How to turn your consultancy into a SaaS

You know from these interviews that founders who address a deep pain for their customers are the ones who create the most dependable successes.

Today’s guest was doing consulting work when he and his team uncovered an issue that his clients had. Well, that issue lead him to create a software company that addressed the need. Wait until you see how big the company has become.

Charles Manning is the founder of Kochava, a leading mobile attribution analytics platform. It helps app creators understand how people are using their apps.

Charles Manning

Charles Manning

Kochava

Charles Manning is the founder of Kochava, a leading mobile attribution analytics platform.

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Full Interview Transcript

Andrew: Hi, everyone, my name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. You guys know the big takeaway that I’ve had from doing all these interviews is entrepreneurs who uncover a deep pain, and address it, end up creating the most dependable successes.

Sure, we’ve had some people with flukes, we’ve had some people who’ve had other approaches, but if you really want something to take off, I’m finding in these interviews find a deep pain that people have. And one of things that I’ve been doing in these interviews is understanding where people and how people find pains.

Well, here’s what today’s guest did. He did a little bit of consulting work, that’s when he and his team uncovered an issue that clients like his had. That led them to create a software company that addressed the need that they discovered and that’s what built his business. Wait till you see how big it got. His name is Charles Manning. He is the Founder of Kochava. It is a leading mobile attribution analytics platform. That’s a mouthful, so here’s how I would explain it.

You know how years ago marketers knew everything that was being done on their websites, I mean right down to like where people would hover their mice, but when it came time to understand what was being done on their apps, they had no clue. Well, what Kochava did was bring that level of insights deep into apps. And so that’s how he grew this business. His next move now is to bring blockchain technologies, which Bitcoin pioneered, to the advertising world. He’s got a product called XCHNG that I want to find out about in this interview.

That’s right crypto fans, we’re going to find out about this new product right here in this interview from an experienced proven entrepreneur. First, I’ve got to tell you this interview is sponsored by two companies. The first will help you hire your next great developer. Wait till you hear what I did with them. It’s called Toptal. And the second will help you host your website right. It’s called HostGator.

But first, Charles, welcome.

Charles: Thank you very much. Thanks for the opportunity.

Andrew: Charles, this whole thing is bootstrap right?

Charles: That’s right. So we had the benefit of, as you had mentioned, innovating on what our customers were asking about, and because we had the revenue footprint of all of our consulting customers that were supporting us, engaging us, we had the opportunity to build on the side what effectively became our 1.0 version of the product. And so we didn’t need outside financing that early stage. And then as we grew, what was remarkable was we were able to continue to fund our growth despite it being ridiculous growth. I mean we had three years of 300% year over year growth.

Andrew: Talk to me dollars and cents. What’s the annual revenue right now?

Charles: Sure, so we don’t share our annual revenue because we are a private company, but I’ll tell you there are some metrics that would make it pretty straightforward for you to reverse engineer into how our model works.

We have several thousand customers who use the product. We have about 130 employees. We’re profitable as a company. We’re on our sixth year as a business, and despite all of this kind of profitable growth, we continue to invest easily 20% of our top line back into R&D for projects outside of our R&D of our core initiative. Which is really where XCHNG came from, is the reinvestment in this blockchain technology.

Andrew: I see, just doing really simple math, if I were to assume 100,000 in revenue for each employee, I’d get $13 million, fair to say over 10 million in revenue for a bootstrap company.

Charles: Much more than 10 million.

Andrew: Much more. All right that gives me a sense of where it is. I’ve been doing a little bit of research about you trying to get a sense of who you are as a person, and then how you built this business from nothing. And one of things that stands out to me is your mom. Your mom was an entrepreneur, right?

Charles: She was. She was an entrepreneur . . .

Andrew: What did she do?

Charles: So she was an interesting character. She, at her graduate school, was the first salesperson for IBM who was a female, which was really, if you think about it, a fascinating dynamic. She had stories where there wasn’t a lady’s restroom on not only her floor but in her entire building, because it was a sales building. And so she’d have to go to the bottom of the building, go next door to go to the restroom. And so just how times have changed. And she’s always been just terrifically kind of the balance of both aggressive and understanding of what it takes to get to a yes in terms of sales. She’s a terrific seller. But in the . . .

Andrew: I’m sorry interrupt, but do you have a sense of . . . I know those old IBM people, they were some of the best . . . there were studied as salespeople. Do you have a sense of one thing that made her a better salesman than other people, better saleswoman than other people?

Charles: Yeah, I think one of the things that she has always been pretty strong on, and I think it’s resonated in my own personal execution of engaging with people, is how do you listen, and really understand what are the objections to a yes. So that instead of regurgitating what you know about your product, your service, instead you understood what the objections were to that product or service and you handled them directly and head on.

If you bring up new things, you’re just opening yourself up to a new opportunity for a new objection. If you can just listen and understand exactly where that prospect is at, and address those things head on, it’s a far more efficient approach and it’s so often overlooked.

Andrew: I see. I’m fascinated by your mom. I’ve got to ask about a little bit more. 1987 she makes this big move, what does she do?

Charles: So in ’87, amazing that you know that. So in ’87, there was deregulation in the telecom space, and she started a telecom company that, because of deregulation, the opportunity for her to even exist was not there prior to that deregulation. And so what I attribute that to is when markets shift, there is just lakes of opportunity, oceans of opportunity, and regulation is one of those areas where markets shift.

In this case, there was a market shift in that you could actually buy long distance minutes from a carrier like an AT&T, at the time MCI, a variety of different vendors. And you could then resell them almost like buying toilet paper at a Costco, and then selling that toilet paper roll by roll to a convenience store. And on that spread, you can make money because you’re packaging up these smaller chunks, and obviously you have to find a market.

Where that’s interesting she has always been involved with higher education, and so she had a very good contact base. And that contact base was typically smaller colleges and universities. Those universities would never be given the time of day from a large account group with a AT&T, and so she was able to bulk buy long distance minutes, and then sell it to smaller institutions and make spread.

Andrew: I see, and you’re right, having done these interviews that’s another thing that I notice. When there are shifts either from desktop to mobile, tech shifts or regulatory shifts and we’re going through a bunch of those right now, some people find those opportunities that didn’t exist before and they jump in. She did and as a result, from what I understand, you around the family constantly talked about what’s like to have a business, what it’s like to have the headaches of employing people, and the obligations that go along with it, right?

Charles: That’s right. Payroll, it happens every two weeks whether you close a deal, or you don’t. So it was one of those . . .

Andrew: Was she anxious about it?

Charles: Sure, yeah, I think so. I obviously had a limited perspective being in junior high school and high school as she grew the business. But I think I had a new-found appreciation as I started my first company after working at Oracle, which I was still relatively young. I was 23 when I started that after leaving Oracle, and had a lot to look back on in terms of history that not worry about the small stuff, but to power through.

