Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com. It is, of course, home of the ambitious upstart, the place where I interview entrepreneurs about how they built their businesses.
A few months ago I was in Las Vegas and I met this guy, Steven, and he’s been listening to Mixergy for a long time. He walks up to me and says, “Andrew, you should interview the founder of my company.” I said, “What’s the company?” He said, “Pigeonly.” I go, “I know Pigeonly.” I know them because I heard this great piece on NPR about them and then I started reading all over how they got funding from Y Combinator. The story is incredibly exciting and captivating.
This entrepreneur went to prison, learned business in prison, came up with an idea based on his experience and frustrations from prison, launched the business, grew it, got revenue, got funding–unbelievable success story. I’m so excited to have him on here. His name is Frederick Hutson. He is the cofounder of Pigeonly. It’s a startup focused on serving the US prison population. They do things like allow prisoners to get photos from their loved ones or make phone calls to their loved ones. Those kinds of services are what they offer.
I’m going to talk about how he did this and the incredible things that he learned in prison. And this interview is sponsored by two great companies. The first will help you hire your first and last and lots of developers called Toptal and the second one will help you schedule meetings with people who will actually show up to those meetings. It’s called Acuity Scheduling. I’ll tell you more about both of them later.
First, Frederick, good to have you here.
Frederick: Thank you. Thank you.
Andrew: Is it wrong that I kind of admire the thing that you did that got you to prison?
Frederick: No. I think I was a little bit ahead of my time.
Frederick: Had I had the level of marijuana distribution that I had in 2005 in 2016, I might have been one of the top sellers and might have got an award.
Andrew: Right. You would have gotten lots of funding…
Andrew: What did you do that got you into prison?
Frederick: Yeah. So what I was doing is I started when I was like I want to say 19, distribution of marijuana, so basically moving marijuana form Nogales, Mexico through Tucson, Arizona.
Andrew: At 19 from Mexico to Tucson, Arizona? That was the first thing you did?
Andrew: Wow. Okay.
Frederick: And from Arizona to Las Vegas and then from Las Vegas down to its destination in middle and Central Florida–Tampa, St. Petersburg, that area.
Andrew: How did you do that? How did you do it?
Frederick: Yeah. So, it was really just leveraging UPS, FedEx, DHL and our process was instead of physically driving it, we would ship it along the main carriers. Then we would basically have shipping routes. People on the payroll that were on shipping routes to basically deliver the boxes to addresses that we would designate or to people we would designate at the final destination.
Andrew: Did you work this out yourself, know who to give money to?
Frederick: Yeah. How I got started is my brain always starts to lean towards a way to solve a problem. My buddies who were doing this, they were actually physically driving marijuana from Texas to Florida and it was insanely risky. It was insanely difficult. So, when I started looking, I thought why not just leverage the logistics systems that’s already in place with the shipping centers. Why not use that? They already have it. We’ll just use those.
That’s how it started. We just started packing it and shipping it. Inadvertently, I started learning all the shipping routes. I learned what shipping routes to avoid, what days the DEA would be in shipping centers, what days they would not. And I just got very good at it.
Andrew: How could you figure out which ones to avoid?
Frederick: I just started learning to watch the tracking information. There are details in tracking information as you look at the packages path that gives you hints to what could be going on at that given facility.
Andrew: Like what? What could be going on?
Frederick: So, for example, if you see a package that would get in at 7:30 a.m. versus 6:45 a.m., it was a sign that there could have been something that went wrong. I would also look was there weather issues, were there other issues or could that also be a sign that when that box was delivered to Tampa, don’t touch it.
Andrew: So, when we talk about money in the startup world, we’re talking about numbers on an iPhone or a bank account. You actually had to have seen the cash. Do you remember the most cash you saw in person?
Frederick: At one time, probably… Over the course of doing this, I saw at least millions.
Andrew: Millions of dollars in cash?
Andrew: What about most at one time?
Frederick: One time, cash, probably about $500,000.
Andrew: And did you know at the time that you were a real business man, an entrepreneur and this was just your path? No?
Frederick: I had no concept. You don’t start trying to be the biggest drug dealer. You don’t start trying to do any of that. Really, it just starts growing. I started buying one pound of marijuana, $500, and it just kind of grew from there. By the time you look up, you’re knee-deep into something and you don’t even realize it. It just becomes a way of life. You have no concept. Now, in business when I see how much work it is to get to $1 million in revenue, how much work it is to get to $2 million in revenue, it’s completely different. Then it was like nothing.
Andrew: So, this is now a business that is fully legitimate. I actually was talking with Tim Moxey, one of my past interviewees. He created Nuun, those little tablets in grocery stores that you put into water and it turns into a Gatorade-like drink that’s actually healthier. He told me what he was up to. He’s creating edibles and selling edibles like all fully legit.
I was at Justin Kan’s place, the cofounder of Twitch, which he sold to Amazon. I asked this guy, Nick, at his place, “What do you do?” He said, “I help manage investments.” I said, “What are you looking at now?” He started telling me about his most exciting investment was in a marijuana company.
Andrew: So, these guys are building these businesses legitimiately. When you did it, there was one day where I guess it was the Drug Enforcement Agency, the DEA, came in. Do you remember that day?
Frederick: Yeah, vividly. You’ll never forget a day like that. I was at one of my shipping centers. One of the things I started doing, as we started getting bigger, it became more and more difficult to be able to drop these packages off, these marijuana packages at existing shipping centers. I started buying my own. I had one shipping center in Las Vegas that allowed me to move more volume because I owned it.
One day I was outside talking to one of our customers and about three cars pulled up and about 11 DEA agents all rushed and I already knew what it was about. “Where do you want me stand? Where do you want me to put my hands?”
Andrew: I’d be so scared to death. I’d be so… Were you scared in that moment?
