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Here’s your program.
Andrew: Hey everyone. I’m Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. The place you come to listen to successful entrepreneurs tell you the story of how they built their companies. So how do you build a successful mobile app company? Joining me today is Michael Russo.
He is the co-founder of Polar Mobile, which builds a platform that enables media companies and publishers to extend their presence across mobile devices. Basically, they build mobile apps for media companies and other publishers. His company’s apps are used by over eight million people. Michael, welcome to mixergy.
Michael: Hi, Andrew. Thank you so much for having me.
Andrew: You bet. So eight million people using your apps. How many apps have you guys built?
Michael: So right now we’re just above the 500 mark.
Andrew: Above 500 apps that you guys built internally at Polar Mobile.
Michael: Yes, that’s correct.
Andrew: Wow. All right. I’ve seen people struggle to build one app. It’s impressive that you can get to 500. Can you give me an example of one of the apps that you built. I want my audience to understand what you guys are working on.
Michael: Sure. One example is a series of apps we’ve actually built for CBS College. Where they have agreements with the college teams. Our CBS College apps, they’re actually specific to each school. Right now you can get them in the Android Market and on the Blackberry App World.
Andrew: So each school has it’s own app and is all built on the same platform. What do the apps do? What can I find out with the apps?
Michael: Sure. So there’s editorial content as well as sports information for all the different types of sports that are being played at that school. Stats, standings, live scores.
Andrew: Gotcha. OK. All right. With apps like that and numbers like the ones we mentioned earlier, are you guys profitable?
Michael: I didn’t hear the question.
Andrew: Sorry. That connection just dropped out, I guess, for a moment. Are you guys profitable?
Michael: We have very healthy revenues measured in the millions. [inaudible] are focusing right now completely on growth. All the money we make, we invest back into growing the business.
Andrew: Okay, and when you invest it back, where are you investing it to ensure that you grow and build value over time?
Michael: We’re investing a lot in the team. I’d say the team is the number one place for where I’m investing. We’re growing the number of engineers and just the ability and capabilities of our platform. That’s probably the biggest area where we’re investing. We’re also investing in other areas of the business, obviously related to sales and global expansion. But definitely engineering is the prime driver.
Andrew: Okay. So Sports Illustrated sends you a check, says, “Thank you for building our app.” You take that money and you say, “We need to hire more developers. Everything else is important. Developers number one. Number two, maybe a sales and international expansion.”
Michael: Correct.
Andrew: Okay. All right. I want to find out how you got here and I especially want to ask you about one of the statements here that you sent me in an e-mail about how we must find creative and ballsy ways to get our demos in the hands of decision makers. Let’s start off with where you were just before you launched this company. What were you doing before Polar Mobile?
Michael: I was actually a student and we actually launched the company while we were students. If we go back to the beginning, the story really starts with Waterloo. Waterloo is a little city, just about an hour away from Toronto in Canada. It’s the home of, arguably, Canada’s top engineering school. I was a computer engineering student there and the. . .
Andrew: Let’s see. We had our connection freeze up again. There we go. You’re back.
Michael: Okay. The engineering program at Waterloo’s really something special. It’s really great. One of the really nice features of it is something that’s called the co-op program. As part of the co-op program, as a student you actually have to do six four-month work terms in order to actually graduate. So the University facilitates this where a number of employers come in and they post jobs. Students apply to the jobs they’re interested in. Interviews are had. Offers are extended. Students pick where they want to go.
I spent the last three co-op terms on the west coast. I spent eight months in Silicon Valley, working at research labs. So SunLabs and PARC, the Palo Alto Research Center, working on really, really, really interesting projects. Stuff that’s not commercially viable today. But maybe in five to ten years. It really opened my mind to a lot of amazing people and a lot of amazing ideas.
Andrew: Before you go on, give me an example of a project that you worked on that was amazing or an idea that your mind was opened up to.
Michael: I was working on, at PARC, a security project that was actually being done for DARPA that used basically virtualization to protect different computing instances. So basically workers would use these different virtual machines to get their work done. The persistent state, everything you do on the machine in terms of files that are touched and different types of interactions that are being done. In the background, while you use the computer, all of those things would be uploaded to a central server where it would be analyzed for patterns.
If some virus broke out then you could actually take a lot at all the machines in the network and then compare the state and say, “Hey, we have this virus containment problem and all these machines are affected because there’s this pattern of interactions on the file system.”
It kind of opened my eyes to the idea of, to this concept of cloud intelligence, where you can take a lot of data from a lot of different people and kind of crunch numbers and use that to make decisions. That’s one example.
Andrew: Okay. What else did you do during that period?
Michael: Yes. My last work term, I worked as an intern at Microsoft. I was actually working on the core, the Kernel, of the security subsystem of it at Microsoft for Windows 7. It was really amazing just working at such a large software company and seeing how they pieced together this operating system. It’s just crazy when you think of the scale of it. It really opened my eyes up to the craft of software engineering. Just really, really seeing it in practice at a large scale.
On one end you had these research projects that a small group of really, really, really smart researchers working on. Then you have this huge operating system that top software engineers are building and shipping. That really opened my eyes to a wide spectrum of companies and ideas and thoughts. By this time I kind of got this idea that I really wanted to start a company and I thought I had the right foundation to go out and start it. I’m really thankful for the co-op program for that.
