HelloWallet: 0 to 300,000 Paid Subscribers In 5 Months

How does a financial guidance application get over 300,000 paid subscribers?

Matt Fellowes is the founder of HelloWallet, which helps workers track and manage their personal finances. It’s aim is to be a full-service financial adviser which helps families discover opportunities to save money.

Matt Fellowes

Matt Fellowes


Matt Fellowes is the founder of HelloWallet, which helps workers track and manage their personal finances. It’s aim is to be a full-service financial adviser which helps families discover opportunities to save money.



Full Interview Transcript

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Hi everyone, my name is Andrew Warner. I am the founder of Mixergy.com, home of the ambitious upstart, the website, of course, where you come to listen to entrepreneurs tell you how they built their businesses.

How does a financial guidance application get over 300,000 paid subscribers? Matt Fellowes is the founder of HelloWallet, which helps workers track and manage their personal finances. Its aim is to be a full-service financial advisor which helps families discover opportunities to save money. Matt, welcome.

Matt: It is great to be here.

Andrew: What do you guys charge per subscription?

Matt: Well, we are primarily distributed as a workplace benefit, and the pricing really varies depending on the size of the employer. We work with some employers that have over 100,000 employees; we have other employers that have just a few hundred, so it really depends on what the size of the population is. If you are a consumer, though, logging onto the site directly, it costs $8.95 a month.

Andrew: What is the lowest that a subscription goes for?

Matt: In the employer channel? You know, that is something we keep to ourselves. It is a sliding scale based off the size of the employer.

Andrew: OK, and how long did it take you to go from 0 to 300,000 paid subscribers?

Matt: We launched just in May, so, what was that, five months ago or six months ago, something like that, so we really have taken off quickly, which has been a lot of fun. It has been crazy. I mean, lots of travel and not much sleep, but a lot of fun.

Andrew: Lots of travel, not much sleep but a lot of love from really important people, including Bill Clinton, who endorsed you; including Steve Case, who backed you financially.

Matt: Yes.

Andrew: I want to find out the story of where the idea came from and how you built it up, but first, for the person who does not know HelloWallet, can you give me a typical person, a typical subscriber?

Matt: Yes.

Andrew: Let’s call him Bob, and tell me Bob’s problem, and then tell me how HelloWallet solves that problem. You know, just a short understanding, and, of course, over the next hour or so, we will get a really deep understanding of the business, but I want to catch them up on the product and then we will explain it further.

Matt: Sure. I think the magic of what we are trying to do is that we want the experience to be incredibly personalized, and so we do not have a single persona or single problem that we are trying to solve.

Andrew: There is no Bob for you.

Matt: Yes, exactly. I mean, that is the cool part of what we are doing. It is just really dynamic, and so it can adjust to whatever financial issue, concern or need an individual has, so Bob, for instance, might be interested in just managing his money in an easy, simple way, and having all his accounts in one place.

Andrew: You mean his bank account, his retirement account–all those things in one place?

Matt: Yes. You know, basic stuff that has really been around in one technical form or another for twenty years. You know, there is nothing really special to that. There are a lot of options there, but Sarah, on the other hand, might be interested in reducing her credit card debt, or Joan might be interested in saving for her kid’s college education and what we do is we really adapt to whatever the needs are of the individual. But the real power of what we do is that we apply behavioral science and behavioral psychology to help people actually change their behavior.

Ultimately, for people to do better financially, it’s less about really providing them the information, and more about helping to motivate them to actually act on that information and improve their finances. So that’s really what we’re about, it’s helping people change, improve the way that they’re spending their money so that they can better be able to get ahead.

Andrew: OK. All right, I think that gives us an understanding of the product and the channel that you picked I think is unique, unlike sites like Mint which don’t try to do the exact same thing as HelloWallet.

Matt: Right.

Andrew: You’re going directly to companies and letting them get the word out and enroll their employees as members.

Matt: That’s right.

Andrew: All right. So let’s go back to what you were doing just before this idea hit you.

Matt: Sure. Let’s see, so it was 6:05 on Tuesday, no. I actually, I was a scholar at the Brookings Institution, which is a large think tank in Washington, D.C. It’s a really fun place. I mean you’ve just, that’s how I got to know President Clinton and all these other fancy characters. I mean just every week you’d have governors come in with leaders, CEOs and they’d look to us for guidance about what they should be doing. So it was a really fun place to be. And, yeah, one of those groups of fancy people that I was talking to was, let’s see, 2007 I think, when the foreclosure crisis was just starting to hit this country and I was working Governor Schwarzenegger and his office to respond to the foreclosure crisis.

And then later with the Treasury Department and what I discovered is that there’s just this bizarre fluke in the financial services market where financial advice hasn’t yet democratized. So, only about 15 % of Americans have access to it and we thought, boy, if all goes, it’s about five million people that are foreclosed on homes. If they had had this independent intermediary that wasn’t trying to pitch a product or sell a product, they potentially, it could have prevented a lot of those homes from being bought unnecessarily.

And what’s really intriguing about this fact that the market really hasn’t yet democratized, it hasn’t reached that 85% of the American public, is that in the 20th century there’s this really broad democratization that happened with just about every other product. So, checking accounts for instance, you know in the ’50’s about 62% of Americans had access to a checking account. Today it’s about 92%. Credit cards didn’t exist in the ’50’s. Now, about 82% of Americans have a credit card. Equity market, in the ’50’s about 15% had access, today it’s about 65, 70, depending on your….

Andrew: So the 15% who do have, or who did, yeah I guess we’re still in that world, the 15% who do have financial advice, who do they turn to for advice and what kind of advice do they get?