Frederick: I don’t know is fear would be the emotion. I think the emotion would be–the first thing I was thinking about, “Where did I slip up? What did I do wrong?” I just started replaying everything in my head to see like at what point did this start. Did this start to go in this direction that I did not see it right? I think I was probably disappointed that I didn’t see it.
Andrew: To you, this is a chess match that you lost.
Frederick: Right, that’s how I saw it.
Andrew: You were wondering what move was the wrong one.
Frederick: I made a wrong move somewhere and someone took the queen.
Andrew: The scary part, I heard, was you were on an airplane shackled to your seat afterwards and there was a guy next to you. Do you remember the guy I’m talking about who was just really in more than a shackle. He had a face mask?
Frederick: Yeah. That was a crazy thing because you know–first of all, I didn’t even know “Con Air” was real. I saw the movie with Nicholas Cage. I didn’t know it was a real thing until they had to bring me back to be arraigned in Tampa, Florida, which my case was out of, and I lived in Vegas. So, you go on this plane. It basically looks like an unmarked Southwest Airlines aircraft. Everything is stripped out. Everyone is shackled. Your hands are shackled to your waist and your feet are shackled.
You’re walking on the plane and you’re seeing all people in different levels of the federal system. This plane was stopping in Colorado at ADMAX. ADMAX is where the Timothy McVeighs of the world are and things like that, the kind of people that they’re so dangerous that they put them underneath the concrete on the floor. So, you can’t even see the jail. It’s underground.
So, when you go on the plane, you see we’re going to make the stop at ADMAX to drop people off. You’re seeing guys that have face masks. You’re seeing guys that you can tell they’ve been in the system for a very, very long time. That was probably the first time where I started seeing what was actually wrong with the criminal justice system, where instead of reserving prisons and jails for people we’re afraid of, we’re putting a lot of people in prison and jails, people that we’re just mad at or annoyed at. That’s what makes up the bulk of the population.
Andrew: There was one guy, 21-year old guy who was there for robbery. He left the cell, I guess.
Frederick: Yeah. He left to go get sentenced and he came back and he had a 40-year sentence. I physically saw him age from the time that morning and the time that evening. I physically saw him age in his face, just the amount of stress of just a 21-year old trying to wrap the concept of going to prison for 40+ years or whatever it was.
Andrew: And was your sentence?
Frederick: My sentence was 51 months. I think generally speaking, I actually got off pretty easy. The average sentence in federal prison is about 10 years. Because I didn’t have a prior record, the judge gave me half the time. She would split it in half at 51 months.
Andrew: 51 months, roughly four years?
Frederick: Right. A little over four years plus another additional six months at the halfway house.
Andrew: I did four years of college, I hated it. To this day, I still resent it. Four years in prison must have been so much worse.
Frederick: Yeah. At the moment, you really can’t fathom. You can’t fathom how am I going to be living in a box for the next four years? There’s no way to prepare for it. There’s no way to wrap your brain around what that feels like. What was interesting is the human’s ability to adjust to whatever circumstances you put in. That’s the first time I really experienced it at a real, real level.
You get a concept of when it comes to time management, where you learn to live in the present. You’re not living in the future because you don’t know what the future is going to hold. You don’t know if you’re actually going to be able to safely leave prison. There are people that I saw in prison commit suicide. There are people that I had seen prison that were seriously injured or killed.
So, you really don’t know what this looks like. Every day you’re just praying and hoping to get to the next day and taking every day at a time. You can’t wrap your brain around what that’s like. You just learn to live in the present.
Andrew: How do you do that? How do you get your mind to not think about all the potential eventualities?
Frederick: Yeah. One of the things that I learned personally was you learn to focus on the things you have control over and not put any energy in the things that you don’t have control over. I think that’s probably the first lesson that anyone in a situation like that learns, especially when you’re highly entrepreneurial and you’re doing what I was doing, you’re used to controlling a lot of things. You’re used to controlling where you go, when you go. You’re not really bound by 9:00 to 5:00, so to speak. So, it’s nothing to pick up and go here and do that.
And then you also have the income to support that as well. So, you’re used to being in control, you’re used to being able to somewhat control your fate. When you go in the institution, you have control over very little. You don’t have control over when you wake up. You don’t have control over when you go to sleep. You don’t have control over what you eat, when you eat. You have control over nothing. You don’t even have control when the lights go on and off.
So, going through that situation, you learn really focus on yourself. What I have control over–I have control over my thoughts. I have control over my energy. I have control over my internal workings of am I going to positive, am I going to be negative. I have control over what books I consume, what books I choose not to consume, things like that. And then you learn that actually that learning that self-inner-control is actually more powerful that controlling all the external things that you’re used to controlling prior to it.
Andrew: Did you have a technique for controlling your thoughts, for getting them on the things that are actually helpful and not for all the things that you can’t control and actually make the time tougher?
Frederick: Yeah. I learned to be deliberate. I learned to be very deliberate on what I did and did and didn’t pay attention to. So one way was the books. I would read a lot of books. I would read books that really were books that would basically roadmaps to where I wanted to go. I wasn’t quite there. So, I read a lot of business books.
Andrew: What are some of the books?
Frederick: “From Good to Great” was a good one, Jim Collins. I read–the just escapes me at the moment. It was really a lot of books, whatever I could come across, magazines, Fast Company, other people building businesses, entrepreneur magazines.
Andrew: Was there a kind of book you were into? “Good to Great” feels like how big companies can be led better. There are some takeaways for smaller companies, but it feels like it’s meant for Fortune 500 companies. Is that the direction you went in?
Frederick: Yeah. Those were the books that were available. But it was about how large companies could be better. To me, I tried to boil that down to if I was going to learn something from what these big companies did, if I was going to start something, what would I do? Some of those principles I actually took with me. I found there were things that were relatable to me that seemed like time was principled regardless of what stage your company was in.
