Investors hated Pex until this….

Today’s guest came up with the idea to scrape the internet’s audio and video to find pirated content. But he had one major problem: no investor would touch it.

We’ll find out how everything changed for him just days before filing bankruptcy. If you have an idea that investors are balking at, you don’t want to miss this interview.

Rasty Turek is the founder of Pex, a database of all the video and audio on the internet.

 

The podcast is in all major apps, just search for Mixergy.
You can also use our RSS Feed RSS feed.

Rasty Turek

Rasty Turek

Pex

Rasty Turek is the founder of Pex, a video and music search engine.

roll-angle

Full Interview Transcript

Andrew: 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, um, you know, that if you play, let’s say Madonna’s song from 20 years ago on a YouTube video of yours in the background while you’re dancing to it, you know, that’s a copyright violation.

But it turns out if it goes on for 15, 20 seconds, Google won’t even flag it. YouTube would just allow it to go up and probably stay there. Well, joining me as an entrepreneur, who said, I think I could do better than Google is smart. You’re smiling, right? Because I’m on the right track with what you’re doing.

Right. He goes, look, I think what I could do is let, let Madonna’s people know. Even if it’s 15 seconds of music that was played, if it belongs to her and she wants to do something about it, I could help her get paid and ditto for small creators who need the money much more than these more established people.

And in order to do that, what he decided to do was I’m guessing this is just a hunch based on a little bit of research that I did. You’re scraping the internet for music. You’re not, I told you I need the video of you so I can get a sense of whether I’m okay. He’s pulling in data from YouTube, from Facebook, from SoundCloud.

If you invented some, some video publishing platform yesterday, there’s a good chance. His software has sucked in all the music from it so that he understands what’s on there. Anyway. What he enables creators to do is say, ah, that’s my music. That’s my video. It’s being played there. Maybe I deserve some money for it.

And here’s how I can do it. Now, the world is changing in Europe significantly, and he’s got a product that he’s creating to. To help creators there. I’m going to ask him to talk about that. but first we’re going to get to know him. We’re going to get to know the time that he didn’t have this smile on his face, where he nearly went bankrupt.

And we’re going to find out how he built up this company to the point where it is today, the person whose face I’m looking at, you’re not looking at him, is Rasty Turek. He is the founder of Pex. I love your domain. Three letter domain. Tex.com PEX. It’s a database of all the video and audio on the internet.

We’re going to find out how he built up this database. We’re going to find out how we came up with a business idea. We’re going to find out about his early entrepreneurship career at a time when it was barely legal to be an entrepreneur, and we can do it. Thanks to phenomenal sponsors. The first, if you need a developer to do amazing things for you, that’ll make you proud of the way that rusty is right now.

Smiling at me. Whenever I talk about what he’s created. You got to go to top tout and I’ll tell you about, about top towel.com/mixergy later. And if you haven’t built a website and you need a hosting company, go to hostgator.com/mixergy. But again, I’ll talk about those later rusty. Good to see you I love the pride that you have in your work. Was there ever a time with PEX that you didn’t have this pride, this smile on your face?

Rasty: Well, I will say most of the time it was very hard to build.

Andrew: let’s start off since we’ve got so much, it’s going well, let’s start off with the time that wasn’t going. Well, December, 2017, you published an article about how you nearly went bankrupt.

Rasty: So one of the challenges of these companies, it started in 2014. In fact, February 14th, 2014, I realized three years later when I was sending some paperwork that would be started in a while. And, uh, somehow I didn’t notice at that time. first three years, these are very, very tough because none of the investors were willing to touch the company.

mostly because they essentially looked at what do we do? They looked at UGC user generated content. At that point, there were a few platforms, YouTube Vimeo, daily motion. Most of those people barely know at this point, Facebook, Instagram, and many, many, many others, including Twitter were not, they didn’t have any, media outside of, images.

And it didn’t look like video is going to be such a big deal or music on the internet is going through such a big deal. And so. When I started to make this company and started telling people, I was like, look, you’ve GCs going through these big, their abuse is going to be growing. And eventually they’ll will be an opportunity, not only for us, but for the creators to venture out and start building their brands on the internet without, the major labels saying, right?

So there’s, most investors kind of scoffed at it in not for me.

Andrew: Well, what was the business model that you were presenting to them with that vision of the future of user generated content being so big? GGC.

Rasty: It was the same as we have it today. Essentially, a search engine for audio visual content that is exposed to the right orders were based on the infringements are essentially the notifications they can take advantage of that situation. Meaning. You know, take down content that they don’t like, forms of mixes and remixes of their content or monetize in addition to what they have now.

So we always believe that the viral at the, on the internet is very important to, general marketing and, kind of a growth of a, of a brand. But at the same time, it shall be not unhinged. And then have a very, have a very fits, right? And so we wanted to give tools to the right sodas to manage these growth and managing the spread in the direction of the steady will make the most sense that our own business

Andrew: Meaning

a musician creates a song. If other people use it, you said it’s going to happen, but the musician should get some money for it. a comedian creates a comedy sketch and other people start to use it. That comedian should get something money or something for that. Right. Some attribution,

Rasty: At least the credit. So it’s not about money per se, but the credit is important, right? So this person put their heart and soul into it and then people take it, put it on their own. You know, pages on Facebook or on their own channels on YouTube and pretend that they done most of this work. And it’s not just small creators, right?

It’s like a very big names, abuse, rights, quite significantly, and often, which is terrible for the, for the true creators. Should we put so much work into it and what is challenging for them? It’s not only that they are not being given the credit, but they don’t usually know about it. They don’t know about this audience.

Right. So. It’s very hard for them to build a product for audience. Like I always say, imagine that you have a pizza shop where you interact with one of a hundred of your customers, how would you know what they really want? You just create pizza based on maybe the mint, but how would you know, how would you be creative if you cannot talk to your audience?

