Andrew: Hey everyone, my name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses. And I don’t remember how long ago it was that installed today’s guest’s app on my phone. But I do remember the feeling that got me to install the app.
I hate when I go to restaurants, and they give you those little plastic things that are supposed to vibrate and glow or something whenever my seat’s ready for me. I hate them because they don’t fit in my pocket, and I have to stand outside like a schmuck holding this thing in my hand. I hate them because they remind me of being a high school kid traveling to Manhattan, getting to go to T.G.I Friday’s and thinking that just waiting in line for T.G.I. Friday’s was such a fun event that I would be willing to carry those plastic things.
And so when I heard that someone modernized it and actually did away with all that, and allowed restaurant goers like me to get texted when their spot was available, I said, “This makes so much fricking sense.” I installed the app, and I’ve had it on my phone. And I’m excited to get to know the guy behind the app, because this business is way bigger than the little part that I saw, way bigger than the app. And it was actually sold to Yelp not long ago, and we’ll find out how he came up with the idea, how he evolved it, how it made sense for more than just me — it was restaurateurs who were the main customer base for it — and why the company was sold to Yelp.
His name is Robb Myer. His company is called Nowait. What a great name, right? Nowait. It does more than that. It allows restaurants to really manage the way that they interact with customers who want to get a seat at their restaurant.
This interview is sponsored by two companies. The first will help you hire your next great developer or designer, it’s called Toptal. And the second will host your website right. It’s called HostGator. I’ll tell you more about them later. First Robb, good to have you here.
Robb: Thank you so much, it’s my pleasure.
Andrew: Robb, what did you sell the business for?
Robb: The number amount, or the reason?
Andrew: The number amount, let’s do that.
Robb: So we sold it for $40 million to Yelp back in February.
Andrew: So the numbers that were public were actually accurate?
Robb: Yeah. Yeah, right.
Andrew: How much did you raise?
Robb: We raised a little over $20 million over about six and a half years.
Andrew: Was it $22 million?
Robb: It was $22 million.
Andrew: $22 million, so $22 million. You end up selling for about, for $40 million. Is that a win for your investors?
Robb: Yeah, it was. I mean I think most people were pretty happy with that. The employees and the founders were happy, and where we are in Pittsburgh, that’s a pretty good exit.
Andrew: What about for you? What share of the business did you own at that point?
Robb: I owned a significant share.
Andrew: More than 25%?
Robb: It was not 25%.
Andrew: Okay. You became a multimillionaire from this sale, we can say that though.
Robb: Yes. That is correct.
Andrew: Okay. And at the time you weren’t still running it were you?
Robb: No, I had left about a year and a half before the sale, kind of from an operating role, and I had just been participating on the Board at that point.
Andrew: Okay. Now before you were an entrepreneur in a more classic sense of the word, where you actually were raising money, building a company yourself, trying to change the world, you were doing this as an intrepreneur, which is a phrase I’d never heard of until I went to college, and they said, “Guess what guys? You’re not all going to be entrepreneurs. Some of you are going to be intrepreneurs. In many ways it’s just as good, and other ways it’s even better because it’s safer. Your experience was that it was what, better than being an entrepreneur?
Robb: So you’re probably referring to about the year and a half I spent at Highmark Blue Cross and Blue Shield. And I was the Director of Product at one of their subsidiaries called Employee Benefits Data Services. And what we were trying to do is be an internal startup as you said.
Andrew: Right, intrepreneur meaning inside entrepreneur. Combined you get intrepreneur, yes.
Robb: Yeah, exactly. So kind of run a startup as part of a large company. Or yeah. So it was definitely a very interesting experience being in health care. I joined because a classmate of mine at Carnegie Mellon took over the company as CEO, and he had kind of a big vision of doing some new products in the consumer-directed health space. This was back in like 2007 and 2008. You know, 10 years ago. And it was a really big opportunity that I wanted to be a part of, and we found it was actually rather challenging to run a startup as part of a big company. So that turned out to be not the best overall experience, a good learning experience.
Andrew: What was the challenge?
Robb: You know, big companies have a lot of inertia, and they have lot of competing priorities. So one of the advantages of why startups can innovate is because we get the ability to focus on one thing and one customer and kind of dig in deep to a specific niche. And that’s kind of the disadvantage that a lot of companies just get as they evolve and become successful.
Andrew: Give an example of a time where things were too tough for you to battle against internally because of the built-in inertia.
Robb: Well, one of the big issues that we had is we had a lot of existing customers for existing products. So we were trying to innovate on a specific product, but we always kind of got pulled back into managing our current customer base, which was producing revenue for us. So we had really competing priorities in that situation.
Andrew: I see. You can’t disrupt the market while you’re catering to the market at the same time.
Robb: Yeah. We couldn’t be completely single-focused as a startup, just find one niche. We had to maintain the business that we already had.
