The $300M SaaS startup you haven’t heard of yet

Have you ever felt like the company you started is not the right one? What do you do in a situation like that?

Today’s guest says that he felt like that. He was tired of his business and felt a little stuck because it wasn’t growing as big as he wanted it to grow.

So he came up with a new idea. Today he has one of the biggest startups that I’d never heard of before and I’m so excited to have him on.

Glenn Elliott is the founder of Reward Gateway, which provides employee perks, recognition, communication and engagement surveys.

Glenn Elliott

Glenn Elliott

Reward Gateway

Glenn Elliott is the founder of Reward Gateway, which provides employee discounts, rewards, and benefits.

roll-angle

Full Interview Transcript

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 and more and more you’re finding that many of the entrepreneurs I’m interviewing are people that used to listen to my program, built up their companies while listening and today they’ve got something so big they’re here to do an interview. That’s the goal here. I want you to learn, build and then hopefully you’ll come back here and do an interview with me about how you did it.

As you’re doing it, you might feel like maybe the company you started is not the right one and you’re kind of boxed in. What do you do in a situation like that? Well, today’s guest says that he felt like that–tired of his business, feeling a little bit stuck, wasn’t going as big as he wanted to go and he came up with a new idea. Actually, I don’t even know if the right way to phrase it is to say that he came up with a new idea. He learned from what was working for someone else and ran with the idea.

Today he’s got one of the biggest startups that I’ve never heard of before. Now that I’ve gotten prepared for this interview, I’m super-psyched for what he’s built. I can’t believe I didn’t read about this before on all the tech sites, especially since I’m an avid reader of the tech sites.

All right. Enough buildup. I’ve got to introduce you guys. His name is Glenn Elliott. He is the founder of Reward Gateway. They provide employee discounts, rewards and benefits. This interview is sponsored by two companies that I’ll tell you about later. The first will help you find the next great developer. It’s called Toptal. The next will help get someone on the phone or an in-person meeting with them. It’s called Acuity Scheduling. I’ll tell you more about them later.

First, Glenn, good to have you on here.

Glenn: Hi, there. Nice to be here.

Andrew: Dude, it’s amazing what you’ve built. What are your revenues right now?

Glenn: We’re just releasing 2016 and it’s $300 million.

Andrew: $300 million annual revenue?

Glenn: Yeah. That’s right. It does sound like a lot, doesn’t it?

Andrew: It does. It must to you too. To think about where you were before, which was really respectable to where you are now, which is mind-blowing, it’s amazing. What about profits?

Glenn: Yeah. We’re $300 million in revenue and we’ve got profits at just over $40 million.

Andrew: $40 million in profit. So, this is like a real business. I can’t believe this. Before, you used to have people ask you about this business, whether it was a lifestyle business all the time. What was the business you ran back then?

Glenn: Yeah. The original business I ran, I ran a design marketing agency, website build, branding, back then brochures, everything we could do. We did packaging design. We did all sorts of stuff. I did that. I loved my job there. But over time, I would meet sellers, “Is it a lifestyle business?” And I would say, “No, it’s not. It’s a real business.” And they’d nod their heads.

I realized eventually they weren’t really asking me. They were kind of pointing out that it was a lifestyle business. I guess that’s because when you’re running a consultancy of any type, really–a creative agency is just a consultancy–they’re really, really hard to scale. Your clients always want to work with the founder or the senior guy, senior girl, senior person. So, generally they’re done by people who are passionate about it, who love it and who want to do that for the rest of their life. Once that dawned on me I realized I pretty much had to get out.

Andrew: Why did you have to get out of that?

Glenn: Well, I’m actually an engineer by training. I’m a programmer, a highly functioning programmer, I call myself. Engineers, we like system and we like things that work. So, in my early days, from my one to 20 staff, I was always craving the perfect business where everyone had a proper job and everyone did one thing well. When you’re small, everyone does everything. It was very difficult to define the roles often because you need everyone’s hands doing stuff.

I always craving the business running smoothly and it never did. We’d be down an extra person, now it’s going to run more smoothly. It wasn’t. So, I wanted to get a business to the size where it had a life of its own and it could sustain itself. Not that I wanted to step back, but I just wanted the satisfaction of knowing that I’d built something that had some sort of permanence. I realized I was never going to get that with a consultancy-type agency.

Andrew: It’s interesting you introduce yourself as someone who’s a highly functioning programmer. When you do build a business that works like a computer where it’s all systemized and organized, you must be so proud. You know what you can improve. You know what you can depend on it working tomorrow and you know you can depend on it working even if you’re sick. You said you’re a programmer which also reminded me you told our producer that when you were nine years old, you saw your first ad for a home computer and that made you do what?

Glenn: Yeah. I had forgotten about that. The first time for a home computer, the ZX81–I’m showing my age now–this must have been about 1982, maybe. I saved money every week for about a year to buy it. Yeah. I remember that.

Andrew: What was it about the computer that got you so excited that you sustained your passion for it for months and months and months at such an early age?

