Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. That was a little weird twitch that I just did, Isaac, with my eye. I thought I had four hours of sleep. It turns out I only had two hours and 15 minutes. And I know because my watch is set to tell me how much sleep I get because I’m kind of obsessed with sleep tracking lately. And the reason I got so little sleep is because my wife is here in New York City for a company event. She works for PagerDuty. And she asked me to come along with her for the dinner that they’re doing tonight, for the event they’re doing tomorrow morning and I said sure.
And so we came in on an overnight and the reason we came in on an overnight was I didn’t want to miss work. I had stuff I wanted to do. So I flew in, Isaac, overnight. I got in here at, what, like 5:30. Shaved, showered, and rented a Regus office so that we could do business here today, Isaac. And the thing that I’m most excited to talk to you about is this. I’ve actually talked . . . this is Isaac Oates who I keep referring to.
I talked to Isaac’s cofounder in his previous company. These two guys created a company. They sold it to Etsy. They looked around Etsy. And as they were there, they realized, “Hey, you know what? I’m seeing some things from Etsy. I’m learning some things from the business I started. I see some problems with the world that I didn’t know when I set out in business, and I’m going to solve them.”
And for Isaac, the problem that he noticed was a problem that I noticed as an entrepreneur the first time I hired people, and then every other time after that, it’s a pain in the butt to deal with payment to people. And let me give an example, Isaac, of what I went through. I won’t talk about the competitor that I use, but I went to this company that everyone uses. I’m sure you’ll talk about them later. They freaking people, they sent a dude to my office, which I don’t dislike hanging out with dudes. I don’t need the guy in here. He had me fill out forms and sign them. His one like acknowledgement of the future of technology in the world that I live in was I think I got to sign it using some kind of whacked out iPad knockoff that he had.
And he’s like, “Look, we’re digital.” I go, “All right, okay.” And everything from then on was just as antiquated and weird and I thought, “Huh, it kind of sucks to hire people. I don’t think I ever want to do it again.” And so I didn’t.
Isaac said, “You know what? It kind of sucks to like pay people. I think I could solve this. And as he talked to people he realized, “Hey, this is kind of a problem that other people want to solution to.” And he built up this business. The business is called Justworks. I’ve heard about them a lot. And, Isaac, I got to be honest with you. I heard about you a lot because you raised so much freaking money, which is an indication that people believe in you, but I wonder about the business underneath it. What is it that’s inspiring them?
We’re going to find out how you got the idea, how you got your clients. The really interesting thing for me is how you got clients by meeting them in person. That thing was pretty interesting and then how you grew beyond that using Salesforce and really an organized sales process. I want to learn all that from the founder of Justworks. Justworks is . . . here’s his quote, here’s my quote. “Justworks,” he says, “is an HR platform for small and growing businesses.” Already he’s like thinking bigger beyond what I’m about to say. For me, I would consider it at this point largely payroll and benefits software. We’re going to find out . . . Oh, wow, you seem a little uncomfortable, by the way, that I said it, but not super uncomfortable. Am I right, Isaac?
Isaac: We’re good. I think . . .
Andrew: Yes? Uh-huh?
Isaac: No, you know, we always talk about in this space how this us a sort of like a low interest, high consideration products. You know, it’s really complicated, but it’s not that exciting. And so I think it’s really hard actually to capture sort of like all it’s in something like this because it just isn’t that exciting in many cases.
Andrew: You know what? You’re right. If you need it, it’s a pain and it sucks and then you still not enthused by it. But you know what you do that makes it exciting? You integrate with Slack. There’s like a Slack bot, right?
Isaac: It’s not a Slack bot. Those are just people. We offer support through Slack. Yeah, yeah. Maybe we’ll get into this later but we made a decision a couple of years ago, we wanted to be able to talk with our customers, you know, whenever and wherever they were. So we offer support in a bunch of different ways, including email and the phone and text, but we also use Slack. And some people really, really love it. In fact, I was at a party recently and somebody like came up to me and they told me that they love Justworks, which was amazing. And then they were like, “The reason I love it is because you’re on Slack. And I can just talk to somebody whenever I want to.”
Andrew: Yeah. And you know what? It’s so easy to dismiss it and go, “It’s kind of silly.” When people talked about the new Apple credit card, there was this big thing about how and now you can iMessage. You know, just text the Apple support team. I don’t think they should be dismissed. Getting on a call and waiting for somebody to answer your call and then having to dedicate the time to the call is not always the way to do things. Anyway, so I see that you found some ways to understand us. And that’s exciting, much more so than HR platform payroll benefits and so on.
We could do this interview, by the way, thanks to two phenomenal companies. The first will host anyone’s website right, it’s called HostGator. And the second hates when I call them an email marketing company, because they do so much more. But I don’t know how else to explain it right now. So I’ll tell you it’s called ActiveCampaign and later on I’ll tell everyone about them.
Isaac, I’m going to be open. You told our producer your revenue. Your team told us, “Guys, just ease off the freaking revenue. Tell the story. Nobody cares about the number.” Let me just ask you what do you feel comfortable talking about? Just give me a sense of how big you are beyond how much funding and then I promise I won’t pounce.
Isaac: Yeah, so we actually had . . . this is a little bit inside baseball. We had a really great meeting inside actually after that conversation with your producer because we kind of want to straighten out like what do we actually say publicly and what don’t we. And so we built this cheat sheet, I have it right here, says what I can say what I can’t say, which I think is actually really important because we have big ambitions. You know, we maybe we’ll be a public company someday, and you have to be really careful about what you say. So I’m actually just going to read you this quote that’s been approved. “We’re currently in the $60 to $80 million range for annualized revenue and continue to see high double-digit growth year after year.” Sounds kind of like an earnings call. But anyway, that’s where we’re at kind of like [60 to 80 range 00:06:26].