Andrew: Is there one that you hold true to?
Frederick: I think one of them is telling time versus–building clocker versus being a time teller. I think that was one that stood out to me. I always try to pay attention to how we’re going to build our product roadmap of what we’re going to offer, especially when we’re looking to get product market fit on something, where is it really heading and where do we want to fit in that story as far as our company? I think in a lot of ways for our business, because we didn’t have a lot of businesses to look at or to compare ourselves to, we had the ability to set the tone of the market.
Andrew: I also remember that NPR piece that I told you about before we started that was just amazing. It talked about how you learned about spreadsheets. Can you talk about that?
Frederick: Yeah. So, you don’t have access to a computer. One of the ways that I would spent a lot of time with guys who had white collar crimes. So these were guys who were either corporate attorneys or CEOs of even some large companies that had different prison sentences for various white collar crimes.
You would ask and you would become basically a student to them. They would teach you basically how to do spreadsheets, how to create business models, what are the important components of a business plan or business process. I would spend a lot of time talking to them and then it would get to the point where you would want to put in practice of what you would learn.
That required working with spreadsheet. So we didn’t have a computer, you would tape pieces of computer paper together and you would get a ruler and you would draw all your lines and you would make your spreadsheets. You would do it all by hand. You had the time. You had the energy.
But it was those exercises which was a lot of mental exercise gives you an escape. It gives you a way to basically place your mind–I would go through in my mind the steps from buying a first piece of equipment to hiring my first employee to having my first sale and I would go through all this in my mind as if it was a movie playing out in my mind. That was what I used to spend my time doing.
Andrew: What were some of the ideas that you had for businesses that you discarded? You obviously picked one. What are some of the ones that you didn’t go with?
Frederick: There was one for real estate that I looked at that I thought might have been interesting to think of ways to be able to get different process for buying and selling houses. There was another one that was around event promotion. There was one around advertising, actually, interestingly enough.
I didn’t have the concept of the sheer mass of Facebook and all the rest of those companies that kind of have those things, I was even brainstorming an idea of coming out with a cellphone service that was completely supported by the advertising, not having a concept of what that would be or what that would look like, just a random thing.
Andrew: I see.
Frederick: Things like that. I didn’t really restrict myself.
Frederick: I didn’t really restrict myself. I would think of things large or small as if there were no barriers in finances or anything and I would go through the mental exercise of what would this business look like.
Andrew: All right. I want to get into how you discovered this idea, what the pain was. But first, let me talk about my sponsor. It’s called Acuity Scheduling. Do you know these guys?
Frederick: No. I have not.
Andrew: You’ve got to find out about them. Here’s what they do. They make it easy for people to get others to schedule meetings with them. So, I’ll tell you a story about one of my past interviewees, a guy named Colin Stewart. He heard that if you want to build great software, you should talk to your customers. Well, he had no customers.
So he decided he was going to talk to the kinds of people that he wanted as customers. He really didn’t know how to get a hold of them, so he said, “I have a LinkedIn account. I have a Facebook account. I’m just going to start messaging every single person that I think is a good fit on Facebook and LinkedIn.”
He just would sit there, open a ton of tabs, sent out messages to these people saying, “Please, can I get on a call with you so I can understand your business because I’m trying to create software for businesses like yours.” He did this so much that he actually got kicked off of just about every network. These days, you can’t get kicked off forever because it’s such a critical part of people’s lives. So, he was able to get back on. But it gives you a sense of how many people he was reaching out to.
Now, the problem of doing something like that is you can’t say to every one of them, “Can I talk to you Thursday at 5:00 p.m. or, “Can I talk to you?” And then say, “What works for you?” And then have them all try to respond back with times. They’re not going to respond back with times. You have to make it easy for them to actually accept a call.
That’s where software that I’m here to talk about, Acuity Scheduling comes in. With Acuity Scheduling, you sign up, you go to their site, you connect your calendar to them. So, Acuity knows when you’re busy, when you’re not. You select the times you’re available to have phone calls. Or if you want, you can even use it for in-person meetings.
For example, I always pick Thursdays. Also, if I have a Friday off, I might just say, “All this Friday I’m available for calls.” And then it gives you a link that you send out to hundreds of people, thousands of people, even ten people. All they have to do is if they want to schedule a time with you, and then click a time that’s convenient for them when you are also available to have that meeting. As soon as they do, that time is blocked off to everyone else.
Andrew: There are tons of other cool features. Like you can say, “What’s your phone number.” It makes it easy to connect. You might as them a question or two like, “What’s your business?” I like to ask people, “What’s your Skype name?” And then you have all that ready to go. As soon as they do that, all that information is on your calendar at the exact date, so you never forget to have that call and it’s also on their calendar so they never forget. They can get reminders by email. They can get text messaging, that whole thing happens automagically.
And if you want, it connects with tons of other software, so when someone books with you, you can even add them to your address book. You can add them to your email list, whatever it is that you want. Great software. Anyone who hasn’t’ tried it should go try it. It’s go for phone meetings. It’s good for in person meetings.
Anything you want, go to AcuityScheduling.com and if you add a /Mixergy at the end, they’re going to give you 45 days free to try it so you can see the results when you use their link. Go to AcuityScheduling.com/Mixergy. Let me say it again because my voice is still hoarse from being sick and recovering. I want to be clear–AcuityScheduling.com/Mixergy and I’m grateful to them for sponsoring.
So, the idea for Pigeonly came from where? What was the problem that you saw?
Frederick: Yeah. So, once you get settled in, you start adjusting to the environment you’re in, I just started noticing that there was a huge problem that I didn’t previously know existed where it was really difficult to communicate and connect with their loved ones on the outside. It was either too expensive or it was to inconvenient for people in the digital world to communicate with people who lived completely in the analog world.
