Andrew W: Hey there, freedom fighters. My name is Andrew Warner, I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses. And people keep looking for interesting stories for me because they know that I love entrepreneurship, and I love stories of success, but I’m also one of the few people who’s just fascinated by stories of failure when things don’t work out.
Joining me today is an entrepreneur who’s had both, he had a company, didn’t work out so well, gave up everything, or lost everything, which turns out wasn’t that much. But he lost it all. And then he said, “You know what? I’m just going to travel.” Somehow he ended up in India with a business that he created in India, where he’s now teaching Indian developers how to code and then helping them get work. And get this, they’re not paying him to learn until he places them in a job. And even then, they don’t have to pay him for, what? Three years, Andrew?
Andrew L: No, they pay over a three-year period. Yeah, [inaudible 00:01:00], yeah.
Andrew W: Over a three-year period? $25,000 total over a three-year period, that’s the model. All right.
The person whose voice you just heard is Andrew Linfoot, he is the founder of Pesto. It’s an intensive training program to help software developers in India get international tech careers. If you’re looking to hire, I’m sure he’d love for you to go to his website. What’s the website?
Andrew L: pesto.tech.
Andrew W: pesto.tech. I want to thank the two sponsors who made this interview happened. The first, if you’re hosting a website or want to host a website, need a good hosting company, hostgator.com/mixergy. And the second . . . This is actually a little bit competitive with you because the second company is Toptal, for hiring developers, it is competitive, isn’t it?
Andrew L: Yeah, yeah, somewhat. The biggest difference is Toptal kind of focuses on like freelancers and flexible work, and they also sort of are more of a marketplace. We really focus on education and full-time jobs.
Andrew W: I’ll tell you what, I’m not going to make it awkward. I’m going to switch over to Setapp, even though I ran out of ad spots for them, like I satisfied my agreement with them, I love them so much. I’ll talk about Setapp and why if you’ve got a Mac, you and your people need to be on Setapp for the best Mac software.
What’s the revenue? How much are you guys doing?
Andrew L: So we have a little over $2 million in income share agreements over the last year.
Andrew W: That means in the next three years, assuming everybody gets jobs, you’ll end up collecting the $2 million or so that you’ve earned.
Andrew L: Yeah, correct.
Andrew W: All right. I’m going to get back to that in a moment. I’m fascinated by the fact that earlier in your life, you were an intern for Gary Vaynerchuk. How did you end up working with Gary Vaynerchuk?
Andrew L: So I basically just was scrolling through Twitter one day and I followed Gary because I was in the startups, saw one of his early keynotes, he tweeted about needing some help in Lafayette, Indiana. And I was going to school at Purdue, which is in West Lafayette, Indiana. So it’s kind of weird, but sure, I’ll respond, like, “Hey, Gary, happy to help, big fan.” And what he was doing is he needed someone to pick up these like vintage toys that he bought on Craigslist, because the seller didn’t want to accept PayPal. He only accepted cash. So obviously, took some money out, Gary PayPaled me, I went and picked up the toys and shipped them to Gary. And then kind of at the end of that exchange was like, “Hey, Gary, if you need any interns, you know, I’d love to come and get mentored by you and work for you.”
Andrew W: This is running a giant ad agency. He’s got a huge following online and a big brand, an audience to cultivate and spend time with . . . Why is he messing with toys?
Andrew L: I think he’s just like . . . He’s a salesman at heart. He just loves selling things. I think that’s kind of where he gets his kicks. And it doesn’t matter whether it’s a multi-million-dollar deal with a brand partner or selling some stuff he found at a garage sale. And he still does garage sales, think today, just for fun with his brother.
Andrew W: I’ve seen it on YouTube.
Andrew L: Yeah, yeah.
Andrew W: So you helped them buy something that he was then going to go sell on eBay or somewhere like that?
Andrew L: Yeah, just like . . .
Andrew W: That’s it?
Andrew L: That’s it, like $6 toys he flipped them for maybe $20. And there’s like a lot of $100.
Andrew W: This is like a mental patient, the way that he’s doing this. But it’s fascinating that he’s that into it. When you ended up working with him, and I’ll ask you in a moment how you ended up with the internship, one of things that you did was you helped him arbitrage ads. What does that mean? What specifically did you do?
Andrew L: Yeah, so when I first interned for him, I helped him launch his book, “Jab, Jab, Jab, Right Hook” and then just stayed in touch. And after college, I ended up working for him full-time where we did the media arbitrage.
And basically what that is, is if we could get you to click a Facebook ad for $0.03, you go to one of our blog network sites and we flash $0.05 in banner ads at you while you read an article, then we profit $0.02. So it’s kind of like day trading eyeballs on the internet.
Andrew W: And what was your part in this whole endeavor?
Andrew L: It was mostly on tech development. So they had a process that was working decently well, had decent yields on the arbitrage, it was all based on spreadsheets and really hard for them to scale. And so I came in and just like automated all their processes, built a bunch of tools and dashboards up to the point where we just kind of go in and look at dashboards and tweak algorithms, and it was just like kind of print money.
Andrew W: Because before it was a human being looking at a spreadsheet and saying, “We just paid $0.10 for this keyword, and then when people came onto the site, we earned $0.04. We should buy more of that keyword.”
Andrew L: Yeah, essentially, yeah.
Andrew W: Essentially. And then you automated it so the system automatically knew what keywords to pay more for and what sites to send the traffic to?
Andrew L: Yeah, essentially, I mean, it’s not so much about predicting keywords as much it is about testing lots of mini experiments and then basically upgrading experiments that perform well and have high yields, and then you basically allocate more budget to those and shut off experiments that aren’t going well.
Andrew W: And this was you writing the code from scratch, this whole system?
Andrew L: Yeah, yeah, I built out all the tech and we hired a small team. It was pretty . . . It was honestly way more responsibility than I should have been given as someone straight out of college. Gary kind of took a bet on me. This is my first sort of like real software engineering job. And we were spending over $1 million a month all programmatically with code that I wrote.
Andrew W: I had no idea Gary was even doing this stuff, $1 million a month in just ad arbitrage?
Andrew L: Yeah, just ad arbitrage. And the market got kind of drying up so I don’t think he’s doing too much ad arbitrage anymore, but in, I guess it was 2015, and basically 2012 to 2015, it was a huge market opportunity at the time.