Andrew: And the truth is I’m not looking for your tax returns. I think what most people go into this wondering is, “Is this business just getting off the ground?” Which I know it’s not? “Is it someone that’s just getting a lot of funding with the hope that one day it’ll get customers,” which I know it’s not? “And if it’s not those things, and how big is it?” And you’ve given us enough that we can work on. Why don’t we kind of go back in time? Actually, you know what? I was prepared for some PR bullshit. That was actually good, helpful, clarifying and I appreciate it. Let’s go back to understand where you got this idea. You started what company together with a past guest here at Mixergy?
Isaac: Yeah, so we started a company called Adtuitive. It was actually called Adtuition at the very beginning. But we renamed it because it sounded like you were paying for college by advertising. And so we started the company in mid-2008 and I joined. As my friend, Jason and Greg, were already working on it. I was at Amazon at the time. And I had actually called Greg to see if he would work on an idea that I had for paying for parking text. That was my idea in 2008. And Greg was like, “No, I’m already working on this other thing with my friend Jason coming out with us,” and ended up moving to New York and working with them on Adtuitive.
And we worked on it for about a year and a half. We had this contextual ad engine that would allow you to advertise really specific ads, you know, nested user-generated content. And actually that was when I called a huge payroll company that is pretty possibly also the same payroll company that you talked with.
Andrew: I don’t know who you called. Actually I do know. I’m going to tell you who I called, ADT. It’s the same one that I used like 20, 50, 100 years ago.
Isaac: It was actually ADP.
Andrew: ADP. Oh, right, ADT was a security company, right?
Isaac: And we can talk about their marketing. But anyway, so we called ADP as well. And it was, like, incredibly archaic process. My background is in payment processing, electronic payment processing, and so a lot of experience with that. And it was like all these forms and faxing and bike messengers. And I was just like, “I don’t understand like how does this complicated just to send some money to someone’s checking account.” And so a couple years later when I had decided to start another company, I kind of knew this was like a thing to go after.
Andrew: Your background was you were a senior product manager at Amazon and before that, you were software engineer at Amazon. Is that where you did it, where you were working on payment processing?
Isaac: That’s right. And we worked on a team called Third Party Payments or 3PP. And I started there in 2002. I mean, Amazon was way smaller then of course than it is today. And it’s like this really great team because it is a company that had been acquired called accept.com. Amazon bought them I think in 2000. And so when I came on board in 2002, it was the sort of like post-acquisition team. They still kind of operated a little bit differently than the rest of the company, and it was actually a really awesome team to be on. And I learned a ton about how to move money, you know, between banks and credit cards and everything.
Andrew: Was this Amazon’s like payment button that people can put on their websites?
Isaac: Not exactly. It was . . . I did work on something like that later. But the main thing that I worked on was it was really the payment processing for their marketplace business. So at the time, this is like you could buy a new book or you could buy a used book. If you bought a used book, our system would charge your card and get the money to the seller and collect the fees and all that kind of stuff. So now of course that is a gigantic business, but we worked on this system that basically moved all that money.
Andrew: Boast a little bit so that I get a sense of what you did over there. I want to get a sense of what you brought into Justworks. What did you do that you are especially proud of either you individually or you as a team?
Isaac: Yeah, it is a really great question. So I think as an engineer, in particular, I would consider myself very much a prototypist. So I really like build proof of concept to kind of show good work. And I really and I think systems that it’s kind of heavy on the network side are really interesting, which has become really relevant these days. And so, you know, the kinds of things that I worked on one was a system called RTIP, which was short for Real Time Item Processor that would take all of the data that we got from a couple of 100 different vendors about the information that we have on a book. So for example, what’s the title of the book? Who’s the author? Like all that kind of data and basically get it from these feeds onto the website. And you know, when I started there, it took more than a week believe it or not for a change to propagate from, you know, file that we get over FTP all the way on to amazon.com or amazon.co.uk or whatever. And I managed to get it down to less than a day, which I was pretty proud of.
You know, I think you could argue there’s still some room for improvement there. And then I worked on some internal tools that I really enjoyed. So for example, we use a system called Remedy which is like a template trouble ticketing system, and I hacked up this like little, I don’t know how to describe it. And basically it put together like a Gantt chart. It would build an image that kind of showed who had been responsible for the ticket over the life of the ticket. So you can sort of like look at a ticket at a glance and see all the different people that had touched it or if it had like been sitting somewhere for a long time.
And actually like the thing that was really cool about it was that I never liked got permission to build it. I just wrote this script that would generate the image so you would connect to the database, get all the info and then build the image. And then I just like managed somehow like get into the server where Remedy was running. And I just added like one line of code that would show my image. And so no one ever knew that it was me really, but they never took it out either. So like I left to go to business school and I came back as a product manager and it was like still in there. And everybody just thought that’s like how it worked. It was very cool.
Andrew: Wow, yeah, I could see then being able to work in such a dynamic company where things like that could get done. And then going and working in . . . seeing how payroll companies work, it just must seem so frustrating. And you’re also someone who’s just a developer at heart. Before, in fact, I get into what you did as a kid. Would you mind just hitting record on your side? I’m a little concerned about the internet here at this office. One of the things I need to add to my checklist as soon as I get in, test the internet speed.
Isaac: Done. Cool.
Andrew: Thank you. Talk about the shareware program that you built when you were younger. What is shareware?
Isaac: I know. This is when I feel old all of a sudden. So that’s pretty cool. So the way that a lot of software, you know, there’s certainly other really big programs, so kind of like Word Perfect or Microsoft Word, or Excel or Windows or whatever, but there’s also a ton of these smaller programs that you could download. And they were written basically by enthusiasts, and you know, they would . . . like any application you could think of people would build. And then more or less, it was like, if you like this, then send a check to this address, and the person who wrote the software would really appreciate it. And that sometimes would like unlock some functionality or whatever.
