Andrew: Hey there, freedom fighters. My name is Andrew Warner. I am a, I am a? I am the founder of Mixergy.com. Unfortunately no co-founders here in this operation. Mixergy as you know by now is home of the ambitious upstart, and today I’ve got a Mixergy fan here who had an idea that investors rejected because it was too much like vanilla. They said it was just too plain. But, he has grown it to over three million users and he’s got this great process for teaching those three million users and for introducing those users to the pay program and so on, and so I invited him here to talk about how he did it.
Today’s guest is Paul Gollash. He is the founder of Voxy, which is a multi-platform language learning company.
And this whole shebang here is sponsored by this little tool that I created that I hope you enjoy. It’s called Andrew’sWelcomeGate.com. It allows you to take the page that I use on Mixergy that gets me my highest conversions, the most hits to e-mail address ratio, or email addresses to hits, and it makes it available to you. So if you’re looking to convert some of your hits into email addresses, you gotta check out Andrew’sWelcomeGate.com.
Paul: Thank you very much for having me. Excited to be here today.
Andrew: I’m really excited to have you on here. There’s so much I want to talk to you about. How you built your company, I want to talk to you about how you got so many users, why you had the nerve to stand up to those investors, and your sales funnel, oh so good. But first, something happened to you in your early 20’s at a strip mall. Can you tell the audience what happened?
Andrew: Where’d you work?
Paul: … yeah, absolutely, it’s a decent place to start, I guess.
Andrew: Yeah, I feel like this sets up your personality a little bit. It shows us what you’re made of.
Paul: I’ll take that.
Paul: So when I was 22, I graduated from college and didn’t really want to be a banker or a consultant or a lawyer or doctor like most of my college classmates. So I bought a plane ticket to Santiago, Chile. I was going to go teach English, or try to convince somebody to give me a real job. I was insanely excited to sort of leave suburban Milwaukee, and I spent my college years in upper New Hampshire, which is equally as remote and sort of un-stimulating. So, I’m packing my bags ready to go on sort of the trip of a lifetime. I had an open ended ticket, and I was going to pick up more contacts, basically an extra prescription to my contact lenses, and a supply of contacts to bring with me in my backpack.
I didn’t even go to a real doctor, I went to the optometrist or something at the strip mall in Milwaukee, Wisconsin, and this guy is putting all this stuff in front of my eyes et cetera, doing all the routine that they do. He said, I don’t really know, but you have something white in your left eye. It’s like pallor. I’m like, whatever, give me my lenses.
I went home that night, told my parents around the dinner table and they were like, oh yeah, you should probably get it checked out. So, I think it was like, eight or nine doctors later, in the meantime I was diagnosed with MS, that was a scary night, but about eight or nine doctors later they finally realized that I had a gold ball sized tumor where your optic nerve meets your frontal lobe. It was big enough and doing enough sort of damage that they had to take it out.
Andrew: A tumor.
Paul: A tumor. Yeah. It was pretty scary when the doctor told me what he was going to be able to do. He had this little skeleton on his desk and he was explaining, I’m going to take your forehead off, I’m going to peel down, sort of like the bag that holds your brain and I’m going to take this thing out. And I’m like, you’ve done this before? And he said, like 300 times, you’re going to be fine.
And you know what? It was okay. Nine or ten hour surgery. Ended up having to do it twice, but they did get it out, and I can’t see out of my left eye to this day, but I feel really lucky. A number of people in that situation would have gotten even worse news, post op. They would’ve had a malignant tumor. Mine was benign so, no cancer. I did have to wear a pirate patch over my eye, because my left eye wouldn’t open. That lasted about three or four months, which is an experience for anyone. You get a lot of stares when you’re walking around the street and …
Andrew: You know what, the reason I said it is, I feel like a lot of people, at that posi… well, actually, bring it back to business for a moment, how many people do you know who start a business, things don’t work out exactly right and they never start a business again. Whether they acknowledge it themselves or not, they are now risk intolerant when it comes to business and maybe even when it comes to major life events, because they don’t want to put their family through that again. They don’t want to put their ego through that again. I asked you before this interview started, how’d it affect your appetite for risk, and you said –
Paul: I said when you’re faced with a long period of time, you know, two, three months where you think your life expectancy is just as likely to be 25 as it is to be 90, it changes the way you think in a pretty permanent way. I think I, super cheesy expression, but I really try to live each day to the fullest, I mean, and there’s a lot of things I wanted to accomplish in my life that I had to sort of start as early as I can and be as resilient as I can while my eyesight held up. Those are all sorts of thoughts that go through your head, right?
Andrew: Here’s the thing that I don’t get. You read the book, “Losing My Virginity”, by Richard Branson a few years later.
Andrew: I remember reading his book and reading biographies about him. I feel like the biographies of him are even more badass than his own autobiography, because they show some of the things that he was doing that, maybe, he’s not especially proud of, like the way that he acquired Virgin, the airline.
Why did you, as a result of that, go to work at Virgin, instead of saying, “I’m going to pirate records, or do something crazy like he did, and then I will start my own empire and build it up.” Why did you wait to build Voxy, or your own business? In fact, instead of saying it that way, let me rephrase it. Why did you do what you. . . What did it lead you to do, and then why?
Paul: I’ll answer the first question. I’ll answer it in your order. So, basically, it led me to, with dogged persistence and make sure I did what I said I was going to do before. When I graduated from college, I was going to Santiago, Chile. I was going to learn Spanish. I was going to try to convince somebody to give me a real job or an internship. I was going to be an international business person, or something like that.
Paul: So, the whole recovery period, I was just adamant about doing that. In fact, I rescheduled my ticket to Chile. I was very optimistic. I still am optimistic to a fault. I rescheduled it six times because I kept thinking I was going to be ready, and the doctors were like, “No, you can’t go yet. You still have to,” you know, “You’re still taking Percocet, and you still have to let the thing run its course.” But I was determined to do that.
The rest of my career is, I’d say, it’s pretty strategic. I think a lot, like most entrepreneurs do, and when I was in Chile, I learned, [??] company, and my boss there said, “Sales the most important thing.” I, to this day, tell every single entrepreneur that same exact fact. So I got a sales job after that. I spent three years selling overpriced commodity car parts.
