Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, where I’ve done over a thousand interviews with proven entrepreneurs who come here to tell their stories so that my audience of entrepreneurs can learn from them.
And as you’ve noticed over the years, many of the people who I’m interviewing are also people who have been listening to these interviews, learned a lot along the way and came back to do interviews themselves. That’s my goal. So, if you’re listening, my goal is for you to not just be entertained, but to learn something, use it and then come back here and talk about how you built a great company as you were listening to these interviews.
Well, today’s guest is a guy who had a grand vision. Like if you’re listening to me, you might have one, but his seemed even bigger, so big that his investors thought the guy might be high. They thought he was possibly high because he was trying to boil the ocean, do way too much. Well, it turns out it actually worked out. This is one of those cases that it actually did work out. So I invited him here to talk about how he did it.
His name is Alan Knitowski. He is the founder most recently of a company called Phunware. Phunware helps Fortune 500 companies engage, manage, and monetize their application audiences worldwide. That’s a lot in one sentence. That means they do things like marketing automation, advertising, application creation, so much more.
We’re going to talk about that and talk about the revenue he’s done with that and maybe a little bit about some of the past businesses that he’s had. He’s had some really good successes in the past. My focus is going to be on his current company, the one that you see the logo for over his shoulder, Phunware, but I’d like to hear a little bit more about how he got here.
This interview is sponsored my two great companies. You probably already know the first one, the one that’s going to help you hire a great developer. It’s called Toptal. I keep doing ads for them because those ads keep working. And the second one will help you finally organize all your financials. If you’re running a company, you’ve got to know about Bench. I’ll tell you more about both of those later. First, Alan, welcome.
Alan: Thanks. Excited to be here.
Andrew: Do you remember you had a company before, Vovida Networks?
Alan: Yes.
Andrew: You sold it to who?
Alan: Cisco Systems, the networking company.
Andrew: Do you remember the day that you actually sold it?
Alan: Yeah. It actually closed on November 8th of 2000.
Andrew: 2000. What was it like? I see a big smile come over your face.
Alan: Well, the first part was I was accused of doing the last deal in Silicon Valley because remember the tech bubble popped in March and everything was supposed to end. So, I was kind of jokingly accused of getting the last deal done before everything derailed. So it was exciting.
Andrew: So, you didn’t know at the time that things were going to derail, did you?
Alan: Well, starting in March, 2000, I think is when everything started getting a bit ugly and it just kind of pronounced. Ultimately we didn’t hit the bottom of the markets until October, 2002. So it took a few years to hit the bottom of the markets, but I think in terms of the tech bubble and the way startups work, it started dramatically changing at the end of 2000 leading into 2001.
Andrew: I’ve interviewed several entrepreneurs who actually stuck it out way beyond where they should have and man, those are painful stories dealing with what was considered the nuclear winter of the dotcom world. You got out. What was life like for you having gotten out at the right time?
Alan: Well, it was both really exciting from one standpoint financially. From our investors and everyone else, I think our investors had put in money and made like 22 times their money in 18 months. So I had lots of happy people that were willing to take me out to dinner and buy a couple drinks.
The flipside though was that literally within 30 days after we closed was the first time in the history of Cisco Systems that it preannounced an earnings shortfall. They used to religiously beat by one penny and they missed. As a result, it’s getting into 2001, it went from this really exciting financial thing to a very bizarre 8,000-person reduction enforced Cisco-wide that happened in the first quarter of 2001. So you get kind of pleasure and then pain, I guess, with both. Financially it worked out well.
Andrew: Did you have cash? I see here an old Wall Street Journal article from September 28th, 2000 saying that Cisco bought you and another company called IPCell Technologies for $369 million. What percent of that was yours?
Alan: We were a nine-digit number, I just am not allowed to say the split between the two companies.
Andrew: Nine-digit number?
Alan: We did well. It was a nine-digit deal.
Andrew: And you didn’t take shares in Cisco, did you?
Alan: We did. That was both the pleasure of pain. The pleasure of doing the closing was great on November 8th but because of the preannouncement, we converted our shares at $53.21 and by the time we finished the year received our certificates Cisco was at about $43.21.
Andrew: Okay.
Alan: So it was an interesting dilemma, right? Do you assume that you just lost $9 or $10 per share or do you assume, “No, I just made $43 per share?” So it’s kind of a glass half-empty, half-full. But Cisco throughout the next few years actually went all the way down to just under $10 a share.
So there’s both good and bad about doing stock deals. If you’re nice enough to do well and you give people some stock as a thank you for all the things they’ve done for you, they’re going to ask you a question and you are an ass no matter what you answer. And the question they’re going to ask after you give them free stock will be, “Should I sell?”
Here’s what happens. If you say yes, they sell and the stock goes up, you’re the ass that cost them the money had they held on. Now, if you say no, hold and it goes down, you’re the ass that cost them all the money they would have otherwise had if they sold. So one of the most thankless things in the world is to give someone a gift of stock and realize they didn’t pay for it, but they’re going to bitch at you either way.
Andrew: And so people bitch at you?
Alan: A little bit.
Andrew: You know what? I’m looking for a good way to ask this question, but I feel like you would accept it anyway, which is did you get rich off of it?
Alan: Well, I don’t know what you mean by rich, but rich is all relative. I have four kids, right? I don’t even know, what is that $250,000 to $500,000 per kid for school in college and that assumes you don’t do private school beforehand. So, by all comparative standards of where I was at beforehand, my net worth was dramatically suddenly in a concentrated stock position of Cisco Systems.
So, by most all measures, I grew up in a very modest sort of if we were upper lower class, that would have been doing well. My father was a mason. My mom worked in a junior high library. So we had very little, but we didn’t know much. The day it closed was a life altering financial event.
Andrew: You told our producer that your goal as kid growing up the way you did was to be a millionaire by 30. Did you hit that goal?
Alan: I did.
Andrew: Wow. Okay.
Alan: Shockingly enough. It was kind of funny because I had gone to school at the University of Miami on an ROTC scholarship. I had my $100 a month and then I gave four years of my life to the military and was an Army Ranger. So the odds weren’t really in my favor. Fortunately, we found a way to start a business and sell it in under two years, so that I think I hit that when I was 29.
Andrew: You mentioned your parents. You told our producer that they sat you down and they gave you what you call a motivational speech, but many other people would have called, “What are you telling me here? What are you doing to my life?” Do you remember what that speech was?
Alan: Yeah. That was the speech that said even if we could afford to send you to college, which we can’t, we would refuse to pay for your college because if we gave it to you and you didn’t earn it on your own, it wouldn’t mean as much to you as if you earned it by yourself.
So that was a real good kick in the butt to realize how hard my dad worked as a mason. That was the best help in summer jobs to realize how little I wanted to do that much manual labor for that kind of environment growing up in Arizona where it was 100 degrees. The only thing I guess they paid during college was my initial flight down and about $20 for the taxi to get to the school and then my medical and dental insurance premium.
Andrew: But it worked. You said you found a way to pay your own way, actually to have your way paid because how did you do in school?
Alan: I was valedictorian of my high school class. So I was first out of about 360. That afforded me the opportunity to win Army, Navy, Air Force ROTC scholarships, get an appointment to West Point, congressional nomination from at the time Senator McCain out of Arizona.
So I remember doing interviews back in the day not knowing who any of these folks really were. Fortunately, I had the option to pursue either military academies or academic opportunities. I got a postcard from the University of Miami and they said, “If you use your ROTC scholarship, we’ll pay your room and board,” and I was like, “Wow, that means it’s all free.”
Andrew: Wow.
Alan: Free was relative. I had to serve four years in the military. It helps shape your life though, right?
