Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com.
When I’m not just doing real business stuff, I’m still one of those people who goes online into different forums. Like I recently got into Soylent, so I went to the Soylent forum. When I got into the Apple Watch, I went into the Apple Watch forum. There was one point I was into Trio forums, just like get into this stuff. I’m one of the people who’s still out there just loving this stuff.
And today’s guest has an interesting business model. He wants to help people who run forums enable their communities to sell to each other. So, for example, if I’m still in that Trio forum and I’m not–I still love the Trio as a phone. I have some right here in my drawer. But if I was still on there and I wanted to sell it to other people who are enthusiasts and I probably could sell it for a bigger price than I paid for it, then his software would enable me to do it.
That’s the business that we’re going to talk about here today. His name is Chad Billmyer. He is the cofounder of Panjo. It’s a marketplace for auto, sport and other enthusiasts and if you’re running a marketplace, you can add his software to your site. Is it cofounder, by the way, Chad?
Chad: Yeah. I do have a technical cofounder, Tom Gerken.
Andrew: And this interview is sponsored by HostGator. I’ll tell you later on why if you’re hosting a website and you don’t like your hosting company, you should switch to HostGator. And it’s sponsored by the great company that allows me to hook up with all these great guests. It’s called Acuity Scheduling. If you want to schedule with someone, you’ve got to check it out, but I’ll tell you more about them later.
First, Chad, let’s get into dollars and cents. What kind of revenues are you guys doing on this marketplace?
Chad: Yeah. So, right now, sellers are completing millions of dollars of transactions a month. That can be everything–I think some of the more expensive things are like $100,000 Tesla Model S’s down to $10 slot cars for slot car enthusiasts who race those.
Andrew: Slap card?
Chad: Yeah, slot cars. It’s like an RC car, but the tracks have slots in them.
Andrew: Yeah. I had no idea people still love those, by the way. In Manhattan, in Midtown, there is a place where you can go and just race slot cars in the middle of freaking Manhattan. I don’t know if it still exists, but I remember going there when I lived there a few years ago. But let me see. When we’re talking about numbers, here’s what you told our producer–$42 million worth of these person to person transactions, right?
Andrew: Over the course of how long?
Chad: That’s over a year.
Andrew: In one year. Do you take a percentage of that or do you charge the community owners a flat fee to use your software?
Chad: Yeah. So, I would say we’re still working in what the monetization model is exactly at this nanosecond. There’s a 6.9% transaction fee for sellers and a fee that buyers incur that’s between $1 and $5. It caps out at $5.
Andrew: I see. So both sides pay. They pay you and do you then pay the forum owner a piece of that?
Chad: That’s correct. So, if we have a partner for one of our community marketplaces–let’s take Audi’s. So, Audizine.com is our partner in that case for one of our Audi community marketplaces. The partner will receive half of the transaction revenue from that community marketplace.
Andrew: So there was a period there where everyone was on vBulletin message boards. I feel like they’re still the leaders. I don’t know the numbers. I probably should know that. Are they still the leaders, actually? You probably know the numbers.
Chad: Yeah. It’s interesting. So, I would say yes, it is true to say they’re still the leader. Talk about a little bit of internet history here–going back to the late 90s, to your point, vBulletin was not a social network, but an interest network. You were interested Audis, you were interested in watches, whatever it was. And so these sites really got their rise at that time.
What then ended up happening is they survived Twitter and Facebook and mobile, all these onslaughts, really because each community site is this silo of a tremendous amount of search engine optimized material. Like experts have been discussing slot cars for ten years at SlotCarIllustrated.com and so I think that really helped those sites survive to this point.
Now, that said to your question of who’s the leader, the team that developed vBulletin went on to develop something called XenForo, which I think a lot of vbulletin community owners are migrating to. It’s a slightly more contemporary take on forum software.
Andrew: I never heard of it, XenForo.
Chad: Yeah, XenForo. So, anybody watching this who wanted to build up a community, a forum for their members, their clients, whatever it could be could go to XenForo and launch a forum for their members.
Andrew: What about Discourse? Do you guys work with them?
Chad: Yeah. We do not have an integration with Discourse. So, that’s yet another example–the list goes on, Vanilla Forums, phpBB, there are lots of forum software platforms, not to mention Facebook groups that folks can use to deploy a community.
For us, when you ask about Discourse, for the work involved on our end to make a plugin or make an integration with a platform, there has to be a decent amount of volume there and not just any volume, but volume where commerce is part of the culture, so if a forum software platform was really strong in conversation about skyscrapers or something, that doesn’t lend itself to peer to peer transactions, so that’s not a great platform for us.
Andrew: I see. And Discourse from what I’m seeing, it’s very much for a techie community. You might talk about coding language there or Soylent, but that’s not the kind of place where people are going to be buying and selling.
Chad: Yeah, where there’s not a decades old buy, sell, trade sub-forum or multiple sub-forums. Those are the folks that we’re looking to partner with.
Andrew: By the way, Soylent, I really do get into these communities sometimes. Soylent is a food replacement drink. They have such dedicated fans in that community that one person said, “I have old expired Soylent. I don’t know what to do with it. Should I sell it?” Someone else said, “I will buy it because I like that formulation of Soylent, the 1.5 version versus the 1.6,” which they’re currently selling. “I will buy your expired stuff.” So, I see the kind of passion that people have for it.
Chad: Yeah. That’s it. We have a file at Panjo called “That’s a Thing.” We’ll say, “Oh, we have a flashlight enthusiast community on Panjo.” We’ll say, “That’s a thing?” Yeah. It’s a thing. It’s folks that are focused on the weight and the brightness and the color temperature.
Andrew: That really is a thing? There’s a community of people that care about flashlights?
Andrew: Where are they? Are they on Facebook? I imagine that’s where they would do it.
Chad: No. In that case, CandlePowerForum.com is one of the powerhouses in terms of members.
Andrew: I want to understand how you’ve built up this business, but I’ve got to admit something to you. I’ve been really bad at creating community at Mixergy. Eight years we’ve been around. I’ve had multiple failures of trying to do this. People want it. They want to talk to each other and I keep failing them. Where could I learn how to create a better community? Who do I talk to about that?
Chad: Yeah. CMX, I think CMXHub.com is an amazing resource.
Andrew: Yes, run by David.
Chad: It’s an amazing resource for community organizers/community managers. I think to your point, the art and science and academia of community creation, management has really come into strength within the last few years. But that’s a good resource to go to.
Andrew: CMXHub.com. That has been the best thing that I’ve found around it. And the founder, David, has been incredibly helpful to me too. He even went to lunch with me when I was really struggling and he talked to me about how to do this. But you’re a guy who’s been an entrepreneur now for a long time. You started out at 13, where I feel you were a little entrepreneurial. What was the 13-year old job you had?
Chad: Probably the summer before that, I was a caddy at a golf club. But I was like the youngest kid there. So, you had to get to the caddy shack super early and I was always the last one to go out. So, I’d sit there, essentially like detention. I’d sit there all morning to the late afternoon. I was so small. I could only carry one bag, which cuts down how much you can earn, all this kind of stuff.