Andrew: By the way, payroll still worries me. I don’t hire as much as I should because I worry about it. It’s a big obligation. I still remember years ago someone’s wife getting on a call with me after I let him go saying, “You’re a monster. We’re about to have a kid,” and I felt so bad, if I could have avoided it, I would have. But do I ever want to take that kind of risk again? You have to, but it’s dangerous. So you decided after working at Oracle, I’ve got to start a company. What was the company that you started right out of Oracle?

Charles: Sure, I started a company called M-Code Software and what we did was we built technology that would measure IT availability and performance of data center systems. And I’ve always been really into data, that was the reason I wanted to work for Oracle out of school, it’s the reason I started M-Code. And really the notion was we had this, at the time a very unique piece of technology. Java had just come out, and we built effectively what was a byte code injection technology that would inject measurement technology into Java methods and classes.

And that had never been done before. There wasn’t a thing called Java PI at the time. It was a Java 1.0. And so it was a pretty neat piece of tech to be a byte code injection component. And what it meant was we can show IT managers the health and availability of their app server tier. And just like I shared before about these kind of market shifts, never before the Internet was there a need for an app server tier, and as a result, there was no measurement tools for app servers by data center operators.

And so observing that shift within the kind of app server space and the kind of web commerce requirement we built measurement tech, because if you can’t keep the systems up and running obviously e-commerce isn’t happening. And so it was something that we were able to sell quite a few customers on, and then eventually sold the company to another private company.

Andrew: Eventually, we’re talking about within two years. From what I understand 1999 is when you launched it, 2001 when you sold it, about two to three years there right?

Charles: That’s right and I . . .

Andrew: What did you sell for how much?

Charles: We don’t share that, but I will say thankfully, we did the deal for cash. I don’t know if you recall, but that was right during the dotcom . . .

Andrew: This was after, I thought that happened 2000, no?

Charles: Yeah, it happened in 2000. I kind of closed in 2001, but we had the term sheet signed and agreed to and finalized.

Andrew: I see.

Charles: And it was amazing, because when we first did the deal it was a remarkable scenario. Initially, the company was out at the East Coast and I was out of the West Coast, and the deal was that I was going to be a general manager for the West Coast office, for this company. And within literally . . . and we had three other term sheets at the exact same time that we were kind of theorizing on what would be the best deal.

And literally within three or four weeks the other two term sheets got pulled, this deal now changed where I had to move to the East Coast. And it was clear to me, we have to sign this and get it done we can’t hypothesize much further. And thankfully, it was a good outcome. It wasn’t an amazing outcome, but it was a good outcome and it was healthy. And for me, the best thing that really came from it was it was like the best MBA I think I could have ever asked for in terms of the experience.

Andrew: Did you get anything to celebrate it? I remember one when I figured out what Mixergy was about, like I got the business model for Mixergy, this is the dorkiest thing, but I got myself a Kindle just like a little thing. You could say who needs a Kindle? I’ve got my phone, I’ve got all these other devices. I got a Kindle and I still to this day have it, and I still enjoy it. It’s one piece of technology I haven’t upgraded even though I could. But it reminds me, it’s that little thing, did you do anything maybe a bigger level than a Kindle?

Charles: Yeah, it sounds a little goofy, but I’ve always been interested in real estate. But my wife and I bought our first house, because we have the capacity to do that. And the great thing about real estate especially in the East Coast at that time . . . remember this is 2001 time period. Overall the economy was not in amazing place as you remember, but we were able to buy much broader than we would have otherwise been able to buy as a result of that transaction.

Andrew: I see.

Charles: And that parlayed very well in terms of an investment, and I didn’t really think of it that way, but I kind of thought of it as this is great as a provider for my wife and I. That was really important to me and I was grateful for it.

Andrew: Okay. Then after that you started something called PLAYXPERT. Are you a gamer?

Charles: Yes, I historically was a gamer. In college I was a gamer. I’m not I think a pretty, maybe a renaissance gamer I was kind of . . . remember the tech in the game space when I was younger was much less sophisticated. But I played consoles back from before the Atari, but then all the way through in college when PC gaming was a little bit more advanced. What I was really intrigued about was that the gaming technologies started to be on a hyper growth trajectory as a result of ubiquitous connectivity and higher end hardware on the PC.

In particular, the hardware you could put on a PC was fundamentally more advanced than what you could ever find before on the console, and the reason why consoles were always so popular previously is you get a special purpose piece of hardware, that’s really high end for those games. And the advent of Nvidia and a variety of different hardware components, I was really intrigued that you could create this gaming experience, and more importantly, have a hyper, hyper connected in terms of connectivity. And so remember this was when Myspace was out.

Andrew: You mean connectivity with people?

Charles: With people.

Andrew: That before it used to be more individual playing a game by themselves it might as well be Pac-Man in an arcade next to the Pizzeria.

Charles: That’s right.

Andrew: Here it’s now all these people online talking to each other, playing each other.

Charles: That’s right.

Andrew: And that’s an opportunity that you saw that the world is shifting to this multiplayer game.

Charles: Yeah, and the space specifically is MMO, massively multiplayer online games. A guy who had worked for me at M-Code who was really my right hand man, and I trusted and continue to trust tremendously, had shifted to go into the game space and really was the lead ops guy for the first free to play company in United States. Where they would license free to play titles from Korea and bring them into the United States.

And he was constantly in my ear about this and it was so inspiring to me about what was possible, because remember, Myspace was kind of at its prime at the same time. And I was thinking to myself, Myspace is nothing if you think about “Ultima Online” or “World of Warcraft” these are social networks where you are really embedded in social, and there’s like an engagement element. That was really intriguing to me because of the massive community of online players.

Andrew: Yeah, and so what you decided to do was create a tool to allow this community of people to be more of a community. Here’s what I’ve got as a best line that I read to explain what PLAYXPERT was. A company that offers in-game community management tools for PC based and multiplayer online game markets. It helps technology gamers to engage forum posts, chat, music control or monitoring system diagnostics. This was for the makers of the games or for the people who decided to create communities around them?

Charles: It’s really for the latter for the people who are engaged. What was unique about PLAYXPERT was that you didn’t have to integrate with the actual games themselves. It just worked as an overlay. Our comparables, Steam had just come out with an overlay technology and Steam is by far just the absolute monster. They’ve done such a great job.

Valve has done such a great job in terms of bringing that community together. But at the time when we first created PLAYXPERT, that was not a foregone conclusion necessarily. There was another product called Xfire, who had recently been bought by Viacom. And it did something somewhat similar but having been bought by Viacom, I think there was some opportunity where there are some new windows of opportunity to be an independent player. And even today, there’s a bunch of companies in the voice space that are continuing down that path. Clearly there’s still a need.

So it’s an interesting space. We ended up launching the product in August of 2008, and if you recall that was about a month before Lehman had laid off their entire crew, and there were some pretty significant economic environmentals. And thankfully, over the course of that next few months, we were able to successfully sell PLAYXPERT to Razer, which to this day uses the PLAYXPERT technology. That’s what Razer Comms is. So if you use Razer laptops, keyboards, mice, and you want to communicate with the Razer community through Razer Comms, that’s actually all PLAYXPERT technology.