Now because I wanted to start a company I thought it would be great if I was working on a lot of different ideas and different projects. During school we got an opportunity to work on a number of different projects. Stuff that could potentially be commercialized later. I was also working with a number of different groups. For example, at Microsoft, I was working with some classmates that also happened to be interning at Microsoft on some really interesting software. We’d work during the day at Microsoft and then we’d get together and work on this really cool real-time collaboration software, as one example. That had potential. I was also working with a number of other different groups on a number of other side projects.
For example, concurrently, there was a group of students at Waterloo. Most of them were engineers that started something called “The Impactreneurship Group”. They started this when they got to school. When they first came in. So this would have been about four years earlier. “Impact” is really an organization that’s dedicated to fostering and promoting youth entrepreneurship and they do this through a number of different events and youth outreach and all sorts of ways. They find really interesting ways to launch their initiatives and get youth involved in entrepreneurship. This group of people had built “Impact” into Canada’s largest student-run youth entrepreneurship group in the span of four years.
There was a crazy number of volunteers, in the hundreds, working on this project. It’s not a surprise to think that, “Okay. The guys that founded this. They were going to go off and also start their own business towards the end.” I became introduced to this group and I’d been to some “Impact” events. But I didn’t know the core team. I became introduced to them through a really good friend of mine who was also my roommate in first year, as well as my lab partner and study partner.
Andrew: Let me pause there. Why did you want to meet them? Did you meet them with this idea that you would end up working together with them or was there something else? What were you hoping to get from them?
Michael: I heard that they were working on a number of different ideas and I really wanted to get involved because I knew that this was a really awesome group of people. Working with them, we’d probably be successful.
Andrew: Do you think you can tell back then just by looking at them and hearing about them that they were going places?
Michael: Absolutely. They held events and all the things they did under the “Impact” umbrella was extremely impressive.
Andrew: What’s one thing that you saw that made you say, ‘Man, these people are going some place?’ and I ask you because I want to know how I can identify other people who are on the right path. I also want my audience to know what they have to do in order to be the kinds of people that people like you are looking at and saying, “Man, they’re going somewhere.”
Michael: There was a couple of things. The first one was just the number of people they were able to get involved, helping to spread the word and organize the different events that they held. It was just unbelievable. The sponsors they got on board and just the amount of effort and the output. You could just look at the things they were doing and think, “Wow, this is impressive.”
One of the prime realizations of this was a conference they were holding every year. They hold a really big multi-day conference and they’d invite hundreds of students and top-level industry people to come in and give talks. They’d host different types of events and contests during it. It was a really spectral conference. Just going to that and seeing that and then knowing it’s a couple of students that founded this network of 100 volunteers they pulled together to make this work. You knew. You just knew.
Andrew: All right. Here’s what I’m wondering now. I understand how they’re great and how all these people see them and are in their world and apart of what these guys are creating. How do you go from being just another person in their audience to being a business partner of theirs.
Michael: Yes. One of my really close friends, my roommate. The lab partner that I was telling you about. He went to work with one of the core members of “Impact” on a co-op term. Which happened to be for a start-up in Singapore doing mobile music streaming.
Andrew: Boy, this co-op sounds like such a great opportunity and experience.
Michael: Yeah. It’s absolutely amazing. So he went to work with one of the core members and they became really close friends. It was a small group of co-ops that went to this start-up so they’re obviously spending a ton of time together. Not just at work but also touring Singapore and going around and having all sorts of adventures. They became really close.
When they got back, I was introduced and I heard about some of the things that they were doing and the fact that they were going to try and start one or more businesses with this core group. I was like, ‘Wow. This is really something. I’d like to get involved.” They were prototyping a lot of different ideas. It was really interesting. They had. . .
Andrew: I was at dinner last night and I saw this couple having an interesting conversation. I wanted to get involved in the conversation. It was kind of tough for me to push myself in to the conversation. But this is even tougher. You’re talking about seeing someone start a company and want to get yourself into that business. How do you go from being on the sidelines and watching them to saying, “Hey, guys, include me in this. I’m here too.”
Michael: Yeah. Good question. The first thing was it wasn’t really that a business was started at that point. It was more that there was some foundational elements in their number of different people that really wanted to get involved. There really wasn’t anything too concrete at the time. That’s the first thing.
The second thing is that businesses are all about the people you bring onboard. Recruiting is obviously an important part of that. They’re always on the lookout for people. They need people to makes these different prototypes and projects a reality. First of all, my friend is obviously vouching for me. Then it’s not too much of a stretch for me to say, “Hey. Why don’t we start working together and see what we can do?”
Andrew: Michael, did you start working with them as a partner or were you just offering to help them prototype something without any consideration for shares?
Michael: This was long before there were any shares to be had. It was an understanding that we’d get together and if this worked out, we’d incorporate. We’d split equities fairly.
Andrew: Okay. I’ve got here in my notes some of the things that you guys prototyped. Mobile banking software. Mobile and desktop course collaboration for students and teachers. Online portals for different niches. Mobile magazine reader. Why so many different projects? What were you guys looking for?
Michael: We weren’t sure exactly what would take off. We had a lot of ideas for a lot of really cool things. But we didn’t know what was going to work and when. Some of the things we were working on we wouldn’t have been able to get traction on them right away because the supporting infrastructure wasn’t there.
