Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, where I’ve done over a thousand interviews with proven entrepreneurs about how they built their businesses, and my goal is to take an audience of entrepreneurs, introduce them to the ideas of people who have built successful companies and have my audience build something big themselves so that hopefully they’ll come back here afterwards and do an interview with me and tell the world about how they did it.
Check out this scenario here for today’s interview. Imagine you have a Shopify store and you want to sell more of your product. So you grab your phone, like you ordinarily would, but instead of opening up an app or a webpage, you go to your messaging app and you actually text Kit.
You just text Kit and say, “Hi,” just two letters, “Hi.” Kit texts back to you and says, “How can I help you?” and gives you a few options. Do you want a sales report? Do you want to market something? You say, “I want to market something.” So you use your two thumbs and type back that you want to market something, and Kit says, “What do you want to market, something new or maybe one of the products that hasn’t been moving much lately?” You say something new.
So Kit shows you some of the newest products that you added to your store right there in your messaging app, and you pick the one you want to market. Kit comes back and says how much of a budget do you have, and you say what your budget is and Kit comes back and says, “Good, I’m on it,” and takes care of it and markets that product for you.
This seems kind of futuristic. If I were to describe it to you without having today’s guest on you might think, “Eh, at some point in the future maybe this will come,” but dismiss it. But I’ve got to tell you it’s here today. I’ve given you a small taste of what can happen all in a messaging app, in SMS, in Facebook, in Telegram if you’re using that.
Today’s guest is the person who created it. His name is Matthew–excuse me, not Matthew Perry, Michael Perry. Michael Perry is the founder of Kit. It is a fully-automated virtual–
Michael: I wish I was Matthew Perry.
Andrew: I think Matthew Perry is going to wish he was you considering what you built. You built Kit. It is fully automated. It’s a virtual marketing assistant for small business owners. It was recently acquired by Shopify. This is from a guy who a few years ago was on a car lot selling cars.
I want to find out how he did it, and I can do it thanks to two great sponsors. The first will actually help you hire your next great developer. It’s called Toptal. The second will get your books in order. It’s called Bench. I’ll tell you more about both of those later. But Michael, not Matthew, Michael Perry, good to have you here.
Michael: Thank you for having me. I’m honored to be here, Andrew.
Andrew: What did you sell the business to Shopify for? How much?
Michael: Well, it’s an undisclosed amount. We’ve decided not to share that information. But I sold the business to Shopify for a very specific reason. What’s interesting is over the last six months — this is month six post-acquisition — so many people have asked me, “Why did you sell to Shopify?”
We were three years into what’s now a bot revolution. A lot of people have pinned us as being kind of a pioneer in that space. The most important thing to me was to be able to help small business owners. Shopify in my vision for what the future of small business and entrepreneurship looked like was incredible aligned.
It was one of these situations where we sat down and I spent some time talking to Toby, who’s the CEO and Craig Miller, who’s the CMO, and we just realized that we could probably both go our separate ways. Shopify is doing phenomenal, and they can continue to build a great business without me. Kit was doing phenomenal, and I could continue to build a great business without them. We started to think about what the future would look like together, and that picture seemed a lot more beautiful than us trying to paint our own pictures by ourselves.
Andrew: All right. This is crude considering what you just said, but is it fair to say over $5 million?
Michael: It is.
Andrew: It is. All right. I won’t push any further than that. But here’s the thing that makes me ask that. You said in an article, I think in Venture Beat, that at one point in your life, you wanted to go build something. You said — I’ve got the quote here — “Fuck the web. I’m going to build a mobile app,” because at that point in your life you said you wanted to get rich. And then you said after you fail enough in business as an entrepreneur, you actually stop caring about getting rich.
Andrew: You hit this point, a line in the sand where you’re like, “I actually have to find out what I’m capable of doing.” When did you fail?
Michael: Well, looking back and as I, I think, become a mature entrepreneur, I realize that I’ve never really failed. I was just learning some really painful lessons along the way. I went up to bat on two different occasions to build a business. The first one I built eight years ago, and that was a photo sharing website and I learned painfully I knew nothing about photography and art.
So I knew I wasn’t going to get rich doing that. I went back to what I was very comfortable with, and that was business and my passion for technology and that just overlapped so perfectly. When I built that business, I really had …. My pride was very much on the line. Clearly we were not going to get rich. Clearly it was not going to be a success. It just bothered me. At that point I had been turned down by over 30 investors. I bootstrapped the business. I was funding it myself.
