicon Valley. And you stop and speak with every CEO on the way. You ask that person,’ Truthfully, how proactively do you apply online information? Proactively he applies all the intelligence that’s available online. I think most companies today would say, probably far from how proactively they should do. Within a few years, I don’t know if that’s five years, or whatever, if you made the same trip, I would expect all the CEOs would say, of course we do that. Because they have to. Because otherwise they will be falling back, perhaps they will get released from their job, they’ll be sued, for all I know. Because if information is available, right, and you don’t capitalize on that information in many ways that’s really neglect. And then you can really look at it from the originally it was online use articles. Now with social media you just have an enormous amount of information every day that is published, about your entire eco-system and general industry. And when it comes to social media, for example, I’m really excited about social media. For the first time in the history you can have a direct access to your client’s hearts and minds. And I think I can give you an example. There was a [yogurt company] that came to us a little bit in panic mode. Because one of his major competitors launched a big campaign for an entirely new yogurt brand. A competitor to themselves. And they were really scared. And then they came to us, and we started to analyze the discussions online. And very quickly we were able to find out, one, that a lot of people discuss yogurt because they noticed this campaign. And number two, during the yogurt discussion people contrasted it with existing yogurt brands. They expressed their likes, and their dislikes. And through those discussions our client could then actually retrieve a lot of invaluable product insights. And the third, and main conclusion was really that this new yogurt was really not such a big competitor, because everyone agreed that the packaging and everything was really sexy, and very nice. And when it came to the taste, most people actually thought it was too sweet. So, for that reason, our client concluded that they didn’t have to do anything to mitigate this new product launch, right?
Andrew: I see. I can see how mining data could be that useful. Without that data they might have spent a lot of money, a lot of time, a lot of energy internally fighting a company that wasn’t worth that effort. Let me go back in time and understand how we got to this. I understand the big picture vision that there’s a lot of data, and that if you can mine that data it would be valuable. But you found a specific entry point with the news.
Jorn: Right.
Andrew: What was the original vision for the product that you had? And who were the customers who said, these guys need this right now, and are willing to pay me for it?
Jorn: Right. So the mission was that when executives and decision makers come to work in the morning they have their normal cup of coffee. So within seconds they get an update on what happened in the world in the last 24 hours, of their competitors, clients, and industry. And that way, they know that the decision they’re making is based on informed decisions.
Andrew: OK. And did you have a specific customer in mind?
Jorn: We really started to focus on medium-sized companies, because they are bootstrap, right? So the name of the game in bootstrap is cash flow, since they’re selling large contracts, we have to sell small contracts. Because small contracts are quick turnaround time and generate cash flow.
Andrew: OK.
Jorn: And also they were inspired by Toyota, and our expression was really, ‘If Toyota can become the world’s largest car company by selling cars that everyone could afford, we wanted to sell [??], too, that would be able to fit into most company’s budgets.
Andrew: I see.
Jorn: So, we offered it very price competitive. And the idea was then to generate cash reserves quickly, and we started out with some small and medium-sized companies. The first clients we actually sold to were [??] newspapers. And they used this to research stories they were about to write. They used this to understand what was going on online. And . . .
Andrew: Why didn’t they just search . . . I know this was 2001 that you launched the business. Am I right?
Jorn: Correct.
Andrew: Why couldn’t, at the time, if not Google, why couldn’t they use Yahoo, or some other search engine, or even Lexus Nexus to come up with the data they needed for a story?
Jorn: Yes. Well, they could. The thing is, you know, the value of our service is based on really two components. I’m an engineer. I originally researched scientists and artificial intelligence. And as proud as I am of our technology, and as proud as I am of our products, I think a deep realization within [??] is that the product alone cannot create the full value. Because on top of the technology you need human intelligence. Because as smart as algorithms are, the computer has a zero IQ. The only thing a computer does is execute instructions as it’s been told. Garbage in is garbage out. So on top of the technology you need to add human context and intelligence. So the big value that we create for our clients is that our people have a good discussion in needs analysis with our clients to help discover where the information needs really are. And then help cater to that through our custom developed search engine and our intelligent algorithms. And that’s really the combination technology and the human personalized consultation that at the end of the day creates value.
Andrew: Oh, so every one of these customers was going to get a human consultation before they started using the product that they were paying for from you.
Jorn: Yes.
Andrew: How long did it take you build the first version? I think you said a year?
Jorn: Yeah, it took a year. So, we were two guys, and we worked tirelessly and pretty much 24/7 for one year.
Andrew: You also said that you brought in $.5 million in revenue the first year. So if you were still launching the product, how did you get revenue?
Jorn: Oh, yeah, so the first year of business we had $.5 million in revenue.
Andrew: Oh, I see. So the first year you were just building; the second year $.5 million in revenue, third year of having the business $2 million in revenue.
Jorn: Correct.
Andrew: So, what did the first version of the product look like? How close to your vision was it, how did it match up, as far as features?
Jorn: Compared to what it is today, it’s of course, very simple, right?