Matt: Sure. It’s basically financial advice and management, right. And so, prior to companies like Quicken and Money, it was just exclusively the brick and mortar type delivery channels, so they, the whole industry is really comprised of sole proprietors, just small little businesses. There are big guys out there, like Ameriprise, for instance. Or a Merrill Lynch, or Charles Schwab, like these are just giant players, but the bulk of the industry is really small mom and pop type places where people are getting financial advice from.

Andrew: And you describe them as, not as sales people, but I do feel like they are sales people. I know my Merrill Lynch advisor would be happier if I bought stocks and traded more frequently than if I just go through him to buy, to buy CDs in banks across the country. And he’s let me know that. So, isn’t it, aren’t advisors by their nature trying to be sales people?

Matt: Yeah, absolutely. I mean that’s, you know, so we’re interested in that 85% that’s not served, but yeah, I mean in that 15% there are a lot of people that have questions about whether they’re really getting good guidance because it’s such a privatized market, so when you show up at the advisor, their first question is not, boy, how can I help you? Their first question is what product’s can I sell you.

Andrew: And what products am I told to sell you, too.

Matt: Yeah, exactly.

Andrew: So, in your head, did you also think, you know, if I get people to trust me like this, I’ve got this opportunity where I can maybe sell them on the right money market funds or I could make a commission off of that, or I can propose that they buy something else more lucrative for us and there’s the business.

Matt: Yeah. I mean we certainly gave that some thought on the front end, but what is the problem with that model is that instantly people get suspicious about what you’re intentions are. It’s really fascinating, it was an early discovery for us, but as soon as you start introducing product recommendations you introduce skepticism. And as soon as you introduce skepticism, you stack the deck against your ability to change someone’s behavior. Right, because their starting, well, why are they telling me that, what do they really want out of this?

And so, we just decided, given what our intention is, which is ultimately to really help people get ahead and convert their paychecks into mobility and prosperity, it made sense for us, at least initially, to just stay away from specific product recommendations. The one exception though, is that we are primarily distributed through employers and employers provide lots of benefits and so what we can do is pre-screen people for benefits, so for instance, for some of our employer partners, they pay for gym benefits and if we see a gym expense on your transaction we’ll pro-actively let you know, hey, did you know you’re employer could pay you, pay your way for the gym benefit. So, that’s an exception, but for the most part we just stay completely away from product.

Andrew: OK. All right, so you had this vision.

Matt: Yeah.

Andrew: And did you know that it would be software instantly or did you start to think we can duplicate the Merrill Lynch experience for the other 85%? No.

Matt: Yeah, I mean, basically the primary barrier to the democratization in this industry has been the fact that it’s a very high cost model, you just kind of sit across the table from someone and that’s expensive because they’ve got to go pay money to find you and once you’re there, they’ve got to entertain you for an hour, hour and a half, which means they’ve got limited pockets of their day. So, it gets really expensive quickly. So we, right from the beginning thought, if we’re going to scale this, for the first time democratize this, we need to do it through technology.

The other reason why we went technology immediately is that essentially advice is math problem. You know, fundamentally, you line up all the variables on someone’s assets, their liabilities, their household profile, etc. And that’s basically an optimization problem to solve. Where there special sauce gets dropped in then is around how do you then motivate people to act on that information, and that’s a really fun part because you get really into psychology at that point and motivating people to really change their behavior.

Andrew: I’m writing a note here to come back and ask you how you use psychology with people to help motivate them to do the right thing. And, of course, I want to spend a lot of time here on how you got to three hundred thousand subscribers in such a short period of time, but let’s continue with the narrative. First, you had this idea and you said alright, it’s going to be software, we can do this, we can build it. What’s the first thing that you do after you realize there’s a business here?

Matt: Yeah, well, I mean officially I was at Brookings so I was like literally being paid to think, so I had a lot of time to think about this and I had, you know, the very first step that I took after I came up with the idea was to actually write some initial algorithms to prove that we could actually automate this guidance in a scalable fashion. So, that was a lot of fun, you know, math geek. So that was a lot of fun. Then once we had done that, we then went out and started talking to people about whether this was something that would sell.

And so we talked to a whole bunch of employers about whether this really met a need for them that was compelling. We talked to, I was at Brooking, so actually I didn’t go talk to venture capitalist, I took a very unconventional route, I went to a charitable foundation, the Rockefeller Foundation, which is one of the biggest in the world, and you know, the proposition for them was, this is a huge social problem, you try to solve social problems as an organization, here’s a scalable way to do that. And they liked that. So we initially got a very large grant from Rockefeller and then we since supplemented that with traditional capital.

Andrew: This is 19, excuse me, 2009?

Matt: 2009, that’s right.

Andrew: So, you’re starting to have these conversations with potential customers, and what are you finding out from them that you didn’t know on your own?

Matt: [laughs]. I would rephrase that as what did I learn from them, or what did I know that they didn’t know. I mean it was just like basically, they taught me everything. Talking to the customer was really key from the early part of the development because I went in thinking that I knew everything, it’s a math problem, it’s easy. But, I left those conversations thinking that I didn’t know very much at all.

Andrew: Mm. What didn’t you know? This is so interesting to hear.

Matt: Yeah. I mean, so for instance, I’m someone who’s really attracted to really elegant math problems and so I thought, boy, you know we could help people figure out whether they should rent or buy by crunching all this data to forecast for them at an individualized house level whether it makes a good decision or not. And, isn’t that cool. And what I learned, very quickly, is that to really engage people to change their behavior, you have to start by thinking more basically. People really just want to know one thing, which is, what do I do next? And that, that it’s more simple and it’s usually not what do you do next, well, you know you’ve got to; it could be depending on the person anything. I could be that one next thing that you need to do, you need to start a rainy day savings fund and here’s why. Or for another person it’s, well, what do you do next, you need to automate your financial life so you stop thinking about it. So just really basic stuff.