Andrew: Is that Adam Opal?
Paul: Yeah, exactly. Just like General Motors subsidiary. I got like an ex-pat assignment when I was 24 to go launch a chain of, basically, Jiffy Lubes in Spain, Portugal, and then Singapore.
Andrew: So here’s the part that I’m getting at. What you did, that I should have actually let you say yourself, but I’ll say it, is you pushed with dogged determination to get a job at Virgin. I think, here, I’ve got it in my notes, 30 interviews is what it took you to get a job there. That kind of persistence is something I see throughout your life and throughout your story, and the audience will see it, but I’m wondering why did you go to work for Virgin, instead of starting your own company? No putdown of working for other companies, it’s a good idea, but why did you do it that way?
Paul: I mean, Virgin was the job of my dreams. Richard was my hero before, during and after. Virgin Hotels was one of Voxy’s first corporate customers. Virgin Hotels is the Virgin’s company that I founded, or helped start.
The worst question is after [??] why did I go to business school, which is like the most risk averse thing in the world, right? So, after learning how to sell just about anything, I was selling container loads, like millions of dollars’ worth of car parts, I went to business school because I thought I was getting to sales-y, and I should probably balance that with some finance and rigor and analytics. Then, I became a management consultant because I didn’t want to do anything remotely related to the auto industry.
So I needed to find some generalizable business skills, and when you’re a consultant, the job is so lousy that you start talking to headhunters from day one. I got a call from a headhunter one day that said I might have a job interview for you at Virgin.
Andrew: I see, and that’s what led you there. One of the cool things that you did there is that you. . . It’s not the coolest thing, but it led to your understanding of online marketing. You had this email newsletter.
Andrew: What did you do with it?
Paul: It wasn’t to do with Virgin, that was something I did nights and weekends.
Andrew: Oh. On the side you were doing it?
Paul: Yeah, on the side, my friend and I. . . It’s funny, so Virgin – this is like 2007, I guess, is when I went to New York and took that job. Real quickly I did. . . They had all given up on me with that job. The CEO had given up, and the headhunter, himself, had given up, and I [??] at Virgin. So I had to fight to get that job.
Andrew: What did you do to convince them to give you the job after they’d given up on you so much?
Paul: They stopped flying me up for interviews. I started flying myself up, like paying for my own hotels, just getting in front of as many people as I can. There were nine people or eight people. After everybody gave up, I called the CEO, Frances Farrow is her name, she’s the one who sold half of Virgin Atlantic to Singapore Airlines. I said, “Look, I think you made a mistake. This job is so for me.” She said, “Let me call you back,” and an hour later I had an offer.
Paul: Yeah. But anyway, when we were at Virgin, this was again 2008-2009. You don’t use letters for like all the rage. You probably remember Daily Candy and Surrealist and Flavor Pill. These were a decent size medium. These were 10 to, I don’t know, probably $100 million top line businesses, and we all sort of look at each other like, “These are not the most complex businesses in the world.”
You can get ridiculously high CPMs and email and there’s not a lot of technology involved. The content seems to get cheaper every day. So I wanted to learn a little about tech anyway, so we just started, my brother and I, started playing around our first blog and figured out how to make it send emails.
And we convinced some comedian to write content in exchange for half the company.
Paul: And man did we … Because both of us had full time jobs. This was just a couple of hours a night, and on weekends we’d meet. It was just pretty fun though. We learned a lot about subscriber acquisition. I remember we used to give Xboxes away in like onlinesweepstakes.com, those type of things. We’d put a link to our site and make people give their email address to us.
Andrew: And every time they give you their email address they were entered in sweepstakes. Is that the most powerful thing that you did?
Paul: During that probably, yeah. Doing the newsletter, I would say that was one of the things that I remember most because it sort of speaks to one of my core values which is just make sure it happens, like you just have to find ways to do things. And mostly about perseverance and getting off the starting line.
Andrew: I see. So you’re doing it. What about the thing that you did with the toilet paper entrepreneur? What did you do with him?
Paul: I just don’t even remember …
Paul: … truthfully. I do not even remember what we did with him.
Andrew: I had a link here. I said, “What could you have done there that did so well?” Or actually, I see, thetoiletpaper.com. What is that?
Paul: We did click trades with Thrillist. I remember that word. That would get us pretty high quality stuff. The way we would evaluate a subscriber whether it was good quality or not was how many open clicks we’d get for each email address. Because that’s what we could end up selling to advertisers.
What else did we do that worked? We sponsored career gear which was one of my favorite charities to date. We did like swaps with them. It was like Dress for Success for men. By, again, all of this was our lobby. This was just something we did at night to learn a little bit about how to build a database, how to sort of evaluate whether or not leads were basically qualified or not. How can you get some predictive measure of whether someone is good or bad?
And then we sold ads out there. We sold the CBS shows, as my dad says. We sold ads for new energy drinks and stuff like that.
Andrew: How did you get to sell ads in just something that was comedy coming via email
Paul: The same way I got most things. I pick up the phone and I call.
Andrew: I see. That’s your thing. You’re really good at sales.
Paul: Yeah, I have a lot of sales experience. I guess, when I was 24 I left Chile and then I moved to Madrid. I was handed a stack of franchise manuals to these service centers that were in English, and I was handed a list of 180 some car dealers and the business said, “Go sell to these people.”
And I showed up for my first sales call, and I spoke Spanish with a Chilean accent which is very sing songy and sort of odd. And I sat down in a meeting. This guy starts cackling with laughter. He calls his friends in. He’s like, “Say something.”
Paul: And I just started laughing, and now I realize imagine if the Mexican guy at a bodega opened his mouth and started talking to you with this like perfect British accent.
Andrew: Ah, yeah. [laughs]
Paul: [??] But it did teach me how to sell. I still consider myself that my core given ability as a CEO selling vision.
Andrew: I see. All right. Was the site called TheToiletPaper.com?
Paul: Yep. It’s called The …
Andrew: I see now what that reference was in my notes. All right. So then on to the idea, the epiphany that led to Voxy. What was that? Where did the idea come from?