Andrew: This is GVING, the business?
Michael: GVING, yeah. I really struggled with this harsh reality that maybe they were more right about me than I was right about myself.
Andrew: I see.
Michael: I couldn’t–I wasn’t going to let the world or anyone else dictate the outcome of my life, and I wasn’t prepared to go back to a car lot. So I really did stop caring about the financial outcome, and I really wanted to believe that I had the potential of being a great entrepreneur and I wanted to push through.
It was around the time we decided to stop GVING I looked in the mirror before we started Kit and I thought to myself I was going to get another job, or did I have the mental strength, did I have the talent, did I have the patience, was I willing to persevere? I think that was a very honest conversation that I had with myself, and I realized at that moment I cared more about entrepreneurship, I cared more about being who I thought I was capable of being more than currency or the amount of money in my bank account.
Andrew: Why? Why did you care about entrepreneurship?
Michael: I care about entrepreneurship the way people who are musicians or artists care about music, right? It feels like a fiber of who I am. I actually can’t close my eyes at night and envision any other world or any other job or any other lifestyle or thing I would be doing. I think entrepreneurship is incredibly important for the world. We’re problem solvers. We identify an issue and hopefully we solve for that by way of a product or a service. I think that we are the spark of creativity and innovation and pushing the envelope for mankind.
At the end of the day, the world that we live in is built by entrepreneurs, whether it’s an entrepreneur who’s putting up a high rise or an entrepreneur who’s building technology that influences your world, like our world is dictated by entrepreneurship. I think that’s incredibly important to recognize and be aware of.
Andrew: Okay. I see in the name or at least in the URL, it’s KitCRM.com.
Andrew: CRM is a whole other product than what Kit is, isn’t it?
Michael: It is.
Andrew: CRM is what you keep your contacts in.
Michael: It’s true. How that came to be was GVING essentially was a CRM service. It was a mobile loyalty product that powered a CRM for brick and mortar businesses. When people would use the app, it would update their CRM, and businesses are able to do direct messaging in app back to their customers to try to help them make more sales. We realized with that business we were not in a position to be in a B2B2C business, meaning we were building a product for both small business owners and we had to build a product for their consumers.
So I chose not to go the consumer route. I chose to continue to build technology and focus on small businesses. The idea with Kit CRM was we were going to build a web application that allowed for small businesses to convert their Facebook page, Twitter account and Instagram account into a CRM-like tool to manage their most engaged audiences, and we partnered with Facebook to get Facebook’s ads API and allow them to use the data on most people to run advertisements to customers that looked like those people.
Andrew: I’ve got to say, I’m not following that and I’m actually looking at an earlier version of the site. Is there a simpler way to explain that?
Michael: Yeah, the simplest way of explaining that is there are businesses and brands that have 10,000 fans, 500 fans, whatever it is. What we were doing was we were focusing in on the people who are actually engaging with the brand. So, if they liked a post, shared a post, commented on it and we used those people, we pulled those people into our CRM and we started building profiles, i.e. the people who are engaging with your brand most are men who are 30 years old who live in San Francisco who liked [inaudible 00:08:42]. And we took the Facebook ad builder that was 20 steps and got it down to three steps.
So that was our original product, and what we learned in the process of building that product was we thought we were being innovative by building basically Power Editor, which was 20 steps, down to 3 steps. But really that was not anything more than an improvement business, right? That just improved the current way that they were doing things.
The number one problem that we identified was that software was not the issue. Labor was the issue. These small business owners that were using Kit were all doing it by themselves.
So bookkeeping became more important, like operationally running their business, product management, every other aspect of the business became more important than marketing because they just didn’t have enough hands, enough time in the day. That’s how we ended up building Kit.
Andrew: I see. So then you said, “Okay, if they need more time to market or let’s make marketing so simple that they actually get to do it in between the obligations they have,” like doing the books, like all the other things that you mentioned.
Michael: That’s right. So the idea was their marketing will only get accomplished one way, and that is that they don’t have to do it. So if you asked ever single small business owner, “Why are you not just paying somebody to do your marketing?” it all boiled down to, “We can’t afford an agency, they’re too expensive. We can’t afford a third-party person.” So we thought to ourselves, “Could we build a labor source? Could we build a person who would do their marketing for $10 a month, $25 a month?” And that’s how we started, in 2014, we started this voyage of building a complete automated person.
