Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses. Believe it or not, I was thinking about whether I should say this person’s name or not. There’s an entrepreneur who I interviewed a few times here on Mixergy who will not just ask the waiter to adjust his meal a million different ways, but also records every little bit of what he eats. He’s not a heavyset guy. He’s not trying to lose weight or anything. He’s just trying to maintain his weight.
I was fascinated that he did that. And as I talked to him at dinner one time, I recognized that there are a few other people who were kind of like waiting to jump in, and it turns out they do it, too. There is this thing, and maybe not in the broader entrepreneurship world, but in the tech entrepreneurship world, the world of people who like to measure things, who have analytics on everything, who just have to record every bit of calorie that they have.
One of the apps that they use is an app called Lose It! And the app, Lose It!, I always thought was like . . . I’ll say the brand name. I thought it was like a Weight Watchers thing, that it’s not meant for these types of dudes. I thought it was meant for people who are really genuinely trying to lose weight, not be anal. But apparently it is used by both, people who just care about their fitness and want to manage every bit of it and people who are trying to lose weight.
For some reason, it never occurred to me that there is a person behind this business. I just always thought it was a thing in the App Store, maybe a giant company behind it. It was a company. In fact, if you go to Lose It! web page, it looks like there’s another company behind it. What is it called? FitNow Incorporated.
Anyway, today I get to interview the founder — and I don’t know if you’d call yourself the founder, but I would — the founder of the company behind Lose It!. His name is Charles Teague. I’m excited to have him on here. I’m excited to see how he’s built up this business. And I can do it thanks to two phenomenal sponsors. The first will help you hire smart developers. It’s called Toptal. The second will help you host your website right. It’s called HostGator.
Charles, good to see you here.
Charles: Andrew, thanks so much. It’s great to talk to you.
Andrew: Let’s talk numbers. How many people have downloaded this app?
Charles: We are up over 35 million people around the world at this point.
Andrew: Thirty-five million people. Now, this is the free version.
Andrew: When people install the free version, it says, “Hey, there’s a paid version,” and then you can skip through that. But then a few times within the app, you see, “Hey, you get more features if you pay for the premium version,” features like tracking water and so many other things that are a little more important than that. How many people are actually paying?
Charles: So we’re up over half a million subscribers this year.
Andrew: Half a million.
Andrew: Paying how much for premium?
Charles: Premium is 39.99 annually?
Andrew: Wowee. So I remember one of the things that my producer told me about you is yes, you have funding, but you come from a very bootstrap mentality and what you wanted was to think like a bootstrapper and make this thing profitable. Is it profitable now?
Charles: It is profitable, yeah. So we have been focused on that since really 2012. And since 2000 . . . 2012 was when we raised capital. We raised a Series A in 2012. And then we sort of decided at that point, this is going to be our last funding for this company so we need to figure out how to somehow feed ourselves and hunt with this money. And so we got really focused on that, starting in 2012, and we’ve been running that way since then.
Andrew: The other thing that stood out for me about you was you were working at Microsoft when somebody on Windows Live — which is a collection of different software that still exists today under different brand names — and somebody handed you an iPhone. And when you first saw the iPhone, what did you think? Because it changed everything.
Charles: Yeah. So I had been working at Microsoft. I was a part of the Windows Live team and I had been obviously following the tech stuff. So I saw the iPhone, I saw the announcement, and I had never seen one but I’d heard all about it. And my reaction, based on what I heard, was, “That’s, like, the worst idea I’ve ever heard. This multi-touch interface on a screen, there’s not a keyboard. What a terrible, terrible idea.”
But they slowly started appearing at Microsoft. Employees started getting them. And the first time I used one, I was, like, “I actually, I need to immediately quit and start working on something for this device, because this device is going to change everything.” And so that’s . . .
Andrew: What was it that you saw about it that told you this was going to change everything? Because a lot of people who had technology background like you said, “No copy-paste. No multitasking, etc.” And even old Treo 650s used to do multitasking and copy-paste. Blackberries used to do this type of stuff. What did you see in it that, despite your tech background and maybe where other people would have had prejudices against it, you said, “No, this is going to change everything. I got to quit my whole job and start a new life”?
Charles: For me, I would say because of the fact that it had such a big screen relative to everything else. Because all the interactions were so clear and so through that screen, it was really obvious, any person who got this was going to have success with it immediately. And then when you thought about it as a platform, you just very quickly realized, “I’m going to be able to make something for this and almost anyone’s going to be able to use it and succeed with it.”
And at the time, the other thing I’ll say about it is most of the other devices were these sort of like Palm, Blackberry, sort of business-y, lame devices, honestly. And here came this delightful, beautiful, engaging, fun device that you were, like, “I’m excited to take this out and use it. I’m not sad that I got an email.” And so it all just sort of clicked when I saw it.
Andrew: Did you actually quit your job at Microsoft after that?
Charles: I did. Yeah, I did.
Andrew: You did.
Charles: Yes, I did quit my job at Microsoft. It was a difficult thing because I had moved my wife and family from Boston to Seattle. We were in Redmond and then when all that happened, she was really starting to settle into life in Seattle. And I said, “I actually think we need to quit. I need to quit Microsoft. My career started in Boston. I kind of want to go back to Boston, figure out this mobile thing. So let’s pick up and let’s head back across the country to Boston and figure this out.”
Andrew: And you had no job at the time, right? Or did you?
Charles: I did. So the good news was, so I was a little sophisticated and smart about this process because it would have been extra painful if I told her also we have no job. But what I was able to do was I was able to use some connections I had to get an opportunity at General Catalyst, which is a venture firm here in Boston. And so I went into General Catalyst as sort of a technologist in residence or an EIR. The goal there for me was to really try to get smart about mobile.
Andrew: What’s a technologist in residence? What did it mean for you?
Charles: For me it was, I think, two things. It was a lot about trying to help them understand the product and technology side of deals or companies or teams that might come in. For me, it was about trying to make myself smart about the mobile space. And so honestly, back then, it’s funny to think about now, it’s kind of like what you said, no one saw the iPhone and really thought, “This is going to . . .”
I shouldn’t say no one. A lot of people didn’t see the iPhone and did not think it was going to be a revolution. They actually thought, “Yeah, I mean, this is like an add-on to some other business.” But the concept that there would be standalone businesses created around mobile technology was just this really far-fetched, ridiculous notion. And so I really spent the first six months or so there trying to understand how businesses would actually get created on mobile platforms.
Andrew: And they were paying you to do this at General Catalyst?
Charles: Yes. Yeah.
Andrew: They said, “Here, learn it. Teach us.” And the reason that they knew that you could do this is, I read a little bit about you. You founded a company called Onfolio.
Charles: Yeah. That was the company we sold to Microsoft. I co-founded that with J.J. Allaire, who’s a guy I’ve worked with for a long time. So I’ve done that.
Andrew: Here’s, by the way, how J.J. Allaire described it. “Onfolio, micro-content and search information management.” Now, this is . . . Rafat Ali at GigaOm, like, 14 years ago kind of made fun of that by putting it in his headline and then said, “Here’s what it actually does. It plugs into Microsoft’s internet Exchange browser and allows you to categorize, annotate, and store web pages that you find, like a bookmarking service.”
Andrew: Am I right?
Charles: Yeah, absolutely.
Andrew: That’s what it was.
Charles: You can think about something between Delicious, if you’ve ever used Delicious . . .