Glenn: Yeah. Back then, we weren’t growing up with internet stuff. It was really exciting. It was stuff of the future. I knew I wanted to be involved. The ZX81 had one kilobyte of memory–not a megabyte, a kilobyte. Imagine your smallest USB stick you can find divided by 1,000. So, there wasn’t a lot you could do in it. Nonetheless, within about a year and a half, I had written a couple of games on it, which I sent to publishing houses to try to get published. I wasn’t successful, but that kind of started me out, I guess.

Andrew: The other thing you did–and I’ll move back on to your story in a moment, but I’ve got to talk about your backstory–you started a sweets shop in school. What was this like and what kind of money did you make from this thing?

Glenn: Yeah. I was very fortunate. At my school, our physics teacher, Ken Schaeff, he got involved with a local bank and ran what was called a mini-enterprise program. So, we were aged about probably 14, 15 years old. You could go to see Mr. Schaeff. I remember him really well. You go to Mr. Schaeff and he’d help you write a business plan for your idea and then you’d take it down to the bank and you felt really excited and important because you were meeting a bank manager.

The bank would read your business plan, they’d ask you some questions about it. If you were good enough, they’d give you £50, like $8 overdraft and a business checkbook. I can remember the business checkbook was really exciting because it was larger than a normal checkbook. It had the company name on it, so it felt really important.

So, I did that several times. One was a school sweet shop. Very unhealthy, we sold crisps, sweets, drinks, whatever in a tiny room. It was literally a broom closet.

Andrew: Your school gave you a broom closet to sell out of?

Glenn: Yeah. They lent us a broom closet. It was sort of a semi-used broom closet. We put a lock on the door and we put a piece of wood across the front, stocked it full of stuff and we were open for 15 minutes every day in the morning break. We made hundreds of pounds. We made at least £300-£400, $500, $600 a month.

It was great. We had to pay the school 10% tax. That was also like the lowest tax rate in the world. We kept all the rest of the money. When you’re like 13, 14 years old, you’re living with your mom and dad, you’re making like $400, $500 a month, literally what would you spend it on? It isn’t easy to know what to spend on. I think I had more disposable income when I was 15 for probably the next 10 years of my working career.

Andrew: That’s the way a school should be. They should see you’re excited about this, that you actually get worked up about the checkbook and not tell you to stop selling candy but actually give you space to do it and encouragement. So, I could see how that background would make you feel like you want something bigger. When you were looking for something bigger, one of your clients helped inspire that next big idea. It was the BBC. What were they doing that turned you on to this new type of business?

Glenn: Yeah. So, I’d been running my agency for maybe seven or eight years and we did lots and lots of work for lots of different people. But we had one really good contract, which was with the BBC, the British TV station. We ran all the marketing communications for their staff members club. So, it was a members club just for their staff so they could feel good working at BBC and they got various benefits.

Andrew: Like what?

Glenn: So, they got benefits like there were different groups they could join, like they could learn to canoe or go sailing together or different things like that. One element of it was discounts on shopping and services. There was a lady at the BBC who part of her job was originally sales by calling up people and saying, “Do you want to provide something special for BBC’s 20,000 employees?”

Our job as the agency was just to keep the webpage live, just to make it look nice. I looked at it one day. We had a big contract with BBC. This was a small part of it. I looked at that one page one day and I thought, “These offers are not that great. It’s like a discount on parking at the airport. It’s maybe a discount on a day out at the entertainment place. Ten percent off like Interflora. Many of these offers I’ve seen dropped through by letter books. I’ve seen the same thing. It doesn’t feel special.

I kind of thought if the BBC wants to provide exclusive special deals to their staff, this isn’t really good enough. So, I started to look around to see if there was something that the BBC could buy, like an external service they could buy that would be better. It turned out there were third-party services they could buy, but essentially they all had the same deals. It troubled me for a while, I thought, “There should be something better available.”

That’s kind of what gave us the opportunity to build Reward Gateway. The company, now it’s broad employee engagement technology company doing a whole lot of work on recognition and communication and benefits and it’s very, very broad. But it started out as a very simple employee discount product ten years ago.

Andrew: One of the things that you said was, “Hey, this should actually exist in a more modern way, like it should offer Amazon. It should offer Expedia, Hotels.com”

Glenn: Absolutely.

Andrew: Services and companies that we’re all starting to use more and more of.

Glenn: Ten years ago we were really starting to all get excited about things like that–Hotels.com, Expedia, Amazon. So, the cheapest place to buy something was online. But these old discount programs, they were giving you like a coupon code off a traditional bricks and mortar retailer. It was worthless because I could get the hotel cheaper at Expedia anyway. So, I wanted to create something where you actually could get a better price on Hotels.com and a better price on Expedia.

It was while kind of just surfing the net one day that I stumbled upon the way to do that. It was by using the affiliate marketing industry and the money we could earn from affiliate commission by hosting links to websites. By using that as an income stream and building technology that would give the commission that we got from the Hotels.com or Expedia, give that back to the user.

Andrew: Ah, so when you started, Glenn, you didn’t even need to work those companies and get them to give you discounts or any of that. That person that was working at the BBC, you didn’t need to replicate her job for your business.

Glenn: No. We didn’t. We certainly got massive scale through it. Absolutely.