Paul: So one of these Sundays when we were working, we thought a lot about whether content was driving sort of opens and clicks, and were people engaging with the content. And it was sort of random at this [??] bar in the East Village on Madison, and I don’t know we just sort of thought, “Wow, what if it were education and like some teacher required someone to read it? That would drive engagement. There was another later motivation to …
Andrew: If somebody could force people to read TheToiletPaper.com, then you would have even more engagement, and then that led you to say, “What environments did get people forced to read and engage?”
Paul: Exactly. Yeah.
Andrew: And that led to education.
Paul: And that email idea only lasted probably enough to raise the first round of funding. At the end of that I was already like, “Wow, mobile is such a richer medium.
Andrew: It’s a lot easier saying, “Why don’t we take instead of TheToiletPaper.com which has comedy email, why don’t we create education via email. And education via email, for you at the time, was language.
Paul: Yeah. It was English learning. That was something I was passionate about. Two things that Richard said to me – Richard has a lot of good advice, Mr. Branson. But two things that stuck with me, were attack a very big market and do something that you’re really bashed about, because these things are fricking hard. You’re working thousands of days in a row, you know, how hard was it to get Mixergy to the audience that you have today, right? Then that’s nothing – it’s a Herculean task. So you better do something that you really like.
The English learning is like the sweet spot. There’s 2 billion people in the world that are using sub-optimal products. I don’t want to name any competitors. But there’s pretty much no good programming or contents or technology that’s being deployed against this huge market opportunity, and something that I personally really like. I loved learning Spanish. I love thinking about language. And language is connective tissue that sort of governs how we interact with the rest of the world, right? And people?
Andrew: You mentioned Richard a few times. How did you get to meet Richard Branson and talk to him, and get his advice directly?
Paul: Yeah-met him a dozen, dozens of times. Ten or twenty times, and he probably wouldn’t remember my name. He’d probably remember me as that tall guy. But if you go to virginhotels.com, that was my PowerPoint presentation. In the first property assigned to be opening in Chicago soon, that I cannot wait to go to party. Virgin does launch parties very, very well.
Andrew: Virginhotels.com. You designed that in PowerPoint, and now it’s up and running-
Paul: The vision is that, yeah-
Andrew: The business idea.
Paul: The CEO of Virgin USA. There are nine desk professionals that looked at different images. We looked at everything.
Andrew: That’s impressive.
Paul: Aviation, to hospitality, and she said, “Why don’t you look at the boutique lifestyle hotel segment?” So I downloaded Marriott’s 10K, that was the first thing I ever did, I [?controlled] my PowerPoint, and I started Virgin Hotels and hired a CEO. We raised $59 million for a real estate product. And now I cannot wait until the-it’s going to be the coolest hotel.
Andrew: You went to see how much Marriott was making to get a sense of what the possibilities were for you? If it was big enough?
Paul: It’s the same that I did with [?Oscar]. The first thing was download his [?son’s] 10K. And my advice to anyone is find a public [?count} for what you’re doing. And they have to disclose so much in their 10Ks. You can learn everything from how they look at the market to what your cost structure should be, and all their analyst reports and stuff like that. They’re telling you what the growth rates of certain market segments are, they’re telling you the backgrounds of chief executives. You can learn so much from looking at stuff like that. I think the first thing I learned from Marriott is that boutique lifestyle is generally four-star. Seeing, of course Waldorf is above that and the Sheratons and Days Inns were below that.
Andrew: I see. You didn’t even walk into it knowing that. Which seems pretty basic, but even though you didn’t know that, because you knew how to do the research on it, and all that data was publicly available, you were able to put together a plan that allowed Virgin to create Virgin hotels.
Andrew: Wow. That’s impressive.
Paul: It’s a lot of-It’s more than that. That’s the foundation, and it’s a lot of calling people and asking questions. One of the tricks of that is anything you see, any consultant is just asking dumb questions. So people aren’t going to call you out on it. And then it’s repeating those answers to smarter people and progressively doing that …
Andrew: I see.
Paul: Anybody’s that you call- I think my title is like, Principal of Leisure and Hospitality -so anybody would take my calls, because at Virgin people were always obsessed with Richard. So I would just learn sort of by talking to people. Asking a lot of dumb questions. In a year or so you’re probably smarter than most of the people.
Andrew: Oh, wow.
Paul: So this is a big topic.
Andrew: All right. So now you have this idea. You stick with email. What were you going to do differently, or how were you going to handle language learning via email?
Paul: One of the things that I would personally do-I’ve always had sort of a point of view on why the general population has horrible experiences learning a second language. Do you speak a second language, or have you had to learn one?
Andrew: You know, I tried- I was living in Argentina, and I had a horrible-no, I didn’t, I wasn’t that interested in learning, because I thought it was just going to be really tough. So I said, I’ll learn enough to just get by, but I’ll spend most of my time while I’m down here having a good time and learning about my business. That’s where I created Mixergy.
Paul: That is probably a good decision. Americans are the toughest sort of motivational factor to learn a language becomes people are learning English all over the world.
Andrew: And, frankly, in our – Spanish is very easy. It’s all my – not my fault, It was my decision not to,
Andrew: Spanish is fairly easy. So then, what are you going to do differently then?
Paul: So basically, there were a couple of different things. One is I thought that the content that you learn from, in today’s world, this is 2010 when we launched the company. You know, this is you and [?tech garage] and everybody is talking about the real-time web. That’s all people are talking about, right? Twitter’s exploding. Content is, like, people are questioning the value of it. It didn’t make any sense to me that publishers and text books were on these ten year production cycles. Quite literally, if you looked at one of our GDB based competitors, that’s trapped inside a physical media and the content that they’re trying to teach you Spanish from was created sometime in the 80s. That didn’t make any sense to me.
Andrew: It’s also that a lot of them will tell you how to say “dress,” how to say “parrot,” how to say “turtle.” But you start off saying “what are you passionate about?” and if I say I’m interested in business or technology, you engage me with not, how do you say parrot, but here’s a video about a technology that you might not have known about and so I’m more curious about it.
Paul: Exactly and-
Andrew: And that was there from the start.