And this is the problem. Once the content starts spreading without you, you don’t know where it goes. It enters new communities without your participation.

Andrew: Okay. So that was what you pitched to investors. Did you raise money that at that point

Rasty: They did not,

Andrew: you did not raise any money and is that why you were getting close to bankruptcy?

Rasty: Well, not really. So I started putting my own money and we were very small team back in San Francisco. We spent many years building. And the challenge was we couldn’t find any customers because all customers said, come back when you have the whole YouTube problem is YouTube is quite large.

And so you already said, well, we have a subset of you to process today. Maybe we can start there, but they said  the whole YouTube or nothing.

Andrew: Give me an example of a customer. You give me an example of a customer that you would have talked to who said that?

Rasty: From a sports league, like NHL, NBA, NFL

Andrew: Got it. So you went to the NFL for example, or one of these customers. And you said the people who are, who are putting up your highlight clips on their YouTube channel, I could find some of them for you. I don’t know all. And they said, until you tell me all, it’s not useful, they didn’t want to go after the people who were there.

You could find no.

Rasty: that the problem with right services, they are not usually technical. And so generally what they care about is like, do you have a large upset in the business of some form or shape? And usually that means it’s like a, the departments for, what they call anti-piracy are tiny.

Usually they have lower budget. Then the toilet paper that they spend for the whole company.  usually this is one or two people essentially tasked with perfection. So for Hollywood studio that has $80 billion budgets, the UNFI piracy is two people. Imagine that you have a hundred million dollar movie and essentially two people are charged in predicting.

Itself through, you know, throughout the lifetime of the movie. And so there was never enough interest in money, not in that department. And so the only way for us to make any kind of business was, or marketing. Meaning helping them to understand the viral, do the content, how it spreads, right. And goes in Florida.

You need to know, you need to have at least majority of the content rather than minority or the other alternative was where we can bring upside, which is the initial monetization. And that is interesting. But at the same time, it still required a certain scale. And so most of the customers were essentially very skeptical.

Mostly because these are speech to them ad nauseam in the past, and nobody’s really delivered everybody traumas, but nobody really brought it in. And then in addition, they were not willing to invest their time and energy into a company that was maybe going to get there. The challenge was if you call and do that, we needed in order to do that, we needed money, right?

It’s not cheap. So we went to investors instead of a look how this all promising businesses, they can actually work with us. You need to give us money. We will be able to sign them. And they essentially told us, I will give you money when you sign them. So we were in these beautiful chicken and egg for over three years.

And, it started getting to a point that. We were actually able to, with my savings and with, some smarts, able to do what we needed to do. So essentially the vast majority of the content to the platform. And from there, we were able to finally convince first, major investor that was actually looking at us, but they were petrified that the crawling is essentially illegal from the, from the legal perspective.

And then. But the platforms will Sue us. And so we spend, we’ll say almost nine months of due diligence, where they were looking for experts to figure these out. Then when finally they were comfortable, they issue the term sheet and all of these things. However, their board refused to sign the term sheet the last, not the, but the last piece of paper.

So we were not able to raise it the money from them. And we had a half, a million dollar. that two over are all familiar indoors to our lawyers. And so at that point, we were actually dead as good as dead and by a sheer coincidence, a customer who we were talking to for years, that’d be essentially told to be, are going out of business.

You have lost two weeks because we have lost two weeks of operational capacity that you have lost two weeks to see how this really works. If you want, it’s cost you nothing. It’s completely free, then have to do anything. And they said yes. And within a week from what they were able to see, they not only decided to sign a deal with us, but also invest that money themselves.

And, from there we go and,

Andrew: you let them try it for free. You said, look, I only have a couple of weeks. Anyway, you might as well get this for free. And if you like it, maybe you could buy who’s the company.

Rasty: Universal music. And, uh, what was very, very challenging for everybody to understand is this is the largest rights are in the music, usually takes very long time to get them to do anything. And these happen in the orders of few days and they doubled down on us and allowed us to actually continue.

And so thanks to them, we are around, but once they signed. The whole industry started paying attention and we were able to sign all of their major competitors within very short period of time, which pushed over revenue from zero to multimillion dollars. Very, very quickly. We just didn’t confuse the, all of the investors that passed on those in the past, which was in hundreds, by the way, I spoke to 450 people in three and half years.

And every single one said no. And by the time we had the, we grew so much, we were getting. Literally swamped with term sheets where people were not confused by how was this even possible?

Andrew: I do so much. I want to break down in here. The first thing is when you were going through that near bankruptcy situation, you would do what to keep your head on, right. Go for walks. Run. What was this whole running thing that you did?

Rasty: I, wake up every morning, five 50, go for a run and run up until I cry. And then you go by your day. Yeah.

Andrew: where would you go running?

Rasty: we shouldn’t be from mission based San Francisco up to South Toledo.

Andrew: Wow. And so as that’s like, right over the bridge, right.

Rasty: Yeah. That’s 14 miles. It’s a, it’s a very nice.

Andrew: And you would literally cry.

Rasty: Well, there’s nothing else left.

Andrew: Thinking what? Thinking I’m a failure. I disappointed my dad. I disappointed. Where do you go in your head? When, when it gets so bad that you cry?

Rasty: I don’t think it’s a about disappointing others. It’s about that. This was my seven in Denver. And so first three companies I was able to sell, but the last three I had to close because I was just not able to do well with them. And so this was a pattern at this point. And it was convincing me that I just maybe don’t have what is needed for this.

And, you know, it is, it is very emotional and the more emotional that these, that the company is not working was the people that are leaving. Right. So nobody wants to stay in a sinking ship. And so email how quitting essentially on a weekly basis. And we have, you were very, very, very, very small team and, People that say, you know, I don’t believe in this anymore and I would just want to do something else.