Charles: . . . in the old days, and maybe a little bit of Evernote mixed in.
Andrew: Yeah, because both Delicious and Evernote do something that other software doesn’t, which is let you tag it and then find things based on tag. Delicious takes that to the next level by letting other people search your tags. And so that’s what you created. How big of a sale was this? Was this an acqui-hire?
Charles: No, no. The company was small. We created that company all with internal funding, so that was very bootstrappy. We’d grown that to about 12 people. We’d worked on that for three or four years and we saw the opportunity to get over to Microsoft with it. They were really excited about it. And so we ended up there in the Windows Live team working on [inaudible 00:09:02].
Andrew: Charles, I’m sorry. No offense to what you built, but it’s a bookmarking service. Microsoft had tons of engineers. They couldn’t just copy that?
Charles: Well, what we had built, from a technology perspective, maybe the thousands of engineers at Microsoft could have pulled that off. But what we had was there and users loved it and . . .
Andrew: Really? Okay.
Charles: . . . the [inaudible 00:09:24] was amazing. The other product we were working on at the time that I think they were really interested in was a product that was called Windows Live Writer. They ended up calling it Windows Live Writer. For us, it was just called Writer. And that product was focused on blogging platforms.
What that actually was, was a desktop app that gave you sort of a Microsoft Word experience for your blog. It did some really cool things. Like it would download your style sheets and all the styles from your blog, and so as you were editing, you’re seeing exactly what it’s going to look like, perfectly in your blog.
Andrew: Oh, okay.
Charles: It automated publishing videos, images. All the things that you think of as really straightforward things now were really complicated in the 2000 [inaudible 00:10:07].
Andrew: But even with WordPress . . . Arie is going to be doing the write up on this in WordPress. She’s going to be entering the text into a wide box and then after she hits Preview, she’ll see what it looks like on the site. You’re saying with what you created, the user could actually see what it would look like within the page, in the design of the page, the whole thing.
Charles: Yes, yes.
Andrew: And so that’s . . . I see. All right. And I see now also why you would get paid to think about the future of mobile technology. You were in there. And still, you told our producer, “You know what? I was spinning my wheels in there.”
Andrew: Why did you feel that way?
Charles: Well, what I will say is my background has always been product, so I’m like a product guy. I love products, I love working on technology, I love building things. And so much of what you have to do at a venture firm, I think, is about relationships, leads, deal flow, deal intelligence, deal structure. And candidly, none of those things really are that exciting to me. And so we get in a two-hour conversation about a bunch of deal mechanics, I’m just of sort of like, “How do I get out of this?”
And so while I loved — I’d learned such an immense amount while I was there, I loved working with partners there — it was clear, I think, that I was sort of like, “I got to get back and start building something. I got to do something. I can’t just sit here with spreadsheets, researching things.”
Andrew: You couldn’t come up with an idea, though, on your own, despite seeing it. Did you have any near ideas, any ones that you considered?
Charles: No, no. In fact, the closest thing that I built while I was there to something that ended up being a great idea was basically the equivalent of App Annie. And so I’d spent a lot of time writing tooling to download data from the iTunes App Store at the beginning to sort of pull together that data so that I could do analysis to trends and starting to understand the dynamics of the App Store.
And that never would have occurred to me that that was anything that was even remotely interesting, but I think had I continued on that, it probably would have been very interesting. But I didn’t know what I was going to do. I knew it was mobile. I had no ideas. I knew that venture capital was not going to be a destination for me at that point, so I needed somewhere to land.
Andrew: And then J.J. — J.J., am I pronouncing his last name right? Allaire?
Charles: Yeah, J.J. Allaire. Yep.
Andrew: J.J. Allaire, the friend who you co-founded Onfolio with, came to you and he showed you what?
Charles: So he showed me Lose It! He’d been sort of keeping me in the loop. J.J. and I have actually worked together even prior to Onfolio. J.J. and I went to the same college. He actually hired me when I graduated college. I graduated college . . .
Andrew: Yeah, I’m looking, 1996 to 1999 on your LinkedIn profile, you were a web developer for Allaire. This is for him.
Charles: Yes. Yes. Yeah, so he hired me straight out of college. I was the first employee at that company. I had a political science degree, so he took a real gamble on me because it wasn’t like I was a hotshot programmer. But so he hired me then. We co-founded Onfolio. And then he bailed me out this third time by building Lose It! while I was busy at General Catalyst. He showed me the product. I knew all about it. And he’d even mentioned, like, “Maybe you should come over here and do some work on this.” And I really wasn’t convinced.
The thing that actually really did convince me was when he gave me . . . So the app had a button in it to leave feedback, and I would just open an email and then you could send an email to feedback at loseit.com. And so he just gave me the Gmail login for that and said, like, “I’ve never really replied to any of these customers or anything, but why don’t you just check out what customers are saying about this product to see if you think it’s interesting?”
So I went into that inbox and it was, like, every email was a love letter. It wasn’t just, “Hey, this is pretty cool.” It was a love letter.
Andrew: Because what? What did it have at the time? This was, like, pre-real version one, I guess it would be called version one. What did have that people were so excited about?
Charles: The number one thing it had is that it worked. Going all the way back to your intro, in those early days and even today, we are mostly focused on helping people lose weight. The transformation that happens in someone’s life when they’re able to take something that’s that hard and actually accomplish it is immense.
Andrew: Because what? And maybe there’s more to this than I know. I know, in fact, that there is because I saw in the upgrade screens that there was. But all I hear people use Lose It! for is for tracking what they eat because they’re anal, because they want to make sure that they’re not overdoing it.
Charles: Yeah. Yeah.
Andrew: What is it beyond that that allows people to lose weight?
Charles: Well, it turns out that that by itself, especially for non-anal people, is really, really helpful. And so . . .
Andrew: Just to be aware, I just snacked on popcorn. I’ve got to go and put it in. Got it.
Charles: So think about this. Imagine if, as a consumer, you operated in a world where I was sort of like, “Okay, I’m not going to tell you how much money you have in the bank and I’m not going to tell you how much [inaudible 00:15:12]. I just want you to go out and make really great decisions. Then we’ll check back in a couple months and we’ll see how much money is in your bank account and we’ll see what things you own.” You’d have a whole bunch of terrible choices, right? You’d end up with a Lamborghini and no money in your bank account. And that’s true [inaudible 00:15:31] . . .
Andrew: Actually, you know what I would say? Lamborghini is something that you noticed that you spend money on and it’s a bad mistake. It’s a lot of stupid little inexpensive things that all add up on Amazon. And I’d say the same thing for food, that it’s not that I’m going out every night and having a big McDonald’s, whatever, supersize meat thing. It’s that I don’t think the popcorn has calories but it turns out it has 220 calories at Starbucks.
Andrew: And so that’s what it did. It was just a way for people to record what they ate, almost like a spreadsheet.
Charles: Yes. Yeah, it was like a great version of that, it had a great food database. Just like you said, there’s sort of the hidden calories. The other dynamic that happens for people that’s a real aha moment is they see the relationship between food and exercise. And so they might think to themselves, like, “I’m going to have a couple of Oreos, not a big deal, 250 calories, whatever.” And then they go to the gym and they try to get on the treadmill and burn 250 calories.
Andrew: That freaking thing is what got me, too. I’m a runner. I used to think, “All right, I’m running.” Do you know if you run an hour, it might be 600 calories? One stupid meal decision and it undoes that whole effort for the day. Okay, so those little things are what people would track manually in the app. I got to ask you one other thing as a setup. J.J. Allaire created ColdFusion.