Andrew: And you pick just one thing for them and you say, this is the next thing that you should be doing. You don’t say, hey, you should be renting not buying. You should be automating or do you?

Matt: Yeah. I mean, so if I were to just kind of condense that, the big lesson was that everyone starts from a different place financially. And it seems obvious in retrospect. But you need to, in order to be relevant in their life, meet them where they’re at financially and not where you want them to be. Does that make sense?

Andrew: Yeah.

Matt: So, a clear example would be, in the retirement market, where I don’t know if you, sounds like you talked to an advisor, you’ve probably at some point been scared by your advisor. I call it the shock and awe number, which is you know, you are five million dollars behind on your goal. What is your problem? You need to spend a lot more money on me. And that just ends up de-motivating people, right? Or they just want to check out because it seems unattainable. So instead, what we’ll do is just ignore, initially, those bog honking gaps in their life and really start with very basic things that people can do that are attainable for them. And that builds confidence and it builds their confidence in us and our confidence in them.

Andrew: Like what? What’s a small attainable goal that builds confidence?

Matt: I’ll give you a good example. So every Sunday, we send our members one small thing to focus on financially. One of them is, give back to your community this week. Do anything. Help someone across the street, donate money to a cause that you’re interested in, spend time reading about something that you’re interested in that gives back to the community. That’s fairly, that’s fairly attainable right? Give a random stranger five bucks, you know, who looks like they need it. Whatever it is. And it just feels good that you can actually accomplish something financially. So that would be one, you know, extreme example.

Another more practical example would be, we want you to set up a rainy day savings goal this week. It will take you three minutes to do that, so that’s all you need to do this week. Don’t worry about the mortgage that’s on fire or your credit card balances that are in the sky, just set up for three minutes a goal and then go away for a week. That is a totally different approach than where advisors are today, which is, you are screwed. You better get with the program right now or you’re going to be dead.

Andrew: OK. A lot of what you’re telling me here, many of the entrepreneurs who I’ve interviewed and many in my audience would be able to think about, maybe not get exactly where HelloWallet is, but, they touch on this. The part that they wouldn’t hit on is, don’t try to sell to each customer individually, go to companies that have all these potential customers for them and who can help enforce it. Where did that occur to you? How did you know, you know I need to work with companies and not try to advertise to individuals?

Matt: So, it occurred to me at Brookings. I was working with a number of large employers on addressing financial health problems with their employees and I was doing this in a non-profit organization, essentially for free and the more that I learned, this is really, these financial health issues are really effecting their bottom line and they have invested economic interests and subsidizing this on behalf of their employees. So that’s, in terms of the first trigger is really in those initial conversations that I was having with employers while I was …

Andrew: How does it affect the bottom line for a company?

Matt: Lots of different ways, so I was in Washington yesterday meeting with this say, meeting with a bunch of big employers there, you know they are focused on retirement readiness, that’s an issue, so workers are about $6 trillion behind on retirements savings, massive amount of money right, that’s that shock number and it’s ends up costing employers a lot of money because people aren’t retiring. Their health costs go up with their older workers, the older workers are more highly compensated, they have more vacation time, you name it, there’s a whole host of costs and so a focus of a lot of these 401K administrators of these big companies is how do we encourage people to save more and contribute more to their savings so that they retire on time, And that’s an example, there’s lots of other but that’s the …

Andrew: Can you give me another big one because you’re opening me up to ideas that I just hadn’t thought of. One of the reasons why I’m really excited to meet you is that you are operating in a part of the world that I’m not familiar with. As you and I said…

Matt: Yes.

Andrew: … as you and I talked about in the pre-interview, you don’t have a consumer facing business.

Matt: Right.

Andrew: You don’t have a product that my sister would tell me to go use or that I see advertised on Hulu in between episodes of the Office, it’s different so tell me what else, what other incentivizes do companies have working with you?

Matt: OK. So that’s one around the retirement readiness, another is that workers are losing massive amounts every year because of their difficulty using financial service products, I mean, just profound. I mentioned the $5 million people that bought homes that were later were foreclosed on, I’ll give you another for an example on that data guy so (inaudible) can reloads, but I did some work with the FIDC a couple of years ago and we found workers are collectively spending about $38 billion on overdraft fees, just insane right these $35 transactions but the really exciting statistic is that 70% of the people that are paying those fees have savings at the bank that they can be overdrawing from, or that they’re overdrawing from that can cover those overdrafts so just $20, $25 billion dollars right there, that could be put back into the pockets of workers.

So we were in New York on Friday talking to a few employers about this, their interest in HelloWallet is to help their workers manage their paychecks. For every dollar that this employer spends 15, 20 cents of that is getting wasted unnecessarily and what happens is that worker then comes back and says, ‘Hey employer you should pay me a $1.15 or $1.20 instead of a $1.00.’

And so the employer obliges and gives them a $1.00, $1.20 and then they spend 30 or 40 cents that gets wasted and so it just creates this really vicious cycle where essentially what employers wind up doing is subsidizing unnecessary fees and consumption of their workers and so they have a very strong economic interest to help workers better use their money and make it more efficient.

Andrew: I see, forgive me for thinking the worse of companies but when you were talking earlier about how one of their issues is that their employees couldn’t retire when they got older and they were getting paid more, I was thinking why doesn’t the company just say, “You know, I think it’s time for us to say good bye to you, we’ll give you a nice severance package and we’ve got to hire younger people.”