So, I hated that job enough to be inspired to create something better for myself the next summer. I was involved in a school program where Friday afternoons we’d go down to the local news station and make these news vignettes that would play during the cartoons. So, I said to the TV station, “Hey, could you use me for anything full-time next summer? It looks like you can use some help here and here and here and I know how to do those things. I’d rather carry the camera equipment than these golf bags.” So, that was the first job I created for myself.
Andrew: And they said yes?
Chad: Yeah. They said yes.
Andrew: And you became a kid reporter, just because you walked in and said, “Can I do anything?”
Andrew: And when you were a kid reporter on camera, do you feel like you were good at the time?
Andrew: You were? What made you so good? It’s an uncomfortable feeling staring here at the camera. I actually intentionally need you on my screen so that I don’t feel awkward looking at the camera. What did you do?
Chad: Just the fun of learning and storytelling–so, our job was to find–this was in the Philadelphia area–to find interesting museums and kids activities. I got to travel around Manhattan in the MetLife blimp. That’s something that very few people in the world get to do. That was for a story to learn how to get sports shorts from blimps. How could you not love that?
Andrew: And you’re just going in asking questions as a camera man recording it. Did you have a producer with you to help guide you?
Chad: It would really just be a camera person and me, for the most part.
Andrew: Then you went to Brown and in your junior year at Brown, you entered what so many students did at the time, a business plan competition. Was it actually helpful for your development as an entrepreneur to go through that competition?
Chad: Yeah, for sure. I think in the 15 years since that I’ve been at Brown, the entrepreneurship program has evolved and shifted and become more academic and less academic. At the time, there was an incredibly popular class where you essentially read Harvard Business School cases. Every other week an alumni/alumnus would come in and speak to the class. I think one of the biggest things I got from that class is it is possible to start my own business. It’s totally conceivable, totally doable. There’s not much to lose.
So, you really need that kick of inspiration to understand–I could see myself doing this. What happened was my work study job at the university was to work in the big main lecture hall and I worked the business plan competition my sophomore year. I setup the microphones and stuff. I saw one of my peers win $10,000. So, at that moment, I was like, “Next year, I have to enter it. I had nothing to lose. I might win $10,000.” So, junior year, I entered the competition and we won $10,000.
Andrew: Really? That’s impressive at that age. What did you do that won you $10,000?
Chad: That business plan, this is now the year 2000. The first dotcom bubble had not yet popped.
Andrew: But it was about to.
Chad: It popped during the course of my senior year. But that plan was centered around what we now call content management systems. We had built a content management system for the daily newspaper at the university, for the alumni magazine, for some various departments.
Andrew: And they used it.
Chad: They used it. Yeah.
Andrew: The difference was that at the time if you wanted to build a website, you would create a bunch of HTML pages and link them together manually and upload to each one via FTP or you would use FrontPage and that was kind of a clunky system because it was helpful or getting started, but it was also very limited. So, what you wanted to do was say, “Here’s an easier way to get your content up on a webpage and edit it.”
Chad: Yeah. My technical cofounder there, we sort of came together at the school newspaper. He used to go to sleep and wake up at 3:00 a.m. to go into the school newspaper to put it online, really solving a problem for him. He didn’t want to go to sleep and wake up and do that. He just wanted the editors to be able to make the paper website by themselves.
Andrew: Interesting. So, he was solving his own pain, his own problem and then put it up for them, they used it and then how did you go and find another person or how did you know there were other people willing to buy something like this?
Chad: The key moment there was the financial aid office hired our team to make some software for the aid office. They had acquired the responsibility for running the Federal Work Study program, which really funnels money from the Department of Education to millions of college students around the country. But there’s a decent amount of management and paperwork involved in those programs.
We’ve done this one off project for the financial aid office and the director there was an amazing champion and evangelist of ours and had talked to some of his peers in the industry and very quickly we had a bunch of colleges and universities hiring us to build software to help their federal work study programs.
Andrew: So, you had both a CMS and a consulting service that uses CMS to build–I see. Could people use your CMS to create sites themselves?
Chad: Yes. In fact, the financial aid website at Brown University for many, many years was running on this CMS. Eventually the business shifted to a focus on SaaS software application as a service, where college and financial aid offices were licensing the software to run these federal work study programs with their scholarship applications.
Andrew: You know what, Chad? I’ve been doing this for eight years. One of the things I’ve noticed over and over again is with every new technology that allows content to be published, someone needs to create a CMS and frankly multiple people will and will make money off of it. So we’re thinking about the web as a great example, and you gave one yourself. WordPress is another one and now Squarespace is another one.
But even if you look at different platforms, like mobile there was a platform for creating content. I think chat bots are becoming big. The idea of creating a CMS to allow people to create content for that will be big. If Google Glass would have taken off, someone would have needed to create a CMS to allow regular people who want to create content but don’t want to care about the software behind it to publish to it.
It feels like we should always be on the lookout for what’s the next platform that could get content and do it. The one that stands out to me more than all of those is back when Facebook allowed companies to create their own static pages on Facebook, there are so many people who then created CMSs that allowed average mom and pop businesses to create their static webpage on Facebook.
Today that’s been replaced by the news feed by the timeline for businesses. But back then when it was a think, you could build a business on it. There’s no question in there, just an interesting observation as I keep talking to people here.
Chad: I think you sort of iterated off that. For listeners and viewers, you posed the question where is the next platform like that? It might be Oculus. It might be VR. It might be Snapchat, where there’s not much in the way of third party publishing or creation tools for those platforms.
Andrew: Instagram. I used–what is it called? Snappa.io to create images for Facebook because now you need that. So, wherever someone needs to create content and needs some kind of technical skill, there’s an opportunity to create a CMS that takes the technical skills out and allows someone to create content.
Chad: Hopefully somebody just started building one right now.
Andrew: I bet they did or maybe they hire somebody to do it from Toptal, one of my sponsors. Was that the company that became Foresite Solutions?
Chad: That’s correct. Foresite Solutions is the company that has to this day hundreds of college and university customers.
Andrew: So I actually don’t know much about the company except that you sold it in 2005. Why did you sell it in 2005?
Chad: It was interesting. I don’t know how big our team was, maybe we were like six people or something like that in 2005 with ten, I don’t know if we had 30 to 40 customers at the time, recurring revenue, software subscription service and the acquiring company, Nelnet, is based out of Lincoln, Nebraska. They’re a diversified education holding company, publicly traded.
We’d see these guys at the financial aid conferences in the education industry and we’d talk during the down times in the exhibit hall and increasingly there were just so many things that seemed like a great fit between us, our opportunity to learn from them and their national sales team, their opportunity to learn from us about providing fee-based services for university, so it was really about fit and an opportunity to learn on both sides.
Andrew: But just because there’s a fit doesn’t mean you have to sell. You could partner or you could just appreciate each other. Were you at the time looking for an exit? This was 2005. Things were just starting to heat up in the Web 2.0 world.
Chad: Yeah. I don’t think–in theory you’re not ever looking for an exit. As long as you’re focused on growing a solid business, there are constantly these flirtations that occur with complementary companies or opportunities that arise. I don’t know that we were looking to sell. It was important to own the asset and for us, the opportunities that their network and their customer base afforded us were really attractive.
Andrew: What did you sell for?
