Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview proven entrepreneurs for an audience of real entrepreneurs.
When a PR agency contacted me and said, “Hey, Andrew, do you want to interview the author of a new startup book?” I said, “No.” To be honest, I didn’t even look at. And they said, “Wait, this is the startup playbook by two authors. One of them is Rajat Bhargava.” I said, “Wait a minute, Yesware. This is not just a guy who has an idea for how to start a business. This is guy who has started multiple businesses.”
Yesware I specifically remember because it was a period there where suddenly I was mousing over email I would get from people and there would be a Yesware URL. I looked up what Yesware was and I realized, “Oh, they want to know if I opened up their email, if I clicked on it and all that. This is brilliant.” So I got a couple people on my team to use Yesware, and we talked about. So I said, “Yes, let’s have him on. Rajat’s got to come on and do this interview.”
He said, “Sure, I’ll do the interview and talk about my entrepreneurial journey because that’s what Mixergy is about.” But he said, “I don’t want to talk about Yesware. Frankly, it wasn’t my idea. I was a cofounder.” Usually, that would mean let’s go back to the drawing board or something else, but this guy started so many companies that any one of them that we talked about would be an interview conversation.
So I’m happy to talk about what he’s working on now. We’re basically talking about a legit entrepreneur with — Rajat, you’re too nice of a guy considering how much you’ve accomplished. You can be an asshole. So we’re going to talk about his latest company, the one that he’s running now. It’s called JumpCloud. Let me read the one-sentence description that I got from him and then tell you how I would describe it. JumpCloud securely connects people to their IT resources.
I think a better explanation is one that comes from the example that I have from a friend of mind. I get together with my friend on Monday. I said, “What were you up to this weekend?” He always does fun things. But he said, “I had to let go of this guy on Friday. The whole weekend I was hunting every service that he had access to — Dropbox, Google Drive, this, that — to make sure we removed him because otherwise it’s dangerous.” He said, “The whole weekend was burned doing it.”
I thought about it and said, “When you hire someone, you’re going to have to do the same thing in reverse and give them a new computer and set them up and get the Wi-Fi and all that.” Well, if you had JumpCloud for his 10-people operation at the time, now it’s growing, he would have an easy, one-click — what is it called, Rajat?
Andrew: Why do I blank out on that word? One-click deprovision and then an easy way to add them on. That’s what JumpCloud is here to do. Even though the guy is super successful, when he tried to raise money for it, he kept getting turned down for a reason we’ll talk about later. I’m going to find out how he built up this business and so much more.
This interview is sponsored by two great companies. The first will help you do marketing automation right. It’s called ActiveCampaign. If you’re doing email. You’ve got to understand how this works. The second is the company that will help you hire your next great developer. It’s called Toptal. First, Rajat, welcome.
Rajat: Thank you. That’s an amazing intro. Thank you very much, far too kind.
Andrew: Thanks. You guys do such great content marketing. Let me ask you something. Was there ever a period when you did like become a jerk, when you said, “I have this world figured out, forget you”?
Rajat: I don’t think so. I hope not.
Rajat: I hope not. I guess you’d have to ask my family and my friends. I hope I was never a jerk to them. I don’t know if you need to be a jerk, regardless of whether you’ve been successful or haven’t been successful, whatever you have done. It doesn’t matter. I think just being kind in general is a good thing to live by.
Andrew: What’s the biggest success of all of these businesses? What’s the one that’s done the best?
Rajat: From what standpoint? If you said from the standpoint of money, return on time, I’d say probably Service Metrics, probably back in the heyday. It was 1999. It was 1998-1999. It was an 18-month deal that was acquired by Exodus for $280 million. The stock price floated up to almost $1.4 billion. From a money standpoint, that was an amazing deal.
From a standpoint of relationships, people who we helped start their career, they went on to build other companies, you can look at companies like Interliant or even StillSecure. Those companies, people have gone on to do great things. It’s sort of like what’s the criteria that you’re using to judge success on it, right?
Andrew: JumpCloud, what’s the revenue you guys have now?
Rajat: We don’t disclose revenue. We’re private. But the company has been growing fast over the last few years. I think we’ve hit on a problem that’s a core pain point.
Andrew: Can you give me a ballpark metric that just gives people a sense of scale? How big are you?
Rajat: Yeah. I think the best way to think about scale is we’ve publicly announced we’re going to hire about 50 people this year. We started the year at about 70 people, and we’ll be at about 120 by the end of the year. That gives people a general scale of the size of the business.
Andrew: How much money have you guys raised?
Rajat: Public information on that is about $37 million.
Andrew: Okay. I want to understand how you’ve built up the business. But I’ve got to ask you this question that’s on my mind. Dude, why bother writing a playbook on startups? Why not run your company? Usually, it’s the guys who have never done jack, or frankly, like some of your investors who are trying to raise awareness for credibility within the entrepreneurial space who do these books. Why would you write “The Startup Playbook?”
Rajat: Yeah. So, Will, who’s a board member at JumpCloud —
Andrew: Will Herman.
Rajat: Will Herman, who I’ve done a lot of different things with, we just kept getting the same questions from entrepreneurs over and over again. We love working with entrepreneurs. We’ve invested in a lot of companies. We’ve advised a lot of companies. It’s just fun. It’s part of who we are. So we finally just said we’ve got to stop answering these same questions. It’s got to be that hour of time or hour and a half time we spend with somebody, it has to be more valuable. So let’s get all the basic questions out of the way because we can put them down in a book. Let’s get to the next level of conversation, the one that’s much harder, where there’s the nuances, the tradeoffs.
Andrew: What’s the most important question for you to get out there so that people don’t ask you but is valuable for them to know the answer to?
Rajat: That’s a great question. The most common question is about raising money. Hands down, that’s the most common question. When am I ready to raise VC money? Can I raise VC money? Can I raise angel money? How much can I raise? It’s almost always about that. We have to sort of dial people back and say, “Let’s slow down. Let’s focus on the business first because if we focus on the business, the money will come.”
