How getting turned away at NY clubs led to a brilliant software

There is a pattern that often comes up in these interviews. And the pattern is finding a problem and then creating a solution by starting a business or product to address that the problem.

Well, today’s guest did that right off the bat. He had a problem himself. He was making good money and he wanted to go out and enjoy life after working insane hours.

He knew he was the type of person club owners would want inside their club but they had no way of knowing that.

So he created software that solved that problem.

Joel Montaniel is the cofounder of SevenRooms, a CRM driven reservation and seating management platform.

Joel Montaniel

Joel Montaniel

SevenRooms

Joel Montaniel is the cofounder of SevenRooms, a CRM driven reservation and seating management platform.

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Full Interview Transcript

Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com. It’s the place where I’ve done over a thousand interviews with proven entrepreneurs.

Today’s guest is a fan and a listener and somebody who’s noticed having listened to a lot of these interviews that there’s a pattern that keeps coming up in these interviews. The pattern is often finding a problem and then creating a solution, creating a business and a product that addresses the problem. Well, today’s guest did that right off the bat. He had a problem himself.

The guy was making good money. He wanted to go out and just enjoy life a little bit after working long, insane hours. He knew that he had enough money and was the kind of person that a club would want in, but the clubs didn’t know that. They couldn’t tell him apart from anyone else. They didn’t know this was a guy who could actually afford to drink here as opposed to a guy who’s just going to walk around and check everyone out and be a little bit creepy. He said, “Aha, I found a problem.”

So he created software that solved the problem, and it actually didn’t go as far as you’d think it would. And the reason, as you’ll see in this interview is because he understood his problem, he didn’t go outside of himself yet. Once he did, once he started talking to the people who ran these clubs and understood their challenges and took it beyond himself, then this business really took off, and he actually has shifted from clubs to restaurants. He created this really freaking cool piece of software that you’ve got to hear about.

First of all I should tell you his name is Joel Montaniel. He is the cofounder of SevenRooms. It’s a CRM-driven reservation and seating management platform for hospitality operators. I read that sentence because my assistant put it together for me, not because I imagine that it’s going to illuminate a lot for you guys.

Let me give you an example of how cool this is. Imagine you walk into a restaurant. You sit down. You have dinner and you order a $300 bottle of wine. The next time you come in, they should know you’re not just some guy who’s coming into the restaurant. They should know you’ve been there before. You’re a VIP. They should take care of you.

Well, with this software, they know that about you, and they can take better care of you the second time. It’s little touches a restaurant like that can do. They can even tap into what you’re doing with social media to understand who you are. Maybe you have a birthday coming up and they can surprise you with a bottle or a glass of wine. Little cool things like that, that’s what Joel’s software does. It’s called SevenRooms. I’m really excited to hear about it and about how he built his business.

And this interview is sponsored by two great companies. The first, if your books stink, if you need somebody to organize your financials, you’ve got to check out Bench. I’ll tell you about them later. And the second, if you need a developer, a really good developer, there’s one company you need to call. You need to know about Toptal. But first, Joel, welcome, man.

Joel: Thanks, Andrew. Pleasure to be here.

Andrew: Before we get into this realization, the reason that I have you on here, I’ve got to ask you about this porn thing that you did when you were younger. Tell me about it. How old were you?

Joel: So I actually look back–because we talked about this on the pre-interview–I was 13 at the time. And I was entering my pre–my pubescent years, I guess, not pre-pubescent years. I was entering my pubescent years, and at that point in time, my world was my grandfather’s Playboys that he had in Oklahoma. He had a lifelong subscription to them. So I was just finding out about these adult content things.

One of the things I was finding out was the internet was coming out. You could access this online. Back then, I’m sure a lot of the younger people don’t know, but you actually had to pay to access this content. Most sites were $20 a month to access that. As a 13-year old, I didn’t have $20 a month, let alone $1 a month to pay for it. I did enough Googling or Yahooing or whatever the search engine was back in the day. I stumbled across a site that gave you access to 1,000 sites for free. It was passwords to 1,000 different sites.

They would update it every month. I said, “Oh, this is great. I now have access to 1,000 sites.” My parents, of course, had no idea what I was doing. This was the time of AOL days. And I decided that I should turn this into a business and I actually ended up starting a subscription company, and I had my mom set up a PO box and she thought I was selling basketball cards online.

It was called XXXtra, and I sold the first subscriptions through eBay. The idea was for $20 a month, you would get access to 1,000 sites. The slogan for it, which I’m still proud about was “More Bang for your Buck.” And so I literally had people sending me money orders and literally cash every month as subscribers to this mailing list. And it lasted probably about four or five months. I don’t recall now exactly how long it went for.

I was actually at home cleaning out my room this past holiday, and I found some old emails I had written to the subscribers thanking them for signing up and how the process worked. At some point in the early ones, I used my home address and then I got wise about it and had my parents set up a PO box to send the money to. So yeah, that was some of my first businesses.

Andrew: You know what? I would have been more excited about the business opportunity at that age than about even the porn. It seems like you had it in your guts. Still you told our producer, Ari, that as an Asian kid, you wanted to, it seems, be a doctor.
Joel: Yeah.

Andrew: Try to do the responsible thing, is that what it was? Even though you had this creative instinct in you, you saw the opportunity, you jumped on it–is that what it was, trying to be the good kid?

Joel: Yeah, for sure. So I’m a family of–there are three kids. I’m the middle child. My oldest sister, she’s the stereotypical “Asian” kid–perfect grades, played the violin, played piano. Some of that stuff didn’t come as easily to me. I did well enough and could do those things. So my parents had these dreams of me becoming a doctor and kind of taking the more traditional route.

At least in the Asian cultures, explaining to your friends what your kid does is part of the whole equation. It’s very easy for people to understand what a doctor or lawyer is. It’s a very respectable profession. To talk about your kid started a business or your kid is doing this or that becomes harder for them to justify or to explain why they packed up and moved over here and risked everything.

Andrew: And it was something that you heard your great aunt say that made you shift direction in life. What did she say? This was a retired doctor, someone who you’d respect considering the direction you were going in. What was it about what she said?

Joel: She really said that a lot of the Medicare things that had happened really changed the patient-doctor dynamic, meaning the doctor couldn’t spend as much time anymore with the patient because they had to get through enough billings to make certain money. For me, that was really tough because I wanted to become a doctor partly because of the medicine, but mostly because you want to help people and you want to spend time with people. So hearing that the industry had changed where there wasn’t that opportunity, it really got me to rethink going into there.

