Andrew: Before we get started, these three messages.
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Here’s the program.
Hey, everyone, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and the place where you go to hear entrepreneurs tell you how they built their businesses, in their own words, so that you can pick up on their ideas and use them and build up your own business and hopefully come back here and do what today’s guest’s doing and interview about how you did it. I’m looking forward to your interview as much as I’m looking forward to this one. So, big question for this interview is, how do you help thousands of people raise millions of dollars to fund their dreams? Slava Rubin is the founder, excuse me, is the co-founder of IndieGoGo, the crowd-funding platform where anybody can raise money for anything. Slava, welcome.
Slava: Thank you! I am excited to be here.
Andrew: Good. I’m glad that you’re here. Help my audience understand what IndieGoGo does by giving them an example of just one project that raised money on your site. I think sometimes we can really understand big ideas through one person’s experience much better.
Slava: Sure. So, IndieGoGo actually has thousands of campaigns that are getting funded every month. So we’re distributing millions of dollars. People can raise money for anything entrepreneurial, anything cause, or anything creative.
Andrew: For example?
Slava: An example that would really resonate is LuminAID, which is an inflatable solar light and these two ladies, Andrea and Anna, from New York, wanted to be able to impact the world by creating an inflatable solar light that is cheaper and more mobile than the typical ways of trying to move electricity and light around the world, especially third world countries. So designed this solar light that is very small and mobile by themselves and it actually inflates like a balloon to be able to distribute the light even further. Similar to other models, what you can do on IndieGoGo is you actually fund the business by pre-buying one of the lights and in the process, you actually also get to send one of the lights to a third world country. So it’s kind of buy one, give one.
Andrew: I see.
Slava: So their goal was to raise, I believe, $10,000 or $15,000 to be able to get this business off the ground and they were actually able to raise over $50,000 in less than two months.
Andrew: That’s inspiring. So they said to the world, “If you pay us for this, and we get enough people to pay us, then we’ll build this and we’ll be able to put it together.” What was the world like before? If it wasn’t for IndieGoGo, if it wasn’t for sites like IndieGoGo, what would these two women who had this idea have had to go through?
Slava: Well, the world has been around for a long time and people needing money has always been consistent. The typical avenues that people go by today or even 10 years ago, is by getting a bank loan, or by getting grant applications, or by maxing out credit cards, or by trying to get money from friends or family, by cobbling $5’s and $10’s and $20’s together on spreadsheets or in your pocket. The challenges in today’s economy: it’s harder than ever to get accepted by a bank, credit card rates are higher than ever, grant applications are more difficult and more competitive than ever, and the actual challenge of cowboy money, one person at a time is just too time consuming. So Indie GoGo created a product to just simplify that process.
Andrew: All right. I could also understand that one of the cool things about it is that it combines customer research with fundraising. You’re not raising money and then going out and seeing if anyone wants to buy it, you’re not seeing if anyone wants to buy it and then looking for funding, you’re combining the two and seeing if there’s a market while you’re looking to see if there are funders, right?
Slava: Yeah. Besides the actual money, there are a lot of benefits. The money is what seems to be the most obvious. What I would say that is if you had $10,000 in your left hand or you were able to earn $10,000 on your right hand with using IndieGoGo, the $10,000 you earn on IndieGoGo is much more valuable. In the process, like you mentioned, you’re actually determining demand. You’re mitigating any risks so you don’t actually have to create something that people don’t want. You’re getting to test market your actual product or idea. You’re figuring out how the marketing works or doesn’t work. You’re actually able to capture all the data for your customers so you can use it in the future. Plus you get the extra promotion of being in the IndieGoGo network and benefiting from the millions of people that are viewing IndieGoGo or contributing.
Andrew: All right. My vision for this interview is to find out where you were before you came up with the idea, see where you got the idea, see how you built this marketplace with two sides, customers and producers, and how you get them all together. But before we get into it, I know my audience and I know one thing they’re wondering is how big exactly is this? So when I said in the intro that you helped thousands of people raise millions of dollars, can you put hard numbers behind that? How many thousands of people have raised money on your site? How many millions of dollars have been raised through IndieGoGo?
Slava: We have over 50,000 campaigns that have been on IndieGoGo since we launched in January of 2008. We’re now distributing millions of dollars every month. We don’t really get into anymore clarity than that. But we’re really excited to have funded campaigns in virtually every country of the world.
Andrew: When you say 50,000 campaigns it’s 50,000 people who have listed their campaigns and have raised at least a dollar. If they raise at least a dollar then they get to keep that money. They don’t have to hit some kind of limit. Do I have that understanding right of the 50,000?
Slava: Not every campaign has to hit its limit. We give money out even if you don’t hit your limit. Our model is completely open where there is nobody that ever needs to apply. We believe the purpose of creating a crowd [??] platform is to democratize the funding process. 50,000 is how many campaigns I’ve started. Some have raised euros, some have raised dollars, some have raised a hundred dollars, and some have raised hundreds of thousands of dollars.
Andrew: What percentage of people actually hit the limit? The magic number?