Chad: I think that’s public somewhere. The full number was probably like $1.7 million. I think if you dig deep enough into a Form D filing you can find that.
Andrew: And did you get to actually–I guess you cashed out. You had no outside investors.
Chad: We did. We raised $250,000 friends and family.
Andrew: I see. Okay.
Chad: The way these transactions tend to go, that number is like the full end number after an initial cash payment, a multi-year earn out. It’s not like you get that–
Andrew: So, you didn’t become a millionaire off of it?
Chad: I became a thousandaire.
Andrew: A thousandaire. Okay. Did you get to buy anything to celebrate that sale?
Chad: I bought a road bike that I use to exercise.
Andrew: And did you go on long bike rides?
Chad: And I paid off my student loans.
Andrew: You did? That’s one of the best. I could have paid off my student loans at maybe 23, paid them all completely, probably 23. I intentionally didn’t pay them off because I wanted the pressure that comes from having those bills come in every month. That pressure is pretty intense and then at 30, I paid them off. I was really happy. Before my wife and I could be married, I said, “Look, we’re paying off your student loans. I do not want us to have any more debt. I loved having the pressure for a long time. I want no pressure at all.”
Chad: Yeah. That’s interesting. That was not my view on student loans at all. It was like, “If I can remove this piece of debt, then I can think about whatever other future financing, financial opportunities.”
Andrew: And Nelnet actually services student loans, right?
Chad: They do. This is actually part of the acquisition story. If you go back to like 2005 to refresh your memory on the student loan industry, there was somewhat of a handwriting on the wall that what was previously a public/private partnership between the Department of Education, the federal student loan program and these private entities was likely going to come to an end under the Obama administration.
Now instead of private companies originating these student loans and the government guaranteeing them through state agencies, that entire student loan industry turned on its head circa 2008, I think, where now the Department of Education originates all those loans so those private companies don’t have to go out and raise different piles of cash which then they disperse out in the form of student loans.
Andrew: I see. But they do need a private company to collect the money.
Chad: That’s right. So, the Department of Education now contracts with entities like Nelnet to service the student loan. So, if your loan is from the Department of Education but if you’re calling a call center or getting an email or needing assistance with repayment, you’re likely partnered up with a company like Nelnet who provides those amazing services for students.
Andrew: Or if you’re calling up and asking them to pause, which I really loved that I could get a six-month pause for a while there.
Chad: They want you to succeed, right? It’s not good for them.
Andrew: They do want to get paid. We’ll talk about what you learned at Nelnet and how all of that ended up leading to Panjo in a moment, but first, I’ve got to thank my sponsor, Acuity Scheduling. That’s the way you and I booked.
I’ve got to tell you that before I discovered Acuity Scheduling, I used to email a guest and say, “Hey, do you want to do an interview at. . .” and I’d give a time. And then the guest would often say, “No, I can’t do it at that time,” which I kind of like because then we’re now talking about when we should do the interview, not whether they should do the interview. But there would be endless back and forths and if I forgot to say 1:00 p.m. Pacific time, they might think it’s 1:00 p.m. Eastern time and then there’d be this whole thing where someone who was ready to say yes now is feeling a little bit bothered by it.
Then there would be reminders I’d have to send out because people forget, stuff comes up and I could never create a calendar invite for them and if I did, it would be a pain because then I’d have to do it on my calendar and then figure out what their Gmail account was so that I could send them–it just became really messy.
Chad: It was easy to schedule with you.
Andrew: It’s so easy.
Chad: It was really easy to use Acuity to schedule with you.
Andrew: Yeah. My mentor said, “Look, there’s this thing called Acuity Scheduling. Go sign up. Stop making it so difficult.” So, I went and I signed up. Now what I give you and other guests is I say, “Can you do an interview at one of these dates?” You click a link. You go to my website, where most people don’t even know it’s Acuity unless they know to look for it. Embedded on there is my calendar of availability.
You set the time zone. Actually, it knows your time zone but it lets you adjust it. Then you pick from my availability the time you want to do the interview. You then enter your name, of course, so I know who I’m doing the interview with, your phone number. I also ask for a couple of other things, like I ask for your Skype name, which is really important for us to record. And then you hit submit.
You get a link that you can add to your calendar so that you can actually remember it and my software will automatically remind you. A while back I found that some people called me the day of saying, “I forgot that I’m doing the interview.” So, I went back to Acuity and I said, “The day before we should setup a reminder email.” Boom. That’s what Acuity is about.
Now, most people listening to me, Chad, and you too, Chad, aren’t doing interviews, so why should you care about a tool that helps people schedule interviews? I’ll tell you why. Most people listening to us are trying to sell something or are selling something or are trying to learn about their customers. If you want to make it easy for people to get on a call with you or meet with you in person, don’t make it back and forth, make it so that they just have one link where they can book a time for you.
In fact, with Acuity, anyone listening to me can say the second email someone gets when they sign up is a link to Acuity so they could talk to me or talk to a customer service person or the second link they get via email after they register for a trial is a link to talk to one of our sales people. I know that doesn’t necessarily scale for everybody, but you’d be surprised. But even if you just have phone calls with a handful of people in your customer base, a handful of potential customers, you are going to understand what all of them are looking for.
Look, I’ve been a champion of Acuity Scheduling for years. I’ve been talking about them now for a very long time, if you want to go check them out they’re giving you a big discount largely because Acuity Scheduling is founded by a long time Mixergy listener. So, here’s the URL–go to AcuityScheduling.com/Mixergy and Gavin, the founder is going to give you 45 days free. You can book a lot of calls in 45 days, really grow your business.
If you’re not happy with it or if you say, “Hey, I’ve got the better of them. I’m going to walk away, you can totally do it, no obligation. My guess is you’re going to get so many more sales, so much more loyalty from your customers, so many more people talking to you that you’re going to continue to sign up for them. I’ve talked for way too long here, Chad, about this. I’ve got to close it out and say here’s a link, AcuityScheduling.com/Mixergy. You’ll thank me for it.
All right. You then went to Nelnet. You learned so much from them about leadership. What did you learn about leadership from working there?
Chad: So, coming straight out of college as the CEO of a startup, I hadn’t really had a boss in a professional setting. Obviously I had bosses for student jobs or whatever, but someone for whom people leadership was an art and science and I had an amazing leader, this woman [inaudible 00:25:14] and she would say all the time, “My job is to make sure that you are as successful as possible, you have the tools you need to be as successful as possible, that you are achieving as much as you can.”
And I carry that with me, that’s such a great set of dimensions, lens through which to look at people leadership. That is everybody on my team set up for success. Does everybody have the things they need? Have I removed all the barriers?
Andrew: So, your job as a leader is to remove the barriers so that they can be successful?
Chad: I think so.
Andrew: What about the vision, though? How do they know where they’re going?
Chad: It’s not singular.
Andrew: So, give me an example of how that played out at Nelnet or any business you were a part of, where you as the CEO have to clear barriers for people.
Chad: So, if you think about what people need in terms of resources and tools, it could be something technical. It could be an intern. It could be a process, something that’s not formalized. So, sales is an interesting one. It’s really common for me to mentor with a young startup where sales is a bit haphazard. One thing I learned at Nelnet is the value of a sales methodology. How do you make sure all sales associates, where they say this opportunity is at 50% that you have a shared definition for what 50% is. So, that’s an example.