Andrew: I read an Inc. Magazine article about you where you said that helped make you a better business person, a better entrepreneur. You also told our producer that if you look at the world, you see a lot of successful entrepreneurs coming from Israel, the UK and Australia because of the military service that people have there. I’m surprised to hear you say that. I tend to think of the military as telling you what to do and entrepreneurship as having you figure out what to do in the most obscenely dangerous way. How do you connect the two?
Alan: The connection is actually quite easy. What ends up happening is that yes, the military gives you orders of what you have to do. So they may have an objective you’re supposed to take. Often they’ll tell you what the objective is and when you have to do it, but they don’t actually tell you how.
Inevitably I generally say Murphy’s laws of combat are very consistent with Murphy’s laws of war and even Murphy’s laws of startup — that which can go wrong will go wrong. The glass isn’t half-full. It’s half-empty. It’s got turpentine instead of water and there are holes in the side. So inevitably everything in the military is just like being in a startup because you get thrown into these really messed up situations. Everything is flying at you. It’s chaotic.
And you have to figure out through all that chaos, even if you don’t have food, you don’t have water, you don’t have sleep, you’re running out of ammunition isn’t totally different than being sleep deprived trying to figure out where you’re going to get your next meal and oh crap, are we going to run out of money. All those things are usually where you’re under-resourced. The ambitions you have are very vast, and you have to deal with just an immense amount of curveballs that you just can’t plan for.
Andrew: Do you have an example of that in the Army, where a lot was thrown at you and you had to figure out a way to get out without many resources?
Alan: Sure. A lot of the ways when you think about that, my first welcome to the real world assignment was spending a year on the DMZ in Korea. So, being in the 38th parallel in a city called Dongducheon and actually spending a lot of time north of the Imjin River up near Panmunjom where you had the Bridge of No Return, where during the Korean conflict you would either walk north or south and that was how they decided which country would you be. So I was there during what at the time were the nuclear weapons inspections.
So it’s interesting. You’re like 23 and you have people from 18-year old privates all the way up to sergeants who may be in their mid-30s and they’re looking to you to either get reassurance or actually confirm their worst fears. So I can tell you that the one thing with all the craziness in our political elections right now interestingly, when you’re in the military, it’s the most integrated of all the workforces.
I never met an atheist in a foxhole. I never met anyone who cared about race, creed, color, sexual orientation, or political affiliation. If you and I are next to each other and are getting shot at, you stop fighting for America. You start fighting so you and I can go home and see our families and drink again or have fun in whatever way we do.
So, without getting into any specific individual mission or operation, I think it just did a lot to shape how to deal with really intense situations, keep a level head about it, panicking doesn’t make things better.
When you play football, you see people where they say the quarterback when you’re really good like Tom Brady or Peyton Manning, the game slows down. When you talk about folks in the military special operations, you see that it’s all chaotic, but in many ways, it slows down and becomes choreographed like a dance routine and it becomes muscle memory from practice and practice.
When you get into the world I’m in now, what an amazing day. I’m going to eat. I’m going to sleep. I’ll see my family since I’m in Austin today and no one’s shooting at me. So how bad could this possibly be no matter what strange things happen in the business world?
Andrew: Yeah. My producer did tell me you weren’t going to feel comfortable talking about that, about the details of what happened in the Army, but speaking about your family, you are comfortable talking about that and I’d love to get into that later on, the challenges of having a family as you’re taking on such a high risk opportunity. And the opportunity you saw was when the iPhone came out, you saw something in it that the Blackberry guys didn’t see, that other people didn’t see. What was it that you saw in the iPhone?
Alan: For me it felt a little bit like deja-vu from the first startup you mentioned, Vovida Networks that we sold to Cisco. Back then, we used to call them the NELAS, Nortel, Ericsson, Lucent, Alcatel and Siemens. And that was effectively what used to be monopolies that became oligopolies of network equipment in support of carriers. That was all called circuit switching.
And then along came this voice over IP stuff like you and I talking right now on Skype and everything was going to go from circuit switching to packet switching. Well, the NELAS used to use marketing fud, I called it, and said, “We’re going to create a bridge from this world to that world.” And reality it wasn’t a bridge, it was a forklift. You were just going to throw all this away and start over with this.
So, if you were the incumbents, you had to preserve the past, which went back 100 years from when the phone system started working. And then when I came out with all the others that just said the hell with that, we’re just going to start with packet and build everything from the ground up starting over and when we did that, we didn’t have any of the preconceived notions about what mattered in the world of telephony. At the time I didn’t even know there was a -y at the end of that word, but telephony and networking.
So, when I saw a circuit go into a packet and then along came the iPhone. You kind of looked at it and it was like wow, this is going to be the first time you and I aren’t bound to our carrier and whatever they want to give us on our flip feature phone of which there were like five billion of them. All the incumbents were saying, “Well, these phones are a bridge to this next world of smartphones.”
And you realized like, “This thing isn’t a bridge.” You just take your thing and you throw it away if it’s a feature phone and you get this and suddenly life is different.
Andrew: Starting completely over. Everything that mattered before is gone and we’re starting completely new and the people that had power don’t have it anymore.
Alan: Exactly. And then also when you thought about how do you replicate 100 years of telephone service, like all these crazy things. Remember back in the day it was like *69, *70, *71.
Andrew: To call someone back, to get caller ID, that kind of stuff.
Alan: Yeah. It was call forward, call forward no answer, call forward busy, all these crazy things, thousands and thousands of features, but what did you really use? There were seven. You answered the phone, hold, transfer, conference, forward, voicemail and maybe like do not disturb if you were really, really advanced. So, when we did the old world, we said, “Let’s not worry about all those features. Let’s worry about seven.” Because when you and I talk, we don’t go, “Hey, does it work because we’re on voiceover IP?” Or, “Am I on CDMA or TDMA or GSM for cellphones?”
Andrew: And this is your realization with the previous company. We don’t have to reproduce all those features, just the ones people need.
Alan: Hey, you and I are talking. It’s working great. Who cares? So, when we went and did Phunware, we basically said well, there are five billion devices. It’s not a bridge from that to the new. It’s just throw it away. So, when we built it, we said look, the other thing that’s fundamental isn’t just that the power is different. It’s not to the carriers. The service providers are not in charge of what you get. You get to choose your own applications and make it your own.
And this thing can be whatever you want. This is really just a computer. So, there was memory. There was processing power and there was beautiful screen size and all the resolution that went with it. We said, “How about we think differently?” Like we didn’t like apps. We hated apps. We were like, “An app? Oh, it does currency conversion. It’s a game. It’s weather.” We said, “What about experiences? What about the identity of a Fortune 5000 company at that high value touch point between their brand and these anytime, anywhere audiences around the world?”
And so when we looked at it, if you remember when the App Store came out, everything was predominately paid and then everything that was free was like a trial or a test. And then there was all this piracy. So, people suddenly made everything free and then used all these in app conversions and things.
Andrew: Yeah.
Alan: Well, when we saw this at the time, what was funny is that when we started Phunware in February, 2009, there weren’t even brand applications from Fortune 5000 companies in the App Store. There was like remember the Bic lighter. You could swipe the thing and make a little light that would go on you’d hold up at a concert. But most of the applications were like games, fart machines, god forbid. It was really dumb, throw stuff against the wall and see what sticks kind of stuff.
What we realized is while everyone is trying to do this business to consumer get rich quick scheme, we’re going to ignore all of it and we’re going to focus on business to business because that’s where all the money is and we’re going to endeavor to learn from the migration from circuit to packet and realize that everyone in the venture capital private equity community were going to invest wanting mobile to be just like the internet.