Andrew: I’ve got to ask you this. Why didn’t you say, “Hey, there is a company already doing this. They’re basically offering it to other businesses. Yeah, they don’t have this digital stuff down right now, but at some point they will and if they do ,they’re going to overtake me. Why would I want to be a little fish that’s about to be swallowed by a shark?” Why didn’t that at all stop you?

Glenn: I think one of things about entrepreneurs is they’re kind of fearless and they do think about risk in quite a different way to other people. All I saw was a market that was ripe for disruption. I saw four or five different players. They were big. In fact, four of them were owned by banks. So, they kind of had a lot of money behind them.

Having a lot of money behind you, being a big corporate can be a downside. They were not agile. They were not fast on their feet. They didn’t understand technology. They were fat and slow. We were a three-person tech startup. We could move fast. We knew what we wanted to do. We wanted to revolutionize that industry. We wanted to turn it completely on its head.

When we joined that market, all the employee discount companies were funded by retailers. Someone would call someone, they’d do a deal and they’d give 10% to the user and they’d get 5% commission for the program too. In order to make something which is genuinely better than anything else you can get on the internet, we need to take all the income we could get, all the income we can get, all the discount and the commission all back to the user. That means that we’re going to have to be paid by the employer. They’re going to fund our bill. They’re going to pay for our other incomes.

Andrew: I see, where other businesses would take a piece of the kickback or what’s given back.

Glenn: Absolutely.

Andrew: You also wanted it to be, you told our producer, SaaS because you wanted ongoing revenue.

Glenn: Yes.

Andrew: You wanted to know that on a monthly basis, you were going to make money. Did you also say to yourself, “I’m not going to switch into this full-time until that revenue exceeds the revenue I have with my consultancy.” Was that at all a factor?

Glenn: The thing about SaaS, when you run an agency, it’s very hard to get recurring revenue. It’s typically clients hire you for project. Even if it’s rebranding a new website in some print media, the project is gone in six months and then you go find the next one. It can be really, really hard. We were really craving that. I really wanted the stability and the growth you could get from being able to sell contracts, sell monthly recurring or annual recurring contracts. That was really, really important.

I kind of–at the time, the previous ten years of my life were invested in that agency. It felt like it was impossible to leave. It was interesting. I did have a kind of a breakthrough moment one day when one of our account managers who is called Stephanie. She’s one of the best people we have and she resigned. I remember being in the shower thinking, “Oh, Jeez. Even Stephanie can resign. Everyone can leave this business except for me. I’m stuck here. I’ve got ten years of my life stuck in it. It’s just impossible to come out of.”

I realized I could leave. I could just walk away from it. Sometimes you can feel really tied to something you built, even though it’s actually not that good. Then I realized I could just build it again. I thought I may think I’m leaving the last ten years, but I’ve learned so much in those ten years that I knew the thing I did next would be much bigger and stronger as a result.

Andrew: I see. Yeah.

Glenn: You can’t take away what’s in your head and your heart. You can do it again.

Andrew: Okay. All right. Let me take a quick sponsorship break and then come back. I want to ask you about this Linemypocket set of emails and phone calls. Actually, here, maybe this kind of ties in. You were making a bunch of phone calls trying to get somebody on the phone, which is kind of what Acuity Scheduling, my sponsor, helps solve.

Here’s a problem. I had this entrepreneur come to me and say, “No one is returning my emails. The system of emailing people out just doesn’t work.” I said, “Let me see what you’re writing.” What he’s doing is he’s saying, “Hey, I’m a great person. Here’s what I do. I think you could really use me. Do you want to get on a call?”

And I think that question seems really nice, but in reality, what he was doing is he was putting a big burden on the other person. The other person now knows they have to say yes and then they have to go back and forth on when. He’s not making it easy for someone to say yes to getting on a call with him, which means if you can’t get him on a call, he can’t make the sale.

So, what I recommended to him, and this was just the other day, I said switch to Acuity Scheduling. What Acuity Scheduling will do is it will give one link that you could give to somebody. So, if you want to schedule a call with them, you could say, “I can help your business. Here’s why. If you want to get on a call, pick on these times and we can talk.”

Then that person would be able to click the link, go to his calendar, pick the time that they want to get on a call based on what actually works for both of them and boom, the call is scheduled. It automatically appears on both sides’ calendars. It automatically will place the phone number that this entrepreneur will need to call to get his potential customer on the phone, puts that number on the calendar so it’s right there ready for him.

Acuity Scheduling is wonderful. For anyone out there who wants to get their sales people on more calls, get themselves on more calls, who wants to do a welcome call for people signing up for their software, you can’t beat Acuity Scheduling. It even works if you want to setup in person meetings. What they do is they will give you a link you can give to someone else with all of your available times. It’s beautiful. It’s easy to use.

One of the best things about it–and I’ve used so many different pieces of software for scheduling–what’s great about Acuity Scheduling is everyone on my team knows how to use it. Some of the other pieces of software are so confusing that no one else can do it and it would always come back to me and I would have to actually adjust it. You don’t want that. You want software that works and is easy for anyone else on your team to use it.