The consequence of having a great business is you can raise money, you can do a bunch of things. But if we don’t focus on the core aspects of the business, then it’s very hard to raise money. You can get lucky, but in general, our advice has been let’s focus on the business first. The money will come second.
Andrew: As we go through your story, if you could identify points of the story that illustrate your message about how to focus on the business, can you illustrate those and then we’ll send people to the book to get more?
Rajat: Absolutely, for sure.
Andrew: I just want to touch on how you kind of got started as an entrepreneur. Your first business was NetGenesis, right?
Andrew: We’re going to jump to JumpCloud in a moment, but just get to get a sense of where you got started. I went on to Brad Feld’s personal blog. He said that this was his very first angel investment, right?
Rajat: Yeah. It was.
Andrew: The idea behind NetGenesis was?
Rajat: When we started NetGenesis, it was late ’93, early ’94, so I’m dating myself. It was a long, long time ago. But this was when the first browser came out. So we were at MIT, and my cofounders and I immediately jumped on it. A couple of the cofounders had been developing websites even by that point in time, in the first few months. The idea was, “Hey, let’s go build a business that has the web at the center of it.”
Ultimately, we iterated through a bunch of different things. We started as a consulting firm. We did a few different products. But then we finally landed on the core of the business, which was basically figuring out when people come to your website, what are they doing on your website. Today, this is like Google Analytics. It’s kind of viewed as something no big deal, everybody’s got it. But back then, it was kind of the nascent start of the industry.
Andrew: That was called NetAnalysis, that was that product, right?
Rajat: NetAnalysis, yeah.
Andrew: You guys also had a form maker, NetForm.
Rajat: We did.
Andrew: You had NetThread. I’m looking at my notes from researching you. What was NetThread?
Rajat: Yes. NetThread, basically, think of it as almost like a discussion group thread kind of . . . what we know as forums today, it was called threaded conversations back then. You can see in the period of time what the evolution of the thinking was.
Andrew: All these tools for what were called at the time webmasters.
Rajat: Yeah, that’s right. We created something called the Webmasters Guild way back when.
Andrew: Wait, Webmasters Guild was a connection of websites that promoted each other?
Rajat: No. It was almost like what you would call a meetup group now, a meetup group of webmasters. That’s it.
Andrew: You raised money from Brad Feld, who I guess you guys went to school together, so you knew each other.
Rajat: We didn’t go to school. He actually was guest lecturing at a class that I took. I went up to him afterwards and said, “Hey, I’ve got this idea.” He said, “Let’s get together.” Then we just sort of hit it off, and he said, “Hey, can I get involved?” We’d say, “We’d love to have you involved. We’re honored to have you involved.” We didn’t anything about what we were doing, so it was a totally different time to start companies.
Andrew: I’ve got a blog post here where he talks about why he left the company. Do you remember why he left?
Rajat: Yeah, totally.
Rajat: We left for the same reason. It’s a fascinating experience, right? You’re 21, 22 years old. Venture capital at that time was a totally different thing. We raised money from venture capitalists and we didn’t ask a lot of questions, didn’t really understand what that meant. They came in and they said, “Hey, great, glad to have you here. We’re going to hire a new CEO.” So we’re like, “Wait a second. We didn’t talk about that before the investment was made.” They’re like, “That’s okay. We’re still going to hire a new CEO.” At that point, I said, “Well, I don’t think this is the right spot for me,” and Brad decided it wasn’t the right spot for him.
Andrew: Because they pushed you out he said, he didn’t feel comfortable staying with the company?
Rajat: Yeah. I think it was sort of my first probably lesson in a connection with somebody that felt so deeply about me and I felt deeply about him. This is a person making a business decision for themselves on money, if you will, and they’re saying, “No, I don’t want to take this money. I believe in our relationship much more. I think we’re going to do a lot of stuff together.” Here we are 25 years later and we’ve been working nonstop for 25 years. But it was an unbelievable lesson for me of loyalty and kindness and caring that you don’t often see anymore.
Andrew: And you know what, the truth is . . . actually, I would even suggest that today you see that a little bit more than you used to, because today we understand the value of the entrepreneur is probably stronger than the current business and at least if they have one successful idea, they’re more likely to have another. So people will bank on it. Back then, there wasn’t a sense. You were disposable. It was an idea.
Rajat: The power dynamics were completely different, right? The power was with the VCs. Today, you could argue it’s much more with the entrepreneur, but it’s also more balanced than what it was.
Andrew: I’m curious about where you got the idea for JumpCloud.
Rajat: Yeah. That’s a great question. I had this idea for JumpCloud probably almost 10 years ago, in 2007-2008. I don’t know why it came to me, but this concept of directory services and how do you connect people to their various IT resources. It was in the context of maybe we were implementing something similar, and I just sort of was questioning why are we doing it this way. But it wasn’t the right time to build the business.
So the idea stuck in the back of my mind, and then as we sort of evolved over the years, it popped back up. It popped back up in the 2013 time frame. I said, “Wow, I remember this idea. This one seems really interesting. The market’s really changed. The dynamics and infrastructure have changed.”
Andrew: I’m sorry to interrupt, but just so we’re following along, when you say way, “Why are we doing it this way?” How were we doing things back then that you felt wasn’t right?
Rajat: Yeah. So basically, there was one platform to do directory services. There’s really two, but one was open source and the other was a commercial product, and everybody used the commercial product.
Andrew: And they were?
Rajat: It was a product called Microsoft Active Directory. It’s a wonderful . . .
Andrew: I was on Reddit deep in these discussion boards of people comparing you to Active Directory. The argument that people made was it’s just a flawed comparison, that you guys aren’t the same.
Rajat: Yeah, we aren’t really the same, but we sort of accomplish the same function. What we’ve really tried to do is to say, well, Active Directory is this incredible product that’s been around for 20 years. They’ve done an amazing job with it. Every company, just about, uses it. Over time, that product was very Windows-centric. We said the, well, world’s not all that Windows-centric anymore. You’ve got G Suite. You’ve got AWS. You’ve got Mac. You’ve got Linux. You’ve got all these different web applications out there. So it doesn’t really connect.