Paul: And that was there from the start. And how I remembered or how I knew that, this was also in the back of my mind from my early 20s when I was living in South America and Spain, I would live with English teachers often and they would wake up after a night going out and had to go teach a class and they were grab the newspaper in English. Like the Wall Street Journal in English or something and they would use that to teach their classes. So that was sort of what got me on the relevance and the recency and the compelling nature of content being the driver of language acquisition.
Andrew: That makes a lot of sense. Right. So if I could, instead of hearing about the parrot while I was in Argentina, be told “you know this road that you are on or the protestors. They were always protestors. Here’s the story of the protestors who are out there.” I would have been riveted. OK so-
Paul: So I call that contextual language learning.
Andrew: So you did that via email. Were you just sending people articles? How do you make it interesting and useful via email?
Paul: So what we were doing was, we would do three stories a day. I hired a multilingual or a bi-lingual blogger who had a pretty good following and she was a very good writer. She would write three stories a day. Sports, entertainment and world news. You know, it’d be like a natural disaster in Shakira and some baseball player in (?) or something like that. And this was for the Hispanic market at the time. At the time we were teaching English to the US Hispanic population. And you would open the email and start to read, and there would be a reading comprehension question at the end.
There would be about five to seven key words in the body of the email. They were highlighted and the definitions were off to the side. You could reply to the email and say, or you could click on it, A, B, C or D on the right answer and it would take you to the website and say “congratulations” or-
Andrew: And it was just simple HTML. Whatever-
Paul: HTML. And then I realized the Java script run doesn’t run in the body of an email and I’m not a technologist at all but I picked some stuff up along the way. Mobile is just such a rich environment and basically that WordPress blog that Voxy started as which was powering an email and very, very simple multiple choice tests. When we started to build more sophisticated technology at the back end, hooking up through an API to a mobile application just enabled such a, I guess it goes without saying. It’s a much richer experience than reading an email.
Andrew: You said you hired someone. You also bought Voxy.com right away?
Paul: I didn’t buy it right-, I mean, yeah. I guess I bought it about four months after I started.
Andrew: Where’d you get the money to do all this?
Paul: So when I was at Virgin, I got this sort of idea like I said, the night at the ?? bar. I’d been raising money for about 18 months for Virgin hotels everyday all day pitching investors so I learned from some of the best. There’s a guy named Paul Wetzel who’s now the CEO of one of those hotels. Who built a couple of ?? and sold them for billions and I got to listen to him pitch for years and I got decently good at sort of venture capital math and how things work and how to speak the language of investors. So I started raising money. I raised a seed around 600 thousand dollars. It was a pretty interesting process. I got a big angel sort of interested in the idea. It took four months to close him but I had to put all of my money in. And I actually didn’t even have it. I had to take out a all my free line of credit out on my condo that I owned in Chicago. My sister …
Andrew: He wanted to see that you were putting money up to?
Paul: He more than wanted, he required it.
Andrew: He required it. Who’s the investor?
Paul: His name is Doug Levine. And no one in my life is-, no one has changed my life as much as Doug Levine. He took an irrational bet on an idea. Literally just a Power Point. I didn’t have an attack team, I didn’t have a prototype. I just had this big market and this idea. And I put my friends, more former bosses, my family and me raised about 250 and then he and his friends put 350 in and I’ll never forget the day the first wire hit. It was sitting, hitting refresh on my browser with a couple of Virgin colleagues behind me and when the first wire hit, I said “all right, I think I’m going to do this.”
Andrew: And you went and you quit.
Paul: I quit my job. Yeah. I had to give six weeks’ notice. And, the scariest thing was that at first I didn’t have to go back to work. I realized that I had to go do everything that I was going to do on that power point. Absolutely frightening, frightening day.
Andrew: Doug once threatened to sue me. He threatened to sue me. It wasn’t acrimonious, but, I had a company called Grab.com, the logo was someone grabbing the word with a hand.
Paul: Grab, yes.
Andrew: He goes “That looks a lot like Crunch.” and he threatened to sue, and I said, “You know what, this is just like a couple months old, I don’t need this lawsuit.” I wasn’t married to this logo, we didn’t even promote it anywhere. So I said, “I’ll change it. But only if I get to meet Doug in person.”
Paul: And did you?
Andrew: I said “I’ll change it without a fight.” because I don’t care, I didn’t have any material with it, really. Maybe a little. So, I’m at his office, and I didn’t know the questions to ask back then, you know? You’re finally faced with someone. I watched this guy build his business in New York and it was amazing. And we had a great conversation, but I didn’t know the thing you learned when you were working at Virgin that I now know at Mixergy: How to ask the kinds of questions that get you useful information back. And so, we had an interesting conversation, but that was it.
Paul: And that’s a great story, can I be able to tell people that?
Andrew: Yeah, absolutely. How did he change your life?
Paul: I mean, the first one was $125,000. It totaled to $600,000.
Andrew: Beyond the money. It seems like he was influential.
Paul: I mean he’s still someone I would consider a mentor. He has a very special place in my life because he took an incredible bet on me. He had a lot of good tells, he knew how hard it was to get a job at Virgin, Virgin was interviewing him to be a CEO of one of the other companies. He did a lot of reference checks. He shopped me around life all of his VC buddies. But, at the end of the day, he had enough, except me. A single person and a power point presentation. And he didn’t even get a note or something like that. He didn’t even get half of the company.
He still wanted to keep me motivated. But it was more than that. He picked the name. So, the reason I smiled too big when you said that Crunch thing, is because I used to talk about it all the time. I talk about it less now. He sold Crunch for 100 million bucks and they only had 20 gyms. Think about that.
Andrew: Not only did they only have 20 gyms, they felt ubiquitous. I read books where the Crunch experience factored in to the story.
Paul: I read the HBS Case. I was obsessed. I was like “Oh my gosh.” When I told my mom who he was, because my mom wasn’t going to invest in Voxy unless there was somebody who knew what the hell they were doing. She’s like “Oh, I’ve heard of crunch.” My mom lived in Milwaukee and in Naples, Florida. There’s never been a Crunch anywhere near hundreds of miles of her, and she had even heard of it.
Andrew: How did that shape the name, then, for Voxy, your company?