So, go check out Acuity Scheduling. And they gave us a special URL where they’re going to give anyone from Mixergy 45 days free. It’s AcuityScheduling.com/Mixergy. AcuityScheduling.com/Mixergy will get you 45 days for free. I’m grateful to them for sponsoring.

Have you ever heard of them, Glenn?

Glenn: Yeah, I have. It sounds great. I’ve used similar systems myself and they’re great.

Andrew: You’ve used what?

Glenn: I’ve used similar systems myself. I know our sales team does too. They’re pretty great.

Andrew: It helps tremendously. So, speaking of, Linemypocket–what is this story where you tried to get someone at Linemypocket on the phone? Why’d you try to do it?

Glenn: Well, this is how I kind of found out about the whole affiliate marketing industry about how we could reinvent this employee discount industry. I’d been surfing the net and I’d stumbled upon a website called Linemypocket, which was doing discounts for consumers. Anyone could go on there. They could register for a free account. They could start doing shopping and get these small cash back payments.

I was like, “Wow, this is interesting.” The discounts aren’t very big, but the retailers are good. We got a cell hone companies. We’ve got online stores that I would go and shop at. We’ve got pretty much everywhere I can think of. I’m like, “That’s interesting. How are they doing this? If I can bring in the way they’re doing that into this for discounts, that would be the magic.”

Andrew: Yeah.

Glenn: So, I sent them an email. I just emailed their like help app. The first thing I got was like a rejection from their automated system saying, “Please look at our FAQs.” I sent them another email saying, “I’ve got a business idea I want to talk to your managing director about.” I got another brush off again. I said, “No, no, I need to speak to a managing director. I’ve got a business idea.”

It’s amazing to think about it. Ten years ago, we didn’t have LinkedIn. It certainly wasn’t prevalent in the UK. That’s how you did things. A few weeks later, I was sitting at my desk in the agency and our receptionist came to see me and she said, “Glenn, there’s this really young guy in reception for you. He looks about 17 or something. He’s here to see you.” It’s like, “Oh, it’s Chris.” It was Chris Whitecombe, who was the managing director of Linemypocket.

It turned out he was running that website from his parents’ spare bedroom. Chris, we met. We got on. I told him my idea. He told me how it works. I was like, “Wouldn’t it be amazing if we could take everything you know about affiliate marketing and turning that into cash flow customers and then if we wrapped around it everything I know about branding and about employees and about HR and about marketing communications and then also if we got the employer to pay for a program so we could give all the money to employees. So, those small discounts become big discounts. I think we can have a great product and be successful.”

And that was kind of–we didn’t do any market research. People talk about market research sometimes. It can be really useful sometimes. But it’s very difficult to do research on a new idea. So, back then, everyone we talked to like in the trades said we would fail because we couldn’t get over the idea that discount programs were free to employers. Ours was going to cost employers money. Why would anyone pay for something that’s free? It makes no sense. Ours is going to be better because all the money is going to go to the user. I don’t understand it, you’re going to fail. You’re going to be bust.

If you surveyed people, if you surveyed HR buyers, they’d have said the same. Until they could see something, it’s hard to imagine what they’ll do, so you run with it. You’ve got to go with your instinct.

Andrew: I see. Did you partner with Chris?

Glenn: Well, what we did was we agreed to setup a company that we owned together. So, absolutely. We setup what became known as Reward Gateway later, we set that company up together.

Andrew: Okay. And he’s a co-owner?

Glenn: He was a co-owner. Chris left. So, I’ve sold the business twice to private equity, so, once in 2010 and again just last year in 2015. Doing private equity was amazing because as the founder and entrepreneur, you get to sell half your stake holding. So, you get money. You get to take some money off the table, which was nice. You can pay for your house and stuff like that and relax a little bit form the personal finance side. But then you’re still running your business.

The magic way that private equity works, but because they want the founder, the CEO to be incentivized to run a great business, they actually give you some shares back. I’ve sold my business twice and I actually own more of it now than I did at the start.

Andrew: You do?

Glenn: I do. Yeah.

Andrew: How does that exactly work? Why don’t we go with it was you and Chris, you each owned 50/50?

Glenn: No, we got some other people involved as well. We needed a little bit of money to start with. So, we had a CFO and an ops director and stuff. I think I started out with 27%.

Andrew: Okay. That means part of it was you also raised money, right?

Glenn: Yeah. What we did was it’s different to VC fundraise in private equity because the simple way to think about it is if you raise money from a VC, the cash goes into the business. So, your business bank account goes up. If you sell your business to private equity, the business bank account does not get anywhere near that and it doesn’t go up. Instead, the shareholders–so, that’s you and your other cofounders–you get the money personally.

Andrew: What I mean is if you started out with a little over 20%, that means that you raised money, right? Otherwise you wouldn’t have split more–you, Chris, and other employees weren’t the only shareholders, were you?

Glenn: Yeah, we were. All the shareholders were in the business.

Andrew: I see. Okay. How did you end up with less than half?

Glenn: Chris and I had the same amount each. We had a CFO who put some money in. We had an ops director put some money in, the supply manager put some money in.

