Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com. It’s the place where I interview entrepreneurs with proven track records, people who have got mega successes. I interview them about how they built their businesses.
My goal here is to understand what they did right, what worked for them and what didn’t work for them and I do it for an audience of real entrepreneurs, people who are going to learn from these interviews, build companies and as you’ve seen here over the years, in many cases come back here after they’ve built their companies and talk about what they built too. It’s the circle of Mixergy. You learn. You build. You come back and teach. That’s my hope here for you, the person who’s listening to me.
Joining me today is an entrepreneur who tried to order some food and it didn’t work out so well. He had very few options. It wasn’t a good experience and he decided, “I think I can do better,” and he did. He did way better. He started a company called–let me make sure that I’m pronouncing everything right here–La Nevera Roja.
Andrew: Yeah. In English, it means The Red Fridge. It’s an online ordering platform for delivery and takeout. The person who you just heard say, “Perfect,” is being very generous to my Spanish. His name is Jose del Barrio and he’s coming to us straight from Spain today.
Today, this interview where we’re going to find out how he built up his business is sponsored by two great companies. The first will help you host your website right. It’s called HostGator. The second company, well, it’s Leadpages. They’ve created great landing pages. More importantly for us, they created a conference that I’m going to speaking in and we’re hoping to have everyone who’s listening to us come see me in person.
Jose, we’ll talk about those sponsors later. Good to have you on here, man.
Jose: Yeah. I’m really happy to be here with you, Andrew. It’s like an honor for me to be here and I’m happy to share my experience with you and your audience.
Andrew: Thank you. I’ve done a bunch of research. I’ve even talked to people who were close to you and I think I’ve got a sense of what you’ve sold the company for, but can you tell us what you sold the company for?
Jose: Yeah. It was $100 million.
Andrew: $100 million? The biggest exit that I heard for 2015 in all of Europe, am I right?
Jose: Well, one of them.
Andrew: Or is it Spain?
Jose: One of them.
Andrew: So, the biggest in Spain, for sure.
Jose: Yeah, that’s for sure.
Andrew: Fantastic business. And you come from a background of entrepreneurs. In fact, your grandfather had this really interesting business. He started out with fish. What did he do with fish?
Jose: He used to deliver fish in the middle of the Civil War in Spain back in 1936. Then he built this huge company with thousands of people, $200 million revenue, but it took him 60 years to build it and it was a great example for me to work to be an entrepreneur.
Andrew: So, he started out delivering fish?
Jose: Yeah, with his bike. He was 14 years old when he started.
Andrew: Okay. And the business he got to $200 million in revenue, what was that?
Jose: He ended up having a lot of boats, fishing boats, a big warehouse to process fish. It was like a frozen fish business.
Andrew: So, it was a frozen fish business. He went from delivering fish himself and then he started getting boats, bringing fish in. Did he own the boats?
Andrew: Do you know his full story? Is it written somewhere? Is there a record somewhere?
Jose: No. I don’t think so. Actually I never tell about him, but it’s the greatest story, especially when he started when he was 13 years old in the middle of a war in Spain, where many people were struggling. He was the older of five brothers and sisters and he had to feed them all. So, that’s a pretty good example for me to follow.
Andrew: Is he alive? Can I interview him?
Jose: No. He died in 2005.
Andrew: 2005. I’ve got to tell you, that’s one of the problems I’m trying to solve with Mixergy. Here is an entrepreneur who must have done so many incredible things to build this company up to $200 million, to have started when he did, to have built his company the way he did and then for the most part the story goes away. We can’t learn from it. I’m sure that your family got something from it, but beyond your family, it’s just gone. I’d love for that not to be true for you or for the 1,000+ entrepreneurs that I’ve interviewed.
Let me ask you this–it must have been something you guys talked about in the family. When you look at him, when you think back on what he did, why do you think he was able to go from where he was to something big? What’s the big thing you took away from it?
Jose: I guess it’s both a lot of persistence and ambition. I think those are the two things.
Andrew: And could you sense it in him when you saw it, his ambition, his persistence, even when he was older?
Jose: Definitely, especially because he didn’t go to a school.
Andrew: So, give me an example. Was there ever a time when you sensed, “This is a guy who’s got something. He’s more determined, more ambitious, more resilience than most people?”
Jose: Yeah. Definitely.
Andrew: When? Do you remember anything like that?
Jose: Well, I have a story. My father used to work for a consultancy firm. He used to think he was like really clever with all the people who went to top universities. When he went to work for my grandfather, he thought that this guy, he didn’t go to a university, he didn’t go to school, but he was much more clever than all of us. It was like he had something different.
Andrew: By the way, I’m noticing that as you talk, your mic was hitting your collar. You know what? Let’s play with something. You want to just try to unplug your headphones? Let’s see what that sounds like. Let’s take it away from the computer. I’m sure you’ll sound a little different.
Jose: Now can you hear me?
Andrew: Yeah. It sounds a little bit less full, but it’s worth it. So, if you’re okay with it, you don’t even need your headphones in this interview.
Andrew: You can hear me okay, right?
Andrew: I’ll have to ask Joe to pump up your volume to let him know we’ve adjusted the volume. It’s worth it not to have the mic hit the collar. Then you became kind of an entrepreneur. Actually, you started out as not so much an entrepreneur. You were playing with graffiti as a kid. What did you do with graffiti? I guess you had some behavioral problems with it.