Paul: I’m about a month in, right? I got through the horrible, deep, dark day of “Oh my gosh, what am I going to do, I have to go bid on this stuff”. I started making a little progress. I hired my first engineer and paper prototyping like crazy just to make sure that I could bring some sort of product to the market. And then I was at my first, well, it wasn’t really a board meeting. It was more of a “Well, I’m going to go down and talk to the guy who really made all of this happen.”
So I flew down to Miami, catching him up on all my progress, etc. I think we were picking his kids up from school. I’m on the phone sitting next to him talking to his branding woman who pitched me a bunch of names that were not that good. But, the company was called AlumnorBite at the time, which is just about the most ridiculous name ever. I’m not a very good namer.
There’s some things I can love, and there’s some that I can’t. Doug, on the other hand, is a great namer. He just heard me say the word “Voxy” and he said “Voxy?” And I said “V-O-X-Y?” and he said “You should buy that, you’ll never regret it.” And it’s poly-lingual, it means voice, it’s from the Latin root of vox. It’s four letters, two vowels.
Andrew: It’s very easy to spell. There’s nobody out there who hears us say “Voxy” who goes, “Is that with a Q?”
Paul: Yep. And it’s weirdly ownable. It doesn’t really conjure up an image of anything else.
Andrew: Yes, it’s a great name. He heard it and he said “Jump in on it.” I’m looking at an early casher version of the site. And I see “Voxy is a new way to learn a language, learn how to talk about stuff you care about most, and do it right on your phone. Click a story below.” It was positioned as a mobile experience, right from the start. And on the bottom right it says “Coming soon to iPhone and Android. My guess is you weren’t creating an iPhone or Android or iPhone at that point. This is November 2010.
Paul: It was November 2010?
Paul: Oh, yeah, our first iPhone app, which is [??] at TechCrunch. I paid $1500 to some, I don’t know, it was like a college kid, and it was basically an off the shelf CMS type app. I don’t even know what they were called, but there were a bunch of sort of reader apps that you could brand, essentially, and then he tried to hack a multiple choice question anyway.
Andrew: He faked it for a few hundred bucks, just to show them what the product was going to be. Before you even got to that point though, you did build up a mailing list through this website that I’m looking at where I can click news, pop culture, sports, and register. How big did you get that mailing list and how did you do it?
Paul: So, that one we got, I mean, that’s the same mailing list that we have, truthfully. We have three, no, probably more, yeah, three or four million names probably in our database at this point.
Andrew: On mailing list. That’s the part that I [??] to get to with the red path, but back then, you had what, 40,000 people before you built the app?
Paul: Yeah, that’s about right.
Andrew: How did you get to 40,000 people?
Paul: You know, I got to give credit to the tech blogs. One of my early [inaudible 00:01:23] busters helped me get into TechCrunch. That’s the very best place to launch a start-up. I don’t know how you could have sort of simulated that type of press coverage any other way. Three days after we launched, I was in CNN, New York Times, the list goes on, because I’ll [inaudible 00:01:39] and I’ll syndicate out of here.
Andrew: Yeah, CNN, AOL Latino, TechCrunch, New York Times [??].
Paul: On and on and on, and it was all sort of a bunch, it was just because one of seven finalists, or whatever.
Andrew: Oh, but that was TechCrunch Disrupt, but is it Disrupt that got you 40,000 people? Or before that?
Paul: We probably got maybe like five or so, and then the rest I was content marketing and email. We might have even started search at the time. Over the years, we definitely have figured out sort of a SCM and some very, very, we’re still not very good at SCM. Just a little bit.
Andrew: SCM means you were buying ads. Were you buying ads for the newsletter?
Paul: Well, we’d never even sold an ad inboxing.
Andrew: What I’m curious about is, how did you get people to join your newsletter? I understand now when there’s an app, people will get into what you do. You do something really special, but back then, how did you do it? How’d you get people to join your mailing list?
Paul: First of all, when you’re calling it a mailing list, you’re throwing me off. We do it like a full functioning web app. So, we had something to do.
Andrew: Oh, it was a full web app. I see. So, it was a mobile app, and it had people on it. That’s why you got so many people writing about it. I see. I thought you were saying, “Look, they would come to the, they would.” I guess I thought it was still an email [??].
Paul: I understand how you could think that. So, the original business plan, the one that’s funded, was like an ad sporting email newsletter for US Hispanics. Like a month after he funded the business and I started thinking about it, mobile was huge. I always say, one of the things that we caught at the right time was mobile. That was great. We were the only English learning app in the app store for well over a year. That’s probably where we built half of our database, but prior to that, you’re asking a good question, I just can’t remember, truthfully. How we got from 5,000 people using the product to 50 before we launched the mobile app, which then got us gigantic downloads? I honestly think it was a good product.
Andrew: Even the web experience was so good that it was, but you collected email within the web experience.
Paul: Yeah, you always had to register on the web, and it’s not that it was so good, because think about who you’re marketing to. You’re marketing to either third world countries in Central America and South America, who are typing in learn English and [??] because of the CNN and Univision stuff, or US Hispanics, and if you’re looking to take an English course, that page you’re looking at that said learn from stuff you like with pictures of Shakira or J-Lo, that’s a compelling value proposition. The very simplicity of Voxy uses real news to teach you English is way more palpable than a lot of the other options that English learners had at the time. So, I think that’s [??].
Andrew: All right. So, you get up on stage at Disrupt. Sean Parker, the guy behind Facebook, Napster, not LinkedIn, a couple of other companies that are well known. I’m trying to think of what was that, Plexo. Really sharp guy. What did he say about it?
Paul: I think he said, “Clever.” Yes, I can’t remember. It was like clever but who cares or something. He was not … This was late 2010. This is Instagram, any Instagram had like 50,000 users and was like adding maybe 50,000 a day. This is not where a sort of MVP web, mobile product’s targeting the U.S., Hispanic market. That is not going to get a guy like Sean Parker’s attention.
Andrew: It’s just not going to be a multibillion dollar company.
Paul: I mean, I certainly think it is now. I think with two billion people, 80 billion plus spend.
Andrew: So than why do you think he wasn’t into it if you can really analyze it from his point of view?
Paul: I think [??] were the most investors. Yeah, pitch them what they like. There are guys like Fred Wilson loves networked businesses. He’s already made lots of money doing … Don’t go pitch him something that’s not like that.