Andrew: I wonder how you knew that. How did you know that simplifying the ad buying process that Facebook had to three steps wasn’t enough, that they didn’t have enough time for even that?
Michael: Because I talked to 1,000 customers.
Andrew: How did you do that?
Michael: I got on the phone and called them individually. We used to host something called–there’s an event here in San Francisco called Treasure Island Flea Market. We used to rent a tent every last weekend of the month and put small businesses in it. I used to actually go there and help them sell their products. We would just talk to them and try to get an understanding of why their businesses were failing, what their days looked like. I also grew up working in small family businesses.
I started working for my uncle at a very young age. I worked for my father when I was 18 years old. I think it was just an intuition thing. It was conversations, and it was a process that trickled over from giving all the way to Kit CRM to what is now just Kit. It didn’t happen overnight. I played the long game and I had some patience.
Andrew: The event on Treasure Island, is that something you organized, or you just went to it?
Michael: I went to it.
Andrew: You just went to it and started talking to them.
Andrew: I see. So when you had to scrap that product — I’m looking at an early version of that product on Internet Archive — it looked good. You put a lot of time into it. I can actually see things like the names of the people who like my page, how many likes they have, how many friends they have, right?
Michael: Yeah. We worked with hard on it.
Andrew: So where’d you get the money to invest in that and the money to scrap all that and then come up with something brand new and the team to do that?
Michael: So one is I had no money. My wife was financial supporting myself and her. I think it’s probably the unwritten story of Kit was that my wife, who is also brilliant, was running a breast cancer research at UCSF and then on the weekends and nights waiting tables to pay our Heroku bills.
Andrew: Your wife was waiting tables after working at UCSF, the hospital, just so you can build this?
Andrew: Did you feel guilty about that?
Michael: Of course.
Andrew: You did?
Michael: Yeah, of course. I think it was a lot of tears. It was embarrassing. It was difficult. I didn’t feel good that my beautiful wife, who has a pre-med in biology degree, is serving drinks at a restaurant while I’m trying to self-fund an internet company, a technology company in Silicon Valley.
I think there are a lot of people, to be truthful with you, who thought I was fucking crazy. Excuse my language, but thought I was nuts. I refused to quit, man. I still refuse to quit. I work harder now than I’ve ever worked in my life. I just really badly wanted to be who I wanted to be, and I want to be a great entrepreneur. It was selfish. It was very selfish. I openly admit that it was a selfish thing to do.
Andrew: That explains why I saw somewhere on your Twitter stream when I was researching you something where you said wife is more valuable than an investor or something like that.
Andrew: Now I get that.
Michael: My wife is my greatest asset.
Andrew: Wow. And then who was developing this for you?
Michael: So my cofounder, Mike Taylor, him and I started the first company together. We did GVING together. We’ve been working together for eight years. We grew up on the same little island in the Bay Area called Alameda. He was working nights and weekends. We were guys that back in 2008, when we first started building websites, people were just building shit back then because it was cool to build stuff. Even back then it was not about the money for us.
We had a third guy, Andrew Cornett, the three of us who founded that company. We just love to get together and build things. With Mike, I was really fortunate because I was an ideas guy. I wanted to hustle. He didn’t want to hustle. We had this great working relationship where … sorry, I lost you there for one second.
Andrew: Yeah, no problem.
Michael: We had this working relationship where he loved to build and I loved to work on ideas and we had a ton of fun doing it and we did it for eight years and I kept promising him someday I was going to raise money and he was going to quit his job and we were going to build a great company and we were going to sell it and he was going to do financially well. The greatest feeling on earth, to be truthful with you, one of the greatest feelings on earth at least was when that guy was able to take a vacation last month in September and he was able to take his wife somewhere really nice.
The journey and the relationships you build along the way are really what is gold, right? That is what makes it fun. We just had a ton of fun doing it together. But yeah, we were just doing it on nights and weekends, and I taught myself how to code and we just kept going.
Andrew: And then you ended up creating one of the model chat experiences that people are seeing as the future of chat. But let me take a moment and talk about my sponsor. My sponsor is Toptal. If someone out there is not as lucky as you are and doesn’t know a guy like Mike, who can code up this beautiful thing you guys built together, then what do they do?
Well, frankly what they should do is look for a guy like Mike, they should look for a cofounder. Then after that when they’re ready to start hiring people, when they’re ready to start building a development team, I suggest what they do is talk to Toptal. The reason I suggest they do that is once you have someone who can start looking over code and you want someone to write beautiful code, the kind of stuff that can actually run a company, the kind of stuff that will help you think through the product, that’s when you need Toptal.