Andrew: So, you sold the business, which meant that they bought your shares. But they still gave you some to incentivize you.

Glenn: Yeah. Chris left completely in 2010. He official retired, age 29, in 2010 and is still enjoying his retirement now. All my other founders left at the same time. I stayed. I ran the business for another five years until last year. We’d grown it a huge amount. Our first investor invested on a valuation of €40 million. Our next investor, Great Hill, they bought in at €220 million, so big increase.

Andrew: Okay.

Glenn: I ended up with–so, I’ve kind of cashed out twice now, but I’ve actually 29% of shares now.

Andrew: Oh, wow. What’s the company valued at now?

Glenn: Well, middle of last year we were valued at $220 million.

Andrew: $220 million, this thing that you cooked up. I heard that the first version was built over a weekend?

Glenn: It wasn’t much fun, but it was a weekend.

Andrew: And then after that you had another version built in India?

Glenn: Yeah. In our early years, we built our tech from the ground up three times. As a pilot, kind of internally we did version one in India, subcontracted it out there, which has got its ups and downs. We did version two kind of half with a UK-based development team and then we built out version three about a year and a half later in the UK.

Now, actually, we’re now 330 people. We actually now have our entire engineering workforce in Bulgaria where we’ve got an amazing team in Bulgaria. We’ve got client support and employee support out there too. We’ve got over 180 staff in Bulgaria, actually.

Andrew: Was it always–so, I did a search for your company name and I ended up with–what was that website? Do I have that URL somewhere? IBM.RewardGateway.com, for example.

Glenn: One of our clients’ sites.

Andrew: Right. That’s their portal and I logged in and then they said, “Okay, go to your pay stub, put in the number and I realized I’m thwarted at this point, but I get how it works. Was it always a platform like that, that anyone could basically white label for their employees?

Glenn: Yeah. It’s really important when you want to create value for an employer that their employee sees it as their program. So, everything we do for every client is all completely branded to them. So IBM Rewards is one of the very earliest program we’ve done. It’s one of our longest running programs, actually.

Andrew: Okay. You’ve got to talk about how you found your very first customer. I thought that was pretty interesting. What did you do to get your first one?

Glenn: When you get into business, getting your first customer is hard, actually. Getting your hundredth is much easier. When you’re getting your first and you’ve got no client references, you’ve got no experience, you’ve never so sold it before so you don’t really know what things, what hooks people would really get excited about.

As soon as someone realizes they’re the first customer, they get scared, especially when you think about who we were selling to, we’re selling to HR people who are not necessarily risk takers. So, many of them would be risk-averse because their job is to protect the people and protect the company. They don’t want to be first.

So, the very first client we did a deal, we actually paid them to take it. Our second client, we did a deal and we actually paid them but we paid them less.

Andrew: How much did you pay them to take it?

Glenn: We got to our kind of fully independent, all money goes to the employee model–we got there really quickly after about three or four months, but in those first days, we paid the employer or the employer’s club a share of that revenue.

Andrew: I see. So, you said to them, “I’m not going to give you one lump sum, but I will also give you a share of how much money is spent one. . . ”

Glenn: Absolutely. But what we did was those first clients we did that with were really big names. It was the BBC, as you would expect, that we’d worked with before, and British Airways in the UK and then also a retailer called Next in the UK. What it meant was we did those deals kind of quietly. We got them all to sign NDAs. I can talk about it now because it’s ten years ago.

We got them all to sign NDAs not saying that they’d got it for free or we paid them. It meant that when we did our first advertising, which was a few months later, we had client references and quotes from BBC, British Airways and this big British retailer. Everyone in the market, in the industry was like, “Where did these Reward Gateway people come from and how have they won these big accounts?” And it was kind of those names that gave us that instant credibility and then it meant that when we were selling again, it wasn’t client number one.

Andrew: Glenn, I’m wondering about the BBC and British Airways and Next. These guys don’t really need the extra money, especially not the department that you’re talking to. BBC doesn’t need more–they don’t the kind of money you’re giving them and HR is not going to be patted on the back for being a profit generator for the business. How did you get them to take the money?

Glenn: What’s interesting is the clients, the thing that’s common in the BBC and British Airways is they both had independent staff members clubs buried inside them. So, they got a grant from the BBC and British Airways, but they had to bring in their own revenue, so they actually were needing the money.

Andrew: Oh, really?

Glenn: Yeah. Absolutely.

Andrew: I see. You weren’t convincing them this new thing is something they should try. You were just saying to them, “You already have this one employee benefits program. Switch to us and here are the two advantages. Your employees are going to get better rewards and bigger discounts and we’re also going to give you some cash.”

Glenn: Yeah, which they could spend on other good things for their employees if they wanted to. I was kind of like a Kickstarter model. It was a model to kind of prime the pump and get us moving, but we ditched it very quickly. From client number four, everyone paid proper annual fees and all the money went to employees. I think it just shows to get your first clients, you’ve got to be inventive sometimes, even break some of your own rules.