Andrew: I see. What kind of an exit was that for you? I couldn’t tell big, small, I don’t want to get into the details of it, because I know you now well enough to know you’re not going to tell me. So I want to give you a place to just give me like a base hit, a walk. What was it?

Charles: That was a small one. It was disappointing only because there wasn’t a single venture guy that wanted to write a single check in the fall of 2008.

Andrew: I see.

Charles: And so if we were going to try to make this work, we would have to figure out how we’re going to monetize it, and the whole model was not to be monetized immediately. You really had to build the community. And so what was great was by doing the acquisition with Razer, again, did an all cash deal, we were able to effectively pay payroll for a full year while we got all of our infrastructure put together with PLAYXPERT . . . excuse me, with the consulting efforts that we were doing. And I point back to that transaction as the reason why Kochava was able to not have any investors.

Andrew: I see, and so that explains to me something that I didn’t understand in just researching you, why would he start a consulting business? Now I heard some reasons and you told our producer about some, which we’ll get to in a moment, but this gives me . . . because frankly PLAYXPERT if I look at it in the gaming world, there’s tons of chatter about it, so I couldn’t tell, was this like a huge hit or not? And if I read articles like the ones on Forbes, they make every exit out to be an exit, which is like do you celebrate like you might as well be living on an island that you bought for yourself.

All right, let me take a moment talk about my sponsors, then jump in and discover this consulting company that you did. The sponsor that I got to talk about, that I’ve got to, I have to talk about. The sponsor that I want to talk about is a company called Toptal. I’ve talked in the past, Charles, about hiring developers from Toptal, hiring a designer from Toptal. Here’s the thing that occurred to me a little while back. I need help, have somebody just look over my finances, someone who’s not internal to me, not my bookkeeper, someone external with an eye for finance.

And I’ve been telling people, I’ve been giving updates about how well that’s been going. This guy who I hired from Toptal, so good, he couldn’t help himself, in the interview, he basically took . . . not basically, he did, he took mouse and keyboard control of my screen because we were using Zoom to screen share, and started going through an understanding my finances as I was showing him my income statement over the years.

Before we even started, he put together a spreadsheet with a few suggestions that I should take and how much money I would save with that, and a Google Doc showing me . . . actually it was Word because he’s a finance guy. But I converted it into a Google Doc, because I am not a finance guy. I prefer Google. Of all his suggestions and how we work together and how we’re going to score his work with me. Boom, that’s the kind of quality you get from everyone.

I’ve had this kind of experience working with Toptal developers, but it’s hard for me to articulate that I can’t help myself even though I’m not getting paid, I have to do this right type of attitude when it comes to developers, because I’m not a developer. I can say when I hired a finance person this is what it was like, this is what these Toptal people are like, they’re freaking insane, for details they can’t help themselves.

It’s like me, if you say to me, “Hey, can you fix my iPhone?” Not only will I fix your iPhone, but I’m going to settings and adjust a few things and give you some suggestions for what you can install. I want to do it right. I can’t help myself even though I’m not getting paid. Same thing with this guy. So I’ve talked a little bit about some of the benefits that I’ve had from him. Here’s the latest. This is last week.

One of things that he told me was, “Andrew nobody negotiates their credit card processing fees enough. I want you to look at all the credit card processing fees and see whether that’s a place where you could negotiate.” And I thought, I don’t even freaking understand what these guys are doing. He said “Give me the phone number. I’ll understand.” And he went through, he got their whole rate sheet. It turns out that if someone pays me using a Chase credit card, there’s one fee that I pay. If they pay using a Chase preferred credit card, it’s another. You’re nodding. You know this stuff.
I had no idea. I don’t care to know it. He helped me out. We negotiated a better rate, and last month, was the first month that I got to see the benefits of it. We saved $2,000 on credit card processing just because he looked at that.

Charles: Oh my goodness.

Andrew: Right, that’s one month and this wasn’t like our biggest month. And it’s just one little step that we took to clear things up. So now we’re talking about minimum $24,000 a year. That’s not enough for me frankly to brag about here in this interview. But here’s what is important that I am talking about, that is brag worthy. Now we have as a team, this mentality that we have to care about the finances, that we think through the details of them, and I have a person who can bring me an outside perspective to show me what I’m not thinking about. And when I don’t understand the details of it, there’s someone who can handle it.

So anyone out there who’s an entrepreneur, knows what I’m talking about, people say it’s lonely. I don’t think it’s lonely to be an entrepreneur, there are too many people around me. I could use some space. But you feel alone in making your decisions. It’s nice to have someone with an outside perspective and experience to help out.

If you’re out there and you need help figuring out like a cohort analysis, how much you should be charging, putting together spreadsheets for investors. Higher people, ICOs, who need help from an outside finance person who go to Toptal. Whatever it is that you need finance related for your business you should consider going to Toptal and getting an expert.

So in addition to developers, in addition to designers, I want you to go to the special URL where Toptal is going to give you 80 hours of Toptal developer credit when you pay for your first 80 hours, in addition to a no risk trial period. They don’t offer this to anyone else. All you have to do is go to toptal.com/mixergy. That’s top as in Top as in top of your head, Tal is in talent because they believe in the best talent out there, toptal.com/mixergy.

All right. I’m shot out of a cannon about them as you can see. The reason I use the phrase shot out of a cannon is because I used to listen to Howard Stern growing up and that was one of his phrases and it stuck in my head. New York, he owned New York for a decade or two. Did you grow up in New York, where did you grow up?

Charles: I didn’t. I grew up in Colorado, but when I lived in D.C. I was in New York probably every second week just for sales deals, and I love it. It’s a terrific town.

Andrew: I love D.C. and I love that from D.C. you could get to New York, just take a freaking train and you’re there ub no time at all, and it’s a good train.

Charles: Yeah, the Acela is amazing.

Andrew: All right. So one of the reasons that you did this, that you started a consulting company I heard was that you had this team of people that you wanted to keep with you.

Charles: Yeah, so part of the deal when we sold the PLAYXPERT was, certainly we had the opportunity to move but we really didn’t want to do it. We really loved where we lived, we live in a small ski resort town with a big lake in North Idaho. Which sounds so oxymoronic that we were doing driver supplanting subsystems on the PC, and there’s like enough people that you can maybe count on two hands that know how to do that.

And we had those people on our team, that kind of caliber of person, and we had folks on the team who were really passionate about getting to live in a town like this, and certainly I’ve been. But also doing something really interesting and relevant in the global scene of technology. At the same time, you’ve got pay payroll and so I was excited about . . . I’ve got a guy who’s been a mentor in the past who used this phrase, “If you stay close to the net for long enough, you’ll end up getting one in.”