Andrew: Right? He is incredibly successful. Why is he creating a Lose It! app for a phone? And it seems like he was just in a play-around mode, right?
Charles: It was very much that, I think. So he saw very much the same thing I saw, which was mobile is going to be this huge thing. He knew the App Store was coming and so he said, “I think I want to learn about this space and sort of understand what I want to do next and if I’m going to do something in this space next.” And so he built Lose It! as a way to do that.
He was really satisfied. When he built the first version he was, like, “This is great. I understand iOS development. I understand this platform. I’ve got Lose It! off the ground, it’s really successful, so, like, mission accomplished.” And so we both were working on the same problem. He was just doing it a lot smarter than me. That’s why he’s the one that’s always bailing me out.
Andrew: And then his brother is also . . . Is his brother Jeremy D. Allaire, the founder of Circle, the digital currency company, he’s on the board of Brightcove? Is that right?
Charles: Yeah. Jeremy’s another entrepreneur, very prominent here in Boston. He founded Brightcove, which is a publicly traded company. He was one of the founders of Allaire Corporation as well. That was a publicly traded company. But now he’s on Circle. So he’s on a run as well.
Andrew: Okay. All right, I get it. And so he didn’t want to do this. Did he just want to hand it to you or was he looking for someone who’d be a partner?
Charles: I think he was really looking to hand it off. And so he knew I was looking for an opportunity. We’d worked together for so long that I think he was thinking, “I’ve got some other ideas for companies that I’m going to be working on, so I just want someone I can trust to take over this and sort of shepherd it along.”
Andrew: And hand it to you or sell it to you?
Charles: Hand it to me, split it with me. We went into a partnership.
Andrew: Split it with you. Got it.
Charles: Yeah, we went into a partnership. Exactly.
Andrew: Got it.
Charles: He had done so much work that that needed to be accounted for.
Andrew: What was the partnership? How much would you get? How much would he get?
Charles: Well, that’s probably where, I probably don’t want to go there.
Andrew: But we’re not talking 50-50 at that point, are we?
Charles: No. I think it was very equitable.
Andrew: Okay. And was it the type of thing that you would have to spend time on and build up your ownership stake?
Charles: No. He was pretty good, actually, about outlining, trying to make sure that I had enough interest in the company that I was going to be very invested in making it successful.
Andrew: Got it.
Charles: And so he got that right away. My ownership did vest, so I had a typical vesting schedule just like anyone would. It was just time. It was time. And we both had very similar, I think, goals and objectives for how we were going to build this company. We really saw eye to eye on this stuff. So I don’t think there was much concern that I was going to do anything too out of control.
Andrew: All right. Now, a lot of people who created apps couldn’t get downloads. Many people who got downloads couldn’t figure out revenue. It took you a while to figure out both, and one of the first things you did was help it get users. And then I want to think about that and I also want to ask you about how you got revenue. But let me take a moment to talk about my first sponsor. It’s a company called Toptal. Charles, do you know Toptal?
Charles: Yeah, absolutely. Toptal is great.
Andrew: You do.
Andrew: How do you know Toptal?
Charles: Well, of course, we’re always trying to find developers. We’re constantly trying to figure out where are we going to find the next great developer, and so we look at everything that can help us with that.
Andrew: So you’ve checked out Toptal. Let me ask you this instead of doing the commercial for Toptal. What’s one thing that a smart developer helped you with that an ordinary developer, even a team of ordinary developers, couldn’t? I want to highlight the way that you’ve worked with good developers, what a good developer has brought to you and your projects in the past.
Charles: So what I will say is that at Lose It! we’re a tiny company. We’re so small, and so our whole engineering model was built around top developers. It’s built around the idea that single developers and small numbers of people are way more powerful than big numbers of people. And so our whole product is built on that vision.
Andrew: Why? Why not have two or three or four good developers instead of one great one? What are you finding?
Charles: So basically, what I would say is that what we’ve seen is that there’s sort of diminishing returns on communication. And so the bigger the team gets, the more overhead gets created. And so if you can take one person and then you sort of add a second person to them, you don’t get 2X of productivity, you get like 1.5. And then when you add the third person, you don’t actually get 2.5X, you get 1.8. And it gets much more expensive. Now, of course, that turns around at some point when you get big enough, but if you can create enough of those high-end people that are really independent, you can just do a ton of stuff.
Andrew: Yeah, that’s good point. That’s even good for family vacation planning. Every extra person you add makes it closer and closer to impossible to schedule.
Charles: Yes, yes.
Andrew: I’ve got to go and see people. All right. Anyone out there who’s looking to hire developers, all you have to do is go to toptal.com/mixergy and frankly, you’re not going to be under any obligations. You hit that big button on that site and you’ll get on a call with someone who works there. You’ll schedule it with them and you’ll get on a call with them and you’ll tell them what you’re looking for. If it’s a good fit, they’ll let you know and they’ll introduce you to someone, or if you need even a team of people that you can interview. And when you’re ready to go, you can often get started within days.
Toptal.com/mixergy will give you that button and also give you 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period. Charles, you probably were never offered that 80-hour offer. Nobody is except for Mixergy listeners. That’s top as in top of your head, tal as in talent, toptal.com/mixergy.
Wow, Charles, I didn’t realize your company was so small. How many people?
Charles: So we’re about 36 people right now.
Andrew: Okay. That’s a lot of revenue for 36 people. Speaking of revenue, the premium model was in there from the beginning, right?
Charles: No. We actually ran . . .
Charles: No. We ran three or four years with just no business model.
Andrew: Just thinking, “Let’s get a lot of users and we’ll figure it out later.”
Charles: Yeah. Just worried, like, “We need to make the right product for people. We’ll figure that out.”
Andrew: And it was your money and J.J.’s money that was funding it for that period, or how did . . .
Andrew: Yeah, what?
Charles: Yes. It was a combination. It was a combination. J.J. put some money in. General Catalyst actually put a little bit of money in as well to help us out in the early days. That sort of kept the lights on. We kept the team very small, so it was just myself for the first year. We slowly started to grow the team, grew up to maybe four people after a couple years, but really kept the team small and tight. [Inaudible 00:23:03] raised up a little bit of seed capital, raised up Series A in 2012. And that Series A was really to start to monetize. And so 2012 was when we really started working on that freemium business model for the first time.
Andrew: One thing you told our producer was, “Right away, I added social features.” What social features did you add and what kind of impact did they have on growth?
Charles: I added friends’ features. That was the main feature, really modeled on Facebook at the time. It’s interesting, because I would say I have great aspirations. Like, “Here it is, I’m about to unlock viral growth. This is going to be incredible.” And then it was like, that doesn’t seem to have affected anything. So it didn’t actually accomplish any of the stuff that I think we set out to do.
I think the way we thought about social has really changed. We really now think about social as a tool about user efficacy and sort of accountability, and not about a tool for growth. It’s not about recruitment for new users. It’s actually about taking existing users and keeping them engaged and making them more successful.
Andrew: I’ve used Lose It! several times over the years. When I think about using it, the last thing I want is other people to know about it, for some reason, when I have bad days, but I will take screenshots and send it over to my friend Brian or Shane or somebody, or my team, even on our base camp. And that’s what you found happened, too.