And I think Sean Parker, if you look at Napster. It was a brilliant music, file sharing sort of taking on the man. Facebook, he sort of tried to turn the same thing. I don’t begrudge him that. I mean, I thought that the … even Napster the skewering I got on stage probably made me stronger and set me up for the 83 rejections I got on [??] Road. Like I pretty much went there.
Andrew: That’s interesting. But also it’s interesting to see that you’re right. You can pitch Fred Wilson on a new pizza chain even if it has good potential. He’s not into it. I was just at something that’s called MELT here in San Francisco which is just grilled cheese sandwiches and nothing but. It could do extremely well. He’s got no interest in it. He’s not in his model, same thing with other investors.
All right. So then it’s time for you to finally start building this app, and about six weeks after you start working with the developer you have to fire him. Why?
Paul: Ah, man. That was an interesting time. And subsequently I learned that I was probably half, if not more, of the reason it didn’t work out. But at the time I’d never worked with an engineering team. Voxy’s original idea, that was going to be more of a content company than it was a technology company. It probably took me about six months to realize that technology was really going to be a driving force behind what we do because of personalization and how we can actually convert media and news into learning objects.
That was all much later in the venture. So, I mean, he was watching videos when he coded. That was like red flag one. I was renting space. You might know Charles Foreman and Dan Porter. Charles started their own G-Pop and Dan Porter was one of my co-workers at Virgin. He let me rent space, like rent a desk for the first couple of months of Voxy’s life, and Charles Foreman came up to me and he was like, “You let your engineer watch movies when he codes?
I was like, “I thought that was what they did.” No? “Get him out of here.” So that was like a learning experience. So he would disappear Tuesday at noon and like come back Friday, very bizarre.
Andrew: So why do you blame yourself if the guy was watching a lot of movies and disappearing?
Paul: I don’t blame myself for that one entirely. I’ve gone through lots and lots of engineering contractors. And not now for the last couple of years. I have a really solid engineering team in New York, but when you’re a nontechnical founder and you’re probably a pain in the neck to deal with, right? I mean, they’re teaching me things like how to Q/A because I didn’t have a Q/A guy obviously and he wanted me to Q/A which was totally fair.
So the learning curve for a venture capitalist who doesn’t know anything about writing code to become a manager of an engineering team is brutal. And I’m sure I was sort of a disaster to work with.
Andrew: All right. So then how long did it take you to actually build the app, one that worked?
Paul: The first engineer we actually hired full time was a mobile developer. Scott, he was awesome. He took what we had these, I think, three different firms that worked on the first version of it after the kid who we paid 1,000 bucks to, whatever. And he took that code base, took it over, and built a really amazing, to this day it was a great quality product and downloaded millions of times. It was the number one app for two years in 23 countries. It was our number one education app for over two years. So, yeah, it was a long time ago too.
Andrew: Why do you think it became so successful that quickly?
Paul: I think there was not a lot of competition and the app stores were “frothy.” People were downloading far more apps than they ever consumed. Our promise to teach English had a mass appeal. I just got back from Sao Paulo on Friday and people talk about that. Learning English is a massive problem for lots of people so there’s just an organic interest in that. Then there’s the other great product spec.
What kind of news and things are you interested in? You push a button and get to see a hundred-word story, learn ten vocabulary words about stuff that you care about. If you’re into music, you’ll get to read about a concert, listen to the words, speak into a microphone, and sing on stage. As opposed to the last time I tried a competitive product, I think they told me, “The butterfly sets the table.”
Andrew: I’ve never seen that but “sets the table” and “butterfly” are taught a lot for some reason. The other thing that you did is, and if anyone gets the app right now, Voxy will immediately say, “Register” and that’s intentional. Why?
Paul: Marketing is a really powerful thing. It’s funny. We never really cracked the code on consumer . The business that we built today – and we’re high percentage in millions of revenue up from hundreds of thousands from last year – we finally really cracked the code and it’s enterprise sales. Although I still love talking about the consumer stuff because it’s interesting.
Andrew: The stuff that I see in the app store, that’s not where the big revenue is?
Paul: No. The big revenue is selling our software to university systems and retail chains of language.
Andrew: Let me look at the consumer version for a moment and then get into that because I have a note on and I don’t understand enough. What’s interesting is, I load up Voxy. I guess I can log out and create a new account, but you immediately ask me for a name, email address, and password. That’s how you get me in there, so if I stop using the app, you can still stay connected to me, right?
Paul: Yeah. We can still remind you to come back and study. We can still give you offers. We have pretty sophisticated engagement services – we used to call them marketing services but now they are engagement services – which will use all the data we get from you. If we learn that you like technology and sports and that you’re a low, intermediate learner who’s trying to pass the TOEFL exam, that’s very rich data for us to target you. In the consumer model, we would use that to try to make you convert into a paying customer. Now, we use those same services to make the kids at the universities that are buying the software from us to make them study.
Andrew: I see. Let me stick with this for just a little bit longer. The next thing I see is, “Tell us what your interests are” and we talked about that. I picked Business because I was interested in that. The next step after that is “Purchase or Get a Seven Day Free Trial”. So you clearly have a sales funnel established right from the start. If I don’t buy from you right away, you could get me via email or I could come back to the app or something will get me to keep trying it until I buy it or realize this is not for me, right?
Paul: Absolutely. I had a years’ worth of charts on things we’ve done that all annotated to where to change the conversion rate. You place that pay wall and at what frequency. We’ve tried premium models where certain parts of the software were toggled off. Main parts of the software could still be used but you’d have to upgrade for others. We’ve tried content models where you could always get all the functionality but only with a limited amount of content. We’ve tried dozens of different places within the product to optimize.
Andrew: What has worked the best after all that?
Paul: Enterprise sales.
Andrew: I see. What percentage of your revenue comes from consumers?
Paul: Ten to 15 per cent. Less than a million dollars comes from consumers.
Andrew: You do over ten million dollars in sales.
Paul: We don’t really report numbers.
Andrew: You’ve back into something here.