Andrew: Similar?
Jorn: It was very simple.
Andrew: Oh, very simple. OK.
Jorn: The underlying idea, the underlying basic and technology components are all the same. But in terms of scale, in terms of sophistication, it was a lot simpler.
Andrew: I see.
Jorn: And initially we only offered alerts to notify you if there was information that was published in the last 24 hours that was relevant to you. Coca-cola was actually a client of ours that approached us, and they said that they loved our service. They had been a client of ours for a long time, but now they had some ideas on how they could become better. By incorporating with Coca-Cola and sitting down with the brand managers et cetera we developed a trend and an ellipics [SP] of statistical analysis, and that is a big part of the solution today. So, beyond actually getting notification of news, statistics and ellipics on top of that.
Andrew: OK. I want to come back to that. I’m writing a note right now to come back to it because it happened a little bit later in the story, and I want to take this step by step and understand every bit of it because I really want to understand your process for how to grow this business.
First, let me ask you about the year of development. Today, it seems like spending a year developing and then taking it out into the world is a mistake, that you quickly want to get to market, get feedback and iterate. Looking back, how do you evaluate that decision to spend a year?
Jorn: I think it was actually necessary because it was also a maturing process for us to actually go through and actually develop the product. This technology was really based on some research work that I did originally back in 1996. Back then I was overseeing a two year research project funded by the Norwegian government, the Norwegian Science Foundation. The research focus was how can we apply sufficient intelligence on Internet applications.
It was really through that research that we discovered opportunities for service like [??] news and [??] online news. It’s very hard from an idea to create a business. In between there, there was lots of iterations to come up with a product that really would create a value and compel the user interface and all the things that you really need. So we put a lot of effort into the user interface and the technology and the scaling factors because once we get clients up on this we need to scale across hundreds, thousands of customers.
Andrew: I see. So, you launch it. Do you take it to any customers at first or any potential customers at first, or do you immediately go to the 1500 customers that that one company helped you reach out to.
Jorn: Yeah. So that was actually a mistake we did, right? We took the product out and contacted the 1500 companies.
Andrew: How did you do that? What does that mean? Did you send out direct mail? Is that what it is?
Jorn: No, we actually had a partner to do this. So it was a sales company. It was a company that presented this. We commissioned a company to render it out and present this to all these different companies. What we under estimated was personalized consultation. We thought in our naiveté that technology in a product itself would be powerful enough to make companies buy. But that’s where the deep realization surfaced that the product and technology in itself has zero value or very little value unless you put in human intelligence and consultation on top.
Andrew: How did you discover that? I would never have known it, and I think most companies in the tech space would have said, would have fought that understanding, would have said instead, we need to improve the landing pages or the sales presentation or the technology.
Jorn: Right, right.
Andrew: How did you know, no, this is calling for human interaction?
Jorn: Yes. Basically, what happened is we analyzed all the results. We contacted 1,500 companies, and we got results, interested, not interested, create value, don’t create value, et cetera. We got a lot of statistics that we analyzed, and the result, of course, was not very promising, but what I couldn’t stop feeling was that information is so valuable. If we get to the right information, then that is something you’ll pay money for and it’s going to be really critical for your business.
We came to the realization that people were not able to get to the information that they needed. The information was there, and the tool was there, but they were not able to find that information themselves. They needed hand holding, and that’s what we tried. That’s when the sales started to come.
Andrew: If they’re saying back to you, we don’t want it, I’m still trying to understand how that data led you to think that they just don’t know that what they’re looking to do is there.
Jorn: Right.
Andrew: And so, I think it’s important because it’s one thing to get a no from a customer, it’s another thing to get useful information. I want to know how to turn my nos into useful information that will build yes type companies.
Jorn: Well, we got 1,500 nos, 1,499 no and one maybe.
Andrew: Right.
Jorn: We had a lot of nos to analyze.
Andrew: OK.
Jorn: When we analyzed that data, most of the reasons why people didn’t buy was this product didn’t create any value for them.
Andrew: Ah so, you were asking them why didn’t you buy, and they said not enough value. OK.
Jorn: And that puzzled me, because I made some deep [??] into the different companies and started to research what articles were really out there. Right? And then we discovered there were lots of articles that were really, fundamentally interesting from a business perspective. But that was not filtered out at the granularity and the precision that they need to create value. So that was buried in a lot of other information.
Andrew: OK.
Jorn: And to actually get to that granularity and precision, you know, we realized we needed a lot more hand holding than they originally had participated.
Andrew: So, what did you do with that information? How did you act on it at first?
Jorn: So, there were really two choices. Utterly scrap the company and do something completely different, right? If we’re going to pursue this we had to do it very different than our initial tech was, right?
Andrew: OK.
Jorn: So basically, we decided that the people we bring on board to sell this must have business acumen. They must be able to communicate intelligently with a business acceptance, and relate to that person’s world, to relate to that person’s problems, and in doing such a dialog be able to tailor this search engine, that’s really what it is, right, to that person’s need. And it’s a sophistication that’s required that goes vastly beyond selling a product. Because a product is not interesting. To sell this product we need to talk with each other. I need to understand your pain points. I need to understand how your business really works. Based on that information I can help create a search service that will meet your business needs.