Andrew W: And this was a period where he was doing keynotes, where he was saying, “People, I want to punch you in your face because you’re not buying Facebook ads.” Now we know why.
Andrew L: Yeah, yeah.
Andrew W: Because it was that much cheaper.
Andrew L: It was so, so undervalued that you could literally buy a Facebook ad, Facebook takes their, you know, 20%, 30%, whatever it is, you send that traffic to a website where you lose a ton of it and you monetize it with a Google ad where Google takes 20%, 30% and there’s still profit to be made.
Andrew W: Who owns the sites?
Andrew L: We built them, yeah.
Andrew W: For?
Andrew L: So each one was kind of like a joint venture partnership with different banner clients. So we did a site about cheese with Ritz Crackers. We did decide about neuroscience with General Electric. And we built a couple of in-house too.
Andrew W: So he goes to Ritz Crackers, and he says, “Hey, Ritz, instead of buying television ads, why don’t you give us money? We’ll build a website for you. We’ll then create the content for you. That’s what you’re paying us for. And we’ll kick back some of the money for you because we’re going to buy ads programmatically. This guy, Andrew Linfoot wrote code for us. And so when he makes money off of your site by buying low on Facebook and selling high to Google, we’ll share some of that with you.” That was the model.
Andrew L: Yeah, basically.
Andrew W: Good Lord. And this is what you signed up for. This is why you were willing to go and buy a freaking toy for cash and then get PayPaled from him and mail it out. You wanted this kind of insight into the world.
Andrew L: Yeah, I just . . . Well, at my last startup, I raised some money for a startup, $50k in seed, and dropped out of school to do it. Thought I was going to make it big. Didn’t know what I was doing and just like ran that company in the ground. And so I was pretty burnt out from that. And so the toy thing, working for Gary intern from was more about just I wanted to learn how this world works at like the real level, if that makes sense.
Andrew W: Because you were humbled.
Andrew L: Yeah, basically because I got my ass kicked.
Andrew W: And the reason you were humbled is because you started out from a place of confidence. You’re a guy who started a school newspaper in the fourth grade. This was an entrepreneurial experience, right?
Andrew L: Yeah.
Andrew W: What else did you do? I want to know why you thought that you were going to make it as an entrepreneur because you had experience that said you will. What are some of the things you did?
Andrew L: I mean, I did all sorts of stuff. I mean, I read one of your bios before this too and you were selling candy back in the day, right?
Andrew W: Yeah.
Andrew L: I did the same thing. Go to school early, pick a bunch of candy, bring it to school, sell it at double.
Andrew W: What was your candy experience? What did you sell?
Andrew L: Mostly like Dr. Peppers and like Skittles, chocolate bars but then they melt a little bit. You know, if you have in the backpack to long, you have too many of them, so that kind of stuff. And then I was always working on different sort of like engineering projects in my free time. I definitely would consider myself more of an engineer than an entrepreneur and I . . .
Andrew W: Yeah, you told our producer you wanted to be an inventor. In fact, what’s this magnetic snowboard binding thing that you did?
Andrew L: Oh, so there’s a video game I really like growing up called SSX Tricky, which basically is like a snowboarding game, super unrealistic, but you go off these crazy jumps, you take a snowboard off mid-air and you like spin around and do tricks. I thought that was just kind of like the coolest concept ever. So I bought some used snowboard boots and some bindings and then started buying neodymium magnets and trying to make a magnetic snowboard binding to kind of make that a reality.
Andrew W: And?
Andrew L: I didn’t really get that far with it. I kind of put together some basic prototypes, never got a chance to actually take them on the mountain. I don’t think the math quite worked out, especially if you like go over a jump. It’s kind of a lot of force. But it was still . . . I never really did it because I wanted to build a business out of it, I just did it because it was like intellectually satisfying.
Andrew W: This was the inventor Andrew expressing himself, right?
Andrew L: Yeah, essentially, yeah, you could say that.
Andrew W: And the business where you are humbled, was that Kyk Energy?
Andrew L: Yeah, that was Kyk.
Andrew W: What was Kyk?
Andrew L: So it was a flavor neutral energy powder, you added to any drink turns into an energy drink. So let’s say, you like orange juice in the morning, but you still want your energy of coffee. You throw a pack of our in, doesn’t change the taste, texture or health benefits, doesn’t add extra calories or sugar. But now your orange juice will give you the energy of two or three cups of coffee.
Andrew W: Why didn’t that work out? That sounds like a great idea.
Andrew L: Yeah, we thought so too, until we kind of got in the market and started selling it. And we, I mean, we sold about 40,000 units. We had customers and they enjoyed it. But the reality is, when you’re tired, you don’t care what your energy tastes like. It’s why people would drink 5-Hour energy, those tastes like crap, but it doesn’t matter.
Andrew W: They’re not looking to mix anything either.
Andrew L: Yeah, exactly. And it’s like, and you have to have something to mix it with because it was designed not to mix with water because it was unflavored so you had to have a flavored beverage. If you mix it with water, it kind of tasted like bland chemicals. So it was like, yeah, it just kind of one of those ideas that sounded a lot better in theory, but in practice just people didn’t care enough.
Andrew W: And you were also running QR Interactive Solutions at the time?
Andrew L: Yeah, that was, I guess a little bit before that, that was a consulting business I did with my buddy. It was like kind of piggybacked off the hype of QR codes in 2010 and sold a bunch of QR code marketing campaigns like this [inaudible 00:11:23].
Andrew W: Did that work?
Andrew L: I made some money, you know, like maybe like $20,000 or something like that.
Andrew W: That’s great. So then why were you so humbled by Kyk Energy? So if the thing didn’t work out, why did you take it so badly?
Andrew L: I think the big one with that is like, we raised money, it was the first one that I really kind of all went all in on. And I think as a founder, when you’re building a company and you really go all in, it starts to not just be about the company, but it also represents you as a person. And so I think going from that, and like we are on Fox National News, we had tons of media hype, but, you know, lesson learned, media hype doesn’t necessarily translate to sales. So it’s kind of like just my first exposure to how fast paced and interesting the world of startups can be. But then a kind of quick downfall after that. If that makes sense.
Andrew W: Okay. He did an Indiegogo campaign for it. You tried to raise $15,000. You got $3,300.