We didn’t believe it. We thought, “That’s HTML5. That’s legacy desktop applications from IBM, SAP, Oracle, Adobe, Microsoft.” We’re like, “None of that stuff will ever work on mobile.” But every big company tried to force it to stay like the internet. So you saw HTML5. You saw write once, run anywhere platforms like Adobe Air or Adobe PhoneGap, StackMob, which failed, Appcelerator. Remember IBM had Worklight.
Andrew: Google Gmail used to be an HTML5 app essentially in a wrapper talking about people who were just trying to bring over old technologies that worked on the desktop into the phone.
Alan: Absolutely. But what they didn’t realize is that native iOS and Android and not using these silver bullets or panaceas where it’s seductive, just write this application once and it magically works everywhere, except it doesn’t.
It’s kind of like taking Nielsen television ratings and applying it to mobile. It just doesn’t work because they take a sample of 1,000, 2,000 people. They create some algorithm in a panel and they estimate audience viewership for all television households in the United States. That’s crazy. Why would we do algorithms or estimation? I have a global real time focus group.
So, everything that we tried to do is to say we don’t believe that everything built for the internet and all these desktop applications, none of it will be relevant in the world of mobile. Now, when we started Phunware, 2% of the world’s internet traffic was mobile, two. Today that’s almost 70%. But back then, nobody could see it because they thought, “This will be like a palm pilot. This is not going to change anything.” But so many things structurally happened at the same time.
Even Facebook whiffed–I never invested in Facebook until it was in the low 20s and I did it because they did something important. “We are abandoning our HTML5 application and we were going to go native.” And then they immediately did what? You have a great business model with a massive audience and all that revenue turned into straight profit and went straight to the bottom line because they eliminated all the friction because the application worked instead of it being kludgy, crashed. It wasn’t synchronized between your desktop, Facebook experience.
Andrew: So, I understand the world was changing and you were ahead of most people in your understanding, even ahead of Facebook as we can see. I still see a lot of danger in the direction you went and I’m wondering why you picked it and then why it worked.
Let me take a quick break here and then asked you about the specific dangers that would have come up to me if you would have told me this was your idea and then understand how you got over them and your revenues are strong now, you’ve got incredible customers. You’ve got a product that just is doing all the things you probably thought it was going to do that shocked me. Let me just talk to people about this one big issue.
If you’re out there and you’re listening to me and you’re an entrepreneur, there’s a good chance that you’re generating revenue and frankly if you’re not, don’t pay attention to what I’m about to say, but here’s the problem. Once you start generating revenue, it’s really hard to keep track of it because some comes in from Stripe. Some comes in from checks or from wire transfers. Lots of the different payments become harder and harder to keep track of. You also have all the expenses that go along with it — rent, employees, software that you’re paying for online that maybe you forgot, all the other stuff.
And if you don’t know how much you’re spending and how much you’re bringing in from month to month down to the penny, you’re not managing the company right. It means that you’re potentially missing big dangers coming up and not preparing for them or big opportunities because you’re not seeing where the majority of your revenue is coming from. I’ve seen lots of entrepreneurs face this problem.
Well, you could do the books yourself, which no entrepreneur wants to do. You can hire someone internal to do, which often for businesses it doesn’t make sense. You can hire one person to do your books for you, in which case you’re really locking yourself into one person who has a lot of control over your finances. Or you can do what many entrepreneurs are doing right now which is signing up for a company called Bench. The reason they’re signing up for Bench is Bench is a team, a company that is there to do your books for you. More importantly, Bench will organize it in a way that will let you see it on a month to month basis so you know exactly where you are.
These guys watch every detail. In fact, I’m going to give you a special page where you can go to where you can get 20% off the price of having them do your books for you. One of the first things you’re going to see when they get to that is they take care of all the details even on this landing page. They understand who you are as you’re coming in here and they understand the kind of experience you need coming from this interview. You’ll see it.
So here’s the URL. If you want them to do your books so you know exactly where your company stands from month to month and can plan for the future–by the way, one of the problems as entrepreneurs is we often don’t want to see the dangers. We start to shift our attention to something else because we don’t want to pay attention to the negativity because it starts to bring us down. You need an outside bookkeeping company that’s going to say, “Stop, here’s how much money you’re losing. Here’s what your burn is. Be aware of it.”
Here’s the special URL. They’re going to give you 20% off your first 6 months. Frankly, even if you don’t sign up, you should see what they’re doing with this page because it just looks so beautiful. The past interviewees who have signed up for Bench have told me this is one of the things they love about them.
Go check out Bench.co/Mixergy for that special discount and also to see how they onboard Mixergy people. That’s Bench.co/Mixergy, cheaper than a bookkeeper and way more effective. You’ll see a few past Mixergy interviewees who have talked really positively about them including Jason Fried and Patrick McKenzie. I’m grateful to them for sponsoring.
Alan, here’s the danger I see with that. To create apps for these bigger companies means you don’t have the iteration cycle of a Yelp, for example, of a Facebook. Facebook took many years to get their apps right. You don’t have that when a Fortune 500 company says, “Build this app for me.” You have to learn everything in order to do what you told me before you started, analytics, customer acquisition, app development. What about that? Why did you take on all that burden?
Alan: Yeah. So we actually thought that the Apple approach in the way they were building an operating system along with all the hardware to completely control the ecosystem to make their environment and the user experience on their device exponentially more valuable. We believed in that from day one wildly more than what we saw the alternative, which was the way that Microsoft first was doing it and how Google was thinking about it.
And now you’re seeing a complete change, right? You’re seeing Microsoft create its own tablets and they announced one today that was massive and it’s this huge thing. They’re controlling hardware and software and the operating system and everything in between and now you’re seeing Google do it with Pixel. It’s identical because–
Andrew: But those are giant companies that are willing to take billions in losses in order to establish themselves in a business that really matters. You could use off the shelf analytics. You could use off the shelf software to do a lot of what you do. Why did you want to take it all on?
Alan: Here’s the deal. All these point solutions that were funded–so, if you said analytics and there are companies like Flurry that’s part of Yahoo that may or may not be part of Verizon, I guess we’ll see. You have unicorns like Mixpanel and Localytics and all these other companies. Then you jump over to messaging and you might get into Urban Airship. And then you jump over into advertising and there are 1,000 of them. Marketing automation looks a lot more like Oracle and SAP and Salesforce and Marketo and all these things, but it’s basically the old email-oriented stuff.
So what we realized is that nobody was focusing on what we thought the problem was, which was mobile first, native first, fully integrated first and much like I was telling you about when we built a phone system, there were really seven features. We didn’t think it was a feature war by individual module that was relevant.
We thought it was the close loop use case of how the analytics interface with the content management, with the interface with the messaging, which interfaced with indoor/outdoor targeting, which interfaced with means to do one on one targeting for individual users based on who they are in the context of what they’re doing where they’re at and their value to that brand because we all have different values.
Our view was that if you took all these “best of breed” off the shelf things, they really work great all by themselves. God forbid you mix them together. You know why? Because each company architected it differently. You would have 12 procurement relationships, 12 architectures, 12 logins, 12 places to go get analytics, 12 places to try to make sense. God forbid you have software development kits and application program interfaces.
Andrew: I see.
Alan: So, take a simple thing like you have a YouTube application. You’re just going to launch a video. That’s all you want to do. That’s real easy as a user. But when you use all these point solutions, what happens? You’ll have like eight of them fight for control. So, when you click that button to watch that YouTube video, you’ll have a Google double-click ad server fighting to do a video pre-roll for advertising because you’re not supposed to get it for free.
You may have like a TV plus SDK that’s activating a companion experience. You have the analytics that are starting. Then you have another set of content management that’s reaching out. You may have to go out to Adobe TV Everywhere to see if this is authenticated for your cable or satellite subscription.