Charles: Yeah. So we found that. And then the other really interesting dynamic is, I had assumed sort of like, the way this is going to work is everyone’s going to invite all their friends and that’s going to be really great. And it turns out people didn’t want to do that at all. They actually were more interested in becoming friends with people they didn’t know. Because they were working on weight loss, because it’s such a private subject, it’s almost easier to relate to someone you’ve never met in person and be honest with them than it is with your spouse or with your group, core set of friends or with colleagues at work. Those are people you wouldn’t typically talk about this stuff with.
Andrew: How did you know that that was it and that it wasn’t just that you didn’t have the UI right or that something else was going on? How did you know that’s what people were feeling?
Charles: I think a lot had to do with seeing how few invitations were being sent and seeing how badly people wanted user search. So we ended up investing a lot of time in user search to help people try to match with users, and that was used far more than just the sort of invite features were being used.
Andrew: What about the community? I know that’s one of the first things that you added or one of the early things you added.
Charles: Yeah, I think the community has grown up nicely, but it doesn’t — the business is really like a single-player business more than it is a community business. I think people love food tracking, exercise tracking, all the integration we do, all the ways we make it easy to do that stuff, and that’s the driver for people. And for a smaller set of people, they really dig into that community, but it’s really as a subset of those people. It’s a much smaller subset.
Andrew: Yeah. It’s the thing that separates it from a spreadsheet is that you have all the calories. I can just say, “Chip, Starbucks.” And Starbucks is not making these chips. As far as I know, it’s someone else’s chips that are at Starbucks. But I could say, “Chips, Starbucks,” and then be told 220 calories for the bag. It’s that data. At what point did you add that data and how did it impact people’s usage?
Charles: You’re exactly right, that data is really key. And in the early days, we had licensed a bunch of data. We had probably 100,000 foods in our food database. We had hand-curated most of them. It was a really impeccable database, but it was also small. Especially if you went to a restaurant that was a San Francisco restaurant with 20 locations, it was brutal. We didn’t have anything from those restaurants.
We actually switched the models. We crowdsourced. And so we switched to saying, “Okay, we will seed this with a bunch of data with hundreds of thousands of foods, but we’ll start allowing user- contributed foods to show up.” And at this point, our food database is well over 10 million foods. And the difference is really astonishing in terms of sort of people’s success using the product.
There’s a trade-off because the data quality is actually worse sometimes. You’ve got a user-entered food with a crazy name or it’s missing nutrients or it’s got the wrong values. And so there’s sort of that negative, but in exchange, just about anything you search for is in this product today or some very close approximation of it. It makes the usability of the product, like, 10X.
Andrew: I get it. I tried that today. I had a spicy something, spicy market [Spice Market 00:27:38] from a place called Eatsa.
Andrew: Have you ever seen Eatsa?
Charles: Yeah, I think we just got one here in Boston. I haven’t been.
Andrew: It’s kind of small, started by this guy who’s, like, a friend of a friend who started multiple companies. And the idea is you order with your phone, there’s no person to order from. You walk into the place and then in the cubby, the cubby glass will suddenly have your name on it when the food is ready and the food will pop in there and it’s just exactly as you want it, the calories and all that.
It’s kind of like, it’s not a big thing, not that many Eatsas. The Spice Market thing isn’t that big. And sure enough, you guys had the data. Now, was it off by 10 or so calories? I don’t think so. But let’s suppose it was. That’s okay, I’m just trying to get a sense of how I’m doing. And so that’s what you’re finding, that someone probably went into that store, and like me, ordered this food, put it in there, and now he had it in the future and I get to share the data, too.
Charles: Yeah, exactly that. I think the big driver for our business that’s just so different than so many other apps is I have a feeling most of the apps, if you talk to people about apps, they’re thinking about entertainment, they’re thinking about games, they’re thinking about social. They’re basically thinking about these activities that people really want to do. So, like, “I’m really excited I’m going to . . . I can’t wait to play this game.”
We’re talking about an app that people desperately do not want to use, for the most part. They’re mainly, like, “This is annoying. I wish I didn’t have to do this. I probably shouldn’t have this food. I shouldn’t have this down here.”
Andrew: And now I have to not just have it, but I have to go and figure out how many calories and then how many screens into another app to tell it how many calories . . .”
Andrew: Yeah. Right.
Charles: Yeah. And so we’re constantly fighting this battle, which is, like, every one of our users desperately wants to quit. And so we have to do everything in our power to make it, like, “Today is not the day you quit because you were so frustrated that that food was missing or that food was so wrong.”
Andrew: What else do you do to keep people from quitting?
Charles: I would say the number one thing we do is make that process easy. That’s by far the most influential, impactful thing we can do. The other thing we can do is show people results. And so our attrition curve is very sharp the first seven days. It’s very hard to get results the first seven days when you’re taking our approach to losing weight.
But after about seven days, it really starts to flatten out because typically at that point, people have actually seen some weight come off. And that first time you step on the scale and a pound is gone, you’re sort of like, “This thing actually works. So that sucks that I had to do that for three days, but I actually just lost a pound and it really wasn’t that bad.”
Andrew: I know we’re getting closer to it, but I’m looking forward to the day when I could just say, “Siri, [inaudible 00:30:14] in Eatsa.” And I know we’re getting close here. You’re laughing. But we have it now, but I have to go through the shortcut app, I think, to create it or through the Siri app. But I think we’re getting to a place where we can do that, don’t you think? Please tell me we’re . . .
Charles: Yeah. Well, maybe. I’m more skeptical, candidly, about voice input for this stuff, but . . .
Charles: Well, it’s just . . . It’s fascinating, right? Because we have this feature called Snap It, okay? What Snap It lets you do is it lets you take a picture of the food. Okay? And we actually use machine learning, we analyze the photo, we use our food database, and we try to help you . . . we sort of skip you through the search process to find what those foods are in that photo.
It’s really cool. It’s a really eye-opening experience when it works. You’re kind of like, “Whoa, that’s amazing that it knows that’s a banana.” But it’s actually faster to type “banana.” If you really sit there with a stopwatch, it’s actually really fast to just type “banana.” And our search is awesome, and like, banana [inaudible 00:31:16] is the first item and you just pick it and log it.
Andrew: All right, here, look, let’s suppose that I’m going to eat this bowl multiple times. I’m now going to create — now, this is the part that sucks with Siri. You have to create the Siri shortcut, but let’s try it. I’m going to say . . . you know what? Let’s go with eggs. I have eggs every morning. I’m going to add egg.
Andrew: “Log egg.” Boom. Okay, it’s done. Now, look. Turn off my screen. “Hey Siri, log egg.”
Siri: You’ll need to unlock the iPhone first.
Andrew: Wait. Come on. I’m unlocking. Right, no. Okay, maybe if I go, “Log egg.” See?
Charles: Uh-oh. Did it work?
Andrew: Oh, you know what it is? There’s an issue with my account for some reason right now. I don’t know what it is. That is not a Siri issue. I don’t know actually what that was.
Charles: [Inaudible 00:32:10], but this, there is friction right there for you. We have to solve that.
Andrew: Right. No, there’s some kind of issue. I don’t know what it is with my account. I noticed it earlier today, and I even took a screenshot of the connection between the app and HealthKit. That was an issue.
Charles: Yes. Well, [inaudible 00:32:28].
Andrew: I don’t think it’s universal. No, it just happened that I happened to get this weird bug with the app.