Andrew L: Yeah, yeah. We didn’t do so hot.
Andrew W: I admire that you didn’t find a way to take this off the internet, that you’re allowing the stuff to sit out there. I feel like it’s a good set of breadcrumbs for people to follow later on when they’re trying to figure out how you got here.
Andrew L: Yeah, yeah, hopefully it’s not a problem.
Andrew W: [Fix 00:12:36] that.
Andrew L: As long as I don’t get in like politics or something where you know they care about, you know, digging up your past or something like that, but I don’t know, I think it’s . . .
Andrew W: Even then.
Andrew L: Yeah.
Andrew W: Okay, so then, how’d you get Gary to go from wanting you to buy a toy for him to bring you on as an intern? You were pretty clever about it, persistent.
Andrew L: Yeah, persistence is better way. Clever, I don’t know. But I basically just emailed him every week until he responded. Basically, it was like 40 emails back and forth before . . .
Andrew W: 40 emails?
Andrew L: Yeah.
Andrew W: And by the way, this is one of things that he says a lot to do, right? If you want to work for VaynerMedia or Gary, actually . . . Forget about working for him. He says that if you’re trying to make it as a musician, send out 500 direct messages on Instagram and understand that nobody is going to respond and then go do it again and then doubt that Gary makes sense, and then do it a third time and then maybe one of those people is going to respond but be that persistent. And you were.
Andrew L: Yeah, and it worked, I mean, it was . . .
Andrew W: Because you were following his directions or because that’s just naturally who Andrew is?
Andrew L: That’s a good question. I think it was more just because I really wanted it. And yeah, he didn’t say no. So it’s like if someone doesn’t say no, you know, that’s a tentative yes. So, you know, you just keep following up and eventually it worked out.
Andrew W: What did you help him do with “Jab, Jab, Jab, Right Hook” his book?
Andrew L: All sorts of the kind of random stuff, everything from like just having book buys to helping put together the artwork for the book, doing some edits, that kind of stuff.
Andrew W: What does that mean, Biz Dev, the big book buys?
Andrew L: So the way like a lot of these books are published, they’ll sell large lots of books in exchange for like doing a keynote. So, you know, like a Gary’s keynote is quite expensive, but they’ll give you a discount if you buy every guest a copy of his book. And now there’s 5,000 extra copies pre-sold before it ever launches. And so then when the book launches, you just skyrocket up the bestseller’s list.
Andrew W: And you are one of the people who is in charge of finding places or was it anyone who is asking Gary to speak, you followed up and saw if you could convert him into a book buyer?
Andrew L: Yeah, basically, I’d follow up. I wasn’t doing too much like cold outbound. Gary gets a ton of inbound for basically anything he does, so you don’t need a lot of outbound on his team.
Andrew W: You sat in on meetings. What did you learn by sitting in on meetings with chief marketing officers and others that he was talking to?
Andrew L: I think I just kind of learned sort of . . . Yeah, I don’t know, I think just how to treat other people and how to listen and kind of be more empathetic. And then in terms of on like a strategy side, you know, how to look at things more analytically from a marketing standpoint.
Andrew W: And you don’t think of Gary as the guy who’d have spreadsheets and he’s doing arbitrage. You think of him as the brand guy who tells you that you should not be selling so fast, you should be talking about whatever it is that people want to hear, you should be . . . I don’t know, building a brand and not be so obsessive about numbers. It’s impressive to see that behind the scenes there are numbers and there are people analyzing things.
Andrew L: Yeah, that was one of the biggest learnings when I interned at Vayner, and I think also is it really hit home for me because I think a lot of reason Kyk failed is because we didn’t track our marketing well. We did a bunch of random stuff and we did well in our launch market, but then never could replicate that success anywhere else because we never knew what actually led to results. Instead going to Vayner and seeing like, you know, people running spreadsheets, optimizing posting times, optimizing content styles, all that kind of stuff, it really kind of showed me how much more of a science marketing is than I originally thought.
Andrew W: I’d love to see what kind of spreadsheets they have about Gary’s Instagram posts because, for a while there was kind of annoying where things just weren’t . . . Some posts were great and then others weren’t. And I could see that they switched them. They got rid of the stuff that was bothering me. Then they moved to things that I didn’t know I was fascinated by. And that’s not happenstance. It feels like there’s somebody there monitoring the numbers and saying, “This doesn’t make sense. Let’s get rid of it.”
Andrew L: Yeah, there’s a guy named AK, or Andy, who basically runs the brand team there. And the way . . .
Andrew W: You mean Gary’s brand team.
Andrew L: Gary’s brand team, yeah.
Andrew W: Brand Gary Vaynerchuk.
Andrew L: Yeah. Team Gary Vee is like 30 people now or something.
Andrew W: Wow. And you were saying something about how he works. How does he work?
Andrew L: Oh, so in general, what they’ll do is they’ll they test a lot of their content strategies on Gary’s personal brand and then use those results to roll them out to the brands they represent. So they’ll try a new Instagram image format and they’ll try a ten of them and look at results and like, “Okay, well, that increased engagement. So now let’s try that with . . . ” I don’t know, Mondelez foods is one of their brands, something like that.
Andrew W: Who was that?
Andrew L: Makers of Ritz Crackers.
Andrew W: Okay, got it. Got it. Got it. Yeah, the thing that was frustrating for me was, he would start a video, but you’d have to continue on IGTV and as this doesn’t . . . I don’t want to do that. I don’t want to watch along long they live or whatever. Now he doesn’t do that. And also Instagram, knowing what my tastes are based on my likes and attention and they’re serving up more of what I like and less of what I don’t like. All right, so you’re learning a lot from this.
You then go off and you start a company. This is the one that didn’t do well. What’s the business?
Andrew L: So it was just a social events app, like I was launching all sorts of apps and this one wasn’t particularly important . . .
Andrew W: The Anvil.
Andrew L: Oh, the Anvil was a nonprofit co-working space I made at Purdue itself, yeah.
Andrew W: Oh, okay.
Andrew L: And that’s still around today. So it’s like that was a good success, although non-profit, so I didn’t really make any money off it, but . . . so yeah.