The other thing that really kind of frustrated me without going into too much detail is there wasn’t as much room for creativity. Taking a biology class in college wasn’t that exciting because there was always an answer to the question, right? It was something that I could study enough and do enough, but that’s not necessarily how my brain worked.

Andrew: I get that. So then you went to work for Credit Suisse. This is one of the big investment banks. You were making good money?

Joel: Yeah. We were making absurd amounts of money for our age. We should not have been paid that well.

Andrew: What are we talking about, roughly? I was an intern on Wall Street. I used to see people who were right out of school making a lot of money. I couldn’t understand. Was it millions? Was it hundreds of thousands? Where were they?

Joel: Yeah. I won’t go into specifics for me, but generally people working at these bulge bracket banks as a first year analyst are making anywhere from–and it’s changed now. So, this is back in 2006, when the market was really hot. But you’re making anywhere from $150,000 to $250,000 as a 21-year old, right?

Andrew: Yeah, without any obligations of having a kid or having a mortgage or any of that. But the hours were insane, you told Ari. What kind of hours were you working?

Joel: Yeah. We were working 100+ hour weeks. So what that equates to, to really break it down is you’re working from 9:00 a.m. to 4:00 a.m. and then you’re working weekends from 12:00 to 10:00.

Andrew: I see. So you would go to clubs to like do what, to let off steam?

Joel: It became–so one of my best friends from college–I was never a club guy. I think that’s the irony of this whole thing. I was always into bars. One of my roommates in the city, he loved going to clubs. So he was also working in finance at the time. In the nights where we would get off at 2:00 a.m., which was an early night for us, his first thing was he texted me, “Let’s meet here at this club.”

Andrew: What was one of the clubs that you’d go to?

Joel: Cain was the one that we loved. It’s shut down now. Pink Elephant was also another one that we went to quite a lot. Those were our two favorite ones. So that was really our place where we said, “We’re working really hard. We don’t go out that much.” So you kind of compact what you would have spent at a bar, all the nights you would have been going to the bar and say, “Let’s go get the best of the night life experience and let’s compact that into the one free night that we have.”

Andrew: I get that. I’m looking at pictures of Cain. That does look like a fun place to go out. But it would have intimidated me, I think, in my early 20s. I would have known what to do in a place like this. Were you someone that would get up and dance, or were you just kind of hanging out with your drink?

Joel: A combination of the two. The funny thing is we didn’t realize–we would go in there and we would buy tables. We were the douchey guys buying tables. But here’s the funny part and the irony there is that we actually didn’t understand the purpose of having a table. A lot of people will tell you it’s so you can talk to whoever you want to talk to and invite them to your table.

But what we would do is we would go with a group of eight guys and we’d start off in our apartment drinking around the table huddle around and we’d transition to the club and the same thing we’d happen. We’d huddle around this table and these girls would approach our table and we would shoo them away, be like, “No, no, no, this is not for you.”

Andrew: Oh, so, “You guys didn’t pay for this. Don’t steal our drinks.”

Joel: We were trying to have a good time with our buddies. So we completely missed the whole purpose of doing this or why people do it. For us it was just a social thing, something fun. We liked the music, we liked the energy, but it was really just us in our own little world drinking at this table and not really socializing as much as you think we would.

Andrew: I see. One of the benefits of getting a table is you don’t have the indignity and the time suck of waiting in line hoping that the bouncer says, “Yes, I bless you. You’re allowed to come into my place,” right?

Joel: Right.

Andrew: So at least you got past that. But there’s a part of you that said, “Wait, this is not right. There’s got to be a better option than this.” Talk about the problem as you experienced it as a setup for the solution. I really hope, by the way, as I do this interview that I do a good job of exposing how freaking brilliant this software is. The solution can just be seen in a simple screenshot and it just makes me think, “Why didn’t anyone come up with this before?” Let’s get to the problem.

Joel: Sure.

Andrew: What’s the problem as you experienced it?

Joel: So the problem is–we’ll lay out a night club door, because this is where it started and it’s evolved from there. We’ll lay out the problem. You have a night club and there’s one door person who’s making the decisions about who’s coming in. There are 300 people standing outside trying to get in, and there is a limited set of quantity of tables and room for people that can get in . Inherently, some people are going to get in, some people are not going to get in.

So the challenge that we saw is the nightclub door man is making decisions about who to let in or who not to let in based on a very limited set of data. The data points that that night club door person is using is: Do they know you? Do they have a relationship with you? So that’s step one. But chances are, 90% of the people waiting outside that club, they’ve never been there before and the doorperson doesn’t know them.

The second challenge is they have a piece of paper that they’re using to manage their reservation list, and on that reservation list is simply the person’s name, the party size, if there’s some type of minimum spend they have to make to get the table and then any notes. The problem is that list is getting put together ten minutes before the door opens. It’s being put together by a 19-year old that who knows what they were doing before and they had to comb through this whole inbox full of email with Viagra spam email, with reservations that were from three weeks ago. Good luck making it onto that list.

So what you have is an impartial list to begin with, very limited notes. You have situation where you have a business where their whole business is built on building relationships and then maximizing the amount that they’re making for every single table, which means that they have to pick and choose the right people to get.

What it really boiled down to, what we asked is: How can you make that decision? A simpler analogy akin to if you’re buying a condo in New York or anywhere, a house, the bank is not purely going to look at if they know you or what you’re wearing or who you’re coming with. It’s a business at the end of the day. They’re going to look at your income statement. They’re going to look at your bank statements. They’re going to look at your credit history, and they’re going to decide, “Is this a customer that I want?”

So we likened it to how is this club making any decisions if they don’t have financial statements, for lack of a better term there. But how can they make these decisions if there’s no data there? That’s really where it started.

Andrew: Isn’t it enough that–so I’ve now gone to clubs in Vegas with friends who work at big companies like Google and Facebook. These guys, I’ve noticed, will just buy the table. They don’t even need to sit at the table all night. They just buy it because they have a lot of money and they can get in. Isn’t that all the club needs to know, like do you look good or do you have money? We know if you look good because we can see you. We know if you have money because you’re going to buy a table and that’s it. Isn’t that enough?

Joel: So it’s a starting point. That probably covers 25%. So where it becomes really interesting is the cases that fall in between. So 25% of the tables, let’s say, are for people that look that part. And then for people that they have a relationship with that are willing to come right out and say, “I’ll buy a table.”