So, that’s when the idea started where I just wanted, at the time, to build a simple product that would allow people to easily send printed photos on the outside and have those photos printed and mailed to their loved ones on the inside. That was it. We started out building out that first product when I was–
Andrew: Let me get clear on it–what was that first product?
Frederick: The first product was what’s now called Pigeonly Photos. What it does is–
Andrew: It was just saying, “How do I get photos to people who are in prison?” How did you know that was a need? How did you know they couldn’t just print it out and send it out?
Frederick: It was just from my own personal experience. I saw the only way at the time in order to send photos were to go to the CVS or Walgreens, have the photos printed out and go to a post office and mail it. It was a really time consuming process that people wouldn’t do it. They first had to figure out how to get it off their digital media and then get it printed and then go through the post office and mail it.
Andrew: I’ve been dying to print out some photos for myself and my wife just to remind her of something or to do something sweet. It’s such a pain. I have a photo printer at home. I can’t get it to work. I want to go to CVS and kind of make a day of it with my son or make an evening of it. Let’s go over to the CVS. You’ll see it get printed. It will be fun. It’s such a pain. It’s such a drag.
Frederick: It’s very inconvenient.
Andrew: I get it. I imagine for them it’s even harder. But a lot of times when people talk about that service, Frederick, they compare it to a number of other services that already do it. So, didn’t this already exist and all people had to do is change the address to the prison their loved one is in?
Frederick: Yeah. You have services like Shutterfly or Snapfish that do the same thing. But there are different nuances that work for this that services don’t account for, one of them being the packaging material. So institutions are very specific about the type of packaging material they allow, and Shutterfly and Snapfish don’t really accommodate for that.
One of the things that we did is we made sure that our packaging would also be approved at the institution. There are also nuances like the number of photos you put in an envelope. That’s something where rules change from facility to facility that also those services don’t account for.
Andrew: And you have to know from facility to facility what the limitations are?
Frederick: Right. Each facility has their own rules and our system we bake in all those rules so from the user side, their experience, they can upload 100 photos. We’ll break it down to the right amount of envelopes that matches for whatever facility they’re sending it to.
Andrew: Oh wow, I see. All right. So let me ask you this. When I started Mixergy, I thought, “Great, the startup audience is my world. That’s what I’ve always lived in. I’ll build a business here.” Then what I kept hearing from people was, “Startups don’t really have money.” I said, “No, that’s true.”
Then I discovered it is true. They’re hustling. They’re saving every dollar. They’re sleeping in their office if they can to avoid paying rent or working out of their home or sleeping out of boxes, literally. There was one guy who slept in a car outside of a Taco Bell who’s a Mixergy fan. Did you have any concern about prisoners not having the money to really become a market for you?
Frederick: Yeah. So inmates themselves are not our customers. Our customer is the family member and their friends, so their support network on the outside. The inmates benefit from the service because they receive the photos, but our customer, the person that’s paying for it, is the family member.
So, when I looked at the market, that was one of the first questions is: How many people are out there that really would make up this market? When we started doing the math, we found that people who have a loved one or someone they’re social connected to that’s in prison is about 16 million to 20 million people in the U.S. What we found is if we can offer this product and have it faster, more convenient and higher quality and be cheaper than it will cost for you to go do it yourself, then we knew we would have a recipe that would win. That’s what we were able to build.
Andrew: I see. And you weren’t doing the calculation son how big this market is compared to another one. You said, “I know the space. I know there’s a problem. No one else is doing this. I could do it.”
Andrew: But in order to do it, you still have to figure out the facilities’ limitations. You have to understand all that stuff. How did you do that?
Frederick: Yeah. It was just collecting data. So first we built the product. We built the first version of the product when I was in the halfway house. We posted a job on Freelancer.
Andrew: At a halfway house you did this?
Frederick: Yeah. So we put the first version, version one, the MVP was while were at the halfway house. Then we were ready to market it, I made the assumption that because I knew all criminal records are public record, that I could do a Google search to identify everyone who’s in jail so I can be able to send them marketing material and say, “Are you interested in getting photos? Here’s a new way.”
What we found was that didn’t really exist. Although all these records are public data, there was no single space where you could go and download or get a copy of a list, if you will, of everyone who’s currently in prison. So we ended up building the first nationwide inmate database that exists that we call Haystack.
Basically what Haystack does is it’s scraping all the public records from court documents to prison facility records to know where everyone is located and we save them on our database. With that information, we are basically targeting direct mail to inmates, let them know, “This is a new service we have. You can let you family know and then they can sign up.”
Andrew: Did the product come first or did Haystack comes first?
Frederick: The product came first. Haystack was born out of problem where we had a marketing problem.
Andrew: So how did you build the product? The ability to print at mass scale and to ship is not easy, is it? Was there a service that offered it that you were able to tie into?
Frederick: Yeah. So, when we first started, I made the assumption that we could buy a printer out of Best Buy and do it ourselves. I quickly learned that actually didn’t make sense. We actually were able to find a fulfillment company in California that that’s what their business was. They did fulfillment for Shutterfly, they did fulfillment for Walgreens. That’s part of their business line, the printing and shipping of photos. We integrated into their system and they did all our photos.
Andrew: I see. So that part was easily solved. How about the part where someone uploads their photos and has a smooth process for sending it over?
Frederick: Yeah. That was what we outsourced to get our first product built. That was a work in progress. We had a lot of learning curve to get that right as far as the user experience. That was my first learning lesson on how to build a website and how to build something that is actually useable.
Andrew: Where did you find the developer?
Frederick: We found them on Freelancer.com, actually.
Andrew: So you went to Freelancer.com. You posted a help wanted ad and you ended up with a developer who was going to do this for you.