Andrew: All right. So you were in San Francisco one day, and you wanted to get some food. Do you remember what restaurant, what I’m talking about?
Robb: Yeah, it was Brenda’s Soul Kitchen, if you’re familiar with that. Since that time, which was …
Andrew: That’s a brunch place, isn’t it?
Robb: It is a brunch place.
Andrew: Yeah.
Robb: We were waiting for brunch. And since then they’ve actually expanded, they’ve doubled the size of the restaurant. But they still have long waits, and they’re actually not a customer of ours. But we walked into that restaurant, and their process was particularly quaint, in the sense that you just write your name up on a chalkboard. No one even tells you what your estimated wait time is. You really have absolutely zero transparency.
So we were waiting for brunch. We experienced that, and we said, “We’re not going to do this.” We looked up other restaurants on Yelp, and we found a couple other ones to go to. But then we had a similar experience when we got there. You know, it’s, “Put your name on this list. It’ll be an hour.” And then one of those restaurants said, “Hey, what’s your phone number? We’ll give you a call when your table’s ready.” And I thought, “That’s brilliant.” No one had ever done that simple of hospitality. So we left that restaurant, and we walked up the street. About 35 or 40 minutes later we got a call that said, “Hey, your table’s ready. Do you want to come back?”
During that hour, during that 45 minutes, I really thought, “What if I could kind of automate this process? Instead of a phone call, use text messages. And if I really knew what was going on at those restaurants before I even had to go there, I could make those decisions and save what’s important to me, kind of my afternoon.” And that really is how Nowait was born, on kind of that afternoon, that Sunday brunch.
Andrew: So you know what? I interviewed an entrepreneur who founded a company called Seven Rooms, based on a similar idea. He was standing in line waiting to go into a club, and he said, “I shouldn’t be waiting in line. I have money to actually pay for a table. I’m willing to come in there. They should understand I am the guy who they want in line, and let other people wait longer.” His problem he discovered was that he was thinking too much from a customer’s point of view, and the customer isn’t the one that is buying the software that helps solve this problem. And it wasn’t until he finally said, “I’m going to literally put myself inside of these clubs to understand what they’re going through and understand their issues,” that he finally understood what problems he could solve that led to Seven Rooms, and it ended up being a successful company.
I’m wondering from your point of view, you’re standing in line the same way. Did you put yourself in the shoes of the person who makes the decisions about how customers wait in line? Did you do any of that?
Robb: Oh, absolutely. So we had a very similar …
Andrew: Talk to me about that.
Robb: So I mean we used the lean startup kind of methodology actually before it was even called the lean startup, and we were doing that stuff I learned at CMU. So the first thing that we did was interview a lot of customers like us, and we found an overwhelming affinity to not waiting in line. So that’s not a surprise.
But we did the similar thing. Then we started talking to restaurants, because we knew we had to get a certain amount of data. So how would we get that? So luckily for us, we found out that the pain point for the consumer waiting in line was actually a pain point for the restaurants themselves.
Andrew: How did you know that that was their pain point? What interviews or what research did you do?
Robb: We went to talk to restaurants. So I didn’t personally have any restaurant experience. So we just hustled and met people, went into restaurants and …
Andrew: You’d walk into a restaurant, you’d say “Who’s the owner? Can I talk to the owner?”
Robb: Yeah. Yeah, I would.
Andrew: But they don’t want to talk to anybody, because everyone’s trying to get the owner’s attention. How did you get through, and yeah how did you get through?
Robb: So we really approached it not as a sales call, but really as we wanted to understand their business and what issues and problems and jobs that they wished someone would solve for them. So most of the time we had some sort of semi-warm introduction, and we used kind of the Carnegie Mellon card. You know being here in Pittsburgh, we said, “Hey, we’re doing some research. We’re from Carnegie Mellon. Would you mind talking to us? We’re not trying to sell you anything.” And I really followed kind of an empathy model of really understanding what it was like to be a restaurateur, all of the issues they had before I even started talking about like the specific waiting in line and waitlist management.
But we discovered that the pain point for the consumer was actually shared on the other side with the restaurants.
Andrew: How? How did the restaurant experience it?
Robb: Because on the restaurant side it’s very hard for them to manage another seating process. The types of restaurants that we went after did not want to use the restaurant pagers, because of the connotations of the chain restaurants. They didn’t want to use Open Table as a reservation model. They wanted to stay casual. But at the end of the day, at the end of the night, they would see this long list of people and know a lot of them never got seated in their restaurant. And their pain point was everything that they’ve done — marketing, advertising, word of mouth, reputation — brought that customer into the door, but they couldn’t service them because of the way they managed their seating.