Andrew W: Ah, okay, so we’re talking about here that ate away the last of your money from Gary because you worked as an intern, you went back to school, you came back and you worked full-time for him building the arbitrage software and you then started your own company. The one that failed is not on your LinkedIn, which is why I don’t see it. It was an events company.
I tell you what, let’s take a moment to talk about my sponsor. Then we’ll come back, find out what happened there and then how you ended up in India. My sponsor is a company called HostGator. I love that what you said was, “I just tried a bunch of different things.” And I’m finding that more and more in my interviewees. Yes, when they were younger they tried to sell candy, they tried to sell soda, they tried to build websites, they tried to do all kinds of stuff. But even as adults, they’re just constantly putting stuff out there until they find the one thing, and then they have to stay focused on it. And for you, it was a bunch of different ideas to the point where it seemed almost for a moment that you didn’t know which of your ideas I was talking about that didn’t do well. And then you found the one.
The thing that I love that HostGator is, when you go to hostgator.com/mixergy, you’ll see that they have a middle option there that gives you unlimited domain hosting, which means you can come up with any idea, just launch it on the platform, keep it going for all you care, it’s just running out there, and then go with another one and another, another and they’re not going to charge you any extra to host all those different domains. Yes, you have to buy the whatever .com or .in, .co, whatever it is, but they will host it for you. And allows you to try a bunch different ideas.
Let me ask you this, Andrew, if you had nothing but a hosting package today and you had to come up with a business idea and launch it, what’s one idea that you would launch right now?
Andrew L: Man, that’s a good question.
Andrew W: May I suggest something?
Andrew L: Okay.
Andrew W: Copy Andrew’s idea completely. Tell me if you are upset by this. Build a website that says, “I’m going to be the Eastern European company that does what Andrew’s business does, what Pesto does.” And then anyone wants to learn in Eastern Europe, can sign up and then as a result, I teach them for a little bit. That might be a little complicated, but it’s an interesting idea, right?
Andrew L: Yeah, absolutely. I mean, and that’s kind of the direction we’re going. Like we started in India just sort of out of happenstance because of the history of where we came from. But definitely, we look at it as a global company. And so, Eastern Europe, South America is a really good market as well, a lot of really undervalued talent there too. So, yeah, definitely if . . . Yeah, I guess if I were to do business again, I’d basically build Pesto in South America or Eastern Europe.
Andrew W: Right, come up with another thing. Well, that’s just one of many ideas. Obviously, that idea is more involved than just a website. But the nice thing about having a website is you could put the idea out there to see if people reacting to it. If they are, build it up. If they are not, kill it and let it go.
All you do is go to hostgator.com/mixergy. They’ve been hosting for over a decade. They’ve been reliable. We’ve seen our audience loved them. Actually, to be honest with you for a while there, our audience loved them, then our audience said, “We’re not, like our customer service calls aren’t being answered. We’ve got these issues.” So I stop running the ads, waited for them to work it out. They responded to every single issue that we’ve ever sent them in a . . . This freaking guys, they created, I think it was a Google doc for each issue, from what I remember, and then, you know, in Google Docs there’s a place to add a description to the document? I think they went in the description and they wrote us a note on how they handled each one. I go, “Who does this?” What kind of OCD people are there?
So I brought them back and we’ve been running ads for them and seeing happy customers ever since. And anytime anyone is happy or unhappy, I invite them to contact me. It’s just email@example.com and let me know. I always help you out if you have issues, or as much as I can help you at every one of those companies. But I really do actually care after you sign up.
So if you sign up using my URL, I’ll get credit for it, you’ll get the lowest price possible, and you’ll have me and my team on your side after you sign up for this sponsor and any others. But if you want to get started with HostGator, go to hostgator.com/mixergy, hostgator.com/mixergy, get you the lowest price, great service.
Andrew L: Yeah, I actually used HostGator to host like a lot of my early projects, like everything with Interactive Solutions. I’d probably launched 10 different prototype products on HostGator, so. Definitely second that endorsement.
Andrew W: I see this like so much in the people that I interview. All right. The business was an event business and then it didn’t work out. Why didn’t it work? What was the event business? Why didn’t it work out?
Andrew L: So it was basically I was trying to create a way to make more spontaneous events with the people around you. And it didn’t work out just because it was never really a business, it was more of just a prototype. So all through college, I basically would do consulting work. I’d take half the money out front, build whatever I sold, and Google had to build wherever I sold, and then basically sell it. And I use that to learn how to program. And so if I wasn’t launching a consulting project, I was launching a startup project. And so this was just kind of another one of those. And I’ve probably built anywhere from like 20 to 30 of these different types of apps, like I built a university Slack, I built . . . Yeah, like . . . I don’t know, a bunch of other stuff like that.
Andrew W: You mean Slack for universities, a way for university students to chat with each other?
Andrew L: For, yeah, university students. So basically, I built a Slack clone. I scraped the Purdue student directory and emailed all 40,000 people when I launched it. And then . . . Yeah, so you could basically coordinate with other people in your classes, chat about homework, that kind of stuff. So the events app was just another idea in that space. I just had an idea and I couldn’t get it out of my head. So I built it and launched it and got some early feedback, and the early feedback was that it wasn’t that useful. So I just packed up shop and left New York.
Andrew W: Because you ran out of money. You had what? Just how much money was left?
Andrew L: Maybe like $250.
Andrew W: $250? And then you go where?
Andrew L: To Thailand. So I just booked a one-way ticket to Bangkok, I was burnt out from working on startups for the last five years, and I just figured I’d go float until I kind of had some inspiration, and I’d come back and build whatever I want to do next.
Andrew W: What does float mean?
Andrew L: Just like go and travel with no plan, I don’t even know where I was staying when I landed in Bangkok. I just figured out. When you get stuck in a situation, it’s really hard to have new inspiration if you stay in the same routine. And so if you want to truly find inspiration quickly, the best thing to do is just uproot everything you’re currently having in your life. And in my case, just getting rid of everything, packing a carryon backpack and leaving. And then, you know, just kind of float around and see what happens.
Andrew W: You know what? I’ve noticed that too. It’s a lot harder when you’ve got kids, but . . .
Andrew L: Yeah, yeah, it’s definitely a lot harder when you have kids or a mortgage or like . . . Yeah.