It’s hard.

Andrew: Yeah. The post that you wrote all those years ago said I had to force myself not to look at my phone before I went for those runs, because if I did something terrible would be my inbox. That would keep me from going out like somebody saying, I’m sorry. And you knew instantly. That means no run for me.

This person’s leaving. The other thing that I’m wondering is I asked you, how can I make this interview useful for you said, I don’t know. There’s nothing that I need right now. And I’m actually not even super comfortable talking to you. This is not what I get off on. It turns out you and I wouldn’t have you smiling.

Cause you wouldn’t have done this interview with me. If not for a guy named M Josh Borek, who’s, teaching at the Harvard Kennedy school, he made an introduction so that I could have you on here. As I’m thinking about you, not especially eager to have the world, know your name and do this interview and get publicity and all that.

I’m wondering, are you the guy who would call up universal? Are you the person who is calling up the NFL? Are you the person who is making call after call after call and trying to pitch yourself? Or was there someone else who was doing it?

Rasty: No, it’s me. It’s a, there was no one else left. So it was always me.

Andrew: Were you good at that? Or was that something that was difficult?

Rasty: I think the fact that we signed them all over the years proves that I must be at least something good.

Andrew: Okay.

Rasty: But it’s, it’s a process. I mean, a of them, our customers took man months to sign. And those are active discussion, right? And so it takes very, very long time to get multibillion dollar companies that sign multimillion dollar contracts with a company of four people.

And, there’s no, just lots of convincing, but it’s a lot of work. Did you have to put into the relationship? And, I might not be bad at it, considering that we were able to sign, essentially everybody that met is within the music industry.

Andrew: What was your check? What was your trick? I was saying, but what’s your technique? What was your process for getting to them and closing sales with them?

Rasty: It’s building relationships, making sure that VR helpful to the person that actually operationally runs with it. So usually in large companies, especially large deals, they’re signing with the CFOs or at least very high up. However, the person that is going to interact three gears, like 14 levels below them.

And usually what a lot of folks will do is like they, they try to cap it to the CFO, go top down. We try to always go from both directions. The next show the CFO showed the leadership that this is valuable, but also be there for the people that actually are going to be utilizing it day to

Andrew: The thing is that you didn’t have investors who would make introductions to them. I don’t see you as the guy who’s sitting on LinkedIn hunting, email addresses, pinging them with cold email. Is that what, what was your process?

Rasty: That’s exactly what I

did.

in fact, I learned in the United States. So as you can tell by my accent, I’m not from this country. you’re one email away from anyone in this country. Truly, you can reach out to anyone now, but until you’re helpful to them, about to, there is a value they will respond and it’s, it applies to.

People from Jeff visas down to the last person in this country,

Andrew: Who’s the most impressive person you got. Or the most surprising toughest one that you still reached out to and got because of email,

Rasty: I mean, we actually raised, some money because we called the mill some investors over the years, but I mean, I know the CEOs of the biggest rights holders at this point. And those were a lot of times cold emails and

Andrew: just cold emails from you.

Rasty: Well, the, one of the things is this is similar to a beautiful person.

When you are in a dance for right. There is a boy or a girl that they are very pretty. The challenge with them is like, nobody is actually approaching them because everybody’s scared of them. It’s a big company is kind of like that. Like nobody reaches out to a CEO of universal because you know that they are going to say no, but that’s not how the world is.

They actually are kind of yearning to be around startups. And so I was able to get a lunch big provider because of exactly these things where yeah, I got introduced to him by a complete random coincidence. And, my favorite part was, my name rusty that I showed him the rest, the, and my company picks out unfortunately out of completes to something very different.

So when Bob Iger was making introductions to these folks introduced me as a tasty from sex. So that was, that was a memorable. But even to him, I got through just cold emailing

Andrew: Cold emailing

Rasty: I called him one of the people in his staff and I said, I can be very. Helpful to your company. And here’s why, and here’s all of the work that would be this prior, without you asking you don’t have to pay for anything for it, dog.

That it’s

Andrew: What’s I, I guess I should say that he ran Disney for the years where they bought Lucas, where they bought, just at the beginning of Pixar. and when, of course they launched Disney plus, but. What did you do that was helpful for Disney before they even ask you for it?

Rasty: Well, we were able to show the, essentially based on the trailers virally, the, how they are going to, play in the box office. So we did, we started doing these reports for based on other movies. And so we benchmark with essential leggings that I said, and it was quite close. And it was based on a trailer data on a UGC plot, six months before a box office.

And so that was valuable enough for them to warrant

Andrew: meaning.

you could show that people were posting their videos on Twitter, on Facebook, that type of thing.

Rasty: Yeah. So what essentially happens is there is a difference between popularly and violated. I think people need to use these words or kind of, use them inter interaction. You know, they use them essentially just as a replacement for each other, but the reality is popularity is. How much, certain things gives us a traffic of some sort.

So you can think of radio. So one radio playing the same song over and over that will make it popular within the radio. Wireless means how far it spreads. So all of the radius playing the same song, that’s viral. So in the, in the UGC world, the online world of video and audio, what this means, Taylor Smith having a 2 billion views on YouTube.

That’s makes it popular. 15 million copies of that song across all of these platforms makes it viral because essentially my relate, the, you can take it from the audience. Popularity is about how deeply you break it to the audience that you have relationships with. So for instance, your subscribers to your at least sinners, that’s your popularity.

So if you’re a hundred thousand subscribers and 90,000 of them are actually. watching, would you produce that’s your popularity it’s quite high, right? Or mailing opening of mailing newsletters. That’s your popularity virally. These about how far it spreads, which also means how other communities you are interacting with that you don’t have that relationship with.