And really the premise was just serve some customers in this consulting arena, do well by them, deliver strong and you’re going to uncover a whole bunch of really interesting dynamics or opportunities that may exist. And no doubt we actually built two or three subsystems that we ended up building at the same time as Kochava, but the other two outside of Kochava did not have the legs that Kochava did. And so we pruned them.

Andrew: What did they do? What were these consulting companies doing? You’re saying that three different consulting companies?

Charles: No, no it was one consulting company but like there were three incubated ideas that we kind of played around with. And if something became interesting enough that we could potentially incubate another one it would come up. So Kochava is just one thing we were doing alongside of our services stuff, but I’ll give you an example.

We’ve built a system that did a real time loan origination algorithm for credit unions, so that if a customer of a credit union went into a teller, the teller on their screen could immediately pre-qualify the customer for a new boat loan.
And it would be effectively on their ATM to just go buy a boat tomorrow if they wanted to. And they used all the history of that consumer to be able to make that real time assessment and prequalify them. And we ended up building this system and we did an incubation and ended up doing that for a company that’s in the credit union space. Kochava was another example.

Andrew: I see. The other idea that sounds great . . . I don’t know why that didn’t take off, it makes a lot of sense.

Charles: It did. It’s now a whole company.

Andrew: I see.

Charles: It’s its own little thing on the side. Right. We just . . ..

Andrew: Oh, I see. So it was a client who asked you for it. You said not only are we going to create it for you, but we should make it as a standalone thing and then we could sell it to other people and then someone bought it.

Charles: Yeah, effectively.

Andrew: Was it your client who bought it?

Charles: It was the client that bought it, but the point is that we got paid partially in consulting services and partially in equity.

Andrew: I see, got it.

Charles: And so we were kind of incubating this as a project.
Andrew: What was it that kept all of these ideas united? I mean, let’s take a step back. The consulting company was going to focus on what?

Charles: It really was just focusing on revenue.

Andrew: Anything that makes sense you would take on. And it wasn’t that you said, “We’re going to be mobile, we’re going to be data.” I see. Okay. But at the same time, you said we’re looking for an opportunity, we’re not going to be people who sell our hours for dollars. It’s not going to work for me.

Charles: That’s right.

Andrew: I’m going to keep finding opportunities. One opportunity came in form of this partnership, why did you take on equity in that? I know that that’s one of the problems for a company that wants revenue to suddenly be paid in equity. Why that one?

Charles: Well, when we did that deal it was when we were far enough along in terms of kind of covering costs that if we could, we had the margin to be able to pull that off. In the past, there was a deal that we did prior to that that was an early form of . . . it was a pretty neat little app. But it was an app that would stop you from being able to text whenever a phone was in movement under the premise that you shouldn’t text and drive. And then it had a whole bunch of different geo-fencing features and some other things. Long story short, it was an interesting one as well and we did some incubation but we did a lot less incubation more . . .

Andrew: Building.

Charles: More building, yeah, billing for our time. But the point is you’re hitting right on the top of the head which is we wanted to just stay in this mobile space building interesting solutions when . . . remember, there weren’t a lot of apps and so if you built a really good app with good game mechanics you could be number one in your category relatively straightforward without a lot of ad buys. And all the while, while we were doing this, we started to discover that more agencies were hiring us as opposed to entrepreneurs.

And when the agencies hired us, like 5% of their budget was on the build of the app, and 95% of the budget was on the ad buy to promote the app. And it was at that moment that I said, wow, we’re in the wrong stream of revenue. We need to be on that 95% stream of revenue. Not the 5% of revenue, and the place we can do it if we don’t want to be an ad network, we don’t want to be a media source, is by being a measurement company because we’re uniquely positioned to be independent and we could just measure all of this technology.

Andrew: I see, so you say that 95% of their budget goes to advertising, let’s take a piece of that. The part that we can take is doing analytics because we’re developers. I see. And so that’s where you came up with Kochava?

Charles: Correct.

Andrew: Talk about the name Kochava. Where did it come from? What’s the meaning?

Charles: Sure. So Kochava is such a unique name and it’s so strong and as everyone knows it’s hard to come by a domain that is even available still. And so there’s a lot of unique thought process behind how you name a company because of that. In our example, Kochava is actually a Hebrew word for star, and the premise was that with the naked eye you can see about 5000 stars in the sky at night, but with the right tools you can see entire constellations of stars surrounding what you could previously just see with your naked eye.

In the same way, Kochava is the right tools that help you understand effectively all of this audience, all of these users of your apps. Before tools like ours, you would see that Apple and Google would tell you that you had 10,000 installs yesterday, but you had no idea what device, what device type, what region, was this their third time installing, or their first time, did they do anything after they installed, did they buy anything, like what the heck, who are they? And so Kochava is that lens that gives you that insight.

Andrew: So one of things that in my research I discovered was, yes, you were doing analytics in the beginning we’re talking about, let me look at my notes here, roughly 2011, but you were doing other stuff too. You were promoting push messaging, you were also doing native apps, you were taking HTML 5 which is what I think Facebook had, wrapping it and turning it into native apps, you were doing something with social that I don’t fully understand.

How did you end up with all these things instead of the one that we just described? I know how you whittled it down. I could see the need for it. But how did you end up with all these things? What was the thought process there?

Charles: Yeah, honestly, we have more ideas than we can shake a stick at, and before the momentum of any one of these things took off on their own, it was a multi-leg race. We had multiple horses in these different races to see what was going to take off, and we actually built this pretty cool tech that would wrap HTML 5, into a native app. It was kind of a next gen of a PhoneGap back in the day, Codova.

And we had some interesting instrumentation around that. We built a product with a company that is now bankrupt called Velte, which was like their drag and drop tool to build apps. Long story short, none of these projects had the same momentum that Kochava did.

The second Kochava went out the door it was being used at scale, and it became very clear we could decide to try to continue to pour gas on all these things, or we could really hyper focus on the things that’s working and then see how we support it.

Andrew: The question I was going to ask earlier, I think I’m starting at the answer to, which is did you do any customer development calls, were you talking to customers to say, “If we built this analytics platform would you pay for it? If we did this native apps using HTML 5, would you pay for that?” Were you doing any of that? And it seemed like maybe minor, you just felt like you understood the market because you were building for them, and then you were going to build as a way of seeing what would take off

Charles: It was more the latter. I think we were on daily calls with a whole bunch of different people, and so we just generally knew where people were at. And interestingly we tried to partner with a number of people to do what we wanted to do, and they invariably could have become competitors to what we did with Kochava. But because they didn’t really want to have anything to do with it, we said let’s just build it, let’s just get this done, and I’m grateful. It’s fantastic.

Andrew: So were customers actually telling you, “I don’t know what’s going on with this 95% of my budget we’re spending money . . .” they were?

Charles: Yes.

Andrew: How did they express it?

