Andrew: Coming up, why do you think founders reveal their revenue here on Mixergy? Check out I think question number 2, maybe question number 3. You’ll get the answer right there.Also, what happens if you’re the kind of person who has a strong vision and you hear everyone tell you, you should validate your vision, get some feedback but it just doesn’t feel like your way of doing things. Check out today’s guest. He had that approach. See what happened to him.
Also, what’s the best feedback that a CEO can get about how good a job he’s doing as a CEO, how good a manager he is. Do you ever wonder that? I mean, you probably give your team feedback. How do you get feedback from your team? Well, towards the end of the interview, today’s guest is going to tell you how he does it and I think it will surprise you and hopefully be very useful. Check that out. All that and so much more coming up.
Listen up. I hate to have commercials interrupt this interview so I’m going to tell you about three sponsors quickly now and then we’re going quickly into the program starting with Walker Corporate Law.
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All right. Let’s get started.
Hey there, freedom fighters. My name is Andrew Warner. I am the founder of Mixergy.com, home of the ambitious upstart. How does a founder like you, the person listening to me, find a start up idea that can get some traction?
After trying several ideas, which you’re going to hear about in this interview, Nick Francis hit on Help Scout, a software that offers the simple, straightforward way to provide customer support and now is getting a lot of traction with it. I invited him here to talk about it.
Nick: Absolute pleasure to be with you today, Andrew.
Andrew: Thanks. What kind of revenue do you guys generate with the business now?
Nick: By the time this interview airs, we’ll be doing over $30k a month.
Andrew: $30k a month.
Andrew: Now, before this interview started, I wanted you to make sure that this was OK for you to reveal. Because you never revealed it publicly before. Check it with your co-founders. You went and checked and came back and said ‘They’re good with me talking about it but they want me to put it in context.’
What kind of context do you mean?
Nick: Help Scout, the way that we’ve raised the money, the way that we’ve decided to build this business, it’s just a little bit different than others even in the same space. So we’ve raised $800k in funding. We’ve built a business and we’ve acquired customers through content marketing and channels that you just can’t write a check for.
So while others in our space may be able to pay $5,000 plus for customers, we pay less than $100 for a customer. So it has taken us a while to build a really loyal customer base and kind of make strides with our [??] customer strategy but we’ve gotten there and as a SAS business we feel really, really [??] where we stand.
Andrew: And the reason that this is specially exciting for a SAS business is because your revenue grows month to month as you keep your current members and add new ones, if you’re doing everything right.
Nick: Yes. And it’s paying customers. These are people that take out their wallet every month and they’re happy to pay for this product. And we’ve got double the amount of users that are actually on our free plan. So we’re really excited about that too. And half of them are paid and half of them are free.
Andrew: And so you’re paying $100 to acquire a new member roughly? What does a new member pay per month?
Nick: On average, about $80 right now. $75-$80.
Andrew: $75-$80 per month on average. So within 2 months, you’re making your money back on them.
Nick: Yes. We have to if we want to be profitable as a company. And that’s what I mean we’re taking a little bit of a different path.
Andrew: Where does the money go then if you’re doing content marketing?
Nick: You know, at this time it goes into team. It goes into a few experiments, we will do some paid acquisition.
Andrew: When you say $100 per customer is what you’re spending you’re including overhead as in marketing person overhead, writer overhead?
Nick: Don’t include personnel. I don’t want to include personnel in that. So we’re doing some ad works [??] but the ceiling is quite low for what we’re willing to spend. So it’s kind of [??]. We can get 10 customers a month, maybe, but that’s about it where we stand in the market today.
Andrew: I have a note here to come back to spend a lot of time in this interview talking to you about how you are using content marketing to acquire new users. When you say to me that its $100 on average per user, is that for the paid users and then in addition to it you also acquire free users through content marketing?
Nick: You know we don’t really measure the free users as far as any sort of paid ROI or anything.
Andrew: I see they are not averaging down your spend?
Nick: Yes. Two percent of our free user base will upgrade over the course of a month and we don’t even include them in our costs or acquisition.
Andrew: This is an impressive story. I wasn’t even sure you should even talk about your revenue, because I wanted you to check in with your co- founder. I specifically hung up so you could check in and make sure this was fine. You checked, you came back on, and I asked you why are you doing this? Why are you willing to reveal your revenue and why are you willing to come on here? Why don’t you tell the audience what you told me? I was excited to hear it and I want to audience to hear how far I’ve come. Because damn it, I always talk about how low I was.
Nick: My co-founders and I are from Nashville, Tennessee. Years ago, when we were talking about building a start up and make software for people, your show was one that really spurred us on. I mean, we don’t have a big start up community. There are some really successful ones in Nashville but for the most part I found people that I look up to and I admire and I learned from through your interviews. So, it’s an honor for me to be here just as part of what you are doing. I don’t think you probably get to hear this from many folks, but it’s true. It was an extraordinary inspiration from us, especially early on for us, your show.
Andrew: Thank you. I appreciate you saying that because I started out with this voice in my head saying I’m a nobody in this space. Everyone, of course, wants to watch Kevin Rose. Everyone wants to watch Jason (?), wants to watch all those other people. No one’s watching me. I almost developed this chip on my shoulder over it. I just kept going and going. That voice is still in my head. I need it to understand internally I’ve come a long way. Now more and more guests have listened in the early days.
Andrew: I need to keep growing and quit feeling like I am a nobody in this space.
Nick: There’s nothing like your style. I like how long these chats are. You really get into the nitty-gritty. Interviewing is hard. It is really, really hard. I did my first one a month ago and it was terrible. So, you are very good at it.
Andrew: What was terrible about it?
Nick: I don’t have the thing. I don’t have what it takes. It was too scripted on my side. There’s a lot of it that’s spontaneous. That’s what I like about your interviews. A lot of it seems off the cuff and spontaneous. You really get into some interesting topics.
Andrew: Thanks. I am happy, offline, to talk to you about how we can improve your interviews if you’re interested.
Nick: I’m just going to book some products.
Andrew: The reason I like to go long with the interviews is because over the years, things that people have asked me to edit out of interviews, and I don’t edit anything out. But, when I look at what they ask me to edit out, It almost always comes around minute 45 or after where we are in a zone, we are going, we are diving in deep, and then they go, ‘this is a little bit too deep can you edit that out?’