Andrew W: But I remember I was stuck after I had my kid and I realized, “Now I’m actually stuck physically and mentally and I’m going to burn out if I stay like this.” And in the past what I would do is just hop on a plane and go to Paris. I love sitting in Paris’ cafes because you could stay for hours. During the day, you would drink a cup of coffee. Café complet was my thing. My wife always laughs at how I was doing a café complet, thé complet. They bring you like this whole cheese plate and coffee and you could sit there for freaking hours, they don’t care. In fact, they’re bothered when you want to pay. Fine, you sit there all day and then at night you can ask for a Johnny Walker and agua . . . Not agua con glace, however, they say . . . Oh, it was like the Schweppes. I think they say by brand name. So I had Scotch and soda. And I could sit there also for hours reading books and just . . . And then I had my kid and I couldn’t do that.
And I said, “I’m stuck. What do I do?” And that’s when at some point I discovered I could go to Napa and find these nice hotels and have beautiful outdoor courtyard sit and work there for the day. I can go to pools in Petaluma. There are ways to do this. You are still coming home to the family and have your whole of responsibility. But the day is shaken up completely because you are in a brand new environment. I went to Stanford University, they’ve a beautiful campus, apparently anyone could just go to Stanford, their Wi-Fi is not great, but . . . You should do that. You’re in the Bay Area, right?
Andrew L: Yeah, that’s not bad idea. I was like, “I’m might go that down”.
Andrew W: You surrounded by a beautiful landscape. A lot of smart people walking around, good coffee shop, good food, so you’re not stuck there hungry. And worst case, you get on a bike and you go somewhere and find something better to do. But that’s what I did. And I’m completely with you.
The thing that I wonder is, what did you do for money? Once you got there, how are you going to get by?
Andrew L: I just picked up freelancing work again.
Andrew W: From where?
Andrew L: So that Interactive Solutions thing that I started in 2010. We were doing consulting work and I kind of just kept doing consulting work since. So I had old clients that I hit up, I had friends who needed like temp CTO gigs, I did a little contract work remotely for a Vayner, I did some media arbitrage consulting for other people in the space. And just kind of did that work about 40 hours a month and . . .
Andrew W: That’s it? How did people even know about you?
Andrew L: I guess just referrals from working on so many different things over the years.
Andrew W: Okay, and it’s 40 hours a month, did you . . . This is such a like petty question, but I’m fascinated by it. Did you try to lump it all into a week of work so you could have three weeks to explore or, what?
Andrew L: Basically, yeah, yeah.
Andrew W: You did.
Andrew L: So I would get an Airb . . . I basically hang out with backpackers at hostels where, you know, you get a bed in like a bunk room for a $10 night, super cheap, awesome experience, meet tons of people. And then when I needed to get something done, I get an Airbnb and be by myself for a week and just work the entire time, basically.
Andrew W: I’ve been thinking of doing that for Mixergy, a week of back-to-back interviews and then that lets me have a bunch of interviews in the can. It would wipe me out because I do a lot of prep for my interviews, but then I’d have three weeks to just go explore something new.
Andrew L: Yeah, it was definitely, it was a really good year. And I did a lot of things that I never really had the time to do while doing startups.
Andrew W: Like what?
Andrew L: Like I got my skydiving license, I went to China and learn Chinese, I moved to Korea and just trained in parkour for like five weeks straight. It’s like a bunch of random stuff that, like, I could have lived my life without doing, I guess, but the fact I got that all done, when I came back to actually work on Pesto, I was like fired up. I didn’t have anything else that I was like, kind of distracting me or like unmet bucket list items or anything. So I could really just focus all in.
Andrew W: Were you getting anxious at all during this? Did you feel like, “I’m not being responsible. Where’s my life going?”
Andrew L: It gets kind of lonely and tiring at some point, just because you have to reset your social life every place you go. And because, you know, if you’re traveling for a year, most people can’t do that. And so, you know, you have to . . . People come and go, basically. So about 10 months in I was pretty burnt out and wanted to go home. But there this tax deduction you get if you spend around to 330 days abroad in a given calendar year, you qualify for a $100,000 tax deduction on income tax. And since I was working abroad, I had a decent amount of income, so it end up saving me about like $15,000 but I couldn’t come back to the U.S. until like December 28 or something because I spent a month in New York end of the year. So definitely, about 10 months in I was pretty burnt out. But I just had to, I guess, had to keep traveling, makes it sound like not that bad, but I kept traveling for the rest of the year and then came back.
Andrew W: And where did you go?
Andrew L: All over, I mean, went to Thailand, then I went to Australia, then I went to China, South Korea.
Andrew W: Oh, so this is not how you ended up in India. How did you end up in India?
Andrew L: Well, I did go to India, too. So I went to like 17 different countries. So basically through Asia, then to Europe, then back to India and then South America and home.
Andrew W: But it was India where you discovered the next thing.
Andrew L: Yeah, so India, basically, I was doing freelancing work. I was in Delhi, I needed fast Wi-Fi. So I went to a co-working space and I was working late. And my co-founder, Ayush, he was also there late, and he was there late because his last startup failed and so he was homeless living out of the co-working space. And so we kind of bonded over this like going all in on our startups and ending up like totally broke. But like mostly okay and happy with that. And so we kind of hit it off immediately. And then we decided to start a dev shop, just hired people in India to take my freelancing work. I was doing from these outside companies and get it done cheaper. And then . . .
Andrew W: And the reason you did that was, you guys were starting to talk about how much money you were making, right?
Andrew L: Yeah.
Andrew W: And how much were you making versus what people in India were making?
Andrew L: I mean, I was making kind of a minimum $150 an hour. And then you can hire a software engineer in India for around $1,000 a month.
Andrew W: Okay, wow. And so you were talking about that. He was blown away by it. Now, you said, “This is what’s happening over here. I think . . . ” And through that conversation you decided, “We could do like human capital arbitrage.”
Andrew L: Yeah, basically, we started doing that. And like it was never meant to be a full-time thing. Like I was doing some biotech research stuff, he was working on a different software product, but it ended up kind of doing really well and taking up all our time. And then, we kind of . . . Because it was taking a lot of time, we were like, “Okay, we have to make this a business. We actually enjoy building.” And so we kind of took a step back and looked at what was the highest value thing we did. And it wasn’t necessarily our ability to sell into big enterprise clients like our traditional consulting businesses or anything like that. It was really this internal training program that we built to kind of get everyone that we hired on par with the expectations, both technical skills and soft skills, that my friends in SF would expect of my own work. And so we ended up just shutting down the staffing agency part of our business and then pivoted into our school model now, where we just offer the training program as its own thing.