Charles: It was even a little bit more derogatory. I think we had a customer who spent about $50,000 for us to build an app. And today it shouldn’t cost you $50,000 to build the basic app that we built but that’s just what it was back in the day, because no one knew how to do it and whatever. But it seems like a lot of money today, but it was a lot of money then too. It was a great way to close some business.

But this customer worked for an agency and I think his comment was something to the effect of this $50,000 it’s cute, but I’ve got $950,000 that I need to go spend in advertising, and I can’t do it unless you make this app trackable. Can you add it as a feature to the app? And I said, “It’s not really a feature to the app. What you’re really wanting is this other thing over here and that’s really abstracted,” and that’s what kind of started the process.

And my response was we should . . . “If I were able to do that, to do what you’re asking, and I were able to do it by this time frame, would you use it?” “Sure, I’d use it if it worked.” “Great. How much could we charge you for doing that?” “Well, I’ll just do it as a change request,” and his comment was, “Well I don’t see a change requests on the code.” I said, “No, it’ll be an ad spend thing.”

And it was around that same time, I think it was 2011 Thanksgiving, we were doing another project and we were doing it for hyper targeting for an ad server. So that when you are within a mile of Walmart, Best Buy ads would show up on your mobile app.

Andrew: I see.

Charles: And it was one of the first geo-targeted ad campaigns and this wasn’t a thing within ad servers, and so we had to write all this custom code and triangulate it real time and do all this stuff. And it was the combination of both of those things happening at the same time. It’s like, dude, we have got to just put all of our money on this one thing and just go with it.

Andrew: So am I right to say that if you don’t have an idea for a business the best . . . one of the ways to do it has to do consulting work, look for those big problems that people just basically bang down your door to get. Like this guy who said I have $950,000. He’s basically pushing you, he’s prodding you to do it. Look for those big needs and that’s what you create software to solve.

Charles: Yeah, and I think that’s absolutely right. I would add an ethics layer on top of that, and that is to say if you’re hired to build product X, then product X is not your new business. You’re building that as a work for hire and that is owned by your client.

Andrew: You don’t get to take that with you.

Charles: Right. So I would just add that for folks that don’t already know that’s a big ethics challenge, if that’s not considered one for the other. Having said that, when you are in an operating room every day, every hour, you tend to understand how operating rooms work. And you may find other ancillary things that are interesting as businesses for the operating room. And so my encouragement would be, an entrepreneur, absolutely consulting is one of the best ways to serve a customer and pay your bills, while also thinking about related but ancillary elements that are not in conflict with what your commitments are.

Andrew: One of the big challenges of doing that is consulting work just takes up a lot of time. Most people can’t limit it to the 40 hours a week. We used to laugh at people working 9 to 5, well this is even more. How do you then with all that pressure from outside clients, find the time to build this thing, which frankly, it’s whole business onto itself. Developers also, new entrepreneurs, new businesses will suck up more than 40 hours a week. So how do you take these two businesses that suck up more than 40 hours a week, run them concurrently so that you can shift from one to the other? How did you do it?

Charles: So for us, I think it’s all about delegation of resources. I think because of the lessons learned working at Oracle, I was both in the product group but I was also in this kind of SWAT team Consulting Group. And the SWAT team consulting group was part of the consulting services group out of the West Coast of Oracle. So I learned some really interesting things about the regimen of billable time, frequency, percentage of availability for the bench, how you potentially bonus people based on overage above and beyond what you should have as their billable time.

And when you’re billing your people out, it’s a very common thing to be billing out at 5X what the costs are fully loaded for a person. And this is a kind of a misnomer from a lot of individuals. They think well, if you’re billing me at this amount, shouldn’t I get all that money? Well, the reality is, there’s a good part of that money that goes to the house and the house is doing things to invest in long term, so that if you don’t have a project, you’re still getting your payroll paid. And so it’s that combination.

And I think because of those lessons learned, the discipline around running these projects, and running them effectively and profitably, it allowed us to create a bench, and that bench ended building catch Kochava. And so . . . I lost your audio.

Andrew: Sorry. The bench meaning extra people? Did I lose you?

Charles: Yes. You’re back now.

Andrew: So extra people and the . . . you just lost your video. Can you turn it back up?

Charles: Sorry.

Andrew: What you did was . . .

Charles: We had the bench.

Andrew: Yeah, the bench. Extra people because you weren’t charging roughly as much as you were paying for people. You had a much bigger padding on your billable than most people would. I see. Okay. And so that gave you the room to do it. I heard from our producer that you then, once you figured out the product, you had all these clients, you went to them and you said, “We’ve been doing consulting work for you. We also have this product. Would you like to sign up for that?” That’s where your first customers came from?

Charles: That’s exactly right. So that whole like baked in customer dynamic allowed us to qualify the validity of the idea, but also pre-qualify the demand chain of who would buy it. So we had customers like H&R Block, and Ford and National Geographic, who we had done app work for, and all of a sudden, we had them to be able to approach and say, “Now how are you promoting this app? Is it interesting for you to be able to qualify who’s responding to that promotion? Can you see what the return on ad spend is, and how effective is that?”

Andrew: Okay. I understand that at some point you decided we’re going to focus on software because software eclipsed consulting and that’s when you made the shift. I’m curious about how you got all those in original customers like H&R Block. And then once you made the shift, to understand a little bit of the challenge, and then let’s get into what you’re doing now which is XCHNG. But first I’ve got to tell people about HostGator. Do you know HostGator at all?

Charles: I do. Great company.

Andrew: Have you used them before?

Charles: I have. It was a long time ago, but I have.

Andrew: Great company like you said. Here’s the thing, one of the reasons why I like HostGator is they have lots of . . . they allow you to create lots of different websites with one account. And do you know this guy Joel Comm?

Charles: No.

Andrew: You should get to know him, now that you’re in crypto currency. He’s in everything. Anytime something comes out he jumps on top of it. Remember that old fart app when the iPhone came out and someone made an app that would like fart, it was huge news because they were making good money and it was proof that there was a market in apps, but maybe was a little silly, anyway, he created that app.

Then he goes on to create, I don’t know a bunch of other stuff I kind of lost track of what they were, then Snapchat was big, so he did this whole Snapchat thing where he was selling courses on Snapchat and also Snapchatting like crazy. And then crypto currency took off and so he created a podcast, that now I’m hearing from people is the second biggest podcast for crypto currency.

Charles: Yeah, I’m familiar with him. I just don’t know him.

Andrew: You don’t know him. I see, okay. So you’ve heard of his podcast?

Charles: Sure.

Andrew: What’s it called? Like the Bad Crypto podcast something like that. He sells airtime to people who have ICOs. He’s got one episode where it’s nothing but the people who have ICOs, who paid him to be on the episode. The reason that I bring him up is he’s a creative person. He sees something that’s starting to take off and he finds a way to jump on it. He finds a way to experiment. Not everything that he does becomes a huge winner, but he has the platform to do it.