Andrew: I want to dig into that. I go to a lot of restaurants around here actually. In fact, I was just at Brenda’s the other day. I go to a lot of restaurants here in San Francisco that are great food. They do have those lists. I kind of feel like they don’t feel my pain when I’m waiting in line. They feel soothed by that, because they look at a list of people who want to come in, and they realize, okay, my business will always fill up. I can’t double the prices of what beignet is what they have at Brenda’s. They can’t double the price of that. So as long as they can’t double the price, they could at least double the line, which gives them more confidence that people want their food. It’s a safety net, and then it signals to everyone else down the street. You drive the street, you see a long line, and you say, “What is that?”
So I always felt like they didn’t feel the pain. To them, this was pleasure. This was satisfaction.
Robb: How many times have you driven by Brenda’s, saw that line and kept on driving?
Andrew: I see. I see. So you’re right. There is, for all the times I’ve been attracted, I’ve mostly been repulsed. But then by the time I’m next to it, I’m usually ready to go in.
Robb: Well, so …
Andrew: You’re saying that regardless of what I’m feeling, what I imagine they’re feeling, that’s not what they felt. They saw a long list of people who weren’t served.
Robb: So some restaurants like Brenda’s, they do have this kind of exclusivity mentality, which is kind of like your last example, which is more common in clubs, right? They want to create an artificial demand. And that maybe does make them feel good. But we use data, right? So in our process is what we said is, “We can help you manage your line more efficiently, and we will seat more guests per night than you can seat the way you’re doing it now.”
Andrew: How? How could seat more guests than a list?
Robb: Because, and we can show this with our data, because guests are willing to wait longer if they don’t have to wait there. They can wait where they want, either put their name … our original product allowed guests to walk into the restaurant, give their phone number, and then leave the restaurant and get that notification to come back. Our product today allows our thousands of restaurants to be viewed in real time and put your name on the list before you even get there. So that act, and our data proves this, more people will enter the list and more people will get seated using our process.
Andrew: I see.
Robb: Even though having a long line outside of your restaurant gives a feeling of demand, and there is demand, you’re not capturing all the demand that you could. And savvy restaurants realize that they would rather get more revenue than have that feeling of …
Andrew: I see. But at first you weren’t getting that. And at first, and by the way I think it’s really smart for you to get that data and show them, “Here look, you’re going to end up with more satisfaction and more business.”
Robb: So …
Andrew: What did …
Robb: I will clarify that. We found actually that we did not sell primarily on satisfaction. We sold very much on revenue optimization.
Andrew: Did that have a problem, did they have a pain? When you were talking to customers, did you see that some of these, and I see you’re nodding, did you talk to some of these restaurateurs and see beyond the words they’re using they feel real pain when they see a line? You did.
Robb: They feel, what they feel pain … they don’t feel pain when they see a line. They feel pain when they see those people on their list, their old paper lists, that don’t eat at their restaurant, because that is lost revenue.
Andrew: Oh. And how can they tell when the list? I thought they crossed off the names on the list. I hate to get so deep in the weeds. But to me, what you did is the ideal way to start a business, to understand that there’s a pain that you feel, but then go and validate that the person who you’re going to sell to cares about this and is feeling the same pain. So that’s why I’m digging in. I’m not telling you that. I’m telling the audience that so they understand why I love this story so much.
But how did they know that there were people who were being turned away, when at the end of the day all they see is names crossed off a list? Some crossed off because they were seated, some crossed off because they disappeared.
Robb: Yeah. So that’s a good question. The more savvy restaurants will actually record that on their list, if they get seated or if they don’t get seated. But a lot of restaurants actually didn’t do that, and we used that in our sales process early on. Looking at the list, “Hey, bring out your list. How many of these people got seated and didn’t?” “Well, I don’t even know. I don’t even have that data.”
So the first thing that we could do with our data-based process is give them the complete list of everyone that entered their waitlist that night, how long each person waited, how many of those people were seated, how many people weren’t seated. And then over time, over a very short period of time, as they kind of learned the system, they could see night by night their numbers improve, improving as their waiting times decreased and the number of customers which are converted. Seated instead of walked away improves.
Andrew: Let me say this. To anyone who’s listening to me who says, “Listen, Andrew you’ve done 1,000 interviews. What’s the big lesson from all these interviews? How do I get something out of it, without listening to all 1,500 at this point interviews?” This what, your point right here, the way that you’re telling this story, the last 17 or so minutes that we spent on the phone together, this is the biggest takeaway for me. It’s to feel a pain, to understand that other people feel it. To make sure that they actually want a solution for it is a way of validating that they really have this pain, and then just keep building and building on it. How did you validate, or did you validate before continuing to build?
Robb: Oh no, absolutely. That’s I think one of the things we did very well. We had a culture of being customer focused and really emphasized empathy. So one example of that is every one of our employees — we had about 65 employees at our peak — would go and work in one of our restaurants for two nights as a hostess or a host. They would use our product. They would great customers. They would actually walk in the shoes of our users. So that was kind of ingrained in our culture.