Jose: Yeah, some problems. They got rid of me from a couple of schools. I don’t know how to say it English, but they didn’t want me anymore.
Andrew: You got kicked out of schools for doing what with graffiti? What did you do? Did you spray paint the walls?
Jose: My behavior was really bad. I was a good student. But I had good scores or ratings, but I was always getting teacher’s way.
Andrew: You were getting in their way. Did you every spray paint walls? That’s what I want to get to.
Andrew: You did?
Jose: I did also that. I was at not jail, I don’t know how to say the headquarters of the police several times. After when I was 19, I used to deal with a lot of trouble. After that, I started my career at the university, so I started being a good boy.
Andrew: But you did also turn that into a business, didn’t you, this whole graffiti thing? What did you do with the spray paint?
Jose: Yeah. I imported that kind paint from Italy and I sold it to my colleagues when I was 14 years old.
Andrew: Really, as a business?
Jose: It was a business, illegal business, by the way.
Andrew: The reason I bring these old stories up is partially because you told our producer about it and I could see there’s a sense of mischief but also a sense of pride in your memory of it. The reason I bring it up is also I feel like as entrepreneurs, you get to express that entrepreneurial bug in so many different ways.
I’ll give you an example and you tell me if this jives with you. We had a nanny that I wanted to work with. The nanny ended up with someone else’s family. This is for my kids. Ordinarily what you do is say, “Okay. She went with someone else. Life sometimes throws you a curveball. You can’t get the nanny you want. You can’t get the stuff you want. You accept it.”
I got on the phone and I talked to the nanny and I did everything you do in a sales call. I understood what is she looking for, what’s her ideal. I don’t want to say too much, but what’s going on with her family. I said, “I think I can help you with that. I’d like for you to come work us and by working with us it can be good for your family in the ways that you just expressed that you’d like it.” And she did and we’ve worked with her for about two years and it’s been wonderful. She’s with our kid right now even though she’s not feeling 100%. That’s how dedicated she is.
I feel that’s the entrepreneurial expression coming out. I’m feeling in your story–tell me if I’m reading too much into it–when you were selling spray paint, that’s you being an entrepreneur, expressing it, right?
Jose: I think so. I didn’t notice that until several months away, a few months away, excuse me, before. When I did it, I didn’t know it. But now looking backwards, I guess it is some kind of expression of entrepreneurial behavior or something you have inside you.
Andrew: So then tell me this–2006, you went to work for Accenture. You then were a fund manager at Fundacion. Then you became a manager at PricewaterhouseCoopers. Why does a guy who’s so entrepreneurial spend about five years of his life working at these bigger companies? What were you thinking about that?
Jose: Well, I wanted to learn. I guess that I didn’t have the–I wasn’t brave enough to start something without working before, so I only wanted to learn from smart people and then knew that I wanted to learn to have something by my own. So, I learned a few projects inside PwC, like a number of projects, some kind of entrepreneurial stuff. I wanted to learn from smart people, so I did it for years after I started.
Andrew: I can see that. Do you remember one thing you learned by working for these companies, for Accenture, for PricewaterhouseCoopers? Did you learn anything that stuck with you that makes you the person you are today, the business man, the venture capitalist you are today?
Jose: Besides the financial stuff and technicalities, I think one of the things I learned is to work really, really hard, like really long hours.
Andrew: What kind of hours did you work when you were at Pricewaterhouse?
Jose: A lot back then. Sometimes we did work like 24 hours in a row, sometimes 16 hours. I think it’s good to spend a couple of years doing that so you learn a lot of things in a short period of time. But I knew that wasn’t for me for the long-term. I wanted to learn something. I probably had to work to be really structured and really serious about things.
Andrew: And then one night, 2009, you were working on a project and you wanted to order food. What happened?
Jose: That was one thing that we used to do really frequently. That was a big thing to order food through the telephone. We didn’t have the proper variety of restaurants. It was a pain to place the order. That was one night and another again. So, we thought that we could do it much better to build a platform with a lot of restaurants with a seamless process to place an order through an app. So, we started building it like a few months later in 2011.
Andrew: Now, this stuff had already existed in the US, right?
Jose: Yeah. The funny thing is we thought we had invented the wheel, but then we did a bit of research and we found out that a seamless app was already invented in the US and also in Denmark and London. So, sadly it wasn’t the first idea in the world. But we thought that was good news because it wasn’t a pricy thing in Spain. Everybody said that in Spain we only drank sangria and wine. So, it wasn’t going to work.
Andrew: I see.
Jose: It worked.
Andrew: That’s an interesting idea. How about an app that you press one button and it brings sangria to you wherever you are? I think there’s a button like that for pizza in the US. Did any part of you say, “Look, these guys in the US, these guys in other parts of Europe had already done this. Why don’t we just copy what they did and that becomes our first app?”
Jose: Well, we took a look at GrubHub and what they did, but we wanted to do something different. We localized. We did everything very tailor made for Spain and for Europe. So, we prefer not to just do a copycat and tried to adapt it to the market.
Andrew: Why not? What did you want to change that makes it more appropriate for the Spanish market?
Jose: One thing, for example, was in the very beginning, we had the two options to order over the phone and to order through the app, through the website. In Spain, nobody orders online. So, it was like a bit by bit process to teach the people to start placing orders online. So, that was one the differences. That made us bring a lot of traffic of like offline traffic and then we changed the users to the online channels. That was one of the differences between us and the US platforms.