Andrew: And did you create the mockups? Did you know how to draw it out and tell them, “Here’s what we want?”
Frederick: Yeah. The first person we hired before we hired the developer is we hired somebody to write functional specs. So what I was looking for is I was looking for someone that I could just talk plain English like, “This is what I need to work,” and then they converted that into actual specs that we gave to the developer to build.
Andrew: And again, you got that from Freelancer?
Andrew: I see. How did you know to do that? Most people don’t.
Frederick: I didn’t really know what I was doing at that moment. All I knew was I needed to setup instructions that I could give to a programmer. So, I made the assumption that because I don’t have a computer science background, I don’t know how to program myself, I made the assumption that I need an intermediary, someone between me and a developer to articulate what I was trying to get done.
When I started searching that, that’s when I came across functional specs. I said, “Okay, this looks like what I need.” I said, “I’m going to post a job for functional specs.” And then there was a woman that responded based out of Houston, Texas. I explained to her how it worked. We spent a lot of time on the fun. She actually created the specs with me.
Andrew: It was pretty smooth with her, but with the actual developer, you had some issues. What were the issues?
Frederick: Yeah. So the first issue was that overall we just didn’t really get part of the issue when you’re first product, you don’t really think of everything. So even when you think you’ve thought of everything, you haven’t thought of half of everything. So our first version was very buggy. It didn’t perform the way we thought it would perform. So we ended up having to scrap the whole thing. The same lady who wrote the specs ended up coding it herself.
Andrew: Oh, really?
Andrew: I also heard that you had an issue where the developer disappeared on you and then there was extra costs involved. It was all that stuff.
Frederick: It was a typical outsource contract. You really don’t know what you’re going to get. If I had to do it all again now, I would spend the time getting all the front end and the UI stuff done and be able to give someone the exact blueprint, “Here’s where the button is, when you click it, it does this.” I’d do it that way if I could do it again.
Andrew: What did it cost you to have her build it out?
Frederick: I think our total investment was right around maybe $5,000 probably?
Andrew: And that includes even Haystack?
Frederick: No. That did not include Haystack. Haystack was probably like another $5,000. We didn’t have as many states integrated as we do now. Today, we have all 50 states, then we only had one.
Andrew: How’d you get the money?
Frederick: So, it was all from friends and family. I reached out to all people I knew. We were raising $500 at a time, $1,000 at a time. I said, “This is what we’re trying to build. Here’s where we are in the process.” The very first money came from Alfonso, my cofounder. He used some of his student loan money. That’s how we started.
Andrew: Alfonso Brooks.
Frederick: Yeah, Alfonso Brooks. And then after got that going, at a time we started talking to other friends and family, we had already started doing stuff. They were seeing that things were getting done and people believed in us.
Andrew: They got a share of the business?
Frederick: Yeah. We did all convertible notes.
Andrew: How did you know to do convertible notes with them?
Frederick: I didn’t.
Andrew: You did it after the fact. You just said, “I’ll give you a share of the business.” It wasn’t specified how?
Frederick: No. It wasn’t specified. It was all based on trust. So what we did was once we got into the accelerator months later, the NewME Accelerator, and we started learning the proper legal structure, is it L or a C corp., all those things necessary to go raise funding. We went back and we were able to clean everything up.
Andrew: Okay. And everybody was cooperative. Nobody said no.
Frederick: Everybody was cool.
Andrew: Right. And frankly, now they end up with a really good piece of an incredible company, the kind of deal that Y Combinator partners would kill for, I think. So, then you had your product, the next thing you did was marketing. This is the thing that Steven told me when I met him, the guy who works at Pigeonly, that just blew my mind. Talk about the marketing you did with direct mail.
Frederick: Yeah. Once we built Haystack, we now said we solved our marketing problem. Now we knew where people were. We knew their address. We knew their name and we knew their contact information. So, then we started sending out greeting cards directly to them telling them about the product and service, basically, “Hey, here’s a new way that you can get photos. It would be easier for your family and it’s going to save your family a bunch of money.”
And we saw a 25% response rate to our direct mail. Now at the time, I didn’t know the average direct mail response rate was one and two percent if you were lucky. I just thought I was a little bit disappointed. I was like, “We only got this many people?”
Andrew: I should underline that. You said 25% response rate. That means that 25% of the people who got the mail–it was 10,000 pieces you sent out, right?
Andrew: That means 25% of them, 2,500, ended up doing what, buying?
Frederick: Going to our website and sending an order.
Andrew: Whoa, I see, and actually paying. Right now I think what you do is free photos plus shipping, am I right?
Frederick: Right. So we don’t charge per print. You only pay for shipping.
Andrew: Back then, did you do the same thing?
Frederick: Back then it was the reverse. We paid $0.50 a print and the shipping was included.
Andrew: Okay. Why did you switch?
Frederick: So, then it was a technical limitation. So, then we didn’t have the ability to… The app wasn’t designed to be able to charge for shipping and print separately, so now that we have everything in house and can design stuff better, we can play with the toggles of are we going to charge for prints or are we going to charge for shipping or are we going to charge for both.
We actually, for institutions where we don’t have a lot of traction, we will turn off the charge for prints and then institution where we do have traction, we will charge for prints. So, we actually use it for marketing some places where we need to, it will be free, but other places where we have a lot of traction, they’ll pay the regular price.
Andrew: I see. Who wrote the mail piece that got 25% response?
Frederick: That was the same contractor, Sabina, who did our functional specs. She wrote the first version.
Andrew: Really? Is she still working with you guys?
Frederick: No. When we moved the company to Vegas, she didn’t want to make the move from Texas when we all moved together. She’s still part of the company, but she decided to move on.
Andrew: I asked Steven why you got a 25% response rate. He said, “They don’t get that much mail. They actually want to get it,” am I right?