Slava: The key to hitting your magic number, as you say, it really isn’t that magic. We have plenty of campaigns, thousands of them, that don’t hit the limit as you call it, the goal, and are actually very successful. As a matter of fact, recently we had somebody on Good Morning America who was able to raise three and a half out of their five thousand dollar target. But they ended up actually getting a publishing deal from a New York publisher who found out about their photography. It’s a photography campaign.
So the magic number is really not so magic. It’s really up to you. See on IndieGoGo you can actually set up a fixed funding or a flexible funding campaign. The key is just to be transparent and to be engaging with your audience. Some audiences will never want a funded campaign that doesn’t hit its target. Hopefully that person has set it up as fixed funding. Some people don’t actually care, they prefer never to get that money back. In terms of percentages, it’s really up to you just how active the campaign is. As long as you follow the suggestions on IndieGoGo in terms of the insights of how to create a campaign, a majority of campaigns actually will hit their goal.
Andrew: So it’s not a binary situation where you either succeed or you fail, some people who don’t hit that number actually end up doing really well for themselves.
Slava: Just to clarify, if you set it up as flexible funding, you will get every dollar that you raise. No matter if you hit your target or not.
Andrew: Pre-2008, I read that you were working as a strategy consultant at the Diamond Management and Technology Consultants. What is that?
Slava: It was just one of the strategy consulting firms out there. I did that for eight years after graduating college. So I worked mostly with Fortune 500 companies, helping them to launch new products, or figuring out a strategy as to where the marketplace was going. They recently, I believe last year or maybe it’s now over a year ago, were bought by PWC, which is the consulting firm, so now they’re no longer an independent company.
Andrew: What kind of consulting did you do for clients like Goldman Sachs, Fed Ex, Mastercard from what I understand. What kind of consulting did you do?
Slava: It was all strategy consulting. So just again, predicting where the future was going for their company. What type of products they should be creating or how they should position their product in the market place. Understanding the competitive landscape, understanding pricing, understanding the trends of customers and trying to figure out how to make more money for these big companies.
Andrew: Slava, can we address the elephant in the room here? Do you mind if I get a little bit personal and ask you something here?
Slava: I don’t know what were talking about but sure.
Andrew: You can say, no. But here’s the thing. You walked into this interview thinking it was going to be a thirty minute interview, it’s going to be an hour. I sensed that in the beginning that you were feeling frustrated that it was going to be an hour instead of thirty minutes, talk about that. If it’s frustrating that it’s thirty minutes, I want to know about that. I want to understand what my interviewees are going through. I’m doing this for my audience but God knows if I have hundreds of entrepreneurship who come on and do these interviews and some of them are feeling some kind of frustration. I’ve got to accommodate that too, and be open to it. So be open with me, what’s going on in your head?
Slava: So, are you accommodating, say we’re going to do a thirty minute interview?
Andrew: No at this point we agreed to an hour and I want to stay to the full hour, but I want to understand how you’re feeling so I can adjust in the future. Just like you can’t make someone who’s campaign was fixed, flexible or vice versa. But you do want to understand it so that maybe in the future you can communicate a little bit better or you can create a different product for future people. So, tell me and frankly I should say, Slava, if you wanted even to end it right now I would absolutely end it. I can about you and I appreciate that you would come in here and give me even a minute, but I want to understand the bigger picture even more. So hit me, what’s going through your head?
Slava: I’m actually enjoying this so far.
Andrew: Good.
Slava: In short, I’m planning for a 2012 right now. There might be some people that are already on vacation and taking off since it’s all ready a holiday season. We’re right now on December 20th, so I don’t know when this will air or whatever. But it’s December 20th, and I have a bunch of conversations to have with my coworkers as we plan out some of our things for the next year. We want to walk into January not trying to plan things. We want to walk into January and have a clear vision with the rest of our team. So everybody can hit the ground running as supposed to, kind of, hit the ground wondering.
There’s just a lot of meeting lined up and a lot of this to figure out this week. But that’s nothing new. Interviews and people like you asking for opportunities to talk are much appreciated. And we love getting to talk to folks like you because then more people get to find out about IndieGoGo. I mean, telling my story is less personally interesting, but if it’s interesting to you and your viewers then that’s great. Having people understand that there’s a platform out there where anybody in the world could raise money for anything and nothing will stop them is why I’m happy to be here.
Andrew: Let me humbly suggest something here. And of course you can disagree with me I don’t want to you to just go along with it. But humbly suggest something here. That this is the perfect time for you to do this kind of interview and I’ll tell you why. It’s really easy when you go into next year planning what you want to do month to month. To just get lost in the month to month of the business, and to just get lost in the local numbers. But when you take a step back like your about to do here with me and talk about why you even created this business. How you got this thing off the ground.
My sense is not only will my audience be inspired and they’ll build their businesses and trust me years from now people will come to you and say, ‘Slava, I heard you on Mixergy, you inspired me, I want to come work for you.’ Or,’ I heard you Mixergy, you inspired me, I built a company on based on what you taught me.’ But I believe you are going to walk away from this and I hope you will saying, ‘This is what I built this for, this is where we’re going with this company. I’ve got to have this meeting with people not just with next year in mind but the next ten twenty years in mind.’ What are you thinking?
Slava: Sounds good.
Andrew: All right. You want to get right into it, so let’s go right into it. So you had this idea for a business. Tell me were that I idea come from? What was that germ of the idea that created IndieGoGo?