Michael, you told me before you started you don’t know Toptal, you’ve never worked with them. Here’s what they decided. These are guys who said, “What if we put together a network of the best developers we can? We’ll actually put together tests on the level of a Google or a Facebook to really weed out the bad people and get just the top people so when a company needs to hire developers, they can come to Toptal and we’ll connect them with the right developers in our network.”
I’ve had so many people in the Mixergy community sign up and hire developers from them that these guys keep buying over and over from us. Sorry?
Michael: That’s awesome. Finding good talent is very, very hard.
Andrew: I got an email recently from Grant Webster, a Mixergy interviewee who says, “I just want to drop you a quick note today to say the first week of working with Toptal developer has been amazing. Thank you so much for recommending and promoting them. Toptal is going to be revolutionary for my company.”
He then emailed me afterwards to say he was going to meet me in person at a conference and said, “Our Toptal developer is helping us rebuild the application.” Then he tells me what it is. I don’t know that I should say it publicly. “It’s the smoothest and most professional onboarding of a new developer I’ve ever experienced. Toptal is going to be a game-changer for us.” So many people in the Mixergy community have used them.
If you’re looking for a developer, I urge you to go not to Toptal.com, but to a special URL where they’re going to give you something they’re not giving anyone else, and here’s what it is–Mixergy listeners will get 80 hours of Toptal developer credit when they pay for the first 80 hours and that’s in addition to a no-risk trial period of up to two weeks. Go to Toptal.com/Mixergy.
Michael: I would do that.
Andrew: They really are fantastic.
Michael: Absolutely. You’re only as good as the people who build your product. You need the best of the best.
Andrew: That’s why it’s so great that Shopify has Toby. Every freaking developer out there respects the hell out of him.
Michael: He’s a god amongst men when it comes to development.
Andrew: Yeah. He really is a legend in the space.
Michael: He is. To some degree he may be more famous for Rails than he’ll — well, no, he’ll probably be always more connected to Shopify — but it’s one of those things but it’s crazy to think as successful as Shopify is, he’s equally as successful in the development community. It’s incredible.
Andrew: The first version–this thing is magical now. The first version of this automated interaction, this bot that you can talk to, what did that look like? How did that work? What did it do?
Michael: What’s amazing and I think one thing that we’re really proud of is we have some big changes coming in 2017, but the messaging interface hasn’t really changed, right? It’s still the same experience we launched back in 2014. What was amazing was I remember coming up with the idea.
I remember writing it out. I actually have the pictures, what we exactly coded from them. I’m getting it right now framed and matted for my house. I remember sitting there and trying it for the first time, and I remember thinking to myself–I remember telling my wife. We were in my living room and I remember telling me wife like, “Holy shit, we’re going to make it. We are going to make it.”
You know when you just know? There’s that moment, that spark where you’re like, “This is going to be a big fucking deal.” We literally got buying a Facebook ad down to four text messages. Now we have it in some cases down to one. I just remember knowing it was going to be something very, very special, and it was going to probably have a massive impact on the way people looked at conversational interfaces and how businesses can get a lot done with them. It’s been an incredible ride and seeing all these companies kind of flourish and build off of what we started.
Andrew: Was it when you saw the pictures or the designs or when it worked?
Michael: When it worked, this is roughly 2015 that it worked. 2014 we built a prototype, yeah.
Andrew: I see. So again, I’m going through the Internet Archive. 2015 is when I’m starting to see it on your site. Did people get it? Frankly, people are scared of the idea of bots and they don’t fully get that they can text message and have a result in real life happen.
Michael: That’s right. They didn’t. So many people would use it and they said, “I can’t believe this worked.” There are still people who use it and say, “I can’t believe this actually works.” We’re at this turning point in technology that I don’t think a lot of people are aware of yet or a lot of people aren’t talking about. We’re kind of moving, we’re ushering past the era of us using technology and us talking to technology. I think that communication comes in so many different formats.
I just think we’re on the verge of this very special time where we’re going to be more efficient than ever and be able to focus on things we care about more than ever. You just had a baby, and so you know that time is everything now, right? You probably want to spend as much time as you can with your child and you’re working. The idea of having something automate all the low-hanging fruit for us that we don’t want to do but have to do is just a fascinating thing.