Andrew: Jorn, was it you who would call up these clients? Did you call up any of the 1,500 clients and start to talk to them about it? Or, did you start with new . . .
Jorn: Yeah, I did.
Andrew: You did. And so, the first person that you called, how did it feel to call that customer up? Were you intimidated, excited, was it just another business call?
Jorn: I was more excited, I was curious. I wanted to understand exactly what was going on.
Andrew: You picked up the phone and said, hey, I saw that you said this wasn’t valuable, why? Tell me? Take it from there.
Jorn: I just wanted to pick that person’s brain, right? I wanted to understand what they were looking for, and then we were able to present articles to them, and they’d say, ‘These articles are actually really valuable.’ And as they got confirmation that the articles were valuable, it was clear to me that they needed a lot more hand holding. In many ways they had this tool, it’s like they had this bicycle where they were so busy they didn’t have time to sit down. They didn’t have the competence to configure it. So they were running next to the bicycle without taking the time investment in jumping on the bicycles and venture off.
Andrew: I see. So, making these phone calls yourself, were you starting to close sales?
Jorn: Yes.
Andrew: OK. You called your business, or your strategy, the Toyota of the information business. You didn’t want to sell high-end cars to a few people. You wanted to sell it more inexpensive. What’s the price? How much were you charging these companies?
Jorn: Our price point was, I think at the time it was around $4,000 a year.
Andrew: $4,000 a year.
Jorn: Yeah, for five seats.
Andrew: How did you come up with the five seats? How did you come up with that price?
Jorn: It was not very scientific. It was more like, if I’m this business owner how much money would I be willing to part with that wouldn’t make me think for a month before I actually made my decision.
Andrew: I see.
Jorn: So, it was more like testing myself. And I felt that $4,000 probably would be a reasonable amount. It would be a sufficient charge for us. It was enough to do the personal consultation, and the hand holding. But it wouldn’t be such a large amount that you would create a long and complex decision process.
Andrew: All right, before I ask the next question I see that you’re very popular on Skype, and as people come in and out of Skype your computer’s making that noise. Can you set your Skype to do not disturb, that way all the noises would be muted?
Jorn: Right. Okay, I’ll try to do that.
Andrew: Then, after the interview, if you go back to whatever level you want you’ll start to hear the noise, instead of hearing the alerts come on.
Jorn: All right. Thank you. Yeah.
Andrew: Let me know when you’ve got that red with the line through it.
Jorn: All right.
Andrew: Cool. So, were you able to close sales on just one phone call?
Jorn: I never did that.
Andrew: You didn’t do it yourself? OK.
Jorn: I didn’t do that, but other people have done it. And that happened many times.
Andrew: But when you were making that phone call to people in that excited state to find out, why don’t you want this? This is really good. Were you closing sales through that process, or you just try to understand?
Jorn: Mostly in research, initially.
Andrew: OK. And what . . .
Jorn: Yeah. For me it was more to really understand them. So I spoke with companies, different sciences, and different industries, trying to really pick their brands right.
Andrew: Did you close any sales, or just learn?
Jorn: In that initial stage I just learned, but later I closed businesses.
Andrew: OK. Beyond the understanding that customers need hand holding, what else did you learn in those initial phone calls to customers?
Jorn: It was very clear that this was a huge market. It was very clear that people were running around blind, and blindly, ignorant of all the information that was available online. In their heart they knew there was lots of information there. In their heart they knew that probably ten to twenty websites that I should go and visit every day, to get up to date. Right? But they didn’t do it, because they don’t have time. Because it disappears in all the daily tasks, and all the priorities. Right? So that was a big piece of it. And it was just realizing that people need help. People are too [??].
Andrew: Was there product understanding that you got from those phone calls, or anything that shaped the offering itself beyond the need to make phone calls?
Jorn: Super, super, super simple.
Andrew: Ah, how did you know that? Can you give me an example?
Jorn: The mistake is that people realize that the few features they have the better it is. It’s much better to solve 80% of the problem without having to configure it and tinker with the system, than to have lots of options that people have difficulty understanding.
Andrew: What options did you have in there that were just too much that you learned from phone calls? We can cut those out or we should?
Jorn: I don’t really remember, but initially the options were visible, but then we decided to hide them, because if you don’t see them it doesn’t bother you. Because if you see all these different options you stop and think, how should I do this? And it becomes a problem, and a worry for you.
Andrew: I see.
Jorn: You don’t see them. And it was just basic [??] configuration, and it worked. They were happy.
Andrew: I see. And they didn’t they didn’t even need to see, if I’m understanding this right, they didn’t even to do the initial setup. You set it up for them, or one of your people did. And as soon as they came in, they had a useful product that they could tinker with, but it was useful.