And I urge anyone who’s out there who is in this creative space to give yourself enough canvases so that you could experiment until you find the one that feels just right. And that’s partially what Charles did. He tried a bunch of different things, some of them worked, out some didn’t. And the one that worked out the best is Kochava and that took off.

So I’m about to give you a URL to go to HostGator and sign up. Many of you are going to say, “I don’t even know what I’m going to do.” I still suggest you go and sign up. They give you 45 day money back guarantee so you get time to really experiment. But once you have it especially if you have what, I think the minimum that you should get is the baby plan only for 4.98 a month is where it starts. It gives you unlimited domain so you get a lot of room to experiment. Try something on Monday, you decide crypto currency is what you’re curious about, read about it and write a blog post every day for two weeks, see how that feels.

You decide that’s not the answer. Maybe these chatbots are the answer, every day try it, find a platform that lets you experiment like that and then one of these things could take off and feel just right. I know for me, I had a software company. It was good. I thought it was good. I was deluding myself into thinking it was good. But I started doing these interviews as a way of promoting it and that felt great. And the only reason I was able to do it is because I had unlimited domains.

And so what I want you to do is go to hostgator.com/mixergy. They’re going to give you a lot of things like unmetered disk space, unmetered bandwidth, so you don’t have to worry about like getting over charges for bandwidth. Unlimited email addresses so have one for sales@newsad etc. 24/7, 365 tech support. I’m going to be honest with you guys, I used to talk that up because tech support was fantastic, within 90 seconds they pick up the phone. It’s taking them longer than 90 seconds. So it’s there, but that’s not one of the huge draws I’m going to be honest, and a 45 day money back guarantee.

So go check them out at hostgator.com/mixergy and keep sending me what you guys build on that platform. And if you hate your hosting company, switch over. HostGator will help you with the migration. hostgater.com/mixergy. All right. So how did you get H&R Block? What was it that you did that got all these big customers?

Charles: So no one is going to trust a small company, especially not a small company in North Idaho. But through reputational equity you can build a great reputation in being a company and a team that delivers and delivers strong. I had happened to have already good relationships with a handful of agencies.

And when we were already doing mobile app development, and mobile website development for entrepreneurs. I started to tap into my agency relationships to say, “Invariably you guys sell a whole bunch of things to your clients, and you probably are lacking resources. I’ll wear your T shirt, I’ll answer the phone with your name, I’ll do your projects, help us be your guy.”

And over time what that developed was we became almost like the fixers. Like we ended up being the ones that were brought in for the hard projects that had particularly tight time frames where the client really had to deliver.

I kind of used that as a bit of a badge with a handful of these agencies because when you’re the guy who always saves the day, and spends all night and all day to make it work within their time frame, then they know they’re going to pay you a premium every time they call on you. And that’s what I wanted to establish is that we were the dependable, reliable, and fast team, but we were expensive.

Andrew: I see.

Charles: And so we did not close H&R Block on our own, we did not close National Geographic on our own, it wasn’t on our paper. These were actually built on behalf of the agencies who were the AOR for those clients, but we did the work and we were on the calls and we knew what the customer cared about, what was important to them.

Andrew: That’s an approach that I never think about no matter how many times I hear about in these interviews, I don’t think about these partnerships. Someone else has a lot of clients, partner up with them to work with their clients. I see. So that helped you get going. What was it then that once you had to reach out with Kochova, outside of your client base, outside of your network, what’s the next thing that you did to help grow sales?

Charles: Sure. So coming from the game space I knew a lot of people in the video game industry specifically from the PC side, the MMO side. An interesting thing that happened is that all the PC MMO guys got . . . there was two transitions that happened. One was social gaming and so the Facebook games, a la Zynga’s existence, all started to happen post 2008 as Facebook came out with the platform, and their entire API stack.

What was interesting is that anyone who did not go to Facebook and social games from the gaming industry ended up moving into mobile a year later. And that was by and large a lot of the PC guys, and so a huge number of my network ended up running marketing for these new found mobile games. And so you you’d end up finding out such and such who I knew three years ago, and have kept in touch with is now head of user acquisition over at DNA, or at this company or that company TinyCo, etc.

And I picked up the phone and talked to a handful of them and said, “How important is the stuff you used to do on the PC side on mobile? I mean, we have this thing that we started doing for all these brand customers, but would you be interested in that?” The answer was unequivocally, “Yes, I would love it. Let me give it a try. Here are the other things that I have to do if I don’t use a tool like that so I would love to give it a run.”

And we immediately . . . I think by the end of our second year of existence, I think 80 some percent of our customers were in video games. And that’s because those guys were the ones that really knew how to spend the money to promote their app, because they’re the ones that are actually making money on in app purchases.

Andrew: I see. There’s one other thing about consulting . . . by the way I was just was told this weekend that I use the phrase “I see” all the time. I guess I’m a visual person and until I see something in my mind’s eye or on paper I don’t believe it. Now that I see it, I see it. There’s one other story about consulting that I want to get into and then I’ve got to ask you about blockchain and why are you jumping on this? What do you see as an opportunity? Where are we going with this? The note that I had here that I forgot to ask about earlier is about the scotch. That at one point you brought, was it two bottles of scotch to a client, tell me that story.

Charles: So in our early days we were having a hard time keeping up with the demand for our product, and the way our product gets integrated is it gets integrated as an STK in your mobile app. We closed some new big customer even if they don’t start using our product, but they just integrate our technology. All of a sudden, we could be getting a few tens of thousands more transactions a second at any given time.

And by all intents and purposes that looks, feels, and acts like distributed denial of service attack if you don’t have the right infrastructure to support it. And it’s not that we didn’t have the right infrastructure, we were just growing far faster than we ever expected, and we just had to keep on adding water. And I remember there was a time period, I think it was in 2012, when we kind of our first year under our belt and we were undergoing huge growth between Thanksgiving and Christmas.

And we had had some outage, some problem, where the data was delayed, or there was some issue. We’re talking about 2012. So thankfully, that hasn’t happened since. But I remember just being so beside myself that this company has a name and that name is associated to my name, and I had made my commitment that I was going to serve them well and I just felt terrible about the whole thing.

And I remember going through the streets of San Francisco and I met with probably nine customers and I had bought a case of scotch at the beginning of the day, and to each and every one of these companies I gave them a bottle of scotch and I said, “This is the last time you’re going to have to deal with this with me. Happy holidays. I’m very sorry that you had to deal with this over this time period and I’m going to make it up to you beyond the scotch.”

And it had a quite an effect in terms of the authenticity that people knew that I wasn’t . . . this was not just a vague company that didn’t care. We were personally indebted to some of those challenges and we overcame them, and with a vengeance.

Andrew: I see. And the scotch and bringing it over was the personal connection, the scotch was a thing that signals this is it, this is not just me speaking, and the words disappear soon as there out of my mouth. It’s me showing you right here something tangible.

Charles: Right, and it’s a little thing, but it is something at least.