Andrew: But Michael, I get why I want to talk to Alexa and say what song to play. It’s much easier to going to an app or a web interface. But for you, couldn’t Kit have just been a simple webpage that said which of these products do you want to sell, select from the dropdown, how much is your budget? All the things I just said could be in a form. Why is it that it needs to be in a text message format.
Michael: Well, I think there’s something key there. That is, again, just an improvement idea. That is taking how we currently do things and taking it one step better. It’s only as good until someone innovates on that one step better. We are in the business of behavioral change. My belief is that people don’t actually want to build Facebook ads. They want the benefits of Facebook ads. So why hand them a shovel and a hammer when you can hand them a contractor? They don’t want to have to do it. They want it to be done for them.
Not only that but it’s a scary world, right? I think what’s interesting about marketing is that that barrier of entry to start a Facebook page is zero, right? The cost of building a house is very high, so you get a contractor. The cost of breaking a leg and going and getting a doctor, you go seek professional help in all these other situations. People are not professional marketers. They don’t know best practice.
Andrew: All the features, all the results you provide through a messaging bot, you could do through a web interface, but there’s something about the bot interface that makes it better, so much so that you’re willing to overcome people’s resistance to newness to give it to them. I’m trying to understand it. You’ve been at it long enough that you probably know.
Michael: I think it’s a couple things, right? One is you’re never … We used to have this thing called the Kit Challenge. That was could any human build an ad faster than Kit could build an ad? Even if we built the easiest to use interface on the web, that still requires a lot of manual work for yourself. Nothing will be as quick as asking Kit to do it.
So I’m actually less interested in the interface. I’m actually more interested in the experience of me doing something versus somebody else doing something for me, and that is where we’re trying to focus our time and energy on. They may be talking to Kit on the web. I think that when we look at like employment and human behavior, I don’t work with employees through a web interface. I work with employees through a chat interface or real life conversation.
What we’re trying to do is over time expanding our lens where we’re not just going to be helping them with their marketing. Kit will embody a lot more ability and skill set that would be kind of like the all-encompassing right-hand man. So I think that what you’re seeing is, like you said in the beginning, the tip of the iceberg, and we’re not even at the iceberg yet. We’re still in the helicopter flying to the iceberg. I think, in the years to come, you’re going to see why we bet very big on conversation.
Andrew: I can see in the future why it would be so big. In the future, I don’t need all this back and forth that I just described at the top of the interview. I can just say, “Hey, sell my most recent ad. All I have is $20 in my pocket.” And then Kit takes care of it. Sorry?
Michael: That will be very soon.
Andrew: Yeah. It sounds like it’s sooner than I expected before this interview. You’re smiling big.
Michael: I think it will be sooner than you expect it, yeah.
Andrew: But you intentionally didn’t go to that. You said that you wanted a multiple choice-type experience. Why?
Michael: Because we wanted to control the experience. That was like a big factor for us is that again, people don’t know exactly what they’re doing. We worked with Facebook. We worked with copywriters. We worked with all these industry experts to kind of try to templatize best practice to the best of our ability. If you started from scratch today and you just text message Kit with natural language processing, “Hey, go run me a Pinterest ad,” well, how do you know that’s the best thing for your business?
So what we did with the menu options is that we built it in a way where they can never put themselves in too much trouble. Kit was going to educate them and guide them to the best thing for their business and that we can sleep at night knowing we were giving them the best chance of success. We have now reached the point, from an intelligence standpoint, where we’re getting smart enough and sophisticated enough where Kit can have those kinds of conversations to really guide you back on track.
Michael: We didn’t have the technology in place or the resources. We ended up raising some venture capital, about a little over $1 million. But we still didn’t have the engineering power that we needed to build this level of sophistication. Part of the idea of getting acquired by Shopify was we were going to have endless resources to accelerate our vision and accelerate our product roadmap and we’re now seeing what the power is of being owned by a publicly traded company.
Andrew: And part of is also that for some things, it’s okay to go to a forum. For other things, I may not know I need to go to a forum. For example, one of the examples I saw on your site was a store owner posts a picture on Instagram. It does well on Instagram and then Kit comes to the store owner and says, “Hey, this is doing really well. Do you want to promote it with an ad?”
Michael: That’s right.