Andrew: What they had was single sign-on, largely for Windows and desktop software, is that how it worked?
Rajat: Yeah. It’s really sort of very Windows-centric. It works beautifully in a Windows environment. Our position was, “Hey, what about for all those companies that don’t have a Windows-centric environment? Don’t they need the same type of capability? Why isn’t that delivered from the cloud? Why do you have to have servers on prem anymore?” That was the thought process between how to come up with this idea.
Andrew: The free version or open source software that was out there was?
Rajat: It was called OpenLDAP. So one of our advisors, Tim House, created the LDAP protocol, which then subsequently somebody leveraged that protocol to create the OpenLDAP server. That’s been an amazing product too. It’s been around for probably almost 20+ years, 30+ years now.
Andrew: That’s the kind of thing, correct me if I’m wrong, I don’t understand this space as well as your previous company, but I would need a server in my office, in my possession in order to run that, am I right?
Rajat: Yeah. You need a server in your office or in your data center, but yeah, you have to have that. That’s not really the world.
Andrew: That’s the problem, that either I’m in this desktop Windows world, which is changing as you’re thinking about the space, or I have to have hardware and have to get into installing this new thing.
Rajat: Yeah. That’s right.
Andrew: You said there’s got to be a better way than that.
Rajat: There’s got to be a better way, yeah.
Andrew: Is that how you come up with your ideas? Is it, “What’s bothering me? What’s problematic?” Or is it different?
Rajat: I think there’s a couple different ways. We talk about this a lot in the book. We basically said there’s probably three major areas or three different ways, and there’s probably more, but three ones that we should talk about. One is personal problems. I’m going through the day and I have this personal problem and I want to solve it. I’m not sure JumpCloud fits into that because I’m not an IT administrator.
Then there’s problems that you see that others have. You talk to your customers. You talk to your friends. You talk to businesses. They say, “Hey, I’ve got this problem.” You say, “Well, I think I can solve that problem. I’ve got some ideas around that.”
Then the third area that we talk about in the book is just doing research. There’s a lot of businesses that have been started where you just do a lot of research and you don’t really have any personal connection to that problem, but you find out that there’s a gap in the market and then you go fill it.
Andrew: Which businesses have you started with research as the basis?
Rajat: I have never started one with research. I’ve just heard of other people doing it and read of other people doing it.
Andrew: Is there one that stands out for you as someone who’s especially famous? There’s a problem with that. Once you do research to come up with a product, as you tell your story, you can’t say, “I researched it to see where the money was.” You have to come up with a story that then explains why this is needed in the world. That takes priority, right?
Rajat: I think your origin story is a little bit different, right? I don’t know if FedEx was an example of something like that, because I think he was doing a lot of research. I don’t know if he felt the pain of that. I don’t think that concept really existed. So it wasn’t like he was talking to other people necessarily. That could be an example. There’s probably other examples too.
Andrew: You talk to our producer and you said there are trends, though, that supported this and one of the trends was consumerization of IT. Talk about how you saw that.
Rajat: Yeah. Consumerization of IT has been a fantastic game-changer in IT over the last 10 years. It means that every group, every department, every person in the organization can go purchase what they need to do their jobs. You can go get Dropbox or Box or Salesforce or whatever it is, and you can do that yourself. You don’t have to have IT do that for you.
You can go to the Apple Store and buy a Mac. You can buy a Dell box and then you can put Linux on there or you can do whatever you want these days. Before, that was all the domain of IT. With all that change, how does IT still remain relevant, and how can they actually do their jobs in that type of environment? I think that’s a huge challenge for these folks.
Andrew: Right. There is no way. They could say you can’t bring in your own computer. I think VCs do that. They say you can have your own computer, but if you’re working for us, we need a separate computer for our work, at least my friends who are working for VCs are like that. But what they can’t do is say you have to use this Microsoft software. You cannot go try Google Drive, right? It’s really tough to enforce a non-Dropbox policy when Dropbox is such a good fit. People are naturally going to use it. You said there needs to be a way to control it and delete those accounts. Is that it?
Rajat: It’s to manage those accounts, delete those accounts.
Andrew: Tell me about managing. I keep saying provision and deprovision. There’s that thing in between that I always ignore. Tell me about that.
Rajat: So it’s basically the management of the device itself, so making sure that the password policy makes sense, making sure that it’s up to date, making sure that it’s secure. So that’s when we talk about being able to manage that. Overall, the concept of management is really when it comes to what we do, it really centers in on you have a bunch of people. You have a bunch of different IT resources. You’re creating a matrix of those two combinations, and you’re trying to understand what are those two connections. You have a person that plays a role in your organization, there’s a bunch of IT resources. What should they have access to? As an IT person, you’re sort of managing those connections. That’s really the concept.
Andrew: Okay. Let me talk about my first sponsor and then I want to come back and ask about this mistake that you made at every single company. I don’t know how you keep making the same mistake, except JumpCloud, and what we can take away from it. First, the sponsor is ActiveCampaign. Do you know ActiveCampaign, or am I about to blow your mind with this?
Rajat: No, you’re about to blow my mind.
Andrew: Fantastic. Good. You know about email marketing, right?
Rajat: Of course.
Andrew: There are tons of different providers for email marketing. The problem is that a lot of them are very simplistic where you just can broadcast email newsletters. Nobody wants email newsletters, but also content in them may not be appropriate for whoever it is that you’re sending it to. Or they’re super sophisticated where they will understand that you’re an IT professional. They’ll understand what software you’re using, and then they’ll automatically send out the right message, but they’re insane to manage.
ActiveCampaign said, “You know what? What if it was simpler? What if we could actually say . . .” Do you guys have two different products?
Rajat: We have one product. Everything is one product.
Andrew: Imagine if you had two different products. Imagine if you had one for small business, one for enterprise, small business meaning startups because you just want to cultivate them and enterprise because those are your biggest and sweetest customers. Imagine if someone like me just kept going into all the small business articles on your website. You guys have lots of great content. I was watching videos about how five people can actually manage their accounts properly. You could tag me and you could then start to email me differently from someone who is looking at enterprise. Maybe someone who is looking at all the enterprise articles and enterprise videos would get an email that says, “If you want a demo, we have people standing by to do a demo. Here’s our calendar for availability.”