Jorn: Exactly. So, we configured everything. And what happened, the next morning they got an email. So, when they came to work the next day and had a normal cup of coffee, in seconds they can get up to speed with what’s happening in the world. That’s what they needed.
Andrew: OK. So now you understand the product a little bit better, you know, simplified the features, give it to the user in an instantly usable way. And you understand the sales process, make phone calls. How do you act on that to grow? How do you go from that understanding to $500,000 in sales in that first year?
Jorn: Right. So, from then on it’s all about building an organization. From then on it was all about scaling. And you know, from 2002 to 2006, I traveled all over the world, basically, all over Europe to recruit people.
Andrew: To recruit sales people?
Jorn: To recruit people, yeah, definitely sales people, but I can get more into specifics of what I was looking for. But I spent more than 50% of my time just recruiting.
Andrew: Just recruiting. Now you only had $15,000 to use to invest in this business. I imagine you spent a large amount of that on the 1,500 companies that you were pitching.
Jorn: Right.
Andrew: What’s left? How do you have more money to make these trips and to hire all these people?
Jorn: Right. First we had to generate the sales in [??].
Andrew: How did you do that?
Jorn: So, we were able to bring in some people I knew from before, that I knew were good sales people that were sophisticated in terms of business acumen that could actually speak with decision makers, both in small companies and large companies. And then it was important to actually start generating the business for us.
Andrew: So, you said, I know a few people who are good at selling, who are smart people who I want to work with. You recruited them, and paid them on Imagining on the sales that they generated.
Jorn: Yes.
Andrew: I see. OK. And that’s what got you to the $500,000 mark, and then you moved on . . . actually, that’s what got you a little less than $500,000. Then you moved on out and made all those trips to find new people to come in and grow the business.
Jorn: Yes.
Andrew: I see. OK. You were collecting money upfront for the year’s subscription?
Jorn: Yes.
Andrew: Oh, so that also helps, too, with cash flow?
Jorn: Super important. It was really from hand to mouth all the time.
Andrew: I want to get to the philosophy of that in a moment, but the original 1,500 companies that you pitched, is that where you went to actually convert new customers. Is that where your customers came from?
Jorn: Not really.
Andrew: Where do they come from, then?
Jorn: So basically what we did, we opened the newspaper every morning to see which companies were in the news.
Andrew: OK. And if a company was in the news you said they might be a potential customer, and you called on them?
Jorn: Of course.
Andrew: You were using your product to sift through the news?
Jorn: Yes.
Andrew: What was your search criteria? Who were you looking for in the news?
Jorn: Well the thing is, if you follow the normal news, there are all sorts of new events all along, and different companies are in the spotlight. And these companies, if they’re in media, they’re very curious about their media coverage, curious about what other media outlets have picked this up, etc. And usually it’s both positive and negative. So often it has a lot of attention within an organization if a company is in the media. So that was a way where we could very easily get access to decision-makers, because they were in the media, we could send them examples — “this is the coverage. Did you know you’re also, not only in Norway but in Sweden and Denmark?” And send, then they’re like “that’s interesting! So do you have more information? And then they got curious about the product, and that’s how we were able to get the foot in the door.
Andrew: I see. Alright, so tell me about this philosophy. I didn’t talk about this yet, but you had a few hits in business before this. You sold your first startup. Is it pronounced U-Net media?
Jorn: Yeah. Correct.
Andrew: You sold it in 1997 for 5 million dollars. In 1999 you ran a company called Optosoft which you sold for 30 million dollars. You were CEO of Mobile Group. I should say that. The company had a valuation of 150 million dollars in 2000. You obviously had a good track record. You had the money and the ability to raise money. Why limit yourself to 15 thousand dollars? What’s the philosophy behind that?
Jorn: Well, I think I’m a scrappy guy. And to be fair, 15 thousand dollars, that’s the money we spent initially, but I didn’t take out salary for it for the three first years I think. Right? So the reality is that we used more, if you consider the salary I didn’t take–
Andrew: But not in the business. In your personal–you didn’t pay yourself. That’s standard stuff. Frankly even if you said, “I put in 150 not just 15 thousand,” it still would be insignificant. You still could have found ways to get more. But philosophically you said, “I want us to not have the money.” Tell me.
Jorn: It became partly a pride thing, right? And I could also see that if a company is very scrapping, and if it’s boot-strapped, it does something to the DNA in the company. So it becomes very cost-conscious, and it becomes very careful with what it spends, and it becomes part of the culture, right? So up until very recently, Melfred [SP] never had any cost controlling systems. It was part of the culture. So in the early days you had the builder box with a company credit card. And everyone could use that credit card if they needed it because they knew the pin code and all that. The agreement was they needed to put the receipt back in the box.
Andrew: I see.
Jorn: But although we had such an honor system, it was never abused. It was part of the culture. And I loved that. I thought it gave me a lot of kick. It was really something that was exciting. And I think it was something that all of us took great pride in.