And so what did we did with the, with these trailers? We took 500 movies. we took 500 movies, their trailers, and we looked at the viral load. That means how far the Australia is when. We separate it into true UGC and then own channels. And then also editorial, which has all of these, you know, variety, the Hollywood reporter and such.

And then we broke them down into these categories and we were able to show how these movies are essentially aligning with each other. So it’s like things like Thor. how it aligns with, for instance, something, it gives DC comics and such. And so we were able to show them how most likely the movie is going to play out at the cinema at the box office, which is one of the biggest things that the movie studios really want.

And so we were so close with, with one of the tour movies, which was the report that we did for. But they were, they essentially started talking to us right after that. And so this got to by biker because I, they didn’t reach out to the marketing department. I reached out to his people and he saw it first before anyone else.

And so he thought that this was interesting enough that he invited me for lunch at their execution, dining room, which was kind of cool.

Andrew: That’s amazing. All right, I’m going to talk about my first sponsor then I want to find out. You got to scrape all the data on YouTube. Is it legal? How, how could you possibly do it without Google shutting you down? And then we’ll get into what happened next in your story. But first, if anyone is listening to you and says to themselves, you know what, that is the power of a real amazing develop a really this isn’t 10 X developer, right?

We’re talking 20 X developer. This is where top tile comes in. You and I both know the co founders of top towel. We talked before the interview started, we know him in like a San Francisco way where you get to know people a lot because you live here, but you’re not like intimate, personal friends with, with anybody.

Cause we’re all working. do you go out a lot here even now in San Francisco, in San Francisco still.

Rasty: I am actually in salt Lake city right now will be moved from San Francisco to LA three years ago. So that’s not really that much.

Andrew: Okay, well, I’m still here and I don’t get to see people that often, but a lot of the relationships I made when I could before COVID are still paying off right now. Anyway. The bottom line is you could get to know an amazing 20 X developer by meeting people, waiting for introductions. Hopefully, maybe you dormed with them in college or when you’re really ready for this kind of transformational development work on your site on your idea on your software.

You can just go to top town. That’s where they specialize. Nobody ever said I got this great deal from top Talla dollar developer from Hong Kong, or, well, you don’t get that developer from Eastern Europe. This person super cheap. No, what’d you say I got this person. They totally transformed the business.

They didn’t with. This is where the work they used to do for Google. Now they did it for me. Everything is different now because of them, if you’re ready to have that kind of conversation. All you have to do is go to top talent.com/mixergy. You press the big button on their site. You’ll schedule a call with a matcher where you’ll tell them what your idea is, what your project is, what part of your business hasn’t gone, where you needed to go and with a consultation from them, they’ll tell you whether they have a developer for you or not.

Truthfully, a lot of times they say to my audience, sorry, it’s not a good fit. But if it is a good fit, they can get you in front of a couple of amazing developers or development teams. Who’ve often done the work that you are dying to get done, and don’t know if it’s even possible. They’ve done it. And if you decide to hire them and you can get started very quickly.

So you don’t have to go through the whole slog of trying to hire people, use my URL and you get 80 hours of developer credit when you pay for your first 80 hours, in addition to a no risk trial period. And that special URL is top talent.com/mixergy. I’ll spell it for you because I talk very fast. That’s T O P T a l.com/m I N E R G Y.

Top towel.com/mixergy. How do you scrape everything from Google, from YouTube without having them shut you down?

Rasty: I don’t think that you learned over the years, but, you know, we had some luck and we had some technical capabilities and, it was a process that takes time. It’s in fact, one of the challenging parts about scraping so much data is not that it’s costly. It’s that they’re the pipes don’t carry that much data anymore.

Right. So essentially the pipes are usually maxed out at this point. By people watching Netflix, YouTube, and others. And so there is so much traffic that you can bring in. And so it’s a process. It took us multiple years to bring it down. Right. YouTube did fight us quite the hard to stop us from doing these kinds of things.

Unfortunately, for them, I will say they were usually you using technical measures rather than legal. And by the time they were be ready to actually take a legal measures or the so big and representing such a large rights, or is that at this point, it will be very challenging for them to explain to the rights it is.

Why are they preventing them from actually seeing all of these stuff? So.

Andrew: so what were you, what were you doing to get them? When you using Amazon servers all over the place, did you put your own servers all over the world? What did you do?

Rasty: We use Google to scrape Google,

Andrew: What do you mean use Google? Does Google.

Rasty: Google cloud. So we use Google cloud. it’s coming because I am ex schooler. And so I grew up with that internally. I grew up with the technology and so I was able to figure out, how did the distinct scraped simply and easily, and we were able to scale well, and

Andrew: You were a security engineer at Google,

Rasty: I was a security engineer at

Andrew: like two years. And so, you know, a lot of people you were about to say before I interrupted you,

Rasty: exactly. I knew a lot of people, so I was able to pull out lots of favors. Totally.

Andrew: there an example of something that you did that you can talk about now?

Rasty: Well, I mean, it’s mostly that if you got to access a Bieber, I mean, tiny little company and we were treated like we are a behemen internally at the GCP level and the GCP group was really, really nice to us. And so we had access to all of these. essentially alpha versions of all of these new services that are very coming out.

We got extreme amounts of credit from them because they were, you know, they wanted us to be on their platform and, they use this quite heavily for promotions to show what small team was able to do at

Andrew: Oh, you mean Google cloud was so in favor of you being on their platform to show what could be done, that they helped you also

find a way to scrape YouTube.

Rasty: Yes. And then YouTube was very, very, very angry about all of that. So it was a interesting, interesting situation, but

Andrew: internally, they don’t know about each other. You know what? I had a friend got a job at Google decided that it wasn’t for him. And frankly, think even Google, just let go of that department. They said, we don’t love it either. He said, go walk around for a few weeks, figure out what you like. You just go sit in different departments, including the self driving car department, which is now Waymo.