Andrew: I’m actually looking at an earlier version of your site. I don’t see the app promoted at all. It seems like more of a directory and a search engine for restaurants in, well, lots of different places including Barcelona, Madrid, Valencia. Did it start out as an app or did it start out as this website that I’m looking at?
Jose: It started as a website because in Spain, 2011, the people didn’t use apps like very frequently. So, we started as a website and only was browser. You couldn’t even place an order. Then we started doing these transactional apps. After all the story when we sold, 60% of the orders came from mobile.
Andrew: 60% came mobile? Wow. I would have thought even higher, frankly, but I can see the progression.
Jose: From zero to 60% in three years.
Andrew: When someone would call, did the calls go to you or did they go to someone else? Did they go directly to the restaurant?
Jose: Well, we had an automated process. We had a machine in the restaurant or a tablet. It depends on the restaurant.
Andrew: What about when they called? Where would the phone call go?
Jose: There was no–well, if you have some problem, you call to us–
Andrew: No, sorry. I thought you were saying that the market was so different that people didn’t feel comfortable ordering from apps, so you had to put a phone number on the site. So, I was wondering if someone did call the number, where did the go?
Jose: Yeah. At the very beginning, they called to a restaurant, so we didn’t monetize those.
Andrew: Ah, gotcha.
Jose: But the idea was to bring that customer to the platform and then we will make him change from offline to online.
Jose: From telephone to place an order online. But at the very beginning, it was like 99% of the orders were offline, so we needed to use that traffic.
Andrew: Okay. You also noticed that–actually, you know what? Let me come back in a moment. I’m going to talk about my sponsor and then there’s a big issue here, which is you’re not a developer. You couldn’t code up the site. You didn’t have best buddies who could code up the site for you. That became a problem. Then how do you get the restaurants? How do you get the customers? We’ll talk about all that.
But first I should say to you and everyone else, there is this incredible conference called Converted 2016. It’s from a company called Leadpages. Do you know Leadpages here in the US?
Jose: I haven’t heard of it.
Andrew: You know who knows them? People who do online marketing. You’re more in ecommerce, right? That’s what you’re investing in right now as a venture capitalist and we should talk about that more in the interview.
But anyone who needs to capture email addresses, anyone who needs to turn those addresses into sales knows a company called Leadpages because what Leadpages does is they create software that makes it super easy to create one page that collects email addresses, one page that converts people to go to your webinar. But the whole job is one page that converts to one thing.
Anyway, they’ve been doing this for a long time. People might have heard that I use it as Mixergy. I’ve talked about them as sponsors of Mixergy. But what you may not know if you’re listening to me and Jose, you definitely don’t know because you don’t know Leadpages yet but I think you should–what they’re doing is they’re doing a conference where they’re bringing the best marketers together to talk about how they do their conversions.
What works for them when they’re creating a page that gets someone to put their email addresses in? We’re talking about 2016. Some people are putting email addresses in some pages. Why are those pages still working? What makes them work?
Well, the conference, the Converted conference is going to talk about that. when you get someone to actually–after they give you their email address, when you get them to actually buy, there are certain things that work. Well, converted by Leadpages is going to be a conference where we talk about what works.
So, you’re going to see people on stage who do this professionally, digital marketers like Ryan Deiss, people like Clay Collins, the founder of Leadpages is going to teach us. I, Andrew Warner is going to talk about this up on stage. So many others are going to be there. But also, I don’t want, if you’re listening to me, to just come to this conference for the people on stage. It’s great that they’ve brought good speakers.
But for me, the best part of a conference is the people in the audience, the ones you’re going to be sitting next to while you’re watching these speakers on stage, the ones you’re going to have lunch with, the ones you’re going to get to know afterwards at the party. Those are the marketers that are going to be in your Facebook Messenger, in your iMessage. Those are the ones you’re going to be able to ping when you want to get an idea or when you want to try out something or find out what’s working for them.
So, that’s why you have to meet in person and I urge you if you’re listening to me to come to the Converted 2016 conference. I’ll be there and I’d like to meet you. After you buy your ticket, email me so that we can change phone numbers and find a way for us to meet up. But if you’re going, I don’t want you to go to their website and sign up. I want you to go to the special page where they’re going to give you a giant discount, $250 off because they want my audience to be in the audience of this conference.
So, here’s the URL, write this down–it’s not available to anyone else–it is this: Leadpages.net/Mixergy. You’ll be able to buy a ticket to this conference, come see me, Mark Marron, so many others. I’m looking forward to seeing you there in person–Leadpages.net/Mixergy. Come see me at the conference that’s called Converted 2016.
Cool. You weren’t a developer. Who was going to build this thing out for you?
Jose: It was a good question. When we started, we didn’t know how hard it was to build technology. So, we hired a developer that we didn’t know anything about him. We realized like six months later that technology was something serious, something critical.
So, we struggled for a few months. We didn’t have cash. We didn’t have the proper platform. We didn’t have technology. We didn’t have anything. We had to spend like 80% of our first money we raised. So, we had these huge problems to survive and then we noticed that we realized that we needed someone senior, so we got help from our advisory board. We fixed it, but we’re like one month away–
Andrew: From closing.
Andrew: So then funding came first. Where did you raise your first money?
Jose: From friends and family. Basically we put like $40k in between Inigo and me.
Andrew: All of you guys together put $40k.
Jose: Yeah. Well, we had some loans and we put that money. Then once we [inaudible 00:22:55] we raised like $200k from friends and family. That was the money we spent without having the platform working properly.