So, you were saying you were in Nashville. And, because you were in Nashville unlike people who are in Silicon Valley you didn’t have as much opportunity to get funding. So you decided to boot strap. You had to, you felt. What was the first idea you said I am going to build on my own and start to generate some revenue with it?
Nick: I think we had to learn some stuff first. We did client work for a couple of years. Over the course of doing that we’ve always wanted to build products. When we first started out 37th Signals was the sass company we looked at as being really incredible. They started in client works, so we said we are going to start in client’s works and try to make it. So many companies kind of fall in their footsteps. We tried to build a product called ‘Feed My Inbox.’ Which was a really easy way to get an RSS feed via email. I actually built it for my mom.
Andrew: Let’s take it a little bit slow here. That wasn’t the first product you came out with, right?
Nick: That was the first public product. We did a lot of client work stuff. The first public product consumer based that we did was actually. . .
Andrew: Was that. When you were doing consulting it was with the idea you were going to learn and make enough money to create your own product.
Nick: Right and that was the part that was kind of difficult for us, right, because I read about all these great start-ups. I told you about 37 Signals, the guys at Litmus who are now here in Boston. It sounded so easy, right. They did client work and they were able to make enough money there to build a product and then kind of wean their way off the client work and do product full time. We tried it for over five years and we never really economically could make it work.
Andrew: Why? What’s the challenge there? Because you’re right. I’ve interviewed all those people who you’ve mentioned, and they do make it seem so easy, and of course this is the way to go. But when you try to do what they’re doing it’s not as easy because, what comes up?
Nick: You know I think it’s a couple of things. One, you can’t really focus 110% on the business and it seems like you can have a side project that goes really far as a business and some do. Some absolutely make it work but we just weren’t able to, money wise, make it work. We weren’t able to take off six months and try to do the business.
Andrew: What about doing it one day a week or in evenings? Why wasn’t that possible?
Nick: Because we wanted to be great at client work too. These people were paying us good money for this stuff. We wanted to able to provide them a quality service and it seemed like I was always on. People were always contacting me. I’d try to block off days but it’s really hard. We weren’t able, mostly economically, just money-wise we weren’t able to make it work but we got so fed up eventually we just decided to force the issue.
Andrew: OK. Feed My Inbox is something you were building while you were still doing client work.
Nick: Yes it was a side project. We built the first version of the product in a weekend.
Andrew: I see and that’s the reason why you were able to launch this because it did take just a weekend.
Nick: Yes, just a weekend. You’re just going and grabbing a feed, sending an email. And it grew like crazy so we just decided to go where it took us
Andrew: You’re starting to say where the idea came from. It was not your own pain. It wasn’t researching other people’s pain. It was something that happened with your mom.
Nick: Yes. This somewhat dates me but this is back in the days when Twitter was all SMS. So there was no GUI really. You would just text Twitter to send a tweet. I was living in New York at the time. My mom, of course, wanted to know the latest on what we were doing. I was like, you should just follow me on Twitter. Of course I love talking to you mom, but you should just follow me on Twitter to let her know what I’m doing. I wasn’t about to teach her how all that worked. It was pretty complicated back in those days. So I just said it would be really nice if she could just get an email of my Twitter stream every day. I pitched it to my co-founders. We thought it would be kind of a fun weekend project and off we went.
Andrew: Didn’t something like that exist at the time, RSS to email?
Nick: Not really. To be honest with you, there was Feedburner and they had their RSS to email stuff but unless you were running your feed through them there really wasn’t an option for the user. So I don’t own the feed. I want to subscribe to, let’s say a Craigslist search. There’s no way for me to do that and so that’s what we ended up doing.
Andrew: You know what maybe because I’m more of a geek I just assumed there was a way because I would build something or use Feedburner and claim that someone else’s feed was mine just so I could get the email or something like that. I must’ve found a workaround. But obviously your mom, my mom weren’t going to. So in a weekend what are you able to put together?
Nick: We put together a beautiful page. By beautiful I just mean so simple. It was two fields, email address, feed address. Submit. And you would start getting emails. It was once a day. There were no features, no options. It was beautiful. You just gave it your feed and we’d send you an email everyday that there were results.
Andrew: And within two weeks how many members did you get?
Nick: I think at least in the first month we had over 8,000. It was crazy.
Andrew: That’s pretty impressive. How do you get that many people?
Nick: We talked about it a little bit but we don’t have huge networks or followings. To be honest, I have no clue. People just started signing up. It was free. We were sending a lot of emails really early on. It didn’t take us long to start sending a million plus emails and have to figure out that problem.
Andrew: Wow. Is it fair to say that this was a big topic at the time RSS and it was a complicated topic. So you just hit on a topic that people are talking about with a solution to a problem that they all had.
Nick: Yes and it was really simple. I would pitch different blogs to talk about it but it was all free. It was all just sweat equity type stuff.
Andrew: They did talk about it.
Andrew: What was the one that sent you the most traffic?
Nick: Man, it was so long ago. I’m not sure. Pretty much everybody I pitched would end up talking about it except the Tech Crunch’s of the world. Anybody that just thought it was a useful product would end up talking about it.
Andrew: All right. You told Jeremy who pre-interviewed you that when you shut the site down you had 300,000 active users.
Nick: Yes, yes about 300,000.
Andrew: You shut it down for a reason, because there was some problem with this. What was the problem?
Nick: Frankly we couldn’t make the economics work, so Feed My Inbox is pretty much a consumer play. It’s really hard to sell that kind of thing to a business, which is what I found that we do much better. With 300,000 active users, less than 2% of those were paying. We found out the magic number for us in this freemium kind of business model was going to be about 4%. Otherwise, it just wasn’t really worth what we were spending on hosting and sending out 5,000,000 emails a month and so on. We just couldn’t make the economics work, and we finally realized that. It was always a side project; kind of the red-headed stepchild when Help Scout was around, but we just decided we can’t make that 4% paid number work, so economically it just didn’t seem viable.
Andrew: I’m looking here at your pricing from back in the day. I’ve got it here in my research notes. It was subscribe to five feeds for free. I don’t know that I would need more than five feeds. Is that a problem?
Nick: I think the problem is that people can use an RSS Reader. They can use Google Reader for instance for free, so we get these angry emails like, “Why are you charging me for something I can get in Google Reader for free?” I get that. I sympathize with that, but at the same time email is a lot harder to oversee as far as deliverability and making sure you get your stuff. It just wasn’t easy for us to communicate the value of the product to consumers. Even our baller plan, like the $16.00 a month plan, was still pennies. It was nothing, but we had so many people who just thought we were outrageous for charging that much. They wanted us to charge like something crazy.