We were thinking a lot of mobile things and some of the stuff that we were working on would’ve worked today but it wouldn’t have worked in 2007. Just building a business for that long, trying to get traction is really tough. We thought, “Let’s try a number of different things and see what works.”
Andrew: Okay. As you’re trying this, how deep into each one of these products do you get before you decide it’s either a hit or a miss?
Michael: We had working prototypes for almost all of them. At that point we were really just experimenting. We didn’t set any metrics like we have to have this product launched by this time and this much usage or anything like that. We were just trying to find our groove. Find a great group of people to work with and some possible businesses that we could run once we graduated. That was really our goal initially.
Andrew: How long does it take you to prototype something like a mobile banking software?
Michael: If you stub out the really hard parts and you say, “Okay. These things will eventually be there and that infrastructure will be available to us.” If you do that hand waving magic it doesn’t take too long. We spent probably, with a couple of guys, over the course of three months. Actually, not even three months. A few months for each. we had something that we could take and show to stake holders.
Andrew: A few months to develop a mobile banking platform.
Michael: Not something that could be launched in production. Just a very basic. . .
Andrew: Just a bit basic. All right. I’m fascinated by this. you had to make some decisions on what to include and what to exclude. How did you decide what to include?
Michael: It was, today was really an ad hawk process. Where we thought there’s this problem that exists in industry and we’re definitely not banking experts by any stretch of the imagination. We just got together, did some white boarding. We worked from there. It was a lot of just white boarding.
Andrew: It seems like a minor detail but any time we launch something we have to figure out, what do we include? What do we take away? I started adding courses here on Mixergy. I had to figure out what do we need to absolutely have? Do we need to have tests? Do we need to give people feedback? Do we need to do chat?
If you add everything that you imagine people are going to need, you’re never going to launch anything. You have to figure out a way to cut some things out. Did you cut out based on how much time you had? Did you cut out based on some other system? How’d you know?
Michael: A lot of it was we were very constrained. We didn’t have a lot of time. We’re still doing our course work, trying to graduate. We weren’t even just working on one thing. We were working on multiple concurrent things. At the end of the day it all came down to time. We didn’t know the concept of a minimum viable product. We didn’t know what that was at the time. That’s essentially what we came up with on our own.
Andrew: What’s one thing that you had to exclude from the mobile banking software?
Michael: I didn’t work very closely on that so it’s probably not the best example for me to comment on. I can give a different example. For example, the course collaboration software. I’m trying to think exactly, this was awhile ago. We had a number of different things that were in this product that we were working on.
One of the features that we wanted was Facebook integration. Everything you did in the system, you could kind of mirror into Facebook. That turned out to be more complicated at the time than we would have liked so we cut that feature.
Andrew: So you have six co-founders right now at Polar Mobile. All these guys were involved in these projects.
Michael: Yes. That’s right.
Andrew: Here’s another thing that I’m wondering. One guy’s involved in mobile banking. Your involved in course collaboration. A third guy’s involved in online portals for different niches. When you eventually settle on the one, do you have to bring in all these guys that are working on other projects who don’t necessarily fit in with Polar Mobile and then divide your shares among all you guys? No one has more than 17% of the business.
Michael: Yeah. What happened was we were working on these different ideas. Something amazing happened in that we managed to actually close customers on the magazine product. This was kind of like an “Aha!” moment where we’re still in school and we didn’t just close any customers. We closed two of probably Canada’s most widely respected, most widely read magazine properties. Maclean’s and Canadian Business. These are really big papers, magazines. These guys put their faith in us.
We thought, okay, you know what, we have traction here already. We’re getting paid just to build this. At that point, shortly thereafter, we came together and we said, “You know what? Let’s put these other projects on the back burner and let’s focus all of our energy on this magazine product.” That’s what we did and it just made sense.
Andrew: All the developers who were working on all the other projects. They had enough to contribute to this one product so that they could actually pull their weight?
Michael: Absolutely. Yes. There was a lot of work to do. . .
Andrew: How did these two companies find you? How did you all of a sudden end up with two big name customers?
Michael: This was definitely not my deal. The prime architect behind this was Kunal Gupta. He’s our CEO. He was the initial guy behind “Impact”. Via the “Impact” network, via “Impact” and all the dealings he did with it, he grew a very big network. He worked his network and was able to get at that time a really crude prototype in front of the decision makers at Canadian Business and Maclean’s. Managed to close the sale.
Andrew: Wow. Just by showing them the prototype.
Michael: Yes.
Andrew: And working his network.
Michael: Correct.
Andrew: And the network is one that he probably built up by building “Impact”, that Canadian group for entrepreneurs. All right. Interesting. Now you guys see that you have enough traction with this one to make it interesting. You drop everything else or do you sit down and say, “Wait. Just ’cause we have one client who loves this doesn’t mean that this has the biggest long term potential. Let’s analyze the long term potential of each of these products.” What kind of analysis do you go through to decide that you’re just gong to focus on this mobile, digital magazine system?
Michael: I don’t think it was anything too elaborate. It was more, “Holy s***. Look at all the work we have to do. Let’s come together and make it work.” The initial idea wasn’t that we were going to can all these other things we were working on. The idea was that once we grew the business to the point where it was self-sustaining, let’s start up and try out some other ideas. That’s one of the reasons why the company name is not actually just Polar Mobile. It’s Polar Mobile Group. The idea was we’d launch other brands and other companies underneath the Polar Mobile umbrella.