Andrew: So, you spent about half a million dollars on software that just did not work.
Andrew: Oh, sorry, not half. I meant a quarter-million. Almost a quarter-million dollars, right?
Jose: One of the–
Andrew: Biggest mistakes. So, the first version that you got back–I see that you’re actually squirming as we’re talking here about this. One of the first versions that you got back, what was wrong with it? When you look back on it, what was the problem?
Jose: You know about building a startup, the minimum viable product, that kind of stuff. We didn’t know anything about that. We wanted to build like a super product from the beginning and it was a big mistake. It was really risky to do it that way. We should have started the first month with revenue, not month number nine.
Andrew: I see.
Jose: So, it was a big mistake.
Andrew: What was it? Was it that that first developer could not finish that site? Was it that he finished it but didn’t do a good job with it?
Jose: We didn’t hire the proper team to develop the platform, but the biggest one was to do something too complex for the beginning. Now I know it. Now that I am a venture capitalist, I know that you don’t need something too complex to validate the first hypothesis. You don’t need something complex. You need something really, really simple. In one month, two months, you need to have something to face customers with it and answer questions about your project, your hypothesis, your project, the product market fit and all. And we didn’t do that. We weren’t in our lab building something we supposed it was going to work.
Andrew: Sorry. I don’t understand then what was wrong with it. So, you spent a lot of time, you spent a lot of money. Maybe it was too much money, too much time, for sure it was. But when you finished it, what was wrong with it?
Jose: Well, when we finished, it was okay. It was a very bad platform, but it worked in the ninth month.
Andrew: When what? Sorry?
Jose: In month number nine, it started working. We had some issue with traffic, so it was okay. The problem was when we were in month number seven, more or less. We had nothing because were building out something too complex.
Andrew: I see.
Jose: So, it was really, really risky.
Andrew: I see. In the end it worked out. It just cost you a lot of money. And you got very close to going out of business.
Jose: Yeah. It cost us money and it cost us time that this [inaudible 00:25:52] sometimes, in a market that moves fairly quickly.
Andrew: How did you get all those restaurants into your system?
Jose: That was funny because we started reaching websites without having a webpage. So, we sold something that didn’t exist.
Andrew: And it was you calling them up and saying, “I’m going to put you on my directory and it’s going to cost you some money to be in there.
Jose: Yeah. It doesn’t exist right now.
Andrew: How did you get them to say yes to that?
Jose: It was free at the beginning. So, we only charged them if they sold through the platform.
Jose: So, it wasn’t that difficult, but in any case it was quite difficult. So, my personally and my partner Inigo, we recruited restaurants directly.
Andrew: Just, “I want to give it to you for free, but any sales I get you you’re going to have to pay a commission on?”
Jose: Yeah, 15% or something.
Andrew: So I’ve interviewed other entrepreneurs who did this kind of business here in the U.S. and one of the challenges they had was restaurants would say, “I don’t know that I want to give you a commission because you’re basically going to cannibalize my business. Somebody who was going to call me anyway is now going to go to your website and now I have to give you a commission just because they went to you instead of doing what they would have done anyway, which is call me directly.” So what did you respond to that with?
Jose: Well, theory I think is real is it’s new customers that they weren’t going to get if they weren’t going to get if they were not on the platform. So, basically they’re new customers. They’re not your customers. If you are not on our platform, you will lose your customers. That was the value proposition.
Andrew: How did you tell them that you planned to get customers to come to your website and eventually buy it?
Jose: Well, at the very beginning, it was very difficult. But at the end, we did a lot of TV commercials, TV adds.
Andrew: But at the beginning, when you didn’t even have a website, if a restaurant said, “Jose, how are you going to get people to come to your site?” What did you say?
Jose: We told them about SEO, SEM, that kind of online marketing channels. They didn’t know at all.
Andrew: So, they trust you. Okay. And actually those are the two things that worked for you guys at first. You did a lot of content and SEO. Let’s talk about the SEO first since you mentioned that. What worked for you for SEO?
Jose: That was the first customer acquisition channel, SEO. Even before we had the platform, we had like a wide directory with content, unique content. The only purpose of that content was to bring some organic traffic, SEO traffic. It worked pretty well. We had like 30,000 visits before we had the platform, the transactional platform. So, once we opened the doors, we had 30,000 visits monthly pretty much for Spain.
Andrew: So, when you say content, you mean restaurant information.
Andrew: You didn’t write any original content beyond that.
Jose: Yeah, some content in every restaurant page and also some posts about food and nothing too original but it worked. It brought us some traffic, organic traffic.
Andrew: I see. By the way, how’d you come up with the name The Red Fridge?
Jose: That was my partner. He was a really creative guy. He and his family, they have very good ideas. They also had this new brand we launched after that. It’s called Urban Ninja. It was like a logistic platform. It worked for La Nevera Roja. Those two brands are really good brands. Rocket Internet bought Urban Ninja and are happy with it, both brands.
Andrew: Rocket Internet is the company that bought you guys. They sold you recently, right?
Jose: Yeah, to Just Eat, public company. They sold the company for the same price, more or less, but they had spun off the logistics platform to other countries. So, they didn’t sell the logistics side of the business. They are managing 400,000 orders monthly in the logistics part of the business, this Urban Ninja.
Andrew: Wow. Urban Ninja, that’s the logistics? I like the name a lot.
Jose: Yeah. It’s cool.