Slava: It’s three founders, two co founders and myself. Eric Shell, Denay Ringelman [SP] and myself. We each had a shared frustration of how hard it was to raise money using the internet. My connection was my dad died of cancer when I was 15 and then 10 years later I wanted to turn something negative into a positive and I also wanted to ‘deal with it’. So as a New Years resolution I actually decided to start my own charity to raise money. That was in mid 2000s. Eric was on the board of a theater company. Denay had been working with different film makers and other productions to raise money. We got together in 2006 when Eric had gone from Diamond, which is where he and I worked together as consultants and he left because he was on a technology side to go get his MBA at Hoss in Berkeley in California. I went to go visit him like any good friend would, to try to have fun at a weekend at an MBA school. And the three of us all went out to dinner, we shared our experiences, did some research, were surprised it didn’t exist, and then we decided to start it.
Andrew: So you say you’re surprised it didn’t exist. Before that dinner you guys had this idea that this was the business, and this what you were considering?
Slava: At that dinner we discussed this business, yes.
Andrew: So how do you end up with this idea? This is relatively – well, not relatively, it’s very different from the funding models that we grew up with that existed in the years that we were going through school, and as you were working your way through Diamond Management [SP]. Where did this specific model come from?
Slava: Well, if you think about (which is pretty hard for most people to do, because the world changes so quickly that they forget what it was like just a few years ago), but if you can think about it was like in 2006, we’re talking a world that barely used Twitter, Facebook is not really mainstream yet, MySpace is still the hottest thing. PayPal is not ubiquitous but is understood; Obama is not a word that anybody understands, and the traditional ways of getting money were the traditional ways.
You have some interesting trends which are happening at that time – which YouTube is something that’s starting to get a little bit of traction – it’s not owned, I believe, by Google yet. And you have things like Kiva, which are showing that there’s interest in micro-finance; you have things like MySpace and Friendster and Facebook, and all these different things that have shown in the past and currently, that social networking is interesting, and it shows ways of adding the social graph. Yet at the same exact time you have everybody and their mother (from our experience) still frustrated at how hard it is to raise money, because there’s some person in a suit, usually a man, who decides that you are allowed to have that money or not allowed to have that money.
So if the Internet, which is our holy grail for democracy and equality and everybody gets access, is supposed to do that, why is it that it didn’t do that for money? So we just thought we would create a platform and see if it could happen.
Andrew: So you just said why isn’t there some kind of social network for raising money, where people can raise money from their friends, is that the thought?
Slava: Well, in the early days we actually called it ProspaTube [SP], which was a cross between Prosper and YouTube. Prosper (if you’re familiar) is a peer-to-peer banking site which was brand-new at the time. They had just raised, I believe, $20 million from Excel [SP], and YouTube was clearly a very cool platform for engagement with videos and personal connection, and we thought, why isn’t there a place where you can use – you know, the YouTube aspect of it is a metaphor for social media. So why not use all of that social media and incorporate it into the peer-to-peer funding process?
Andrew: I see; so that makes sense. I see the vision. Let me ask you this: KickStarter wasn’t around at the time, right? KickStarter launched, as I understand it, April, maybe 2009?
Slava: Yeah. Since we launched in January of 2008 I think we have actually over 280 competitors.
Andrew: 280 competitors, including . . .
Slava: Over, over – we actually have competitors funded on our site. You can check out StartSomeGood.com, they were funded on our site.
Andrew: So if I wanted to start a competitor to IndieGoGo, and I went on your website, you wouldn’t kick me off and say hey, this is not what this platform is built for?
Slava: Unless it’s porn or completely illegal, there’s nothing that would get kicked off. Even for you, Andrew – we won’t kick you off!
Andrew: You wouldn’t kick me off? All right! I know the owner now so I’ve got an in. Actually, I don’t need the in.
Slava: You don’t even need to know us at all.
Andrew: Of course.
Slava: That’s the beauty of IndieGoGo.
Andrew: All right. So I see where this idea came from; what’s the next after having this meal together?
Slava: Do some research.
Andrew: OK. To look to see who else was out there?
Slava: Exactly.
Andrew: And what did you see that was out there that you didn’t know of before? What did research help you understand that you didn’t know before the research?
Slava: The research was able to show that you’re not allowed to publicly solicit investments. So if you wanted to do IndieGoGo as a for-profit opportunity for companies, it was going to be very, very, very challenging legally to do that. So does that make sense, or should I expand on that?
Andrew: Actually, I would like to understand that; I didn’t realize that. I mean, I understand that you can’t raise money from unaccredited investors; you can’t solicit. So that’s what you saw?
Slava: Yeah, I didn’t know that before.
Andrew: OK. And so if you couldn’t raise money to fund a business, then where did that, how did that change your direction?
Slava: Well, you couldn’t raise money for profit. It couldn’t be a financial instrument; you couldn’t get money and give money back. But there was nothing about actually funding or pre-sales or donations. Obviously, donations have been around for a very long time, and there’s nothing wrong with that. But what we were able to find out because of different rules and the government (and we don’t have to get into too much detail here), but it was going to be very challenging to publicly solicit for-profit investments so we just researched that for a little while to figure out what our options were.