Andrew: I see. Will you, now that you’ve seen how big you’ve gotten this mobile, digital magazine system. Do you plan to go back to the others still?
Michael: I think in the long run, yes, we’d like to do that. In the short-term or even the medium-term, it’s not realistic to think that we could. We have a huge market opportunity and a lot of work still to do so it’s important that we stay focused.
Andrew: All right. What’s the share breakdown of the owners of the company? Of the founders?
Michael: It’s very equal. I prefer to not get into the exact details. Everybody has a very fair share.
Andrew: Do you guys have any outside funding?
Michael: Yes, we do. We’ve done two angel rounds. a good chunk of the equity is owned by the investors.
Andrew: More than 50% is owned by the investors?
Michael: No, not more than 50%. A nontrivial sum I guess. What you’d expect.
Andrew: Can you say what size round you guys raised?
Michael: I’d prefer not to go into the exact details because we haven’t published externally the numbers. There are two angel rounds.
Andrew: Okay. I’m not going to push for simple reason. Lately what’s been happening, now that the audience is bigger here on my site. Entrepreneurs who reveal stuff freak out that others are going to see it and hear it an know about it. So they start asking me to pull information odd and start asking me to edit within the interview and I can’t do that. It’s a big pain in the butt. At times I have to just watch myself.
If the information is not that useful for my audience to know. I don’t think anyone’s really going to alter their view of this business or their understanding of the market based on how much money you raised. If it’s that kind of question then I’d much rather stay away from it. Let’s move on then.
You guys are focused on this one product. This one product that becomes apps for mobile devices. You start building out the product for Canadian Business and what was the other one, Maclean?
Michael: Maclean’s. yes.
Andrew: Maclean’s. What do you give them at the end of this process? What’s the first product like?
Michael: The first product is initially just on Blackberry. This was before you could actually write apps for the iPhone and other mobile devices.
Andrew: What year was this?
Michael: This was at the beginning of 2008. We launched the first product for Maclean’s and Canadian Business in January of 2008. The product was essentially a magazine reader, where every week or every month you get pushed a new issue of the magazine. In some ways the concept was, this is a magazine. It’s on mobile. We had a lot of things from print that we translated over to the mobile device. it was very simple. There weren’t a lot of features. It was more about just being able to read the content and being notified when there were new issues and new content for you to read.
Andrew: I was going to ask if this was just a scanned copy of the magazine but it couldn’t be because Blackberry doesn’t show images all that well. It was probably just text of the magazine, right?
Michael: Text. There were some images as well but it didn’t look like a print page, like you would get in some of the iPad magazine apps of today.
Andrew: Were they selling it?
Michael: Actually, no. It was available for download for free. We monetized the advertising.
Andrew: Then how do you go from there? Now that you’ve built the first two apps.
Michael: It wasn’t just those two apps that we built in a vacuum. We also had to build a back end to support the applications. We also had to build out some other infrastructure that was extremely complicated but a necessity at the time. For example, we had to build our own ad server that could serve advertisements into these applications.
Even today the ad server that we have has some nice features that you can’t really get anywhere else. For example, if you downloaded one of these issues of the magazine and you were on the subway or somewhere without coverage, you could actually still see an ad. We could still track the fact that you saw that ad. To monetize it. We also had to build out an analytic system.
Today there’s several startups and other established companies that have mobile-specific analytic solutions. There wasn’t anything off the shelf that we could really use at that time so we had to build that out. We also had to build out a content ingestion back end and CMS.
Andrew: Why add all these features to the first version? Why not say, “Hey. We’ll get customers and then later on after we have our customers, that’s when we’ll add the ability to see ads in the subway. That’s when we’ll add analytics to track them. But before we have customers, why not just focus on launching?”
Michael: We would have loved to been able to do that but for media companies, it’s all about analytics. They need analytics, they need to know as much as they can about who’s reading, how long they’re reading, what they’re reading. Otherwise, they can’t sell advertisements into it.
It would have been a big stretch for us to go to them, this young group of guys, in unproven platform and technology and say, “Hey. Why don’t you pay us and eventually we’ll add the ability for you to make money from it.” We couldn’t do that so we had to add that complexity. We focused on building out those apps. We also closed another customer before we graduated, which was actually The University of Waterloo. Specifically, the alumni communications. We built an app for Waterloo, where they could keep in touch with the alumni. That was the initial time. What happened was we graduated.
Nothing really changed that much right away after graduating. We moved into office space in downtown Toronto from another start-up. A really awesome start-up that had extra space. So we moved into their office and from there we started slowly closing more deals. Building up the capabilities of the platform, adding support for other operating systems. It wasn’t too much later that the app store came to light and Apple said you can develop on iPhone. We just started, at that point, slowly building out the product and the platform and trying to bring more customers on board.
Andrew: Were customers just coming to you in the early days? It seems like it was very easy. Like, The University of Waterloo. Did you go to them? Did you guys have to sell them or was it just so easy because Kunal was well known and because you guys already had customers and were students of the school?