So as we expanded our product over the years, our feature set into more data, more analytics, more features, we always did lots of user testing. We interacted with larger and larger groups of customers. And then we started kind of segmenting our restaurants into kind of the clusters of what was important to them. So the chain restaurants, our biggest customer was Chili’s with over a thousand locations. They have very different kind of requirements than kind of our local mom-and-pop restaurants.
Andrew: When you were starting out, you said, “All right, I see a pain that I have. Let’s go talk to the restaurant, see if they have a pain that’s matched that’s similar to this.” You saw that they did. Before you built the first version, did you validate? Did you say, “Hey if I build this, will you pay for it?” Did you do anything like that?
Robb: We tried to validate. I find personally validating people’s willingness to pay is pretty challenging. So we did ask people, and they did respond positively. But I always take that with a grain of salt. So what we tried to do is understand the value that we could create for it and how we could I guess prove that value proposition so to speak.
Andrew: And was that then why you created the MVP, which was just basically a send. Talk about what that … you know what, let me take a moment here to talk about my sponsor. Then I want to come back and understand what the MVP was.
For anyone who’s listening, my sponsor for today is a company called HostGator. And Robb did you ever watch “The A-Team” growing up?
Robb: Yeah, I did. Yeah.
Andrew: Do you remember B.A. Baracus?
Robb: Yeah, yeah.
Andrew: They called him Face. There was this period there where like every episode he would have a stack of business cards in his pocket, because if he wanted to pretend he was someone, he would just pull out a business card that had that. So if he wanted to pretend he was a lawyer, he had a business card of a lawyer and give it to you. If he wanted to pretend that he was a plumber or someone else, he would just give you a business card. And if someone got a business card that on the piece of paper said he’s a lawyer, well, they’d have to take it seriously. And they’d treat him like a lawyer and let him in the way they’d let a lawyer in, or let him in like a plumber, right, whatever it is.
The reason I bring it up is that back then if you had a business card that said you were someone, people all just expected it on face value. That’s it. That’s who he says he is, that’s what he is. Today I think the same thing happens for businesses with websites. That if you have a website that says you’re something or that your company is something, even if it’s just like a homepage with nothing behind it, you could send it to someone and say, “Here’s my new business. Here’s what I have.” And you’re much more likely to get a response.
Now imagine today if you weren’t just a student, but you also had a website talking about what your idea was and you’re calling on restaurants and you say, “Here’s the business that I have.” Or imagine someone who’s not a student who has an idea for a business and wants to get taken seriously, they just put up a quick website, nothing but WordPress. Oh I saw your eyes do something. Why’d your eyes do that? Do you disbelieve that? Am I …
Robb: No, I’m sorry. I don’t know. I …
Andrew: Oh good. I said, “Oh, you know what, if he thinks that I’m exaggerating, I want to know it.”
Robb: No, I totally agree. Yeah.
Andrew: Yeah. Well, the thing that I’ve noticed is if somebody says, “Here’s the business that I’m in. Can I talk to you?” And I go and I Google them and I see a website that says they’re in that business, I take them seriously. And so what I’m saying to you guys, and the reason that this connects back to HostGator is if you have an idea and you want to set up a quick website, there is no better place to do it than HostGator, because HostGator will allow you to set up a WordPress site in second, in minutes. Is it minutes or seconds? I’m going to say minutes. I think seconds is an exaggeration. It’s minutes.
It’s one-click install. You are going to have to make a couple adjustments so that it actually represents you, right? But it’s inexpensive, and you’re ready to go. That will open up doors for you, add credibility, and allow you to build your business with that platform that you’ve already set up so fast.
The reason I recommend HostGator is they have an inexpensive package that they call the Hatchling Plan. It lets you have unmetered bandwidth, so you can just keep having people come to the site, no extra cost. Single domain, one-click install of tools like WordPress, and you’re up and ready to go.
But as your business grows, you’re not going to want to stay with the Hatchling. You’re going to want to grow beyond shared hosting. You’re going to want to have a dedicated server, or maybe what you are going to want is continue to use WordPress, but you want them to manage WordPress, not you.
Well, they’ll scale up with you. The prices obviously rise as you ask for more features. But they’re still, from my experience, less expensive than the competition, even at those more expensive plans. So if you want to set up a website for an existing business, an upcoming business, or if you want to be the next B. A. Baracus and pretend you’re a lawyer or a plumber or anyone else, HostGator will get your website up and running fast.
I used them on my new business. We had thousands of people go through the site, often all at once because we had this webinar that we were doing, and people had to show up at the same time. The website held up.
So go sign up and use this special URL where if you come in, they’re going to give you 50% discount, and they’ll always know you as friends of Andrew and that they need to take care of my people better than they would anyone else, because I get pissed if my customers aren’t taken care of.
Here’s the URL. Go to HostGator.com/Mixergy. Think of that gator, HostGator.com/Mixergy, and you’ll get that great deal on a wonderful hosting plan.