Matt: Yes, sure so company A could do that and say, “Good bye people that are 55 years and older.”, well a few things would happen then, one they’d get sued for age discrimination, two they would build a reputation in the market of not caring for their workers and that would hurt them in competition, so here I’m in Palo Alto today, right, the value prop for these companies is totally different, they’re competing to essentially to have the best benefit packages and so they’re trying to do what’s best for their workers all of the time and that’s an incentive that works for all employers, it’s just that intense out here and so then yes you build up a reputation as a company that really doesn’t care about its employees because they’re just basically sending them to the wolves. And third, you know, companies feel a sense of responsibility to their workers. And you’re right to be cynical, right, I think there’s, that is the MO, right, it’s about the bottom line. But it turns out that treating our employees badly really hurts your bottom line.

Andrew: I see.

Matt: That’s one of the ways that we’ve been able to plug into employers. There’s again, I don’t want to give you my whole game plan here [laughs].

Andrew: Cause you want to hide it, or?

Matt: Yeah, yeah. I mean right now, we don’t really have any competition in the market and I’d like to enjoy that advantage as long as I can, let’s be frank.

Andrew: Let me understand one other aspect of the model.

Matt: Yeah.

Andrew: You decided to charge on a recurring basis, instead of…

Matt: Yep.

Andrew: No?

Matt: Uh, yeah.

Andrew: You did right? Instead of saying, we’re going to sell it the way that Microsoft Windows was sold when it first launched, we’ll sell it to you one time and then maybe we’ll come up with a new version next year and offer you an opportunity to upgrade, but if you don’t upgrade, you get this forever. You’re charging monthly. How did that decision come about?

Matt: Well, for a couple of reasons. One, I mean, that’s how the benefits game really works. If you’re selling to IT Departments, that’s a different story, but with the benefits department most vendors are charging on a recurring basis. So, that’s the model that their comfortable with, right, and that’s the most important reason. The second is that Microsoft is shipping out itself where, right, their installing it and it’s a huge deal. You would not, you would be completely depressed to know how many of our clients are using IE6 [laughs]. You know, because it’s like a totally different game when you’re selling it to IT Departments, because there are all these security issues and migration issues and so on. For us, we’re a Cloud based application, so we’re constantly upgrading our service and to reflect that upgrade, we expect a recurring revenue basis.

Andrew: I see. All right. So you’ve had these conversations, extremely enlightening. You see the opportunity. You know the way you’re going to approach the market. You know who your potential customers are because you’ve had conversation with them and you know that they’re going to be more than people who you’ve talked to because you’ve studied the market. It’s now time to create that first product.

Matt: Right.

Andrew: How do you create that first product?

Matt: Well, I was a first time entrepreneur, when we were creating the product and you know, to be frank, this is where I may have made some mistakes, in the development of this. We launched our baser version in March of last year. So March 2010, and we start building it in June 2009, and I’d come from an environment at Brookings where it was very go-getter, you just go out and, you know, you go out and hunt to kill. And you work 24/7, literally, around the clock. And so when I kind of took that approach to building the product. And we pushed out very quickly and I think in retrospect, it would have been better to just kind of have experiments and play with it a little but more, then maybe we did when we initially rolled it out. So that we were, you know, in a stronger place. Now, that’s my own perspective, I’ve since talked to tons of people in the tech world that believe just the opposite. You want to just throw out something like two weeks into it and just start getting feedback right away.

Andrew: How long did it take you to launch that first version?

Matt: It took us about eight months, I think. No, yeah, about eight months.

Andrew: And how did you find the developers who were building for you?

Matt: I relied initially on a local tech leader who I’d gotten to know who just helped me hire people and then collectively we built a team.

Andrew: Can you say who he is, or what she was doing, if not by name?

Matt: Yeah, and this is just and IT, he runs a NDC IT Consulting business. And so I think, as we got smarter as we developed technically, you know, we started relying more on recruiters and we’re very, it’s a very competitive environment because we’ve got a pretty small team, everyone’s very bright and ambitious and we have, I think, from our last hire, we just hired three engineers and we looked at 250 people for that.

Andrew: Wow.

Matt: And everyone’s talking about this crunch, this labor crunch, but we are getting flooded with resumes. We are just very, very particular about who we hire. We really just, we have a wonderful culture of just an amazing team right now of very talented people who are very ambitious and innovative and we just want to build on that as we go forward so we’re very selective about…

Andrew: So Matt, did you feel that you launched too soon or your saying you launched not fast enough?

Matt: I think, I mean from my perspective, we probably launched too soon.

Andrew: OK.

Matt: We think we probably should’ve hung out a little bit more and experimented in a private beta with our application and our customers because essentially this is what happened, when we launched in March we experimented with six different channels, I think, because I, President Clinton brought me up on stage at the Clinton Global Initiative and we were on Larry King and it was a ton of fun, right, and we started feeling really good about ourselves and all of these people started coming at me saying, “Hey I would like to partner with you to do this and that.”.

And so we were, we had to talked, we did deals with utilities to help people reduce their delinquencies rates, we did deals with mortgage servicers to reduce foreclosure rates, we experimented in the consumer channel for a few months and I think, in retrospect, we should have just stayed focused on the importer channel, we should’ve because that really made sense from the beginning and we should’ve just worked more closely with the employer’s who we ended up working.

Last year we ended up by June we were working with employers, really large ones, and I can mention them, HJ Hines, Marsh McLennan which is another Fortune 200, California State University School System so we had a very diverse customer base and we ended up working with them to essentially just redesign our product in a way that made sense specifically for the employer market.