But for the most part, it just would say thank you. And where these programs are distributed among other things on bulletin boards or BBSs which is a bulletin board system. And the way that it worked is like people would . . . you’d have a modem with a terminal program on it and you would I get a list of BBS phone numbers. You would call a BBS, you know, and go like . . . and make all kinds of funny noises. And you could sign in and it was like this very basic kind of command line type interface. You can send messages with other people on the board, you can upload and download files, including their shareware they were talking about. And it’s this kind of community, I guess. And so I ended up writing a program called Eternity, which was, in fact, would let you run your computer as a bulletin board.
So basically, you kind of had to kiss your computer goodbye as like an actual thing you would use and then instead you would start it up and then it would say on the screen, “Waiting for caller,” and then eventually the phone would ring and somebody would dial up to your board. And then you could just like watch what they were doing. And they could post messages or upload files or all those same things. And that was kind of it and it was DOS. So you know, there’s no multitasking and your computer could only do one thing at a time. But it was really fun and the introducing boards . . .
Andrew: Your parents let you have a computer that you did nothing with except let people log in and chat?
Isaac: Yeah. I actually got my computer from a neighbor who was throwing it away. It was an IBM PC 5150. It was like the original, original IBM. And I don’t think my mom really cared what I did with the computer honestly. But I loved it. I mean, I really like learned how to how to program doing that.
Andrew: Did people actually send you money for your shareware?
Isaac: Yeah, I got a couple of dozen. It’s really funny. I had this like little what looks like a like a recipe box thing with like little index cards. Every time somebody would mail me a check, I would like right up this index card. I don’t think I have them anymore. But it was just was like a list of people that paid, and I think was $15 and probably 2 dozen people registered it, and I had somebody from Finland register it. I thought that was pretty cool. I lived in New Jersey. Finland seemed infinitely far away. Yeah. So, I mean, I don’t know. I kind of made like 500 bucks off the thing. But I loved working on that.
Andrew: And still, you leave Etsy. I think this is . . . no, this is before you leave Etsy, before you started coding up. Even though you can and you’re the kind of person who does just create what it needs, you start having conversations about this idea that you had for payroll. It doesn’t have to be the way it is right now. What do you think? Tell me about some of the conversations you’ve had and then what it was about them that made you say, “I think I need to start a company here.”
Isaac: Yeah. So I should say, first, I knew I wanted to start another company. So it’s more like I was looking for the right thing to build. And I think even 100 employees in, people would ask a lot about what we did. And I said, “You know, we could do anything, but the thing we do is this.” And I think that didn’t really make sense but like in my mind, that made sense because when I started the company, we really could have done anything.
Andrew: Yeah, with Justworks. You said it could be anything at all. Yeah, okay.
Isaac: But we chose this. And the reason I chose it, you know, first I had this kind of awful experience firsthand. And I was just like, “Okay, if this is really where we’re at, that somebody needs to build a great product.” Then I started talking with other entrepreneurs that were sort of in the startup community and they’re all like, “Yeah, so and so sucks. This is terrible.” And I was like, “Okay, I see the need is still there.” And then the last thing was really interesting when I was at Etsy, we did all this research to kind of say, “You know, what can we do for our sellers? These are all people that they make and sell things online. What can we do to help them be more successful?”
And one of the things that we realized was like a huge gap is that they basically couldn’t . . . they were scared to hire employees. Like they would hire contractors, which was probably like a gray area anyway. But they just were like, “I don’t know if I hire an employee, I’m going to get sued like something bad. That’s too much to do.” And so you know, it was like these people like they make their products, handbags or furniture or whatever and it’s like flying off the shelves, but like were afraid to hire people. And I was like, “You know, if there’s really easy way to do this, like I think like everybody involved, you know, it sort of be better served.”
Andrew: Like what? You know what? Let me take a moment because I have to tell you I’m in that situation too. I work with a bunch of people, but the idea of hiring somebody is such a pain in the butt, especially when you’re talking about across state lines in all the different requirements when they leave and so on. I’d love to hear from you what those issues were and then how many of those you saw.
But first, let me just take a moment talk about my first . . . I just teed you up for a question. I thought you’re going to spend some time thinking about it and I realized, “No, he’s got an answer fast.” Let me talk about my sponsor, and we’ll get into that fast answer you’re about to fire off. First sponsor is a company called ActiveCampaign. Frankly, I think anyone who’s on Etsy should be considering ActiveCampaign. Anyone who is selling anything online.
Here is the problem. Most email marketing is that dopey thing that lets you collect email addresses and fire off a message to everybody. The same message every single person. And there’s some software that will let you customize based on what people are doing on your site, but it’s too complicated. So you either have the dopey thing that everyone gets the same thing or customize, but it’s too tough. ActiveCampaign said, “You know what? Not everyone is in the same boat.” Like even at Isaac’s company, even at Justworks, I’m sure there’s some people who have just hired their first person or maybe up to their fifth person. And then there’s some potential customers who have hired 100 plus employees, and they need to be treated differently.
And they’re going to your site and looking at different content. You don’t want to send them same sales offer, which is “Don’t worry, we’ll get you started hiring right away. Hiring your first employee is tough. We’ll make sure that your second is easy,” right? That’s going to insult the person who has 100 plus employees.
What you want to do and this would ActiveCampaign lets you do, I’ll give him a form asking them questions. Just watch what they’re doing on your site. And if they’re going constantly to the questions or the blog posts and the pricing for the bigger companies, start sending the messaging that’s aimed at the bigger companies, maybe even send them an offer to get on a call with someone. If they’re just at this Getting Started stage, reassure them. Tell them you’re here to help them. That’s what ActiveCampaign does.