Andrew: No, I like scotch. It’s never a little thing to me. Now that I’ve got two kids I don’t have time to drink scotch I’m now . . . the thing I was drinking the other night was club soda with bitters in it just to give you the same feeling of a punch in the mouth of a scotch. But I don’t have time to drink and savor it.

Okay. Blockchain, really exciting stuff especially as soon as Bitcoin jumped over $10,000 for bitcoin, everyone cared about this. And frankly that was what Bray browser with their ICO that everyone cared about, that they raised so much money without having to give up a share of their business. I get how attractive it is. I’m curious, was there still a problem that you were coming to this to try to solve? Were you still applying the same techniques that brought you to success with Kochova or was it something else?

Charles: Yeah, what’s great is there is a lot of sheen and excitement around tokenization of industries and ICOs and blockchain today. But one thing to note is that I went down the rabbit hole of crypto and blockchain in particular about two and a half years ago when Ethereum was in beta. And there was no at scale notion of ICOs. And because we’re in the business of measurement ads, I saw what the Ethereum was doing, specifically as being really a smart contract that’s kind of open ended and universal, but with this alternative token.

And the connection in my mind and then later across our team was what if we had a smart contract that really reduced down the terms of buying and selling ads? So instead of a smart contract and Ethereum, it’s really about these all coins and just changing money around, it’s a coin other than bitcoin with a more universal smart contract framework. What if we built a universal smart contract framework but we incorporated the life cycle of the buying and selling of the ads in the process.

So that means you’d have to have a buyer element, a seller element, which is common with any smart contract even on Ethereum. But then also a first class citizen for measurement, first class citizen actor for ratings, a first class citizen actor for payment, for mediation and arbitration. All the sudden, we began to think through what is the Ethereum for digital ads.

And Brave is just an add on top of Ethereum. Our system is actually our only ground up blockchain with its own peer to peer system, its own consensus engine, its own persistence layer of chains. And the implication is we can deal with the volumes of transactions that adtech has.

Andrew: What’s the problem that it’s addressing?

Charles: It’s unifying the buying and selling of media. Today when you buy and sell media, you sign a PDF between a media source and an advertiser. And then you hope to God that someone traffics that ad campaign correctly, and that could have tags, that could have tracking, it could have targeting, it could have regional specifics. But there is a total disconnect between what you sign and what actually gets trafficked.

And the concept here is that the blockchain reduces down to the smart contract the terms and all the details all the way through the server process. So it makes the entire process more efficient and avoids fraud.

Andrew: And the blockchain can tell me that my ads were served to people who are 18 to 25 years old in the West Coast?

Charles: It can with some nuances, yes, and now remember, this is a B2B play, not a B2C. So it wouldn’t tell you as a consumer, but it would tell you as an advertiser.

Andrew: Me as a business owner.

Charles: Yeah.

Andrew: Let’s say that Mixergy decided we’re going to go out there and buy some ads. I want to only reach people who are 18 to 25, they’re in the early stages of their careers. You’re telling me if I go out to a standard network I have to hope that they’re actually going to give me my audience, as I told them, right?

Charles: That’s right, and you likely have to spend a premium to buy a third party product i.e. Kochava, to verify that very thing that you just were committed to was delivered on.

Andrew: I see, and that’s what you guys at Kochava do?

Charles: That’s what we do already.

Andrew: You confirm it, and because there’s enough fraud or enough people getting not what they were looking for, that we need a third party to come in and verify it. So you’re saying why should someone hire Kochava, why can’t this network self-regulate? So I understand if you guys do it, how you would work. How would the blockchain, how would a network tell me that this is working that my ads were served to the right people?

Charles: Good question. So let me use two analogies, I guess, and the answer to your question very quickly is standardization. So right now we integrate with over 3,500 different media sources, in integration points, all of them are different in some fashion. And it is a splintered mess whether they’re an SSP, a DSP, a publisher, all these acronyms. It’s a very intermediated world of components.

And the example of standards is the shipping container industry was able to really scale when shipping containers were of the same size with the same bulk hooks, and the cranes could always pick up the same containers no matter who built the containers, no matter what the contents of the containers. The barges that carry the containers were spec’d out to be a certain size with certain buckling hooks. Independent of what was shipped, having that standardization enables the shipping infrastructure to be consistent and work well.

Blockchain represents the consistency of that shipping infrastructure. With common pipes those 3500 different sources that we already integrate with, can integrate with a common blockchain framework, as opposed to working differently with us versus one of our competitors, versus some other advertiser, versus some agency that’s out there.
The other example, I’ll just kind of put an end cap on that is to say, FasTrak is a mechanism to provide toll roads for highways. It wasn’t until one or two highways were built in major areas that enough people wanted to have the FasTrak device in their car. But once enough people had that FasTrak device in their car, there could be a whole bunch of roads that would be a nomination to be tolled, because there was enough of the demand that was present. And so just like any other marketplace that kind of consistency can come into play.

Andrew: So if I wanted to now, speaking as a publisher, wanted to start running ads through you, I would have to have the standard ad format, the standard software for measuring who my audience was. Am I right about that? I saw your eyes do something as I said that?

Charles: Yes, to some extent. I would add one thing. Today as Mixergy, you guys could buy media from Facebook, right?

Andrew: Right.

Charles: You can target males that are 22 to 35, whatever the example is that you described, and Facebook has made it tremendously easy to not worry about the details. You just buy those ads. The reality however is that that is largely dependent on Facebook’s own inventory or as a proxy to other people’s inventory. By having everything on blockchain you could buy with the same level of sophistication and ease, but the interacting with thousands of different individual pubs thereby making it more cost effective for you as an advertiser, and more yield producing for them as a publisher.

Andrew: I see. So they’re all using the same software for publishing, I’m not going through a third party, I get to go directly to them. I know that it works because we’re all using the same software that’s being monitored by all of us, and I pay them now, not with a credit card which puts money from my bank account to them, but with this new token that you guys are going to be creating.

Charles: That’s right.

Andrew: I’m imagining what you’re doing is doing an ICO, you’re going to sell these tokens upfront, anyone who wants to buy the token can buy today, and then we’ll get to use these tokens to buy advertising or we’ll sell it to people who want to buy advertising, right?

Charles: That’s right.

Andrew: That’s the overall. How much are you raising with the ICO?

Charles: We’re raising 200 million which is a relatively large token sale. We’re dealing in an industry of $230 billion as an overall digital advertising industry worldwide. Kochava today measures over $6 billion in ad spend.

Andrew: Over how long, over a year?

Charles: Over a year, and so what’s compelling about this $200 million raised is that’s really about having a marketing budget to promote that XCHNG is the alternative to buying media directly, directly to SSPs, directly to individual high end publishers, but the notion being that you can have this alternative to effective targeting at scale, no intermediaries, as the mechanism.