Andrew: So having too many customers and …

Matt: Yes.

Andrew: … having to broad a customer base, how did it impact the way you guys were able to operate in the early days?

Matt: Well, I mean, what I’ve learned since then is that this is fairly typical, right, people experiment with different channels to see what will stick and so we look smart in retrospect, I’m just trying to be very honest here about the facts that I’m not sure we necessarily thought of these as tests initially, we thought, we really believed in all of these different channels and so in retrospect I wished we had focused more just on the employer channel.

Andrew: I see and so what happened was you talked to different kinds of organizations and you realized no, the employer channel is our core; we have to focus on that?

Matt: Yes so within three months of launching or maybe three and a half we just shed everything, it was like, “What’s going on in Google right now”, like, “That’s dead, that’s dead, that’s dead.”, we just …

Andrew: How do you shed, how do you tell an organization that signed up with you, ‘You know what, we’re not going to be able to continue with you because we have to focus on companies first and maybe we’ll come back in the future?

Matt: You say that.

Andrew: That is what you said?

Matt: Yes.

Andrew: Was it a hard conversation to have?

Matt: I think there’s always an element of surprise, there’s a lot of excitement around what we’re doing in our mission and trying to help people but at the end of the day we’re trying to grow as quickly and (inaudible) as possible and so we need to put the interest of our primary customers first.

Andrew: How do you come to that decision internally, so when you’re starting out, it’s so hard to find customers or to tell yourself believe these customers will be here.

Matt: Right.

Andrew: You end up with customers. To be able to say, “Matt settle down, we’ll get to them in the future, trust yourself that they’ll come back, say no.”, that’s a tough thing to do. Most entrepreneurs I believe would say, “Let’s hold on to all of these guys, we’ll figure out a way to work with them and maybe we don’t bring new people on but we can’t say no to someone who just signed up.”

Matt: Yes, no I mean I…

Andrew: I want to learn from you because I think that’s the right way to do it but on the spot I don’t believe that I would react as well as you did and I want to learn how, what your thought process was?

Matt: Well, I mean, here’s what I think made the difference for us, because we looked very smart in retrospect, and at the time I don’t think we were as smart as we thought we were or we … and really what the difference was, was both the team that I had around me and the investors that I had around me who collectively held me accountable for what we were seeing in the market place.

We have a very democratic organization, everyone talks about the direction of the company and where it’s going, everyone’s invited to talk about it. I make decisions but we are all a part of this together and I think by not isolating myself as kind of the person in the organization that calls, makes calls, it helped because it created very active dialogue among us about what we should be doing so that’s in general I think were it made the difference and that’s why I think one of the best things that entrepreneurs can do to get started is really surround themselves with smart people that are successful.

Andrew: Who is in that circle of yours, the smart people who help you out?

Matt: There’s no doubt that Don Rainey at GrowTech was instrumental in our success. I mean the guidance that he’s provided us, really from the get-go and on an ongoing basis has just been extraordinary. And then in addition we received guidance at later stages from Ty Savage at Revolution and from Steve and Jean Case, and so those are on the investor side. What we’ve received guidance in. And I feel extraordinarily lucky to have them on the team; I mean, their just very bright people who are just have been very successful.

Outside of that, just the team that I have at HelloWallet is very special and so that’s really everybody. I mean, it’s not, it’s all the engineers, I mean every two weeks we sit down as a team and review the entire company. And everyone’s invited, all the metrics are put up so we have a completely transparent work environment and that’s breeds a lot of communication and excitement about, internally about the direction of the company.

Andrew: GrowTech is your investor?

Matt: It’s one of the investors.

Andrew: One of the investors.

Matt: Steve and Jean Case.

Andrew: I’m on their website right now and I see that, I see a picture of Tim O’Shaughnessy from Living Social and I see other entrepreneurs. Do you get to talk to the other entrepreneurs that they’ve backed?

Matt: Sure, if we want to and we did. But, it’s really, you know, their accessible if we need them to be accessible.

Andrew: All right, going back to the launch, and I promise I’ll get past this launch, but I’m curious about how ideas come to life. You say that you probably should’ve waited a little bit longer before launching. Can you talk openly about some of the things, some the issues with the launch, some of the things that were missing, some of the things that weren’t exactly right?

Matt: Yeah. So, I mean, I think the bottom line for us is that we got distracted by the volume of opportunities coming at us.

Andrew: OK.

Matt: And they look really, to be fair, very sexy. So let me just describe our launch to you, OK? We launched on March 8th, 2010. And it was out here in San Francisco, I was on stage with Mayor Newsome, the Mayor of San Francisco at the time, a celebrity mayor. And he had assembled the Head of the Chamber of Commerce, the member of the big unions out here in San Francisco, the Pacific Gas and Electric which is the major utility out here, San Francisco Public Utility Commission, and the some foundations, some non-profits. We had a perfect canopy of the city; I mean it was just amazing representation across very large companies and non-profits. And we were there on stage in front of dozens of cameras.

And I thought, wow, this is incredible, you know, what a way to launch a company, this is, we don’t need to worry about getting media attention, it’s just all here. And I think we got maybe like 500 people to sign up for our service from all that attention. And what I learned quickly is that that’s not a very powerful channel for distribution because people don’t look at your mayor for guidance about your financial guidance services. I think we probably could’ve figured that out if we had just been a little but more diligent and up front about these different opportunities that were coming at us and stayed focused really on the employer channel, which was our core competency and really where we wanted to take the company. So that’s an example of where we wasted time and resources, where we probably wouldn’t have if we had slowed things down a little bit.