Then you have the other 75%. Actually a stat is for most clubs–Vegas is an exception–but for most of the clubs across the country and the world, as crazy as it sounds, half of the reservations or half of the tables will say they’re selling night of. So they don’t even know if they’re going to sell half of the tables. They’re starting the night with only commitments for half of their revenues.

Andrew: I see. They assume that someone will walk up to the door person and say, “Hey, can we buy a table?” And that’s a way of getting in. That’s a problem too.

Joel: They’re playing this guessing game for half of the tables, and then it comes down to do you have enough data on these people to actually make the right decision. The challenge is–and we’ve seen this all across the board. Night clubs are more in line with this.

But the challenge is quite frankly some of their most valuable customers and some of the wealthier people, a lot of times, they don’t have the right look and they’re the least well-dressed. That’s a whole kind of fallacy with this whole thing. The least well-dressed person in the room is probably the most successful or the most wealthy on paper.

Andrew: Yeah.

Joel: So there are many times where I’ll hear a story about someone where they literally own the real estate of the club. They are the real estate owner.

Andrew: Of the building that the club is in.

Joel: And they can’t even get in to this place. It’s not because they don’t know the right people. It’s because they don’t want to be that guy that’s like, “Don’t you know who I am?”

Andrew: That is such a douchey thing to do. So they’re waiting in line or passing up–okay. So you have this idea. Is the next step that you took to go and code up a first version?

Joel: Yeah. So we looped in one of my best friends from home. I’ve grown up with him since I was 10. He’s our CTO, Kinesh. And then one of the people I worked with at Credit Suisse, Alli, those were the first–this was the first team. We’re still all together. So this original solution was let’s make it easier for the consumer to get access to these places. If they’re willing to pre-purchase ahead of time, they’re willing to commit and indicate to the venue that there’s someone that can spend that–

Andrew: I see, like OpenTable for going out.

Joel: For going out. That’s right.

Andrew: Okay. You’ve got to tell people, since you didn’t have a lot of friends in the business, how you went about meeting the people in the industry so you could sell.

Joel: I’ll go into a little extra detail here because I think it’s interesting. So we were about to launch this service and we were looking at two competing blogs to launch us. One was called Guest of a Guest and the other is UrbanDaddy.

So what’s really interesting is Guest of a Guest was helping us out, and they were fairly well connected. The founders were great people. It turns out one of the founders is one of the Winklevoss twins.

Andrew: I didn’t know that.

Joel: Yeah. It’s funny because I was talking to him and his name was Cameron. Literally I talked to him on a Monday, and I’d be sneaking into the cafeteria to have this conversation with him. I was like, “Hey, dude, what’s going on? Where are you?” He’s like, “I’m in Jersey rowing.” I’m like who on a Monday afternoon is in New Jersey rowing?

So they were trying to help us. They couldn’t get us because we had all the mid-tier clubs. We didn’t have any of the top, top-tier clubs at that point in time. So they were trying to help us get to the right people. That really wasn’t working out. So leave it to fate, where we were about two weeks away from launching and both publications were like, “Well, you guys have got to get these big-name clubs. We need to make this a story.”

So I went out one night and I ended up finding–I got into this club. I was pretty drunk. I found this pink Blackberry on the ground. I was like, “This is really interesting.” I end up trying to text to give it back to the person. I’m not getting any texts back. The next morning I get woken up by this alarm. The mom of this person is calling the phone. I see that the alarm says, “Modeling shoot, 8:00 a.m.” I’m like, “Oh, this is interesting.”

I get into work and I have my meetings and I’m very hung over. So I talk to the mom, I’m like, “Hi, I found your daughter’s phone.” She’s like, “Oh my god, Casey’s going to be so happy. Thank you so much. She can be a space cadet.” She’s like, “I’ll have her dad come pick it up from you.” Of course I’m like, “No, it’s okay. I don’t mind dropping it off to wherever she is,” trying to be the good Samaritan except not. And I’m like, “Okay, fine. Here’s where my office is. Have her dad come meet me.”

Five minutes later I get another call from what turns out to be her boyfriend and her boyfriend wants to come pick it up. He ends up working it out with the family to come pick it up. He calls me back and he goes, “Dude, you seem like a really good guy. I want to return the favor. Most people don’t return phones. Let me do a favor for you.” I’m like, “No, don’t worry about it.” He goes, “No, seriously, let me do something for you.” I’m slumped over like this. I ‘m really slumped over because I’m very hung over.

Finally he doesn’t relent, I said, “Okay, fine. What can you do?” He goes, “I work for the hottest night club in the city.” And I’m expecting him to say some mid-tier club and he says 1 Oak, which at that point in time was the hottest place. Even if you wanted to say, “I’ll spend $100,000 to get in,” they’d tell you no. They’d tell you to go away. Long story short, he goes, “Come with me for a night out. It’s going to be Casey and all of her model friends.”

That night, Leo DiCaprio was at our table, just crazy people. Long, long story short, he ended up walking me into the meetings or into the doors of all the club owners around the city and that was my first introduction to them. That’s kind of how we got them on board.

Andrew: Unbelievable. I’m looking at photos of it on Google Images. It does look like a fun place to go out. All right. Let me do a quick sponsorship message and then I’ll come back to what happened when you finally got on UrbanDaddy and you launched the first version and how things changed after that.

The ad is for a company called Bench. Do you know Bench? Have you heard of them, Joel?

Joel: No. I haven’t. Tell me about them.

Andrew: All right. Here’s what they do. They do bookkeeping, which sounds like a very boring thing, unless you’re an entrepreneur, in which case it could make or break your whole company. I had this period in my life at Mixergy, frankly, where we were making money and I thought, “It’s all coming in from PayPal,” and then later from Stripe, “It’s all getting organized. I think I know where the revenue is. I think I know what my expenses are because I have a credit card statement for expenses and Stripe and PayPal for revenue.”

What I didn’t realize was there are a lot of other random expenses that were coming out of my bank account directly because if you do HCH–ACH, is that what it is? Where they wire and then you get a discount–so I did some of that. And then there was money coming in from other places, like American Express. Anyway, it wasn’t being tracked properly and it wasn’t being attributed to the right months.

What I thought we were doing was actually not very good. I’m an entrepreneur. I always think that the worst is always going to happen. I have to fight because the world’s against me, the numbers are never good enough. I didn’t realize we were actually doing pretty freaking well. I didn’t then invest that money properly. Worse, when it came to October 15th, it was actually more like February 15th, my accountant asked for my data and I said, “I actually don’t have it.” I spent months trying to put it together.