All right. The original question that I had before I jumped into the ads was about the minimum viable product, which was?
Robb: Yeah. You know, it was interesting for us with a lot of consumer products, the mantra is, “Get your product out as soon as you can. It’s okay that it’s embarrassing.” And everything like that. So we tried to follow that, and we did, but with the exception that when we were doing our alpha testing, we were actually asking restaurants, about 10 at that point, to use our product in their restaurant live. So even though we skinnied down the MVP to the minimum viable product, which was basically creating a digital wait list and sending a text message, the backend had to be robust enough not to break, or we would not get a second chance. And I think that’s one of the big takeaways between kind of a B2C and a B2B kind of agile or lean approach.
Andrew: That with B2C it’s okay if the product stinks. With B2B, you can’t have it stink. It can have fewer features, but it can’t stink.
Robb: Yeah. If you’re getting into to someone’s operation or asking them to load up some of their data or whatever, there’s kind of a higher bar than, “Oh, it’s embarrassing. It’ll be better next time.” because sometimes you don’t get a second chance.
Andrew: You also told our producer, “I wanted to prove our thesis.” And it seems like the thesis … well, what was it that you were trying to prove?
Robb: Well, I mean there was different assumptions and thesis that we had at different points. At the very beginning in 2010, one of the assumptions that we had to prove is: Would people give you their phone number to text you? And now it almost seems like kind of a non-issue, but there was a lot of naysayers that said, “Oh no, people won’t give you their phone number. That’s too personal.”
So I remember one of the exciting, very early points for us is when we were doing our alpha testing, and we would kind of watch ethnographically as the interactions between the host and the customers would happen. And that customer, I can still remember the host would say, “Oh, it’s going to be an hour wait,” and their eyes and their countenance kind of fell. And they’re like, “Oh …” You know? And then the host said, “But hey, we can take your phone number and send you a text message.” And their countenance kind of raised, and they said, “Wow, that’s amazing. Why doesn’t everyone do this?”
So they had the same reaction that I had, and not only was it not an issue for them, it actually became a selling point. And now they were actually more likely to go to a Nowait restaurant, because a Nowait restaurant didn’t make them wait in line.
Andrew: I’m wondering if you were also testing to see if these restaurants that were using lists were so against technology that introducing anything would shock them. And by having this basic test, you were able to see: Will they take even the minimal viable technology in their place? Or are they that opposed to tech?
Robb: Yeah. No, that’s true. I mean in some restaurants, they fell into they were opposed to technology. One very fortunate point for us is our first product, our first alpha product, we actually launched on the iPod Touch. And I wanted to do that, because it was $199 and it was super cheap. Right around that time, the iPad came out. So we learned that the iPod Touch just did not have the form factor. You just could not manipulate it fast enough. So we very quickly learned that that bit of technology would not be adopted by restaurants. But when we moved into the iPad, that was viable.
Andrew: It’s amazing there are some restaurants don’t do any technology. Yesterday, I went to breakfast at this place where I had to put my name on a list, constant anxiety. “Am I missing it, because I’m walking away because I wanted to see this indoor rock climbing?” I sit down. I see a sign that says, “We have the right to pour coffee on your phone.” Meaning put your phone away at this place. And they’re way out of technology. I think I even had to pay in cash. Then others I see have multiple iPads now on their counters, which means one for every service.
You got your iPad in by going door to door. Were you like Michael Evans from Grubhub, who told me that he literally used to go door to door talking to restaurants? Were you one of the people doing that?
Robb: Well, so actually we started off that way, and we pivoted off of that sales model very early on.
Andrew: Why?
Robb: Because it did not work for us. It was just too time consuming. It was too expensive. We just couldn’t grow fast enough. So we really followed kind of an app freemium model. And we retooled the product, made it even easier to use. We built in videos and tutorials so restaurants could download it, get set up and start using it in five minutes. And we really created a pretty remarkable inbound sales channel.
Andrew: So the idea was someone would go into the App Store themselves, look for some kind of waitlist software, see your app, use it for free, and then upgrade?
Robb: Yeah, exactly. And beyond just the App Store, we did a lot of search engine optimization on other content and other terms that restaurants would be I guess like substitutes, right? So a lot of people would go on and say, “What’s my substitute for using reservations? What’s my alternative for using restaurant paging?”
Andrew: I see.
Robb: And that would drive the traffic to our website and then ultimately to the App Store. And we had really tremendous conversion rates once a restaurant actually used us for a weekend.
Andrew: You know what, and I must have at some point downloaded that app too, though I must have deleted it too and I see that. I see that it just makes sense, and people can use it on their own. You were sending out text messages yourselves, right? Even though by the time you launched, Twilio was about two years old, and you could have used them to send the messages.
Robb: Well, we did. I mean we used Twilio.
Andrew: At first?