Andrew: They wanted you to charge what? Like a dollar, you said?
Nick: Yeah, like a dollar, or pay $10.00 for the year. Well, that doesn’t go very far on our hosting, so it is what it is.
Andrew: I wonder if people who say I’ll pay a dollar for this because it’s worth it, and you’ll get so many more people for a dollar, I wonder if they would even pay a dollar?
Nick: Yeah. In many cases, I think not, and Feed My Inbox in this case is I think not.
Andrew: You know what? In the early days of Mixergy when I was selling premium I let people pay whatever they wanted. They didn’t all see that they could pay whatever they wanted, but I let them do it. Sometimes people would complain and say, “$25.00 is too much.” I would say, “How much do you want to pay?” They would say, “If you just charge $5.00 a month.” I had this text expander snippet that if I hit 0.5, it would expand to a URL where they could pay $5.00 a month. If I hit 0.10, it would expand to a URL where they could pay $10.00 a month. Hardly anyone used it. It was just a rare situation where someone might have thought, “Hey you know what? I feel kind of cool that he responded, and I’ll feel really douchey if I don’t follow up on this. Fine, I’ll do it.” Those guys don’t tend to pay. The people who are . . .
Nick: It’s crazy, and that’s what we learned with Help Scout too. Whenever we make a lot of these deals that we used to make and we don’t do very much any more, they weren’t the right fit for the product anyway. If they’re not seeing the value in what we’re charging, which we feel is affordable, then chances are they’re not a good fit for the product anyway, and the same thing in your case.
Andrew: Were you still doing client work at the time?
Nick: At the time we?
Andrew: While you were doing Feed My Inbox. Did you, at any point, say it’s time to just do Feed My Inbox, and maybe then we can make it work?
Nick: It wasn’t making enough money. So we were doing the client stuff.
Andrew: Look at the credibility you got from it. I got email after email from people who thought I should talk to you about how you built this successful company. When you dig in you see . . .
Nick: Everybody loved it, but nobody wanted to pay for it. What can I say?
Andrew: Since the business has shut down, what size revenues did you get at your height from it?
Nick: I think we were over $10,000.00, but it wasn’t enough.
Andrew: Why shut that down? Because your expenses were still higher than that?
Nick: We just shut it down at the end of 2012. We kept it around for a long time, and for a long time it kind of helped us fund what we were doing with Help Scout. It certainly was beneficial, but then again, if we wanted to build a big business with Help Scout, which we do, we had to cut ties, and it was clear to us pretty early on we would have to kind of choose one.
Andrew: I’m not a big Flippa person, but a lot of people in my audience are, and they’re going to want me to ask you why didn’t you sell it on a site like Flippa?
Nick: You know, we would have always had to support Feed My Inbox, it seems like. We built a custom back end for it. It wasn’t built on WordPress or something. We would have always kind of been on the hook and especially if we left the same brand and just kind of changed the name of the owner, then we would always feel some sort of accountability towards that product. We did end up selling the domain. We don’t own the domain anymore, but we couldn’t really sell the product. It was pretty complicated.
Andrew: All right, so did you then do any other software or any other products of your own?
Nick: Not really. We may have experimented with a few things. We had this CMS that we built for all our clients that also had a really robust e- commerce engine, and we were thinking about making an online shopping cart — us and everybody else pretty much at the time. It just didn’t really vibe with us. We didn’t want to build a CMS, and we didn’t want to be in that business. While that’s a great product, and the core of that CMS still runs our products today, our next real try was Help Scout.
Andrew: I see. I want to understand why you came up with Help Scout and how you knew that was a problem, but I’ve got to first ask you about something that you said to Jeremy Weiss in your pre-interview with him. You said you cry, there you go, “I’ve been nearly brought to tears after losing a customer.” Is this just marketing?
Nick: No, no. I mean . . .
Andrew: When? What did a customer say that made you want to cry?
Nick: . . . and my wife will tell you I don’t really cry, but when we lose a customer at Help Scout that’s a really great fit, it’s really tough to take, especially early on in the business when you’re counting on it. Back in the day when closing 10 customers a month was a huge month, and that was really early on. Man, if we lost one that’s 10% of the business we were planning on doing that month. It was crazy, and there was a time specifically I was talking to Jeremy about. How it’s really important for us to wow people early on, because we can’t write a check to acquire customers. Our customers are our biggest advocates. That’s kind of some of the vision behind Help Scout is word-of-mouth marketing is king. If you just love your customers then your customers will do a lot of the marketing work for you it turns out. Whenever we lose a customer it hurts. We lost this particular customer for perfectly reasonable reasons.
Andrew: What was it about this customer that made you especially sad?
Nick: They were a fast-growing company in the Silicon Valley. We had a really strong relationship with them. They had a ton of users. Their volume was huge, and we loved what they were about as a company. They really embodied our persona of companies that love customers. It turns out we just didn’t have a couple of the features that they absolutely needed, and eventually they moved on to another product.
Andrew: What were the features?
Nick: One was one we’re going to launch soon which is called rules. It’s just a way to kind of automatically move things around. Gmail filters. We’ve gone two years in Help Scout without having any form of that.
Andrew: And rules are helpful that if an email comes in specifically saying “cancel my membership” we at Mixergy need to forward it to the right person who’s going to cancel it and who has access to give refunds, that kind of thing, and that’s what a rule would do. What’s the other one they needed?
Nick: They felt like it just wasn’t as fast as they wanted it to be.
Nick: We’ve made a lot of strides there, and we’re going to make more this year. That’s all we can do.
Andrew: How do you know that’s what made them leave?
Nick: They told us, because we did have that relationship.
Andrew: All along they said, “Hey, listen, Nick this product is just not fast enough,” that kind of thing?
Nick: Yes. Performance was an issue for them, but I will chase a customer. I don’t do it as much any more, but I will laughter]
Nick: I don’t have a problem doing that.
Andrew: How do you get a customer, after he leaves, to tell you why he left?
Nick: Usually we will have developed a relationship if it’s a paying customer. And this is early on. It’s a beautiful thing. Now we get customers and I actually don’t have a personal relationship with them. In the first year of the business I talked to almost every person . . .