It was bad business management on my part. It was a misunderstanding where my business was. It was a time suck to finally get it all together and that’s not the way that finances should be. We have to have the right system. Now, most people at that point would just go out and get a bookkeeper. What did you guys do at your company?

Joel: We ran it internally for quite some time and we had the same exact issues that you’re talking about.

Andrew: And when you did it internally, who did it and what were the issues you had?

Joel: So we had our CTO do it and we said, “Hey, you just graduated business school. You should know how to do this.”

Andrew: Right. “You graduated business school. Now keep track of how much money I spent on lunch yesterday.”

Joel: Exactly. And then probably every four months or so we would have a Sunday working session where it was categorizing expenses, trying to figure out, “Do you know what this line item on the credit card statement is, this X2781?” And then we ended up moving it to a service similar to Bench and it’s made life much easier now.

Andrew: That’s the way to go. You could hire just a single bookkeeper. Accountants will introduce you to someone if you want it, but that single bookkeeper could be sick, could be a little bit shady. We talked in the past on Mixergy about how Mark Cuban had somebody do his deposits, his check deposits and the person stole money out of the account. You never know who they are or they could be sick or they could end up changing their direction in life and then you’re out of luck.

What I like is a service where you have multiple people. If one person is out, there’s somebody else to be there. And if one person does a great job, there’s at least another person to keep an eye on them and make sure they didn’t miss one of the expenses.

I also like Bench because they have this team of bookkeepers, but they also have automated software that will suck in the data from Stripe, that will automatically remember oh yeah, for this company when we’re talking about Mixergy, if Andrew happens to be at 1 Oak, it’s entertainment, but for SevenRooms, if they happen to be at 1 Oak, it’s actually a business expense that could be treated differently. When you have software that sucks in the data and automatically categorizes it, you don’t have these problems where someone has to remember Andrew actually goes out for fun to 1 Oak but Joel does business at 1 Oak and it’s a different way of doing things.

So Bench has software. They have people. They do your books. It’s an incredible company. Anyone who’s listening to me should go check them out. Here’s a special URL where they will give you a big discount because they’re sponsoring Mixergy and they want to see if Mixergy people actually convert into customers. If they say, “Hey, go to Bench,” they don’t know if we converted. If they say go to Bench.com/Mixergy and we’ll give you a big discount, then there’s an incentive for people to go to that special URL and they can tell if I’ve done a good job as a guy reading their ads.

So here’s a URL. Again, Bench.co/Mixergy. And I’m grateful to them for sponsoring.

All right. So you had an in. You had–you actually got on UrbanDaddy, which is a great place to launch. And then what happened? Did it work out? Did the first version kill it?

Joel: Yeah. I wish I could say yes. It was the exact opposite of what we thought was going to happen. So what we thought was going to happen was lots of people would come to the site, would book reservations, would pay us lots of money, would email us about how great we are and how we’re changing the world and how amazing our service is.

What actually ended up happening is 100,000 people hit our website, the website crashed momentarily and then never came back. It was something that we spent two years working on the side on. It was something that we thought we were so smart about and clever about. We thought we were solving a real need. It actually was very depressing for quite some time because you basically invest everything you have into from a time and energy standpoint and when it doesn’t turn out the way you want it to work, it was a very good lesson for us, but it was a very hard lesson.

So we spent about six months kind of licking our wounds and trying to figure out and diagnose actually what happened, why did this not work out, and we went from a momentary period of feeling bad for ourselves to trying to actually understand and get down to what happened. At that same time–I’ll pause here–but at the same time, that’s when I was starting to work at LivePerson and starting to learn some of these lessons and get some of these insights. So those two things really happened right at the same time, and it was an interesting intersection or cross-section.

Andrew: Why did you leave finance to go work at LivePerson?

Joel: It was one of those things where I’ve always been trial by fire, learn by doing and I knew a couple of things. I knew that I wanted to build a business. I saw tech happening around me. So I thought tech was a natural place to build a business. And I knew that if I wanted to go ever start a tech business, I had to know what I was doing, especially if I expected someone to come join the team. I was like, “Okay, if they ask me why I should join or what I know about tech, what am I going to say to them? I can’t show them a spreadsheet I built in finance.”

Andrew: I see.

Joel: So around the same time, it’s actually interesting. My group at Credit Suisse got shut down. I got laid off. It’s a whole other story. I thought I was actually getting promoted.

Andrew: Wow. Okay.

Joel: And at that point in time, it was a decision whether to stay in finance or whether to go into tech. So this was 2009. Tech wasn’t really a thing in New York. I applied to two tech jobs, LivePerson being one of them, as a developer, which I didn’t know how to code. And then the other jobs were finance jobs. So I ended up getting a finance job.

At the same time, before I got that finance job, which was at a real estate fund, I interviewed with the head of product at LivePerson, this guy Julian, and we really hit it off. At the end of the interview, he goes, “Okay, now I need you to take this coding test.” I go, “Shit, okay.” Excuse me. I took it and of course I got zero out of ten. I failed it miserably. He emails me and says, “Thanks for coming in. I thought it was really great. We’ll keep your résumé on file, and if there’s a position that opens up, we’ll bring you back in.”

Of course, companies say that to you. You never think they’re going to reach back out to you. So six months into this real estate fund job, which was great too because my two bosses who were very entrepreneurial, came to the states not knowing a lick of English, Israeli guys, had built a phenomenal real estate business.

Andrew: So, C&K Properties.

Joel: C&K Properties, yeah. Literally, we would drive around the city and Meir, one of my bosses, he was like, “If I’m making less than 10% for my family every month, then I’m doing them a disservice.” Here’s a guy worth over $100 million.

Andrew: If I’m making less than what, 10%?

Joel: Ten percent of my money every single month.

Andrew: He wants a 10% return on his money every month?

Joel: “I’m doing my family a disservice.” This was a guy who for 25 years was grinding, hustling. So you work under people like that, where you realize how driven they are. It’s not necessarily–the money, I think, is a measure, if you will, for someone like that. You realize how hard they work. Six months later I got an email back from my person asking me to come in, but that was kind of one of the crossroads or forks in the road, I guess.

Andrew: So you go in to talk to LivePerson. Did you get to meet the founder, Rob?