Frederick: Yeah. That was a big thing. A lot of times people would receive our mail and it was such a big deal, which I already knew from my own personal experience. It’s a really big deal when your name is called at mail call for mail and it’s one of those things where you pay attention to it. So it’s not like here or when you’re out and you get all these junk mails and you don’t pay attention to it. You actually pay attention to what you see.
Andrew: Okay. So now you actually had customers. You had real revenue. Do you remember the revenue after that first piece of mail you sent out?
Frederick: I think we did after a couple hundred dollars. It wasn’t a whole lot. It was a little. But it was starting from zero. It was enough for us to pay our cell phone bills. We were ecstatic. It kept growing. So, what happened, the word would spread. Before we can do another mailer, friends would tell other friends, people would tell other people and we had more people send orders.
Andrew: I see. Did you cover your costs? It doesn’t sound like if you only had a couple hundred dollars that you made back the money?
Frederick: No, not at the time, but over time it did. So the very first response, it didn’t, but over time, when those people come back and send more orders, it did.
Andrew: Okay. All right. I want to find out how you got funding and then how you developed the next product. Why don’t we get to revenue real quick? Where are you now with revenue?
Frederick: So right now we’re doing a little over $150,000 a month in revenue.
Andrew: $150,000 a month in revenue?
Andrew: Wow. All right. Let’s talk about my sponsor and then I’ll come back into this and hear how you grew to this point. My sponsor is a company called Toptal. Do you know them?
Frederick: No. I don’t.
Andrew: That’s why they’re sponsoring. My guess is they want as many of my interviewees to hear about them as possible. If the audience hears, then it’s gravy. Toptal is a network of really top developers. We’re talking about the kinds of people who would work for Google ordinarily. That’s the level that they want. And they pride themselves on having a really rigorous screening process. They’ve been called the Ivy League of developers.
Once they have that network of developers, when an entrepreneur or project manager or somebody needs to hire developers, they call up Toptal, they let them know what their issues are, what they’re trying to build, how they work.
Then Toptal has a matchmaker, like a real matchmaker at the company who goes and finds the right person in their network, makes the connection and says, “Here, is this the right fit?” And if it is, you can often get started within days and just keep going. You can work with them part-time, full-time, project basis, you can get a team of people all at once. I saw some of the back end.
If there’s someone who’s working for your iOS app, for example, if they have an issue, they now have this other network of top developers that they can go on Slack and start saying, “Here’s the issue I’ve got,” and get a lot of feedback on it. They’re a phenomenal company. What’s great about them is the developers can actually think through the problem in a way that you as the entrepreneur may not be able to because you don’t know the code.
Anyone who’s interested in checking them out and many people in my audience have, anyone else who wants to go should go to Toptal.com/Mixergy. When you go there, they’re giving Mixergy listeners 80 hours of Toptal developer credit when they pay for their first 80 hours. It’s an extra 80 hours of developer credit. In addition, they’ve got a no-risk trial period of up to two weeks. I’ve never seen anyone offer that. Have you ever hired a developer, “If it doesn’t work out, two weeks, don’t pay me anything?”
Andrew: And you get started not when they quit their job and then finally get some space and then come back to work for you, they’ll start within a couple days. They’re ready to roll. All right. I’m really grateful to Toptal for sponsoring. Frankly, if anyone out there wants an intro to my guy over at Toptal, just email me, Andrew@Mixergy.com. I’ve got such a close relationship with them now because I sent so many of my audience members to them that I’d be happy to make an introduction to anyone who wants it–Toptal.com/Mixergy. I’m grateful to them for sponsoring.
What happened next, Frederick? Is that when Y Combinator and the funding came in or did you go for another product first?
Frederick: Yeah. So we actually had the photo printing product and then I learned what a technology accelerator was. We reached out to–I saw a CNN special, “Black in America,” and it was talking about Silicon Valley, the new promised land and then I learned about the NewME Accelerator. I thought, “Oh wow, this is interesting.” So, I just started applying to every accelerator I can find–Techstars, Y Combinator, NewME.
NewME was the accelerator that accepted us. So we went out to San Francisco, my cofounder and I, and we did the program and at the end of the program, we raised our first million-dollar funding round. And then we were able to basically start building the business at that point. That’s when we added our second product, which is our VoIP product.
Basically what this does is that it allows people to save money on their expensive prison phone calls. So you have some cases where prison phone calls can be as high as $15 for 15 minutes. Our service will allow them to be able to get their cost down. For example, in federal prison, you pay upwards of about $69 or $70 for 300 minutes. With our product, that cost drops down to about $18 for this same 300 minutes. 300 is the market because that’s the max of the minutes you can use in the federal prison. Most people used around 300 minutes.
So those are the price differences. So our system basically because we had the data to know–once again using Haystack–we have the data to know where people are, our system will automatically generate local numbers for people based on their location. So, for example, if you have a loved one in San Quentin, our system will give you a San Quentin telephone number that forwards to your existing Atlanta, Georgia telephone number. So, when he calls home, instead of calling your direct line, he’ll call the San Quentin telephone number that forwards to you.
Andrew: Now I get it. For some reason it just clicked as you said it. They still have to pay for that local call, right?
Andrew: It’s the long distance call where the real rip off comes in and now they don’t have to pay the long distance call. What’s the price difference when they have to pay for a local call versus a long distance call?
Frederick: Yeah. That same local call costs about $0.90. So it’s substantially cheaper.
Andrew: $0.90 for how long?
Frederick: For 15 minutes. So it’s about $0.06 a minute.
Andrew: That’s way more reasonable. That’s more reasonable than a payphone here. I see. Now all they have is that local call. And they don’t have to pay themselves. It’s their loved one who pays, the person who’s receiving the call.
Frederick: Right. Exactly.