Andrew: Was it part of the company that was bought for $100 million or €80 million at the time? It was all one for the same price, right?
Andrew: So, tell me about that. What was the logistics business?
Jose: Do you know Postmates?
Andrew: Postmates, yes.
Jose: It’s more or less similar business model. You run below La Nevera Roja. It used to run for La Nevera Roja as the only client. The idea was to start bringing clients was different clients, not just La Nevera Roja to do the logistics.
Andrew: I see. For people who don’t know, Postmates is a service where you just can get anything delivered, essentially. My wife was sick in New York. I wanted to get her some medication. The hotel she was in wouldn’t send anyone out. I went to Postmates and said, “Get this drink.” She wanted ginger ale. “Get this, get this, get that,” and then they went to the shelves, they picked it up and they brought it to the hotel. They work by just empowering anyone who has a bicycle or a car or any transportation or a phone.
So, when you go to them, they route it to the right person, that person gets the order on their phone and then they go to it and get the job done. Did you guys work that way too with freelancers who were going out and picking stuff up at stores?
Jose: Yeah. We didn’t have time to launch different categories apart from food. We were just working on food, but the idea was to open it to different categories as Postmates and us. The network was the same. It was a lot of couriers in the city doing deliveries in around 30 minutes.
Andrew: Where do you learn how to come up with that plan to separate the business into two standalone companies essentially where the logistics company can work for anyone else and help grow your business? How does that thought process come about?
Jose: Well, there were a lot of discussions about that with the advisory board and board members. It was like a natural process. The industry was going that way, in that direction. So, we’ve failed it like the natural way of doing things.
Andrew: The industry was going towards what direction?
Jose: Towards a logistics integration into this platform like DoorDash in the states or Deliv. So, we really thought that the customer experience was key.
Jose: We needed to ensure that the logistic was very good quality, like high standard of delivery and the only way to do that is to internalize it. Don’t rely on third parties. So, we had started internalization process of the logistics.
Andrew: How are you doing with the English in this interview? I feel like I’m flinging questions at you to check in and see how you’re doing with it.
Jose: For me, I feel more or less comfortable, but I’m worried if your audience will understand everything I try to say.
Andrew: I think they will. Anyone who doesn’t understand, screw them. Don’t you think? Like if you’re not able to process something that’s just a little bit different, you’re just not ready to be listening to Mixergy. Don’t you think? I think so. You keep talking about these advisors. Who are these advisors who helped you think through the business? How did you get them?
Jose: They were like basically either friends and family, either people who were like really like the project. They didn’t earn any money. So, they were there because they wanted to help us and they enjoy helping us. So, they were very senior people and we really trust in that kind of combination, very young people, specialized in some way and then senior people to give advice. So, in that mix, you can get very, very high quality decisions.
Andrew: How did you get the senior person, the senior people?
Jose: Well, they were like friends, basically friends.
Andrew: Can you give me an example of one person who wasn’t an investor but was a senior advisor and was helpful?
Jose: Well, at the very beginning, our board member in Samaipata, the venture capital firm that I lead right now, he wasn’t an advisor and he was the chairman of one public company in Spain and he liked internet. He liked us.
Andrew: How did he get to know you? You said he was what?
Jose: He was the chairman of the company.
Andrew: Chairman of the board of a publicly traded company in Spain–how do you even get a meeting with him and then how do you get him to say yes to advising you? Can you walk me through that?
Jose: Yeah. It was a friend of an uncle of my partner. He told us you have to meet that person. We went to his office. He liked the project. People want to be involved in interesting projects, something new, something different than what he does every day. So, he liked it. We started having lunch together a lot of times. Then he became one of our advisors. In the end he was an investor and he did a lot of money, actually.
Andrew: And when you–yeah, I bet that it paid off for him, but in the early days when you were just going to lunch with him and you didn’t have a lot to teach him, I don’t think, or did you? Why did he want to sit down with you?
Jose: Well, I think I also like now to help people with starting projects try to be helpful, like trying to help if the project is interesting, you just do it.
Andrew: Why? Because it helps you think better? If you see someone work on an interesting project, does it shape the way you think and allow you to become a better entrepreneur, better investor, is that the goal?
Jose: Maybe. Honestly right now, I don’t do it with a lot of people because I cannot spend a lot of time outside the VC because I have a commitment with my investors. But I like to mentor two or three young people just because the fun of it because I want to help, the same thing with this senior advisor. It’s not about money with him.
Andrew: You told our producer that you had trouble finding investors. There’s one guy you had to keep going back to, I think it was six times, right?
Jose: Yeah. That’s correct.
Andrew: Who was this person?
Jose: He’s right now in our advisory board in Samaipata Ventures, the venture capital. He’s also an investor. He was the lead investor in La Nevera Roja and now he’s the number one investor in Samaipata. He started a company in the late 80s. Then he sold that for a few hundred million euros, like ten years ago, more or less. He’s an entrepreneur. We went to visit him like five or six times and he said no all the time but we kept growing and growing and there was a time that he said, “Okay, I will invest.
Andrew: I see. You just kept watching the growth. So, every time he said no or wasn’t interested, he at least was picking up on some information that helped him make the yes decision later on.
Jose: Yeah. We send him emails with graphs and like growing very fast. In the year number three, more or less, in the third year of operation, he decided to invest, otherwise we couldn’t sustain the growth rate because we invested a lot of money. This is the kind of business that you need a lot of money to grow and you need to scale, critical mass. So, he trusts us and in the end, he did a lot of money because of that.