Andrew: OK. So you discovered the right market and you decide, and you know your channel. It’s time to go out and get more customers, how do you get? I guess the first customers came to you through the conversations that you had before? Before launch?

Matt: Yeah. That’s right.

Andrew: How many of those people who expressed interest ended up signing up? Was it, rough percentage I mean?

Matt: In terms of the number of companies, it was, I’m just doing the math in my head, 80% of the companies. Almost all of them.

Andrew: Oh, wow. So you have a conversation with somebody and you say, would you buy this if somebody put it together. They say no, we need a few other tweaks, I think you need to think about it this way. You think about it that way, you create the product, you say it’s ready do you want to buy it, 80% of them say yes, you did it?

Matt: Yeah, and we did that part right. I mean we were really working very closely with our employer partners while we were building it and so they saw mock-ups and actually they saw wire frames, then they saw mock-ups, then they saw alpha and beta and then they saw products. So we brought them along in process. Because ultimately they’re our customer and we needed them to be satisfied. It was a really fun opportunity to allow the customer to work very closely with us in the development of the product.

Maybe in an unconventional way because I think that lesson is out there for the consumer market. But what was different about this is that we really needed our customers, the employer ultimately. So we needed to work with them in the construction of the product.

Andrew: How do you get the next batch of customers?

Matt: It’s fairly straightforward at this point. There’s certainly momentum. When we go to these conferences now people are coming up to us and saying, “We heard about you from so-and-so. We’re excited, will you come in and meet us?” So, this week I have 10 employer meetings and I think every single one of them came from people coming up to us who had heard about us. So there’s a momentum now.

Andrew: They see you speak at a conference?

Matt: Yeah. That’s right. The other way, of course, is just to hire sales people. So we’ve just opened up a San Francisco office three weeks ago, which is a sales office. We have someone in that office and we’re hiring more people.

Andrew: How do you initiate conversations with prospects?

Matt: Employer benefits world is a fairly clubby environment. In that, they have a lot of money at their disposal, they have millions of vendors that are trying to get that money. A lot of them are unscrupulous. So what they’ve evolved into is essentially group of networks of benefit administrators of different companies that talk with each other and help each other make decisions across the universe of different options.

To really penetrate that market then you need people that are friendly with those networks. In our case what that meant is that we have to hire very expensive people who are senior, know what they’re doing, have a lot of relationships. That helps us then build a footprint quickly in the employer market.

Andrew: You know what strikes me, Matt, talking to you, is so much of what you’ve done in such a short period of time just feels like a case study in the right way to build a business. In your background you have so much non-profit work that it feels to me like every article I read in preparation for this interview was just blown away. That your business was a business, that it wasn’t a non-profit, it wasn’t a government agency or something.

How do you learn to build a business this well? How did you learn it?

Matt: That’s super-generous of you. Thank you. We’re really excited about how much more we have left to do.

I definitely have an unconventional background and I’ve been pretty lucky in the team that I’ve been able to attract. Because it’s not a one-man show, it’s certainly a team effort at HelloWallet. I think that that’s really helped us move forward more aggressively and smarter than we would otherwise had been able to start.

Andrew: Was there someone on your team who said, “You need to do customer development. Spend time with potential customers. Hear their issues. Don’t push your vision on them but be willing to be quiet and listen to them. Launch this way, don’t launch the other way.”

Matt: Yeah. There wasn’t a single person. I think the temptation is to think about building a business in terms of a Playbook. You need to check this box, and then you need to check this box and then you need to check that box. When the reality is that every company is it’s own organism, and that organism needs different inputs and outputs.

For that organism to thrive it’s really not about reading the Harvard Business Review, it’s not about reading a single Playbook. It’s about being diligent and smart in your decision making to understand what you’re organization needs next and now. So it requires more an emphasis on process than it does specific steps. If that makes any sense?

In our case what that meant is that we were a very transparent organization at our early stage and that issues were talked about in recent. That meant that a lot of input was gathered at each milestone or each big pivot point for us. That ultimately led us to make our good decisions to grow the business. I think that’s part of it.

The other part, undoubtedly, is our mission. We want to save the world. This is not about making a bunch of rich guys even richer or a bunch of young guys really rich. It’s really about making the world a better place and helping people get ahead with their money.

That has allowed us to really attract good people who have a lot of integrity, and who are bright, very bright.

Andrew: Let’s see what else I’ve got here on my list that I wanted to talk to you about. The psychology.

Matt: Oh yeah.

Andrew: You have to understand customers or users psychology in order to get them to do things that are even to their own benefit. What are some of the psychological hooks that you’ve discovered that helps steer people in the right direction?

Matt: Sure. Well, there’s tons. That’s our special sauce so I can’t get super-into it, but I’ll give you a couple of examples. One example I mentioned, which is, give someone one thing to focus on at a time and give space between those different tasks. The Sunday email that we send out with the one thing to focus on, that’s attainable. What happens psychologically is you build confidence over time.

A second, is to surprise the user with unrelated information [laughs], that’s personal. For instance, when you log on to our website you’re shown on the second page all this personal information about your neighborhood. We show you your median income, the home value, the size of the population.

For purposes of financial guidance it doesn’t seem totally relevant. But if your purpose is really to engage someone it is relevant because it’s interesting information and you buy a little bit of their attention span at that point. So, that’s another example of how we influence people.