Someone like me, who’s just getting started, you could say, “You may just have a 5-person operation, but you have to think about when you have 50 and 500 people, and here’s how to get started right. In fact, we’ll even give you a free account until you get to your 10 people.”
So you’re messaging each one of us differently based on what we are seeing on your website. You can do it based on what we click, etc.
If it’s a demo, you can even have ActiveCampaign fire off a text message that says, “You’ve got a demo scheduled with Steve right now. Here’s the phone number so you can call up and dial in.” That’s the kind of automation that they have. Does that make sense?
Rajat: Yeah. That’s pretty cool.
Andrew: I feel like I should just be an explainer video.
Rajat: Well, you explained our business really well, really simply too.
Andrew: Thanks. I was working on it. So anyone out there who wants to try this, I’m going to give you a free trial at a special URL. I’m also going to tell you that if you do sign up, you’re going to get a month of free service, which means your second month, actually, is going to be free. I think that this stuff is so powerful and easy that you can get started on your own, especially if you’re a Mixergy listener or a Mixergy interviewee, but if you want it, I urge you to take advantage of the fact that they’re going to give us two free one-on-one sessions with their consultants.
So you get on a call, you tell them what you’re doing. They tell you how you can achieve it with ActiveCampaign. They send you out into the world to use it. Then you come back and you have a second session with them to make sure that you’ve used it and to adjust what you’re going to do next.
Finally, if you use this special URL I’m about to give you, you’re going to get free migration. So if you’re with this simple, overly simplistic or overly complicated email provider, ActiveCampaign will migrate you for free. So here’s the URL. It’s ActiveCampaign.com/Mixergy.
All right. The mistake, do you know the one that I’m talking about? I saw you smile as I mentioned it.
Rajat: I think I do. Yeah.
Andrew: What was it?
Rajat: I think you were talking about sales and hiring salespeople if I remember right.
Andrew: That’s actually not it. Tell me about that mistake.
Andrew: Tell me and I’ll come back to the mistake I have in my notes.
Rajat: We’ve got a bunch of them then. The sales mistake is I think we’ve always scaled sales much faster than we needed to, the sales team, if you will. It’s a common mistake. We talk about it a bunch in the book, which is you feel like you’ve got some traction, and so you scale up with fast. You hire a bunch of different salespeople. You say, “Okay, we’re going to go really hard.”
But the product is not quite there. The positioning is not quite there. The messaging is not quite there. The marketing plan is not quite there. Everything is not quite there. So it’s sort of this false . . . you get this early false hope of this thing can scale. It’s that first initial wave of customers that give you that. Usually, we can go find that first wave of customers pretty well, but it’s that second wave or third save that becomes really hard.
Andrew: At that point, you should be scaling, but not sooner.
Rajat: Those are the hard-won lessons of you should really wait to scale sales until you’re really confident that you have product market fit. It’s going to go.
Andrew: On StartupPlaybook.com, the site that you guys created for the book, you have quotes from phenomenal people. One of them is from Dharmesh Shah. Dharmesh at HubSpot, I thought he created an army of salespeople really fast and it worked for him. Do you have any insight into whether he did that or not?
Rajat: I don’t. My guess is that Dharmesh probably had product market fit very fast. So if you feel like you’ve got it, then it’s time to go. That makes sense.
Andrew: So that’s a distinction. You’re saying at times in the past you had this need to get customers to find product market fit and you scaled up too fast.
Rajat: Yeah, because the conversation around the board table is, “Great, we’ve got some success. We’re starting to scale. We need to go bigger. We need to go harder. We need to grow the business faster.” So, the VCs are like, “Hey, you need to hire more salespeople.”
Andrew: Give me an example of a company where you did that where you regret it?
Rajat: I think all of them, except for JumpCloud is the only one where we haven’t done that. We haven’t scaled the sales team as much because we have much more self-serve product.
Andrew: At Yesware you guys did that too, you had salespeople?
Rajat: We did have salespeople. We didn’t right away, but then very soon thereafter, we started to scale salespeople. We went to larger enterprises. It’s one of those things where it’s a drug. You get your first big deal and you’re like, “I can do more big deals like this.” You can achieve your goals faster if you do bigger deals, right? But it doesn’t always work that way. That one deal that you got may be an aberration. It may be that false point. It may not be the start of a trend. It just may be one data point.
Andrew: I didn’t realize that Yesware would have salespeople. I thought it was all viral marketing. Didn’t you guys also have a message on the bottom of emails that used Yesware?
Rajat: We did, yeah. A lot of the first phase of the company was that, and we got a lot of customers that way. But then we also started to get bigger customers. We had some fantastic bigger customers. Then that pushed us to go more and more salespeople and go upmarket.
Andrew: The salespeople are so hidden in my view of the startup world. It wasn’t until I moved to San Francisco, for example, that I realized that I remember the second week in here, I had dinner with someone that happened to work for Box but was a friend of my wife’s. I said, “What do you do?” He said, “I do sales for Box.com.” I said, “What do you mean?” He started telling me about this whole process.
I forget specifically what he said, but basically, we all know the drill now. You see a domain from a major company. You start calling them up and you say, “Can we do a demo?” And you get into the rest of the company. I had no idea this existed. Who’s out there who’s good at talking about that, at how to set up and scale a sales team for software? I don’t think we talk much about that.
Rajat: Oh, I think there’s amazing people. I remember Ben Horowitz’s book. He talks about a few different people.
Andrew: “The Hard Thing About Hard Things.”
Rajat: “The Hard Thing About Hard Things.” He talks about some of the great sales leaders that he’s hired and the process and the approach. There’s people in the Valley who have done such a great job of it. Ben’s companies in the past have done a great job of it. But there’s a lot of enterprise sales-focused companies in the Valley that have done an amazing, amazing job.