I think whenever I’m talking to startup businesses and they’re thinking about getting those first logos on their sheet, those first references, I always say do anything possible to get the client as long as you’re going to make the client happy. You don’t want an unhappy client. You don’t promise something you can’t deliver. Break all the rules, bend all the rules. Don’t worry about making money off your first clients. Get the clients because you need the experience. You need their logo and you need the reference.

Andrew: You said that then you used their name on ads. Is that where you got your first batch of real customers, by buying ads?

Glenn: Yeah. Again, it’s amazing how things have changed in ten years. Back ten years, we would do mail shots. We’d do magazine advertising in the HR Press. We did a lot of press and PR. It’s interesting. We’re talking about press and PR this week at reward gateway and looking at agencies and things. We did all of our press and PR ourselves internally. We didn’t have a marketing manager for the first five years.

Andrew: What worked for you? It doesn’t seem like a sexy business idea outside of HR, right? What did you do to get press for yourself?

Glenn: You just have to find out which magazines your clients are reading, that’s the most important thing. HR Press it was for us. And then you just say hello to the journalists and the editor. What it turns out is it turns out–everyone thinks it’s really hard to get PR and really hard to get press. It actually turns out it’s hard for PR agencies to get press because journalists don’t want to be fed lines by PR people all the time. But if you’re an entrepreneur or a founder, these people, they want to talk to you.

So, you call them up, you send them an email and say, “Can we get a coffee?” You start off by saying, “I’d like to know what stories are you interested in? What’s useful for you?” rather than saying, “Please print my press release.”

Andrew: And they will tell you what stories are interesting to them?

Glenn: Yeah. They’ve got a job to do too. A journalist at a magazine will have a whole lot of articles she’s got to file every month on time. So, she’s looking for good stories. You’re a potential story. She tells you what she’s looking for, what she’s not looking for, what the readers like and then she waits. I think if you start those relationships by thinking about, “How can I help the journalist?” rather than, “How can I get the journalist to print my story?” that’s kind of how you do it.

Andrew: Let’s go on then with the story. After that, you had your customers. They were coming into you from ads and PR. I’m wondering at what point did you decide, “We’re going to expand beyond this?” At what point did you say, “I don’t just want to give these rewards?” You’re doing benefits, right? Are you guys helping companies find their insurance plans, for example?

Glenn: No. We don’t get involve in insurance. Insurance is a murky industry where we decided we couldn’t get anybody. But we do a whole lot of other benefits. We do recognition. We do thank you awards.

Andrew: I saw wellness on the site, which is what made me wonder.

Glenn: Yeah. We’re investing in heavily in wellness at the moment. We haven’t launched our product yet, but we’re building an amazing wellness team. We just did an acquisition a couple months ago. We acquired Yomp, which is a startup well-being engagement technology. We’ve got a great team that joined us form Yomp. So, we’re going heavily into the wellbeing space in the next year, which we’re really excited about.

Andrew: How did you know what the next thing was to create? You had this one thing that was working for you. Where do you go from there?

Glenn: I think you’ve got to do two things. You have to listen to your clients because to a point, your clients will tell you what they want next. So, our clients told us they want consolidation. They wanted more things from one vendor and they were buying other parts of their overall employee engagement mix.

Andrew: Oh, so they told you specifically, “I don’t want to buy from you and 12 other people. Here are the other 11 things I’m buying. Can you take on more of that?”

Glenn: Exactly. So, you have that. That gives you part of your roadmap. I think you’ve also got to have your own vision. You’ve got to be able to kind of imagine what the market will need before it asks for it. Steve jobs used to use a quote which I think it’s a hockey quote, “You’ve got to skate to where the puck is going, not where it is.”

Your clients will generally tell you what they want now. And they generally won’t necessarily know what they could want in three or four years’ time. I think that’s your job as a vendor. You’ve got to really understand your market enough and you’ve got to bring in your understanding of technology where you and take things and imagine the future.

Andrew: So then how would you know. I think it was Gretzky who said, “Skate where the puck is going.” How would you figure out where the puck is going?

Glenn: I think you’ve got to be deeply connected to your market. The thing which we did very early on which really helped was we decided to be completely dedicated to HR people. That’s the only people we would sell to. So, whenever we got an inquiry, whenever someone would call up and say, “Hey, I’m a customer group manager and I’ve got 100,000 customers. Can we provide your benefit program to my customers?” We would say no.

We said no and we’d give them one of our competitors names and we would turn their business away. It happened all the time. By doing that, we got to completely focus on HR so we got to completely understand HR people and HR as an industry. That’s kind of what gives us the ability forecast where that market should go.

Andrew: I see. Did you actually embed yourself in the BBC’s office for a while?

Glenn: Yeah. In the very early days, we had someone there full-time, four days a week.

Andrew: You hired them but they were sitting in the BBC’s office.

Glenn: Absolutely.

Andrew: Doing what?

Glenn: They were running the account for the BBC. So, they were the customer success manager for that BBC account but they did it from the client’s offices. So, they were completely connected to everything that was going on there.

Andrew: I see. Wow. And at that point, were you getting paid by BBC or were you still paying them?

Glenn: We were getting paid by them now.