Andrew: When they bought?
Andrew: That way, when they left you weren’t a stranger to them, and you could say, “Hey, i just need to get some feedback from you.”
Nick: Yeah. You’ve always given us great feedback. I noted, in your profile, that I’ve got this, this and this feature request. Is that why you left? Was there something else? Did we let you down? I love it. People love it.
Andrew: In their profile you record what features they want?
Nick: Yes. Yeah, we’re very detailed about all that.
Andrew: You know individually what each person wants?
Nick: Basically we group it by features. For rules, for instance, we’ve just got a big list of people that have asked for it and what specifically they wanted that pertained to rules.
Andrew: All right, I’m going out of order here. We have to understand how you came up with this idea. What was it that led to Help Scout?
Nick: It was Feed My Inbox. It wasn’t too bad. It was maybe 40 to emails a day, support-wise, that we needed to deal with. On several occasions, I would try to set up a help desk. I know two Saturdays in particular, I just kind of threw my hands up and said, ‘This is too complicated. I just want to share an email inbox with my team, with my co-founders. That’s what we ended up doing. We basically had a Gmail box, and we would share it. I thought a about this problem for two years, by the way, while we were doing Feed My Inbox support, because we always had frustration. In Gmail, somebody would accidentally mark it as ‘read’. Then, it would kind of get lost in the shuffle because ‘unread’ meant that it needed action in our world, or we’d respond to the same customer at the same time. Gmail still didn’t work, but all the help desks that were available at that time were way too complicated. We didn’t want anything but just a shared email inbox.
I thought it would be really cool if somebody just added a collaborative layer right on top of email that was completely invisible to the customer. You get all the scale of a help desk behind the scenes, but it’s invisible to the customer. It’s like a normal email. That’s kind of where we started.
Andrew: Alright. It would have been cool if you could add just another plug-in, kind of, to Gmail. That was the original idea.
Nick: Yeah. We just wanted to be able to say, ‘So and so has this, or there’s no ‘read’ or ‘unread’. There’s only stuff that’s been answered or stuff that’s not been answered.’ Just some basic, ‘I want to assign this to Denny over here, assign this to Jared over here,’ but there was none of that available at the time.
Andrew: Alright. I see why you want that. I see how you’re thinking about it on your own, but how do you know you’re not crazy? How do you know that other people want the exact same thing?
Nick: Yeah. Thankfully, we were in the client business. We did a lot of consulting with online retailers. That, from day one, was pretty much the big market that we wanted to go after, was online retailers. I know that they care deeply about customer service. I don’t have to sell them on the value of great personalized customer service. If I could go to them and say, ‘Hey. You guys get 500 emails a day. How are you managing this with Gmail?’ They would go on and on about how they were having trouble, but they didn’t want to use a help desk because then it felt like they were losing the personal touch. They’d be treating everybody like a number. We did a lot of kind of informal customer interviews. Like I said, I thought about the problem for a couple of years.
Andrew: Do you have an example of an idea that came to you from having these informal customer interviews, that you didn’t know on your own?
Nick: It was really early. I’d say that we pretty much had it. We pretty much had the use case because we had the problem ourselves. I’m one of those big believers in scratching your own itch with a product. At least our team isn’t quite smart enough to build something beyond the day-to-day experience we have ourselves. We have to have that problem, in order to build an elegant product to solve it.
Andrew: OK. You told Jeremy in the pre-interview. . . We do research here.
Nick: I loved it.
Andrew: You start with the design, not with code.
Nick: Because I think when you are coding something, it’s really easy to say, ‘Oh. If the design just worked this way, then it would be a lot easier to code.’ Frankly, your customers don’t really care what was easier to code. They care about the experience. They care about it being magical. That’s a term we use a lot at Help Scout. It doesn’t shift unless it’s magic. For us to dive into code. . . We do some informal prototypes, but we start in Photoshop. We get the experience right from that vantage point, before we start to think about anything else, as far as how we’re going to build it.
Andrew: How does Photoshop create a magical experience?
Nick: It creates the start of a magical experience, certainly not the end. Today, we’ll start with Photoshop. Then, we’ll do full prototypes that are interactive. You can save stuff to the fake database. That’s just the first step. If you’ve seen my co-founder, Jared, and some of his work, he’s got a level of detail in the things that he creates that are magical. They’re just beautiful. It’s because he comes from a background that’s not a coder.
Andrew: You know what? I’m picturing an entrepreneur who’s listening to us, who’s thinking, ‘I have a great idea. Now, I’m listening to Nick Francis. He’s saying design it in Photoshop, but my idea can’t be communicated in Photoshop.’ People need to see the way it works.
Andrew: How are you able to overcome it? Give me an example of a way that you can use Photoshop to show a customer what’s so ‘wow’. What’s so magical about Help Scout?
Nick: So Photoshop isn’t something I would show a customer. I’d probably show them a wire frame. Which is pre photo shop.
Andrew: Pre Photoshop?
Andrew: So how do you show someone via wire frame a magical experience that will explain to them what’s coming?
Nick: You just tell them how is going to work and how they would change how that’s going to work. We did a lot of view-x[SP] work in the client world. I would take a sharpie and all of our wire frames are sharpie marker and you just kind of write out exactly how things are going to work. If possible you do that in front of the customer so they understand why you though a thing the way you have. And then you can kind of walk them through how things would work and then get their feedback on where they would take it.
Andrew: I see. You sit down, marker. You take them through it.
Andrew: I’ll tell you. As an interviewer, I have to call out what I’m looking for. I want you to give me your story, not what I’m looking for. Let me bring it on the table. I think for me. What would help me is to say. Look you don’t come up with the idea on you own. Go talk to your customers first. Your customers will give you direction and then you come back and you build it. They’re going to change the way you think about the product because you’re building it for them, not for you. But that’s what all start up people say. I don’t want to force every entrepreneur’s story into that nice neat box. It doesn’t seem like yours does. You seem to me to be someone who has a clear vision.
Nick: Yes. I’d say that customer feedback, as much as we love our customers and their feedback. It makes up less than 50 percent of how we build the product.
Andrew: Maybe even in the beginning, it seems like you were so clear on what you wanted to do. That maybe you shared it with people with a sharpie. But, bottom line you were so insistent on it that you weren’t looking for feedback. Maybe they knew you weren’t looking for feedback. Maybe they gave you feedback and you didn’t listen to it because you knew.