Andrew: I’d love to hear more of that how to. I’d love to know who the author is that they’re reading, what’s the process, what’s the minimum viable product type of message from that world. I know that you’ve got opinions about that which I’ll get to in a moment, but here’s the thing my producer put down here. Maybe you guys are talking about the same thing. She said building too quickly. Did you mean just the salespeople, or were you in the past making a mistake of building overall the company too fast?
Rajat: I think we were talking much more about sales in that concept. There’s always a chance that you can build a company too quickly and you lose control and it doesn’t end up working out very well. That can happen. But I think that was less of an issue. It’s always hard to hire engineers. There’s almost a governor on your growth because of that, unless you’re a Facebook, you’re an Uber where the dollars don’t really matter, so you can hire at a ridiculous pace. Most companies can’t do that.
Andrew: What about the product, though? I kind of had the sense that maybe you’re saying we might have overthought the product. You weren’t. You were smiling as I said minimum viable product because you said, “Hey, look, I’m selling to enterprise. I can’t give them a minimal promise of a future value,” right?
Rajat: Yeah. Minimum viable product is an interesting term, right? It’s really taken hold. I don’t love that term. I think it’s a misnomer. I think you really want to focus on minimum sellable. It really depends on your market. If you’re selling into enterprises, I think it’s unlikely that you can show up with a product that’s so lightweight, that you built over 90 days or maybe a little bit longer. It’s probably not reality that you’re going to get much traction on that. So if you’re selling to those style customers, you need a very deep product. Now, if you’re selling to consumers, minimum viable might make a lot of sense. You might be able to just get a very lightweight product out there and iterate it on it a bunch.
I think in the book, we really talk a lot about this concept of minimum sellable and really taking your time at the beginning of the company to build a product that really matches up to what your customers want. So we talk a lot about finding that group of customers that’s a small set that you believe is representative of your overall project and just build an amazing product for those folks. Then you can always scale up over time. But get it right for that group. That takes time. It takes a lot more time than you think.
Andrew: How long did it take you?
Rajat: At JumpCloud, probably two years.
Andrew: Two years of building it?
Andrew: And constant conversation with your clients?
Rajat: Constant, yeah. People are like, “It doesn’t do enough yet. We need it to do more, or we need it to do it this way. We like this feature. We can use this. This is great. But you need to go build these other things too.” It’s constant. That doesn’t mean that we couldn’t generate revenue during that period of time. We did generate some revenue, but it’s not a lot. Your focus at that time isn’t about revenue. It’s about let’s build a product that really matches the needs of what these people want.
Andrew: So how did they change your vision of the product as you had conversations with them?
Rajat: They come up with so many things that you’ve never thought of.
Andrew: Do you remember one?
Rajat: What would be one good example? Not one coming off the top of my head.
Andrew: I am kind of putting you on the spot here. Again, I’m looking at my notes here, and you were telling Ari, “The first product was pretty simple. We took the concept of an LDAP . . .” I Wikipediaed what LDAP stood for. “But we took the product of it, we took a solution that was open source LDAP and we’re good. We got it up and running.” I thought what you guys did was say, “This thing is open source. People needed hardware to make it work. We’re going to remove the hardware and keep the rest of it and then we’ll outsmart the system.” But that’s not it.
Rajat: Well, that was just the first initial. We knew that that wasn’t going to be enough, but that was the first thing we did.
Andrew: But that didn’t take two years.
Rajat: That didn’t take us two years. That took us maybe six months.
Andrew: Six months. Then you sold that. Did you get a client to actually use it?
Rajat: Yeah, we did. But it was such a small piece of the overall product that people wanted. It’s basically we created a relationship with a set of customers and we said, “We’re going to solve one small minor pain point for you, and then we’re going to grow with you. We’re going to do a lot of the things that you want done. Some of them we agree with, some of them we don’t. We’ll figure that out together, but we’ll go build a product that covers what we think is the opportunity and what you think is the opportunity, but we’re going to start in one specific spot.”
Andrew: So maybe then the first was six months, not two years. But the right product was a two-year journey. The first clients came from your personal network.
Rajat: Yeah. A lot of them came from personal network. This is why you get the false hope, right? We got our first wave of customers, and then all of a sudden, we’re like, “Oh, now we can scale, right?” But we resisted that urge, but at previous companies, that was the thing that we did. We said, “Okay, we’ve got a bunch of customers. This is great. Let’s go scale. So, we’ll hire a bunch of sales people. We’ll do a bunch of marketing. We’ll be much more aggressive and the revenue will follow.” Well, those first few customers, they bought because of our relationship with them, because we worked with them very closely on the engineering front, but you can’t scale to be a large company working with every customer in that form and fashion, so it’s false.
Andrew: Who were the first customers? Do you remember them?
Rajat: CrossFit was one of them. I’m trying to remember. We have a lot of customers now. I can’t even remember all of them. A lot of them were local companies here in Boulder. Sovereign is a good example. Full Contact was another one. Yesware was, of course, an early customer.
Andrew: Yesware the company that you cofounded. Full Contact, a company invested in by Brad Feld.
Rajat: Yeah. A lot of the Foundry Group companies became our early customers and folks who gave us just tremendous feedback.
Andrew: So let’s talk about Brad Feld. You told our producer, “I want to raise money here. I’ve got a track record.” Dude, I’ve got to tell you, I have my producer put together a list of companies that people are a part of. This timeline is maybe the longest that I’ve had here, a full cofounder, it’s not like advisor, advisor, advisor. There’s some people who on their LinkedIn profile, they’re advisor to everybody. Why can’t you just say, “I want to raise money from these 20 people,” and go get your 20 or let’s say three people and go get your three. What was the issue?
Rajat: Well, there wasn’t with Brad. Brad believed in it. That’s been the great thing. Brad was fantastic and the Foundry Group team, Seth now, who’s on our board, they’ve been incredible supporters of us. It was when we went to get the round outside of Foundry, where people are like, “I don’t think this is going to work.”