Paul: It’s enterprise. I’m a mentor at one of these education accelerators and I beat the drum like selling to individual consumers over the internet is really challenging. Match.com, Lumosity, Ancestry.com. Too, there’s maybe a handful more that I’m not thinking of. But, unless you have a crazy compelling prog where it builds value over time, like have another Dropbox or something like that, and those models, as soon as you lose that sort of aggregation or building of worth concept, then the consumer model’s tough. It’s very tough to…
Andrew: And even you see Evernote moving more and more to Enterprise. I see more Evernote for Business features being promoted within the app. So these…
Paul: Evernote is…
Andrew: So could it be the price point? You’re charging, I think $79 a year or $79 for the product? Could it be that consumers aren’t willing to spend that much?
Paul: But some other competitors will charge thousands of dollars for the [??] in English learning and we have the very best product. We have, I know a lot of people say that, but we actually do have like the most efficacious product. We did lots and lots of sort of longitudinal studies on how we can improve people’s language skills.
Andrew: How do you test that? Because I noticed as you said that, I spent a lot of time focusing on marketing, how you get users. But I should be spending more time on the product. How do you make sure that the product is as good as you say it is?
Paul: The first thing I did, which is one of the, maybe next to mobile and a couple other things, the best thing I ever did was I hired the world’s expert in second language acquisition. Her name is Katie Nielson. She’s a PhD, she spent 14 years studying that same thing that you noticed and the same thing that I noticed in Chile. Which is task-based learning. Learning about things that you need to do or want to do. And if I taught you a word for social network and you know video conferencing and entrepreneur and conversion marketing, you would be way more interested than [??], right. So she…
Andrew: That’s the problem. I remember taking a class in speed reading when I was starting in business, and I know that they had numbers on how their ads converted to, and so they know whether the ad that they were running for me was effective or not. I know they had numbers that showed how likely people were to ask for a refund and so on, but I don’t believe that they had any… I don’t think that they did, any stats that said how effective the speed reading class was.
When I left or a week later, they weren’t checking in with me to see, are there, they didn’t have those numbers to see whether it was effective or not. And I always thought that’s a disappointment in education. They know how well they’re converting for sales, they don’t know how well their ideas are sticking with users.
Paul: Exactly. That, wow, you’re preaching to the converted [??].
Andrew: So what do you do for that?
Paul: We do longitudinal tests. We do pre and post-tests with objective assessment tools. Like, we have what’s called the Voxy Proficiency Assessment, and it’s unrelated to the content that we’re teaching you. So if we’re teaching you about entrepreneurship and all that other stuff, at a certain level, you still need to be able to pass a standardized test, right? You’re going to need to go out to dinner with an investor and speak about whatever he’s interested in, right? So, in English learning it’s pretty easy to tell if someone is fluent, you can test for that.
So built into our product we have, you know, sort of gateways, gateposts, where we actually get a really objective measure of your proficiency and, differently than a lot of other, definitely not the language learning companies, and even a lot of education companies, until you prove that your overall proficiency goes up, you can’t advance. So it’s not like, hey, I’m going to buy, you know, Levels 1,2, and 3 of XYZ language learning program, and when I do all the coursework for 1 I’m going to go on to 2, we don’t let you do that. We actually assess you…
Andrew: I don’t think I could do fast forward through a video until I answer a question about the part that I saw, right?
Paul: You can’t. And that’s Katie’s, that’s all her pedagogy. I use the word pedagogy and efficacy literally about 5 times a day. If you told me that four years ago, I would have laughed. I never ever used the word pedagogy and we have 10 people out there that are dedicated to doing research on, you know, the users and their experiences, and we follow them like you sort of wanted that speed reading company to follow you.
Andrew: Yeah, it would have been great if like a week later they had checked in to see how well their class was doing. Just so they could’ve tried something different the following time, to see if there’s something that they could do to make the ideas stickier. All right, so I thought it was this registration path that was the magic for you, collecting all those email addresses, allowing you to follow-up with them, get them to learn, but also get them to buy. You’re saying no, that’s 10% of the business, Andrew you’re not seeing the whole thing, it’s Enterprise. How’d you get into Enterprise?
Paul: So we took a strategic investment from Pearson. Pearson’s one of the biggest education companies in the world. 9-10 billion dollar business. And, they have a pretty big English [??] business but didn’t have any mobile assets. So their head of English came up to me and said, look, I need mobile assets and every banker’s telling me that Voxy has, you know, the best mobile English learning platform so, talk about a niche, right? But we did, we did clearly have the best mobile English learning platform. Tried to buy the company, I said I just worked my butt off for the last 3 and a half years, it’s not for sale. Like, I’m trying to change the world, and they took a minority investment, and they introduced me to that model.
What Pearson does is sell schools and institutions materials, essentially. We tested that market with them, and their sales force didn’t actually work for us because they’re textbook analog sales people. That’s something I caution entrepreneurs about is with the strategic investor make sure their sales people actually know how to sale your stuff.
Andrew: And in your case, they didn’t know.
Paul: They didn’t, but they were able to introduce us to enough customers that they started buying thousands and thousands of licenses at a time for hundreds of dollars. That’s real money. Especially when you’re . . .
Andrew: So, Pearson’s sitting you down with one of their customers. They’re telling you their customer’s sales process, who the decision maker is, how they work, how long it takes. Is that right?
Paul: I wish.
Paul: So how does it work?
Andrew: Hearing you say that, I was like, “That would have been great.” This is in Brazil. There’s a lot of stuff going on. Pearson in Brazil had another big building or acquisition. So, I really shouldn’t-, I don’t want to-, ideally, that’s how it works, right? They would explain to you what the decision criteria and decision process and the economic buyer, but the important part is that they understood the market demand, and we were able to staff up a sales team our ourselves, and now we have six people in Brazil that are digital software salespeople calling on those same customers and because of the efficacy, getting back to what is the core part of Oxy, what’s really in our DNA, is outcomes and efficacy.
Andrew: So, it was schools, initially, who were buying?
Paul: Yeah. It’s all schools.
Andrew: It’s all schools, and they’re buying it for their students?
Andrew: And, you had to change the product in a way so that their students would deliver the-, so the scores would make it back to the teachers.