Andrew: What do you mean this opportunity is at 50%? What does that mean?
Chad: Yeah, being 50% closed, that is to say. So take the solution selling methodology as a definition for an opportunity that’s at 10% or 25% or 50%. So 50% in the solution selling methodology means you’re in touch with a power sponsor. Okay. What’s a power sponsor? That means you have confirmed that you are in a conversation with the decision maker. You are in a conversation with a person who can sign the contract for whatever it is you’re wanting to do together.
Andrew: I see. I never thought of that. So, when you get together with your sales people, you want to know how far along is each one in the sales process. If one person’s definition of 50% is, “I just got on a call with the first person. That means I’ve started.” Starting is 50% of the battle. Another person thinks 50% is when you’re starting to close the deal, then you have no idea as a sales manager where everyone is. What’s the methodology that you were talking about that employs the level of specificity?
Chad: Yeah, solution selling. Eames, I believe is the author. I think you go to Amazon or something and look for this book, “The New Guide to Solution Selling,” or this field book, field guide. I know there’s Sales Performance International of Atlanta does some great training. You can travel there or they’ll come to you.
I’m a huge believer in applying a sales methodology and a workflow to an organization. If you think about what entrepreneurs are, in part most of them are natural born sales people. Even as a natural born sales person, you can fall in these traps and pitfalls of selling. When your awareness is heightened of these places where an opportunity can get stalled or stuck and then you have a toolset for how to move it beyond that, it’s night and day. You’re talking about doubling or tripling your close rate or your success rate.
Andrew: And you use that right now too?
Andrew: I see. I want to find out what the process is. Let’s understand first how you came up with the business idea. You graduated from school back in 2001 and you had a passion yourself for a specific kind of car. What was it?
Chad: Yeah. So, I was the first person I knew in 2001 with a hybrid car. Back then, Honda had a two-door Insight. Now they have a four-door Insight. They discontinued it for a little, brought it back. So, it was a two-door Insight. It had covers over the rear wheels. Then the Prius came out shortly thereafter and nobody I knew had one.
I modified the car a little bit and like you got really interested in how do you get more gas mileage out of this thing, what kind of modifications can I make to it? So, I got into web forums and just discovered a world of fragmentation, supply broken up across different sites, friction. I’m a member on one site, not a member on another. I see something I want and now I have to like register and wait and figure out what the culture is.
Andrew: That is the worst. Some of the want to approve you, others don’t. I don’t remember the username and password. They don’t take Facebook login and at the time they definitely didn’t. I don’t even know if Facebook existed. By the way, I’m looking at the Honda Insight. This is the least sexy car that you could possibly get. What attracted you to this Honda Insight?
Chad: I did not say it was cool or sexy.
Andrew: What was it then?
Chad: Well, for me the technology was really cool, so, the regenerative braking when you’re slowing down.
Chad: This battery is charging. The battery is there to give you a boost and reduce your fuel consumption. I thought the technology was really cool.
Andrew: I get that. I get that a lot. Okay. So, you started looking online for people who are passionate about it and you found them. So, this thing was just kind of in your head. After you left Nelnet, you said, “I want to start another company. What company am I going to start?” And then you kicked around a bunch of ideas. What’s one idea that you didn’t pursue but you were kind of excited about?
Chad: One was a kid’s first email account. So, I think somebody should run with this idea. I think there’s a there there. I have a seven-year old. At the time he would have been like two or something. I was kicking this idea where like a kid could email fictional characters. So, you could license the characters from Disney or whoever. Now with bots it would be even easier to execute.
Andrew: I was going to say email probably is going to be outdated, but text messaging to whoever is the way to go. So, they could do it maybe with a limited Facebook account and create an app that just has that and connected to Grandma and Grandpa. Oh yeah, someone could definitely run with that. That’s not hard. There are tools already that exist.
Chad: Yeah. So, there was something about elder care, being able to quickly retrofit a home if something had occurred to someone who has an elderly relative. But ultimately the thing I was most excited about, the thing I could get my hands around in terms of market size was this idea of building a marketplace that really catered to enthusiasts that was focused on making sure on the buy side it was enjoyable, efficient and really informative and on the sales side that we were successfully surface really quality buyers willing to pay a fair price and reward sellers really with credit and status in the community.
Andrew: I also feel like this has the most opportunity for growth and for revenue. If you’re retrofitting homes, you’re basically in a market that is already mature and you have to find a clever way to take market share away, you’re not growing market share, right?
Chad: Well, I’m not sure that’s true. If you think about like Care.com, it’s a marketplace for everything from childcare to elder care, that’s a very successful marketplace where whatever, a total addressable market was there.
Andrew: I see. You were thinking of a marketplace for people to go and find someone to retrofit their home.
Chad: Yes. Thank you. Yes.
Andrew: I see. I still don’t think it’s as big of a business as this because you hire them one time and then that’s it.
Chad: I agree. I later came to learn a little more about the academic side of marketplace businesses. Think of like an Airbnb. Say, “Well, what does Airbnb sell?” Someone would say, “A short-term rental.” When in fact, all marketplaces–Airbnb, eBay, Uber, Panjo–really sell a reduction in transaction cost.
It’s incredibly unsexy. It’s incredibly academic. But when you start to think about a marketplace business like that, it really focuses you from a product roadmap perspective–which features should we ship? Can we reduce search and information costs? Can we deduce enforcement costs? Can we reduce transaction costs?
Andrew: You’re looking for where the friction is and that’s your job. It’s not about necessarily trying to find the right supply buyer and seller. It’s to find what the friction is in the marketplace that you can eliminate.
Chad: That’s right. Yeah.
Andrew: Interesting. How is that a different way of thinking about things than to just what are my customer’s problems?
Chad: Yeah. I think it frames–so, for any business, there are hundreds upon hundreds of features that one could ship and that could or could not make a meaningful difference, move the needle for the business and when you frame a marketplace business in the context of, “Okay, we’re trying to reduce cost on the buy side and sell side. What do we ship next? Which one of these things can reduce the most cost for the buyer or seller?”
Andrew: Versus understanding pain, you have to figure out what’s their frustration, can they not find the right message board, etc. Here you have a specific number you’re aiming for. Got it. Where do I find out more about this? I really want to find out more about the academic side of marketplaces.
Chad: There is a professor at Stanford, Johari, I think, is his last name, who has a wonderful syllabus online, Ramesh Johari I think is his name off the top of my head. He teaches a marketplace course either out of the econ or engineering department there. There’s a great list of academic–
Andrew: Ramesh Johari, people can find him by looking him up online. He’s at Stanford. Actually, it’s Profiles.Stanford.edu/Ramesh-Johari or there is the Market at Munger. I guess it’s something he was a part of. Interesting. I never heard of that. I love when you’re opening my eyes to this stuff. It seems like you’re really into marketplaces, but most people are afraid of marketplaces. Why do you gravitate to them?