Andrew: OK. So I actually, I talked to one of the founders of Kiva[?] and he said, “Hey, you know what? You don’t have to think too much about the law. You just have to launch it and then you’ll figure things out later and you’ll adjust as you need to.”
Slava: Was it Premal that you talked to?
Andrew: I talked to Premal, who I think wasn’t officially the founder but he’s called the co-founder.
Slava: Right. Right. Good guy.
Andrew: So why didn’t you go with that frame of mind where you say, “We’ll just launch it. We’re entrepreneurs. We’ll figure this stuff out and we’ll adjust as we need to.”?
Slava: Because, at the end of the day, you actually don’t know what you have or what you don’t have until you actually have customer response.
Andrew: OK.
Slava: So the quicker we can have customer response, the quicker we can figure out what we have and adjust and make it better, or figure out that it’s not worth anything and close it down. The idea of a business plan and using theory, it’s a very old-school mindset.
Andrew: So then why didn’t you just launch this raising-money-to-fund-companies idea instead of waiting, just prove it out with the marketplace before you move it out legally? I think that’s what Premal was saying, was that direction that he liked when he saw prosper.com and that’s the direction he saw the direction of, in my opinion, of the real two cofounders of Kiva.
Slava: Right, right.
Andrew: So why didn’t you go in that direction?
Slava: I think we did, actually.
Andrew: Oh, so you did, so at first, even though you did this research that told you you can’t raise money to fund a business, you said, “Let’s try it and see what happens.”?
Slava: Oh, yeah, yeah, absolutely. What we did from the first dinner to the point of launch is we actually had to create the site.
Andrew: OK.
Slava: Without a site, we wouldn’t actually have an Internet company. We would just have some sort of other manual idea. So we did. I would say we actually followed exactly what you’re saying.
Andrew: OK. So you launched this. You were raising money for companies. You had the website up. What was the initial response to it?
Slava: Initial response was good. This was early 2008, before the economy crashed. We had a plan, which was have some case studies in the first quarter, start raising money in the second quarter and then able to raise money in the third quarter and that was all going swimmingly. Then the famous crash of the fall of 2008 happened and that was not so fun.
Andrew: OK. So when you say “swimmingly”, I want to get to the crash and how you responded to that big setback, but how did you get people to discover you in the beginning when you launched this site? Getting the first customer is always tough. Getting the first, in your case, getting the first project up and then getting the first funder in the project would be tough. How did you get people on there, on both sides?
Slava: Yeah, I mean, we focused on really the project owners, in the early days, and we just hit the ground, going from different events and trying to find people that were wanting to use YoGo and, I would say, it was hard work.
Andrew: What events did you go to?
Slava: We went to different conferences, film festivals, and, yeah, literally, net-working events.
Andrew: OK.
Slava: There’s no question that without those early pipeline of campaigns, we would not be anywhere because you need that traction to get the ball rolling. So we were very committed to finding those early campaigns and we did everything to help them and support them without actually doing their campaigns for them.
Andrew: So one of the things that I’ve heard from people who’ve had those kinds of conversations is that they learn how to pitch when they pitch one-on-one, that they see what resonates with people and just by looking at their eyes, they can see which aspect of their pitch doesn’t work or doesn’t convince anyone. What were you learning as you were pitching people one-on-one and looking at them in the face and judging your reaction based on their feedback?
Slava: I mean, this was the very early days of trying to figure out how to make IndieGoGo a positive value and how to spend their time and want them to want to use their time on IndieGoGo. So we had to be very sensitive to listen as to what was interesting to them, what was erroneous, and how to, as you say, get those hot buttons for them to say, “Yes! That’s what I want to do. I want that.” Keep in mind, IndieGoGo has a pretty interesting proposition because it’s this new way of raising money, so whenever people hear the word “money”, their ears perk up, and the second thing is, they think of fraud or it’s too good to be true, so you need to somehow be able to explain to them why it’s not too good to be true.
Andrew: I see. So one of the issues was people were thinking that it was too good to be true. When you have that kind of reaction, how do you overcome it?
Slava: Yeah, I mean, the perfect way to overcome it is by example.
Andrew: OK.
Slava: And just to show the proof.
Andrew: When you’re in the early days, and don’t really have as many examples as you have today, what do you do?
Slava: You just need to make more of a connection and show the people that you’re not just taking them for a ride.
Andrew: OK.
Slava: Show that you’re there with integrity and you believe in this just as much as they do, and you’re willing to help and get them to the right place.
Andrew: Was there something that helped show your integrity or proved to people that you’re the real thing? I mean, were you finding that your resume and your background helped? Were you finding that some connection to an adviser helped? What helped you get credibility in the early days, when most people would have said, “No one trusts me, I’m going to walk away from this business because they don’t believe I’m as good a person as I believe I am.” What was it that communicated trust.
Slava: I think probably just a combination of two things. One, a personal connection, which is trying to literally connect in the very, very… I’m talking about very early days, right? We’re actually talking pre- the launch of IndieGoGo. The first customers that we had on IndieGoGo we had already been talking to even before IndieGoGo started.
Andrew: OK.
Slava: Right? So, it’s one, making that personal connection, and then figuring out how to see the pipeline. Two is really having a product that speaks for itself. Even before it launched, we would share the products to show them what they’d be working with, and they got excited about it. So, it made it easier to have them want to engage.