Nick: Yes. We were looking more for validation. We know this is what we want to build. And that’s because we were scratching our own itch. And that’s where we wrote a post on our blog not long ago. About why Steve Jobs didn’t listen to customers. He’s got that famous quote. I believe at a high level vision wise. You have to have that. You have to own that. And that’s where we’re building a product to scratch our own itch. But when it comes to the execution and validating the fact that our details are right, I think customers are the best at that. . .
Andrew: So for example.
Nick: . . .So for example. When were creating the way that we want to pitch Help Scout. So collaborative email you can assign to other people. You can do all of these things. You can add private notes. That’s the high level vision. I’m not changing that. Based on what a customer tells me, unless I’m just way off. I’m just going to change that based on how they think it should work when you assign to somebody else. So when John Doe assigns to Sally Doe. What does that experience look like? And is that clear to you how it works? Is it clear? So it’s the lower lever execution detail where I try to rely almost 100 percent on other . . .
Andrew: I see. So you know that Andrea at Mixergy needs to assign certain customer service emails to Andrew. The names are a little similar so I want to be clear about them. You know that no matter what I say I’m going to eventually need to have some things assigned to me. What you want to make sure is that when she does, in Help Scout, I see that what’s assigned to me is in front of me and that it’s not disappearing. That it’s obvious to me. And that’s what you might show me.
Nick: Right. Those kind of usability details are where customer feedback comes in most valuable. But the high level vision, we’ve got this problem. We know this problem better that anybody. We’re just going to build something that solves it. And ask our customers to help us get it right.
Andrew: So this isn’t so customer development heavy. Lean start-up focused the way other people do?
Nick: I’m not a fan of that stuff.
Andrew: First of all. I’m a fan of it. But why aren’t you actually? I’ve got to stop talking about me. Why aren’t you a fan of the lean start- up methodology?
Nick: I’m a big believer in product. I believe that collectively driven kind of democratic process in creating a product is not going to give you the best possible end result. I believe in people having a strong vision and validating that vision over time. We have a very strong opinionated vision on the way that we think Help Scout needs to work, and how it’s going to work for businesses in the future. We never would have… If we would have found that out through the lean start-up process it would have been so watered down because we really wouldn’t feel the problem as much as we feel it today. So I’m a big believer in vision of the founders, being able to create that initial jumping off point and then relying on customers for the details.
Andrew: All right. So now, you realize that you can’t bootstrap through doing client work and get enough money to build this product, to build Help Scout. You realize that starting Feed My Inbox to make enough money to build Help Scout, is just not going to be enough either. It’s time to get some funding. You go and you talk to David Cohen, and David’s first response to you was?
Nick: I said guys we’ve got to be all out on Help Scout. You know this is the opportunity we’ve been looking for, at that time, almost six years. Well let’s go all the way. We haven’t been able to make this seamless transition that everybody else seemingly has been able to make, so lets just force the issue. And what TechStars is about, I read this book ‘Do More Faster’. I’ve seen this guy David Cohen. I think what he’s got is pretty special and I think we need to be surrounded by more people like us. So let’s find a way to get into the program [??]. And basically we went through the application process, we made [??] it to the finals for New York. I met David Cohen at that time; didn’t get in. We’re passed along to Boston which end up being an unbelievable blessing in disguise. So literally after the month [??] discussion, four months later we’re showing up for TechStars [??] in Boston, pretty much ready to move the whole [??]. Yeah.
Andrew: So he turned you down for New York. I’ve heard other people have this experience. They don’t get into New York, or they don’t get into one of the cities, he suggest they go apply to another city. I’ve had conversations with people who weren’t sure if that was a blow off or if it means that they’re just not ready or whatever. And then they get accepted. Why do you think you got accepted in TechStars Boston, instead of TechStars New York? Same incubator owned by the same people essentially. What’s the difference? Maybe even the exactly the same people, I don’t know. Why did he send you to one and not the other?
Nick: I think it’s about fit [??]. He realized that our business it’s a help desk, right, it’s SaaS. We’re not reinventing the wheel, we hope that we’re just executing a little differently and a little bit better in some cases. So, New York and David Tisch [SP], the guy that runs the program down there, I feel like they’ve just got different strengths as far as the kind of startups they can do. They can launch for the [??] consumer ideas [??], they can do all these others things, it just wasn’t [??] a great program fit [??] and even market fit. In New York it would have been harder for us to succeed. Boston is beta driven to the core. It’s where sass businesses are made, in my opinion. I love this city and Katie Ray [SP], the Director of the TechStars program here, understands all that. She understands, yeah your idea is pretty basic and that’s not that interesting but I like the fact that you guys have been doing this for 6+ years at the time, we’re going to take a risk. And so in a sense, we got kind of lucky but it was a better kind of market and program fit.
Andrew: Alright, I can see that. Going back to what David Cohen said when he first saw your product. What was it?
Nick: I think it was the marketing site. When we showed him the first version of our marketing site, he just kind of laughed. And it was all wrong and I’ve got to say, David Cohen has been a champion for our company from day one, unbelievable support and gives incredible advice. He answers every email but he has a way of giving advice that is incredibly critical but it’s never self-serving. It’s always humble and so he just kind of laughed at our site and was like its all wrong, it’s just completely wrong. Because we were, basically the messaging was email for teens [??]. We’re pitching ourselves as the anti-helpdesk. There was a part of marketing site at one point that even said we’re not a helpdesk. And we was like dude, you’re a helpdesk. Everything is pointing to the fact that you, guys have a helpdesk. You own it and understand that you can own this part of the market if you execute it right but you’re still a helpdesk. So let’s be what you are instead of trying to be everything to every person.
Andrew: And was that helpful advice, did that actually change the way…?
Nick: yeah, it was brilliant.
Andrew: I would think that people would, sorry I just interrupted what you were saying. But I would think that your way of looking at the world made sense. You’re saying, look people hate helpdesk software, it’s too cumbersome for many entrepreneurs to use and many businesses to use. We’ve got something that’s like what they like, which is Inbox, but the next step forward which is collaborative. Why didn’t that, why wasn’t that the right approach.
Nick: It’s the point that Dave and some other mentors in the program made. We [??] and at the time we were thinking about boot-strapping, maybe raising a little bit of money. We’re not going to have the money to a market, a group [??], what group email even is.