A third, and I’ll stop here, is peer pressure. We have a lot of comparative information, not about your geography, which isn’t really persuasive, but about your actual peer group. We look at your income, if you’re making $10, $15, $20 an hour, we’ll look at people that make that amount that are in your age group and household size. We’ll tell you not only what the average person is doing but what the best person is doing in that peer group. That’s persuasive for people.

Andrew: How do you keep that from being one of those shocking discoveries that scare people off?

Matt: Yeah. It’s a great question, super-good question. I’m trying to think of how I can answer that without giving away some stuff. But I think the trick to do it is to be deliberate about not shocking people and be more focused on motivating people. Maybe I’ll just leave it at that.

Andrew: OK. All right. I wanted some examples, you said no at first and then you ended up giving me three, which is what I was hoping for. I knew that there must be some that you can share with an audience of non-competitors.

Matt: Yeah. Absolutely. I’m sure I’ll be more open at a later point. But these are some nice chunks out there which you want.

Andrew: All right. You mentioned something earlier that I wanted to circle back and ask about. You said, “At the Brookings Institute our MO was to hunt and kill.” The “hunt and kill” part is what I wrote down.

Matt: Yeah.

Andrew: I don’t think of people in think tanks as hunters or killers, what did you hunt and kill there?

Matt: Wow. That’s why Brookings is the best, or I think it’s the best. That’s one component of the story here that very consistent, in that, what you have in Brookings is an incredibly ambitious organization that wants to change the world and make it a better place for everybody.

I think that’s characteristic of entrepreneurs, there’s no lack of ambition usually. That’s one of their strong suits to be sure. From that perspective it made a lot of sense for us to come here. In terms of what this specific ambition was there why they were pushing on [??].

In the policy environment, which is mainly where Brookings deals, they’ve definitely got more into helping businesses make decisions or foundations, but in policies where it is for the most part. And policy environment is a lot like consumer markets in the tech world, where you’ve got a lot of intense competition for very limited mind share and so, to be specific about this, you know, if you want the President to talk about your policy priority, you’re competing against hundreds of thousands of other priorities and so to win in that environment, you have to be pretty aggressive about getting your idea to be paid attention to. And so that’s really it.

Andrew: How do you do that?

Matt: So, in the case of the place like Brookings, you are helped out by the fact that there’s decades of track record there, of people producing smart ideas that have improved the world. In my space, an example of that would be Mark Eerie who’s now a Treasury Aide, or Bill Gail who helped create and promote automatic enrollment in 401K’s, which is a huge deal.

Instead of asking people, do you want to participate in retirement savings or not, most people lie, eventually, not now. Instead people now just got auto enrolled and that required legislative change, huge, big idea. It’s transformed how people save in this country. So that, they were helped out of course by the fact that they come from the legacy of a place like Brookings. But I think, ultimately, how you do that is you are very smart about incentives. What motivates people to listen to you? What motivates them professionally to get ahead? And by paying very close attention to what people’s incentives are, you can attach your ideas to the right incentives.

Andrew: Interesting that that happens outside of business. Do you have a book that you recommend on this? On this, on human psychology, on attaching your mission to someone else’s incentive?

Matt: You know, we’ve been really influenced by people like Dan Orelli down at Duke, or BJ Fogg at Stanford, or John Zinman at Dartmouth, Moriba Shears out here at Stanford, you know these are really, there’s others as well, but these are people who are all kind of behavioral psychologist and bayroll economists who are, at the end of the day, focused on how do you change people’s behavior, and both at Brookings and then here at HelloWallet, we see that as really core to what we’re doing. Which is how do you convince someone to do something that they weren’t doing otherwise? And, so that’s like from a practical point of view where I would go. Less practical but more interesting, I’d go like into the theory world. So, I’m a political, I was a political theorist once upon a time, and that’s like super interesting because like you think about power relationships across people and how do you, how do some people get power and other people don’t get power? And so, you know, there’s a whole bunch of really fancy people you could read there.

Andrew: Who?

Matt: I’ll stay away from that.

Andrew: You can’t toss out a name there?

Matt: Well, I mean someone like Fuco, right, he wrote Power, he would be someone to read on that.

Andrew: Who, who wrote Power?

Matt: Uh, Fuco.

Andrew: OK.

Matt: So, yeah, I mean I’d be happy if you want me to send you a bunch of books.

Andrew: I’d love it and I know my audience would love it too.

Matt: OK.

Andrew: All right, let me just send a message out, actually, no wait, before I even do that, you’ve got brand new offices in Washington, DC, cool space from what I’ve heard from you. By the way, I’m hoping that I get a chance to check it out because it’s not too far from where I am right now. How do you bring in, how do you fill it up with smart developers? How do you fill it up with the kind of talent that got you here?

Matt: Yeah, I mean, I think that’s the central management question for an organization. Again, I think it’s all about who you surround yourself with. It’s like cultic personality is really useful for branding, but in terms of managing and succeeding it’s really about a team at the end of the day. And, so, first of, we will have a party at our office when we open it up, so we’re excited about that and we’ll, I’ll have, part of what we’re trying to do is be part of a set of magnets to pull people into DC to help grow it as a tech center. I think there’s about a 20 tech start-ups now. It’s really exciting what’s happening there. And people on our team like Jasten Thorp [SP] are big part of that equation. But in terms of you pull people in, longer question, we’re almost out of time.

So, I’ll just answer just very simply. Get the right mission, that’s exciting, that will pull people in. Two, take your time in hiring people. We put all of our engineers through tests. Not to be pedantic about it, but we want to hire people that are going to succeed. And so, we’ve got a bunch of very fancy engineers who are extremely smart and innovative, and some of the best in the field. And they will administer test to people that come in. Three, look at personality as well as technical skills, because at the end of the day, you’re building a family. Specifically, you know, or particularly among, at a start-up. And so you really want really good people to be around you who are going to be fun and energetic and will kind of go that extra mile. So those are very quickly, kind of a few things that I would do.