Chad: People are right to be afraid of them. Here’s the thing about a marketplace business. It’s notoriously difficult to start. So, you simultaneously have to sell to a supply side and a demand side or grow a supply side and demand side or you get a lopsided marketplace and one side is really unhappy. So, it’s not like we make a widget and market a widget and sell the widget and it’s us and the buyer. It’s we have to sell that we’re reducing transaction costs for sellers and we’re reducing transaction costs for buyers.
Andrew: Right, for two different groups of customers, where for most people, finding one group is hard enough. You found an interesting way to get around it and we’ll talk about that in a moment. But that doesn’t scare you away. Why didn’t that scare you away?
Chad: You talk about your passion for some of your hobbies and these things do wax and wane and come and go. It is so much fun and work with our members. And the stuff is so interesting, from refers who are into aquariums and saltwater fish tanks and aquarium equipment to folks into slot cars, camping gear–
Andrew: But then you can still find one group of them and create like a CMS for them to sell or something like that. I feel like here’s the one big advantage that I’ve heard about marketplaces, They’re incredibly hard to setup, but they’re the most defensible thing that you can have online, where if you have a marketplace like Craigslist, even if Craigslist software is out of date, it doesn’t matter, they’ve got the marketplace, so it’s very defensible.
Chad: You raise an interesting point. I’m going to correct your language. As schooled to me by Simon Rothman and Greylock venture capital–Simon ran eBay Motors. I one time had this conversation with him. He said, “So, is Panjo a classifieds or a marketplace?” “What’s the difference?”
You just bring up Craigslist and I think this is interesting. Craigslist is a classifieds and you’re right to say that there’s something incredibly powerful, a network effect. The marketplace effect we can talk about in a second, but this network effect, whereas Craigslist gets bigger and bigger, it gets stronger and stronger.
So, this is one of the cool things about both classifieds or network effect businesses and marketplaces, which are also network effect businesses, that they defy the laws of business gravity. You think about a Google or a Microsoft getting bigger and bigger and getting weaker that it has all these tentacles and more to coordinate and organize, as opposed to eBay, that’s now over 20 years old, or Craigslist, to your point, that looks like it was left off in the late 90s, these network effect businesses that grow stronger as they grow bigger.
Andrew: And the difference between a marketplace and classifieds if I were to describe it–it seems like the difference is with classifieds, people are talking to each other and playing each other and the money doesn’t go through the marketplace?
Chad: Yeah. The best way to look at it is classifieds are ads. You say, “This is an ad for the fact that I am selling something.” So, classifieds are ad-based businesses where you’re buying an ad. There’s also often a listing fee. Marketplaces are much more focused on improving liquidity, reducing transaction costs, lubricating the transaction and monetizing through fees.
Andrew: So then which one are you, a marketplace or classified?
Chad: So, Panjo is a marketplace.
Chad: Panjo is a marketplace.
Andrew: Because the money goes through the system. I see. It does kind of feel like there are a bunch of ads, not the bad kind of ads, but it feels like it’s the kind of classified ads that you used to see years ago.
Chad: I think the interesting thing about Panjo is by way of the technique we’ve used to grow, we’ve partnered with sites or communities that have historically operated through classifieds that could create listings for free or create listings for a listing fee. We’ve identified that gosh, there are a lot of problems, a lot of friction, inefficiency in those classifieds and a marketplace could serve these individuals better, serve us better.
Andrew: I see. So, when I look at those message boards, the way they used to operate is if they want to run an ad, you can run it. Sometimes you have to pay. Sometimes you do it for free. You run a listing. People pay you directly. When I looked at yours, you guys offer 100% money back guarantee, is that right?
Chad: That’s right.
Andrew: The only reason you could offer that is because you’re in the middle of the transaction, so you can guarantee that this is a real transaction and someone’s not taking my credit card number and running away.
Chad: Yeah. We have machine learning fraud detection and prevention running in the background, checking the credit cards being used, the IP addresses, patterns in their messaging and email. These are ways that we can provide that guarantee and provide a degree of safety, security and trust that are just not there in a classifieds world.
Andrew: All right. Let me take a moment and then come right back and ask you about this thing that you told our producer about the numbers that you saw when you were looking into the business because I want to understand how you decided this would be the right business.
But first, my sponsor is HostGator. It’s a company that helps you host. I actually had one of my fans sign up to HostGator and I said, “Eric, great, you’re a HostGator customer. I could use a testimonial. What do you say?” And he said, “Ho-hum.” I said, “What do you mean ho-hum?” He goes, “It’s hosting.”
Then I realized you know what? Maybe people don’t jump up and down about hosting. Maybe when hosting works, it just means it works. It’s nothing to be super-excited about. The thing about hosting is it’s a solved problem. Hosting WordPress websites, as long as you can keep the site from crashing, it’s a solved problem. So, what we need is somebody who can keep the site operating and someone who when stuff goes bad is available to take your phone call and that’s what I like about HostGator.
If you go to HostGator.com/Mixergy you’ll get all that and they’re offering already low prices. They’re known for offering some of the lowest prices in the business for hosting whatever website you have. Now, because of a special deal that they’re giving only Mixergy, you can get 50% off of their prices. If you can find a better price than they’re offering my listeners, go to take it. I swear, I won’t be hurt. But you won’t find it.
Go to HostGator.com/Mixergy and I’m going to give you guys one suggestion based on this interview for an idea. If you don’t have a business, here’s an idea you could take. Every time there’s a new platform, there’s someone who creates a CMS and there are a whole bunch of people who should use it and they’re super, super confused. What you want to do is take the CMS that already exist sand create a service, a product based service business where you are hosting their websites or their product using the CMS.
Let me give you a better example. Right now I feel like bots are the next big platform, super easy to do. There are people who have CMSs for bots. Create a service where you charge businesses a few bucks a month to create and manage their bots. They don’t want to get involved with a CMS. They just want to produce their content. You create a service that does it. And as you create a service, you find new ways to integrate SaaS software into it and then you can eventually transition away from the service into a SaaS-based business.
Or you can keep growing the service-based business, especially if you’re clear about what you’re selling. You’re only doing bots, you’re only doing it this way, you’re only working with this many messages back and forth. You could do it and systemize it and grow it and sell it. So that’s one idea. You can do that all with just a HostGator website. Just put up your website tomorrow. Offer your prices for this bot creation service online and just keep growing it from there.
If you already have a business, which many people listening to me already have and you hate your hosting company or you want to reduce the price, always good to do, same thing. HostGator will make it easy for you to transition. In fact, if you’re on WordPress, they will do the transition to HostGator for you. Here’s a special URL. Nobody is offering a lower price than this–HostGator.com/Mixergy. I’m talking a lot in these ads, Chad. I realize I’m just throwing a lot of words because there’s so much I want to say about it. I’ll close it out–HostGator.com/Mixergy.
Here’s the thing that stood out for me. I go through research on you. I go through where your traffic is coming from and so on. I go through the notes from our producer call. Here’s the thing that stood out. You said you dug into the numbers into the industry–RC cars, outdoor sporting goods, etc. to find out what the biggest vertical for hobbyists would be, whether the biggest vertical would be big enough. Talk to me about that. I like the analysis that you do on this business. What did you do and how did you know you found the right vertical?