Andrew: I see. Okay. Second sponsor and then I’m going to come back and ask you about this quote about defeat that I think is really important for us to talk about. The second sponsor is a company called Toptal. Have you worked with Toptal? Do you know them at all?

Glenn: I don’t. No.

Andrew: Okay. I’m going to introduce you to this great idea. You might end up being a customer of Toptal’s.

Glenn: Okay.

Andrew: The thing about Toptal is that it’s really hard to hire. Is that a big challenge for you?

Glenn: Hiring is always hard.

Andrew: What’s the craziest thing you had to do to hire that worked?

Glenn: Well, I’ve just hired our first ever director of talent. So, I’ve just hired a really, really amazing guy to kind of run all of recruitment for us.

Andrew: I see, like hiring someone to focus on.

Glenn: Yeah.

Andrew: One of the things that I’ve found is that some companies that don’t have hiring managers end up really struggling to find developers specifically because if you find the right developer, it can really change your business. So, they end up looking for–they end up asking the people who they’ve already hired if they can introduce them to friends. They end up paying bounties to people like me or paying bounties to people they work with. They end up placing ads all over the place and then hiring other companies to keep track of all those ads. They do all kinds of things and then often they end up with the wrong person anyway, even after all that.

So, Toptal said, “I think there’s a better way. What if we just create a network of really good people, people who are such good developers that they love being tested, they love being put through the ringer to see if they really are the best, that they take pride in having gone through the gauntlet–is it a gauntlet? I don’t even know that I’m using that word right. Taking pride in having gone through that challenge and coming out a winner at the end of it.

So, they created that challenge. They got the best of the best and they had this network of people. Then they went out to companies and said, “We now have this network. If you want to hire people, we can have them start working with you full time, part time. We can have them work with you on a project basis, if you need a whole team of people, like if you want to get your iOS app up and running, we can do it.” That became the magic that ended up taking Toptal to the top.

Now, anyone out there who needs to hire a developer can just go to Toptal, sign up, tell Toptal what you’re looking for. Is it an iOS developer, an Android developer, something else? Today you can even hire designers. Once you tell them what you’re looking for, their matchers go into their network and match you with the perfect person for you. You get to talk to them. You get to make sure it is the right fit. If it is, you can get started often within a couple of days.

It’s incredible. If you haven’t tried them for developers or designers, next time you’re looking for someone who’s really good, really the best of the best, they pride themselves on that, I want you to go to a special URL they setup for Mixergy because when you go to this URL, they’re going to give you 80 hours of Toptal developer credit when you pay for your first 80 and that’s in addition to a no-risk trial period of up to two weeks. So, that URL is just for you and your friends. It’s Toptal.com/Mixergy. Top as in the best, top, tal as in talent, Toptal.com/Mixergy.

Glenn, I’ve actually interviewed people who said, “I’ve never used Toptal,” then someone in the back of the office said, “We did. I’m the one who put the offer in through Toptal.” So, it’s possible that you guys have even used them and if not, give them a shot. They’re a fantastic company.

Glenn: It’s very interesting.

Andrew: I’m a happy customer of theirs. Here’s the quote that you gave our producer. It’s a George Orwell quote. You said, “Autobiography should only be trusted when it reveals something disgraceful because any life viewed from the inside is simply a series of defeats.” That’s what Orwell said. Is your life a series of defeats? Can you share one of the big ones with us?

Glenn: It is one of my favorite quotes. It’s from a George Orwell short story. I forgot which one, actually. I think you look at like Reward Gateway and it’s a $300 million revenue business in ten years. To some people that looks great. But business is not a straight line. There are a lot of ups and downs to get there. Often, I think the thing that makes great businesses great is their internal ambition is never fulfilled. So, there’s a heap of things that we haven’t done right.

Andrew: Like what? Give me a big one?

Glenn: We made mistakes on a daily basis. I remember a big mistake I made back in 2011 was I was trying to get our US office up and running and I needed someone to run it, found an amazing sales leader, sales director called Tom in the UK. The only person we can trust in the US was Tom, so we looked to find a new sales leader for the UK and we found somebody, seemed great.

We spent lots of times working on the training to get them embedded and gave him a sales team. We were close by, helped him get it running. We were like, “He’s got it nailed now. Tom can go to the US.” Just after that, we realized that the we had in the UK, whilst he was working his best and doing the best he could, he did not have it nailed.

Because we have a 9 to 12 month sales cycle, the things can look good and then they suddenly jump off a cliff because you’re sort of selling what you started nine months ago. By the time I realized that our UK sales were not going to hit for that quarter, Tom was already in the US and we couldn’t really get him back because he was gone even though his visa was all sorted out and he was no running our US business.

So, I went to a board meeting and say to our investors, “Guys, we’re going to miss our sales target this quarter.” We’ve never ever missed a sales target ever. “We’re going to miss our sales target this quarter. Also, I’m afraid, because of our nine-month sales cycle, we’re going to miss our sales target for the next three quarters as well.” I drew a line right through half of them. I had to fire the sales leader that wasn’t working out and then I ran the sales myself for the next six months while I found a new person. I hadn’t previously been that connected into sales for some time. So, that’s just one, but there’s loads of stuff.