Andrew: So, as I mentioned earlier, you share a philosophy with many of the other entrepreneurs who I interviewed here, which is launch it and then see the response when you did launch it. What did you feel internally was missing from it, that was different from your grand vision, but you had to launch it anyway? What was the painful part of launching? The painfully missing part of launching? Actually, you’re smiling, so I’ll let you go with what you just picked up on.
Slava: When we launched our product was probably one and a half percent of what we “desired” it to be, but I think that’s an example of you need to do that. One, because you don’t have time to make it 100% done. Two, because when it’s 100% done, it’s actually usually quite complicated. What you need in the early days for an internet company is to get early traction, and to get early traction, you often need it to be very simple. So, sometimes you need to have less functionality and just the cleaner, easier product.
Andrew: What kind of functionality would other entrepreneurs have, in your place, been tempted to put in on day one, that you said, “I’m going to cut this out? I have to accept that it’s not going to have this piece, and that piece and other pieces. What are those pieces that you had to leave out that were a little tough?
Slava: I mean, they’re all a little tough, but just an example or two was… I’ll tell you one that we left out, and one that we made a mistake by not leaving out. A messaging platform, we left that out, so peer-to-peer messaging, but we did allow you to friend each other. Right? So, you can become friends with the other people in the marketplace.
Andrew: OK.
Slava: So, friending did not help in the early days. It actually just confused people to think that we were a social network, which we never wanted to be. So, we actually took away that functionality.
Andrew: All right. What else? Not what else, but now you’ve launched this site. You talked to us about how you decided what to add and what to leave behind. What was the feedback from people who used it?
Slava: What was the feedback? People thought it was really exciting. It was fairly easy to use to create a campaign, but they thought that there was a lot of effort into the promotion of the campaign. So, that was a learning curve, which we expected, but we thought their customers would have to go through that learning curve. There was feedback about our fixed funding model. When we launched we only had fixed funding, and a lot of people didn’t like the fixed funding model. Yeah, that’s some of the early days. I’m thinking back, now over three years, so you’re really testing my memory.
Andrew: It’s looking really sharp, actually. I usually can’t get these kind of detailed notes from people first shot at an interview. OK. I want to come back to that in a moment, but what I didn’t get to ask you about is the funders. You told me about the projects that needed funding and how you persuaded them to come and give your new idea a shot. It seems to me relatively easy to get the guys who need money to come on the site. The guys who will put money in seem a little bit harder. You kind of touched on that by saying that your early response was, “It’s an effort to promote the project.” So what did you do to bring in funders who were going to participate and help fund these creative projects on IndieGoGo?
Slava: Genuinely, on day one, we didn’t do anything.
Andrew: OK.
Slava: . . . to bring funders, except for create a site where all the different campaign owners can bring their own funders.
Andrew: OK.
Slava: So the key to that was creating social tools that were easy to use so that the people who wanted to promote via Twitter, Facebook, YouTube, e-mail, widgets, etc., links, that we gave them the tools to promote easily.
Andrew: Of the ones that you gave them, what was the most effective?
Slava: E-mail, links, Twitter, widgets, e-mail was number one.
Andrew: E-mail was number one. And then they told you, “It’s still not enough.” What do you do about that when . . . how do you solve that it’s still not enough tools to promote our projects?
Slava: I mean you always listen to your customer. Your customer is your number one asset. They are the most helpful, the most knowledgeable since they’re the ones using it. They would say things like, “I want to be on your homepage. I want the widget to be easier to use. I don’t want to have to write my own Twitter words. I want you to write it for me”, so we wrote it for them. We keep on improving the product based on customer feedback and then as the different campaigns started bringing in their different funders, you now have the opportunity to get exposed to a campaign in the process that you might not have seen before. So then people say they want to be on the homepage or higher on the browse page and we just evolved all of that, so to make it better in terms of how we showcase any campaign.
Andrew: OK.
Slava: The evolution, the question you didn’t ask, which is, “Why work on getting campaign owners? Why not work on getting funders?” It’s a very strategic question because wouldn’t it be great to go to a crowd-funding platform where there’s just, like, millions of people with $20 bills in their pocket just waiting to fund whatever is sent their way, one at a time, which is possible. It’s just a very difficult and very expensive proposition because to get somebody to fund something out of the blue is very challenging.
One of the easiest ways to get them to fund is if they have a connection to the campaign. So we, the founders of IndieGoGo, don’t have a connection to all these campaigns. The people who have a connection are the people with the campaigns. So if we find the people with the campaigns, they will then reach out to tens, hundreds, thousands, maybe tens of thousands of people at a time, and if the experience is good enough, then some of those funders turn into campaign owners, very similar to the invite model, like party invites, also very similar to YouTube.
YouTube, in the early days, many people forget, that it wasn’t viewer-driven. It was video creator driven. It was a place where people who created videos would use that tool and then send it out to their friends via text message, e-mail, or whatever. Now, as more people got to see those videos, as viewers, they would then look around and discover more and some of them would say, “I want to make a video too.” So that’s the strategy behind that.
Andrew: So you kept saying over and over, “We listened to our customers, we listened to our customers.” You saw the way that I listen to the people that I interact with, I asked you here, put you on the spot in the interview and I asked you what I could do better, what I do crappily. How did you . . .