Andrew: That proactive–
Michael: It’s paying attention to what’s happening. In truthfulness, Andrew, it should never even get tot the point where you’re saying, “Hey, Kit, I have $20, go run an ad on Facebook.” I’m happy that we’re making some big evolution steps in the product, but what we want to be is be as proactive as possible and pay attention to what the best opportunity is and for Kit to reach out to you proactively and say, “Hey, Andrew, this product has been getting a lot of traction. This would be a good use of investing $20, because I believe our return on ad spend will be about $60. Would you like me to go through with publishing the ad?”
Andrew: I see.
Michael: That’s a very educational experience. It’s outlining the opportunity fully. All that should take is somebody to respond back, “Yes, that sounds great.” The decision making needs to rest with Kit, not for the person to have the knowledge of what’s the right decision to make.
Andrew: There was a time — you saw this yourself — when people were so enamored by apps that everything became an app to a ridiculous degree.
Andrew: I wonder if now as people are racing to create messaging bots they’re kind of repeating the same mistake.
Michael: They are, 100 percent, 1 million percent. I made that mistake seven years ago or whatever it was. I think there are some experiences still that are best on the web. There are some experiences that are best on mobile. There are going to be some experiences that are going to be best with a bot. I think a lot of people because they made the mistake I made a lot of years back and that’s chasing the gold rush, they’re trying to force squares into round holes.
We stumbled across this. We didn’t follow a trend. We realized that this was the right solution to the right problem we were trying to solve, so we started building into it.
If you look at some old Venture Beat articles, they don’t even mention bots because bots weren’t even a thing. Bots didn’t even exist then. We were the only people doing it. So it worked for us because it was the right thing for us. Again, I always use every product decision we make as a measurement against time. Is it faster for Kit to do it or for a human to do it? If it was still faster for a human to do it, we’re not making the right product decisions.
I wholeheartedly believe everything we’ve built in Kit you cannot do faster than Kit. When you go to a bot and you ask for the weather and it doesn’t give you the right weather, it gets frustrating and annoying and you just open up your weather app on your phone and you get the weather yourself.
Andrew: So what should we be looking at when we’re deciding whether to turn an idea into a bot, a website or an app?
Michael: Well, the first thing I think people have to have complete clarity around, which I don’t think enough entrepreneurs do, is what problem are they actually solving? So many people want to tell them what they’re building. Very few people want to tell you what problem they’re actually solving.
I think once more people build clarity around what problems they’re actually solving, then they can start building clarity around is this experience going to be most meaningful in conversational format, web format, mobile format and kind of take it from there. I do believe that we are in unprecedented times, where all three things do kind of work, but I wholeheartedly believe that the expectation for everything to become more conversational is a very real expectation. The same way that mobile is slowly killing off the web, I actually think the bots will slowly start killing off mobile.
So it’s a very progressional thing. It’s not necessarily about where you need to be five years from now to be successful. It’s where do you need to be today to be successful and over time kind of renavigate, recourse what that experience should actually look like.
Andrew: Several times during this conversation I heard the shake of dice, which is the telltale sign that you’re using Slack. I noticed you guys don’t have a Slack bot. Why aren’t you on Slack?
Michael: So we’re on Slack because it works for our business. I think that the tipping point of where Slack works is when you have three, four, five plus employees. If it’s just two people, I don’t know if Slack is the appropriate platform. The majority of the people that are using our product and beyond the majority, nine of ten people that are using our product are doing it by themselves. They don’t even have Slack on their phone. It’s a complete afterthought.
So, where we exist, the platforms we live on are where people are spending their everyday lives. It’s the most natural fit. If we start going upstream and we start focusing on more medium to larger size businesses, which we’re not right now, then that makes sense to start thinking about how do we have Slack built into their workplace. Right now we already are built into their workplace. We’re built into Facebook Messenger, we’re built into text message and that’s what they’re running their businesses through.
Andrew: Why Telegram?
Michael: So Telegram, long before Facebook had their own bot API and support, I actually went–so what a lot of people don’t know, and I don’t think it really matters much, but last F8, not F8 2016 but 2015, when they made their big announcement for Facebook pages being able to message businesses, I begged them to let me build Kit to work with businesses through Messenger and they wouldn’t let me do it.
So we actually went on and the reason I was begging them and I met with various people on the messaging team is because we weren’t able to secure SMS numbers in every country, i.e. we had a really hard time getting numbers in India. We do not have a number in New Zealand. So we needed to have a more universal platform that, regardless of where you were, you could use the product.