Andrew: I completely brushed over NewME. What is NewME?
Frederick: So NewME is a technology accelerator that focuses on underrepresented minorities when it comes to people trying to get into technology. So this is women, Hispanics, African Americans, etc., people that you typically don’t see that are building startups or people you typically don’t see that have a network in San Francisco, people that live in different places, can’t necessarily pick up and move.
Angela Benton, the CEO and founder, she’s done a huge job. She’s probably the reason how we were able to get started. We didn’t have any network. We didn’t have any connections. We wouldn’t have been able to be introduced to the investors we were introduced to once we finished our program.
Andrew: What did the give you and what share of the business did they expect in return?
Frederick: Yeah. So the model then was 4%. It was basically just a [inaudible 00:42:30] is how it was setup. What they do is they work with you on your model. They basically help you spend a lot of time helping you prepare your deck and your pitches, helping you think through your business models, make sure you think of all the aspects, basically help you understand what the investors expect to see, what type of traction you need, design help.
Andrew: What’s one thing they gave you specifically that helped your business?
Frederick: I think for us, the biggest thing that helped us was understanding how to position and basically focus on what was really important in our business. So that’s when I learned that we really should focus on the database, which actually today is about 80% of what we do. And then the product is how we monetize the data that we collect.
Andrew: I see.
Frederick: That was probably the biggest turning point for us.
Andrew: You got into–I guess greeting cards weren’t next. It was the phone service that was next. Same model for getting new customers?
Frederick: Same model. We also had the added benefit of being able to leverage all of our photo customers and let them know about the phone service.
Andrew: How’d you let them know?
Frederick: So basically we would cross markets. You would send a photo. On the receipt for the photo, we would print an ad for the voice product and let them know, “If you’re interested in phone service, you can use this phone service. Here’s this call to action.” That’s how we created that.
Andrew: Okay. What about the greeting cards that I saw on the site?
Frederick: Yeah. So, those are coming soon. Those are things we’re working on. Right now, what we’re having developed is our messaging product that will allow people to send letters and messages either digitally or through the mail. So, if the institution has digital communication like email, it will send it digitally and if not, it will send it through the mail and then after that postcards and greeting cards.
Andrew: I see. So some inmates don’t have the ability to get email?
Frederick: Yes. So there are some institutions, particularly in federal, that will allow you to receive basically a closed email. So, it’s not email as you and I know it, but it’s basically digital messaging that it doesn’t allow you to do images or things like that, but just text-based messaging back and forth.
Andrew: What about the product that lets people send articles?
Frederick: Yeah. We’re excited about that. That’s in development. That’s part of the messaging app. What the idea would be that one of the big demands is people always call home and they say, “Hey, can you send me some information about this or information about that?” So, we want to make it easy for the family member to be able to print out documents as they would print out at home and then have it sent to their loved one, but we do the printing and mailing for them.
Andrew: I see. So it’s not just, “I came across this article that I thought you’d find interesting.” You’re specifically concerned with this one issue, but you don’t have access to updated information on it. I’ll send it over to you and here’s an easy way for me to do it.
Andrew: The reason I asked about the greeting cards first is I see here in the producer notes our producer said that you said, “We sent 1,000 greeting cards to inmates and I wrote the copy, told them someone wants to send you some photos. Go to this website.” And you got 2,000 signups.
Frederick: Yes. So that was how we were marketing the photo product. That was what we were using for the direct mail.
Andrew: Sending them greeting cards?
Frederick: Yeah. We would produce our own greeting cards and send it to them and they would get a nice greeting card, a nice motivation message and then it would tell them, “Hey, here’s how you can get some photos if you’re interested.”
Andrew: I see. Okay. Yeah. That’s a huge response. You wrote that yourself. You came up with that marketing.
Andrew: Then the other thing that you said that helped grow was the UI change.
Frederick: Yeah. We made so much–I’ve learned so much about user experience, user interface. We’ve spent so much time optimizing it basically from what we’ve been learning. We’ve probably–I can’t even count the amount of changes we’ve made to it, but it makes such a big difference just because of our user base. They’re not super tech-savvy.
So we have to really work to simplify things and make them as easy as possible, even things that we’re constantly making decisions when it comes to user experience, even how much information we want to show, how much information does the customer need to move to the next step. We’re doing those give and takes to try to give the best possible experience. So, we’ve seen changes that we’ve made that can change the needle from 20% or 30% on the amount of photos being sent.
Andrew: What’s one? I kind of see one here but to be honest, I don’t understand what the producer wrote, something like, “We put search the inmate first and then allowed them to upload photos. They completed the process and when the steps were reversed, they were much less likely to complete the process.”
Andrew: What is that?
Frederick: So one of the big changes that we made is we used to allow you to upload photos and then you would use the search function to find your inmate and find out his address and all that information. We realized a lot of people were falling off because they were either uploading their photos and getting discouraged not being able to find their inmate at step two, so we reversed it and we made all of our products inmate-centric.
What we mean by that–or contact-centric, I guess is a better way to say that–is that the first thing you do after you create an account is you find your contact. Who is the person you’re trying to connect with? Once you connect with your contact, then we give you options to communicate with them. So you can choose to send a photo, you can choose to use the phone, whatever you want to do you can choose after that. And then that significantly changed the amount of successful–
Andrew: Why do you think?
Frederick: I think it’s mainly tied to the way people’s brains work. When they show up at our website and our user base in particular, they’re thinking about an individual. That’s what they’re thinking about. They’re not thinking about a photo. They’re not thinking about a letter. They’re not thinking about a phone call. They’re thinking about John. That’s my son or that’s my brother or sister or whatever.
Frederick: That’s what I’m thinking about. So the first thing I want to do is I want to find John. Once I find John, then I’ll think about how do I want to communicate with John? How do I want to maintain that relationship and that contact with John? So, we’ve made it very personal. We’ve made it very focused around the individual.