Slava: Yes.
Andrew: I’m inventing words here too. How did you go and talk to your users and how did you listen to them? What was the mechanism for doing that?
Slava: The number one mechanism was having the “contact us” link above the fold, actually in the headline, at the top, right next to the other most important links. We’ve since moved it down to the bottom, but we still get plenty of contact these days. We also created a survey, in the process, which was both a pop-up, which was based on how long you spent on the site. If you spent long enough, we would ask you what you think about the experience and we would also do surveys, off-line surveys, asking people what they think about it. Then, we would tediously talk to people and say, “What do you think about your experience?”, in person.
Andrew: How would you do that? How would you do off-line surveys and how would you talk to your clients, your users, in person?
Slava: Well, off-line we would just send e-mail surveys, meaning, like there’s lots of company surveys out there that you can send surveys and ask, “How do you think we’re doing?” and have them fill out a few questions.
Andrew: OK.
Slava: “What do you like better? What do you not like?” And then, talking to them in person, we would either speak to them on the phone, based on them already being a customer, or we would go to potential customers, show them the website and then see how they react, see how they play with it and see what they like and don’t like.
Andrew: How would you see that? Would you put a computer in front of them, or would you have them come into your office?
Slava: Both.
Andrew: Both, and you just watched them as they use it and see where they’re stumbling?
Slava: Or talk with them. Yeah, both.
Andrew: Have you ever done that personally, where you watched someone use your site?
Slava: Oh, yeah, totally.
Andrew: Do you remember one thing that stood out for you that you said, “Oh, of course!”, or, “How could we have done that?”, as you were watching them?
Slava: I don’t know if it’s so clear. It tends to be more like, “Hmm, that’s really interesting that that’s how they look at it.”, or, “Hmm, that’s not how I thought it was supposed to work for them, but they actually look at it a little bit differently.” It’s really incredible how every human being can be different and when you try to make a website especially, really any company, but especially a website, which the attention span that a new customer is willing to give you on a new website is seconds, I mean, seconds, literally. You really need to simplify it at first.
Andrew: I see. OK. You mentioned earlier that one of the issues was the fixed-funding model is what you launched with. Could you remind me again what the fixed-funding option was?
Slava: Sure. So on IndieGoGo, what you need to do is you set a goal, which is an amount of money, and you set a deadline, which is a date between 1 and 120 days of when you want to raise that amount of money by that date. So in the early days, we started out with a fixed-funding option only, which means that if you hit your target goal within your specified amount of days, you get to keep your money and everybody gets charged and everything’s good. If you don’t hit your target goal, then all the money is refunded to the funders, no one gets charged, no money is exchanged.
Andrew: OK. And people were saying . . .
Slava: Sorry, go ahead.
Andrew: No, no, you, please.
Slava: And a flexible-funding model, is where, if you don’t hit your goal, all the money that has been raised still gets processed, everybody gets charged accordingly, and the campaign owner gets the money. So in the early days, we launched only with fixed-funding out of what we thought was respect for the funders.
Andrew: And then when you got that feedback where people said, “That’s not enough for us.”, how did you respond?
Slava: It was really interesting because we felt right away that the campaign owners would get upset because some of them would raise, you know, $8,000 out of $10,000 and not get their money, so we understood their frustration, while others would get $3,000 out of $10,000 and not get their money. So it makes total sense that the campaign owner would be like, “Oh, man, come on! I almost got it. You should totally give me the money.” But the interesting feedback was that the funders, the funders, a majority of funders were genuinely upset that they had to get the money back, because they had already mentally made the decision to give or fund this campaign. So when the money was refunded, they actually got upset because they were like, “Wow. Now I’ve got to double the effort because I still want to send this money to the campaign owner. Now I’ve got to send them a check.”
Andrew: I see. OK. I can understand that. Once you put that money down in your mind, you’re expecting to get the product out into the world or in your living room and if it doesn’t happen, you feel really disappointed.
Slava: It wasn’t even about getting the product or not getting the product, it was about, “I already mentally decided to support this campaign.”
Andrew: I see.
Slava: “Whether I get the product or not, is not my number one reason for giving the money and you’re frustrating me because you’re making me do double the effort as a funder. Why do I have to use this website when I could have just sent them a check?”
Andrew: Why didn’t you just respond to that with education, with a suggestion that people reduce the amount on money that they ask for so that it’s easier for them to hit the target? Why did you decide to change your model for this?
Slava: Yeah, we actually did do that for several months and it wasn’t until the middle of the year that we finally decided, based on the amount of feedback, that we should change the model in the near term and revisit when the demand is showing anything otherwise. So, again, it’s going back to the cliche reasoning of just listening to the customer.
Andrew: OK. Forgive me. Earlier you said something that I didn’t understand and I don’t want to be too embarrassed to ask about it. You initially, the vision was ask funders to fund a business and you discovered at what point that it was not legal and that you needed to abandon and shift the model. Before you even launched the website you discovered that and decided that, that you weren’t going to fund businesses but fund projects?
Slava: Sorry. So just to clarify, our model is to raise money for any idea.
Andrew: OK.
Slava: Whether it’s businesses, causes or creative campaigns. Now, as part of that, what we were looking to do, if possible, was to offer profit in return for any financial investment.