Andrew W: And this happened because you saw, yes, the Indian developers that you were meeting were getting paid less than U.S. developers, but the first guy you hired was not that good and it was the second one who was almost that good, and you started working with him and you realized, “We could get these people up to a level that the U.S. companies would want to hire, but they’re not there yet.” Am I right?
Andrew L: Yes, basically, and the things they were missing were a lot of like unknown unknowns. They were like cultural differences or soft skills or some development best practices. So they’re actually fairly easy to teach once you know what they are. And so . . .
Andrew W: Like what?
Andrew L: Like an example . . . So in SF, you know, everyone basically like lives and dies by their calendar to the minute, like you’re sending calendar invites to like brunch with your friends, right? In India, they don’t do that. They just kind of like call each other. So we have to teach them how to use Google calendar, Zoom events, that kind of stuff. We have to teach them about opportunity cost and the effect that has in decision making, because a lot of them grow up culturally expected to just like save, save, save their whole life. And so we had an issue where one of our employees wanted to basically build a thing to replace Zapier because they don’t want to pay the $25 a month for the Zapier subscription. I was like, “Dude, your salary is way more time than this $25 a month.” We would have to have for like 10 years to get an ROI on this. Just spend the money. But like that was kind of counterintuitive to him because his whole life, his value system was taught that you have to save in any way you can.
Andrew W: And so you could actually create a process, an educational process for teaching that?
Andrew L: Yeah, yeah, you can. It’s hard. It’s like really hard. And it takes a lot like a lot of sort of like cultural immersion and empathy to kind of understand these problems and a lot of iteration. But yeah, we built a soft skills curriculum around sort of helping bridge all these kind of cultural gaps that we found when operating our own staffing agency business.
Andrew W: One of things that stood out for me from your conversation with our producer was that you just weren’t excited about running the agency. You could have kept running the agency, but it would have been it a job. It would have been a way to make money, but it wouldn’t have changed the world, it wouldn’t have been something that lit you on fire, you just been like so many other agencies, right?
Andrew L: Yeah, basically. I mean, me and my co-founder, we’re startup people. And that’s like, you know, what gets us excited is the actual process of building something meaningful. And so the problem with an agency is, your business model is predicated on keeping your engineers’ salaries as low as possible and jacking up client billables as high as possible. And we hire all these people, you spend all this time with them, they basically become your family. It’s just like it’s a pretty shady business to build because you spend all your time sort of like, you know, motivating them for reasons they shouldn’t necessarily be motivated for, trying to kind of give them career opportunities in an area where they’re not particularly high leverage within the company. And it’s like, not because you don’t want to do more, it’s just your business model fundamentally doesn’t support you supporting your people in the way you’d like to.
Andrew W: Where do you get off? You’re a guy whose business didn’t work out and so you ended up working for Gary Vaynerchuk as an intern to get yourself going again. You finally worked for Gary full-time. You go start another, a company or set of companies, it doesn’t work out, you have to leave the country, you have to stay out of the country because $15,000 is suddenly worth a lot of money to you. You finally found a business that works. Where do you get off saying, “I’m going to give it up because it’s not fulfilling me enough”?
Andrew L: Yeah, I mean, I don’t know, it’s just I build startups because I really like building things. It is the biggest kind of rush you can have, in my opinion. And everything else sort of seems mundane comparatively. And so it’s more of just like I feel like a founder is kind of like a blessing and a curse. Like you just have to build things. Because it’s how you keep the world exciting.
Andrew W: And you would’ve been willing to . . . ? I understand being willing to lose it all. Because you have an idea that’s going to work out. Are you willing to lose it all? Meaning, like start a whole other idea and lose it all because the first one wasn’t satisfying enough, are you willing? It seems like you are, you are willing to sacrifice everything in order to have a satisfying startup, a satisfying business?
Andrew L: Yeah, I think. It really depends on like what you do it for. Like, if you do it for the destination, then like that doesn’t make any sense at all, right? If you’re doing it to get rich or to get famous, then like, no, that’s a horrible idea. But if you’re doing it because you just like love the thrill of building something and like taking an idea and turning into reality, then like the money doesn’t matter, the comfort doesn’t matter. And granted, it is biased by the fact that I don’t have kids or I’m not married. So like, you know, that does help. And that changes your kind of risk profile. But, I don’t know. I live a pretty, pretty simple life. I wear black T-shirts literally every single day. Like I just have a stack in my closet. Like I don’t need much. And like, what I need is that satisfaction of taking an idea and making it reality. And that’s kind of like what I crave.
Andrew W: Where do you get your black shirts?
Andrew L: H&M medium, slim fit.
Andrew W: I love wearing black t-shirts to, the V-neck stuff, but I wonder if I’m just not . . . Like being as interesting as I could be.
Andrew L: You know, that’s a fair question.
Andrew W: But then you know what? Sahil from Gumroad. His stuff has always been beautiful. Everything he creates, he always thinks about the little details. Like I remember I asked him, “How did you get . . . As soon as somebody types in the credit card on your site, it just you show them a small image of what a credit card looks like. And then when . . . ” He says, “Yeah, but now I move over to CVC,” right, the three digits on the back of the card, go to that field. So I went to that field. And the little drawing of the card flips over so you can see the back and to tell you where to go. And then if you dismiss this whole box where you’re supposed to enter your credit card information, it just drops down on the page to the bottom. I go, “You think about all the details?” He goes, “I sweat them all, they’re very important to me.” I said, “Why do you always wear flip flops and a dirty t-shirt?” Not a dirty t-shirt, but just a t-shirt. “I don’t care about that.” So then maybe I shouldn’t worry too much about my t-shirts, as long as I’m spending a lot of time prepping for you and looking you up, that’s all that matters.
Speaking of looking you up and prepping for this interview, one big question I want to ask you, is Lambda School? It seemed to be the pioneers of the space. Austen can’t stop talking about how he’s revolutionizing education. A lot of us admire Austen. I wonder, did you copy him? I’m going to come back and ask you that question.
But first, let me tell you about Setapp. You’re Mac person, right?