Andrew: I wrote down to come back and ask you about Coke and trends and analysis. Did they reach out to you with this desperate need, or was this part of your process? What I’m trying to find out is, how can a company find out what its customers are so desperate for that they should build, and their customers would be happy. How did you come across it? Did they reach out to you? Did you have this culture of feedback? Tell me about it.
Jorn: They actually reached out to us.
Andrew: OK. Why?
Jorn: I think that they really enjoyed the service. I think they also felt they got a lot of value out of it. But they came to us saying they had ideas on how to make the product even better. And that’s why they reached out.
Andrew: OK. And how did you know this was important enough to build?
Jorn: Well, if Coca-Cola comes to you and says, “Well, this is what we’d like to have in your product,” and they see value in this, you think, OK. These are some of the most sophisticated brand people out there. If they see a need, I’m sure there are lots of other people who would see it as well.
Andrew: I see.
Jorn: So that was a very easy call. But that said, we have one rule, in that we never customize the software.
Andrew: Tell me about that.
Jorn: Never customize the software, because that will kill your margins. Because if you have different variations of your product, and you need to support different source bases. Our core base is very, very difficult. So, the requirement and for us to do those changes and add those functionalities for Coke was that this was officially see other companies would benefit from. And for us it was a no-brainer. It was something we aspired to do already. So, this was something we wanted to do. But Coca- Cola was the one that came to us and initiated that process, and really helped us spread a really exciting service.
Andrew: How? How did you collaborate with them to do it?
Jorn: Basically, sitting down, talking with them, asking them, so what would you like to see? What would be helpful to you? What are the pains that you experience on a daily basis? It’s basically talking. You listen as much as possible to their pain.
Andrew: How did you get Coke as a customer in the first place?
Jorn: Oh, we just called them up.
Andrew: Really? Just the same way you did other customers? You said, hey, I’ve got all this great data. Do you want to take a look?
Jorn: Yep.
Andrew: All right. You have a background as an entrepreneur. You have a background as an engineer. You don’t have a background in sales, and yet your business is built on making sales in a clever way. How did you learn how to do that?
Jorn: Well, it really was more a skill you have to develop out of necessity in a startup. Actually my background is on the engineering side, right? Actually, I never aspired to become an entrepreneur in the first place. I never even aspired to do business and become a manager. So, that was really accidental, that I became an entrepreneur. That was just all the excitement, all the things that happened on the Internet. I was sitting there in the lab, doing my research, and I love that, you know. I really love that. But I just realized this Internet that is developing is such an important and significant event in human kind that I just wanted to be a part of it. So, that’s why I just quit my job and started a company. And I really didn’t have a business idea. I didn’t have business training. And very quickly you realize you need clients. Very quickly you realize if you’re going to be a business, you know, you need to generate revenue. So, one of the mottos for me, and for [??] has been that one of the value creating processes in every company is sales. And, you know, all other processes are cost generating. Sales is the only one that actually brings money. Right?
Andrew: How did you learn to do sales? How did you personally learn to do sales?
Jorn: I think, initially, it was more enthusiasm than sophistication and technical skills. But I think it’s something that we learn as you go along. At the end of the day it’s human beings communicating. If I’m able to help you, you know, if I’m able to help you solve a problem, then it’s a win-win situation for both of us. Right?
Andrew: I see. So you’re just approaching it almost as a researcher. How can I help you solve this problem? Why are you interested in this? Am I understanding that right?
Jorn: Yeah. Actually, and for me it started out with, I was curious. How is your world, what are the problems that you want to solve? I was just curious about how your industry operated, and so on. Right? And that is one of the things that I find actually exciting about sales. You learn so many industries. You learn how different people at different levels think, the problems they’re have internally, the problems they have and they walk around them, the value they want to create and contribute to the world. You learn so much. You develop your business acumen in an incredibly fascinating way. And you can contribute with a service, or a product that helps them. I think that’s incredible [??].
Andrew: The name. Why Meltwater?
Jorn: So, Meltwater’s actually originally called Magenta News.
Andrew: Magenta.
Jorn: Yeah. And I think it was really, we didn’t have any marketing budget. So, you want something that stood out. And I remember I admired orange for a very strong, distinct corporate profile.
Andrew: Right.
Jorn: But, you know, if you have a name like, orange, it lends itself well to a very clear profile, right? So, I was thinking is there a color that we could own. And that’s how we started with Magenta, because that’s bright pink, right?
Andrew: OK.
Jorn: But for some reason, Deutsche Telecom actually had a trademark, and Magenta in Germany.
Andrew: OK.
Jorn: So we discovered after being in Germany for a couple of years that we had to change the name in the German market. And that’s when we realized, we want to have one name that we can use globally. And then we actually brought in a naming consulting firm. We did a lot of research we actually concluded in our quarter. And part of what they liked in Meltwater is it gives them association to our Nordic heritage, which they really like. And secondly, Meltwater has this interesting duo quality. It is tough and soothing on one side. On the other side it is very strong. It has the strength of changing and transforming landscapes. And that’s a little bit how we look at ourselves, as well. Internally, we focus a lot on developing our people, and nurture our people. But outside we are very ambitious, and some people might even say we’re aggressive, and will build and grow very, very quickly. In many ways it reflects the dual nature of [??].