Charles: Yeah. Yes. Yeah, yeah, yeah. What I will tell you is I’ve set that up, like, for coffee. I have the same coffee every day. And so I actually have set up that Siri for a cup for that. And for those kinds of cases, it’s like I’m in the car driving, and so, like, “Hey, I have the coffee,” and it logs it in. And that part is great. The idea that I might be able to say these very complex sentences and it’s going to parse them, and then I’d say I feel like today we’re a pretty long ways from that.
Andrew: Yeah, mostly we are. And one of your competitors, MyFitnessPal, they had a situation where you could do it from the Apple Watch, but boy, is that a nightmare. I could never do it, and I love my watch. I just couldn’t do it. The only thing you could log is water because it’s just like a plus.
Charles: Yes. Yeah.
Andrew: That’s one of the issues. How do you get people to do this faster is something that you noticed. If we can make it easier for people to log, then we know. And do you look at that? Are there metrics that told you that people were improving the speed, that they were getting in there faster?
Charles: We look at it constantly, and we’ve spent several years with a lot of analytics around search position, timed the log, time on various screens, so that we understand are we actually making things better or not, and we added a bunch of features that are designed to do that. So they’re some really, I guess, in hindsight, really obvious things, but it’s surprising how effective they were. So, for example, when we go to the empty search experience, we used to just have an empty search experience, like type what you have. We actually started saying, “Well, why don’t we just take a guess? And so if he has coffee every morning, let’s just put coffee there and then he can just pick it.”
Andrew: Based on time of day.
Charles: Based on which meal you’re having and what you [inaudible 00:34:12] frequently in that meal. And then you can start to say, “Well, once he has coffee, what else does he usually have with coffee? Let’s put those there, too.” And it turns out that for meals that you eat repetitively, like breakfast, I don’t ever have to search for breakfast. I just start adding foods that are suggested to me from the search screen. A feature like that, which is not that sophisticated, pretty dead obvious, speeds up food logging massively, and you can really see it.
Andrew: You’re talking about right under it, not within the search field but . . .
Charles: There’s still a ton of things . . .
Andrew: . . . right under the search field, not within the search.
Andrew: So the search field’s still blank and then underneath is a list of all the things that you’re probably going to be adding at that point of day.
Andrew: Okay. So I see that this thing is starting to grow. One thing that you told our producer was you didn’t have that many analytics for growth in the beginning, and so what you’d do is you’d go into the App Store and start looking at the ratings, read all the reviews. Was it actually useful? Sometimes I feel like companies don’t even look at it, let alone do anything with it. Were you actually able to get anything out of the reviews?
Charles: Yeah. I read a lot of the reviews, I read all those emails, I listened to what people were saying. I have a long experience building apps, building apps both using ColdFusion, building ColdFusion, building apps with Writer, building . . . And so we had pretty strong opinions about how we thought things should be and I think we got lucky that they were right.
It’s funny, we’re very analytic-driven now, and so I sort of look back at how primitive we were and chuckle that I was just reading things and would be like, “Well, I read that 20 people said this, so let’s go build this feature.”
Andrew: Like what? What’s a stupid feature that you got because people were complaining about needing it but in the end it wasn’t useful?
Charles: Well, actually, I don’t have an example of that. I have an example of the exact opposite.
Andrew: Something useful.
Charles: Something very useful that everyone was saying was useful, but I was like, “That’s so stupid. Why does anyone care about that?” You might actually think I’m really stupid when you hear this.
Andrew: What was the feature?
Charles: The feature was barcode scanning.
Andrew: Ah, yeah.
Charles: People were constantly, like, “Oh, it would be so amazing if I could scan a barcode, it’d be so amazing, it’d be so . . .” And I was always, like, “You know what? That’s the same as search. I don’t get it. Why is that such a big deal?” And we added that and it is staggering how great that feature is. It is amazing how good it is, how much it’s used, how many people like it.
Andrew: And you thought, “Look, no one’s going to want to look over for the barcode, hit the button to scan, scan it in, when they could just type in the name of the product.”
Charles: Yes. I was just like, “They’re holding the box. Why don’t they just type it in?” And it’s like, “No, [inaudible 00:36:46] the product.”
Andrew: I guess for some reason . . . that makes sense. I always thought that barcode is all I would use, and then it turns out, no, you can’t barcode an egg. But the idea that you could do a barcode makes the rest of it seem that much more approachable and doable. Okay. So you’re going in, you’re looking, you’re finally adding what people are looking for. And then at 2012, you . . . was it 2012? At what point did you decide “We’re going to start charging”?
Charles: It was 2012. And so we’d had tons of success by then. Because that first version that J.J. built was great, because we were early in the App Store, because of Serendipity and Apple loving the app we had great traction from day one. So when I showed up on the scene we had a million downloads, 500,000. We had hundreds of thousands [inaudible 00:37:29].
Andrew: Within five months you got a million downloads?
Charles: Yeah. Well, so the big breakthrough was that first January, Apple had reached out and said like, hey, they wanted a special build of the app that just did certain things and they were thinking about using the app for something that they were working on. And then when that series of ads, “There’s an app for that” came out, Lose It! was one of the apps in that ad. And so we were [inaudible 00:37:57].
Andrew: Ah. So, they came to you and said, “Give us these feat-,” I interrupt, I’m sorry. When I get excited, I interrupt.
Charles: No, no, no. Get in here.
Andrew: You’re saying they came to you when they were going to create this “There’s an app for that” ad and they said, “Here are the features we need in order to feature you.” You added the features or he did, and then they included them in the ad?
Charles: Well, actually, they wanted the features, but what they wanted is they wanted exact behaviors. So they wanted, like, “We need a special build and it needs to only do these things.” It needs to be a very limited build that doesn’t have — none of the buttons work, nothing else works, but you tap the screen and it goes to this screen or you tap the screen and it does this, and if you tap . . .
Andrew: Got it.
Charles: . . . it does this. And ultimately, they put that exact sequence in “There’s an app for that.” And so on a Thursday night in prime time, here’s 10 seconds of Lose It! being featured by Apple every night, seven days a week during football games, millions and millions of dollars of ad spend. That made Lose It! intensely popular, and so we never had that traction problem. But we did have that monetization problem, so we did start working on that in 2012.
Andrew: And your competition, didn’t they come in? Was MyFitnessPal founded in 2005?
Charles: Yeah. MyFitnessPal was ahead of us, although the interesting thing is MyFitnessPal was originally founded as a web app. So they had a web experience and a web app, and they were actually very late to the App Store relative to us. So from sort of 2008 to 2010, we were probably continuously the number one health and fitness app in the App Store for that time period.
And then they showed up. I don’t remember exactly when they showed up, but at some point, they showed up and flipped that on us. We sort of became the number two most popular app and they became the number one most popular app. And so they made that transition from web to mobile wonderfully.
Andrew: I wonder why. Why do you think that they suddenly took over number one?
Charles: I think there’s a bunch of different factors. They built a great app. They had done a good job with their app. In particular, the biggest difference between their app and our app at that point was that they had embraced this crowdsourced food database way earlier than us. When you looked at their food database and you looked at their search, their search was always better than ours. Ours had better data inside of it but was missing so many foods.
And so I think that was a really big advantage. They were certainly more aggressive than us in terms of pursuing growth, using growth tactics. We were very bootstrappy, they were very aggressive.
Andrew: Like what? What did they use for growth?