Telegram had — again, they get massively underappreciated here — they had a bot API long before Facebook had a bot API. So they were the easiest option for us to grow on and extend an offering in places like New Zealand where they couldn’t get phone numbers.
Andrew: Got it. Second and final sponsor is a company called Bench. Do you know Bench?
Michael: Actually, after you gave the breakdown, I do know Bench, yeah.
Andrew: You do?
Andrew: What they do is they do bookkeeping as a service. Every time we talk about having this work that entrepreneurs have to do themselves passed on to someone else, I’m thinking that’s what Bench does, only Bench isn’t all automated. There’s no bot there. It’s a human being, a set of them who are all doing books for the entrepreneur.
I’ve had them on here largely as a sponsor because I’ve had my books in disarray at times in my life, and it’s just very dangerous for an entrepreneur. First of all, you don’t know how much money you should be spending. You don’t know what’s working for you. You don’t know whether you’re losing money or whether you’re making money.
So what Bench is they say, “Step back, hands off, we’ll take care of it. Our team of people will take care of it fully for you.” It’s been used by past interviewees, including Patrick McKenzie, who did a whole write-up about it long before I started having them as sponsors here. If you’re out there listening to me and you don’t love your bookkeeper or you’re finally ready to pass your work on to someone else, go to Bench.
They do fantastic work. I urge you to check them out. You get a sense of how good they are when you just check out this landing page they created for us. It’s Bench.co/Mixergy. When you do that, you’ll see that they really understand what the Mixergy community is about and what entrepreneurs in our audience are doing and they’re also giving us 20% off the first six months. So, try them. Get set up. Really inexpensive, great service at Bench.co/Mixergy. Remember to get your 20% off there.
Michael: They’re Canadian-based, yeah?
Andrew: I thought they were based in the U.S.
Michael: They may be. I met a couple of those guys at a conference in Whistler last summer called GROW, the nicest people, man. I can’t remember their names right now, but they were really, really nice people.
Andrew: Their freaking design is out of this world.
Michael: I endorse niceness every time.
Andrew: Me too. I didn’t know you were in San Francisco, by the way.
Michael: I am, proud San Franciscan.
Andrew: Man, that must have been hard. Forget not having money in San Francisco, which is tough enough, to not have funding in San Francisco.
Michael: Man, I’ve got to tell you, so many investors that passed on me emailed me after the acquisition saying, “We are so happy for you.” I think that they knew that–
Andrew: Why didn’t they invest?
Michael: It’s something that I used to go home and scream and cry. It was so frustrating, man. I was working so hard and I really thought–I had guys doing me when we were doing the SMS stuff, we had this crazy growth in 2015, insane. They’re just like we don’t think people are going to want — again, this is way before the big bot — again, the bot thing really didn’t come about until 2016. So think about go March, May, 2015 and no one is doing this. We were kind of out on our own island.
People are just like, “We don’t think people are going to want to use a messaging client to do their marketing.” It just sucked. It was really frustrating. I adamantly was like, “This is the best experience I’ve ever had in building an ad.” I would demo it and I have emails from guys being like, “I can only get half my team on board,” or, “People just don’t get it.” It was really tough. It was never a flat out no. It was always like, “Half the team is not bought in.”
And honestly I think the one thing that I’ve learned is that it always kind of falls back on the entrepreneur. I clearly was not painting a good enough vision. I didn’t know how to story tell well enough to help them see what the future actually looked like. It’s also one of those things that it was a blessing. Not having money forced us to stay very learn. We couldn’t afford to hire an iOS developer to build an app that you talked to. It was like text message was the easiest entry point for us. We used Twilio. It was a very simple thing.
It just was one of those things where I just knew in my heart I was right. I just really in my heart felt adamantly … I used to tell my wife I wish I felt different because it would be a lot easier to stop.
Andrew: Did you make money from it before you raised money? You did?
Michael: Yeah, we were making money.
Andrew: I’m trying to figure out where you got your traffic. When I go to SimilarWeb to look you up, what I see is the majority of your traffic, the majority of your users seem to come from Shopify where you are in their Shopify store, highly rated. That’s, I’m imagining, where you got the majority of your customers.
Michael: They were a majority. We were on five platforms, and they were the lion share of our business. We were in Shopify’s marketing app. What I was doing was I was going around the country with Shopify. They had something called the Retail Tour. I was just going and speaking about Facebook ads. I wasn’t even really speaking about Kit. We had a little booth.