So, what happens is any one of those systems by themselves would work really well. But once they’re all fighting with each other, there’s no way to test the permutations of all these interfaces. So, what happens is they just crash. Think of the two biggest crashes in the last several months. You’ve seen them both. No one talks about why did this happen.
Andrew: Which ones?
Alan: HBO Go failed during the “Game of Thrones” season finale. Do you know how many OTT subscribers were just a tad upset?
Andrew: I don’t know how many, but yes.
Alan: Now, what was the big one? ESPN Fantasy Football–wow, that’s kind of important on opening day of the NFL season maybe. And what you see is nobody really knows why it happened. It just happened. You saw this if folks lived in Silicon Valley, out at the 49ers stadium. People were ordering food. They were getting billed but none of the food was arriving and then the apps were crashing.
Andrew: I see. You’re saying with all these different partners, you can’t figure out who caused the problem on this one day that then brought the whole app down and you don’t have enough control over it.
Alan: Right. And then what happens is all of those individual companies will point at each other and say it’s their fault. At Phunware I say, “Here’s my throat. Choke it. It’s my fault. If anything ever goes wrong, it’s my fault.” So what we did is we started by doing the biggest live event applications in the world and we did the biggest flagship applications in the world, starting with media and entertainment and sports. So, in sports, the NFL, NASCAR, NBC Sports–
Andrew: Let’s talk about the very first app that you created because that was featured by Apple. What was that first app?
Alan: Yeah. That was actually the Mythbusters application for Discovery.
Andrew: How did you get that, the Mythbusters app that you guys created?
Alan: So, we won by pitching the exact opposite of what we were supposed to. So, that sounds really ironic. Here’s what we did. Mythbusters, the team at Discovery put out an RFP. They wanted to create a game on mobile based on Mythbusters. So people like Electronic Arts and Jamdat and Activision and others, big, big companies, were responding.
So, if you’re a little company that just starts and you have an option to go into an RFP to compete on the strengths of every other company that’s been around forever or to change the landscape of what it is to try to have a way to win it, we changed the landscape. We went in and said, “Why in the world would you waste all your tens of millions of digital investment in content to make a game. That’s not what Mythbusters is about on mobile. This is the Mythbusters identity, your brand between Discovery and these anytime, anywhere users. Every single person on every brand thinks differently.
What I love about Mythbusters I bet you is different from you and different from most others. What you do is you say we wanted to organize a branded mobile experience that had five key elements, features content, social content, player engage. We added three sort of casual games based on episodes of Mythbusters because that’s what they had originally asked for. Media, like short, long form, all the photographic stuff, podcasts, and then commerce.
So those five elements are what we thought should represent the identity of any Fortune 5000 company. When we pitched that, it was so different from everyone else’s RFP response and we only had four days to do it because we found out on a Thursday it was due on a Tuesday and everyone else had already had this for two months.
So we presented it and little did we know that Discovery went to see Apple, the media and entertainment team. They showed them what they were going to do to create a game. And Application being Apple, which I love, was like, “You’re going to insult us that we created this work of art. We created all that memory, the processing power, that beautiful screen size and resolution and you’re going to make a game? That’s not what this is about.”
So after they sort of tore into them, Discovery pulled out this RFP and said, “We heard this thing from this company called Phunware in Austin we never heard of. This is what they pitched.” They handed them what turned out to be the proposal for the world’s first companion television application in history. They said, “That’s what this is about. That’s what you should be doing.”
So little did we know that not only was that the stimulus of us winning the first ever application portfolio for the Mythbusters brand at Discovery, but the team in the media and entertainment group at Apple then went to all of its strategic content companies and reached out to media entertainment and sports properties and said, “Are you all done embarrassing yourself on mobile? You ought to meet this group called Phunware.”
And literally my phone would ring. And it would be, “Hi, I’m so and so,” and they might be the SVP of digital or marketing at NBC or CBS and what was the means that we got in because we didn’t give someone what they asked for. We gave them what we thought they needed because this was so new. People were barely learning the internet. Then they suddenly get social media. Mobile was crazy.
Andrew: So here’s something that I never noticed until I was getting ready for this interview. If you look at the Mythbusters iPhone app on iTunes, it still says by Phunware. I never looked to see who created it. You guys are still managing that app for them, right?
Alan: Yeah. We have thousands of applications. A lot of times we’re really invisible.
Andrew: Actually, this was last updated 2010. So, maybe I’m looking at an older version of it.
Alan: There are older versions and over time some of these companies and brands do different things. Sometimes they wanted to publish using the Phunware brand, sometimes they publish using their own. So, when we do all the work for Fox Now or CBS or the CW network or Turner Classic Movies or many others outside of media and entertainment, often they will publish as themselves and we’re invisible behind the scenes.
Andrew: So, with any other app, you want to create it. You want to test it, then put it out there and then you’re going to get user feedback and adjust. It’s like a product market fit takes time, it takes months.
Alan: Sure.
Andrew: How do you get that fast considering how many different clients you have?
Alan: Well, what we do is we wanted to do everything. So, what we realized is there will be different types of customers by vertical that want different things. So, one group feels, “We can build our own applications,” or they may have an IT team, an agency of record, another app developer. For those, we say great. We’re a platform. We’re the mobile cloud, just like you’d go to Salesforce for the sales and marketing cloud, you come to Phunware for the mobile cloud.
And we would give them all the ingredients in forms of software development kits, application program interfaces, scripts and tools and we can license all the ingredients and tell them, “Go be an amazing baker and make an amazing cake,” if amazing cake were applications. But in other cases people say, “We don’t have the time money or inclination to want to figure out how to do any of what you just said, but we know we need a solution. So what can you give me?”
So the we say, “Okay, great. We can either give you a pre-integration of that entire cloud platform.” That would be the shopper experience for malls or the traveler experience for airports or the fan experience for stadiums and arenas or the patient experience for hospitals and healthcare institutions. And we would pre-integrate it and make them as licensable iOS and Android application portfolios where they can get the equivalent of leasing a Ferrari because they don’t have a budget to afford to buy a Ferrari.
In other cases–and that might be a range from $100,000 to $500,000 kind of opportunities. Then there are the others which it’s the Olympic Games. There are $1 billion of advertising and a half-billion dollars of digital rights. This is the identity of CBS on mobile. These are their prized jewels. Nothing can go wrong. One strike you’re out, never again.
In those, you might have $1 million to $5 million budgets instead of $100,000 to $500,000. So, what we do is say, “Look, we’ll help you no matter what you want to do. We’ll help you plan for it so you know what are the use cases, feature sets, devices, platform and what is that experience supposed to be because all of us who use apps, we don’t care who made it or how it works. We just know we either like it or we don’t. Give me what I want right now, wherever I’m at and if you don’t, I hit delete and you’re dead to me. That’s how it works.
So what we do is say great, we’ll help you plan that amazing experience. We will then bring it to life where you can either make it, buy it or lease it. After you build hat application portfolio that brings that experience to life to your point, then you have to make sure people can find it, discover it and build an audience.
Andrew: But Alan, how do you make sure people are going to like it? What’s your process for taking your software out to real users, getting feedback and iterating considering that you have so little room for error?
Alan: So what you do is you do have this iterative process. We’ve now found did the CBS application ever go away. Does the Kaiser application ever disappear The answer is of course not. What happens though is it goes through release one and two and three and four and five.
Andrew: And what’s your process for taking it through all those releases?
Alan: Yeah. So what we do up front is we either can engage where they just say, “This is our brand and we want mobile and we know nothing. Do it all.” And we can turnkey that entire operation and make sure to learn from everything we’ve done how to maximize the ability to be successful.