And then our goal is to bring that person as close to you as possible so that you can interact with him the same way or as close as you can to everybody else in your contact list, just like how you use your phone. You go to your contact list first and then you do whatever your next section is.
Andrew: Plus on my phone, I know I’m going to be able to find my brother if I want to send him a text message, right? So, if it happened to come afterwards even if it was a little clunky, I’d be confident he was there. In this context, I wouldn’t necessarily know that I could find the person I’m looking for or you could find them or you even understand what I’m doing.
Andrew: That makes a lot of sense. Who does your UI experiments?
Frederick: We have a guy we were able to recruit, Peter Vogt, from Texas. He’s been a huge asset. He came in and he’s kind of turned everything upside down and he has us really dialed in.
Andrew: Okay. One of the big challenges you told our producer is you have to build everything from scratch.
Andrew: What do you mean? How’s that different from other entrepreneurs who have to build everything from scratch?
Frederick: Yeah. I think one of the main differences for us is a lot of times we can’t just pull a platform or API off the shelf that does what we needed to do. So we would have to build things that if we were just going to build a phone product for the general public, we could probably just a Twilio API or the Plivo API and be done. But because we’re building it for our user base, we have to go a step further and we have to build the tool before we can use any other tool.
Andrew: I see.
Frederick: We just have a lot of that just because there haven’t been a lot of tools built to interface with this demographic. Had there been, then I guess now we’re inadvertently building that tool to interface with this market that other people can use us, but we’re the first ones.
Andrew: Is that where it’s eventually going?
Frederick: Yeah. I definitely would like to see us move more towards a platform and for us to be able to leverage all the data we’re collecting, just because I don’t expect us to be able to build every product that’s possible. I think that a lot of benefit can be brought to the market if other people might have creative ideas and they can leverage our data and build on top of it.
Andrew: By the way, the name Pigeonly, I misspell it. Does that happen with your users too?
Frederick: What’s funny is the majority of our website, we just recently started putting time to building up our online presence. Prior to, all of our website was direct traffic and it’s because it’s coming from the inside out. So what we give on the inside is our call to actions are all SMS-based. So we’ll tell the inmate, “Have your loved one text “phone” to this phone number,” and then we’ll respond with that text message with the link. They just clicked the link.
Andrew: I see. They don’t even have to type it in.
Frederick: No. People know our name now. People even know the names of our products before, PhotoPigeon, the old days, that we don’t use anymore. They all point to us. People can easily find us now. Now we’re starting to have an online presence. For the first two or three years, it was 100% all from inside out. So it was all direct traffic straight to us.
Andrew: Do you guys have Pigeonly.com too?
Frederick: We do.
Andrew: That helps. Your mom, we asked you about what was a moment of great satisfaction, a time you celebrated. It had something to do with The New York Times. What was this New York Times article?
Frederick: It was right when we finished the accelerator. The New York Times wrote an article about my story. It was funny because the very first time I was in the newspaper, it was my indictment. That just broke my mom’s heart. For the next time to me in the paper for it to be so positive and to be recognized for turning something around and building something that is benefiting so many people, it was a big moment for the both of us.
Andrew: Actually, a typo on your name, Pigeonly.com leads to a competitor of yours.
Andrew: Yes, I think so. Do you know InmateAid?
Andrew: Right. So it looks like they bought a typo on your domain.
Frederick: Interesting. I didn’t know that. I’m going to pull that up.
Andrew: Here, I’ll send you the typo in my chat box.
Frederick: Please. That’s interesting.
Andrew: What’s the best part for you day to day?
Frederick: I think the best part for us is really about just knowing that we’re making an impact with all the people that we’re making an impact with and just knowing how much we’re helping folks that rely on our service. Right now we’re shipping about 5,000 photos a day. So seeing that kind of volume shutting out where we just had a couple hundred in a day to the amount of phone calls that we provide, do two million minutes a month.
So just seeing that type of buy in, just knowing that there are so many people all over the country that are relying on our service. It’s just really encouraging.
Andrew: What about fans? I get the sense that you must have a lot of fans too, you personally?
Frederick: I think I have a lot of supporters. I think it’s mainly because I just represent to them that if I can do it, you can too. It really just takes the idea and the willingness to actually put the work in, you can just build in. I always tell people to focus on building a solution to a problem and it can actually go a long way.
Andrew: It’s such an inspiring story. I feel like at some point, you’re going to have an incredible career as a speaker, author, something because I told you when I heard you on NPR, I guess really excited. There’s something that makes life more exciting after hearing that. I think it’s a sense of possibility. Like you said, if he can do it, I can do it. It’s more than that. It’s he put in the time and that’s how he did it. There’s something to, “I’m not putting in enough time. I could do more,” that’s very inspiring too.
Andrew: And the highs that you reached–Tony Hsieh is there now as an advisor, Mitch Kapor is there for you as an investor/advisor, so many other people are now there with you, the kinds of people that they themselves have super fans.
Andrew: Congratulations so much on building this up.
Frederick: Thank you.
Andrew: All right. The website for anyone who wants to check out is Pigeon.ly or Pigeonly.com. Make sure to spell it right or else you end up on this other site that actually charges more and is the wrong site. I really have got to thank Steven for both being a fan of Mixergy and also making sure that I got this introduction and got to do this interview with you.
And of course my two sponsors are Toptal if you need to hire a great developer and if you want people to actually schedule meetings with you in person, on the phone, go to AcuityScheduling.com or frankly even if you want your team to be able to schedule calls and meetings better, AcuityScheduling.com. Really good.
Thank you so much. Thanks, Frederick.
Frederick: Thank you.
Andrew: Thanks. Bye, everyone.