Andrew: I know Jason Calacanis likes to say, “bet on the jockey, not the horse,” which is actually not the way it works in horse racing. We don’t know who won any of these. We know the names of the horses. We don’t know the riders. But it is the way that people invest. They weren’t just saying, “Hey, here’s a jockey who’s found all the right horses. Here’s a person who’s had all these hits,” just blindly put money into him? You don’t get that.
Rajat: It’s not true, right? That’s the problem. That’s the conventional wisdom, but it’s not true. It might be true in certain cases that they bet on the jockey, but it’s largely untrue. It’s a nice statement for people to say that, oh, we always bet on the team, but it’s not true.
Andrew: They don’t. They were afraid of what?
Rajat: They were afraid of a lot of things. First of all, you’re a company going up against the largest software company in the world that has a complete lock on the market. We’re out of Boulder, Colorado. It’s not San Francisco. There’s a number of reasons that we heard. It comes down to ultimately does it match a pattern that they’ve seen before. It probably didn’t match a pattern that they’ve seen before.
Now, we were fortunate that we ran into this firm called OpenView out of Boston. We matched the stuff that they really look at, which is enterprise, B2B, expansion-stage SaaS companies. They said, “We understand what you’re doing. We understand your challenges. We understand your problems. We understand what the movie looks like here and how it’s going to play out.” They got excited and they invested.
Andrew: This is OpenView Partners?
Rajat: Yeah, OpenView Partners.
Andrew: I didn’t realize that. They’re not on your AngelList profile. But I do see Battery Ventures, Golden Ventures, Google Ventures, which then became GV.
Rajat: Those are investors in Yesware.
Andrew: And IDG.
Rajat: Yeah, IDG. Actually, IDG is now Ridge Ventures, and they are an investor in JumpCloud as well. So, Pat Kenealy, who has been a longtime . . .
Andrew: Oh, I’m looking at Yesware. I clicked on your profile. It took me to Yesware on AngelList.
Rajat: Pat has been somebody that we’ve worked with for almost 20 years as well. You build all these great long-term relationships. Brad and Pat have worked together on a number of things.
Andrew: Okay. Now I see it. I still don’t see Open Ventures.
Rajat: OpenView Partners.
Andrew: This is the problem with AngelList. This is why I have to talk to the founders directly. Galvanize Ventures and Foundry Group. It’s interesting that you had a challenge. Do you think, in retrospect, that if you could go back and rephrase it, that you’d find a way to explain this to them to convince them?
Rajat: I don’t think so.
Andrew: It’s just the way it is.
Rajat: I think it’s the way it is. At the end of the day, we were a company that had some traction. We had some interesting technology. But we didn’t fit a pattern for them that really was something that they had conviction around. That’s okay. Ultimately, we did find the right partner for us, which is two major partners, Foundry Group, who has been with us since the beginning, and the OpenView Partners. OpenView, they understand our size, our scale, our type of business incredibly well. So, when they saw us, they were like, “Yeah, this is what we do for a living. We work with people like you”
Andrew: Why don’t you feel comfortable saying what your revenues are? I don’t have a problem with it. I just feel like companies that sold to enterprise seem not to want to talk about it. I’m trying to understand why.
Rajat: We sell to SMEs mainly. I think it’s the wonderful part of being private. You don’t have to share all those things that public companies do. You don’t have to have that same level of scrutiny around all those factors. We do a lot of different things that we don’t share publicly. For us, we’re a security business, so we also try and generally keep a low profile and we try and have our customers keep a low profile too.
In general, it’s been for me much more about let’s talk about the substance. Let’s deliver a great product, let’s deliver a great experience. It’s not really about how much money we’ve raised. It’s not about the revenue. It’s about let’s make sure we solve that problem for that customer and do a great job. As long as we do that, everything else will take care of itself. That’s what we talk about with our team a lot. We really do believe in that. If you build something of real value for your customer, you’re going to be just fine.
Andrew: I’m glad also that you corrected me and said you guys go after small to medium-sized businesses. I think the reason that I always think of you as an enterprise company is because you keep talking to the tech professional or the IT department, and I don’t think of small businesses as having an IT department. Or is it just the content I saw?
Rajat: No, you’re right. Every small business has somebody that does this. Every single company on the planet in some way has to connect their users to some IT resource, whether that’s their computer, whether that’s G Suite, Office365, somebody’s doing it. Whether that person is the owner, the IT person, or an engineer, it varies. That’s the interesting thing about this opportunity is that in SMEs, they have a huge problem doing this and they want a lot of efficiency.
They don’t have a ton of people and we can offer them that efficiency, that control and that security. If they don’t have an IT person, there’s a whole group of MSPs out there who basically go and manage these companies. So they love our product too, because they’re like, well, we can use this product to manage our customers.
So that’s why we love this category. It’s a really super interesting category from that perspective, because you’re offering a tremendous amount of value to the customer. You’re unlocking their ability to go use technology, ultimately.
Andrew: MSP, that’s managed service provider. They’re these businesses like I’m assuming law firms, for example, don’t want to have to deal with their own IT. They don’t want the office manager to do it. So there’s a company out there that does it for them, and if there’s a computer that needs to be set up, they do it.
Andrew: I’ll talk about my second sponsor, and then I want to jump into why you guys don’t do cold calling or didn’t in the beginning and what you did instead. Second company is Toptal. Do you know Toptal?
Rajat: I don’t.
Andrew: I always think that everyone knows Toptal. This is a company that Andreessen Horowitz backed. They’re just growing phenomenally. Here’s their premise. They said, look, hiring developers is really tough. What if we put together these really challenging tests that will draw the best developers into our network, and then when a company needs to hire a developer, they just come to us and we’ll talk to them and then we’ll go and match them with the right people in our network, who they can work with part-time, full-time. Sometimes even a whole team of people will get scaled up at once.
Because of that, they’ve just been growing phenomenally. They also won’t let me talk about what their revenues are, even though I think it’s impressive. They’re here at Mixergy for a long time, about two or three years of ads constantly because it’s just been doing so well with our audience. So if anyone out there is looking to hire a developer or a team of developers full-time, part-time, project basis, whatever it is, I want you to go check out this URL, where they’re going to give you 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period of up to two weeks. They really want to make sure that you get the right person.