Robb: I’m trying to remember. I think at first we did not use Twilio, because I think they had some limitations right at that time, and we were using a different service. But we used Twilio for a number of years and lots and lots of text messages with Twilio.
Andrew: I imagine. So when someone was using the free version, that was costing you money every time they were sending a text message out.
Robb: Yeah, and that was one of the slightly non-traditional aspects that we have over software. We were not completely zero incremental costs, because the text messages cost money. We had to pay Twilio. So we experimented with our pay walls, and we really had very high conversion rate from free into the paid services.
Andrew: How many restaurants did you have using you before the sale?
Robb: I want to say maybe around 4,500 or 5,000. I don’t remember the exact number.
Andrew: Wow. And so you told our producer when you were asked what’s the biggest challenge, you said the technical challenge was the hardest. Scaling was the hardest. Servers and SMS messaging kept getting bogged down with high volume spikes. Why did that happen, considering that you were using Twilio, and you were using other cloud-based infrastructure?
Robb: I mean we ran into a lot of the limitations that Twilio had. I mean we were hitting their API really fast. We had to develop our own system to get in multiple numbers and then kind of share them and monitor the bandwidth and a lot of those things that maybe Twilio’s changed that now. I mean this was several years ago. So I mean the technical challenges were significant, because I think one thing that we were doing, which was rather unique, is we were actually running a real-time system in the cloud. So a lot of these systems that are kind of cloud-based aren’t really real time. I mean, we were synchronizing thousands of iPads and iPhones, because each restaurant generally had multiple devices. So we’re synchronizing …
Andrew: I see, yeah.
Robb: … in real time. We’re sending out text messages, and really that message had to arrive at a person’s phone within like five or seven seconds. And if it was longer than that, even though that could be completely out of our control, that was not working for the restaurant. That was considered broken, even though text messages don’t actually have kind of a guaranteed performance, which most people don’t know.
Andrew: Yeah. No, they don’t. Yeah, frankly I use Apple’s photo app on my phone and my computer. It takes awhile for them to sync, and sometimes you just have to eat it, accept that’s the way it is with their platform.
Robb: Yeah, and that’s a pain or whatever. But that shows you that a lot the cloud services are not actually real time the way that we think of them. So we’re running a major business, with lots of moving components, doing tens of thousands of transactions a second during peak times. So that was a pretty big technical challenge.
The other thing I’m really proud of, which is how we grew kind of the networks. So building a two-sided network, as your listeners know, is extremely hard. And the way that we did it was we built one side at a time to avoid the cold-start problem.
Andrew: Two-sided network meaning you have the restaurants that need consumers to use it, and you have consumers that, “What’s the point of having this app that I was so excited about if there’s no restaurant to use it?” So you said, “You know what? We’re going to forget about the consumer side. We’re not going to create a consumer app. Instead we’re going to create a restaurant app. Restaurants will text message people. We’ll have a whole bunch of restaurants who can use this independently, and then we’ll create the consumer part,” which you built after you had about 1,000 restaurants on your platform. And what did the consumer app do when you launched it?
Robb: It really connected that loop. So now with those 1,000 restaurants, immediately we avoided the cold-start problem. So a consumer pulls up our app and sees all the restaurants that are in their local area and gives them the ability to get real-time information, but more importantly get into line at the restaurant that they want to go to.
Andrew: And so if I now want to go to a local restaurant that I know always has a long line, I can install your app, see how long the line is, and then I can cut if I want to, right?
Robb: So we didn’t promote cutting per se, but what we’ll tell is you is our algorithm will tell you the next available seat at that time for a party of your size. So you go at the end of the list, but you’re not there. You’re still traveling to that restaurant. You’re walking. You’re driving in most cases. So by the time you get there, your wait is greatly diminished.
Andrew: I guess I’m thinking of this, that I don’t know that can actually see it on your screen if I hold up my phone. But on the screen it says, “Here’s where you’re going to be. We’re going to get you there,” meaning to the front of the line. “This could be you. Find out how.”
Robb: Yeah. But you start at the end though.
Andrew: I see. So you always start at the end of the line.
Robb: You always start at the end. Yeah, we don’t … It’d be an interesting feature to let someone pay or something to skip the line. But we really let people … we wanted to give people the ability to get into the line at the end, but then just manage their own time to get to the restaurant when they were at the head of the line.
Andrew: I see. So then how do you get consumers to use this app that you just created for them?
Robb: Well, we used the restaurants to help promote this as one of the extensions of their own hospitality. So they didn’t want people to wait in line. They a lot of times were apologetic. “Hey, I know you’re using Nowait. But next time you can just get in line ahead of time.” So it really became almost like a VIP kind of service that the insiders of that restaurant would know about. But then the nice thing is everyone that experienced the first time became an insider and a VIP.
Andrew: Which then I always wonder, Robb, with an app like this, why would a restaurant want to turn me on to Nowait when they’re basically saying, “Here’s an app that’s going to show you all my competitors’ restaurants, and meanwhile I’m okay with you calling in or walking in. But I’m not okay telling you go try this app that’s going to tell you about other local restaurants that you don’t have to wait in line for?”