Chad: So, going back to my first company, I didn’t have context for what a big business is. No matter what, you work as much as you can on your startup and your startup, there’s probably some kind of a ceiling on every venture, maybe not Facebook or Google or some kind of a ceiling on that original kernel of an idea you had. So, going back to this company that made software for college financial aid offices, there were only so many universities in the world, we can only charge so much a year, which gets you to a TAM, a total addressable market. That market was only so big.
So, when it came to starting this business, one of the criteria that I was looking at was how big could this business really get. Could it be a billion-dollar business or not? Is the potential even there? So, what it really boiled down to is yeah. There’s no one place that says online use peer to peer transactions are x-per year. So, vertical by vertical we had to dig into whatever kind of industry research was available within those verticals. So, take auto parts, auto is a big part of what’s available on Panjo. We have really big BMW, Porsche, Tesla, Mazda, Subaru.
Andrew: Audi, I saw.
Chad: Audi on Panjo. So, it turns out that there are $64 billion a year spent on auto parts. However, that’s not our number. That’s not our market. That we had to dig through was to find the number that is online, used peer to peer. That’s the market that we’re looking at.
Andrew: How do you know that?
Chad: That’s $3 billion. There’s industry research out there. In this case, CEMA is sort of the industry leader or conference organizer around the data and the research for auto parts industry size.
Andrew: I see. So, you know that you’re going to take some percentage of that but you’re also hoping to expand the market because if you make it easier–how do you take all that into account, what percentage you can get and how much the market can grow if you do this right?
Chad: Yeah. So, you’re doing at this point pre-product in the planning stages. It’s back at the napkin calculations. And proxies for reasonable assumptions–how big did eBay’s motor section ever get? Does what I’ve come up with pass the smell test?
Andrew: What percentage did eBay take?
Chad: I don’t know–off the top of my head I do not know their Motors. . . Also, what’s interesting about eBay, at this point, a majority of what’s sold there is new and we’re focused on used. So, as eBay veers off to compete with Amazon and focus on commodity sellers, power sellers, the enthusiasts, those Beanie Baby and laser pointer enthusiasts that gave eBay their start are not really the core audience that eBay is focused on at this point for either growth or the way their service operates. That’s where we saw a void in the market and a multibillion dollar opportunity for Panjo.
Andrew: Did you initially think that the marketplace would be on your site or did you know you were going to have to go and partner with other sites to get the market?
Chad: To this point, we knew the grand goal was to have a destination marketplace, a Panjo mobile app or a Panjo.com website where buyers and sellers could connect. So, then you have to say, “How are we going to source initial supply and demand? Where are we going to find our first customers?” To this point, we kind of looked at PayPal for inspiration. We looked at Zynga for inspiration. We said, “Whose back can we grow on?” PayPal grew on the back eBay. Zynga grew on the back of Facebook.
We said okay, the opportunity is there for us to grow on the back of enthusiast forums to provide an amazing service to the community organizers who are running those communities and the members participating in those communities. That’s sort of the quickest path to getting those initial members and the initial supply and transactions.
Andrew: What did Etsy do? They didn’t grow on someone’s back. How did they get all those resellers?
Chad: I don’t know a ton about their founding story. I think certainly from a–I think they were very successful with events, quite frankly, and crafting and homemade goods and sort of tapped this underserved market in that world. What’s interesting, 95% of Panjo users are guys and I think a vast majority of Etsy users are women. So I don’t know the intimate details of their founding story.
Andrew: I see an early version of your site. You focused on automotive, electronics and sports and outdoors. I get automotive. Why sports and outdoors?
Chad: Yeah. It’s really about where this passion exists, where there are parts and accessories and subject matter expertise. It’s information. If something is a commodity, a set of toy blocks, a futon, you don’t need subject matter expertise to do that transaction. But if you are a cycling enthusiast, a snowboarding enthusiast, all kinds of sports, lacrosse, for that matter, there’s subject matter expertise that comes into play as to like what kind of equipment is best for you at the stage you’re at and the geography where you are, for the type of–
Andrew: So, there needs to be more conversation around it before people buy it. I see.
Andrew: That’s how you decided. Where do people need to talk a lot before they buy?
Chad: For sure.
Andrew: Is that right?
Chad: That’s totally correct.
Andrew: That’s why you couldn’t really go after the Trio market first. Who has a Trio?
Chad: That’s a commodity. A Trio is a Trio. It’s unlocked or in whatever condition and you can say how fast the processor is inside of it or whatever, but this is a different world that we’re really focused on.
Andrew: Versus I see here on a version of your site from 2013 there was a blue light that I could put at the top of my car, kind of like a police light. There I would have to talk about it. Do I need this one? Do I put this one on the inside of my car or outside? Is it the best one? I get it.
Chad: That’s the light bar enthusiast community. It’s a lot of emergency responders. So, I never noticed this. Once again, that’s a thing.
Andrew: So, it’s called light bar?
Andrew: Even if it’s a bulb?
Chad: What’s that?
Andrew: Even if it looks a little bulbish.
Chad: Yeah. It all falls under this light bar enthusiast community. As you take your next drive, you open your eyes to how many vehicles have these sort of emergency construction vehicles, emergency vehicles, school vehicles, busses and things. There are a lot of lights on vehicles that serve a lot of business functions and that’s a whole world to outfit the vehicle, to replace something that’s damaged.
Andrew: So, we asked you in the pre-interview how you got to this level. You didn’t start out with $42 million in P2P sales. You had to build up to it. You said one of the first big milestones to get to that was to have a power seller. How did you get the power seller and why is that such a big thing?
Chad: We had a great partner in the site, Planet-9.com for Porsche enthusiasts and at the time we partnered up with them, there was this gentleman, Joseph DiSimone out of the Pittsburgh, Pennsylvania area who had a vision for the 2006-2008 Porsche Cayman. So, if you look at the 2006-2008 Porsche Cayman, it’s got this really dated looking fog light. In fact, the fog light design is the same on the Volkswagen Beetle. Just don’t picture a Volkswagen Beetle fog light on a Porsche.
So, this guy had this vision for a much more slick, contemporary LED fog light modification. At the time, he was working with folks in China making molds, making prototypes and just the timing was right. We struck up this partnership with this Porsche enthusiast community, this entrepreneur with this incredible vision for a fog light modification for Porsche Caymans. It came on and sold a couple hundred of this item through Panjo. That was sort of this aha moment. We’re like, “Okay. We’re onto something.”
Andrew: How much of the sales in your business, what’s the percentage that come from these power sellers versus individuals who just have something to sell?
Chad: At that time, it was a majority. I was an outlier. Ultimately it’s a minority. Almost everything on Panjo exists in a quantity of one. So, it’s unique.
Andrew: By someone who doesn’t sell more than, say, ten.
Chad: It’s unique inventory.
Andrew: More than ten overall?
Chad: Say that again?
Andrew: Most of the sellers don’t sell more than ten items at a time?
Chad: Ten of a single thing. Right.
Andrew: What I mean is are they basically creating businesses where they’re selling on these platforms through you or are they just individuals who have stuff?
Chad: Yeah. It’s individuals who have stuff. Occasionally a maker like this entrepreneur in Pittsburgh will make 100 or a few 100 of something. Another example that was like a lighted hood ornament for the Tesla Model S and the guy sold like 200 of those or something. But for the most part, everything on Panjo exists in a quantity of one.