Andrew: What do we take away from that? What’s the big lesson? I understand why you would send Tom to the US, he’s the guy.

Glenn: Yeah. He’s the guy.

Andrew: He made the UK so strong.

Glenn: Of course the next time you do it, you’re much more careful about getting to the skin of really understanding whether the person has got the job nailed. So, you’re much, much closer to it. We thought we were close enough to it then, but we weren’t close enough.

Andrew: I see.

Glenn: I think what we always learn a lot when you have some of these things.

Andrew: I see. You’re saying, “We thought we know how this new guy was doing, but we didn’t realize we should have been even more cautious. We should have really paid attention to how this person runs.

Glenn: We thought we were being really close to what he was doing. We thought we were being close to helping, but clearly we weren’t close enough.

Andrew: I want to close out with a deeper understanding of what happened with this private equity thing. I understand why private equity would give you some shares in the business to encourage you to do well. You’re the founder, you’re the leader. They want you to have some interest in doing well, otherwise you’re going to sit on a beach or you’re just going to call in the job. How do you end up with 29%, right? That’s what you said it was after they do the second buy.

Glenn: So I think I might have this on my blog, actually, on GlennElliott.me. I think I’ve got a lesson in private equity math. Essentially what happens is in the typical private equity deal, if you’re a founder, you talk about as selling half of your stake. But what actually happens is you sell all of it and then you take half the money and you reinvest half the money back in the company at the same rate.

Because of leverage, because private equity have bank finance, typically, so you bring in bank funding, because the way the math works out, half the money buys you more than half the shares back. So, let’s do easy math. You had 30%. You sell it for…

Andrew: Let’s say my company is worth $100 and I own 30% of it.

Glenn: Okay. So, those shares are worth $30. So, you’ve got $30. You reinvest half of that, $15. But because you’ve got some leverage, you’ve got bank financing as well, which has taken part the first price, your $15 will probably buy 18%.

Andrew: Okay. $15 will buy 18% of the business?

Glenn: Yeah. If you negotiated a really good package with your investor–when people get an investor or do a private equity sale, the headline number that goes out is what was the value, yeah? So, if you look at the press about our deal with Great Hill last year, it was $220 million deal, yeah?

The bit is not reported because it’s too complicated and people don’t understand it is what was the management equity package. The management package is how much is the new company that you create to buy the asset, how much is that new company to reserve to incentivize the management going forward.

Andrew: I see.

Glenn: So, if you negotiate a good price and a great management equity package, then you’ve got more equity to share out with your management team. Typically CEOs get half. So, if I value your business as $100 and you’ve got 30%, I say, “I want you to stay, Andrew, really important.”

You convince me you’re invested by rolling half your money forward. That buys you 18% back. I really believe in you as a leader. So I’ve created a 30% equity pop and I give up half of that to you personally and the other half is for you to give to your management team however you see fit.

Andrew: I see.

Glenn: So, that means you’re going to have 18 plus half of the 30, which is 15. So, you’re going to have 33%. That’s as simply as I can explain it. That’s how it works.

Andrew: When I have 30% of the business in the beginning that’s worth $100 and they come in to buy it, are they buying the whole thing?

Glenn: Yeah.

Andrew: They’re buying it outright but they’re saying, “Hey, Andrew, I also want you to buy shares.”

Glenn: Yeah. Private equity investors, they’re always really following management. You can sell–if you wanted to sell all your shares and walk away, you can do a private equity deal like that, but you’ll get less money for it.

Andrew: I see.

Glenn: What you’re saying is, “I haven’t got confidence in this business going forward. I want out, whereas if you’re saying, “I’m going to invest half my money back, then the investor’s got confidence that you believe this is a great business.

Andrew: Got it. I see how it works. So, they’re saying, “We’re buying this whole company, but Glen, you’re buying it too. You buy a piece. We buy a piece. It’s going to be a little more leveraged. So, you’re going to end up with more of the business and because we need to stick around and care about this, we’re also going to give you and other management ad apiece of this business.” I see. That’s how you ended up with more than you started. What a fantastic deal.

By the way, your cofounder, Glenn, I was doing research on his as we were talking. He also owned like an affiliate business, right?

Glenn: Yeah, that was Chris.

Andrew: Chris, excuse me. Sorry.

Glenn: He was the Linemypocket guy, absolutely.

Andrew: He owned a bunch of other businesses, it seems like and he was huge on message boards, apparently.

Glenn: Is that right? Yeah. He would be.

Andrew: I kept looking him up and coming up with his personal email on message boards talking about affiliate programs. I can see he was really in the space.

Glenn: Yeah. Great guy.

Andrew: All right.

Glenn: Great guy.

Andrew: I’m grateful to you for doing this interview. Anyone who wants to check out your website should go to RewardGateway.com, right? My two sponsors for this interview are Toptal.com/Mixergy and AcuityScheduling.com/Mixergy.

I’m grateful to you, Glenn, for doing this interview.

Glenn: Thanks very much, Andrew.

Andrew: You bet. Thank you all for being a part of it. Bye, everyone.

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

x