I then thought based on that, that they were all kind of working together. If one group can hire him, someone else pays him and then he gets to walk around through whatever group he wants to. It feels like it’s like they’re working well together from your story. It seems like they’re siloed and they don’t know what they’re each doing.

Rasty: I think they do work together, but not as closely. Also Google has over a hundred thousand people. So it’s very hard. Even when I was there, we were, you know, few things of thousands and I usually get asked, do you know these guy? Well, it’s like saying, do you know this person from San Francisco’s like, the likelihood is

Andrew: Right. Yeah. I do notice that a lot smart people. If you say I work at Facebook, they’ll say, do you know this person? And I think what they’re hoping is that you’ll, that you’ll like them and feel connected to them somehow. Yeah. Validation.

Rasty: Yes.

Andrew: So that’s how you did that. You were taking your, taking a risk, you then, moved on to other platforms.

What’s the next platform you moved on to.

Rasty: I think Facebook was the second. I’m in VR now past 50, I believe. 50 different platforms. Now, the adding a new platform for us as a question, maybe a four hours or so. And so it’s very easy. The system is very well developed and it’s very low friction process, but initially a lot of these things were by hand and we had to pay it.

They shouldn’t, if they changed the platform, we had to change the scrapers and stuff and they fought us constantly. They put recapture and other blocking mechanism in front of that. So we had to do a lot of, Different things to, to essentially not be stopped from what we were

Andrew: You, you created software that circumvented their captures that basically typed in I’m a human in a way that looked

Rasty: yes,

Andrew: found the

bus when they do their capture bus, find the

bus thing.

Rasty: I can tell. We did that. I can tell you over a team was very happy when we finally finished the labeling of the data where people are seeing hydrants in their dreams.

Andrew: Yeah. Why, why does Google want fire hydrants so much in those captives?

Rasty: It’s a, it’s just what they are doing is essentially the art they are using. It’s called games with purpose. So what they are doing is they take data from straight to you and you let them, you help them to annotate them for them. So essentially they take pictures of random. parts of them the street view.

And they said, he’s like, is there a fire hydrant in there is there is a traffic light. Is there a taxi in there? And so you essentially go, yes and no. Yes. And no one, because you have 4 billion people online or 3 billion people online and a few billion times a day, people say yes and no, actually process Massimo’s of data

Andrew: I get that, but I understand why Google might want to know where the traffic lights are. Why do they care so much about fire hydrants?

Rasty: I don’t know why. I mean, maybe they will help you with parking. Yeah.

Andrew: All right. So you built the first version. It was time to start to build a team now that you’re, you’re making money. How’d you do that? How’d you go about hiring what’d you get the advice on how to set together a team.

Rasty: Yeah, we did a lot of, I am not really good with advice. I am the person that does and learns on their own mistakes. So we did a lot of other mistakes at that point. So we wanted to scale the team, obviously. So we started hiring some people. Hiring in the Bay area, especially for a startup that is not venture funded.

It’s very tough, very, very tough, especially when the technology is very complicated, and requires a significant amount of work. And so we were not able to compete with Google, Facebook and others. in fact, in most cases, the outbeat does by seven to 10 X. And that tells you a lot. And so we won. That was one of the reasons why we packed everything and moved the whole company, essentially moved to LA where we thought we have a better chance.

And we eventually did, and then started paying attention to things that people say you supposed to pay attention, but we thought we don’t have to like culture. And so we started, you know, reading books, trying to figure out what’s the best way we try to emulate. I don’t know, companies that never worked out that the people failed.

And then we went with the most common sense thing that we believe is the right one. And, fortunately we were eventually able to figure out the process that actually works for us. And, I must say in last six and a half years of the company, only five people left us.

Andrew: What’s the culture that what books helped you create your culture and what’s the culture that you think helps you hire.

Rasty: I don’t know, one book, I think it’s a series of books, obviously the Bibles of, Silicon Valley, like high, high output management by Andy Grove. I think, if you walk into Silicon Valley, it’s like in Alaska, walk into Alaska, get checked. Welcome to Silicon Valley. You get this book. and so Dan was definitely a big one.

I don’t know, like books that are focused on hiring or management. It’s more, more the books that are about biographies of people in the past and how they done certain things. And then just reading really common sense of like, we listened to the people, we actually involved every single employee into the process and we told them like, what, what can we do better for you?

And then we got to a place where the PR team is very strong and we actually have quite significant competitive advantage against others. Because we do the complete opposite of most Silicon Valley, the how work life balance. We don’t work over 40 hours. We don’t work, nights and weekends. any of these things are not happening, you know?

So it’s a, it’s kind of, it’s kind of a. Working well for us. And, it was a process. So, I mean, the oral was seven years old, so this was never, it was not always this way.

Andrew: Are you going to charge up your phone? Is that why you’re walking around?

Rasty: I was moving from kitchen.

Andrew: Why someone just got in there?

Rasty: Yes,

Andrew: Uh, how’s working from home then for you.

Rasty: not easy. I personally preferred the office, but, We got a pretty good pattern and the shutdown offices forever. So we are now remote, only company

Andrew: I saw that in your hiring page.

Rasty: Yes. The good thing. The interesting thing about that is I will say half of our office is at this point moving or in process of moving or already moved somewhere.

And so we took advantage of that and we started moving every single week for like 200 miles or so. And so every week we explore a new place and we move a little bit further.

Andrew: So this is in your, that’s why you ended up in salt Lake. I was Googling you to figure out why is he in salt Lake? Is there a thing? No, that’s just part of you

Rasty: Yeah, exactly. So next week we will start color or Colorado.

Andrew: Wow. All right. Let me take a moment. Talk about my second sponsor. It’s a company called HostGator, by the way, when I was looking you up rusty, one of the things that I brought up was a website that you built. I don’t know how long ago it’s got like four articles on it from a list of books, right? The law, the latest article was written.