Joel: Yeah. He was in all three of my interviews. I’ll never forget the day that I met him. He’s sitting across the table and he was fidgeting. I think we were meant to meet for half an hour. We ended up meeting for much longer. What I saw and what I heard was really amazing, which was you have–what he told me without going into too much detail was, “We’re coming upon our 15th year of business.”

“Every five years or so, our growth starts to plateau more than I want it to. I think we’re still at a point where we can be growing 100% year over year. So what I really want to do is get to that growth rate and we’re entering in where we want to expand our product lines and rethink our business. So there are different ways to do that. One way is you can release new products.”

And at that point in time, LivePerson was a single chat product company. It’s now a multi-product platform, which is really cool. Two, and this was what really got me, was, “We can change our culture. Our culture is 15 years in the making. It’s international. It’s global. We have a big tech office in Israel. We have an office in San Fran. We have an office in Atlanta, New York. We have this way of doing things, but if you can actually change the culture and you can get more out of people collectively, then you can start to achieve that growth rate too.”

Why that really spoke to me is I had been around successful people in the finance world and they didn’t–most of the people I had met with, they didn’t really care about culture. You were a cog in the wheel. Here you had someone who is just as successful as everyone else I had been around, at least on paper. And he was actively thinking about, “How do you change the culture? How do you break the mold?” For someone that thought that way too, that really resonated with me.

So we ended up meeting a few other times. He put me through a crazy interview process. The very last round–by the way, I had no tech experience. So he had no business hiring me to begin with. But the very last round, he asked me, “I want you to write a paper, and if you were the president of the U.S.,” and this was 2009, “How would you get the U.S. out of a recession?”

So I ended up writing a paper that same day, so excited by it. It was basically if I was president of the U.S., I would take government dollars and use that to subsidize startups. I saw them doing that, actually for debt and for financial instruments trying to shore up that part, but for me, it was like if you can actually invest in startups, then that would create job growth and that would create a more vibrant economy. I ended up turning around this 20-page research paper.

Andrew: 20-page research paper?

Joel: Overnight. I was an English major. That was partly my diverse background. I was [inaudible 00:33:12] but also English. So I kind of knew I can’t write to save my life these days, but I had fully researched this paper and sent it to him with all these references and fully researched and that same day, he called me up and he was like, “Let’s talk about you coming on board.”

Andrew: Why did you apply for coding jobs when you couldn’t code?

Joel: That was all I saw. So I went on this site. I forget the site name now. But my idea was how can I get my foot in the door.

Andrew: I see. You just said, “I’ll figure out how to code once I get the job.” Got it. But you just want to learn how these startups worked. You couldn’t have found, I think, a better guy to work for, especially in that part of the country. Rob, I did an interview with him which you told me about before the interview started, you know that interview. He was so freaking open in that interview. He was open even before the interview.

It’s one of the reasons why people for years remember his interview. Anyone listening to me who hasn’t heard Rob’s interview from–just search LivePerson on Mixergy. Go listen to that interview. It’s great for business. It shows how he came crashing down at one point in his life. But it’s also great for the mental side of entrepreneurship because he gets into going to therapy, how he built himself up, how he built up his business.

You said going there helped you learn how to build your company right. What did you learn from Rob? What did you learn from working at LivePerson that helped changed this business that before was actually called–what was it called? Nightloop and today it’s called SevenRooms. What was it that changed in you?

Joel: The first thing is the level of work and commitment that it takes. So what I was fascinated and surprised by–I don’t think it should be a surprise, but when you actually see it up close in personal, it’s when it really hits you. Rob 15 years in the making had gone through everything you can go through and then some as an entrepreneur. He was the first guy in, last guy out. A lot of people say they’re the first guy in, last guy out. Maybe it happens every once in a while.

But literally, late nights spent with him just talking about life, talking about the business, him being completely enthralled by it and so passionate about it. That was the first thing, which is basically if you want to do this, if you really want to go build a business and go build something completely new, you cannot half-ass it. There are no nights off. There are no days off.

Andrew: Before you guys were doing this part-time while you were working in finance.

Joel: That’s right. So the level of commitment it takes, not just from a time standpoint, but really just committing your entire being to solving something or building something. That’s one of the takeaways is just–

Andrew: What else did you learn?

Joel: So trusting and getting the right people. Ultimately I think a lot of people know this. A lot of people talk about it. But one big thing that I learned that was a revelation to me is unless you’re Steve Jobs, most companies don’t have the answer and they don’t know. So I thought you launch a product and you did kind of a consulting analysis where you say, “Here’s the problem, here’s the solution.” Then you kind of launch it and it’s done.

In this case, what I learned is no one actually knows the right answer. You know directionally which way you have to head. Ultimately what will help is the customers you talk to or the end users of the product, they will guide you on the right path. You’re never going to know exactly what that right path is, but if you actually trust in the process to talk to enough of your users to help guide you and then you have the right people on the other side.

So it takes both. You need to be willing to talk to your users, throw away the game plan, understand that those people are going to create that game plan for you. If you have the right team in the room to be smart about it and think about it, they’ll get you there.

There’s a really interesting analogy that I heard and I went to this thing called Summit at Sea. If anyone hasn’t been there, I was a little bit of a skeptic, I’ll be the first person to say it, but it actually is a phenomenal experience.

It reminded me just as we’re talking–Quentin Tarantino actually had a really similar analogy to this. It makes a lot of sense putting it into this context or lens, which is when he writes a movie, it starts by first coming up with the characters in his mind and they’re literally having conversations with each other. He’s able to write the first half of the movie, but the second half of the movie gets written by itself based on what he’s done in the first half and where the characters have gotten.

In the same light, I think a business and a product is much the same way. You start out with a hypothesis and the characters are really your customers. Those characters are actually telling you and interacting and they’re guiding you along this path of how the ending should happen. It’s never an ending, but it’s really how the product will start to evolve and what that journey will look like.

Andrew: I see. So you realized you needed to talk to your customers and continue that dialogue. What did you do? How did you start having those conversations with those customers?

Joel: So it started with, “Can we come by and talk to you about how you operate today and your problems?” So one of our cofounders, she had one of her alumni, who coincidentally owned a club here in the city, he goes, “Yeah, why don’t you come by? I’m happy to talk to you.” We were supposed to go there for an hour. We ended up sitting in the office for about six hours.

We were just fascinated by all the things that were happening, many things such as, “So I got this request in. It’s over email. I don’t know who they are. Our first process is we start Googling them. We look them up on Facebook. We try to find out what we can know about them before we reach back out to them.” We started this customer research phase, which was interesting.