Charles: I think they were more aggressive at pursuing things like ratings, prompting for ratings. Basically, if you made a list of all the growth things that a mobile app company should do, we were always, like, “Well, I don’t know. That feels a little bit cheesy to prompt users for ratings. I don’t know if we want to do that.”
And I think MyFitnessPal is pretty much like, “We’re doing that. We’re trying to grow this thing. If that’s going to help us grow, we’re going to do it.” And so they were really pursuing that aggressively. They followed the really traditional Series A-type route at some point. They raised capital [with 00:41:12] Kleiner. And so then they sort of really started that explosive growth and fueled that explosive growth with that capital.
Andrew: The thing that stood out for me that they did was, I was a longtime . . . I forgot the name of the app that I used. Wow, I can’t believe I forgot it. And Strava took over everything. Well, I was using this app forever, and the app said, “Do you want to send this data to MyFitnessPal?” And I thought, “What is MyFitnessPal and why are they helping them?” And this is before HealthKit became the intermediary that allowed data to pass from app to app. It seemed like they were forming these types of deals a lot.
Charles: Yes. You’re absolutely correct. Another difference is we had sort of a partnership strategy that was a curated partnership strategy, and they went with a very open API-type strategy. It’s the same thing. It’s like they got the advantage of exactly what you just described.
Andrew: Meanwhile, Strava, the reason I’m using Strava is not because I love it anymore. I use this indoor bike with an iPad that when I’m riding on my indoor bike, the character in the fake world rides. It’s called Zwift. It’s totally addictive. At the end of a ride, they say, “Do you want to send the data to . . . ” and the app that I could send it to is Strava. I said, “Okay. Then I’m going to sign up for Strava.”
And so now whenever I do a bike ride in this virtual world around a virtual volcano or even virtual New York City or virtual London, it’s like I’m a New York City map or on this virtual . . . Anyway, it’s just . . .
Charles: That’s really cool.
Andrew: . . . the fact that they all integrate is really helpful.
Andrew: Of course, now with HealthKit, I could connect the data that I have from Lose It! into HealthKit and then back into Lose It! So if I do a run using Strava, it shoots back over to Lose It! and you know, “Hey, Andrew gets another 600 calories today.”
Charles: A hundred percent. Yeah, absolutely. In fact, Lose It! actually writes all your food data in HealthKit if you’d like too. It turns out not that many people use that data, but that’s available to apps. We want to make that available to apps [inaudible 00:43:03].
Andrew: Yeah. I’m not sure why. Like I think glucose or . . . I never think of what these other things are, but I think I could take all the stuff that I eat, all the carbs and put it in.
Charles: Yeah, yeah.
Andrew: Why don’t I talk about my second sponsor and then we’ll continue with the story and figure out how monetization happened.
The second sponsor is a company called HostGator. There’s something, Charles, that you might have noticed that happened recently which is Tumblr said, “Hey, you know what? We’ve been having porn on this platform for years, like, who would have thunk it? We have to now get rid of the porn from the platform.” Okay.
So now they’ve got this software that’s supposed to identify porn [version on 00:43:33] porn, and what they’re doing is they’re misidentifying stuff. And so people’s websites who were built on Tumblr, suddenly, the one that I think is the funniest because I’m a runner, there’s a guy who drew a cat with runner’s legs and the runner legs happens to have some hair. I guess it must have triggered some porn something or other and Tumblr basically is looking to kick them off the network.
The reason I’m bringing this up is because if you guys are out there listening to podcasts, you hear that there are a lot of different apps out there, a lot of different companies out there that have beautiful website builders. And what happens is, you go to them, you pay very little at first and a lot more later on, and you use their builder to very quickly create a website. The problem is if they decide that they’re going to change their policy tomorrow and boot you off, you can’t take your site content off of their platform to someone else and use it at a different hosting company.
That is why when you have your own website, WordPress is such a gem. Because it makes it easy to load your site, get it up and running, to edit it, to do all those things that you’re looking for, but it also makes it easy to move. If you’re not happy with the hosting company, you can move. And so if you’re going to be building on WordPress or any one of these open-source platforms, you need a hosting company that could do it right. And I really, really like HostGator.
HostGator has been around for years. You’ve seen me interview people who they crushed. They have tons of competition and obviously, they crushed them or they bought them. And it just works. Inexpensive, just works. What else do you need? Go to hostgator.com/mixergy to get the lowest price possible and to also be tagged as a Mixergy customer, which frankly, helps me with them. And thank you for doing that.
And also, if you ever have any issues with any of my sponsors, if you’re tagged as one of my people, contact me, contact my team. We are always there to make sure that our listeners are taken great care of. Hostgator.com/mixergy.
Was it obvious, Charles, what monetization was going to be?
Charles: I’d say it was pretty obvious. It was pretty obvious. We thought it was going to be freemium. The one thing that we were really going upstream against was this notion that apps were 99 cents. And so when we show up and say, “Our app is 39.99 a year,” I think a lot of people looked at us cross-eyed and it was, like, “Your app’s worth, like, $1.99 to me because it’s really great. It’s so great, it’s worth $1.99.”
And so that was, I think, the biggest thing. We sort of aligned ourselves with that mission and the platform happened to really — everyone shifted and the platform shifted and the platforms all started enabling us to do these things. And so it ended up being a smart bet. But I think we knew it was going to be freemium.
Andrew: When you say the platform shifted, how did the platform shift to allow you to do that?
Charles: The iTunes, both the Google Play platform and the Apple platforms underneath us have been really evolving continuously. In the early days you could make an app free or you could make an app paid. And then they introduced in-app purchases. And then they introduced recurring subscriptions. And then they introduced trials. And they’ve constantly been sort of evolving and improving the state of the art in terms of the business models.
The thing that’s wonderful about it is they’re very aligned with us because they have a meaningful rev share. So if they can create more happy users that stay subscribed and engaged with apps, they also participate in all that upside and it makes it . . . they have a lot of incentive now at this point to really spend time making those experiences good, enabling developers like ourselves to build these businesses on top of their platforms. They’ve been doing a great job for years.
Andrew: I agree. And you know what else they do that I think helps developers? They kind of hide where your subscription list is, and so you don’t know, like, where am I going to go to cancel? You have to load up the App Store, then you have to go hit your photo, then you have to go and hit Find Something, and then you see a list of sub . . . And frankly, when I go through my bill, I see all iTunes, I go, “All right, it’s iTunes.” I don’t know what it is. I forget sometimes.
Charles: Yes. Yes. I actually sometimes go through because I have to, like, expense things for work and I’m having to like . . .
Charles: Right. Is it worth trying to figure out what this, like, 9.99 thing is or am I just going to let it go?
Andrew: I have a hard time letting things . . .
Charles: [Inaudible 00:47:30].
Andrew: Yes. Yeah. I have a hard time letting things go and I think I do. Zwift now just shifted to the in-app purchase $15 a month, iTunes is paid by my company. So now is my company paying for me to ride Zwift? Like, they don’t separate it at all. There’s someone on my team, she said her iCloud has no space. I go, “I’ll just pay for your iCloud,” but I can’t give her my credit card because then everything on her iTunes gets paid. So they still haven’t done this.
But what they did prioritize, as you say, is enabling in-app purchases, making it easier for people to get enrolled. And I think as time goes on and they see that this is a bigger and bigger portion of their revenue, they’re not looking to trap people — I don’t think they’re looking to trap people. I think it’s just lower priority. And they’re going to find ways to do this, and I see it.