And the fact that they hate that I say that their email marketing company is because they’ll do a beyond email. They’ll do text messaging and they’ll do anything you’ve got. They integrate with chatbots. I’ve talked too much. Isaac, I’m just going to say this. The bottom line offer is anyone who’s interested in getting started can try it out for free. They just go to activecampaign.com/mixergy. When they do, they could try it for free. If they sign up, they get the second month free. If they like it, and they’re in there, they get two consultations with real human beings like Isaac has real humans. They do too. Try it, they’ll help you out. And finally if you’re with a different email provider, they’ll migrate you. Go to activecampaign.com/mixergy.
Andrew: You get into your own email marketing as a CEO, Isaac?
Isaac: Not too much. We have a really great marketing team that I know that they have a tool stack that they’ve evolved over time, but I’m not even sure what they’re using at the moment.
Andrew: Hey, you’ve come a long way like a as a CEO. I’m telling you your company seems like one of these big . . . I don’t know what it is. Like these unicorns that just have everything perfectly aligned. I’d love to hear from you later on some of the challenges that you had because I’m kind of surprised that I even see you just wearing a fleece over here. I thought that you’d be one of these slick dudes with, I don’t know, five handlers around you. But I’m glad to see it. Let’s talk about the challenge of somebody who’s maybe on Etsy or somewhere else who says, “I don’t want to hire because . . . ” What are the specific issues? And how do you guys help them overcome them?
Isaac: Yeah. It’s a great question. So I mean, I think to a large degree, this is like a structural issue with how I think particularly in America, how the government works. So I mean, basically, you know, the deal is that most . . . like, obviously, federal taxes are collected by the federal government, you know, most employer issues are the state level. So there’s a Department of Labor, Department of Insurance, these kinds of things in every state. And they have a bunch of requirements and their requirements are things like you need to register for employer taxes, you need to collect them and send them in. You need to have workers’ compensation insurance in case your employee gets hurt or sick while they’re working for you. You need to have disability in some states and so on.
And I think it’s really just kind of like a fear of the unknown, which is that, you know, this stuff is pretty esoteric. You don’t just like pick it up based on real life. Like I had no idea what workers’ compensation insurance was when we started Adtuitive until the insurance broker was like, “Hey, by the way, what are you doing for work comp?” And I’m like, “I literally don’t know what you’re talking about.” And so I think the challenge is it’s this sort of like death by 1,000 cuts thing. I think it’s particularly difficult if you have employees in a lot of different states. Because then it’s like you, the business owner, are basically dealing with all of them and it is too much. And they’re all similar, but they’re different.
And so I think where business owners really get tripped up on payroll stuff is that there’s something that they’re supposed to do, they don’t know they’re supposed to do it. So whether it’s registering . . . getting a certain kind of insurance policy or something like that. And then the states have automated system that basically figure out that like you aren’t doing the thing and then a lot of times it’s like really big penalties, tens of thousands of dollars, like the kinds of penalties that put people out of business when they’re first getting started.
And so I think having one really easy to use platform, Justworks or otherwise, is such a huge win for the entrepreneur. Because, I mean, essentially, like, I think, especially in a small company, they’re the ones that are like bringing everything together, right? And so if you then kind of say, like, “What if they don’t want to offer benefits?” A medical provider or a dental provider and your 401k provider and a transit provider and then there’s like 10 providers, like this stuff will take half a day. And so just having one integrated thing where you like know that you’re doing all the right things and you have relatively few interactions, which is why in fact the company is called Justworks is I think that is really what does it for the entrepreneur.
Andrew: Wait, you do health insurance too?
Isaac: We do. Basically any kind of benefit that you would offer or you might find in a really big company, we allow small companies to offer to their employees. And obviously, they don’t offer everything because they cost money, but we at least provide access. So we make it easy.
Andrew: You know what? I was looking at your company, I looked at your competitors, I looked at all kinds of stuff. I don’t know how I missed that. I think I just kind of assumed that health insurance would just be beyond what you do, but your software can manage whatever I do for health insurance.
Isaac: It was actually bigger than that because you know the way our business works is that we . . . so they’re sort of Justworks, that’s me and 450 of us sitting here in New York, and then there are over 60,000 employees that are kind of technically employed by one of our subsidiaries. It’s called Co-Employment. And so basically we’re able to go buy in bulk as kind of the Fortune 100 company and secure really great benefits for them. And again, like you can opt in or not but it’s a really big deal.
Andrew: Wait, because the employee is an employee of your company?
Isaac: That’s right. So sort of an employee and the other employer and us.
Andrew: Got it. Got it. So you get the health insurance as your company but I get to offer to my people because they’re co employees of my company and yours?
Isaac: That’s exactly right.
Andrew: Ah, got it. I had no idea. All right.
Isaac: I could have explained that to you but . . .
Andrew: No, that makes sense. I just didn’t realize that’s how it worked. And I don’t get that on your site, but I understand it now from you. All right. That makes sense. How much of this did you describe to people when you were saying, “This is what I think my idea is going to be?” How much was going to be in there?
Isaac: A lot less. All I really wanted to do at the beginning was where as an employer, as somebody starting a company, you can have employees and you could pay them on time correctly, easily done. And then so we built that. And then a lot of companies in our space offer benefits. Our customers started asking for it. And then just over the past, really, it was over the past four years, we’ve just sort of added benefit after benefit. And now we have a really rich offering.
Andrew: What was the original thing, the one thing that when you’re talking to people, you touched on the pain that they were willing to sign up for?
Isaac: You know, it’s really like the forms and the faxing and like the letters from the state? I think it sounds like if you have been there, this makes perfect sense to you. And then if you haven’t done it, it doesn’t exactly make sense. But it’s terrifying to receive these notices. And basically I was just like, “Look, if we can make that work, then we can go from there.”