There’s a lot of education that has to take place there. All right, group email. What the heck do I write that for? And there’s this help desk market over here and we really want to be a customer service product. Guys like Zendesk have done an incredible job educating that market. Everybody knows what a help desk is. Everybody knows what support systems are.
So by kind of attaching ourselves to that market, which is correct and just taking a different approach, we’re able to say yeah, we’re a really simple help desk. We do 98% less than anybody else in the game.
Andrew: We do 98% less?
Nick: Yes. And people resonate with that. But if I were to say we’re email for teams and you can use it for this and this, again, we’re kind of all over the place and people come away from the conversation wondering like, how do I use this? I don’t really know. But when I say We’re a help desk. Oh, they’re support, OK. Next question. It’s clear.
Andrew: Next question. Why you’re different and the way we’re different is we get rid of all those features that you don’t want.
Nick: Right. Yeah.
Andrew: I see. OK. So the way you’re getting traction is you’re coming up with an idea that you really have a problem with. You’re showing it to users but you’re not letting them influence the core idea. They’re just influencing the implementation of it and the way you describe it. You’re showing it to David Cohen, before you even get any investment from him, he tells you hey, let me see if I have the quote that you gave Jeremy. Oh, you said the meeting was a train wreck because your marketing sucked.
He helps you communicate better, terrific. Did you ever end up getting funding from him also?
Nick: Not from him but from TechStars. I mean, David has a very specific and disciplined investing strategy and basically we don’t fit in the bucket. And I’m not going to get into what that is but we don’t fit into the bucket of the kind of investments he makes. But he gave us all the opportunity we ever needed as a company. He led into TechStars. We got the funding there and then we were able to get to [??] and raise from 18 really brilliant investors that are continually supportive of the business today.
So I couldn’t be more happy.
Andrew: You told Jeremy ‘Andrew would only know [??].’ I like that you know that I know [??] as one of the angels.
What are the other angels? What other kind of angels helped you raise money?
Nick: You know, the guy that works with [??] named David [??], who was a mentor throughout the program and he’s head of product there. He’s the best product IM boss in my opinion. I got to know him thorough [??]. He resonated with the product and he wasn’t able to go out, he’s the kind of guy that everybody knows in town, everybody respects his opinion. He co- founded [??].com. He did a lot of other really interesting things. He was able to kind of back channel support for what we were doing at Champion, us raising a little bit of money. He’s from Nashville. I know he’s a little weird but believe me they’re building a really great product and the market needs this.
He was able to back channel some of those conversations.
Andrew: To get them to invest in you.
By the way, [??], Mixergy fan and interviewee. He came here to talk about Compete.
But beyond the fact that he got you funding, did he also help shape the product in a way that we can learn from?
Nick: You know, he gives really pointed feedback. He is a product guy and so I would send him a [??] and he would go over it and say where it was wrong. It was mostly marketing stuff actually because we had a good grip, good grasp on what we were doing with the product but the marketing was wrong for a good year and a half. I think we have it right now. And he was right on it. He would just circle stuff, say it’s all wrong, you’re totally missing the boat. And so that was very helpful but he was an investor by then. I mean, [??] he would just say I think what you’re doing is really cool. How can I help?
Andrew: OK. All right. So far I’m talking about where the product came from, how it was influenced by your vision, by your mentors understanding of the way they explained product and a little bit through customer conversations. I think it’s time to talk about where you got the actual paying customers.
How did you get your first one?
Nick: Begging, mostly. We were in an office in Cambridge for TechStars and it was a space called [??] Labs and basically tons of startups there. There were probably 30 startups in the space, just on the floor. And I went door to door, just asking people ‘OK. What are you guys using today? It was kind of an informal survey, but it was also hey, would you mind trying my product. I will totally give it to you for free. Some of them tried it, and some of them are still customers today, thankfully. Can I watch you sign up for our products and set up a mailbox? Do you have ten minutes for me to watch you do that so we can make it better for other people? I mean, it was [??] but it was awesome at the same time because we learned so much, and we were able to get a few customers out of Dogpatch.
Andrew: Door-to-door sales is how you got your first customers?
Nick: Yes, knocking on doors.
Andrew: All right. So that gets you pretty far, and it gives you feedback. How do you get the next big batch of customers?
Nick: You know, I did, pretty much from day one, to bet the business on content marketing. We were entering a crowded space. It’s pretty competitive which I love. I love entering a crowded market because that means really great stuff floats to the top, and from a content standpoint, I thought we could create some really great stuff that would get some attention. Darmesh is an investor. I’m a big believer in inbound marketing, right. So from very early on, I knew that we couldn’t just write checks for customers. There were other people out there doing that, but we could differentiate with some really great content. So we started to put out ebooks, many of which are still available on the site today. We started to write what we thought was compelling content for our blog in the hopes that we would be able to start to get a little bit of a following, and people would start to get some value out of what we were putting out, whether it was the product or not. Hopefully, they were getting value out of the content, and maybe they would recommend us to somebody else. It started, from day one, it was all about content.
Andrew: Okay. The ebooks were one of the first things. What’s the ebook about? What’s the first ebook that you put out?
Nick: Well, the first one was 75 stats, quotes and, I think, graphs on customer service because of course, I was in the market. I had to do a demo day presentation at TechStars. I had to find every customer service stat there was. So I did a lot of research. Basically, we just put together all these quotes and really great things about customer service. You can make a case, your organization, put them all in one ebook, and to this day, I mean, I’m sure its got well over 10,000 downloads. It’s done really well.
Andrew: You know, I talked to one of your competitors when he was starting out, when his company was starting out, and I suggested content marketing for him, and I showed him KISSmetrics and what they were doing and told him what I was learning from the interviews and from getting traffic to my site. And essentially his response was I can’t get people to come to sign up to my help desk program. You now want me to get them to sign up to get an ebook, too? And so now I have to be in the ebook business and this business and try to get people to one, and then from one to the other? How did you solve that? How do you get people then to the ebook?
Nick: Frankly, it doesn’t matter. I’m very much a fan of the Gary V. mentality of, you know, the kind of that thank you economy. Just keep giving, just give, give, give, give, give.
Andrew: Give to who? I put an ebook out. No one is going to pay attention unless I have an audience.