Andrew L: Yeah.
Andrew W: What’s your favorite Mac app? What do you like about . . . ? You know what? And forget about favorite, that’s a pain in the ass question to ask. What do you what do you like about Mac apps versus PC apps and other platforms?
Andrew L: I’m a software engineer, so it’s all the Unix based command line tools and all that kind of stuff, so.
Andrew W: So I’m not. The reason that I switched to . . . Even though I was mostly spending time in a web browser, I just love that you can see the creator in the app. You can see that they have artistic integrity, that they care about the freaking details. And I love that there’s an app to solve just about any problem. I prefer my iPad, but when it comes to the desktop, there’s an app to solve everything. Like right now I’ve got a whole bunch of old interviews that I want to sort into a Google drive and also sort into a Dropbox drive. Certain ones go here, the other one goes there, some are private just to me, the others go to folders, that other . . . They have the apps that will take that and sort it for me and rename it for me on the Mac.
The problem is, it starts to get expensive, right? If somebody just put up a store right here in my office and every time I tried to do something said, “Give me $5,” I think I’m done, I don’t need that much. Well, that’s what happened to me with Mac apps, there were a bunch of I needed, but I didn’t sign up because there’s always a paywall. Then I discovered Setapp and I’ve been a customer of theirs now for a long time. What I like about Setapp is they have all these apps in one place. You pay one monthly fee and you get access to all these super expensive apps as part of your membership. And that means that I get PDF Pen which lets me edit and write in PDFs really cleanly. I just had to fill out an application for my kid’s school, what I do is I take a picture of the document that they give me and then I use PDF app to write information about the kid because my handwriting sucks. And if they asked me to print it, which they do, I print the freaking thing, but I’m not writing by hand like a sucker. I wanted to look nice. I want to be clear.
If you have too many tools at the top right of your screen, there’s something called Bartender to organize it, if you have Google drive or other drives that you need that don’t have software for you to mount like AWS, you can get CloudMounter, allows you to mount the cloud, mount the cloud-based drive. There’s so many different tools. Use Ulysses for beautiful writing.
All right. You got all these apps. You pay one fee, you get them all. But here’s the thing, you might as an individual, are you willing to pay for this? Your team doesn’t know that they could do this, your team doesn’t know that they could improve their computer and get it to run faster if they use the right app . . . Clean My App is what I love for that, by the way. Your team doesn’t know that they could do all this stuff.
What I recommend is, if you’re starting, if you’ve got a team that uses Macs, you go to setapp.team/mixergy and for 60 days give your team all the apps that they need in order to do the work that they do best. Free them up by giving them incredibly powerful apps that are created by artists that will let them be more productive on their Macs, get more done for you. And if you’re happy, you could stick with the membership. If you’re not, you cancel and you haven’t paid them a dime. But your team will love it. And I believe you’re going to see big improvement in the way that they work. That’s setapp.team/mixergy. The app collection is got over 100 apps and it keeps growing.
All right. Did you, in fact . . . ? No, I don’t want to say it. I did talk to you before the interview because I thought maybe there was a . . . I thought maybe you were copying them, but it was a much more interesting story than that. Tell me how you came to this business model of you teaching and not charging until you get your students a job.
Andrew L: Yeah, so the income share agreement idea actually came about because we signed up for YC office hours, and we got connected with Geoff Ralston, who’s like the partner there in charge of like education efforts. And yeah, we were telling about what we’re doing and how we’re doing this kind of like . . . Basically the same model that we had before. But we were hiring people in-house, so much more like a traditional staffing agency.
And, you know, we’re talking about the growth and . . .
Andrew W: And at the time, you already had shifted to the education model and you were charging people.
Andrew L: So we weren’t charging. We basically just hired people and we put them through an internal training program and then basically placed them directly. So we were still doing like full time remote placements for companies here. But it was your standard staffing agency model, like Andela or Infosys, those kind of companies.
Andrew W: Did he ask you about revenue the way that I did?
Andrew L: Yeah, yeah. So he asked us basically how much profit we’ve made. We said about a $150k. And he just stopped and was like, “That’s cute. You could buy yourself a nice car.” And then continue to rant about, you know, what did they look for at YC, you know, things that scale, founders of vision,” He’s like, “Okay, I like what you’re doing, you’re making progress, chipping away at that. And you have something interesting here. But you should look at income share agreements as a financial model to basically scale this, because hiring people is never going to scale.” And so that’s when we started looking at income share agreements and did a bunch of research, talked to a bunch of companies offering them. Purdue, actually where I went to college, has been offering one for a while. So I talked to the lady in charge of the program there. And then we end up basically launching our income share agreement based model like a month later.
Andrew W: Wow. He’s now the president of Y Combinator. He’s taken over.
Andrew L: Yeah, yeah, did not know that going into. That guy’s intense. He is . . .
Andrew W: I don’t know much about him. And he’s the guy who created Yahoo Mail back in 1997. So he’s a pioneer that way. He developed a bunch of other things too. And he handed this idea to you and one of the big questions I would have had is, in India, how do you make sure that people pay you, that they follow up?
Andrew L: Yeah, that’s a really good question. So when we started, no one was doing it income shared agreements in India, and Lamba School was kind of just starting to pick up steam. And so that was something we were super worried about. But what we found is we just process payroll for our hiring partners. So almost all our hiring partners are U.S. based companies, and they don’t have entities in India. So we basically process payroll on their behalf, which allows us to automatically deduct the ISA contributions, and it makes easy for the partner because they don’t have to worry about the tax or legal logistics of hiring an overseas employee.
Andrew W: How’d you come up with that?
Andrew L: I don’t know. It’s just customers asked for it. So we built it, basically.
Andrew W: Just see the need. And when you come up, when you charge $25,000 per student over three years, are you taking money out every month?
Andrew L: Yeah, yeah, every month based on a monthly income.
Andrew W: Okay, this sounds like a fantastic model. And then you told our producer a year ago, you had a graduating class that had 100% placement, that means every single person who went to the class was placed but you had only six students.
Andrew L: Yeah, correct. So their first two batches were three students each. But we got 100% placement rate and they averaged a 6x increase in salary. And so, and like their response to their hiring partners was really phenomenal as well. And so that kind of was what gave us sort of the validation to try to scale it, which is what we’ve been working on this year.