Go to this URL and just set up a conversation with someone at Toptal. If it’s not a good fit, they’ll tell you. If it is, they’ll tell you and then you don’t have to hire someone unless you love them, and once you do, you can often get started within a day or two.
Here’s the URL, it’s Toptal.com/Mixergy. Top as in top of your head, tal as in talent, Toptal.com/Mixergy. I love that I get to introduce you to stuff.
Rajat: I know. That’s pretty cool.
Andrew: Cold calling, what is the traditional model and then why did you eschew it?
Rajat: Yeah. The traditional model of selling into businesses, let’s say, it’s mainly selling into enterprises is that you do a bunch of cold calls. You might send them direct mail back in the old days. But somehow you’re trying to get them to take your call, take your meeting and appointment setting, if you will. You’re going to talk to them on the phone or do a presentation and you’re going to try and get them interested in what you’re selling.
We just always looked at that for what we were doing as a hugely inefficient way to generate clients and to share with them what we’re working on. We sort of said, “Let’s flip it on its head.” From our perspective, the person that we’re going after is the IT admin, the IT person, and these people are incredibly savvy. They want to know what it is we’re doing at a technical level. They want to play with the product. They want to actually touch it and see does this work for me?
We said, “Well, why don’t we just try and drive them to try the product themselves?” We’re not going to sit there and sell them. Let the product sell itself, if you will. But we have to let them know it exists. We’re going to let them know it exists by sharing with them some of the problems that we see out there and how to solve those problems through written content. So just a different way to do it and we found that to be much more efficient for us.
Andrew: Meaning blog articles that explain how to handle what?
Rajat: How to build a cloud LDAP system or how to connect a Mac to Active Directory or how to build a secure Wi-Fi infrastructure. There’s all these problems that IT people face that we can actually have some insight into helping them with and so let’s write about it. If we’ve done a good job of sharing our knowledge and our information, then maybe that generates some credibility with them to go try our product at some point.
Andrew: So I’ve had pluses and minuses with your content strategy. The plus is I emailed you before we started. I was watching this video by what’s his name?
Rajat: Greg Keller.
Andrew: He’s your product guy, right?
Rajat: Yeah, he is.
Andrew: What’s his official title?
Rajat: Chief Product Officer.
Andrew: Chief Product Officer is just standing at a whiteboard, not great video quality, which I’m fine with, and the reason I know it’s not great video quality is because I watch so many of his videos, the audio level is different on each one, so I have to raise and lower it. But he explains things super clearly. I wouldn’t understand what you guys do unless you had this kind of content out there. It was phenomenal. I had to write you a love note about how great your videos were.
Rajat: Which I appreciated.
Andrew: Then the other thing was I was looking for competitors to JumpCloud. You guys are so SEO’d up the wazoo that every time I look for a competitor to JumpCloud, it’s basically an article written by you.
Andrew: JumpCloud competitors, here is the first three responses, “Differences Between Better Cloud and JumpCloud Directory as a Service,” that’s on JumpCloud.com’s blog, “Active Directory Competitors,” that’s on JumpCloud.com/blog, and “Cloud Identity Management Competitors,” JumpCloud.com/blog. Where in your background do you get this content marketing strategy? I don’t understand how you bring this to such a tech heavy company.
Rajat: There’s nothing in my background, and there’s nothing in our background as a company that taught us this. I think we just sort of stumbled upon it. We said our profile of the person that we’re trying to work with and sell to is they’re looking for real data, real content, real information, and it has to be high quality. We don’t think a lot of slick marketing or sales is going to work with that particular audience. It might work with a different audience, but for our audience, I don’t think it’s going to work.
I think what they want is they want to know the truth. They want to know detailed explanations, technical explanations about how to solve their problems. If we can do that in a credible way, then maybe they’ll give us a look at some point and they’ll say, “Maybe these guys could actually help me.”
Andrew: I’m looking at a page “Active Directory® Competitors.” At the top is reserve a seat for I guess it’s a webinar that’s really prominently displayed there. There’s a button that says Demo also go my attention, where I can I guess schedule a demo or try it for free. The whole thing is about we want to show it to you any way you want to see it, hit this button, tell us a little bit about the size of your organization and your needs, and then we’ll set you up with a way to see it. From there, you follow up often with a human being and a sale. How did you come across that? What was the process to develop that sales process?
Rajat: It goes back to the person we’re selling to. I don’t believe they’re going to buy a product like our product without actually trying it. We could try. We could try and hand wave and say there’s all these people who use it and you should buy it sight unseen. I just don’t think that’s reality. I think they want to try it, so we have to make it super easy for them to actually engage with the product. If they try the product and they like it, then they’ll move forward because they believe it’s actually a quality solution. If they don’t like it, then we should make it easy for them to throw it away, and we don’t impact them.
Andrew: How do you try that? I wish I’d gone through a trial to get a sense of how do I can try creating a user directory or a team directory in software and then throwing it away?
Rajat: Yeah. It’s actually super easy. You can just sign up for an account, and then you add a few users. Let’s say you have G Suite. You just connect them to G Suite. Or you want to connect them to their laptop, you can . . .
Andrew: You guys have two-way sync with G Suite. So every user in G Suite would automatically have an account in JumpCloud. Am I right?
Rajat: We import it in, and then we become the controlling authority for that. Then if you want to add a new one, then you can just create that person in JumpCloud, and then it automatically gets created in G Suite. The same thing can happen with your machine too effectively. If you have a new Mac that you got, then we can create your account on that Mac.
Andrew: I see the login to the Mac. Then the software that goes on the Mac, you guys also control that?
Rajat: Yeah. Basically, you put a little agent on your machine, and then we control the user access to that machine.
Andrew: I don’t want to sound like a Senator questioning Mark Zuckerberg with my basic questions . . .
Rajat: Yeah, exactly. he got two days of it.
Andrew: But if one of my users then uses Google’s G Suite to log in to new software and create an account there, you guys manage that and we could delete them if I want to, right?