Michael: Even though Kunal was well known and we were students at the school. It still wasn’t as easy as you’d think. We still had to go out and do the sale. At that point, customers weren’t coming to us. We still had to really convince people that the idea behind having an app that you can install on your phone that would give you content and that you could read on.
We had to convince people that that actually made sense. A lot of our early sales meetings were just convincing people that, ‘Hey. Users will want to install apps on their phone and there’s a lot of utility in it. It will help you extend your reach and increase your engagement across your readership.’ We had to work really hard. At that point, Apple had not educated the market, which is really what happened when the App Store launched and the iPhone really started taking off. Apple educated the market. They demonstrated the consumers want to install apps but that wasn’t the case yet.
Andrew: All right. Was there any question in your minds about whether you would launch this business or not? Did you guys have to sit and say, “We have all these great job offers. We’ll take those.” Or was it just, “We have a business, we’ve got to do it”?
Michael: At that point it was we have this business, we have these customers, we have these obligations, we have to do it. There were separate discussions going on with other guys that potentially would have joined the Polar team as founders that. . . some of them dropped off and said, ‘We don’t want to take this amount of risk at this point in time.’ So we lost some really great guys in the process to big companies that are paying them a lot of money. That type of thing is to be expected.
Andrew: Did you secretly in the back of your head go, ‘Pft. Take that guys’ Every time that there’s another win? You’re missing out on this party.
Michael: Yeah. More like, “Man, it would be great if we had even more guys on board that could’ve helped us get here faster.”
Andrew: Really? You’re not saying, “In your face.” You’re saying, “Boy, I wish they were still here”?
Michael: Absolutely. Yeah.
Andrew: Wow. You’re a much nicer guy than I am. Let’s go over to the ballsy ways that you got people to try out your demos. How did you do it?
Michael: This was definitely not me going out and being creative in this. I was more running the technology. Really, I’m way too introverted for this type of thing. Kunal really drove this and what he would do is all sorts of techniques to find the right people to show our products to.
Andrew: Tell me about that.
Michael: For example, he’d go to different media conferences. Really just work the room. Find out who the right people are we would need to show our stuff to. It’s not necessarily the top executive at whatever media company. We need to find the right decision maker. Particularly, someone who would be making a decision about mobile at a time when these media companies didn’t have SVP of mobile or director of mobile because it was just too new. He worked the room, worked the network. Find the right guys and just be persistent.
Even if he didn’t know their e-mails. Just try every combination of their e-mail and try and set up a meeting. Usually the guys would eventually say yes at which point he’d fly down to their offices and say, here, we’ve built an example application of what your stuff would look like on BlackBerry and iPhone and whatever other platforms we were supporting at the time.
We’d actually give them something that they could install on their phone and play with. In hindsight, that was really the most important thing that we did and it set us apart from all the competition. We gave potential customers essentially a fully working app that they could see and touch and feel.
Andrew: I can see how that would be very moving for a customer to see that it’s already there. To imagine what else it could be. To maybe come up with ideas for what you’d need to build for them next. Instead of just trusting that you could get this done. How do you build so many apps? One for each person that you’re wooing?
Michael: Yeah. This was actually a major point of contention on the team. The sales efforts, we’re saying, “If you give us a demo. It really, really helps.” At this point, before we started getting that first real onslaught of customers, we didn’t have any data to prove that these demos really did help. We didn’t really know yet. We’re having this pushback between engineering and sales. Sales, “We need all these demos’. Engineering is, ‘It takes time to make them.”
We want to be able to makes these demos quickly but we can’t unless we invest time into it. If we’re making demos, we can’t invest that time just because we’re stretched too thin. It was definitely a trying process. Eventually we were able to really bring the tools up to par so that we could do this sort of thing really quickly.
Andrew: You created, from what I understand, a platform for creating apps so that it wasn’t building a new app for each potential client and each existing client from scratch. It was kind of like me building a new website on WordPress with an existing theme that’s commodified.
Michael: Exactly. The same type of idea.
Andrew: I see. That was intentional because you wanted to pursue a business where you were creating apps for multiple companies within this one space, within the media space.
Michael: Correct. We wanted to build a platform. We wanted to make a really scalable business. We didn’t want to be a consulting shop.
Andrew: I see.
Michael: That was really important.
Andrew: Why build apps for other companies, then, and not build them for yourself?
Michael: We saw a big opportunity in the media vertical. In media and publishing it’s all about your brand and that brands content. We need to leverage the brands and that was what was most important.
Andrew: Why not create an RSS reader or some other kind of reader that would just pull in all the data that’s out there already?
Michael: That’s something that we’ve seriously considered in the past. What was interesting was. We debated this. Then what we did was, we actually asked some of our customers. Some of our customers, actually a lot of them, syndicate their content into channels like Yahoo and other places. We asked our customers about this and what we found out was they made no money doing this. They made no money.
If we tried to adopt a similar model, we were thinking, “What would we do differently in that model that would allow us to make more money than these guys would with other partners like Yahoo?” So we thought, “Okay. There’s probably no money in it. At least not right now.”
Andrew: I see. How’d you figure out what to charge these companies?
Michael: That’s an interesting question. We started off doing revenue share deals on advertising.
Andrew: Really? They would sell the ads, you would just get a cut of the revenue that they brought in?