By the way, I’m looking at an early version, maybe even a screenshot from the first version of your sales page. Here’s what was coming for anyone who was willing to pay, not 39.99, but at first you said 29.99 a year to get started.
Andrew: Connect apps. So we could use things like . . . what was it? The BP, the blood pressure monitor, I could use a sleep monitor with it. Right? I could challenge myself with more goals. I could add things like steps, exercise, minutes and calories, sleep. I think if I paid, I would be able to connect it to Runkeeper. That was that app that I loved forever. Right? That’s what was in that first version.
Andrew: How did you know that’s what to put in there? Or did you just kind of make things up and see what people got excited about?
Charles: We just made things up. It was really hard because one of the — with the freemium business, I don’t know how many other freemium people you’ve talked to. It turns out the scary competitor in the whole world is actually your free product. And so the challenge for us is like, oh, we’ve got this free product. People love this free product. It’s got really good traction. So we have no marketing expense. But anytime we do anything to the free product, we worry that we’re going to hurt all of that goodwill and all that free marketing.
Charles: But meanwhile, the better the free product is, the more people don’t want to buy the paid version. And so in the early days, it really was like, can we think of some features that aren’t currently in the free version that we think that would be helpful, because we’ll stick those in the premium version and see if people will pay for it. And so, like, connecting your Fitbit was a great example of that. We’re like, “Okay. Well, you can connect your Fitbit and Runkeeper and this and that,” and we’ll see if people will pay for that. And people did want to pay for that.
Andrew: And then also it seems to make sense to me because if someone’s buying a Fitbit, it means they’re willing to invest in their health, in their exercise program. It’s a good indicator that they’d spend a little bit more.
Andrew: I like how you told our producer, “In the beginning, we were horrible at it. What we would do is when someone created an account, we’d put up a page that said, ‘Do you want to go premium?’ If they hit X on that we never showed it to them again.”
Charles: Yes. Yeah. Actually, that was an evolved version of what we did. In the first version, you just would download the app and use it and we had hoped that you navigated somewhere in the app. Like, if you went into settings somewhere, you might be able to discover that you could upgrade your account. Eventually, we started doing things like, “Well, we’ll send them an email and just tell them that premium exists.”
And then eventually, we got to the point where it’s like, “Oh, we’ll actually have a thing describing the premium in the app so they can see on the screen.” And now we’re doing, like, “Let’s actually preview features. Let’s show them a little taste of the feature and if they like that, then we can get them perhaps to upgrade [inaudible 00:50:48].”
Andrew: What’s an example of a taste?
Charles: We have a feature called Patterns that we’ve developed that basically looks at your habits and then tries to highlight specific foods you eat or types of meals or sort of nutritional composition of meals, things that indicate you’re going to have a successful day that we’ve seen based on your past history. It actually can show you, like, this is a good pattern. Like for me, I’m sure sparkling water is a good pattern. If I’m drinking a lot of sparkling water, that’s probably indicative that I’m being pretty disciplined.
Andrew: Oh, if you’re drinking sparkling water, it means you’re not likely to have whatever your junk food is.
Charles: Yeah. It’s likely that I’m — although that’s happening on days that I’m being good, and so Lose It! can sort of highlight that for you. Some of those things are going to be causal and some of them are going to be correlative. But the point is that if I understand that it can make me more thoughtful, like, “Okay, well, I’m actually going to really focus on that sparkling water because I know that on those days I’m doing a good job.”
And so we have that in premium, but we will occasionally show a free user, like, “Hey, we’ve noticed this pattern.” We show it right in the log beneath the food that they’re logging. Like, “This thing’s a really good pattern for you,” or, “This thing’s actually a problematic pattern for you,” and let them see that one pattern one time and decide, like, “Is that interesting to me? Do I like that?”
Andrew: Why is logging water a premium feature?
Charles: Logging water is a premium feature mainly because I think users demanded a lot and we don’t think it’s a core user experience. I think one way to think about the free version is we want the free version to be sort of the best calorie tracker, the best lightweight, simple calorie tracker
And so if you have these very robust or complex goals, if you’re trying to balance protein against carbs and you’ve got a water thing you’re trying to hit and you’re tracking your sleep and you’re integrating with — we think okay, if you want to step up to premium, it’s going to be more complicated. If all you want to do is watch your exercise and food and track your calories, freemium is going to do a great job [inaudible 00:52:50].
Andrew: That’s the philosophy. Calorie recording, that’s core. Anything that’s related to it, that becomes a premium, potentially.
Charles: Yeah. Yeah, absolutely.
Andrew: Okay. What have you noticed that correlates with buyers, with people who become premium members? Number of [inaudible 00:53:05], something else?
Charles: I’m trying to think if there’s actually a pattern, because you’re right about things like device buyers, people who come in with a Fitbit or other device. So those are good buyers. In general, what I would say is actually, our approach, in advance, we don’t know very much about whether or not you’re a buyer. I’d say what we have is, you hear that 35 million number, I’m sure it’s even more than that, to 500,000, that’s not a super-efficient funnel.
What it tells you is those 500,000, we filtered out the buyers. We identified those buyers. They’re the 500,000 that bought premium. So, I think that that’s what I would say, is we actually don’t know that much what makes you a good buyer. But we offer all of our users premium and we make sure they understand and understand the value. And then a pretty meaningful subset actually will convert.
Andrew: What have you found about advertising?
Charles: Advertising for us is not a huge business from a revenue perspective. Honestly, I think we see it as more of a revenue driver for premium upgrades. So, it’s really unfortunate, because we don’t want to drive people to upgrade because the experience is negative, but I think that that’s really a part of how the dynamics of ads in a freemium business. It’s, like, yeah, it’s great that we monetize those free users, but really what it’s doing is it’s a little bit of a nuisance, and it’s a nuisance you can remove if you upgrade. We have both of those missions for advertising business, but it’s not new. Our core premium business is the driver for all [inaudible 00:54:53].
Andrew: And that’s the big revenue.
Charles: Yeah, that’s the big revenue, [inaudible 00:54:56] . . .
Andrew: [Inaudible 00:54:56].
Charles: . . . yeah.
Andrew: What was it? When MyFitnessPal sold, when Weight Watchers got into it, how did you feel about that? Wait. Let me see. MyFitnessPal sold for . . . you know the number. I have too many tabs.
Charles: It’s four, maybe 450, 450, 400?
Andrew: To Under Armour.
Andrew: Which is a serious — because suddenly Under Armour decided they were going to get in the app space and they bought a bunch of companies, including, I think, Runkeeper, right? Or was that Adidas?
Charles: No. They bought MapMyRun. Yeah, Adidas bought . . . or actually, ASICS bought Runkeeper.
Andrew: Okay. All of a sudden I’d see all these apps that I like are being bought by running companies, [inaudible 00:55:35], running companies. So then when suddenly your biggest competitor gets bought out by a giant company, what happens internally?
Charles: Well, so a couple things. It certainly, for someone like me, I’m like a little bit of an introspective guy, so I suddenly am like, “Man, did we, like, really mess up this strategy?” We have this whole strategy about we’re going to be the cockroach and we’re not going to need other people’s money and this is going to be great because we’re going to live forever. And now our biggest competitor just sold for $450 million. Like, I’m just supposed to look at everybody when I go to work and tell them that “Hey, this is great, we’re doing this great thing.”