Andrew: Do I understand this right, that you actually, that went in front of a tribunal that ruled against you in the lawsuit? Or am I looking at a different lawsuit?
Jorn: You’re talking about the copyright in the U.K., right?
Andrew: Yes. I think so. 2010?
Jorn: Yes. So, in the U.K. we have challenged that Newspaper Licensing Association.
Andrew: I see, the Links.
Jorn: Right. So, they want to slap a copyright fee on the Links that we send to our clients. And to me, you know, that’s so counter intuitive. And so, we basically challenged their position. And we put that in front of the copyright tribunal. And so, it’s still unclear what will happen, but my thinking is, you know, if we sent links to our clients, to put a copyright fee on that does not make sense to me at all.
Andrew: How ridiculous that suddenly there has to be a copyright of a link, and that I have to get permission before I link to people, or put a collection of links.
Jorn: Exactly. Because, if that should be their interpretation of copyright law, it makes millions of people offenders every day.
Andrew: I’d be an offender in a heartbeat.
Jorn: Right.
Andrew: I’m looking right here at an offense, because I’ve got my research on U in a collection of links.
Jorn: Right. Right.
Andrew: I mentioned in the beginning of the interview that you had five different products. At what point did you decide it’s time to add a second product?
Jorn: That was really the philosophy from the beginning. Our aspiration was really to be a global distribution. So, that’s why we established offices from Dubai, Tokyo, Berlin, U.S., Australia, and so on. That was the first stage of the company’s development. We wanted to be a global distribution. And the second stage was, once we had the global distribution, we can roll out new products. So, we rolled out new products during 2009 and 2010. And then, the philosophy’s very simple, that if you’re able to build a global business, $100 million business, starting with $15,000, and starting from scratch, we believed we could do it again. So, every new product that we’re launching we expect is going to be $100 million business by itself.
Andrew: I see.
Jorn: In addition to that, there are all sorts of cross selling opportunities and synergies, right?
Andrew: Which was the first business that you launched after Meltwater News?
Jorn: After Meltwater News we had a product called, Meltwater Buzz, which is in social media. So that, basically, does all the things in social media that we used to do in [??].
Andrew: I see. And we talked a little bit about that. Then there’s Meltwater Press, Meltwater Reach, Meltwater Talent, Meltwater Drive 6, right? Did I say [??] in the beginning?
Jorn: Six.
Andrew: Then, I understand the thought process behind another product, why wait eight years before you launch the second product?
Jorn: Because I like focus. I was itching to get started in other products, as well, but you know, we wanted to complete, the build out the global distribution. So, before we embarked on new products, we wanted to make sure that we had the distribution in place. And once that was done, we were ready to roll out new products.
Andrew: Why didn’t you focus in the beginning on a niche and say, we are only going to cater to software with our research, or we’re only going to cater to Window repair companies. Why say, to abroad?
Jorn: Well, the thing is, it started really that in an opportunistic way, right? We open a newspaper to see what is the news today, what has been accomplished in the media. And that’s really the low-hanging fruit, initially. And we discovered we had a product that is really not industry specific. Every company out there needs information. Every company out there needs intelligence. So that basically was a very natural thing, you know, that evolved without really thinking much about it. It was just natural.
Andrew: So far we’ve talked about high, high, high, high. Every time you move forward you seem to achieve a new high, in the story as we told it. I want to be fair to the full story and talk about a bit setback, maybe a time when you said, you know, I shouldn’t be an entrepreneur. Or, I shouldn’t do it again. Or, I better sell and get out. Tell me about a time when you hit a low.
Jorn: There are two moments that I would bring forward in that regard. The first one we just talked about, and that is we worked a whole year for the product, right? To develop the product, and then we launched it. And we had spoken one thousand times to the companies, right? And we weren’t so far from closing the business down, before it generated any revenue, right? That was a real, legitimate scenario at that point. That was a very crucial crossroad.
Andrew: OK.
Jorn: The second one was really when we decided to go into the U.S. So, we always aspired to become a global company. Beyond what that says is we are not a chicken-s**t company. If you’re going to do this you do it in a big way. Otherwise, we don’t bother. So from the get-go, we wanted to be a global player. And if you want to be a global player, you have to be big in the mother of all markets–the U.S. of A. And I wouldn’t say it was a low in any way, but it was a very critical moment, because you hear about these stories of European companies doing really well, but when they come to the U.S. they get their a** kicked, right? There are companies breaking their neck trying to establish themselves in the U.S. So what we did was really take that challenge very, very seriously. So, we were four people who made a pact. We sold all earthly belongings in Scandinavia, house, car, whatever, and packed the stuff we needed in two suitcases each. And then we jumped on a plane and went off to the U.S. And the pact was, we’re not coming back until we have fixed this. And that was a critical stage, because it was a very risky move, because the four of us were really the management of the company at the time, right? So what happens to a company when you send the management team off to the other side of the world? What then happens to their European business?