Michael: Correct. There were different models where usually, and this is the way that ad sales work. If we were to sell the ads, then we’d get a slightly higher cut than if they sell it. This worked well. It wasn’t perfect. We found that we wanted to switch the model up a bit so that it was a bit more consistent for us with more potential upside for our customers.
So we switched to charging really a technology CPM. Or a price per thousand page use for our customers. We do it on a sliding scale. The more page use they have, the lower the overall rate becomes. We took this model to our customers and a lot of them said, ‘Yes’ right away. At that point, advertising was really starting to pick up so the numbers worked out and the numbers made sense.
It was really important for us to have our customers making money. That’s a key element. Our customers need to be making money off of our product. Otherwise, there’s no real arbor why. [??] We wanted to make that easier for them.
Andrew: Actually to give people a sense of the kinds of customers you guys are pulling in. You got TIME Magazine, you got ELLE Magazine, CBS Sports, Crain’s Chicago, CNN Money and other companies like that. This isn’t just the top brands that I pulled out. These are really representative of the kinds of companies that you guys are pulling in and doing business with. Why not charge them a one time fee or a monthly fee for maintenance that’s not dependant on CPM but that’s just dependant on the technology you build for them?
Michael: I think that the CPM basis, it really speaks to the value of our product in the fact that we’re willing to say, ‘Instead of, pay us this many thousands of dollars a month, let’s make it scale based on usage.’ It makes the incentives right. It forces us to really invest in improving the product. For them, it helps them to say, “If we promote this more and we put more advertisements behind it and we focus more on it. Our overall rate is going to go lower.” Which means that for all the page use monetized, we actually make more money. It just keeps the incentives in line.
Andrew: I got to ask you a kind of personal question here. Before the interview started, I said, “I don’t know anything about these guys. I can’t find any information about Polar Mobile.” It’s kind of a generic name, Polar Mobile. It’s hard to Google for it.
Just as I was going through that I saw in my inbox that you sent me an e-mail, and to Tristan, our producer here at Mixergy. Which is full details on your company. Background, number of people at the company when it founded, product details, questions and answers that I could possibly ask you. There’s more text in here, and I read every word of it, but there’s more text in here than there will be in the whole transcript that I put up on this site. How long did it take you to put this together?
Michael: We initially signed up this interview slot about a month ago and since then I’ve been chipping away at this. Really because I’m a very novice interviewee so I wanted to make sure that I prepared myself as much as possible. I’d work on it, basically, an hour a day for about a month.
Andrew: So an hour a day you wrote down notes in preparation for this interview?
Michael: Yes.
Andrew: That makes me wonder about the kind of person that you are. Give me an example of how this plays itself out in the rest of your life. How does being this detail oriented express itself in other aspects of your life?
Michael: Great question. I think it’s important to be very thorough. Sometimes mistakes happen because I’m too thorough. For example, focusing on the wrong things when architecting a new version of our software. Those types of things cause problems because if I had focused on something else then we’d be in a better position. This other problem wouldn’t have been happening. It’s just about picking what’s important and deciding to focus on that and that’s something that I’ve learned over the years.
In the case of this interview, I thought, “I’d really like to help out other entrepreneurs and other guys that are sitting on the sidelines thinking, do I really want to take that leap? Do I really want to get out there and do this?” I wanted to make sure that, to the best of my ability, this interview would help convey that. So I thought it’s a good investment to spend some time consistently over the course of a month just preparing notes. To help other people make that leap and help them on their journey.
Andrew: You must of had all “A”s in school. Did you?
Michael: At university, it was really tough. I’d say . . .
Andrew: If you weren’t at Waterloo. If you were at a different university, you probably would have done all “A”s.
Michael: Yeah, I think that’s a fair . . .
Andrew: Other people. Why do you think they should take the leap and become entrepreneurs?
Michael: I don’t think that anything else that you could do would prepare you for it. The number of mistakes we made while running this business, it’s unbelievable. Because we just went out and we did it and we learned from it. We learned from our mistakes and didn’t repeat them. It allowed us to grow and really start to make a difference. That’s why I think you need to get out there and just do it.
Andrew: I see. You’re saying, co-op, as great as it is, doesn’t prepare you for entrepreneurship. “Impact”, a great organization that encouraged entrepreneurship isn’t going to prepare you. Even listening to Mixergy interviews is not fully going to prepare you. The only way to really be prepared is to go and just do it.
Michael: Yeah. I think that’s fair. I think that having resources like co-op and having resources like “Impact” and Mixergy. I think that they help in extreme amounts but nothing compares to actually just going out and doing it.
Andrew: Give me an example. What did you learn on the job that you wouldn’t have learned otherwise?
Michael: I guess we can look at some of the mistakes we’ve made and then use that to help answer this question.
Andrew: Okay.
Michael: We had a really kind of dark period in the company’s history. When we started signing up too many customers and just getting too many users. In that e-mail I sent you, I used the expression, “Getting traction almost killed us” in the sense that we were just growing too quickly. The number of users and users using our products was growing at an exponential rate. The number of customers we signed on was growing at a very healthy rate. We made a lot of mistakes.
For example, we thought we had all this work. We need to hire a lot more people. To that point we had a very organic approach to hiring and it worked great. When you say, “Okay. We’re a company of this size and need to double,” that changes things. You go and you’re running around. You’re trying to hire people. You inevitably make a lot of hiring mistakes.