But otherwise it’s an iterative process where we’ll take the best of what we’ve learned through all the verticals and applications we’ve done, see what they’re trying to do and help them refine and finalize what a base version 1.0 would look like that maximizes the ability to be successful. The way I’ve defined that is defining it to say, “Can I give you most of what you care about for that brand on mobile to then enable each user to be themselves and engage with that brand in whatever’s important to them?”
For instance, if you went to a casino in Las Vegas, you may care intimately about gambling or poker, specifically. I may just enjoy the shows and the food. We have to allow ourselves–I can be there for a bachelor party or you can be there for a conference. So, depending on the user, you have to make sure the application can dynamically transform that experience as if it was built only for them. That is where it’s a little bit of art, it’s a little bit of science.
Andrew: So then what do you do? Do you watch users as they use the apps? Does your software tell you? What do you use to get that feedback?
Alan: What we use now is experience. When we started Phunware eight years ago, we used our belief about what the market should be.
Andrew: Okay.
Alan: And that belief was something that was very unpopular and it was also something that people didn’t believe in. Think about it. We’re saying this is the only screen that matters. This isn’t the fourth screen, the third screen, the companion screen. Mobile first. Imagine that. That sounds obvious now. February, 2009, that sounded insane.
Andrew: By the way, forget mobile first, I’m almost living in a mobile only world. If I’m not here recording interviews where I really need what Steve Jobs called the truck, I’m on my phone working. I get that. At first it was your belief and you were ahead of the world.
Alan: And then what we did is we took our framework, those five areas and we filed a patent on what a branded mobile experience was. We said we don’t believe in apps. We believe in experiences. We were the only one going out and saying, “We’re going to create your brands identity on mobile at the most high value touch point that exists, the one that’s in their pocket everywhere they go that they never walk away from.”
And we are going to focus on making that touchpoint the most amazing interface between those customers, those consumers, those users and your brand, whether it was in a virtual world, like watching your favorite shows or WWE content or whether it was in a physical world going to your favorite mall or traveling to a resort. We used that taxonomy to organize tens of millions to hundreds of millions in some cases to billions of dollars of investment in digital assets and content, which they already did for the internet and television and radio.
They might have even done it a little for social. But they had never made all of that available in one location mobile. So, we started there and now that we’ve done this for year after year after year, we have learned how to take things in media, entertainment and sports and apply it to HIPAA compliant healthcare or to cities and governments to engage residents.
Andrew: That brings up what I see on your site today which is different from what was there before. Let me do a quick and final sponsorship message and then I’m going to come back and ask you about this thing that I see when I’m on your homepage. The second sponsor is a company called Toptal. Do you know Toptal? Have you heard of these guys?
Alan: I have not worked with them.
Andrew: My sense, by the way, Alan, is these guys at Toptal are only sponsoring me because they want the interviewees to find out about them. Think about this, like the guys who I have interviewed here, like Sam Altman is discovering Toptal on Mixergy. You’re discovering Toptal on Mixergy. If they got nothing other than this phone call introducing you to Toptal, I bet they’d be happy with the ad, but they’re also getting the audience as a bonus.
Here’s what Toptal is. In all seriousness, this is a company that said, “It’s really hard to find great developers. But there are a bunch of great developers that don’t want to be locked in to Malibu, don’t want to be locked in to Palo Alto. This is where Google and Facebook live, don’t want to be locked in to one place. It always seems beautiful, Alan, from a distance, but I live in San Francisco. I see the commute that these guys have to go through when they go to Google.
There’s a guy who got a job at Google. He said, “I don’t know if I want to go all the way down there. It actually is a bad lifestyle decision for me.” They don’t want to work at those places. They’d rather work from home or travel and work or stay in their countries instead of trying to come to the US with the crazy visa policies we’re establishing.
So Toptal said we’re going to get them all together. We’re going to hire these guys and then when a company needs to hire a great developer, we’re going to go to Toptal and Toptal will introduce them to the perfect developer they can work with remotely as if that developer is part of the team, part-time, project basis, full-time, whatever they need. Boy, has it worked out beautifully.
You get these top developers being hired by great companies, matchmaking being done by Toptal and what people are telling me who have gone through the Toptal system is that they end up getting developers who are better than the ones that they’ve hired full time without all the agony.
The classic example that I give out and have in past interviews is Derrick Johnson, a guy who I’ve had here on Mixergy for an interview. He runs Tatango. He had 20 to 30 interviews trying to find the perfect developer and then said, “Andrew’s been talking about Toptal. Let’s just try them. I can’t keep going through interviews. It takes up too much time.”
Toptal introduced him to two people, said both of them were good. He picked the one that he wanted, moved on. He said this guy was so good that he went to from hiring full-time to full-time plus, which means extra hours and then the CTO of Tatango said this developer that we got through Toptal is as good as I am, which is a big thing for a CTO to admit. That’s what Toptal is about.
Anyone who’s listening to me, including you Alan, who wants to sign up should not go to Toptal.com because there’s a special deal that they’re giving just Mixergy people. This was created by a past Mixergy interviewee. So, there’s a deep connection to Mixergy here. One of the cofounders of Toptal used to listen to me, came out to the first live event that I did in Austin where he saw me do a live interview with Gary Vaynerchuk and Tim Ferriss and Ze Frank, who’s now running BuzzFeed’s entertainment division. He’s a long-time fan.
So he’s giving Mixergy this great deal. Mixergy listeners will get 80 hours of Toptal developer credit when they pay for their first 80 hours. That is, of course, in addition to the no risk trial period of up to two weeks. This is unreal, really good company, call them. In fact, go sign up and they will have a conversation with you to see if it’s a good fit for you and help you find the perfect developer. Go to Toptal.com/Mixergy. I like the model they’ve got here, very sexy, on that landing page, so go check it out for that alone, Toptal.com/Mixergy.
I forget where we were. I’m so lost in that read. I didn’t even take a big breath in between that. I was so excited to talk about that that time. So, why don’t we talk about the second big project that you guys had, which was Petfinder, that’s the service that I used to find my dog. Why was Petfinder such a big deal for you guys?
Alan: Well, one, it was a big deal because it is inside the internet section of Discovery. So, it was one of those where you start a relationship on the media and entertainment side with Mythbusters and you sort of move within the organization across to another component. Most of the media companies have a media and entertainment group, a sports group, an internet group, a news group and in the case of discovery, they also had discovery education.
So, for us, it was a great way to take something that was very popular online and mobilize it and bring it to the masses to do what felt wonderful–saving pets. Finding homes for amazing pets. For us we took and made a very unique mobile experience to facilitate over 14,000 animal shelters in North America to be able to connect pets with people and it worked out wonderful In fact it worked out so wonderful that Apple chose to highlight not just the application, but they created a 30-second commercial with the 3GS launch talking about now thanks to the iPhone my family is complete.
They talked about, “We looked for our dog on Petfinder. We shared it on Facebook to show all our friends. We found dog-friendly parks,” and then they had a cam video that said, “Even when I’m not at home, I can still see if my pet’s okay.” And what literally happens the second those primetime spots hit. You would watch the downloads go vertical. You would go from nothing to 150,000 downloads literally in a matter of minutes. That’s amazing.
So, for us, it was two for two with Apple, where we built a very important brand of a media company. Apple loved it. It was good for them. It was good for us. It was good for Discovery and it felt good because we were really doing a wonderful cause. To us it was helping with our business model to say, “Look, we can win a customer and then go in different parts of that organization with different brands and different properties they have and actually be very successful.”