Andrew: And were you thinking from the start about this co-employee structure?
Isaac: Yeah. So I actually so I borrowed the model from something I learned at Amazon and at Etsy. So when you look at these big payment processors and there are a lot of them now so Square and Stripe and PayPal, Venmo, Amazon, Etsy, Airbnb. The way that it works is that they act as like a “master merchant” and then they allow all these sort of sub-merchants to receive payments kind of under their ID. And so it means that you can go on to Etsy, for example, and sign up. It takes like two minutes and you can be all set up to receive payments or you can sign up at Square and get the thing of plugs into your phone and that never used to be possible.
It used to be like you had to fill out all these forms and show send them like your tax documents and like all the stuff. And by kind of like aggregating all these small entities into one big one, it like totally reduced the cost of access to these networks. And I was like, “Well, if we could do the same thing for employers and we can take all these employers and then instead of having them have to do all their thing with their ID, we could just do with our ID, then, like, is going to save a huge amount of pain.” And so that was like exactly the analog that I was coming from.
Andrew: Oh, that’s brilliant. All right. So what I understand from your conversation with our producer, Brian Benson, as you were telling your friends, “This is what I’m thinking of doing,” they didn’t just say, “Hey, I like the idea.” They said, “Can I invest?” Am I right?
Isaac: Yeah. So I was really lucky at the beginning. A bunch of my friends and people that I just sort of have gotten to know over my time at Etsy in particular, I was like, “Hey, can you write me a check?” And they were like, “Yeah, I’ll write you a check.” And I think at the very beginning, some of what you’re really just trading kind of like more credibility in like your track record. And I did a really good work at Etsy in particular and people knew it. And so I think they said like they would take a chance on me and then much later became much more about the business and the vision and how it works.
Andrew: So you know what? I went to a to AngelList to see who those investors were. I see Jason Davis, your co-founder, and founder now of Simon Data. I’m trying to figure out who the others who were friends who signed up in the beginning.
Isaac: So the very first people, Jason. Greg, who’s our co-founder at Adtuitive as well.
Andrew: Greg Fodor.
Isaac: A friend of mine named Matt Stinchcomb who was the first employee at Etsy. I mean, I saw all of them every day. And so as I was starting to think about building this, they were sort of the obvious ones to go to.
Andrew: Okay, let’s talk about first customer then. You remember your first customer. Who was it?
Isaac: I do. So it was a co-working space. They don’t exist anymore but they were calling New Work City, like New York with a W. And they were based down on Broadway right below Canal. And they were actually that was where we set up our first office in January of 2013. And so I was very committed to building kind of like the initial prototype, I suppose, as fast as possible. And so we managed to get the system in a place where could actually move money. I think it was only contractor payments in the very beginning, but it can move money in April of 2013. So it took 90 days to build. And then I had been talking with Peter at New Work City, and I was like, “Hey, man, do you want to try our thing?”
And, you know, we got along pretty well. And he’s like, “Yeah, yeah, I’ll try it.” And then I was like, “No, really.” And he’s like, “Yeah, yeah.” And so then we walked to his computer together. And I signed him up. And I helped him put his account information. And that was how they became our customer. And I think we charged them $3 to do a couple of . . . that was like our first revenue. It was $3. But that’s how I got them.
Andrew: I checked on New Work City. What they do now is they help other people who want to create co-working spaces set it up based on experience.
Isaac: Yeah, there’s a guy named Tony there who’s like he’s really big on the co-working movement. And I mean, there’s just this whole community around that. And, I mean . . .
Andrew: And just smaller ones out there.
Isaac: Yeah. And I was going to say, I mean, speaking of community, I mean, the other big thing that we did to get customers early is we started to host dinners. And it was it was pretty cool. It’s actually my co-founder’s idea. But she was like, “I’m just going to invite everybody I know to dinner,” and then that’s it, we had dinner. And I was a little bit like, “I don’t really understand how this is like making a business, but I trust you.” And we started setting up these dinners. And they were in like the basement of this antique shop in Soho.
And I found a caterer who would come and cook just like amazing food and everybody would hang out a dinner and we’d give like a one minute kind of welcome that was just like, “Look, you’re here, we’re here ourselves.” That was kind of it. We didn’t really talk about Justworks at all. But we started to get customers and actually some early employees also that just were people that came to the dinner and they’re like, “I don’t know exactly what these guys do but they seem like good guys or good people.” And so that was actually turned out to be a really big part of kind of building our initial traction.
Andrew: That’s a great idea. I highlighted that to make sure to bring that up in a conversation here. It was just friends of yours who ran companies? Is that the thing they had in common?
Isaac: They weren’t even . . . they were just people we liked. Like that was kind of the bottom line. They did all kinds of stuff. I mean, many of them were sort of like somewhere in the startup ecosystem, but it wasn’t all founders or anything like that. And then they would sort of . . . they’d be like, “I went to this cool dinner so maybe my friend wants to go also.” We just started building kind of like building network out of that.
Andrew: And it was in the basement of an antique place, which is in Soho not too far from where I happen to be sitting right now. You hired somebody to actually . . . no, you got it catered, I imagine, right?
Isaac: Yeah. There’s this program called City Grid. They make like fried chicken or whatever but really good fried chicken. I forgot the menu, but it was really good. But it is very informal and I think intimate.
Andrew: That’s a great idea. I do stuff like that all the time but I never have like an ask. It’s just, “Let’s hang out.” And then in a month I’ll be hanging out with other people. We’ll forget about each other except we’ll remember we had a really nice dinner.
Isaac: I think it’s a huge . . . I’ve really come to . . . when I just want to started the company I was just like, “Well, I’m going to have this automated thing. People will just come in and they’ll sign up. If somebody calls, it’ll be because they need to reset their password.” And I really underestimated how important the human element was in terms of everything. But like, in the end, it’s like, well, who you’re going to do business with? You’re going to work with someone or something that you trust, and the foundation of that is the people you interact with.