Andrew: I kind of made the mistake of going to Planet-9.com when you talked about and then I clicked on something I’ll bring up in a moment and I see all these freaking Porsches. I have no interest in cars. I don’t like driving at all. But these guys know how to take pictures of their freaking Porsches. This looks hot. I just want to look at it.
Chad: Yeah. It’s a casualty of working at Panjo where every day you’re like, “No, I think I should get a saltwater aquarium tank in my house because that looks really interesting,” or I really need to take up snowboarding.
Andrew: This is why when I work I don’t start clicking around. It’s such a distraction. Now I’m thinking, “Why don’t I like Porsches? It actually makes sense. It’s a beautiful car.’ Anyway, the thing that stood out for me was I went to Planet-9, I clicked on classifieds because I though that’s the part you probably handle. I didn’t expect to be taken to Panjo.com/P/Planet-9. Why don’t they just have it integrated? Is this the way most people do it?
Chad: Yeah. It’s interesting. We tried that for a couple of years. From a software architecture standpoint, there were just great costs to having a marketplace running on Panjo Rails embedded in a partner site, particularly running on vBulletin, which is software that dates to the late 90s or early 00s.
So, it really boiled down to like how fast could we deliver an amazing experience? How fast could we ship new features? How fast could we reduce transaction costs for buyers and sellers if we’re like stuck building something inside the shell around it? So, it boiled to what kind of amazing experience we can provide to our members and the limitations of trying to do that inside someone else’s site.
Andrew: I see. And then what happens though is don’t they have to create a Panjo account, right? You don’t automatically take their name from the site, do you?
Chad: We don’t automatically. In that case, no. If you’re a brand new member, you create a Panjo account and it immediately connects your Panjo account to your forum account.
Andrew: I see. So, I can have one name on Panjo, one name on the forum, but it’s connected somehow. So, if someone likes my writing, then they can go look me up?
Chad: Yeah. Exactly. So, you have a profile page on Panjo. On Panjo, we can know that you’re a member of three different BMW communities, you have different screen names at each one, so we’re connecting those dots.
Andrew: What about this–if I bring someone to your community who’s looking for pens because I have a pen enthusiast community and they click on the Panjo in the upper left and they click around and they buy a Porsche, do I get any percentage of that?
Chad: At this point, if you ran a fountain pen enthusiast site, which is FPGeeks.net, if that was your partnership with Panjo and your member then went off to do a Porsche transaction, right now there’s not a rev share across partners.
Chad: It’s a technology investment we haven’t made quite yet.
Andrew: I’ve got a lot to ask you here I believe we have just a few more minutes, but one of the things I promised I would get back to is your sales process. So, for you, your sales process is getting more of these sites on board, right? So, what is that process? How does that work?
Chad: A lot of these site owners, community organizers have very purposefully obfuscated their contact information down to like the who is contact information for their domain. So, there’s not a lot available in terms of phone numbers. So, we have to go in through the contact forums of the communities to introduce ourselves. We have to participate in the communities where the community organizers gather, vBulletin.com or XenForo.com.
Andrew: Oh, that’s why CMX is something that you know right away. That’s where community leaders gather. Okay. So, you start participating.
Chad: Yeah. And then it’s really a matter of identifying what the pain point, the problem is of the individuals we’re partnering with. It’s different strokes for different folks. So, for one community organizer, the loss of nights and weekends to dispute resolution for the classified section, that’s their pain. That’s the issue that Panjo can solve for them.
For another, AdSense revenue is declining and the operating costs of the site aren’t changing because they’re not on HostGator and getting cheaper hosting, so the opportunity to have a new fee-based revenue stream is appealing. Like I say different communities, what you have to do is really identify what is the issue that you are having that we can help you solve?
Andrew: I see. But when you ask someone what’s the issue you’re having, they don’t want to give you that answer. What’s your way of figuring it out?
Chad: Getting back to solution selling methodology, there are techniques for really discovering and asking about someone’s pain–you don’t use the word pain, so the way that might look in a cold email is some of the issues we’ve helped our partners solve are a reduction in fraud, an increase in revenue, or some of the issues we hear some partners saying we’re having are an increase in fraud, a reduction in revenue–
Andrew: Ah, do you have any of those issues?
Chad: Yeah. We’ve helped our partners solve these and others. Does any of this sound familiar? There’s this interesting concept of somebody looking for your solution versus not looking. They have latent pain versus active pain. It’s easier to close, to partner up with folks who aren’t necessarily looking for your solution because you establish he conversation, you establish the solution from the start of that engagement, that relationship.
Andrew: I see. I feel sometimes that it helps. Tell me if this is true for you. To throw out a bad example of a pain that they might have, just so they can come back and say, “That’s not my issue and here’s my issue.”
Chad: Yeah. For sure. That’s totally a technique, right?
Andrew: And you were saying that at some point in the sales process, there could be a problem that you as a company need to go in and address because you have a process, you know how to do it. What’s an issue you might have in this sales process that your company can come in and address?
Chad: As far as a sales process is concerned?
Andrew: Yeah. I don’t know how to express this question clearly?
Chad: Well, I think what you’re asking–if you think about one of my peers who’s having these conversations all the time, me as a people leader, me as a CEO, we say, “Which of these opportunities are stuck on why have we not moved our partnership with this aquarium enthusiast site any further after months and months?”
Andrew: Bingo. You had that problem. You know it stuck because your software tells you it’s been at this stage for a very long time. Am I right?
Chad: You use something like Salesforce.com or those sales pipeline management tools to know this opportunity has been opened for weeks and weeks and it’s been stuck at 50% for a few weeks. We haven’t moved it past that. And then you say, “Okay, so, you haven’t determined–you’ve confirmed you’re in touch with the decision maker. You haven’t confirmed what the issue is the decision maker is having.” There’s this saying, “No pain, no change.” If you don’t know what the pain is for that individual–again, this is like internal sales language. You don’t say, “Hey, what’s your pain,” then yeah. You’re not going to be able to advance that partnership opportunity.
Andrew: I’ve never heard that phrase but I like it–no pain, no change. How did you get vBulletin to integrate you guys as a plugin? How did you get it? It’s pre-installed. I had no idea.
Chad: Yeah. Thankfully, it just so happens their offices are a 20-minute drive from us. So, over the series of establishing a relationship, establishing trust, really demonstrating the we were providing value to their members and their partners and their community organizers who are running on the platform and that this was something that was desired and missing from the default vBulletin deployment was an opportunity for us to pursue sort of pre-install partnership.
Andrew: Okay. Let’s talk about a couple of challenges. We’ll close out with that. You guys don’t have an iOS app. Talk about that.
Chad: Yeah. We invested a solid two years and to be really candid, nearly half a million dollars, fully loaded–design, product, back end dev, front end dev, iOS dev–into building an iOS app. I think we put the cart before the horse in that case. For the stage we were at, for the audience size we had, for the problems we had yet to solve, it was premature, I think, for us to build an app. It also speaks a little to what the environment was around mobile.