Robb: Yeah. You know, that’s a great question. And some restaurants often thought that, but we really promote it and we built it, again, if you kind of look under the surface. The restaurants were our customers, so we added features and functionality that really helped them manage their business better. So we never wanted to put the customers ahead of the restaurant. So an example is you can’t get in the line at more than one restaurant at a time.
Andrew: Okay.
Robb: Once you’re in line, you can’t double-dip so to speak and put your name on another list. You’ve got to pick. But what we found is that if you give … you as a consumer have a first choice of where you want to go. So if we give you the ability to alleviate the pain of going where you want to go for that first choice, then you’ll go there. So you won’t go to the restaurant that has no wait or does not have a wait if you can use Nowait to get into the restaurant that you really want to go to. And most restaurants found that to be true most of the time.
Andrew: Okay. All right. Let me take another sponsorship break, and then I want to come back and ask about empathy with consumers. I understand how you understood what your businesses wanted. How did you understand or try to understand what consumers did? I also want to ask you about how you partnered up with Yelp, why you left the company, and then why do you think Yelp wanted to acquire you guys.
But first, I’ll tell everyone about my second sponsor, which is a company called Toptal. One of my past interviewees heard me talk about Toptal for a long time. His name is Derek Johnson, and he said, “You know what? I know Andrew. He’s not full of it. If he’s talking about Toptal, it’s got to be more than just that they’re sponsoring.” And at the time, he was doing 20 to 30 interviews. When I asked him, he couldn’t remember exactly how many, but it was a few dozen interviews, trying to find new developers for his company. And he and his CTO were just exhausted trying to screen people.
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All right. Let’s start with empathy towards consumers, Robb. How did you understand what your consumers were looking for, so you could create an app for them?
Robb: Yeah, that’s a great question, because doing product management and designing products for B2B for businesses is very different than for consumers. So for our businesses, we’d go in, we’d watch them use it, we released a cycle maybe once a quarter. But consumers it was really a different kind of mentality. So it was a lot more data-driven. Since we had hundreds of thousands of people using it even initially, we could look at who our super users were. We would kind of interview them over the phone. We went out to restaurants. We watched consumers kind of interact with our restaurants on their phone, just kind of watching them without talking to them. So we did a variety of different things, but it was definitely a lot more kind of data-driven based on that.
Andrew: So do you remember any questions or anything that pulled out the most insight? Was there a question that did it? Oh, you’re nodding. Yeah. What did you see?
Robb: I’m trying to think. I mean we really learned a lot about transparency, kind of what you showed up there on the screen, not just knowing the time, but visually showing how many people are ahead of you was important. Actually one thing we learned is we had some ideas around kind of doing like a points-based system, and we actually found out that users didn’t really have an affinity towards points for waiting in line. The act of not having to waste their time waiting in line was actually use enough. So one thing that we started doing was showing people how much time they were saving overall, like a cumulative kind of total, and that seemed to be a good way to kind of reinforce the value proposition on the consumer side.
Andrew: I see. All right. Things seem to have been going well. Why’d you leave?
Robb: Yeah, so that’s a good question. I mean I was there, I started the company in 2010. We brought in some investors. We hired kind of a professional CEO, expanded the management team. So after five years and the company had grown to 65 employees, I really thought that I wanted to get back into kind of the early stage of startups, kind of picking a new problem, investigating it, and kind of building a small team. So that’s what I decided that I wanted to do.
Andrew: And what was that business?
Robb: Well, actually I had the opportunity to go to Carnegie Mellon as an entrepreneur in residence.
Andrew: Is that where you are now? I’m looking over your shoulder, and it looks like you’re in a school.
Robb: Yeah, I’m actually in a co-working space called Sender here in Pittsburgh. I’m not on campus. But I’ve been at Carnegie Mellon for almost a year now as an entrepreneur in residence, working with a lot of exciting companies. A drone company that’s doing autonomy software for drones, it’s pretty interesting. And now I’m working on a project that’s looking at applying artificial intelligence in the home improvement space. So again, kind of looking at early customer discovery, finding product market fit, that’s what I really liked. So I had the opportunity to leave Nowait and stay on the Board and kind of get back into the early stage.
Andrew: Why do you think … well, I guess I know why Yelp made the investment, right? Yelp started to integrate Nowait into their app. They wanted to have an investment in the company that they were integrating so tightly into their software, right? And so they invested $8 million in the business.
Robb: Yeah, I mean the synergies between the networks that Nowait have and Yelp have are pretty obvious. Yelp has been, for a number of years, expanding into kind of other transactional systems. They bought SeatMe a number of years ago. On the reservation side, they bought Eat24. So they’re expanding their portfolio, and Nowait was the market leader in what we were doing. We had really loyal customers, restaurants, very loyal users. So expanding kind of our functionality into the Yelp app, at orders of magnitude more consumers, just made perfect sense on both sides.