Rajat: Straight off of G Suite, yeah, we can delete them from g Suite.
Andrew: Then couldn’t I do that as a G Suite admin anyway if they go and create another account that they sign into with G Suite?
Rajat: Of course, you can do that with G Suite, but you can’t then do that on their Mac, or you can’t do that on AWS, or you can’t do that on their on-prem Jira, Atlassian account. It sort of cascades from there. You can do it inside of G Suite. Google does a wonderful there. AWS does a wonderful job for AWS. Microsoft O365 does a wonderful job for O365. Who’s pulling all that together?
Andrew: And I can with Google log in to Amazon Web Services. I see what you mean.
Rajat: Why would they want you to? Google wants you to use Google Cloud Platform. AWS wants you to use their products. I think this is a very interesting part of our space, which is there are all these big players who have very specific interests that are aligned to themselves. From our perspective, we said, “What’s the alignment with the customer? What do they want?” We think the world has moved towards multiple platforms. If you’ve moved to multiple platforms, then you need something that integrates all those different platforms together in a neutral way.
Andrew: Macs, Windows, Linux also. Are people using Linux that much? Is there that much use for Linux at a desk?
Rajat: Yeah. All of our developers have Linux laptops. We could be different than other folks, but I don’t think so. I think that’s pretty common.
Rajat: We don’t do iPads, but we don’t see a lot of iPads for our size company. We’re not using iPads internally really for much of anything business related.
Andrew: Let me go back a little just to understand you. You said that there was part of school that was bullshit classes. What part and what did you do about that? Just to get a sense of who you are as a person.
Rajat: I don’t remember what Ari is talking about, but I told her that when I went to high school, basically I finished up in three years. Basically, I did half my day at this new school that was created, a magnet school for math and science, and then the other half of the day was at a public high school. So it was like a really interesting education, because half my day was going to just doing math and science at this school that’s totally different than the public school. Public school, I’m doing basically English and social studies, phys ed and things like that. As I got through school, I was three years in and I said, “I’ve basically taken all the credits. Why am I sticking around for another year? What value is there?”
Andrew: You just left. but you did graduate, right?
Rajat: I did. They didn’t really want to give me my diploma. At that point, I didn’t really care because I’d been accepted into MIT. They did end up giving me my diploma. But it was an interesting experience, because it was different than the normal process. When it’s different than the normal process, people don’t necessarily know how to handle that. So the first inclination was well, “You can’t do that. You can’t leave after three years. We don’t do that here. You go for four years.” But we’re like, “I’ve done all the courses. What am I doing? Am I just sticking around for courses that don’t really matter?”
Then the next point was, “Well, okay, you can do this, but we’re not going to give you a diploma because we don’t want to make it that everybody else will start doing this.” Then it was like, “Well, let’s rein you in, because oaky you’re going to go do this. But we don’t anybody else to get any ideas that they could do this.” Then finally they relented. But at that point, when they relented, it didn’t really matter, because I’d already been accepted to MIT.
Andrew: And you just did it because you loved the challenge and you loved learning? Is that what it was? Or were you someone who didn’t have a lot of friends and this was your way of dealing with the world?
Rajat: No, it was more about challenge. For me, it’s always been about how do you be the best at what you do? At that time, the best was I was a student. How do I be the best at being a student? I figured out I can graduate in three years and then I can go to a school that I want to go to, and that’s a really hard school. So I got challenged a lot there. When I was there, I did different things to challenge myself in different ways. Ultimately, it ended actually with me starting a company in my senior year, which turned out to be a different challenge. Then you’re on this journey of how do you become a great founder and CEO over time? That’s a hard thing to do.
Andrew: I feel like we didn’t cover . . . I feel like your PR people might not be happy that I didn’t cover enough about “The Startup Playbook,” but I feel like you and I had a good conversation that the audience is going to appreciate. Is there one thing we should tell people to . . . that we can people . . . here’s one thing I’m going to point out. You guys picked the name “The Startup Playbook.” There are like three other books already called “The Startup Playbook.”
Rajat: There are. We just felt like the name was the right name for our book. It really is just a playbook. I think the core thing about the book that we hope everybody takes away is this concept of we sort of call it vetting your idea and really going deep. It’s a big chunk of the book. I really hope entrepreneurs find that valuable. First-time entrepreneurs I think will find it really valuable. It’s a way to really make sure that what you spend your life’s time on is worth it. Not everything that we all come up with is worth our time. This really is just like let’s really go deep on our concept to make sure it’s the right one to focus on.
Andrew: It’s that vetting process, the circle that you guys explain in the book.
Rajat: That’s the vetting process.
Andrew: If you guys out there want to try it, go check it out at Startup-Playbook.com or frankly go to Amazon or any other book place. It’s all over there. If you want to win, I’ll tell you that now any time I type in “Startup Playbook” anywhere, your book is the only one that comes up. So I don’t have to tell people to watch out that they’re going to get the wrong book. It’s an honor to have you on here. I’m really glad that you’re doing this.
I feel like you know Warren Buffett wants the richest people in the world to donate as much of their money as possible. He’s working on that. He’s actually actively making phone calls. So is Bill Gates. I feel like the money is going to disappear 100 years from now, but the ideas that these people have had, the thought process is what is even more valuable and will outlive them maybe for thousands of years. I’d love to see more people like you who have done a lot say, “Here’s my thinking of how I did this. Here’s what I did that is useful for the next group of entrepreneurs.”
You did it. The book is called “The Startup Playbook.” Guys, go it, let me know what you think of it. JumpCloud is another place you might want to go check out. I had no idea this technology existed. Frankly, I knew about your other stuff. I didn’t know about JumpCloud, and I’m glad that I got to know it.
Finally, the two sponsors who I’ve had here who make this interview possible is, number one, the company that will help you do email marketing right. It’s called ActiveCampaign.com/Mixergy. And the second one will help you hire right. It’s called Toptal.com/Mixergy. Cool. Thank you so much.
Rajat: Thank you. Thanks for having me.