Andrew: I see.
Slava: And what we identified is soliciting a for-profit opportunity is not allowed unless you’re registered on the SEC.
Andrew: And so you never offered that option?
Slava: Correct.
Andrew: OK. Now I understand. Alright, so then, at some point, as you said, the market took a hit. How did you respond and what happened internally and then how did you respond to that?
Slava: In the fall of 2008, as many people probably remember, the economy took a big crash, they say one of the biggest crashes in, you know, probably the last hundred years in American history, and we were definitely in a place where we had to figure out what to do because the company was initially funded by bootstrapping. The three co-founders funded the company.
We had opportunity for external investment, and we decided not to take it before we launched or in the beginning of 2008 because we wanted to prove out more of our model so that we can retain more ownership and have more leverage in the discussion of raising external capital. Now, raising external capital in the fall of 2008 really was no longer an option. Pretty much every financial institution closed the hatches, buckled down, and said time to fire everybody, ‘we need to exist six months from now’. Which is pretty much what IndieGoGo did, just with no money. And we weren’t living lavish lives six months before that happened, and we certainly weren’t living lavish lives for the next six months either.
Andrew: I see.
Slava: I could tell you that, you know, if you could think of what is the…most frugal way of living for an entrepreneur and you could think of that example or metaphor in your head, well that’s exactly what the three of us lived. Between our founders, some of us were living with our parents, some of us were eating ramen everyday, some of us no longer could take cabs or even subways, forget owning a car, that’s just besides the point, and walking places, so, very frugal. But you what it did, which was, we said to ourselves, ‘we’re not going to raise any money from anybody, ‘cuz no one’s going to give us any thing. So we need to start making some money from this process.’ So, it really caused us to stop being cute and less strategic, actually, and really just focus on ‘How do we turn IndieGoGo into making some money?’
Andrew: When you say, ‘stop being cute’, what are some of the things that you did that you’d consider that at moment you said ‘that’s not really right’, ‘no more of that because the world has shifted’?
Slava: ‘No more of that ‘cuz the world is shifting’…
Andrew: Was it offering free everything, was it…
Slava: It wasn’t so much about free everything ‘cuz since the beginning we always had a pricing model, so we were always making money, but it was really less about trying to think about where the world is going a year or two from now and it was really trying to figure out how do we make $10 instead of $5 today, from this customer.
Andrew: I see.
Slava: And there’s a customer that’s hitting our website, and why are we not making money off of every customer that hits our website. So how do we improve the actual funnel of getting them to our site and then converting. And why is it that the people that actually want to pay us are the most obvious revenue, right? People that want to fund a campaign. Why is it that three out of ten people aren’t finishing that process? So…
Andrew: What did you learn about that? Why did some of them not finish the process?
Slava: Well, some of them didn’t want to use Paypal, some of them didn’t want to use Amazon, some of them didn’t like using credit cards, they want to send in checks. So it’s really just learning those reasons and, again, it’s talking, and getting feedback from the customer, and adapting so that we can get more of that revenue. It’s really obvious, like, it’s kind of silly if you think about it. Ten people want to give you $100 to a campaign and three of them, you like, make it impossible for them to give. So…
Andrew: I see.
Slava: Yeah.
Andrew: I wouldn’t have even thought about checks, and how would you even know that somebody would want to give a check. Did you capture their email address before you took them to the payment page, and so you were able to follow up with people who gave you the email but not payment?
Slava: Well, you know what we did, which was actually very smart and also maybe very obvious, which was if we then found out that you were one of those three people who didn’t finish the funding contribution, we then hit you with an e-mail saying, ‘Hey, we noticed we didn’t complete your contribution. Is there any way that we can help you, or do you have any feedback for us?’ And that’s it.
Andrew: You just sent them an e-mail. So how did you get their e-mail address? Tactically, how did you get the e-mail address of someone who didn’t give you payment? I guess you asked for it first and then you took payment?
Slava: Well, in the early days we asked for it first.
Andrew: OK.
Slava: We then eliminated that because that caused too much friction. But in the creating of even creating funding, you actually have to give us your e-mail, so we’ll be able to capture that.
Andrew: You know what, I can see that there’s some people in the audience who, if they got nothing else out of this interview, that alone is going to reshape their business. What else did you do along those lines that made you say, or that resulted in you saying we need to earn some money now, because there’s not going to be funding tomorrow?
Slava: You know, there’s something very focused about knowing that if you don’t make some money, six or nine months from now you’re going to have to actually go back to a job that you don’t really want to have to go back to. And if you don’t make some money now, you’re actually going to have to admit that you didn’t succeed. I wouldn’t even use the word ‘fail,’ because even if we didn’t not succeed, you know, in the fall of 2008 or the summer of 2009, all of it was an amazing, amazing, experience. I would never say that it’s not valuable, or in the long run it’s not something that will forever change the way I think about business. But when you know that the options are either, get your company to make some money for you or have to move on, you get pretty focused – and that focus is very good.
Andrew: You eventually did raise money, right?
Slava: Yeah.
Andrew: How did that happen?
Slava: Through a lot of hard work.
Andrew: OK. By then you had traction; by then the market changed?