Nick: You’re adding value. So that ebook is going to add value. Somebody that downloads it, they’re going to get hopefully a tremendous amount, maybe just a little bit of value out of that ebook. And maybe it helps that …
Andrew: How do they even know it exists? I’m sorry. I’m raising the issues that I think the person listening to us might have, that we tell them to write an ebook. They can write an ebook. First of al, it’s a little bit of a pain to do it, but you just showed us how you did it. You took data that you already had. All right?
Andrew: And now they have to get someone, they post it on their blog. I’ve looked at new founder blogs. They end up having very often something like 12 hits and one tweet on the Twitter counter, and it’s them. They can’t get people to come to that, but you did. What did you do that got them to come to the ebook?
Nick: I’ll show you one thing, slide share. Put it on slide share. Within 72 hours, we were featured on slide share’s home page because it was interesting. And we got over 20,000 views in a 72 hour period.
Andrew: And you don’t even care if they’re not coming over to your site because you want some of them to click and buy the product by HelpScout?
Nick: Yes, but if not, I’m very aware that we’re adding value, or people are downloading our ebooks that aren’t really fit for Help Scout, but chances are our name is going to be top of the line when somebody asks about a help desk, and that’s good enough for me. For others, it may not be manageable, or it might be a really hard way to acquire a customer. I think it’s extraordinary. I love it. I love earning a customer through adding value to what they’re doing on a day-to-day basis rather than writing a check for them.
Andrew: Okay. We talked you building a blog and that helped. How did you get people to come to your blog?
Nick: A couple of things. One thing that worked really, really well for us, and all credit goes to our contact guy Gregory Sciotti, but we bet the business on guest posts. We know the people are going to come to our blog and this is very much the buffer strategy by the way, we’re friends with Leo and Joel there. And I was talking to Leo one day and he’s like, “Dude, just guest post. I mean, people aren’t going to go to your blog how are they going to learn about Help Scout? You’re going to post on other blogs. And I heard a story about buffer that the first three months that they were around Leo was writing like three guest posts a day. He was all over the place. And that’s a brilliant strategy because you’re writing what you think is great content and you’ve got a built-in audience on somebody else’s blog. That’s such a win-win and you’ll benefit. It’s juicy from so many angles. I really like that and it’s bringing people to the site, so for instance, what we would do is we do a guest post and then Greg would embed our slide share. You find a way to kind of off-handedly bring some of our content. They click on one of our ads, they click on to one of our other articles on our website. You know, eventually 8% of the people that hit our website are giving us their email address.
Andrew: Eight percent of the people that come to your website give you their email address?
Andrew: How? What do you do to get them to do that?
Nick: We don’t push very hard. we’re just adding value with some of our content and resources. Like, we’re not throwing we throw one pop over if you click on a blog post once every 30 days you might get a pop over asking for you to join the email list. But we’re really not super aggressive with that. It’s all about adding value.
Andrew: Where else do you get the email? Do you ask it on the margin, I can’t go to the site because our internet connection for this interview has been so bad I don’t want to risk running Chrome, which is now an abomination. Resource hog. Where do you have the email requests? Is it underneath the blog post? Is it on top?
Nick: As of today, it’s on the right sidebar.
Andrew: And that’s helpful?
Nick: It’s mostly from our resources, so you download we’re constantly linking to our downloadable content. That’s something that we’re pretty good at. Jared, my co-founder, great designer. He can make anything look good. So, we created these ebooks people love to download them and their happy to give us their email address. And then we’re respecting their privacy and the way they want to get communication from us. We send them one email a week, we’re not selling. We don’t ever sell. Just, “Here’s the new article for the week, enjoy it.” That’s it.
Andrew: We’re getting Leo here to teach a course on how he did this content marketing. I had his co-founder Joel on here, and Joel brought it up and ever since then I just keep pinging Joel, pinging Leo, until to get him to come on to talk about he did this to teach it. To break down that process.
Nick: They are so good at it. And Gregory is brilliant at it too he worked for us. But he was an intro from Leo so it’s all one big happy family.
Andrew: Is Gregory your full-time content marketing creator?
Andrew: Ah, okay. So that’s another thing, that if you’re really going to get into this, you need somebody like Gregory.
Nick: I would kind of argue in that only because Greg started as a contractor. So if I was like, “Hey I need somebody to write one article a week” and Greg started to do that for us. So we were able to by the time we weren’t planning on hiring him I was like “Yeah I’m going to do some of this stuff. He can work on the side for us.” And he was adding so much value to the business that I thought it was crazy not to hire him. That wasn’t the plan upfront. I think you can pretty easily as long as you’ve got a vision, which I have an abundance of that, my team will tell you. You can work with a contractor to create this kind of stuff. You don’t have to hire a full-timer.
Andrew: And when you say vision you even have a vision for what the article should be about and he puts them together.
Nick: Yeah, so I gave him a very simple role, I said, “Data driven customer service.” How does customer service make people money? It’s not about rainbows and unicorns fluffy stuff. It’s about how do we present the data about customer service so that people understand the value of doing it in a great way?
Andrew: Data driven customer service all the articles should show how customer service measurably increases peoples’ revenues.
Andrew: That’s it? So, if someone listening to us wants to go check out articles to get a sense of how that vision is executed what’s one article that they can take a look at?
Nick: There’s actually an ebook and it’s free online. You don’t have to give us your email address. It’s called “The Business Case For Loving Customers.” And I wrote it myself. I’m kind of plugging my own stuff. Sorry. But if you want a vision of Help Scout and the way that we see customer service, that is it, 5,000 words, that’s my vision and that’s what Greg kind of pulls from constantly in order to pull out these data driven customer service pieces, but he does it much better than I, by the way.
Andrew: How do you get the sites that yo do guest posts on? How do you find them and how do you get them to say yes?
Nick: Greg is brilliant at this, but it’s basically got to be personalized. So you’re going to a blog, and typically he’ll find one or two articles of a similar topic or subject matter and he will say. “Hey, I really like these articles. I can write one that’s going to deliver better results for you and here’s why.” He makes a pretty blatant approach like, “I’ll write a better one. We’ll get you better results. Try it out” and it works.
Andrew: So he’ll go to the guy, to Dharmesh, [?] start ups and say, Dharmesh, I see you have these two articles on customer service and I can do another one for you and it’s going to have better results.”
Nick: Yes, that’s right. I noticed now they each got 100 shares. I’ve got this concept that I’ve been working on. It’s kind of like this. I think we can get 300 shares.