And it started–going back to your question–it started off as these initial conversations and it turned into us actually spending time learning how their business runs and actually being a part of how their business runs.

Andrew: You were just sitting around–first of all, you interviewed them, you asked them questions and second, you were sitting around watching what they did, things that they may not think to tell you, like we Google our people. Who admits to that? Who even notices that they do that?

Joel: That’s right.

Andrew: I see. What else did you see while you were sitting there?

Joel: We saw the list being made. We saw the challenge of it, of going through the email box trying to figure out who that person was, what they’re actually asking for. We saw the operational process, where it’s as much of a grab bag as you think it is, where they don’t know who’s going to come in, they don’t know–it’s kind of fly by the seat of their pants. We actually worked some of the doors.

We were–I remember quite frankly standing at the host stand and people being like, “What are you doing here? You’re not this hot, 6’0″ tall model that usually runs out door.” The owners were very quick to be like, “No, they’re learning. Let them be here.” We got the benefit of people being very supportive of us very early on. But we were able to see how decision making was done at the door. We were able to witness the interactions the team was having on the side.

We were able to see just how that whole process from beginning to end worked and it’s exactly what you said, Andrew. It wasn’t so much the things they told us because those are the things that are going to come out in the one-hour interview.

It was actually everything else that we had witnessed, all of their habits, all of their patterns, all of their ways of doing business that actually will end up–for us, at least, I think for other businesses as well–will end up asking all the difference in the world because there’s 1,000 different ways to skin something. But the more nuances you understand of the business, the more you get where they are trying to get without them having to say that to you.

Andrew: So you took all that back. Did you talk to any other clubs?

Joel: We did this with 20 or so places, at least, in the early days.

Andrew: How did you get 20 or so places to let you in?

Joel: Partly because our initial idea had failed. We said, “Guys, we’re going back to the drawing board. That didn’t work. We’re taking this new approach. We’re looking at your technology and your systems and trying to help you build better relationships with your customers.” It didn’t come out that cleanly back when we were talking to them. I’m sure it was mumble jumble. But it was, “We need to do research.” Partly the thinking was as I was learning at LivePerson, let’s make sure we really understand the end user.

Andrew: But why did they let you in? Frankly, like you said, you’re not a 6′ something model. You’re not a beefy guy. You’re not someone who looks like you’re in the club scene. Why are they letting Joel in?

Joel: I think they respected the hustle because we had tried to build something originally that originally I did try to help them. So, we had this pre-existing relationship. So, after that point, it was, “We know that Nightloop didn’t work. We’re trying this new thing. We’d love to talk to you about your business. We’d love to spend time with you.”

Andrew: Got it.

Joel: It wasn’t like everyone was like arms open, so we took whatever we could get early on and get–

Andrew: What’s an example of something that’s just scraps then you took it even though what you really wanted was to spend six hours in their office, you instead did what, or you got what?

Joel: It’s, “Hey, why don’t you come by tonight? Come hang out and see it.” So we come by. It turns out the guy’s not there that told you to come by. It turns out that he’s not going there until 3:00 a.m. Okay. Now you’ve got to figure out what’s going on. So, you meet people. We basically inserted ourselves into that world. We met some people and then just being persistent and the door person is seeing you 20 different times, “Okay, this kid is up to something. I don’t know what he’s exactly up to, but I’ve seen him enough times now where,” and he said at least a few of the names I know, “Okay, great, why don’t you come in?”

Andrew: I see.

Joel: The other thing I think they really respected is this–and we still do this to this day–which is we went open to close with them. Even though we said we were going to come for an hour, we went until their lights came on. I think they really respected that because it was like, “Okay, you’re in the trenches with us. You actually are spending time. You’re investing in us. You’re not just here to party.”

Andrew: Did you do anything–oh, right. That’s the kind of business where people would hang out because they want to be a part of it somehow. Did you do things like take out the trash or help out?

Joel: My secret trick is actually bringing them candy. So they actually–

Andrew: Bringing them candy?

Joel: Candy. Restaurants, the host, they get a family meal, but throughout the night, they’re on their feet, they’re running around, they’re young. I brought them whatever type of candy–I’d literally go to CVS, buy $50 worth of candy, drop it off at the host stand and I’d be their best friend.

Andrew: This is the kind of thing that most people would think they’re too good to do or would think it’s a waste of time. In reality, they’re intimidated by it. It’s not that they really are consciously are too good for this. It’s not that they don’t have the time for it. It’s because it’s intimidating. It’s because it takes a long time.

This is what people should be doing, as opposed to spending hours coding themselves. If you want to code by yourself, frankly there’s a company you can hire, one of my sponsors, Toptal. You call up Toptal, literally get on the phone with them, you tell them what you’re building, you tell them who your customer is, they find the perfect developer for you. They code it, you got out and talk to your customer. I love how you guys did this.

I should say, by the way, my sponsor is Toptal. I had a couple of entrepreneurs here in the office, Joel. They said they were in San Francisco because Jason Calacanis, a friend of mine, is hosting the Launch conference here. So, a few people happen to be in town.

I always say, “If you need a place to hang out, you can come, you can work from here. We can have coffee. We can do whatever. We talk shop.” One of them said, “I really need a–I think I’m ready to get this new developer to do something.” The other said, “You should go hire someone from Toptal.” It is that branded in my audience’s head now that Toptal is the company to go for.

The reason that people should be hiring from Toptal is this. Toptal people said, “Look, there are a lot of great developers out there who do not want to live in San Francisco and commute down to Mountain View, which takes a freaking hour and a half. It sounds luxurious when you read about it in the tech press. They have these Wi-Fi buses with tables and all that. No. It’s a drag, man, an hour and a half going down to Mountain View, an hour and a half coming back from Mountain View.

At the end of the day, you’re out of your mind exhausted. A lot of developers who are good enough to work there say, “I don’t want that.” They work somewhere else, maybe in Barcelona, maybe in Eastern Europe, maybe in Asia, but they’re smart guys. Toptal has vetted them, made sure they’re the best of the best.

When a company needs to hire developers, they say, “We’ll understand how you work and we’ll match you to the perfect developer with their temperament, the way they work and you tell them how you want to work. What do you guys use, HipChat to talk? Great. Use Slack? He’ll be on your Slack.”