Andrew: You know what? It blows my mind still that that is true. I get it when it comes to dinner in person for a software like yours. I’m still shocked though that my friend, Dave, runs a software called Proof. When you go onto someone’s website, this little widget might come up from the bottom left corner that says “Steve from Chicago just bought,” right? There are many different companies that do that now. But because we all know Dave in the marketing space, because we know Proof we’re more likely to use it.
You think that people will be more rational than that and would say, “Great, I like Dave. He can come over to my house. Let’s look at the software clearly and see what’s better and what’s cheaper and go with that.” And that’s not the way we make decisions. Like people are going to sign up for Justworks now because they know you. Not that this is going to lead to more sales and you can get through other channels, but it’s going to create that goodwill, which still surprises me. Why are people not more logical and rational, do you think?
Isaac: You know, I mean, I was thinking about this in particular. So, you know, if you’re signing a contract with someone, right, you’re going to type a bunch of stuff on a piece of paper, it’s going to say, “I’ll do this. You’ll do that.”
Andrew: I hope I didn’t just lose him in this environment.
Isaac: . . . electronically. And then you’ll . . . That’s it. Like you put it in a drawer. So what if you don’t do your part of the contract, like you’re going to take them to court? I mean, like, who wants to do that? And so, you know, I think people really underestimate kind of how important trust is. Like you’re signing a big agreement with somebody and, I mean, you know, of course, we have an agreement in place with customer that we have in every vendor. You know, in the end, like no one wants to go to court. So you better believe that they’re just going to do the thing that they said they were going to do. And I think that that’s why trust in businesses is so critical.
Andrew: And also come through in cases an issue. Like if I know there’s somebody there, if there’s a big problem, someone who can handle it, it helps. For a second there looks like we lost our connection. I’m glad that you’re back. Let me tell people about my second sponsor and then we’re going to continue with this interview. And I want to talk about a low point. Let’s not go from high to high. Let’s go into something where . . . a period where you felt like maybe I’m not qualified to do my job, and we’ll talk about that. You comfortable with that?
Andrew: Okay, great. Second sponsor is a company called HostGator. If you’re looking to have a website hosted, you might as well get a low price from somebody you trust. I’ve been working with HostGator for a long time. In fact, Isaac, one of the things I’m doing this year is running seven marathons on seven continents in one year. I just got back from . . .
Isaac: Wow, good for you.
Andrew: And if I just tell people that, it sounds kind of interesting, and then it doesn’t feel real. I went to HostGator. I created a website called “Run with Andrew.” Now, when I try to get people on board for this mission, try to get help, I have a place to send them to. And for some reason, it feels more real when there’s a website. And the reason I’m saying this is I’ve seen people like a marketer, Seth Godin, who has this idea for something he wants to create. He doesn’t just add a slash something on his personal website. He goes and buys a whole new website like what was it called? Personalmba.com? Whatever it is.
He creates a website, gives it its own life, it feels more real, it feels bigger than just an idea. And people interact with it and treated differently because of that. The reason I’m saying this to you, Isaac, is because frankly, the sponsor pay me and also to the audience, because if you have any of your ideas, just sitting there, bring it to its own website and watch it come to life. If you go to hostgator.com/mixergy, you to get the lowest price that they have available and you’ll get 45-day money. Actually, you know what? All the features are on the site, hostgator.com/mixergy. I really like them, you will too. Last point, one of the last point is talk about feeling qualified to do your job.
Isaac: Yeah. So, you know, I think, first, I would say, in general, I have had plenty of moments where there were sort of these like general purpose low points where I felt pretty unqualified to do my job. And I think those are growth opportunities. Probably, the low-low, definitely the low-low was when we were about to run out of money and I was pretty sure that I was going to have to move “the business” which was really at that point, you know, like a PC and check printer into my basement and just run payroll by myself for the rest of the year. And so I could get all my customers off the platform.
You know, and basically, what had happened is that we raised some money initially and honestly like the early money was easy because it was just like, “Isaac, I know you, I trust you. Who knows if your thing will work out but we’ll give it a shot.” You know, getting money after that was a lot harder. You know, there’s a same, “There’s nothing like numbers to mess up a good story,” and I probably trying to keep the explicit filter off.
Andrew: I think there’s nothing like money to . . .
Isaac: There’s nothing like numbers to fuck up a good story.
Andrew: Oh, yeah.
Isaac: You know, we started to have numbers. And, in particular, I didn’t know the first thing about how to get new business. And like so many product people I was like, “I’ll build it. It’ll be awesome. People just come and use it.” And that matched pretty closely in my experience at Amazon and Esty where we did launch things. And then you have like this huge customer base that you market you. When you have no customer base, that trick doesn’t work. And so I started to realize I didn’t know that. I started to learn everything I could about online marketing, for example. And I was like in AdWords like setting up all these things.
And I finally figured out that we probably needed to have sales. We didn’t have sales. And so I ended up hiring a head of sales. But, you know, before that, basically, we’d been going out to get more money. And everybody was just like, you know, asking all these questions, “What’s your unit economics? What’s your LTV to CAC?” And I was like, “I don’t even know you’re talking about right now.” And they’re like, “Well, you’re not ready to raise money.” And I was like, “We’re about to run out.” It was pretty terrible. And, honestly like . . .
Andrew: You had no money coming in?
Isaac: Our revenue was like a couple of a thousand bucks a month. And we didn’t even pay for the office space. It was nothing. Also our pricing was totally messed up.
Andrew: What do you mean by that? I heard you tell Brian about that too. I wanted to follow up. You said that you couldn’t figure out pricing for a long time. What was the issue with it?