If you rewind five years ago, there was a lot of venture capital investing into mobile apps, the mobile space, the assumption being that there must be an app-based replacement for all the great web brands we know. We got sucked into that thesis, I think fairly and rightly so. Maybe we would have done something that would have hit an inflection point.
But the reality was that to coordinate across a mobile responsive website, a plugin for vBulletin and a mobile app, the mobile app just didn’t have enough users to justify the expense and was really just slowing down the speed that we could iterate, learn and improve what we were doing for our members at the time.
Andrew: Someone would have to come from a vBulletin site–and it’s usually a site. I don’t know if there’s even an app from vBulletin, but I know there’s an app that turns vBulletin boards into apps, right?
Andrew: Tapatalk, yeah. I got sucked into that for a while because apparently MacBreak or one of the Mac people have it, so I got sucked into that. I know what it was. When iOS allowed external keyboards, I got into one of the keyboards really heavily and I wanted to know all the tricks for it. So, then I downloaded Tapatalk so I could try it. Anyway, so, someone would have to come from the website to your site and then from your site to the app and then download the app before seeing the marketplace? That’s essentially it.
Chad: Yeah. We have a thesis like you’re already going into your closet, your garage, your basement, you’re taking pictures of these things. You’re already taking the pictures with your mobile phones, so why don’t we just make the shortcut?
Andrew: Got it.
Chad: I think one of our failures in our mobile deployment was we did not stay lean. If we had said all we’re going to do with the Panjo mobile app is it’s just for sellers and it’s just for creating listings, if that’s where we had started–but I think we just kept piling feature onto feature on there and you could search and browse and filter and save things. We tried to do too much instead of saying what is the core use case that this is good for?
Andrew: I see. That’s a mistake you made at the beginning. You started out as Dealberge. You’re now Panjo. You said you over-engineered that first version. I think you even said you had to scrap that whole thing to start over?
Andrew: And now again you did it with iOS. It’s such an easy problem to fall prey to.
Andrew: You also at one point had to cut head count pretty dramatically. It’s always dramatic when you have to cut people back, right? You know them, especially when you’ve got like a dozen people at the time, just slightly more than a dozen. Why did you have to cut back?
Chad: We looked at what we needed to solve for our next milestone and where we were in terms of our venture capital financing and how many months that would give us. It really made sense for us to reduce headcount, do a workforce reduction and focus on solving like really core questions that we needed solved for ourselves.
Andrew: What were the questions you needed to solve in order to raise the next sound?
Chad: It was interesting. So, going from the last round of financing to the next milestone for us at the time, the last round of financing, Panjo.com, our destination marketplace did not exist. You asked about this earlier. We were operating as a marketplace shoved inside our partner sites. That was fraught with all kinds of limitations and costs and sacrifices in terms of experience. So, one of the things we had to do with the last round of financing was build Panjo.com mobile responsive site.
Another thing we had to do was begin to identify what the right fee structure was for our members. What was palatable, what made sense, what was economically feasible. And then the final thing is really beyond these forum partnerships, what are the other repeatable, scalable paths to growth and that’s the question we’re solving right now. So, it’s about thesis testing as fast as possible. If we do this, how does that scale? How fast does that grow? If we want to go into a new category fountain pens, how fast can we get that?
Andrew: What’s one thesis that you had for growth that didn’t pan out?
Chad: I think tests centered around small businesses, SMBs. You think of them as having supply and you can onboard one partner and suddenly have 100 listings or something like this. It’s interesting, Airbnb had the exact same thesis and the exact same problem, where they thought if we onboard this early in their lifecycle, if we onboard property managers, we’d get one property manager and we’d suddenly get 100 rooms in Santa Monica, California.
Chad: The problem with that is that was not true to the value proposition of what Airbnb was providing. So, you’d end up with this non-authentic Santa Monica stay experience and we were facing a similar thing where we said let’s try this SMB thing and we ended up in these commodity items. It looked too much like competitors and it wasn’t true to Panjo where it’s unique inventory in a vibrant community. That’s what makes Panjo Panjo.
Andrew: I see. I don’t want to go find something I can find on Amazon. I want something that’s more interesting, more unique. Got it. All right. Panjo.com is the website. I’m a little afraid of sending people over there because it just sucks me in.
Andrew: I think especially because you let me figure out what I’m into. I made the mistake of saying, “I’m into mobile phones. Let’s see what the mobile phone stuff is like.” It was in the stuff like–here’s what it was–wet shaving. I have no interest in wet shaving. I use electric and then I do use a disposable from one of those big companies that’s been selling via mail.
But I got sucked into looking at straight razors and safety razors because I think there’s an article in The New York Times about how safety razors are the better way to go, at the brushes. Now I want a $70 freaking brush. I have no need for that $70 brush. I don’t even know that I could appreciate it.
Chad: You do. It can solve a problem. It can save you from your disposable.
Andrew: I kind of want this one razor here. It costs $325. I just want to keep it. But I don’t want a knife around that looks like that.
Chad: The good folks at BadgerAndBlade.com.
Andrew: Yeah. That’s right. I was looking at where you guys send your traffic. BadgerAndBlade.com is one of the big places you send it. You also send it to eBay. Why are you sending so much traffic to eBay?
Chad: At this point, there are enough searches going on, on Panjo where if we don’t have the result on Panjo, we want to help you. We want to help you find the thing you’re looking for as quickly as possible, reducing friction and fragmentation.
Andrew: And then you get a cut of any sales that happen from new customers there?
Chad: Yeah. If you did a search on Panjo, we didn’t have that item. . .
Andrew: Got it. Then you go over to eBay. Got it. There’s so much here. I really like how systematic about your thinking about marketplaces. I hope at some point, you have enough free time that you’re going to go in and do a course and teach it, I mean at university and talk about this stuff.
Chad: That’s taken care of. You’ve got to go to Stanford for that.
Andrew: I’d like to see you in Stanford for it. I feel like you’re interested in that. Am I wrong?
Chad: For sure. I have a passion for marketplace businesses, the academia of them, the science behind it, the econ studies behind the psychology of reviews and pricing and auctions.
Andrew: I can see you’d be good at that. All right. I hope to see you when you’re in the Bay Area at Stanford and I’m really glad to have you on here. The website is Panjo.com. And of course, the two sponsors are if you want to build a website or move your website over, HostGator is the right place to go. It’s HostGator.com/Mixergy and yes, of course, you can host your own forum there and you can bring Panjo to your forum if you do. Frankly, I just discovered if you have a Facebook group, you can do Panjo on there.
Chad: A local club. We have local clubs in Texas and Philly and stuff. You don’t need a site to build a community marketplace.
Andrew: What’s a good group on Facebook that is selling with Panjo well?
Chad: There are a couple BMW enthusiast groups in California that had Facebook groups that are now operating community marketplaces on Panjo. I think it’s Panjo.com/P/BMW-California.
Andrew: I don’t know how you do that. I never would remember all these different companies. I’d have to Google it while we’re talking. The second sponsor is the company that will help you get on the phone with people. If you’re not getting enough of your calls returned, if you’re not scheduling enough, if you’re not maintaining your customers, you should be scheduling phone calls using Acuity Scheduling. The URL for that is AcuityScheduling.com/Mixergy. I’ve been using them for five years. You’ll love them. Thank you so much and thank you, Chad.