Paul: Yeah. We had a huge data warehouse anyway. We were using it for performance marketing, and all of that same data is excellent to drive outcomes and engagement. We started sending Excel based reports to teachers, and now we can do it more sophisticated. But, yeah, it’s essentially the same product and rally the same sort of KPI’s [sounds like]. We want students to engage and to learn and to improve their English, but we just take the buying out of the equation for the student, and we buy where these students already are paying tuition for.
Andrew: So, I’m glad that we’re walking away from this interview with an understanding that Enterprise is bigger than most entrepreneurs realize. Even bigger than I realized walking into this place with all my notes. How do you get Enterprise, then? How do you get them to buy?
Paul: Honestly, for me, it’s more similar to raising money, right? You’re trying to convince people to write bigger checks, and there’s a partner at a VC has his partners that he has to convince, right? The dean of a university in Sao Paulo has their marketing or finance guy to convince. So, it’s about understanding the sales process. I actually was blown away with how well you laid out what Pearson should be doing for us in terms of really helping from an Enterprise sales standpoint.
It’s about being smart and tenacious. We have a long sales cycle, a long-ish, such is short for education, but it takes eighty some days for us to go from a prospect to closed deal, but the good news is that we have a really sticky product that the kids use, and they learn, and they like – or learn from, excuse me – and like, so we have an annuity, and we can start to get really sticky revenue and that makes it . . .
Andrew: Who pays for it? The student or the school?
Paul: There’s two different models that are falling out. In the beginning, we didn’t know. We now actually encourage the school to resell it at cost or small margin to the students because it gives the students a little more skin in the game. So, we’ll see engagement of two X, if the student is in one of the schools that actually charges them, and it’s very cheap. It’s like, 10 bucks a month. If they don’t charge for it and the school includes it, sometimes they don’t feel as motivated.
Andrew: I just heard a Planet Money episode about textbooks and schools, where there’s an-, I think it’s called an agent problem, where because the professor gets to pick the books for students, but the students have to pay, the professor has no awareness of the cost and isn’t even interested. All he’s interested in is does it have these features, and so they throw a lot of features at the professor, and the professor then passes the cost on to students. And, “voila” the student ends up with a $300 textbook which is great for the textbook companies, or was, until today, where students see that and they either buy used textbooks or sometimes they’ll just scan it and pirate it.
So at the end of it, there was a rep from, I forget the name of the book company, it’ll come to me to later but that’s why we’re moving to mobile apps. We can’t continue with books, in fact planet money kept talking to him about books and he said I have nothing to say about books. That’s the past. We’re going to mobile apps. We have tons of people who are working to do it.
Paul: That’s exactly what the future is for education. It’s personalized learning with individual pathways that are adaptive, and it’s definitely multi-platform. These students are on so many different device types throughout there day trying to get someone to…. They will have their book. There is no way you’re going to get anyone to buy a $300 textbook. Right? They will find that PDF online. They will borrow it. They will do something else.
Andrew: The article ended with this wise crack about until they learn how to pirate the app. Anything is possible, but that’s not likely to happened. First of all, people can’t pirate as easy on mobile phones, and second if the teacher has to get the data back; it’s easy to tell if the person cheated or not.
Andrew: Wow, this is a killer story. I didn’t realize just how much was below the surface of this iceberg.
Paul: Thanks for taking time to get to know it. I’ve actually enjoyed the conversation a lot.
Andrew: Here’s another thing that I realized Periston they had their hands full with an acquisition. They bought Groupa Mopie for 440 million pounds which is what $700 million dollars. And is it in person learning?
Paul: Yea, its a retail chain. Its like a franchise chain of English learning centers. So imagine Kaplan or Coolin Centers those are popular in New York Test Prep centers. But, there literally brick and mortars schools with teachers and classrooms and books and that’s how most people in the world are learning English. So we sale to Universities which will hopefully make that little section of the market the private language school like Moochie a little smaller because that focuses on adults. But, we also sale our software to chains like that. We have a big deal with the second biggest chain of English schools in China where they use Voxy to power what’s going on in their classrooms. It’s exactly as you said.
Andrew: I was looking at it because what you said earlier. When I said “maybe its not interesting enough to Shawn Parker because he wants multi-billion dollar businesses.” And you said, “this can be a multi-billion dollar business.” Now when I see this one in person program that’s valued at 700 million dollars the idea of an ongoing app being worth more than a billion dollars is a lot more reasonable. So this seemed very plain vanilla to them. What convinced all those investors to finally say yes?
Paul: Probably would have to say that efficacy is what has really has been the alpha and the omega for Voxy. The fact that we have a real focus. And I think early on, I convinced our board that the way to drive long term equity value in this industry is to show efficacy. Nobody wants to buy a yellow box, not learn, give up after a couple of hours, and then be reminded that they’re not learning.
Andrew: So it’s that it worked not that Enterprise was willing to pay for it.
Paul: It’s that it works. The only way a Dean at a University is going to stake his reputation Universities has huge, huge brand assets there’s a lot of downside. They’re not going to use anything that doesn’t pass through really rigorous efficacy frameworks. That’s why Pierson looked at hundred different magnifying apps and chose Voxy. It’s because we have a dying conviction and out comes a efficacy drive the winning product.
Andrew: You know I’ve now looked at so much. I know we need to end it here but ill say this. I looked at so many of your sites and iterations of the site in preparation of the interview, including the toilet paper dot com; where on the about page I don’t think you said your name. And then the early version of Voxy there is no name it just an idea that’s there. Today I go to Voxy’s about page and maybe I’m reading too much into it but; it feels like so much pride for it. So much of a connection to it, that every team member seems to have a photo up there, the board member are there, your story is clearly told.
Paul: Thank You. That’s praise from you so I’ll take that. You talk a lot on entrepreneurs.
Andrew: I do. It’s really impressive to see it. I knew it was an impressive story but I was clueless compared to usual because I didn’t realize how big this freaking business was.
Paul: There’s a lot of people learning English a lot of people learning English in the world and someday they will all learn from Voxy.
Andrew: I had no idea. Congratulations on all the success. Thank so much for sharing your story. Anyone out there that who got anything out of it please find a way to let Paul know or me know. We always like getting to know the people who benefited from this interview. In this case I got to benefit. So thank you so much Paul.
Paul: Thank You so much. I appreciate it.
Andrew: You bet. Thank you all, bye.