Isaac: Well, it’s too low was the main issue. And we just kind of made something up at the beginning and kind of said like, “Okay, that looks like a reasonable pricing grid . . . ”
Andrew: Three dollars per employee.
Andrew: The $3 per employee things you gave New Work City, for example, was just . . .
Isaac: Right. I think the original pricing was like 30 bucks a month plus $5 per employee. And, you know, so that’s great. But there are some fundamental things like you need to be able to cover your sales and marketing costs. And you need to be able to cover your cost of operation at that price point for what we do, it does not work. And these kinds of like economics and making sure all the ratios are like more or less than equilibrium, it just took me a long time to kind of understand that.
And so it was like a very . . . and, you know, I think coming out of that experience where we were, you know, maybe six weeks from running out, and then an angel investor came in kind of the last minute and said, “You know, I’ll invest anyway.” And we managed to pull around together. But I think there was like a real kind of survival instinct that I think is still in the company today based on this kind of like new investor.
Andrew: Who is the investor and why did that investor believe in you?
Isaac: Yes. So her name is Joanne Wilson. She is Fred Wilson’s wife and a prolific angel investor here in New York. And, you know, as it turns out, Fred was on the board of Etsy, and I knew him from then. And I guess when he found out that . . . because I have the same [inaudible 00:42:20] here. But when he found out that we were about to implode, I think he basically asked Joanne to kind of like pay it forward and just say, “Like, hey, can you get Isaac back?” And so we went and we met Joanne and, you know, like 10 minutes later, she’s like, “Okay, I’m in. You know, here’s the terms of the deal.” And I was just like, “Wow, that was amazing.” Because she’s known for being really a difficult ambassador to get. And I think it was just one of those like karma moments where it was like I was doing the right thing when nobody was looking and then . . .
Andrew: How? Get you back for what? What did you do at Etsy that . . . and he was one of the investors of Etsy.
Isaac: Yeah, well, I built their payments platform which was called Direct Check Out. And it was like a really challenging project. Just thinking now, I mean, Etsy was like growing incredibly quickly, and it’s just really a complicated environment. And I managed to build and launch the product anyway. And, I don’t know, it was a big deal and I think he appreciated it.
Andrew: Yeah, I feel like I don’t know enough about her. I know her as Gotham Gal because that’s the way he writes about her, and I think that’s her blog name, but she’s not as high profile as he is, or not as high profile as others. I don’t think I even saw her on your angel list. I’m looking through it.
Isaac: Yeah, we never really updated that. So unless somebody added themselves they’re not on there.
Andrew: Yeah. And people are reluctant to add themselves to someone else’s angel list because they don’t want to impede on what you’re trying to do. Maybe you’re trying to hide something, right?
Isaac: Yeah. You know what? I feel incredibly grateful that she invested. And she also is a great investor. I was just going to say, I mean, there’s like the certain category of investor who will really like fight for their company. And they’re . . . I don’t know even known how to put it better than like they kind of take like an active interest and . . .
Andrew: Yeah, give me an example of what she does that’s active.
Isaac: Yeah, I guess she will . . . well, certainly like if she runs into somebody that she thinks should be a customer, she’ll unabashedly send them our way, which was really big deal in the early days. But I think the other thing is when she’s out there talking about us, she’s just like a proponent. And she has a ton of energy. She’s a really important person in the ecosystem. And if you think about . . . it’s like, well, people’s perceptions of you and your company are really made up of these thousands and millions of tiny little interactions that they have. And so it’s like if I have Joanne Wilson or any of the other half dozen investors are out there that are just saying great things about us to whoever will listen, it actually makes a really big difference.
Andrew: I can see that. All right, let’s talk about how soon after that, you professionalized your sales operation. You hired a head of sales. You had inside sales. You got Salesforce. Talk about that and what did that structure look like that allowed you to grow to where you are today?
Isaac: Yeah. So our head of sales is named Rob Lopez. He has worked here since May of 2014. So coming up on five years. And he’d worked at Groupon before, which similarly has a really sort of like high volume transactional inside sales approach. And so between him and another guy named Florian who was also an angel investor but had been a VP of sales at Zocdoc, which is another very similar kind of profile, you know, we were just like, “Okay, we’re going to build one of these things.” You know, I think like sales is incredibly operational. And I think, especially for a business where it’s like ours, where it’s pretty transactional, you’re doing many small deals not like not whale hunting, so to speak.
So it’s all about like systems and being organized and kind of like running an operation. And so I think there are a few major components that we have built and, I mean, you know, like all things, it’s messy. So we sort of like come along over the past four and a half years. But one thing is we decided that we wanted to use Salesforce as our CRM. We decided that we want Salesforce to be like basically to represent what the market look like, what the world look like. So we want our database to be like a list of all the businesses in the United States with as much in permission as we could possibly get. And so we invested . . .
Andrew: All the businesses in the United States?
Isaac: Well, the businesses in our target market.
Andrew: In your target market. So everyone that would . . . and what was your target market at the time?
Isaac: Well, it’s businesses under 100 employees.
Andrew: Under 100 employees. Okay. So anyone who has . . . that’s why earlier when I said in the ad for Active Campaign if you have over 100 employees, I saw something in your eyes and I thought maybe . . .
Andrew: Got it. I thought maybe you just didn’t like ActiveCampaign or the way that I was demonstrating it. But . . .
Isaac: No, no, no. Yeah.
Andrew: So you want all of them in Salesforce and you want as much data about them as possible. What kind of data could you get on them?
Isaac: Yeah. So we would just go to every source we could find. So Crunchbase was big. So certainly, if you were venture backed, you know, you would use Crunchbase. We would scrape like different sites that had . . . like if you remember of like an association or something like that. And then after a while, we started buying data from a bunch of different providers that kind of like sell data by these businesses. But the big thing that we did is we were able to kind of like merge it all together so that in our system, you can kind of look at a business. And then maybe most importantly, after a couple of years, we were able to say, “All right, here are the things about a business that will increase our likelihood of closing the deal.”