So there’s a real personal crisis of competence, like, did I really just mess this thing up really badly? That’s one thing. And the other thing that you really immediately do is you go, “How many people were bidding on that company? Because if there’s more than one, I’d love to talk to the other ones.” So I also immediately made a trip over to the West Coast, hit a bunch of companies on the West Coast, hit a bunch of companies in New York, just to say, “If you’re still interested in that space, we’re number two, so you might want to talk to us.”
Andrew: This was almost four years ago, though, and you didn’t end up selling. What happened?
Charles: I think that the reality of it is Under Armour had a very unique vision. They uniquely saw something that they wanted to pursue with these digital health apps that most companies actually didn’t see. And so most of the feedback I got was a little bit like, “We don’t get it. They are definitely seeing something we are not seeing, because this does not make sense to us.”
So, I actually came back from that exercise . . . really shifted the focus for me towards away from trying to build a company that we’re going to sell to somebody else towards building a company that we are going to just work at every day because we love it. My worldview and the company worldview really changed and got really focused on . . . we have no liquidity plan for this company, and we have to own everything that goes with that. And lots of things go with that that we don’t think about like, hey, all these employees work here and they have options. And what am I supposed to tell them when I tell them we’re never selling this company? So, don’t worry about liquidity because that’s not happening.
Andrew: What do you tell people in that situation?
Charles: So I do tell people that. I do tell people, “Hey, I’m here on behalf of shareholders. Of course, I want to make shareholder value go up and you guys are all shareholders, but this company is a long-term company.” And so we do all kinds of other things to try to make the experience great. We overpay on compensation. So, for a [inaudible 00:58:15] company our size and our maturity, we pay better. Our benefits are off the charts. And so we have benefits that rival the biggest companies out there.
And what we started doing, actually, the last two years is we’ve started taking portions of the profits and putting them in a pool that’s redistributed out to employees, and not little bits of the profits, but lots of the profits, a meaningful-enough amount that someone could look at their total compensation and say, “I’m good with this. I’ll stay here. No, I don’t need liquidity right now.”
You get to do a lot of different things, but the interesting thing is you really have to put your money where your mouth is about it being a great place to work on all those dimensions because you can’t rely on “it’s a terrible place to work but I’m going to be rich in four years.”
Andrew: Right. Twenty million in revenues, under 60 people working at the company. We’re talking about significant profits at this point.
Charles: Yeah, yeah, we’re doing great. Yeah, we’re building up some nice capital reserves. I think we have been growing really, really nicely the last couple years. I think we think that’s going to continue. The bookings are going to continue to outpace the people, which is great. I think we might be . . . we’ll still be under 60 next year, I guarantee that, easily under 60.
Andrew: Under 60 people, over 20 million recurring revenue. The brand just keeps growing.
Andrew: Why are you here? Charles, I told you, I love that you’re here. It’s great for me, but I’m trying to think that, like, are you going to end up with 20 new users of Lose It!? More than 20 but not enough to make a significant difference. Why are you stepping up? I know that you’re not someone, as you told me before we started, you’re not someone who likes to go out and talk about this company and brag about it. Why are you doing this?
Charles: Well, so it’s a great question, yeah, because you’re right, I’m not the kind of guy that likes to sort of pump my own tires. But I think what Lose It! is doing is really interesting and, candidly, I’m really proud of the company that we’ve built. We’ve built the type of company where it’s easy for me to say there’s a lot of people here that are instrumental in exactly what this company is, what this culture is, how we do things, that are people that have been working here for years. And we’re looking to find more people like that, more of those exceptional people that want to be a part of this small team with this very particular way of building things, but that is going to have this really outsized impact.
This year, we’re going to help users — we’re at 9.8 million pounds lost this year by our users. And so we’re hoping we’re going to get through 10 million by the end of the year. That’s a lot of improvement in the world. And it’s really . . . I’ve worked in software for, like, 20 years and I’ve made all this different software and it’s been great and people like a lot of the software that I worked on and that’s been really rewarding.
There has been nothing that has compared to Lose It! in terms of the number of people that have been affected, and really, the profound impact it’s had on their lives, whether it’s a medical condition that they don’t have to deal with anymore, like they were pre-diabetic and now they’re not, or whether it’s they lacked self-confidence because they didn’t feel good about themselves because they were 250 pounds and now they’re 190 pounds and they feel great.
Those impacts that you have on people’s lives are really outsize in this product and in this company. And I’m here to sort of try to tell people about that and help them understand that this is a special place and we need more people to come help us. So hopefully, someone hears this and thinks, “I want to talk to those guys at Lose It! and figure out how do I get to be a part of that.”
Andrew: I think so. And obviously, on the bottom of your site there’s a link to the jobs. When you were talking about all the benefits, I clicked over just to see what it was. The one thing that stood out for me is “Weekly organic fruit delivery.” Where’s that to?
Charles: Oh, I’m sorry. That is delivered here. We have . . .
Andrew: To the office, and so there’s always healthy food there. I figured you guys would be a good company to work for if someone cares about their health, like gym memberships. You know the thing that I love is shower. Do you guys happen to have a shower in the building?
Charles: No, we don’t.
Andrew: It’s the weirdest thing. Buildings are starting to add showers. I thought I was a weirdo for needing it, but I need it. I ran into the office today, I showered.
Charles: It’s so funny you’re bringing that up, because we just moved in January to a new office space and one of the things that we were interested in was, like, is there a shower in the office space? That was a thing we were looking for. And we ended up not getting an office with a shower, but that’s 100% on our list. And it was a little, I’ll be honest, it was controversial. Some people were like, “That’s awesome. I’m excited.” And others were like, “That’s very weird. Like, are people going to come out in bathrobes?”
Andrew: I know. I wouldn’t have wanted a shower in a building — or especially, I go to some offices, I wouldn’t have wanted a shower in my office because of exactly what you suggested. But for running and cycling, for doing stuff in the middle of the day, I kind of like it.
Andrew: All right. Thanks so much for being on here. I’ve been fascinated by your company for a long time. I’ve been using the app. I think anyone who’s listening to me who’s at all curious about this should go do this. I think it was Tim Ferriss who first said to me, I think even before the app launched, he said, “Andrew, if you really want to be healthy, just take a picture of what you’re eating all the time, write it down in Evernote.” I think he was an early Evernote guy. “Just keep a record of it.”
And I thought, “Ah, yeah, that’s good for some people.” It turns out it’s actually good for me, too. It’s a thing that I don’t notice, which is I have this mind-set of I’m not a heavy guy. I don’t eat junk food. I don’t need it. It turns out I do eat junk food. I had potato chips earlier today, 220 calories, and then popcorn from Starbucks, 220 calories. I could be wrong about the calories, but look at there. I really like the app. I love the simplicity of it. I could see why Apple would want to feature it. It’s got the same Apple-y simplicity.
Thank you so much for being on here and I want to thank the two sponsors who made this interview happen. The first will help you hire phenomenal developers, go to . . . Do what Charles did. Actually, Charles went to toptal.com. Take it a step further, toptal.com/mixergy. And when you’re waiting to have your website hosted or if you hate your current hosting company, go to hostgator.com/mixergy. You’ll love it.
All right. Finally, I do want to actually shout one more thing out. If you’ve got a smart speaker, tell it to play Mixergy. You’re going to love Mixergy on the smart speakers. Lately, it’s been phenomenal. People keep telling me they love it. Thanks, Charles.
Charles: Andrew, it’s been great. Thanks so much.
Andrew: Thank you.
Charles: See you.