Andrew: Let me do a second sponsorship message and then I want to come back and ask you what you did to grow outside of SEO. That works at the beginning. You need to grow even more and you said you hustled more. There was something you did before television. Then I also want to ask you about why every time I search for your name in Google, it suggests that I also look for bad companies, “Jose del Barrio bad companies.” I’m going to come back and ask you about that. There’s something that I see when I do that search.
But first–I see you’re a little bit nervous. You don’t need to be nervous. Here’s the sponsor. The sponsor is a company called HostGator. Are you about to do the search to see what comes up? Jose, did I just lose you because you’re going to do the search to see why? I’ll tell you what comes up because I can tell you’re a little worried about it.
It’s a YouTube video that is apparently a techno mix. Are you a DJ on the side also? Listen…
Jose: No, I am not.
Andrew: This is “Bad Companies Original Mix” by Jose del Barrio. No, that’s not you?
Jose: I didn’t know that.
Andrew: Also available on SoundCloud and Fap Tunes. It’s not? So, there’s somebody else with your name who’s also a DJ.
Andrew: I guess so.
Jose: [Inaudible 00:41:28], I think.
Andrew: Maybe not. I wonder where this person is. I can’t tell. All right. So, the sponsor is HostGator. Look, Jose, you were just talking about how one of the things you wish you had done in the beginning was create a minimum viable product instead of spending nine months with these developers, lots of them trying to figure out how to get your product off, you could have just created something in days, frankly.
What you could have done is if you knew about it, if I was there to tell you about it, you could have gone to HostGator and just signed up for a simple hosting account and they would have even installed WordPress for you with one click, make it really simple. With WordPress, there are tons of themes that allow you to create directories. You could have been up and running within a matter of a day.
Frankly, with you, because you’re a fast learner, you probably could do in an hour. And then you could start making your phone calls to restaurants and signing them up for a site that actually exists and you can add them to the directory while you’re working with a developer now to build out what you wish this WordPress minimum viable product had done for you.
You can’t do that. You’re not going to go back in time to 2011. Unfortunately time machines don’t exist yet, but I hear that Elon Musk is working on one. What you could do is pass this knowledge on to anyone who’s listening to us. If you have an idea and you haven’t just implemented it, even if you’re just using a basic hosting account with WordPress, you’re doing yourself a disservice.
You can do just about any idea quickly within days using a HostGator account. We’re talking about just a minimum viable product. I know, Jose, a lot of people are going to listen to me and say, “I have an idea for an app. I can’t do that with WordPress.” First of all, yes you can. You can kind of fake it with WordPress. But second, I interviewed the founder of Buffer. He needed to create a whole app, a SaaS-based business. He didn’t have it.
You know what he did? He created a basic webpage that said this is what my service does. Click this button if you want to sign up. Anyone who clicked the button was told enter your email address. They entered your email address and then they went to a confirmation page that said, “I’m almost done building this out. I’ll contact you via email as I build it out.” Then he got this email list of all the people interested in this software that he was going to build and he would contact them and say, “Here’s the idea for Buffer. Here’s what I got in mind, etc.”
Let me actually see how much Buffer is doing right now. What’s their number? It’s Buffer.Baremetrics.com. Anyone who wants to listen to me who wants to see how far Buffer got can go to Buffer.Baremetrics.com to see. Their monthly recurring revenue is $872,000 now. That’s how basic his idea was.
I’m going to research Maven. I went back in time to see what that page looked like. It was nothing but a page and a button. You click the button. You’re told to enter your email address. You entered the email address and he said, “I don’t have the product yet, but I’ll contact you.”
Anyway, all this is to say if you’re listening to me and you want to create a minimum viable product like the guy sat Buffer did, like Jose wishes that he had done, all you have to do is go to HostGator, but not HostGator.com because I’ve got something special for you. If you want to get a deep discount on HostGator’s already low pricing, go to HostGator.com/Mixergy and they’re going to give you 30% off.
That’s in addition to unlimited email addresses, unmetered disk space, etc. yadda, yadda, yadda, all of this stuff comes in. Everything you could want in a hosting package is there and then when you’re reading to go, HostGator has got more intense hosting packages available for you. Go check them out, sign up and send me a link to what you built.
Finally before I finish the ad for them, if you hate your hosting company, you should switch to the Gator. HostGator.com will migrate you for free if you’re on WordPress or make it easy for you if you’re on some other system. I’m really grateful to them for sponsoring. Go sign up, HostGator.com/Mixergy.
Jose, you told me about SEO. You also told me about SEO and television. Somewhere between SEO and television is that middle ground that you had to really hustle to get new customers through. What did you do that worked?
Jose: Well, given that we needed to grow really fast, we wanted to grow at a 20% growth rate month on month. We decided on very cheap acquisition channels like SEO. Then we switched to–not switched, we added a new acquisition channel, which was SEM. Then we tried display, then we tried also email marketing and lead generation programs.
So we tried the whole variety of channels, also Facebook ads. We tried all of them. We needed to understand which channels worked the best and also offline channels like flyers, outdoor. We tried a lot of them. So basically 80% of the orders came from search, both organic and paid.
Andrew: 80% came from search, organic and paid?
Jose: More or less until the third year around that, maybe 60% to 70%, but there was a time that we needed to grow faster. We were selling around 20 million or 15 million in gross merchandise value yearly. We needed to grow again at 20% month to month. So we start thinking of offline channels. We know that was much more expensive, but we needed to try them. You would try radio and it works pretty well but it was very small scale with original television. It worked really well.