Andrew: Ah, OK, and he’s giving a number. How does he hit that number? How does he get 300 shares?
Nick: He’s confident. I think that’s what it comes down to.
Andrew: You guys then email your list and say, “Hey, I know you guys are all customers of ours so it means you care about customer service. You should go and check out this article on OnStartups, and if you like it, share it. Is it that kind of a thing that you know you’ve got this pull with people?
Nick: We only email our customers in our newsletter about content that’s on our blog. So he will just look literally at articles that have done well there and if the articles that have done well on OnStartups are getting 300 shares, he says, “I can write you an article that’s going to get you 300 shares.” And he does it. He’s very good at it.
Andrew: OK. Does he have some techniques for writing headlines that do this, or an approach because you want to do this on a dependable basis so that you don’t let someone like Dharmesh down and then never get invited back.
Nick: Yeah. Let me plug Greg’s personal site. It’s called Sparringmind.com, S-P-A-R-R-i-N-G, Sparringmind, and he writes a lot about that kind of stuff using SlideShare, a lot of that stuff.
Andrew: Sparringmind, and he talks about it there. All right. Let me see. Oh, there is one thing. The reason that you and I, I think, couldn’t do this interview before, I want to bring that up, but before I do, let me just quickly put a plug in for Mixergy Premium. If you listen to this interview and you care about customer service, there is a woman named Sara Hatter [SP] who I hired at Mixergy to help me with my customer service and set up the process that we have here and that’s what she does at Cosupport.us. But that’s not what I’m plugging. I’m plugging that she taught a course on Mixergy about how to do customer support. She showed me things that I didn’t know before even though I thought I knew everything because I’d done all these interviews.
If you’re a Premium member, go to MixergyPremium.com and check out Sara Hatter’s course on customer support. I’m looking at it right now and if you’re not signed up already, because we have people like Sara who I spent a long time persuading yes to do these sessions. They teach what they do best, and soon Leo will be on there teaching content marketing. That’s what Mixergy Premium is about, real people, real entrepreneurs, real doers teaching what they do best. Go to MixergyPremium.com. I guarantee you’ll love it. By the way, does Sara like your stuff? Is she an advocate yet?
Nick: I’ve talked to Sara but when I talked to Sara they were working primarily with Desktop.com, and with the kind of consulting they do, they’re working with really big companies, it may not be a great fit. Our average number of users per paying company is like six users. The kind of companies that hire Sara are at a much higher level, so it just might be different. I’ve tried to talk to her a little bit about the product early on.
Andrew: I hope she goes for it because she actually in her course brought up an issue which is that customer support software isn’t for everyone. She talked about how KISSmetrics used Gmail, nothing but Gmail labels and she showed how they did it. Now KISSmetrics is a customer of yours.
Andrew: Is that what you were about to say? I’ve got my research up on the screen. KISSmetrics, Litmus, Wistia, TechStars, Treehouse, I know who’s using it. So maybe now this just fits in with her, with what she presents to smaller companies that maybe are too small to work with her. Anyway, I wanted to put that out there. Here’s what I wanted to ask you. You, in February, were not in the U.S. Where were you and how does this business that you focus on so much do without you being in the U.S.?
Nick: I believe that a CEO’s greatest performance review is a vacation. There’s way to really understand how your team is going is going to do without you than when they do without you. I think hat’s the CEO’s job (?). I left for South East Asia for about 18 days, enjoyed myself and came back and we had the best month ever by like 50%. So I’m thinking about leaving again, I don’t know. But it was great. It was really great to see the team kind of come together. I mean the only bottlenecks were kind of around product where I’m OCD and I created the bottleneck.
Andrew: What do you mean, did somebody need to improve the product and they said, ‘I’m not going to touch this until the visionary, until Nick comes in to okay it.’
Nick: A few things (?) basically. Usually I but in before something ships. But otherwise they were getting a lot of stuff done and we had a ton of paying customers in February. Shortest month of the year but we outdid our goal by like 50%, it was great.
Andrew: That is the CEO’s best, how did you put it?
Nick: It’s the best performance review.
Andrew: Performance review.
Nick: Nobody tells us how to do a job except a board. But I think just leaving town on vacation’s a much better evaluation.
Andrew: How long does it take you to respond to email? Your company.
Nick: Company, I think we’re around five hour response time right now.
Andrew: Within five hours. When the founder of (?) was on Mixergy early, early on and he talked about how he built up his business, he said that they have rapid fire response. And I said to the audience, ‘Guys, send a customer support question to him right now.’ Because I had a live audience. ‘Let’s see what happens.’ And wouldn’t you know it, someone did it, and then within five minutes, five minutes he got a response. I’m not suggesting that every company needs to do that. That may not be the healthiest way to operate a business. But I would like to invite the person who’s listening to us now to send an email into Help Scout, and just see what happens. Where do you go? I can’t load my browser here. Maybe you can tell me, ,where do they go to just send an email, the way if they were Help Scout users, their customers would use it.
Nick: It’s firstname.lastname@example.org.
Andrew: So they can send an email to email@example.com. What about on the web?
Nick: There’s a contact page on the website that they go to.
Andrew: But really helpscout.net, they could see it there.
Nick: Yeah, but truly it’s invisible to the customer. The email you get back from our team is going to be like a personalized email, Gmail, whatever. You’re not going to know that Help Scout was the middle man kind of making sure everything worked as it should.
Andrew: Unlike other help support systems where it’s just way too obvious.
Nick: They treat you like a number, yeah.
Andrew: Would somebody please, I need just one person to do this. Help@helpscout.net. Is that right?
Andrew: Help@helpscout.net. And then just report back in the comments and let me know what happens. In fact, if you could do a screenshot too of the response and put a link to it in the comments, I would like to see that.
Nick: I would like to (?), you never know.
Andrew: If the person listening to us wants to thank you for doing this interview. Maybe there’s someone who’s listening to you from Nashville or some smaller part of the country, the way that you used to listen to David Cohen on Mixergy and they want to say thanks for doing this, what’s a good way for them to do it?
Nick: On Twitter I’m Nick Francis. So that’s great.
Andrew: And of course your name will be on this interview. On Twitter, Nick Francis. Thank you so much for doing this interview.
Nick: Thanks Andrew.
Andrew: You bet. Thank you to the whole Help Scout team for saying yes to Nick’s revealing his revenues here for the first time publicly. Bye everyone.