From a customer perspective, we were onboarding way too many customers. We didn’t realize that we were doing anything wrong at the time. We though we could do all of this work and we could easily handle it. No problem. The reality didn’t work out exactly like that. From a technical perspective, we made a lot of mistakes just from product design and how things were implemented that kind of handicapped us from making changes quickly and adapting to our problems. We also had other problems. Every time the user base grew by a factor of ten, we’d have to rewrite serious amounts of codes to make the server scale. Now it’s one thing to have 10,000 users and 100,000 users but once you hit 500,000, 1 million, 2 million, 5 million, different parts of your system get stressed.
You need to work to resolve those but you didn’t plan for that when you signed up all these other customers and all these other features and promised them. We had a lot of challenges. The hires weren’t right. We weren’t able to manage the whole team to the level of quality that we needed. Things started falling apart. It became really, really tough for us.
I guess I’ll answer how we got through it and then I’ll circle back to your original question. I think the most important thing we did was, the founding team, we didn’t give up. We had all these challenges ahead of us but we didn’t give up. We did make other changes. We brought in some more senior management. We hired some other people that were better fits for the team. We took more care when hiring. We did all these things. We grew our advisory board. Other people were helping us out. That was great and that stuff was important. Because we never gave up, because as founders we didn’t check out. It’s like, even though this sucks we’re going to work as hard as we can to fix these problems we’ve created and repair the customer’s trust in us. We’re going to work really hard and get through it.
Because we were able to do that and not lose faith. And because we had such a large group of core founders that we could all lean on, it really helped us get through it. I think that was a really important element.
Now circling back to the kind of mistakes. I think the couple mistakes we made were that we were too ambitious. As an entrepreneur, someone running a start-up, you’re supposed to think, ‘I’m invincible. Our team is invincible. We can take on the world. We’re superheroes. Throw anything our way, we’re going to win.’ But there’s a point where that becomes counterproductive. You need to work within your limits and you need to focus.
Andrew: How did you take on that you shouldn’t have?
Michael: Just too many customers concurrently. Not even just the customers but also, there were features that we accelerated into the world map that we could have phased out more slowly. We could have promised them to customers at a later date. It was just all that and we weren’t very experienced with account management. We had a lot of engineers but not a lot of people that could be liaisons with our customers and help them understand our development process, handle all the inputs, do the branding and how to get their feeds integrated into our system. We didn’t have a lot of that infrastructure in place. We were just too ambitious.
Andrew: How do you as a company turn away customers when you’re a new business trying to put your name out there, trying to lock up as many customers as possible?
Michael: We didn’t do that initially.
Andrew: You didn’t. You’re saying you should have.
Michael: We should have.
Andrew: Really? Okay.
Michael: I think one of the few mistakes that we made was that, it sounds silly saying it, but we didn’t realize that no was an answer. We didn’t realize that you could say no to business. We just thought we’re an unproven start-up. We have all these people that want to work with us. We can’t say no to them. In hindsight, we probably should have. Although, if you take another step back and you say, “As a startup, the alternative would have been having no traction versus having a lot of traction that almost kills you.” Which one would you pick? You’d always pick your death. . .
Andrew: In fact, let me ask you this. Wouldn’t you, on a practical level, prefer to take on more customers than you can handle and even disappoint them at first than not take on those customers? Because this is a growing business. Whoever these customers lock in on, they’re married to them for a very long time. ESPN can’t say, “Hey. Forget about that app that we just built with Polar Mobile’ I don’t know if you have ESPN. Sports Illustrated can’t say, ‘Forget about the Polar Mobile app that we built. Let’s go hire another company.” No. They’re locked into you.
So if you lock them all in, in time you’ll figure out how to make it work. If they’re disappointed with the first product and they’re upset with you because you didn’t scale right, you give them a free year or two but in the next few years, you’re going to make your money back on them. You just want to lock them in when a business and an industry goes this fast. Don’t you think on a practical level that’s true?
Michael: Yeah, in general, you want as much business as you can. I think that there’s always a price to be paid. In our case, if the founders had given up, checked out. If we didn’t have that support group that we had. If we didn’t get together and say, ‘You know guys, we need to make this work.” Well, the company would have folded. That was a real possibility in the case where the founding team gives up.
Andrew: How did you know that you would end up with such a good founding team? You happened to not have people on board who were going to destroy the business or destroy morale or start blaming each other. When there’s six people, it’s so easy to have infighting. How did you know before you launched these are the people you want to be married to professionally?
Michael: I think it all comes back to those prototyping sessions. When we were working on a number of different products and working really hard. Even when we came together, before we actually officially incorporated and were just working on our initial magazine reader product.
You really learn a lot about a person and a team and the group dynamics when every night you’re working the night shift from ten p.m. until two in the morning, three in the morning, five in the morning, working to launch a product. You learn a lot about them. I think that period was formative and that gave us all the confidence. We could get together and work and run a company in good times and bad.
Andrew: You and I were introduced by Jing Lou [SP] and one of the things that I think Jing Lou told me before we started was you have a good support network outside the company, too. Advisors, mentors, people you can talk to about the issues. Is that right?
Michael: Yes, that’s right.
Andrew: How did you get that network?