So what we always did is we didn’t listen to any of the traditional Silicon Valley elite on what they wanted because we know that Google and LinkedIn and Facebook were somewhat contaminating the Valley with the internet, internet, internet, HTML5, write once from anywhere. We just went all in on mobile. It was easier for us being in Austin, Texas to realize there was a little bit too much Kool-Aid being drank and so we went all in on what people didn’t believe in.
And then what we said is as soon as people stop paying us, we’ll believe they’re right. In the interim, we’ll just assume it’s all marketing fud, just like Nortel and Ericsson and the others did to say, “You don’t want voice over IP because they were protecting cash cows.” In our world, we just went all in and we raised almost $17.5 million over the first five years of Phunware from angels, which basically was wildly unusual to have institutional sized money and the board was just three founders.
We did what we thought the market needed, not what anyone else believed. We didn’t go pay Gartner to buy the Magic Quadrant and we didn’t pay to play. We just said, “We’re going to go out and win on merit.” Very, very quickly went all the way through the media and entertainment companies, all the way through sports and those were the passion verticals of early adoption, as you know, our favorite teams, our favorite brands. It was only later that all these other verticals from internet to automotive to healthcare ever started showing up to think what is this mobile thing.
Andrew: The thin I see on your homepage is solutions for healthcare. Solutions for media and entertainment, solutions for shopping centers, for airports. It seems like what you discovered after a while is there are these components that certain industries want. We can bundle them together and allow them to pick and adjust them, but bundle them together in a way that’s easier to adjust these big markets. Am I right?
Alan: I stole that from Jeff Bezos. He’s successful. If he said, “What is Amazon’s key three things they care about?” He doesn’t care what any of the competitors do ever. He just says broadest selection of products, best prices, fastest delivery. You and I could fast forward 10, 20, 50 years from now, and guess what? We’re not going to want less products at a higher price delivered slower.
So, those endearing values mean if you get those right at Amazon, he just can win and win and win. What we did at Phunware is we said we don’t care what our competitors do because there is no competitor. We’re the only one that does all this in one location. All I care about is the best shopper experience in the world, the best luxury resident experience in the world, the best fan experience, the best patient experience, the best television companion experience.
And guess what? If you get the experiences right selfishly from the interests of the application user and make all the technology, all the infrastructure, the operating systems and everything completely transparent, they don’t even have to know why it works, it just works, that’s what people want and when you get that right, it means by default.
We’ll have the right feature sets in our infrastructure modules. It means by default when we pre-integrate in those experiences that anything you need to engage, manage or monetize those audiences or users, we’ve already thought of it all.
When you think about how important it is to have the right structure, which most companies don’t, only two in media and entertainment right now do. They have a person at the top and there are three people that report into them. The first person controls all the digital and mobile, which means if they’ve got 50 different properties in the physical world, maybe theme parks, networks, shows and other things, they control all the application portfolios that represent those brands, those venues, those properties.
Right next to them, they have someone who controls the media buying, which is how do I invest outbound to find new users and engage with our brands and properties and venues. And then right next to the media buyer is a data science group, and what’s their responsibility but to preserve or enhance the monetization of all of those people that have been built up to consume those applications and experiences across those brands properties and venues.
That ecosystem when you do it right means that you’re able to focus on every human being worldwide on a one to one basis indoors or out, give them what they want, when they want, where they want it because you don’t have to worry about, “Oh, this is just everyone who likes NBC Sports.” You can get very granular in maximizing the amount of conversions and values of that user by knowing more about them.
Through Facebook building an empire with five applications–Instagram, Messenger, Facebook–we’re building an empire with 5,000 applications and growing. We have applications for real time events, applications for flagship properties, applications for thousands of physical venues around the world and then we have an entire platform that people can use to build their own applications for everything.
Andrew: Do you have a different sales team for each one of them?
Alan: Say again?
Andrew: Do you have a different sales team for each one of those products?
Alan: We just have two sales teams and they work in concert together. We have one on the subscription side, one on the transaction side.
Andrew: What’s the difference between–
Alan: The subscription side sells enterprise software, direct enterprise software sales. The transaction teams typically are dealing with media buyers that control budgets that can go through agencies of record, they can buy direct and those two groups both use data. We now have a petabyte of data against over 650 million monthly active users through those 5,000 applications with Phunware IDs.
That basically means we’d be the fifth largest social network in the world if we were considered one. It would be Facebook, Messenger, WhatsApp, all owned by the same company, QQ out of Asia, then Phunware and then ironically, this is scary, then Instagram, big drop off, LinkedIn, drop off, Twitter, drop off, Snapchat.
Andrew: Because you still are controlling all these different apps.
Alan: Absolutely.
Andrew: I see. That’s a subscription, people who want you to build an app for them are paying you on a subscription basis for that app and you keep improving it and controlling it.
Alan: So the way our revenues work is 90% of our revenues, over 90% are subscriptions and transactions. Less than 10% are services. So services would be like time and material of helping somebody with planning for or building an application. What they’re predominately doing is on a bookings basis, it’s about 50-50, those that license either the ingredients of a platform, licensing software to use it when they build themselves or if they’re not a do it yourselfer they’re an off-the-shelfer. They’re licensing application portfolios branded specifically for them for their venues or for their environments.
So, think of it as software licensing and data licensing on the subscription side and then on the other side you have audience building and audience monetization associated with media buying. So, in our world, if there’s Facebook and Google that control most of the media dollars in the world, we want to be the trusted third after those several hundred billion dollars of media buying because Facebook will give you whatever media buying you want as long as it’s on a Facebook property. Google will do the same as long as it’s a Google property.
Phunware is loved by our customers because we’re a horizontal slice through all of them, not just Google, not just Facebook but Microsoft and Apple and Amazon and very other vertical walled garden. So, our benefit is we’re a software company and we’re a software company that can help these brands to control maximizing the ability to be effective at that touchpoint.
I have four kids. If you screw up with my teenagers, you’re dead. They just delete you. You’re done. You’re dead to them. That’s a very, very real and dangerous problem. If you think about the investments most companies make in their physical world, they are barely even allocating funds on comparable basis for their identity in the virtual, digital and mobile world.
Andrew: You mentioned kids. Ben Horowitz in his book, “The Hard Thing About Hard Things” talked about the dangers and the sacrifices of running a company with a family.
Alan: Sure.
Andrew: Can we talk a little bit about that? You talked to our producer about it. I want to include that because I think it’s an important conversation to have.
Alan: Sure. Definitely always a difficult topic.
Andrew: Very, but it’s important. Tell me. What’s going on with you? How many hours are you working and how is it effecting your relationship?
Alan: Well, so, the interesting part is I’ve been married for 21 years and have four kids, so, 17, 15, 14 and 11 this weekend. Clearly when you try to be an entrepreneur, the stress of business and trying to start from nothing and build permeates all area s of your life. It puts stress on your family. Doing a startup is kind of like taking off your floaties and diving in the deep end of the pool and assuming you’re going to figure out how to swim.
Your family is part of that, your immediate family, your spouse, your children, obviously your parents and siblings and all that and other personal relationships and friendships you have that really get strained because of the lack of ability. So, when you want to be a CEO or a founder, the harsh reality is that with all the wonderful things that go on, there are some real world issues that are kind of the unfortunate downsides that go with it.
At the end of the day at this point, I shoulder the responsibility for one of the fastest growing companies in North America. We just won for the Inc. 5000, the third year in a row for the Deloitte Fast 500.
Andrew: What’s your revenue now?
Alan: Our revenue we’ll recognize will be just under $50 million this year on a bookings run rate of about $70 million right now.
Andrew: Wow.