Andrew: Right.
Jorn: And their [??] was that the European business delivered better than ever.
Andrew: [laughs]
Jorn: Why? We just had to get the management to the side and then . . .
Andrew: Why? Seriously, a lot of times management leaves and things just fall apart. Why did this work out? What can we draw from that?
Jorn: I think that is one of the strengths that actually really made Meltwater grow from $15,000 to $100 million. And the key strength that Meltwater has in that regard is the growth of people, continuous growth of people that comes from below and keeps shouldering responsibilities. And it’s really based on a philosophy that people, if they get a chance, they will grow into their responsibility. I never met a person that didn’t want to successful. There are a lot of people who want to be successful that haven’t really got the chance to try themselves.
Andrew: Yeah. How do you create a system where people who want to be successful within the company actually get to express that desire and get to see progress?
Jorn: By challenging them early on, and giving them continuous opportunities that are a little bit outside their comfort zone. And realistically outside their reach right there and then.
Andrew: Can you give me an example? What do you do with someone early on that sets them up for success later?
Jorn: So, there was this guy that was celebrating his 24th birthday in Oslo. He was British, and had been working with the company for six months. The next day he jumped on a plane to Hong Kong to set up the Hong Kong office, together with one other person. And to set up a business in Hong Kong, that was our first Asian office, is very challenging. And through that process, you go through all sorts of ups and downs, etc. But he was able to work himself through that and became Managing Director of the Hong Kong office. Later he set up our office in Tokyo, Beijing and Shanghai, Singapore. And now we see the Asian operation as one of the fastest growing business units.
Andrew: So, how do you do that? Do you set your company up almost like a franchise, where there’s a set of systems in place that if someone moves to a different territory they get to use that system, but maybe have to customize it to the local market? That’s what it is?
Jorn: Yeah.
Andrew: And how do you create that system so that when someone hits the ground in a new country they can count on it and know that all they have to do is localize it and adapt to the situation that they’re facing.
Jorn: Right. So, we had very well developed methodology for that. We have now 57 offices across the world, and all those offices having hatched out another existing office. So very simple, when we set up the first office in Sweden, that was hatched from Norway. We went to Sweden, hired people in Sweden, we can talk a lot about that, but it’s really important to pick the right people. We brought three people from Sweden back to Oslo, trained them there for three months. They were completely immersed in the culture, the way we do business, what they’re thinking about the company. And then they sent them back to Sweden. And then, they were the one with the guidance from a person from Oslo to build an office there.
Andrew: Who moved in with them?
Jorn: Yeah, with them.
Andrew: I see.
Jorn: After a while we withdrew from the Stockholm office and then were running the office themselves.
Andrew: I see. What about, is there a manual or anything like that where you guide people, or is it just a culture and immersion?
Jorn: No, we have manuals, but initially there were no manuals. We were just working with them, leading by example. It was learning on the job. Right? The key part of that is really empowerment, right? So, initially bring people to Oslo, and when you send them back they know that that’s going to be their office. They go to Ikea together, build the furniture, then [??] about when the company’s going to be profitable. They buy this copy machine, or that furniture, or whatever it is. So they have ownership, right? They feel this is my office. They get an ownership to that office and that business in a very realistic way. And that is part of the [??] view. You need that emotional attachment. And that really will give them in all offices we set up across the world.
Andrew: One thing I think that enables you to do it, and you tell me if I’m wrong, is the high margins on the product. Once the product is built, it takes people to launch a new customer, and to find and launch a new customer, but at $4,000 a year for five seats, there’s a lot of margin there to pay people good salaries so they can continue to grow the business, to know that your investment’s going to pay off in office space in people because there’s enough margin that you don’t have to close that many sales. And there’s enough enthusiasm that if . . . am I right about that?
Jorn: Very good observation.
Andrew: OK. Then let me ask you the next question, which is one I postponed from the beginning of the interview about Meltwater buzz. How did you know that’s the next product we have to create?
Jorn: So, that’s partly a number of things. Partly it’s input from clients. They’re asking, do you have this [??], do you have this kind of product, etc. And partly we also try to stay on top of what’s happening outside there. We have our own unit, the corporate bench unit, that continues to scan the market for trends, for new opportunities; and also helps set up new business lines. And this has always seen that the establishment of our business lines, as well as the token acquisitions. So you [??] three token acquisitions in social media, based on the research media in that corporate venture unit.
Andrew: I see here JitterJam here acquired this year, for $6 million, for example. You’re taking them, tucking them into the product instead of building yourself. OK. What about competition? You tell me about the high margin, you tell about the reach. You tell me about your system, and I feel like why don’t more entrants come into this market with $16,000, and an understanding of how you built it and come in? What’s the defense against them?
Jorn: First of all, I say we have lots of competition. Every market we entered has been five to ten different competitors.
Andrew: In some ways even Google’s a competitor.