You communicate however you communicate. It’s like this person’s working for you in the office. They’ll build out your software. Toptal gets these best of the best developers. If you’re out there listening to me and you need a team of developers, you need someone full-time, part-time, for a project, whatever it is, here’s where you go.

Don’t go to Toptal.com. That’s for everyone else, Toptal.com, Top as in top of the mountain, tal as in talent. Don’t go there. Go instead to Toptal.com/Mixergy. This company was created by two Mixergy fans long before Andreessen Horowitz discovered them, they discovered Mixergy and they want to give back. So, they’re offering us 80 hours of Toptal developer credit when you, my listener, pays for your first 80 hours and that’s in addition to a no-risk period of up to two weeks, a trial period to let you guys know that I’m not full of it and they stand by everything. Go check them out at Toptal.com/Mixergy.

This is one of my favorite freaking stories. I hope you have more time just because I’m going a little bit over.

Joel: I want to add to what we were talking about.

Andrew: Yeah, please.

Joel: As you were–I’m kind of obsessed with this because I’ve been watching “Westworld” a little bit and I’m still trying to figure out what’s going on in that show because I fall asleep during some of the episodes. I think there’s some, again, analogies there too. It’s why are people scared to go talk to customers and really invest. One thing I think is just getting over fear of failure. We had to get over it because we failed. We actually had to accept the fact that wow, whatever we thought we knew, we didn’t know anything. In fact, we were completely wrong.

I think the challenge of being an entrepreneur and having a vision is you have to so much conviction around it early on that if someone tells you you’re wrong, that’s like a ding in your armor. And actually I think if people start flipping that concept in terms of the more customers you talk to will only strengthen that armor and the more dings you get along the way will only make it whatever. It’s either you can fail and what we learned is it’s way more painful to fail then to actually put in the time and talk to customers.

Or putting it the other way, you will save yourself so much time and energy down the road, the more time you can invest upfront with customers, especially as you’re trying to figure out what your product should be, the exponential impact that will have, that will be the best investment you can make early on for your time or your energy or your dollars is just talking to as many customers as possible.

Andrew: If you had talked with customers, would you have added the social networking component that you had in the first version of your product?

Joel: It would have–no. Definitely would not have added it. It’s something that we thought was cool, but we ended up adding it in. It was called the Loop. It was Google Circles and friend groups before that stuff existed. But it was completely confusing to the user. Had we known what the real problem was, we wouldn’t have added that in.

Andrew: Why did you think people would want that?

Joel: The five people we talked to who are innately our friends circle, like instead of using text message, they want to log into this random site and message each other that way. So, we were in this echo chamber of our friends and these problems and they were–the problem is our friends were being nice to us, quite frankly, because they wanted us to stop talking about something they didn’t really care about or wasn’t that big of a problem for them.

Andrew: You were thinking, “You know what? We can book our club night through this app and then we can chat with each other and you’d say to your friends, “Hey, you’d want to chat with me before we went out, right?” And they say, “Yes.” I get the echo chamber. All right. So you said, “This is not it.” You understood your clubs a lot better because you went out to these nightclubs, you sat in them, you worked their doors, you gave them candy. Then you built that next product. What features were in that one?

Joel: Yeah. So what we did is we actually put together a list of the problems that we heard and saw and we prioritized those problems 1 through 100. What we said as a team and the commitment I gave to Alli and Kinesh and Dan at that point in time, who was our developer, was, “Guys. . .” Because we had gone through the journey originally and failed. It was like, “Okay, here’s what I’m learning from LivePerson is we have to solve real problems.”

We’re only going to commit to build these first three problems which were the most important problems. One of them was helping the nightclub or restaurant, but starting with nightclub, better understand their customer. So giving them better data points about who that customer is, why they’re important to them, what type of relationship we have. That’s number one. So, investing in the CRM or customer profile part of the software.

And then two was moving away from that list of paper to an actual system where the team can access it from a centralized place and it wasn’t point to point and something they printed out that couldn’t be modified. So those were kind of the two main areas where we wanted to focus on.

Then the third point which came a few months later, but it was how can we–it still came back to how can we drive them business and it’s something they asked us about. So, the cool part was after we had solved two of their problems, we actually built up more trust with them and they started sharing more stuff with us. We’re like, “Another problem we have is we can’t find the right customers. It turns out 2011 not everyone wants to spend $5,000, but we’re not a bar, we can’t advertise openly online because we don’t want to dilute our exclusivity and we don’t want to make it seem like it’s really easy to get in.”

So we ended up building a B2B concierge network taking credit card companies, taking five-star hotels and we gave them a private portal to book reservations at these nightclubs. I think you’re on mute.

Andrew: Sorry. The random person reading a newspaper ad is not a good fit for them, but if somebody has a level of credit card that gives them the concierge service from the credit card, then they have enough money to pay for this nightclub experience and they are elite enough to be allowed in. I get it. That didn’t come until later.

The very first version was you guys need CRM, we’re going to give you a CRM that’s better than paper, better than print out, digital. You also are doing all this research to see who your people are. We’re going to combine it. We’re going to actually give you that in a CRM.

Joel: That’s right.

Andrew: That is elegantly simple and deceptively overly simplistic. I would have thought, “You know what? They can just use one of these CRMs that already exists that does that.”

Joel: The challenge–we’re still solving this today, which is most of the CRM systems are built to track relationships between business and sales to businesses. So, there’s a whole lead process. They’re qualified to contract out. There are different fields we’re tracking. When’s the last time you talked about your friend as, “Here’s where they are on my lead process. They’re a qualified lead. They’re a prospect.”

So what we found is most CRM systems are actually built to track businesses, but they weren’t built to track relationships between people. In the hospitality space, that’s what we’re talking about. It’s a relationship between you and a person. It’s understanding them as a person, as an individual, what their preferences are, what they care about. It’s not the traditional CRM systems that exist that look at businesses as opportunities and so–

Andrew: And the nightclub business, what’s a personal characteristic or preference that they’d want to include in their CRM that I couldn’t put in a standard CRM?

Joel: Yeah. I think it’s not the–it’s basically how everything comes together. So it’s not that you can’t track that field in Salesforce, let’s say. You can. It’s partly Salesforce doesn’t have a reservation seating management platform and it doesn’t easily sink in because that’s the other thing we were trying to solve is the data matters most when the person is in front of you or you’re interacting with that person. So rather than have it be standalone and try to integrate, which it doesn’t, but let’s actually have both side by side.