2017. So it’s five articles. The earliest was from 2015, the latest 2017. You do have a bookshelf with, Oh, I actually don’t even see a list of books on here. Here’s the point there? No books on this. It’s just a link to bookshelf. Here’s the point though? I found it. It was one of the top things that I looked at when I was trying to understand you.

And the reason I bring that up is I think most people do not understand how much they are being Googled, how much they’re being looked at by everybody. We’re setting up a small pod. We hired a teacher, we’re getting a couple of my kids’ friends into a garage, which should be safe and a park, which will definitely be safe for them to sit with the teacher that we hired and learn.

You can bet that every one of those parents was Googling me and saw my personal website saw my work website. We’re all being Googled. Clients are Googling. You potential friends, everybody. So the reason I’m bringing this up is yes, I’ve talked in the past about how, if you need a website for your business, you should go to hostgator.com/mixergy.

I’m going to tell you that right now, just go and create a site for you. It doesn’t even have to have this cool domain like you do. What do you have? You have turik.com, right? But it’s spelled, Oh yeah, it’s spelled right. It doesn’t even have to have a great domain. Just has to have your Frankin name in it.

And you know that when a client looks for you now you get to represent yourself the way you want. Get it basic template. Is this a template? Even it’s nothing. It

Rasty: No, it’s a, it’s a build. Yeah.

Andrew: It’s just straight up black and white with purple on your name. That’s it. That’s all it takes. It’s even better when it’s like that, because it makes it easier for people to look you up and then put links to three or four things that you care about, even if it’s just two of your hobbies, what you do for work.

And then one of the things that you want to highlight. The less, the better. I find, just think if somebody’s researching me because they wanted to, I don’t know, pot up with me or if they’re researching me because they want to buy from me, what do I want to show them? It’s an unfair advantage that gives you a huge, huge, huge, benefit.

And if you go to hostgator.com/mixergy, you’ll get HostGator’s already. Prices reduced even further. It’s the lowest price that they have available and you’ll get unlimited disk space on meter bandwidth, email addresses. Which frankly helps also my wife and I have an email address. It’s a joint because every time somebody emails us, it’s like, did you get it?

Did you forward it to me? No. Now I have one email address for both of us. We can both check it, no headaches. You can do all of that for super inexpensive at hostgator.com/mixergy. I know. Yeah. If you do want to start a website for your business, go to hostgator.com/mixergy. To hate your hosting company.

Switch over. They’ll help you move hostgator.com/mixergy. Everything. Alright. What do you think of that ad? Are you, are you a person who loves ads? I know we talked about how, when you were a kid, you loved business and I saw your eyes light up. When you talked about it, did you used to watch ’em infomercials?

The way that I did to just, just to watch how the sales process worked.

Rasty: well, I grew up in a communist era and so we were not allowed to have any Vester and stuff. And so when could communism ended, we started getting German channels and it was so strikingly different. So my first ever movie. Was home alone. That was my first American movie ever seen. it came out essentially the Christmas has, can be new.

I said it was one of the largest purchases of the television and, we were all watching it. We had single channel in the whole country and we were all watching it. And, what killed us was multiple things. Like for instance, they had all of these. Christmas lights outside of the, on the, on the house.

And we just couldn’t believe that someone puts the lights on the outside. And then what was the absolutely staggering experience was when Layla, Kevin takes his food. from the fridge, puts it into this a little oven and in 30 to 60 seconds, it’s done and it’s called microwave. We never saw microwave before.

And so we were sitting there and I were mouth open and it’s like living these future life now. Right. So when I was growing up, I was watching all of these German. Channels, mostly for cartoons, but then they always showed all of these commercials and it always looked better. Like all of the communistic stuff was like simple design because they had no competition.

There was no marketing. And then you had these mini sausages and you see the kids smiling as they’re eating it. It was like, I want to be the smiling kid.

Andrew: What country was

Rasty: of my Slovakia.

Andrew: What year was this.

Rasty: he was like a 1992, three years after the company there. I ended.

Andrew: And so did you want to partake, I know your dad was an entrepreneur. What type of entrepreneur was he?

Rasty: I think he still is. He started a company to, essentially he bought up a company from the, from the Pasco ballistic era or from the communist era, for, that was making tractors. And so you still own it and they still produce structures. And it’s the, I think second largest company in the world producing tractors are after John Deere and Caterpillar.

So it’s, he was, you know, he’s making a engineer, both the white parents are making engineers and it was really interesting to see how they struggled to learn business because is didn’t allow. Any business. Right? So, everything was in by the state. There was no competition and essentially all products that you bought were provided by the state.

And they were always in one. So you had one type of anything you call them have more. And so when, when the communist there, I ended, but now you have three companies doing the same thing. They didn’t know that there’s such a thing as a marketing. And so a lot of things were learned the hard way, like from scratch.

And I watched my dad. Essentially trying to figure out how to actually sell services that are not necessarily mandatory, right? Like if you wanted to have a tractor, you could go to someone else and buy it. Not necessarily just from you.

Andrew: What did you watch as he learned? What did you learn from him?

Rasty: He struggled. I mean, they struggled extreme amount. In fact, I remember when IRS showed up, we didn’t highlight or as before, because you don’t meet. To file taxes. When the state is the only one paying you, like w what taxes do you need? You know? And so when I showed up at, they started saying, these are going to be the rules, people that didn’t know with the double double books, AA counting means, or any of these things.

And so they had to learn everything from scratch. And don’t forget, there are no books about these topics. You can go to a library and get a book and read about it because they were not allowed. And so it took a decade I will say, to learn even the absolute basics for them.

Andrew: And did you then want to be an entrepreneur watching him struggle? Or did you say this is actually not for me?