Andrew: Alright, before I ask the final question, just a quick note to the accidence, if you already have a Mixergy premium membership and you heard us talk about how to find the right customer for you, I urge you to go to mixergy.com/premium, and pick up that customer targeting course that we created. I created it with Cindy Alvarez of KISSmetrics. It’s spot on about how to find your customer, and how to figure out what that customer wants that your company can help out with. If you’re a premium member, it’s right there. You don’t have to pay anything. It’s part of your membership. If you’re not, I hope you join that premium membership and get courses like that, and dozens of others, and hundreds of interviews like the one that just listened to. Final question is this, if someone want to connect with you and say thank you for doing this interview, or just otherwise follow you, what’s a good way for them to stay in touch after this interview?

Matt: They can look at our blog at HelloWallet.com, which is updated every day or every other day. That would be the best place. If someone’s interested in talking, you know, I’m completely swamped, but I love to talk to folks, and I usually will take a meeting every couple weeks. So, just send an email to Justin at HelloWallet.com, and he can hook someone up.

Andrew: Justin’s the one who introduced me to you, so thank you Justin. And thank you Matt. And check out also, the HelloWallet website which apparently, it works on IE6.

Matt: It does.

Andrew: Thank you for doing this interview, and thank you all for watching.

Matt: OK. Thanks.

  • Mehatem Ashenaffi

    HelloWallet, amazing product. I have been dreaming of such a software for the small business industry. This has a lot of benefit at the individual level, but can also be applied for small business. Matt are planning to do anything like that

  • Mehatem Ashenaffi

    Andrew Great interview 

  • Thanks!

    They’re doing phenomenal work.

  • Jesus

    what happened to http://mint.com and not spending more than u have?

  • Cynthia Andre

    HelloWallet has a unique and powerful position and distribution strategy by teaming up with employers, and because of how their product integrates with workforce benefits, they meet a different set of needs and objectives – in addition to basic money management – that Mint doesn’t. 

    I think Mint has its place in the world, and a product, like HelloWallet, can, too. 

    Insightful interview, Andrew – what a great guest.

  • Right. Similar businesses, but their products are different and the markets they pursue are very different.

  • Great interview. The peer pressure idea, where it’s localized to the user’s financial peer group, was very interesting. 

  • Thanks!

  • Anonymous

    excellent interview! thank you both for the story of a successful startup.

  • Thanks!

  • I liked this interview a lot. It does seem that the Brookings atmosphere really helped this company develop its mission.

    Still I’d would be very interested to see that book list — and will follow up on the writers he mentioned (some I have already read):
    Matt: So, yeah, I mean I’d be happy if you want me to send you a bunch of books. Andrew: I’d love it and I know my audience would love it too.

    …. we’ve been really influenced by people like Dan Orelli down at Duke, or BJ Fogg at Stanford, or John Zinman at Dartmouth, Moriba Shears out here at Stanford, you know these are really, there’s others as well, but these are people who are all kind of behavioral psychologist and bayroll economists who are, at the end of the day, focused on how do you change people’s behavior
    ……Foucault, right, he wrote Power, he would be someone to read on that

  • Sean lewis

    300,000 paid in 5 months, does that really ring true to you? Not me.

    Have you ever heard of hellowallet before this interview, not me.Have a look at the traffic on Alexa.com, its really not very impressive, only a few thousand visits per day. Also it shows the site has had a stream of traffic for over 2 years, not 5 months.We all know getting paid subscribers online is tough, so I’m surprised how poor the website is, considering how successful they claim they are. The signup process is not slick. The sign-up button is not clear on the homepage, the sign-up form is long. They don’t seem to have a simple compelling offers, etc, etc.Andrew I really hope you saw this guy’s number before letting him on your show.

  • Sean lewis

    300,000 paid in 5 months, does that really ring true to you? Not me.

    Have you ever heard of hellowallet before this interview, not me.Have a look at the traffic on Alexa.com, its really not very impressive, only a few thousand visits per day. Also it shows the site has had a stream of traffic for over 2 years, not 5 months.We all know getting paid subscribers online is tough, so I’m surprised how poor the website is, considering how successful they claim they are. The signup process is not slick. The sign-up button is not clear on the homepage, the sign-up form is long. They don’t seem to have a simple compelling offers, etc, etc.Andrew I really hope you saw this guy’s number before letting him on your show.

  • Sean lewis

    Some other low stats for a site that is suppose to have 300,000 paid subscribers in 5 months are:

    1) All of their blog posts have zero comments
    2) Only 570 facebook fans
    3) Only 2404 twitter followers, plus they are following 1508

    My guess is they sold to just a few company who have large employee base, at a discounted price. Very few people sign up individually.

  • Sean lewis

    Some other low stats for a site that is suppose to have 300,000 paid subscribers in 5 months are:

    1) All of their blog posts have zero comments
    2) Only 570 facebook fans
    3) Only 2404 twitter followers, plus they are following 1508

    My guess is they sold to just a few company who have large employee base, at a discounted price. Very few people sign up individually.

  • I disagree w/ the posters that are questioning the usefulness of this interview based on traffic figures.

    I think the main takeaway was that you gotta go after the *employers* of the 300K ppl, not the 300K individually.

    If you go to their site, you can see that a lot of their web copy is geared towards employers. Maybe they sign up bigger companies for licenses for all of their employees, but only a portion of them actually visit HelloWallet to take advantage

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