So like this is like a really funny example, but if a business has Stripe on their website, they’re like a really good prospect for us. And so we know if you have Stripe on your website and we are more likely to call you if you have Stripe on your website. And that’s just take that time to 100 different factors. That’s kind of like how it works. And you know, I mean, in the end, it’s like you’re limited by the amount of time that people have. So it’s like you got to kind of call your . . . you know, take your best chance, I guess.
Andrew: That make sense. Go ahead. Sorry.
Isaac: Yeah. And then I would say the other thing, like the kind of real like system, or professionalization we’ve done is really around sales training. And I’m so proud of what we’ve done built here but basically, you know, we take people, usually, straight out of college or maybe they have a year of experience. We put them in a sales development program where they’re cold calling and appointment setting, which is unbelievably challenging job. And if you make it through the program and there’s like a cumulative amount of appointments essentially that you have to set, then you go into this kind of training pipeline to become a full quota carrying AE.
And those people, those account executives are that have come through the program are incredibly high performing. They also kind of like grew up here, so to speak. And so they kind of like live our values and our culture. And so these days, many of the people that are sales people at our company have come through this pipeline. And we do really great job of training them both at the beginning and that kind of doing ongoing training. But I’d say like those two things, sort of like training and then really good systems that kind of let you pick out who you want to pursue are probably like the two specific things that we’ve done under Rob’s leadership that made a really big difference.
Andrew: And the way the process works is you have your CRM. It tells you who should be called and who should get an email. There’s a human being who writes those initial emails or is it software that then . . . ?
Isaac: No, it’s usually a person.
Andrew: It’s usually a person, an SDR. What does an SDR stand for again? Sales . . .
Isaac: Sales Development Rep. Usually we call them Sales Development Rep.
Andrew: Sales Development Rep.
Isaac: Same difference.
Andrew: And the whole job is to just ping people who could potentially be customers and then get them to respond and get on a call with a real salesperson, an account executive.
Isaac: Yeah. It’s a hard job. Not just because of the rejection, which is obviously intense, but also because I think to do it really effectively, you want to know about the customer you’re reaching out to. And so you actually have to bait every single one. You have to do some research on their website, figure out what they’re about and then try to reach out with something that kind of cuts through the noise. So it’s tough but it works.
Andrew: And so, yeah, it’s like writing a bunch of marketing campaigns, each one to like one person at a time, right?
Isaac: That’s right.
Andrew: So, finally, I was looking at SimilarWeb to get a sense of like how big you are. I’m surprised that you guys do over half a million visits to your site a month. What is that from? Usually, you would tell me that you guys have a really strong content marketing team, but a lot of it is direct.
Isaac: Yeah. That’s a really good question and observation. So we do have a kick ass content team. And we have been publishing a lot of . . . we publish I think a lot of really great authentic content . . .
Andrew: On YouTube and on your site and on other platforms, right?
Isaac: Yes. But the other thing that we do is we advertise outdoors. So we advertise on the subway here in New York. We are advertising at . . . we sponsor the Mets. So we have an ad up in Citi Field. And so I think those are probably a lot of what are driving the direct traffic.
Andrew: That explains a lot too of why by far the top search term for you guys is Justworks. So people are seeing the ad, typing and Justworks according to SimilarWeb 60.46%, 60.46% of your search term traffic is people searching for Justworks. The next top one is Justworks login. And then thing about Justworks is two words.
Isaac: Yeah, it works. It took us a little bit of time to figure that out but it’s pretty cool.
Andrew: Wow, wow. All right. So you’ve come a long way from the guy who was just creating shareware. Let’s close it out with like what’s the best part of having done all this?
Isaac: Yeah, I would say there’s two things. One is the personal growth. I feel like being a CEO, you know, the job keep changing as the company grows. And so, you know, sort of like every time I feel like I have it figured out, I get punched in the face again and there’s like something new to learn. And I really like that. I like a challenge. And this one is definitely challenging. The other thing I would say is the people that I get to work with, you know, there are a couple of people here that I knew from before I started the company but I mean, almost everybody here, you know, I’ve met because they work here and they’re really amazing, kind, smart people. And I just feel really lucky to get to walk in every day and hang out with them.
Andrew: Wow. I can’t believe I didn’t know this about your business. I can’t believe when I was searching that wasn’t on my radar. All right. The website for anyone who wants to go check it out is justworks.com, which frankly is a kick ass website. Let me just check that. Yeah, it is, justworks.com. That cost you a bunch of money?
Isaac: We did a rent to own back in 2013. Back then it was not expensive.
Andrew: Wow. And now you own it outright?
Andrew: Yeah, justworks.com among other things. It works with Slack. And it’s really human beings, not a Slack bot, which I thought . . . wow. And I want to thank the two sponsors who make this interview happen. The first doesn’t like me to tell you that it’s an email marketing company, but they accept the fact that it’s an easy way for you to understand what they do. Start off with easy with email marketing. Go to like marketing automation with an email and then level up to anything there fan freaking fantastic. I promise you’re going to love them.
Go to activecampaign.com/mixergy. And finally, the sponsor who will help you get your website right, it’s called HostGator. Check them out at hostgator.com/mixergy. And finally, if you have one of those in home speakers, and you’re using them to listen to this by shouting, “Hey,” whatever, I won’t say the name. Let me know. Just email me and the team contact at mixergy.com. We want to know how you’re using us in those new speakers that are out there. Isaac, this is fantastic. I’m so glad that you did this interview with me.
Isaac: Yeah, thanks so much. I had a great time talking with you.
Andrew: Thank you. Bye. Bye everyone.