Michael: I think a lot of this goes back to that “Impact” base. Part of “Impact” is just getting really, really successful people to come to conferences and events and speak to youth entrepreneurs of tomorrow. Part of running “Impact”, you had to grow this network of people and you really leveraged that in our business.
Andrew: Who’s one person who you can call up right now and say, “We’re having a crisis. We don’t know what to do. Help us talk it through and give us some ideas”?
Michael: Some of our investors are really great examples of guys that have been there and done it before. An example is Greg Wolfond, who is a lead investor. Runs Blue Sky Capital, where he does his angel investments. He is an entrepreneur that started a number of different companies. One of his companies he actually IPO’d and just ballooned in size. They learned a lot of valuable lessons. They’re obviously really close with us.
He has a core group that he founded a number of companies with and they currently are running a company called SecureKey, which Intel invested into recently. He has a core group that has kind of followed through with him throughout the years, especially on the technical side. His CTO, his VP engineering has really helped us throughout the years and provided a lot of advice. Particularly in running a technology team or an engineering team.
Andrew: Is he an investor too?
Michael: Yes.
Andrew: He is. Okay. What about focus? In the notes you sent me beforehand, you told me that focus was a big issue for you guys. That you just needed to keep getting rid of certain options. Tell me about that.
Michael: One of the things that I talked about earlier was how we had to build out all this other infrastructure before we could actually build out our actual product. On the analytic side, the advertising side, as examples. Those projects and those products that we built to support our main product. Those were really big distractions for the team. We had a really, really small team and there were a lot of problems that we needed to solve.
We could look at those as examples and say, “These things are making growth of the rest of our business more difficult.” One of the things that we’ve done recently is we started working with partners. Really, we could leverage partners for the stuff that they focus on and are really good at. Now we have different partners that we work with for advertising, different partners we work with for analytics, as examples. They focus on what they’re good at. We focus on what we’re good at.
Andrew: I see.
Michael: That has really, really helped us just to stay laser focused.
Andrew: We have a company goal that is simply “focus”.
Michael: Yeah. Every team meeting, we’ll bring up a slide that says, “Okay. Here’s one of our goals. It’s focus.” The teams nods their head and they’re like, okay. This is important. We’re entrepreneurs, we’re ambitious, we’re naturally coming up with all sorts of other really awesome ideas. Then we look over and we see focus there and we’re like, “Okay. Maybe we should put this one on the back burner.”
Andrew: All right. I see focus coming up a lot in my interviews. I got the focus. I have the understanding of how you got the first clients. How did you grow from that? There’s only so many people that, as a small group, that you guys could fly out and create apps for and show those apps and put them in their hands. How do you go beyond the first few clients?
Michael: There’s a couple different stages of growth. Our initial growth was completely in the Canadian market. Where we brought onboard a lot of Canadian customers and we built apps for them. Then we started to slowly but surely grow in the U.S. We brought onboard the TIME Inc family of companies and companies like that by being creative and figuring out ways to get our demos in their hands. That’s helped us grow significantly for very obvious reasons.
But what happened was, we looked at the global opportunity and we said, “Okay. How about growing internationally?” So we looked at some partners that we could actually work with and what we’re piloting right now, a couple different scenarios with a couple of different companies that represent big presences in different regions. We’re working with them to onboard customers. As resellers, basically. That is proving to be really valuable. We have a very small team. We don’t have geographically dispersed sales team. Working with partners has really helped us to grow.
Andrew: You know what I’m seeing here? What I’m seeing in interviews like this is just the impact of the finding the right trend. You guys jumped on mobile before it was big. Just as it was starting to get big and you rode it up as it was growing. If instead of doing mobile you guys wanted to work on blogging and introduce blogging to the corporate world, you wouldn’t have done as well. If you wanted to introduce the web to them. Obviously, at this point, they all know what their web presence is. But you happened to hit this one spot just as it was growing and you were able to intelligently grow with it. Shows the need to find those trends. True?
Michael: I agree completely. We really knew that there was something special in mobile. We had a really good feeling that we have these amazing Smartphone. There’s just so much potential that’s not being leveraged. One of the advantages we had was actually being in Waterloo and being in the backyard of research and motion. We had a lot of that idea exchange. That really helped us. I agree completely.
If you get in on a trend at the right time it can really, really help you grow your business. Sometimes you can be too far ahead, in which case you just can’t get the traction you need. In some cases it just makes it harder the longer you wait. You got to find that sweet spot.
Andrew: Yeah. There were some people who found that sweet spot when it came to a search engine optimization. They were just so good they were able to ride that wave and grow along with it. There were some people who did that with FaceBook apps. I did a couple of interviews on that. In FaceBook apps, anything you did just grew right away but just as quickly it all kind of just disappeared because it was a shaky platform to build on.
Mobile, I’m now starting to do interviews with. Just a few companies that hit it just at the right spot the way that you did and were able to build up with it. It’s been four years. You must be incredibly proud of what you built.
Michael: Absolutely. I’d say I’m probably most proud of the team we built and the people that I get to work with on a day-by-day basis. I’d say that’s probably the best part of it. But absolutely. As a company and as a team, we’ve undergone an incredible journey and I’m really, really proud of it.
Andrew: All right. Well, thanks for sharing the story with us. Good to have you on here.
Michael: Thank you so much, Andrew.
Andrew: Oh, you bet. Thank you all for watching. Bye.