Alan: We’ve been growing and growing and growing. I’ve got 200 employees full time and their families. We’ve got 300 investors because a lot of angels. So, when you take those 500 folks, they become an extension of your own family. The hardest part of that is you’re always going to have strains because you’re not always able to be in every school event or sporting event. You’re not always able to be there without traveling.
Andrew: And when you’re there it’s hard to stay focused on it because there’s just so much going on.
Alan: Sure. It goes like this. The biggest thing is trying to take an even keel in what’s full of daily highs and lows of starting a company. It’s different now than when I started Phunware I probably wore 15 or 20 hats. Maybe I wear three to five hats now. What happens in your personal relationship is–so me and my cofounder, I call him my Vietnamese twin, we’re both 47. We’re both married 21 years. We both had four kids. We both had three daughters followed by a son and our kids were literally 8, 7, 6, 5, 4, 3, 2, 1 in alternate year sequence.
Andrew: Okay.
Alan: He did his graduate work at Stanford. I did my graduate work in engineering at Georgia Tech and business school at Berkley out your way in the Bay Area. What we found is that his wife and my wife have always been the ones that have been overwhelmingly supportive so that they can allow you to try to do this because this is messy. I say what is a startup? A startup is like sausage making. No one on the planet wants to see what the hell what goes in to making it. You just want it to taste good at the end.
So what goes on in this process is even with your spouse, you can go where you think everybody is all in and they also can get stressed and strained to a point that’s even unfair for them. So, that’s a constant battle. In my own situation, I’m optimistic that I can maintain and continue but I’m also terrified that the last two years of Phunware in my life has been immensely challenging.
And I honestly in 22 years of knowing somebody, I’ve had 20 years of spectacular, the most amazing woman, the most talented individual, someone who used to work at KPMG out in Valley, who when we had our first child, said, “I don’t want to go back.” We struggled to divide $60,000 between the two of us was our salary to try to live in the Valley. You know how fun that is. Thank god I could use a VA loan to buy a house for a dollar down, four quarters or ten dimes.
Andrew: $60,000 is what I pay just for childcare, $60,000 a year, just for childcare.
Alan: Exactly.
Andrew: Are you worried about–you are worried about losing your wife, about breaking up over this?
Alan: Sure. As you get into different phases of life, I would say I would never do another startup from the ground up again, but I’m 47. I’m not 27. Life is different. But I’ve also got the benefit now of I’ve got a fast growing company, but I have 200 people and the ability to execute in ways that doesn’t mean the life of a CEO will always be lonely. There is nothing you can do to change the realities that you need to.
Andrew: What’s the danger now? Now that you have investment, now that you’re taking a salary, now that you have all this revenue now that you’ve figured out what the business is about, what’s worrying you now and keeping you from spending more time and being more present when you are there?
Alan: Well, that’s implying you aren’t present when you are there. To your point, I think it’s really a matter of how much if you want to call it either damage or how much difficulty do you create during the window when it’s really, really painful and all consuming. And then when you get back to something that’s really going fast and then being embraced but you do have more bandwidth and more of an ability to do that, you don’t have five people or ten people. We’ve got 200.
That’s different. It doesn’t change how hard it is. We’ll be closing a final growth financing and we’ll be at $90 million raised and soon that could be close to $100 million and that’s a lot of money to raise. It’s a lot of responsibility. It’s not like Tim Cook has a company the size of Apple and almost a quarter-trillion dollars of cash and suddenly it’s easy and he’s available. That’s part of what the job is.
The big thing is that you want to be there and you want to be engaged and do all those things and you are hopeful as best you can that you haven’t caused enough problems or damage that it’s just exhaustion on either side.
Andrew: I see. Okay. How close do you think you are to it? You think it’s a danger but it’s not so close that it’s imminent, right?
Alan: I don’t know.
Andrew: Wow. Being open, do you think you’d risk your relationship for this, you’d give up your relationship to see this work because it’s too important to stop right now, right? You’d have to.
Alan: Wrong.
Andrew: You wouldn’t.
Alan: Wrong.
Andrew: If you had to pick between one or the other, you’d just say, “I’m handing the keys over to my Vietnamese brother, my Vietnamese copy and I’m going to take some space.” Would you be able to do that?
Alan: Sure.
Andrew: Wow. Okay. But that wouldn’t help, would it?
Alan: You don’t know what would help, what doesn’t help. I’ve actually offered that before, to be candid. I’ve said, “If you would like for me to stop being a CEO, I’ll quit.” That is an interesting discussion at lots of levels because I don’t live to work. I work to live. I also know what it’s like to have the context of the material and no one appreciates peace more than a soldier, let me tell you for sure. But I would say that it’s a very difficult thing to feel all the things you want to accomplish with your relationship, with your spouse, all the things you want to accomplish with your children, how you want to take care of extended family members.
Andrew: You’re saying that you still have financial obligations that if you left the company today you couldn’t personally meet. You’d still have financial issues?
Alan: No. I would say that everything you do as you make more and more money ad all just decisions. It’s not an issue of, “Could you shut it down?” I could do that a lot easier than other people could. There’s people that–I don’t think Steve Jobs could have ever stopped doing what he was doing. It was about the work and nothing else. I think there were times in Austin where work life balance if you want to call it that, Austin is not Silicon Valley.
If I looked at where do I have more employee challenges, I would say Austin first and foremost would be the most because there are a lot of people that left New York or California and they came here for the good music and the food and the weather and the lakes. And in Silicon Valley, you don’t have that discussion.
So I think that what you do is to try to find the most reasonable balance that you can, understanding that if Facebook was struggling, Mark Zuckerberg wouldn’t be the CEO right now. So anyone who thinks that Michael Dell wouldn’t still be the CEO. Bill gates would have never been the CEO.
When you’re young and growing, you can grow up in that. And if the business model works and you’re printing enough money and the valuation goes off the stratosphere, you can continue and continue and continue. Google’s founders didn’t get to stay CEO. They came back.
Andrew: But they had to give it up.
Alan: Steve Jobs didn’t get to stay CEO but he came back. So, there’s always these tradeoffs. Jerry Yang came back to Yahoo but it didn’t necessarily work. A lot of people like to look back in hindsight, “Look at what happened.” The reality is you don’t know that. My attitude is you can take someone who’s never done anything in their life and until they prove they can’t continue to do it, who the hell cares how small or big the thing is.
I’ve been doing Phunware for almost eight years from zero. We started with services to learn how to build the platform. No one can do a transition from services to infrastructure, right? That’s what the VC model says until it’s wrong, right?
Andrew: And you did it.
Alan: And you did it and you prove it. And so what happens is there are sort of these things going on where you’re constantly trying to disprove. Phunware would be a unicorn right now if I was in Silicon Valley. Phunware is the biggest damn company no one has ever heard of.
Andrew: Even though it’s there in front of our faces.
Alan: Exactly. I just looked at the list of the next likely 25 unicorns. Phunware is not on it. We’re bigger than over half of the people on the damn list.
Andrew: In what way? In revenue?
Alan: In revenue, what matters most, in terms of growth.
Andrew: If you raise again, what’s your valuation?
Alan: Quarter-billion dollars.
Andrew: Okay.
Alan: So we’re doing it off of modest multiples to make sure they’re defendable multiples that give us a path to have an exit in the public markets. All these unicorns, Mixpanel and others included, guess what? You have to grow into that. If you don’t have the revenue to catch up to what the value is, you’re either going to take a haircut to the public markets when they downgrade it or you’re going to have to figure out a way to stay private long enough to be worth what you think you are.
Andrew: At that level, you get to take some money off the table, right? Have you decided to do that?
Alan: We’ve never taken a cent off the table.
Andrew: You personally have not.
Alan: Not a cent.
Andrew: That adds so much stress.