Slava: Yeah. Probably the lesson that I would want to say is we ended up raising money, we got a – probably the thing I would want to say is that when you try to raise money, it is very time-consuming. It’s quite challenging, especially if you’re a very small team, to be focused both on raising money and on improving the company. So I would suggest that they always have one focused person working on the fund-raising part, not the whole team, and know who that person is.
Andrew: I see.
Slava: Now separate from that, you need to make sure that you’re not just hitting your head against the wall. If everybody keeps on saying, ‘Not now. I really like it but I need to pass; let’s see the market get better. It’s not you, it’s me,’ whatever – it’s time for you to stop raising money and it’s time for you to just focus back on the business. And ask them (the people who you’re trying to raise money for), ‘What will get you to raise money?’ Sorry, to give money. ‘What milestones do I need to hit? What do you need to see?
And when you get that feedback (because they’re like your customers as well, right, because they’re your investors), then work towards those goals. When you get back to the goals and you actually hit those milestones, then go back into fund-raising mode. Don’t straddle – don’t go back and forth.
Andrew: Was there a big milestone that you kept hearing over and over?
Slava: Well, the milestone that we were hearing is, ‘We want to see that this is a consistent trend, not just a one-off, good month or two.’
Andrew: I see.
Slava: So at the end of the day our numbers kept on going up and to the right, and the numbers did the talking.
Andrew: From the research that I was given before this interview by Ari Andrea [SP], it says, ‘$1.5 million funding led by Metamorphic Ventures and one of Zynga’s co-founders,’ so you did pretty well.
Slava: Yeah, we have one of Zynga’s co-founders, we have one of the early guys from Google, Metamorphic in New York, MHS Capital in San Francisco and a few others. But yeah, I mean, in general we are very happy as to who our investors are. And part of that process, I would say trying to get investors is like trying to date or trying to get married, meaning there’s lots of options out there, but not everybody fits everybody – you’ve got to find the right match. What’s good for me might be terrible for you, and what’s good for you might be terrible for me. So you know, and there’s a lot of principals in the whole, ‘he’s just not that into you.’ You know, the book, He’s Just Not That Into You?
Andrew: Yes.
Slava: You know, like he doesn’t return your phone calls, he says vague things. I think entrepreneurs should read that book and instead of thinking the word ‘boyfriend’, they should think the ‘VC’ [SP].
Andrew: All right. A quick plug, and then I’ve got to ask you one final question that’s really important and of course, I’ll let you go back to your work. The quick plug is this: guys, if you’re enjoying the tactics in this interview and you’re saying Andrew, I want more tactics, go to mixergy.com/premium. I’ve got top entrepreneurs who give you the tactics behind what they do best. One of the people over at Fee Fighters talks about how they get incredible press and gives you specific tactics you can get for duplicating their press success.
I’ve got someone from KISSmetrics who shows you how they did customer development phone calls. She gives you the exact scripts she used to talk to frustrated potential customers to see what they needed to see in a project that KISSmetrics would eventually build. This is what they did before they launched and of course, they built KISSmetrics which is phenomenally successful. They teach you, they show you, they give you specific scripts.
If you’re a premium member, go to mixergy.com/premium and it’s there. If you’re not a premium member, I hope you go and sign up and join us because there’s a lot going on there that I think you could benefit from if you’re building a business. So Slava, with that plug behind me here’s the final question: you’re now thinking about the future with your people. How do you now translate your vision of the future into action steps for your people for 2012 and beyond?
Slava: Great question. We’re working on that right now. We can just put the webcam in on our meetings and you can just listen in for a few hours like a war room.
Andrew: Is there a method that you go through? Do you first put down the vision for the overall business? Do you lay out metrics first? What do you do? How do I copy your model?
Slava: I would say it’s a few steps. One, be on the same page with vision. Two, understand what are the main themes for the year. Three, understand how you’ll evaluate if those themes are hit or not by determining metrics that you’ll measure against for those themes. Underneath the metrics, identify what are the tactics that you’ll actually do to hit those milestones, to follow those themes. Number five, figure out the action plan. Action plans include budgets and resources, which mean people and money which you’ll allocate against the tactics so that you can hit the milestones to follow the themes which go towards your strategy.
Andrew: Well I appreciate you doing that. I’ll let you get back to it. Of course, to the audience, if you got any value out of this, when you see Slava at a conference, when you walk into his office for a job interview, when you partner with him five, ten, I don’t know how many years from now, just say thank you. I always say let the guests know that you appreciate what they’ve done. Let them know that you’ve connected with what you’ve learned from them. I hope you do that. Every time someone tells me that they’ve done it I hear great things sprout out from it. IndieGoGo, you know where the contact form is. Today it’s not above the folder, it’s on the bottom. But you guys know how to find it. Of course, if you see him in person, do what I’m going to do right now. Slava, I know you’ve got a lot on your plate but thank you for doing this interview with me.
Slava: Andrew, thank you very much for your time. In terms of contacting me, it’s totally open. It’s just slava@indiegogo.com. My Twitter is @gogoslava. Anybody should feel free to contact me, especially if they feel they want to debate anything or feel they want to ask a question. If they want to raise money for any idea, just go check out IndieGoGo and we’re here to help.
Andrew: Indiegogo.com, thank you.