Rasty: How you love the idea? I, the struggle was something that I was not really a previous, like, I was not that visible to me. I see it as a. Kind of from the hindsight, but as a kid, that’s not what your parents expose you to what I did see. It’s how my dad was making the business. And it felt like, like he doesn’t do anything.

He just goes, meets new people and talks to them. And so that’s the business and I felt that’s the most engineer’s thing that can happen. Like you don’t have to do physically anything. We just talk to people. I felt that it was magical. And, since I was. Very very little. I wanted to be badly and to preneur.

And I used to try to do so many things, from selling sneakers to my classmates, through running a food business and stuff like that, whatever I call it and we’ll generate money, how was very, very happy with it. And it’s also how we learn accounting. Like you learn the basic of ledger who owes you money with the collection looks like, and any of those things, then you also hired the muscle, right?

Like, so when I was. In a fifth grade, I hired nine graders to collect my money for me, for a fraction of whatever it was there. And it was experience.

Andrew: That is fun. You built up your business, you did this tweet. That’s now a pinned tweet on your account 2019. What was the monthly recurring revenue?

Rasty: That’d be close with over a million.

Andrew: Over a million recurring monthly revenue you had about 60 people on the team. You ended that tweet for the year saying 2020 is shaping up to be significantly better considering COVID I’m still assuming it did better right than last year,

Rasty: it’s a, it’s shaped to do way better than

Andrew: way better. Where you guys with revenue now?

Rasty: we are hovering around the same number, but mostly because of the streamlined operations too. Focused on the new opportunities. And so, as you mentioned at the beginning, the world is changing. And so we are kind of dividing the core into two operations and doing a little bit more there. And, yeah, this loving the quarter revenue for us.

Andrew: and the new product is the one that we just discussed is called discover. The new product is called attribution engine. I think called article 15,

Rasty: It’s currently called 17.

Andrew: Is it 17 now?

Rasty: Yes.

Andrew: Okay. What is this article? I’ve heard it called the link tax.

Rasty: Well, it’s article 15 is in fact, the link tax, articles 17 is a little bit different. So there’s a new law, which is called European copyright directive, which Europe, European union doesn’t have laws. It has directors which are more like a frameworks that then, every state has to implement internally.

And so this director is changing how essentially rights have to be dealt with all the. Internet let’s call it. And so article 17, which is more like a more relatable to our business, it’s essentially shifting the liability or it’s kind of putting new liability on the platforms. What that means is actually YouTube.

Currently, any video that is uploaded to them is not liable for it’s, whatever the video does, whatever it contains. It’s not YouTube problem. If a ride sooner, even in edifies the video on that platform. And finds out that video essentially holds something in there that they have the right center to.

Right. So they can now issue what they call a take down notice, meaning I don’t want these to be on this platform in certain platforms like YouTube, you can go and say, you know, I actually don’t want to take this down, but I also want to be paid. So you can do that. Haven’t heard the new law is essentially shifting this to YouTube now needs to license that content before it’s published.

So it needs to explicitly know who it belongs to. as the user is uploading it before it allows it to be published on the

Andrew: Because if, if I take Taylor Swift’s latest music video and I upload it to my YouTube channel in the past. Tell us what some people could have said, Hey, YouTube, take it down. And as long as you took it down, they were fine today. If YouTube lets me up floated what, or actually after this, law passes, what’s the danger to YouTube.

What happens?

Rasty: Well, so if YouTube lets you upload it, upload it, but it doesn’t know. It belongs to Taylor Swift look, Swift and Sue for statutory damages and additional fines, which can amount to 85,000 euros per infringement.

Andrew: Per infringement. Okay. And so now they have a bigger need to know ahead of time is every bit of content that they publish. Is there someone who ha who owns the copyright on it

Rasty: Correct.

Andrew: and do it in real time?

Rasty: Do it in real time at the scale of theirs, right? So they get 600 hours of content every minute, around 10 hours a second. And so that means they have to analyze the numbers of content a second, which is quite heavy. and challenging. And obviously YouTube is not one of many hundreds of platforms.

And so you, how big ones from Facebook, Instagram take the hook and such, but you have many small ones that are still, in the aggregate quite significant when it comes to scale

Andrew: and

roughly this, I keep talking, I talk about Madonna lady Gaga, Taylor Swift, but even Andrew Warner. Right. If somebody takes my content and republishes it to YouTube, I have a case against YouTube against Google.

Wow. All right. And so then what are you doing to help YouTube with this and frankly, to make some money from it?

Rasty: So we built what we called visa for digital rights. It works like the visa card. so the idea is we bring three sided marketplace together, creators rights holders and platforms, and we settled the licensing at the point of publishing. So what that means is the user goes as always uploads. The video to YouTube is filling up all of these titles and other stuff.

And by the time they are done filling it, filling it out. The video goes through us. We make all of these little notifications. We’ll look at what the right shoulder is actually had as an intern in our system. So far as the stellar Swift story, whoever is owner of her rights comes to our system and says, if you find the song in this situation, on this platform, you can, I want to do acts in this territory.

So for instance, in that Taylor Swift case, They call say, if you’ll find this song played in this one video and it’s on YouTube, I want to monetize in all of these territories about China in China. I want to block. And so essentially we couldn’t go and he should have his license back to YouTube and tell them YouTube that’s what has to happen in each of these regions essentially.

And then if you do follow it, the liability is then taken away from them and be covered. So it’s kind of an insurance. Rather than the technical play.

Andrew: And this will happen. What I’m trying to understand then is what happens. If, if Taylor Swift doesn’t do it, if her people don’t say anything ahead of time,

Rasty: Well, then the platform is non liable up until they show up. So. the law requires both parties to cooperate. That means Taylor search thing, whoever owns the rights has to cooperate with the platform in the first place or meaningfully does. And if they do, then they are able to, get paid or whatever they are requiring.