Andrew: Okay. So let’s say someone from my audience decides to get in on the ICO, let’s suppose that they put in a million, that’s half of one percent of it, of what you guys are raising. The money goes to you, you guys use it to promote this, to reach out to publishers and say you should be putting this on the site. This person gets the tokens. If this person then wants to go and buy ads they give this token to . . . I see. They give it to the publisher, the publisher gets the token, got it.

And so basically, they get a million dollars’ worth of ads. So if someone who’s doing this would either say I need to buy ads and I’m banking this is going to be a good place for me to buy my ads, that there will be publishers who care enough to buy this. I mean to take these coins instead of my cash, or I am willing to bet that this is going to be the big platform for buying ads, and that people will buy this from me for more than a million dollars for this number of tokens. That’s one or the other. All the money goes to marketing. Do you have to say how much you guys keep internally? Do you say that?

Charles: Yeah, we do and to be clear we do this as only to accredited investors, so there are some big questions from the SCC about these token sales whether they’re utility or security. And we work with Cooley an example that you described earlier today about having the right kind of advisors involved with you.

Andrew: Cooley is a law firm that handles all the . . . not all but they’re big in the Silicon Valley raising money space, right?

Charles: And very big in the token sales space, and so they’ve been very assistive. And one of the key aspects that we have is we’re only making our forward contract available to accredited investors, and this is, unlike a B2C model, a business to consumer model where every individual consumer may want to get involved because they’ll have a personal benefit, we’re largely doing this token sale on a B2B basis.

Because as you described, if you’re a big ad buyer and there’s a chance that you have an opportunity to arbitrage by investing in a token today that will be used for ads later, and having a creative dynamic, there may be a great benefit to them doing that.

Andrew: I see.

Charles: And in the same way a publisher who may want to have more yield of their inventory but they’re looking at new alternative ways to invest in things to create more yield, they may want to buy tokens today, and then be the secondary market of those tokens as advertisers want to buy tokens in order to transact.

Andrew: So then how much of it do you guys keep, and how much are you going to spend to market this?

Charles: Sure, so we’re taking the entirety of the 200 million and promoting the system, and all of the technology and tools to integrate it with all of our partners. But that only represents about half of the total number of tokens that will be available for circulation at some point. Another 25% we have available to all of the different ecosystem partners.

Actually, it’s 35% ecosystem partners and advisers who are people that are involved. And the remaining 15 to 20% is actually going to be resigned back to Kochava as really the forefather and founder of the system who built it originally.

Andrew: Got it. And then are you going to be releasing more coins over time?

Charles: No, it will be flat . . .

Andrew: That’s it?

Charles: . . . after the billion tokens.

Andrew: Oh, I see. Got it.

Charles: And so there’s real benefit to the people who participate because there will be dynamically an [inaudible 01:04:58] development as there’s velocity to the tokens.

Andrew: Why did you choose to do that? Why not release more, it seems like that’s a common thing to do?
Charles: It is a common thing, but if you think about investing in a token and thinking about the long term value of that token, if there’s a built in diluted effect by having more tokens generated, it ends up being contrary to the investment pieces. And we want to make sure there’s plenty of meat on the bone for anyone who participates on the token.

Andrew: How do you pay for all the work you’re going to have to do beyond this with your share of the percentage that you’re holding back?

Charles: Well we’re making . . . yeah, it’s with that, but we’re also making the whole system an open source system, and so it’s going to be up to the community who wants to be involved in the ongoing maintenance and support of it. And we think if there’s . . . we believe that by the time this is launched we’re going to have a billion monthly actives on the system, and that’s comparable to a Facebook today. And that’s because of the polarity of the of all the other media sources that are going to be integrated with it based on the progress we’ve been making already.

The reason I bring that up is to say this is kind of like the RTB spec in that no one owns the RTB spec, but it continues to mature over time. This is the real time bidding spec for advertising. In the same way I think the exchange system will continue be contributed on over time.

Andrew: I see. I was going to say, “I can see,” but now I’m noticing every time I say the word see. I can understand why only you, not only you, but why you guys have an advantage in creating this, and I understand the need for this. This isn’t just a way to raise money. It’s an actual useful coin that it sounds like you guys, since you’re doing credit investors you are going to be offering this in the U.S. If someone wants to be a part of it, what do they do?

Charles: You can request the white paper and mention that you have interest in participating.

Andrew: Where do I request it? You know what be honest with you, I want to request just out of my own personal curiosity.

Charles: Sure, just on the website it’s XCHNG.io.

Andrew: XCHNG.

Charles: XCHNG.io.

Andrew: Got it. So it’s the word exchange minus the E in it.

Charles: Correct. And the letter A.

Andrew: No XCHNG a I missed it XCHNG and then get rid of letter . . . give it me one more time. I’m going to type it exactly.

Charles: Sure. It’s xchng.io.

Andrew: I see, I think now I’ve brought it up.

Charles: It’s the ticker of exchange.

Andrew: I see. I see a million times. Look at you on the home page in a suit. In reading about you that’s the person I was expecting to see here today. You’re a little intimidating like as I was researching you. Because you’re not doing B2C, the technology is a little tougher to understand, I said, “What am I getting myself into? I better do my homework.” And so I did my homework. I understand.

And then you showed up with that jacket. First of all, you had your logo on the jacket which basically made you feel a little more accessible. And second it’s a track suit with the logo, so I felt, all right, I could understand this guy.

Charles: This is a throwback to the Beastie Boys. These are called black and reds and these are what we wear any time we’re in public. And we just happen to have 100 pairs of them as a team, and so I wear them in private too.
Andrew: I love the Beastie Boys. I have over the years learn to appreciate their non-popular stuff and they . . . I used to be so upset with them. Why did you guys . . . you have this audience, they love this hip hop with rap, hip hop with rock, why did you shift the way . . . and now I’ve learned to appreciate it. There’s a lot of artistic merit to what they did before and after that.

Charles: Yeah for sure.

Andrew: Anyone want to go check it out, check out XCHNG.io. We’ve spelled it about a billion times. I’m not going to do it one more time, and of course the main business is Kochova. I’ve learned so much about you. I’m proud to have you on here.

I want to thank my two sponsors for making this happen. The first is HostGator. If you want anything hosted, you got to get a good hosting package. Go check out hostgator.com. It’s not for nothing that so many of my guests have said that they’ve used them, they know them, they appreciate HostGator. Check them out hostgator.com/mixergy.

And if you need a great developer, I mean the best of the best, if you need a great designer and somebody to help you with your finances, boy, this is becoming the platform for hiring. The best, the kind of people that Google would hire. Go check out Toptal. But don’t go to their home page. You’re going to get a great deal if you go to toptal.com/mixergy. I got to talk to Satchit, why do we not have any of these ICOs on as advertisers. I’ll talk to him.

Charles: I know.

Andrew: Right? Thanks, congratulations. Thanks for being on here.

Charles: Thank you.


  • I’ve been listening to mixergy for 5 years. Over the last few month I keep hearing bass noise every time Andrew is typing. Not so great.

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