It just became kind of a word of mouth thing. We got popular on a couple of Facebook groups. People started talking about us a lot. We became the number one marketing app on Etsy for a little bit or the most popular marketing app on Etsy for a little bit. It was a slow growth, slow trickle effect. Finally, when we started making some money, we ended up, like I said, we ended up raising about $1 million in funding.
So we started heavily acquiring people through Facebook advertising, which we found to be very, very successful for us. We just kept plugging along. Again, I just knew if we could keep putting one foot in front of the other and we didn’t quit on each other and we didn’t give up that at some point, something good was going to happen.
Andrew: Who were these investors? I actually know Chris Gammill from L.A. Was he an individual investor, or was he–
Michael: No, Technicolor Ventures invested. They were our second largest investor. So, again, very small seed funds invested.
Andrew: Then you created–you basically became a platform. I saw as I was going through your site that there was a discount app that then built on top of you. Did that help in getting new customers? It did.
Michael: Yeah. So we built an API. Again, early 2016, late 2015, we had this epiphany like, “Fuck, we need to be able to build more skill sets. We need to give Kit more ability.” We only had one backend engineer, Mike, my cofounder. We didn’t have the bandwidth to build 20 things. So it was like, “Let’s spend two months building an API and let other people build on.”
I think now we have about a dozen apps on the platform. Three are being built this month. It automatically created trickle effect, like Bold built onto our platform. They’re one of Shopify’s biggest developers. Then we had hundreds of people just from Bold alone on any given month sign up to use Kit because now Kit can do all their discounting for them. We just were patient and strategic, and we thought through as much as we possibly could to play the chess board as smart as we possibly could.
Andrew: I was going to ask you how do you get people to use your bot, because it seems like there are a lot of bots out there and no one is signing up for them. I think I understand. You basically have–the sales process happens on your website and then once someone buys, then they get introduced to this bot that will take care of them after that. But you’re not trying to get them to sign up through the bot.
Michael: The merchant? No. They go through KitCRM.com and we put them through an onboarding and then Kit starts proactively text messaging them.
Andrew: Right. It seems like that’s a much more effective way to do things than what most bots do, which is say, “Sign up to my bot right here.”
Michael: We’ve built it this way three years ago, and we’ve just stuck with it and it’s been working really well. We had it at one point where you could text message Kit. It basically sent you back a link for you to sign up, and we had a really great mobile onboarding experience. But no, I think over time we need to get better about how can we create relationships with Kit where you don’t need to be on the web.
We’re heading into across the board a much more conversational experience. It’s one of those things where it’s like we never had enough people that if it wasn’t broken, we couldn’t afford to fix it. We were converting very high and it was going very well. So, it was one of these things that we didn’t even both trying to improve it.
Andrew: All right. Let me close out with this because I know we agreed to a limited time because, man, your schedule is packed right now.
Andrew: What’s the best thing about having done all this? Now that you can go to your wife and say, “You don’t need to wait tables anymore,” what’s the best part of all this?
Michael: The best part of all of it, it’s really hard to identify the best part. The best part about all of it is that I’m living the life I wanted to live for me and my family and my friends. I don’t think the best part has happened yet, to be truthful. I think this is a very long journey, and I’m just incredibly grateful that I didn’t throw in the towel when it was really hard and I’m really mostly thankful for my wife and close friends who wouldn’t let me throw in the towel.
I think it would have been really easy for my wife to say, “I’m packing up. I don’t want to do this anymore. I don’t want to wait tables anymore.” And she stood by me through all of it, and now she’s enjoying a very good life and I’m just happy that I didn’t let someone else dictate the outcome. I think that’s the best part. This is what I wanted for myself and this is what’s happening.
Andrew: I think your site is so beautifully designed that if anyone wants a taste of what’s coming, it’s such a good way to see it, not just the homepage, which I think explains the problem really well, but you guys have a set of videos around the skills tab, I think, of your site, where you show how I could interact, how I could actually buy a Facebook ad using text messaging or an Instagram ad or do email marketing from messaging, right inside there. The URL for anyone who wants to go check it out is KitCRM.com.
And of course my two sponsors for this interview are Toptal, where you can hire a developer at Toptal.com/Mixergy and Bench, where if you finally want your bookkeeping done right, you can go to Bench.co/Mixergy. I’m grateful to them for sponsoring.
Michael: Thank you so much. It was an honor and best of luck to you.
Andrew: Yeah, it’s good meeting you. Bye everyone.