Andrew: All right. How did life change after the sale? What’s an example of one thing that changed in your life?
Robb: Yeah. I’d say it hasn’t changed a ton. I mean, somewhat. I guess the biggest example is I’ve gotten into angel investing. I guess a lot of people do that. So I actually started a syndicate called 99 Tartans, and we’re really focused and Tartans is kind of the mascot. If you know what a tartan is, it’s actually …
Andrew: No, I don’t. I was just Googling it as you’re saying it.
Robb: A tartan is the mascot of Carnegie Mellon. It’s basically a plaid piece of cloth. So 99 Tartans, it means really a syndicate for alumni of Carnegie Mellon to invest in other alumni companies. So we have some great companies coming out of the university, and I wanted to create a syndicate where, for kind of small amounts of money, alumni all over the country and the world can kind of participate in the growth of these companies. So that’s kind of the biggest kind of side project I have, and I’m really excited to be able to kind of do that with my personal resources and then involve other people as well.
Andrew: Yeah, I see this. “Each year Carnegie Mellon students, staff ,and professors launch 20 to 30 startups.” That’s your investment pool, potential pool.
Robb: Yes, but it’s actually bigger than that, because we want … those are the ones that come directly out of the university. We actually want to invest in alumni that have already left the university and maybe are on their second startup or their third startup. So we’re not just limited to Pittsburgh. We’re not just limited to companies that are coming out right …
Andrew: And this isn’t your syndicate on AngelList is it?
Robb: That’s the same one, yeah. We’re using both AngelList and also non-AngelList.
Andrew: Okay. All right. Well congratulations. It’s got to feel good also not only that you had the sale, so that it’s clean. You know exactly how well this company did. There’s actually finally a finish line in life. But also isn’t it great that Yelp said how much they paid for the company, so you don’t have to be quiet about it, you don’t have to have this, “Did they or didn’t they?” It’s honest, right? It’s open.
Robb: Yeah, a lot of times they don’t. Companies choose not to disclose that. I’m not sure the rationale behind that, but …
Andrew: Me too. I’m surprised. It wasn’t such a big deal that they had to tell the public markets how much they spent, but they said it. Did that feel good that everyone now knows how much you sold for?
Robb: Yeah, I mean I it feels good to not have to say you can’t tell people, I guess.
Andrew: Yeah. And then there’s always the cloud of, “Did they really sell in a fire sale or not?” You can never tell. But once you have the actual number, it feels like all right Yelp valued this thing considerably.
Robb: Yeah, it’s great to have Yelp here in Pittsburgh. I mean, Pittsburgh is really kind of exploding with a lot of the larger companies kind of moving in. Facebook and Amazon and Uber, of course, and Google’s been here for a number of years. So Yelp is kind of the newest the newest addition to the …
Andrew: Through your office you mean, because of you they …
Robb: Yeah.
Andrew: Yes, it was. Now you’re integrated in the app, and people can go and put themselves on a wait list inside the Yelp app.
Robb: Inside Yelp they have almost pretty much the full functionality. You can see what the real-time information is, put yourself on the list, get the updates, everything.
Andrew: That’s another cool thing, to actually know that your business lives on, that’s you’ve got that legacy that people can actually interact with it. It didn’t just get swallowed up and disappeared.
Robb: Yeah, I mean it’s been great. I mean, Yelp has really kept the team here intact, actually expanded the team. And when they add kind of their resources on the sales and marketing side, I think you’re going to start to see Nowait just really exponentially increase across the country.
Andrew: All right. The website and app are Nowait, but frankly you have the Yelp app on your phone. Now you know the story behind the Nowait feature in the Yelp app. Robb, thank you so much. And you have a personal website I think, which we can direct people to if they want to connect with you. It’s just RobbMyer.com, isn’t it?
Robb: Yeah, that’s actually my LinkedIn page.
Andrew: Yeah, I just saw that. It links right …
Robb: I know. I guess I fail on your example of not having … I’ll have to get my WordPress site set up.
Andrew: Well, it does … yeah right, it’s easy to set it up. But it’s RobbMyer.com for anyone who wants to be redirected to your LinkedIn profile. And my two sponsors, the company that will help Robb and anyone else set up a quick website that looks good, has full WordPress functionality and grows and expands with them, it’s HostGator. Check them out at HostGator.com/Mixergy. And if you want to hire the best of the best, top three percent developer, you really need to go check out Toptal.com/Mixergy. Toptal.com/Mixergy.
Robb thank you so much for doing this.
Robb: Thank you, Andrew. It was my pleasure.
Andrew: Congratulations. Thank you all for listening. Remember the goal is listen to these interviews, build up a great company, and come back and do an interview the way that Robb did. Bye everyone.