Then there was the biggest bet we did, it was national television. When we went national, I was personally really, really worried because it was a lot of money. I remember one day with my wife in my house. It was Friday night in the kitchen and I told her, “I’m really worried because I don’t know if this national TV campaign which is really expensive, it cost like blah, blah, blah, I’m really worried because I don’t know it’s going to work.” She answered me, “I completely understand you’re worried.”
Andrew: You should be worried.
Jose: It was a lot of money. It was like huge. When you talk about marketing online, you can spend €1, €2, €1,000, €20,000, the amount you want. But you go to television, you had like a fixed amount, a minimum amount, which is huge. So, that was one of the toughest decisions, but at the end it worked really well.
Andrew: Why did television work for you? What did you learn about television?
Jose: Well, I think it worked very well because we did the campaigns in a very smart way around dinner time, which is the time that we used to do most of the orders. So, we basically [inaudible 00:49:10] watching TV at 9:00. You are hungry. If you are in Spain, people have dinner at 9:00, 9:15 p.m.
Andrew: I love that.
Jose: You are at 9:00, you are hungry, so we showed this TV ad with food so you don’t have a choice to download the app and order. We track every download, every order and we were able to measure the ROI per TV ad because we matched the downloads with the TV ads and that was very a very efficient channel.
Andrew: Based on the time you were able to match it up?
Jose: Yeah. You are able to measure it in the next three to five minutes after the spot, you can see that a lot of people come into the app on the web. So, you can track the impact that every spot ends up in the platform.
Andrew: I see.
Jose: You can do it in a very efficient way.
Andrew: That founder of Carbonite, the software that backs up people’s computers told me he does the same thing. He told me he found radio ads worked really, really well for them because he could measure it using what you’re talking about. But you basically have to custom create software that keeps track of when your ads are running and what downloads you’re getting, right? For him he even had to do it within each market, so he would know if New York was leading to sales or California was. Am I right? Is it what you had to do?
Jose: Yeah. But we did it on our own. We built this small piece of software to track it. We did it very precisely and that was one of the keys. Otherwise you waste a lot of money in TV. You have to do this very precisely. It worked very well. So, after five months, we signed an agreement, a huge agreement with a top media company in Spain. It’s called Mediaset. So, we signed an agreement that they put TV ads, let’s say for free. It’s not for free. They put TV ads and we gave them equity. So, that was a great deal. So, we do a lot in the next few months.
Andrew: So, they got equity in your business in exchange for helping you promote on television.
Jose: Basically. It’s called media for equity. In Europe, it’s pretty useful in the last two years.
Andrew: What’s TradeTracker.com? Do you know those guys? Do they buy ads now?
Jose: I’ve not heard of them.
Andrew: I guess maybe they’re buying ads now for your company, but you’re not there anymore. You don’t have any recollection of what the connection is to the business, do you?
Jose: I’m sure.
Andrew: What I’m doing is I’m going to SimilarWeb.com to see where traffic is coming from for La Nevera Roja and for some reason, they are coming up in the traffic. I’ll tell you what else is coming up that maybe you do know about. It seems like couponing sites and deal sites are doing well. That’s what’s driving some traffic. Do you know anything about that?
Jose: Yeah, probably that’s because they take the coupons that the platform publishes and they republish the coupons.
Andrew: I see. You guys have the coupons on your site. They see it. They put it on their service.
Jose: Or maybe through email. They are like signing up like a lot of accounts. They receive the coupons through email and they publish.
Andrew: And then do you give them affiliate commission?
Jose: I didn’t do that because it didn’t work properly, the affiliates. It was a lot of, let’s say–excuse me for the word, like shitty traffic.
Jose: But maybe they are doing it now. I left the company one year ago.
Andrew: I see. They were shitty traffic. That’s totally okay. I like that you say that. It sounds like what you did was you said, “We know SEO is working for us. Great. What else can we do?” And you just kept taking a bunch of small bets to see what would work and then display ads didn’t work, this other thing didn’t work, that didn’t work but television didn’t happen to work, so you just kept doubling down and doubling down on television because that’s what worked. Am I right?
Jose: That’s correct.
Andrew: That’s the thing that worked for you guys.
Jose: SEO and SEM also worked. But there was a moment in time that it wasn’t enough to grow.
Andrew: Why did you sell the company?
Jose: We weren’t thinking about selling the company in September and October of 2014, but suddenly like one company came to us and make an offer and they make like a bid and our shareholders said, “Listen, we need to understand how much is this company valued from outside investors?”
So, we started the process. In a matter of weeks, the price went up like it was really high, so we need–the decision wasn’t only our decision. We were happy with the decision, but when you raise money from investors, you’re committed to give them results also. So, it was enough.
Andrew: I heard one of the companies was Just Eat, that they made an offer too.
Jose: Yeah. We had four different offers in one month.
Andrew: And did you just go with the one that had the biggest price?
Jose: Well, not really. We received a higher offer the day before we sold.
Andrew: So, why didn’t you take that one? Was it too late?
Jose: Yeah. It was too risky.
Andrew: Too risky to take apart the Rocket Internet deal just so you could take this other big one.
Andrew: You told our producer that you remember the day that all the money went into your account. Can you tell us about that day?