Andrew W: Take me to the lowest point where you finally found the model but . . . You’re smiling. You know what I’m talking about. When was this?
Andrew L: Yeah, yeah. Okay, happy to tell this story. Basically so, when we started the consulting business, we made a lot of money. The staffing agencies are pretty profitable. But then we switched to the income share agreement model, it was really hard from a cash flow perspective because we front all the capital to train these engineers, our training program was three months and then they only pay it back over a three year period after, and our first two batch sizes where three people each. So it was six months of basically no income, and we were running off our bootstrapped revenue from our consulting business.
And so basically, October last year, I was talking to my co-founder and we had to make a decision. It’s like I can either make rent in SF or make a payroll. And so being a founder of a company making payroll, in my opinion is kind of like your most important job. So obviously got rid of my place, threw all my stuff in storage unit again, and packed up a backpack and moved out to India with the team and just kind of like waited it out until more students graduated and started getting jobs and paying their income share agreements.
But then we end up raising money and I was able to come back. But it was definitely . . . It was pretty rough. I remember on December 31, I took a really, really sad and lonely flight to India because it’s the cheapest one I could get, because like, who wants to fly on New Year’s Eve? And then when I got there, it was like just pretty rough not knowing when I was going to be able to come back because we were running the business off about $20,000 or $30,000 in credit card debt on my personal credit cards, and yeah . . . It just kind of like we knew the thesis was strong because 100% placement rate, we were getting more students. We had over 20,000 people apply for a second batch in three weeks. And so like we had a lot of validation there, but it was just a cash flow waiting game. And yeah, they only really like tool we had to work with that was my personal credit cards, so.
Andrew W: What was it like to live in India? What is India like? I’ve never been.
Andrew L: It’s interesting. It’s a very . . .
Andrew W: What part of India where you in?
Andrew L: Delhi.
Andrew W: Delhi, okay. Yeah, so tell me about it. What’s it like for you there?
Andrew L: Yeah, it’s different. It’s pretty hard as like a foreigner to live there just because I’m used to San Francisco where you can whip out an app and basically get anything at the click of a button, everything is super sort of like organized, systematize. And then India it’s like a lot more chaos. And so that’s definitely hard when you’re trying to be productive. I got amoebas twice and like that was pretty rough, so.
Andrew W: What’s that?
Andrew L: Basically intestinal parasites.
Andrew W: Whoa.
Andrew L: Yeah, yeah. So that was pretty bad.
Andrew W: And just to be clear, from what I understand, you were living on the floor of a co-working space on a mattress, at night. People would be done with the co-working space and you’d stay there overnight and sleep. Am I right?
Andrew L: So at this point, my co-founder had an apartment, but I was living on a mat on the floor in his apartment, yeah.
Andrew W: And dealing with this intestinal issue there.
Andrew L: Yeah, yeah, I had, yeah, I lost a lot of weight. Yeah, it was not great but . . .
Andrew W: What was good about it? Beyond the work part, what’s one of the beautiful things that you know years later you’ll miss if you never go back?
Andrew L: I think my team and our students.
Andrew W: Being with the people there in person.
Andrew L: Yeah. And like seeing the impact we’re having. Like we had one student who basically he grew up on a farm and like super rural area of India, like you can’t even find on Google Maps. His family sold their farm to send him to college and he went got a bachelors and a masters in CS in five years, and when he went to college that was the first time he ever saw a laptop too. And then he went and worked for a company as a software engineer for a year and a half, making about $5,000 a year.
After he graduated our program, he had competing offers from two YC companies at $48,000 a year, which doesn’t sound like a crazy amount of money from like a U.S. software engineer perspective, but that’s more money than the entire economy of the village he grew up in. And he is now leading a team there, that company is raised series A. So it’s like, seeing that is pretty cool and kind of makes it all worth it. Especially, you know, when you’re on the toilet with amoebas, and questioning why you’re doing what you’re doing. And then, you know, we have a really solid team and it’s pretty cool, like working with them and all that.
Andrew W: How do you get your investor? We’ll close out with that.
Andrew L: So, Ayush, my co-founder kind of spearheaded that. He’s pretty connected in the in the Indian VC scene. We talked to some investors here in SF and people were like, “India? What? We don’t do India.” And so, even though we had like all our U.S. based revenue, all our U.S. base C-Corp and we are as much of a U.S. company as any company, it’s just people weren’t interested. But then we got in touch with Matrix India, the team there, they were super excited about what we’re doing. And then we just pitched them and ended up closing a $2 million round about a year ago. And that’s when I got to come back to the U.S., basically.
Andrew W: How much of the business?
Andrew L: Yeah, I don’t know if I should disclose that actually, from the valuation stuff. Yeah.
Andrew W: Wow, congratulations. There’s so much we didn’t even cover. Apparently, you were a janitor for a while there, am I right?
Andrew L: Yeah, yeah, that’s my first job in high school. I learned a work ethic and how to clean toilets.
Andrew W: So many ups and downs in this life and still you stuck with it. I think you hit on a really big idea here. Obviously, I think the potential is fantastic. It’s exciting to see how far you’ve come. Thanks so much for being on here.
Andrew L: Yeah, thanks for having me. It was fun.
Andrew W: All right, if anyone wants to go and hire from you, it’s pesto.tech.
Andrew L: Yeah, just they can shoot me an email at firstname.lastname@example.org, and we have a bunch of really, really talented engineers, people who’ve been senior software engineers at companies like LinkedIn, people who’ve led teams before, and they’re all just looking for awesome remote companies to join, oftentimes because they want to stay close to their family or they want that work flexibility, more interesting tech stacks, better salaries. So yeah, if you’re interested in hiring really, really talented engineers and also, you know, helping make an impact in improving their lives, I’d love to chat.
Andrew W: What was the email address again?
Andrew L: email@example.com.
Andrew W: All right, Andrew, thanks so much for being on here. I want to thank the two sponsors who made this interview happen. The first, if you’ve got a Mac, just go browse the list of apps that they have available for you at setapp.team/mixergy. It’s an amazing collection.
And number two, if you’re looking to build a business, if you’re looking to experiment, go do what Andrew did, do what I did, go sign up for HostGator. They’ve got an incredible hosting package available for you at hostgator.com/mixergy. All right, cool. Thanks, Andrew.