Jorn: Oh, yeah, pretty much in every market Google’s a competitor, which is a free service. And also Yahoo, right? So then, lots and lots of competition. Mostly the competition rely, in my opinion, too much on their technology. They are overly confident on behalf of their technology in product. And that was a key realization within Meltwater very early on, as we talked about. You need that human contact, intelligent personalized consultation on top of the technology.
Andrew: I see. And that is so hard for us to understand as people in the text space, both entrepreneurs and engineers, we feel like there’s always a tech solution for everything. And what we’re discovering is companies like yours, like Groupon, have sales people out there and it makes a huge difference.
Jorn: Right. Yeah. Now, I think, particularly here in Silicon Valley, I think the confidence on technology is too big. I think people think technology can solve everything. And I’m into technology myself, so pains me to say this a little bit. It goes down to… A computer has zero intelligence. It’s just executing the instruction it’s told to. That’s it. Whether that instruction makes sense or not.
Andrew: I enjoy, by the way, the buzz over your shoulder as we’re talking. It looks like an active business at times. I saw someone just run behind, get something, run out for a meeting, I guess.
Let me ask you this, as a final question. My goal here with Mixergy is to bring successful entrepreneurs like you to talk about what they did, how they did it, and to bring their best ideas back to my audience. That’s my life’s mission here. As a person who knows data, and how to organize it well and make it useful, how can I do this project better?
Jorn: How can you do Meltwater better, you mean?
Andrew: No, my project here at Mixergy, where I bring entrepreneurs the best–as you know, you’re here–to talk about their stories. How can I make it more useful to other businesspeople? To others who are aspiring?
Jorn: That’s a good question. I think you’re doing a good job. You seem very engaged, you seem very excited. You ask questions and you dig deeper after you get the answer to those questions, because you really want to know.
Perhaps, one way to consider it is that you contrast and compare business models, and how different execution of those business models creates different successes. Because it’s very easy to listen to a success story and hear what they did, and they go “Oh, that’s great.”
You only hear one side of the story. You only hear the result on their hard work, and in the midst of the project everything looked like a disaster. And then, finally, it became successful. But in a systematic way, to understand “these were the different models”, and “this is how they executed on those business models.”
Andrew: Who would I contrast your business with? What model would I contrast your business with to make it interesting and useful for you?
Jorn: Our focus on personal consultation is very interesting. It’s very contrasting to a lot of other Software as a Service providers. We did talk about that, of course. That’s a different take on Software as a Service that we’ve been contributing to.
I also think another that we have done uniquely is that we’re not shy about betting on young people, although they are unproven. The guy that went to Hong Kong at 24 years old and one day, right? There are lots of examples of that. How do you grow people and talent within the company? Because, at the end of the day, that’s the biggest problem.
Perhaps your interview was very product-oriented, and technology-oriented.
Andrew: And sales.
Jorn: But the biggest problem when you build a company, at least like ours, is not the technology, is not the product. The biggest challenge is, how do you scale an organization? How do you enter a new country? How do you build? How do you grow from two people to 900 people?
Andrew: That’s a great point.
Jorn: How do you build the management layers at all different levels in the company and keep people motivated, excited, aligned, and all that? That’s the challenge. That’s the biggest challenge every day on my desk.
Andrew: Why contrast, by the way? Most people would say, “I want more angles on the same message. Give me one idea, one way to do it, and show me lots of different people doing it. If the way is to have people make phone calls to customers, and not just technology, then show me multiple companies that are doing this so I can understand it really well.”
You’re telling me the opposite, which is, “Show contrast. Show a company that goes all tech, that solves a similar problem to us with nothing but technology, and let’s understand how their model is different from Meltwater.” Why? What’s the value there?
Jorn: To me, that’s more interesting: to contrast and compare. To tell, also, people that there are many ways to solve a problem. And also give people the confidence that they can choose their own way of solving the problem. Because, at the end of the day, if you do the same thing as everyone else does, you’re not unique.
You need to be a little radical; you need to be a little bit different. Otherwise you’re not contributing. Otherwise you’re just following everyone else. And then if you see the variety and diversity in how companies can be successful, I think that can be very inspiring.
Andrew: I see. So in that middle place between all the other approaches, that’s where you find your approach, you’re saying.
Jorn: I think so because, at the end of the day, when an entrepreneur builds a company, it’s like expressing yourself. A musician creates, a writer, music, and an artist writes poetry. An entrepreneur builds a company and it’s their particular voice, their way of expressing themselves. I think it needs to be unique, it needs to be distinct to be authentic, and often, also, effective. And perhaps also to be innovative and contributing. That’s why people must do it their own way.
Andrew: This interview’s been an absolute pleasure. I know anyone who’s listening at this point knows exactly what I’m talking about. I love the stories. I love how analytical you are about business, and can express the analysis that went into each step with a story that highlights it, that illustrates it and is memorable. I’m so lucky that I got to do this interview with you and I appreciate you doing the interview with me.
Jorn: Thank you so much. It’s been a great pleasure.
Andrew: Thank you. Thank you all for watching.