Jose: Well, it’s not that day when the money came to our accounts. It was more like selling your baby that you raised. So, you raised your baby for five years, no four years, excuse me, suddenly it’s not with you anymore. So, you don’t really know what to do. I talked to my partner and we were like shocked and said, “Now what am I going to do?” I remember I had lunch with my family, with my father, my parents and my wife and I went the whole night without saying a word. I said nothing. I didn’t know what to say.
Andrew: Because you were in such shock?
Andrew: How much of the €80 million did you get to keep yourself?
Jose: I cannot say that. There were a lot of investors.
Andrew: Did you own more than 25% of the business by the time it was done? Can you say that? You can’t say that?
Jose: Sorry, I cannot say.
Andrew: Okay. Then you went and you became a venture capitalist. Why? Why take that direction?
Jose: Well, that wasn’t an easy decision. It took me three months thinking about my next step. Then I realize I prefer to help the new generation of entrepreneurs to build their business, help them to be successful with the experience we have. So, my dream, I think, is trying to help European entrepreneurs to build great companies and also to fill the gap between Europe and the states in terms of venture capital.
In Southern Europe, there is like a ridiculous amount of money invested every year in venture capital. It’s growing really fast. Right now it’s really low. It’s not rated with the GDP, the gross domestic product. So, we really think that should disappear in the medium term. We want to help them, these countries to feel that.
Andrew: And what’s your focus?
Jose: We are specialized venture capital. We only invest in the market place and ecommerce models and the status in terms of geographical scope is Europe, Southern Europe. We think the biggest opportunities in Southern Europe because it’s really, really underdeveloped right now.
Andrew: I’m looking at your portfolio and one of the companies is a company called Jinn. Am I pronouncing it right?
Jose: Yeah, in London.
Andrew: Which is very similar to La Nevera Roja, right? They do delivery of anything you want. I think their tagline is, “What do you wish for? Get anything you want delivered in minutes.”
Jose: That’s correct. La Nevera was only food. Here is anything delivered in 30 minutes.
Andrew: Including my dry-cleaning, for example.
Jose: That’s correct.
Andrew: Why marketplaces? Most people are afraid of marketplaces because it means you have to go after two different customers. Why are you embracing marketplaces? What do you know that they don’t know?
Jose: Well, we really trust in that kind of business that has both economies of scale and network ethics. So, the combination of both economies, let’s say, make very powerful business models with high barriers of entry. If you do it properly, you’re going to scale them really fast, much faster than any other business model. We think we understand creatively with that kind of business. So, we are going to find the best teams and try to help them being successful.
Andrew: I see one of the other ones is CornerJob. That’s also a marketplace for work.
Jose: Blue collar jobs.
Andrew: I see. Then once you get this marketplace going, it’s harder for people to compete with you.
Jose: Yeah, that’s correct. Once you have critical mass, it’s like a natural monopoly. In CornerJob, for example, we have that kind of dynamic in Italy and France, where you are much bigger than the second player and high liquidity, very powerful user experience. We love that kind of business.
Andrew: Okay. Before I say goodbye, I get packages here from a lot of times people in the audience, I want to open up this last one. Let’s see what’s in the box today.
Jose: A present for me.
Andrew: I have to wrestle with this one. If you’re listening to me, tell me about if this bit is working or not. I’m curious about what’s in these things, but I always put it off. Nice presentation. “Andrew, thanks again for being an amazing moderator. I heard so many great things from the audience about you, looking forward to working together in the future. Cheers. Nelson from Toptal.”
I moderated an event for them here in San Francisco. They wanted someone who could ask questions of the panel of guests. They got me chocolate, which my wife and I are going to love and a cocktail kit, which I’m probably going to love on my own and more chocolate. I wish you were here. We can actually split this chocolate together. Well, thank you, Nelson. Thanks for sending it over. I’m glad that I got to moderate.
Jose, am I pronouncing it right? I realize, by the way, I’m pronouncing your name two different ways, Jose, am I right? Or is it Jose?
Jose: You can say it both ways.
Andrew: I’m trying to be authentic, so I think Jose is better, right?
Jose: Yeah. My family calls me that way.
Andrew: All right. Jose, thank you so much for being on here. It’s amazing what you are able to build in four freaking years, four years. Whoever is listening to me, please, stop for a second and ask yourself, “Where was I four years ago?” I know where I was four years ago, Washington DC. Look at what he got, how far he got in four years. It’s an incredible story. I urge people to go check out your newest website. How do you pronounce the new company name?
Jose: It’s typical also for Spaniards to say–
Andrew: Let me try it, Samaipata.
Andrew: Samaipata Ventures. I looked up Samaipata in Google Translate to see if it could translate. It just said Samaipata means Samaipata. So, what does it mean?
Jose: It’s a municipality in Bolivia.
Andrew: Ah, why’d you pick that?
Jose: Well, I was there in a mission when I entered my career, my university.
Andrew: So, it has meaning for you and it’s not a name that would lead us to be confused with another venture capital firm. It’s unique.
Jose: That’s correct.
Andrew: All right. I got it. Anyone who wants to connect to you is not going to have a hard time finding you in lots of different ways. I’m grateful to you for doing this interview. I’m grateful to my two sponsors for sponsoring it. The first is HostGator.com/Mixergy. The second one if you want to come see me at a conference, it is Leadpages.net/Mixergy. Thank you so much for doing this Jose.
Jose: Andrew, thank you very much. It’s been a pleasure to be with you here.
Andrew: It’s an honor. Thank you. Thank you all for being a part of it. Bye, everyone.