But if they don’t cooperate with the platforms and they have no case.

Andrew: So now you will be the marketplace because as I understand what this guy. You provide the software big, big content owners work directly with you, but smaller ones work through third parties through smaller independent software companies. Right.

Got it. And so now you’re going to be the middleman sitting there with the marketplace.

Where am I going to have to come on your platform and then, and then register my stuff I will. And today you have to create a whole consumer facing experience.

Rasty: Yes. And it’s completely free to all create a separate service.

Andrew: All I have to do is say here’s all my content. And now this is what I want you to do whenever that happens.

Rasty: exactly.

Andrew: And do you have any experience creating consumer facing content?

Rasty: I will hope so. my previous company was in consumer facing, we did the recommendation as a service. So Netflix like recommendations for like, imagine I am DB more social.

Andrew: This is a synopsis. Everywhere. I see. And I know we need to close this out, but everywhere. I see you, you’re known as synopsis. You Twitter accounts, Synopsys, LinkedIn accounts. And obviously this is a company that didn’t work out for you.

Does it hurt?

Rasty: Yeah.

Andrew: Does it hurt?

Rasty: I mean, it’s not easy. Right. I can see the why it didn’t work out. And at the end of the day, it’s like a, it was a good experience, but it, it’s not simple. Right. I don’t pay too much attention to it anymore, but it

Andrew: do you keep it? You can go to Twitter and change your name. You’ve got something about domain names. You could go and get a great name on Twitter on LinkedIn, but I feel like you’re doing this intentionally. Are you doing it to hurt yourself and remind yourself not to make a mistake?

Rasty: Just have it as a historic. So, I mean, I created those accounts, you know, I think I have to either from 2008, at least basic on the Hill, 2008, I think I bought the one from 2006 legged in, from as long. And so. They’re just historical there. And a lot of people know me, especially in the central European region, know me by that big thing.

So I still go by that. I am in transition to use my first name as a, as a basic nickname everywhere. The problem is like, I don’t want on Twitter. I can change it to rusty, but I don’t want anyone else to see NAPSI. And that’s, that’s kind of the challenge there. Right? So it’s like a, when people to how those, those nicknames that I utilize now, it’s just, I still have the domains.

I still have all of the trademarks and everything else there. So it’s like, it’s kind of part of my, if this company, works out really well and I decided to go and do something else, I might put something else there.

Andrew: Yeah, I think you used that name twice with two different companies. Am I right?

Rasty: Yeah. I sold the previous one and didn’t want the name.

Andrew: What, what did you pay for a pex.com?

Rasty: lower tens of thousands, surprisingly, it took me, yes.

Andrew: under $50,000 for three letter name.

Rasty: Yeah. it took me nine months. I created the anonymized Gmail account. I started writing the owner for a couple of months and I was coming back and forward and I convinced him that is in his best interest to do it with me.

And, he did.

Andrew: why, why was it in his best interest to sell to you?

Rasty: Well, I try to, as with everything I do in business, I try to understand the personal, the other sides that these gentleman is out of Japan and hit some financial troubles. And I try to be compassionate about that. And I was trying to figure out if I can be of help. And, I was able to, you know, Match what he needed.

And, he was willing to sell it for lower amount of money because, it was, it was more offensive at that point that it was a business

Andrew: Had you stay, had you become friends with him over

Rasty: You just, I emailed. Yeah, suddenly I was just curious about him. I didn’t even ask him about the domain. I was just, I want to, when he’s at the first time, he’s not interested in selling.

If you don’t mind, I would like to get, you know, Oh, you’re a little bit better. And try to understand the person that you are essentially trying to make a transaction. But because as you know, it’s much easier to do business with friends, then it’s with strangers.

Andrew: All right. Well, thanks for being on here. I hope this brings us a little bit closer to friendship, but man, I admire what you’ve built now. Now that I get a sense of what it is. I don’t think I fully understood it until I started researching you and doing this interview. All right. For anyone who wants to go check out the site?

It’s PEX. When’s the new disco. When the when’s the attribution engine launching.

Rasty: end of the year for public, we are in process of changing the page. So PEXA will be now attribution engine only, essentially. and it’s whatever we are doubling down when it, so it’s going to be next, the next four, four to five months, she’ll be up.

Andrew: So a new domain name then for the new business.

Rasty: No, it’s back.

Andrew: Oh, it will be okay. Alright. pex.com. And I want to thank the two sponsors who made this. If you need to get a website hosted and believe me, you do go to hostgator.com/mixergy, super low and very effective. And if you want to hire top developers, that kind of will just make you smile the way the Rosti was smiling here in this interview with pride, like yeah, I built that.

We own that. We did that. That’s where you want to go to talk to top  dot com slash Mixergy. And finally, I’m gonna recommend something to you. Rusty. If you still care about culture, there is this guy, Scott bins. I interviewed him. He’s a guy who just owns car, truck, parked truck parts on the internet. Got it to a few million dollars.

Wasn’t really enjoying life said I got to go to work. Yeah. The place where I love it, he went to Google to look at their culture when to Zappos went to other companies, figured out what he was going to do to create a right culture for him wrote a book that’s so under appreciated. I forget the name of the book.

His name is Scott Ben’s. They’ll look it up in the Amazon store where he said, here’s how I did it. God, his business up to a hundred million dollars. In revenue and then he sold it. And I know him because he did a course. If anyone out there has Mixergy premium, you guys are going to love his course where he talks about how to do it.

It’s amazing. Alright. Highly recommend his book or the course or talking to him and I’ll be happy to make an intro for you, but you’re doing well. You’re smiling. So congratulations.   Thanks for being on here and thanks for doing this.

Rasty: you for having me.

Who should we feature on Mixergy? Let us know who you think would make a great interviewee.

x