Alan: You have to make tradeoffs throughout. There’s a lot of folks who really believe there’s this active vibrant secondary market for private companies. That’s bullshit. That doesn’t exist.
Andrew: But your investors aren’t urging you to take a little bit off the table so that you can have a clear mind?
Alan: But the issue–there’s nothing wrong with financial or clarity of mind. That’s easy. Money isn’t the solution. When you’re talking about relationships, whether it’s with your children, spouse, friends, that’s about time and availability and attention and a million other things that have absolutely nothing to do with money. I will tell you that first time we sold to Cisco and made life-altering money, going from nothing to staggering amounts of money, money will never buy happiness for anyone. That saying is so true.
Andrew: So, Alan, what will buy happiness for you?
Alan: Happiness for me, I’m thrilled. I’ve had the most blessed, amazing life. I’m completely happy in what goes on. Everything in life in terms of business and everything, you have headaches at work. The headaches you had when you’re starting a company versus the headaches at $10 million or $50 million or $1 billion, they’re different. The headaches when your private aren’t going to go away because you’re public, the headaches just change.
Andrew: What’s the current headache for you? I feel like anybody looking at you from the outside would say, “This guy Alan has got no headaches. Everything is working for him. He’s got great clients. He’s got a good revenue base.”
Alan: No.
Andrew: What’s your personal headache? What’s a big one you have now?
Alan: A personal headache. I have three daughters in high school. Do you know what it’s like to have three daughters in high school? I didn’t have any sisters, so I’ve got a lot of hormones flying. It’s great. It’s very humbling to see a senior, a sophomore and a freshman and high school and they don’t care about dad as it relates to Phunware. They just want Dad. They want Dad to be at sports or Dad to be at this or that. They also know that someone could have not asked them out on a date and it’s the worst thing in their life.
What’s important is to understand that everyone is a parent. Whether both parents work or one works and one doesn’t, whether you have lots of kids or one kid. Everyone every day of the week around the country and around the world are living a very similar life. The dollars might be different. The headaches might be different.
At the end of the day all you want to do is do the best you can. You want to provide for your family. You want to have active employment. You want to be a good parent. You want to be a good spouse. You want to be a good child. You want to be a good uncle, aunt. At the end of the day, that is very challenging for everyone. And when you watch social media, the funny part of it is most of social media and the selfie generation has more to do with an artificial aura of bullshit. It’s not reality. Reality is messy.
We live at a country club and I’ll go and get food there probably later. Guess what? Everyone goes around and smiles and happy. If anything, it’s more about people wanting to find what’s going on with somebody else because they don’t want to have to look in the mirror at the stuff that’s going on.
I’m in my mid-40s. I haven’t met anyone mid-40s–what’s the mid-life crisis? Whether it’s a guy or a girl, whether people are different. Everybody goes through chaos. I don’t know whether it’s from 40 to 50, 45 to 55, 50 to 60. But there’s a window between 40 and 60 that I don’t think anybody is immune to going through chaos.
Andrew: That’s scary.
Alan: And think about it. Your kids are at a certain age which are more difficult in the teens. Your parents are getting at the age where they can have medical problems and issues. I realize what’s been very humbling for me is to realize life is life. If you choose this particular career path, whether you’re just being an entrepreneur on one side or you want to be an executive.
Forget being an entrepreneur, an executive. There aren’t a lot of places that pay you six digits, give you a bunch of equity and say please stay at home, don’t travel and not be available for work. At some point you have to say where are those tradeoffs or do you do it to a certain point and stop.
The other flip side is things like Phunware, do you think we thought we were going to be number four the first year we qualified with enough history for Deloitte, number four in North America, 18,800% growth rate over the window. Even I had to sit back and go, “Oh my god,” watching Facebook’s trajectory or Snapchat. Certain things take on a life of their own. I’m sure it was no different than Apple or Microsoft.
Andrew: Let me ask you this question speaking of the future.
Alan: Sure.
Andrew: You’re a guy who saw the future a few times. You knew where telephony was going to go. You knew where mobile was going to go. If you’re looking now towards the future–let’s close it out with this–what do you see that’s coming up that most people don’t realize.
Alan: We’re in what I call the mobile computing era. If I wanted to evolve it I would say multi-screen because mobile is smartphones and tablets and wearables but now you’re getting in-car infotainment systems and digital signs and all this other stuff. Basically every screen other than the desktop. What I see happening is an acceleration of the dominance of iOS and Android permeating the operating system of everything. The internet of things, where all these sensors are going to be all over the place. They’re going to touch networks.
What I see happening is we’re already always on and always accessible, almost to a point where it’s probably too much. The more global business is and the more borderless technology is, it never stops. I could get off this call and start talking to Asia because it’s the morning tomorrow. Tomorrow morning when I wake up and I can start dealing with Europe. What you’re going to see is technology is eliminating barriers and borders and timelines and languages and everything. The world, no matter how big, is becoming outrageously small.
What I see happening here is that ultimately we want to create specific Phunware ID for every connected device touching a network globally. If you think of the internet of things as the hardware, the chips, the devices, the gear and the networks, we’re kind of like the software of things.
We do the applications that light up how wonderful all those investments are. Ultimately if we can create the world’s greatest database associated with these users knowing who they are, what they like, where they’re at based on the way they want to view the world, we are able to influence the behavior of people on a global basis to change everything.
Andrew: I see. So I’m on my phone. I’m on the app. Phunware is part of that app. I get off my phone, sit in my car. There’s no Android Auto or Apple Car, whatever they’re calling it, Phunware also a part of it. But I go home and have my lights turned a certain way, you’re thinking you guys are a percent of that too and if the speaker gives me an app like the weather for the next day or tells me what’s going on with my favorite TV show, you want to be part of that and it’s all connected to me.
Alan: Yeah. So, if we do this right, which I’m hopeful we can, there will be hardware, software, firmware and Phunware. When we’re thinking about this, we’re looking at it from the context of where did the $100 billion companies come from? So, back in the 80s, there were two of them, Apple and Microsoft for the PC area. Then we migrated to the client server era, which was Oracle. Then we migrated next to the internet era. Everyone would say of course that’s Google. Then we went to the social era and everyone would immediately say Facebook.
Now we’re in the mobile, multi-screen era and we expect that’s going to be us. Foundationally what you’re saying is we don’t care whether we’re the cloud platform for all these Fortune 5000 applications and they want to build it themselves. We don’t care if they want to license a right to use in all these physical locations around the world or if they want to make the biggest live event or flagship apps in the world.
What we want is Phunware to be reaching ever single user through all of it. The way people love Amazon AWS, this huge cloud thing they offer to support people, Phunware is like that except we do that with Fortune 1000 application portfolios globally at scale.
Andrew: I see. That’s the big vision and that’s what you’re spending so much time working on and I can see how powerful that would be. I didn’t realize how big you guys were up until now. I didn’t realize it until you were suggested as a guest. But I’m glad that I found out about you. I’m glad we had you on here. The website for anyone else who wants to check it out, it’s just Phunware.com–the -ph as in phone, the -un as in fun and the -ware because you want to be like the hardware and software on the phone.
For anyone who heard about my two sponsors who forgot to write them down, the two sponsors are the company that will do your books right and tell you exactly what your revenues are, what your expenses are and help you manage your company in a much more aware way. Go check on Bench.co/Mixergy. Check out what happens on that video when you’re on there. And the second one is the company that will help you hire a great developer. Check them out a Toptal.com/Mixergy. Again, they’ve got that sexy, sexy, sexy model on that page. I urge you to go check it out, Toptal.com/Mixergy.
Alan, thanks for doing this.
Alan: Thank you for having me. I appreciate it.