So when Andrew walks up, I have my whole reservation list, but I click on your reservation and I see your profile, I see who you are, I see what our relationship was with you. I see that you know the owner. I see that you like this table and these types of shots. And, “Andrew, good to see you. I know you haven’t been here. John told me to look out for you. I’ll get your table ready right now, send you down, comp Andrew’s table a round of tequila shots, send them on behalf of John,” meanwhile John may not even know you’re coming.

Andrew: Got it. But because they know that I know John, the owner, they can do it in John’s name. Got it.

Joel: That’s right. They were treating their regulars like this. So you saw the intent to actually provide that level of hospitality, but they were able to do it because the data was enough in their head because someone had come enough times that they knew those patterns. The idea was how do you take that same set of data and make it easier for them to build it so they could treat everyone like a regular no matter if you’ve been there ten times, two times, your first time.

Andrew: You also told Ari in the pre-interview that because of the kind of person that you were working with, everything that even a single client asked for could be mission critical. Can you explain that?

Joel: Yeah. So, because of the nature of our business, we literally–the customers we have or the partners we have are reliant on our system to understand and run who’s coming into the door. We’re not their cash register, but we’re the next thing to it. So, if we go down, we’re getting emails from everyone and text messages like what’s going on. So, what was interesting is the feedback we got from the customers very early on was very important, naturally because it’s things they’re using to run their business. When we got feedback in, it wasn’t like–

Andrew: Like photos. What’s the thing with the photos that came up?

Joel: Yeah. So, basically with the photos, we saw that it would be helpful if we saw what someone looks like before they came up so I could identify them. I didn’t have to ask, “Is this Andrew? Does he really know the owner?” It’s when they pull the reservation list, your photo is there. So, when you walk up and there are 500 people standing outside of the door, I can recognize you instantly.

Before us, before I was doing that, what the door person would do is the same thing they were doing in the office. The owner would text message someone, “Hey, has Andrew come yet?” They would Google what Andrew looks like, but there’s [inaudible 00:57:30] they’re still looking at. We’re like, “Okay, let’s combine that element in and help them provide more seamless service to their customers.”

Andrew: So then you realized we can bring in more people by partnering up with credit cards. You partnered up with–was it one credit card?

Joel: The starting partner was one credit card company.

Andrew: It seems like you’d rather not say who that first partnership was with?

Joel: I can’t disclose. It’s someone–yeah.

Andrew: It’s totally fine. I feel like I can get people to be open because they trust that when–that I’m not pushing them to reveal thing that don’t matter to the audience but do actually matter to their business. So you then got that. But here’s the interesting part about that deal. That deal helped open up a whole new category. You’d been thinking nightclubs all along because that’s where you noticed the original problem and they shifted you towards what?

Joel: Towards restaurants. They said, “Hey, this is great. You solved this problem for us in nightlife where you took something that took 48 hours for us in service down to seconds. We also don’t have to entrust our multi-millionaire card member to a 19-year old that is flaky that doesn’t respond back to us.” They helped us corporatize our service there. “Can you do this in restaurants because it turns out we get 30 times more requests for restaurant bookings than nightlife?”

So we said, “Can we apply this same model?” The model, which was innovative at that point in time and in some ways still is, which is can we give the business control? We call it ecommerce for the privacy settings. Can we give them control over who they want to business with and how they want to do business with them? It’s now a better version of personalization. But can we personalize for the business who they want to interact with and what services they want to provide?

So we said, “Okay, can we take the same model and bring it to restaurants?” So La Esquina was one of the very first partners in it. The cool part was the places I thought they would care about, they didn’t care about. They were less concerned with the money folks and they were more concerned with, “Let’s get the people that we want to be friends, the locals, the neighborhood regulars, that’s the people we care about. I don’t care if someone wants to spend $5,000. I’d rather get someone that will come in a lot and is friendly to my staff.”

Andrew: Is that what it is? I noticed when I was living in Santa Monica and Venice, a lot of the bars and restaurants would actually prioritize people who had driver’s licenses with local addresses. I thought, “I couldn’t understand why they cared that much. That’s partially what it is. They want the repeat business. They want the friendlier relationship with the person who comes in and they’re willing to sacrifice a big hit that’s a one-time hit from someone who’s richer.”

Joel: That’s right. There’s partly this whole “Cheers” mentality, I think, of being the local neighborhood spot people go to. What we figured out and how we think about things is this–and it goes back to our philosophy, which is we don’t know the answer, but if we build tools for the partner–the partner being the restaurant or the nightclub–that enabled them to choose or make decisions on behalf of their business, that’s the ultimately way of [inaudible 01:00:40] scalable way.

So rather than assuming that this business wants these types of regulars or these types of locals, we say we’re going to give you the tools to interact with these audiences. You can pick and choose how you want to interact with them. So, we’re not going to make any assumptions for you, but we’re going to give you the vehicle to interact with those audiences.

Andrew: I see. Before we started, I told you, you have really good press. I don’t mean really good press in the sense that it’s everywhere and complementary. I mean that when I was researching you, I understood the business. I understood what you were about because of it. There’s this great article in Fortune Magazine about you guys which has screenshots of, I guess, the editor’s account, the person who wrote the article.

What I can see is how many visits you’ve had, how many no-shows she’s had. I can see her photo. I can see that she’s VIP. I can see a little tag next to her that she’s press. I can see how much she’s spent overall, what her average spend is. It even says, “Have champagne ready and chilled.” Why would it have champagne ready and chilled, by the way? How would you know that? Is it because she would have to ask for it ahead of time?

Joel: No, it’s just based on a preference if that’s what we found. One of the tags people have in the restaurant industry is bubbles. So, if it turns out that person loves champagne and that’s what their thing is, they have that note on their reservation to always send them bubbles or have it ready for them upon arrival.

Andrew: I see. All this makes so much sense. It feels like something that should have existed a long time before. I’m surprised that it doesn’t. You say now more than ever it’s important because of services like Blue Apron. I’m a customer of Blue Apron, have been for a couple of years now. They send me the ingredients. They tell me how to cook. I’ve never cooked before and now I know how to cook and make it interesting. Why is Blue Apron an issue for restaurants?

Joel: Yeah. So we are seeing this shift in food and restaurants and where blue apron fits into that shift is consumers are becoming more and more knowledgeable about food. They’re more knowledgeable about the food they’re consuming. So there’s this whole green movement, “What’s actually in this food?” And rightfully so. I think it’s a very good thing that’s happening.

You have services like Blue Apron where ingredients are coming to your doorstep, where you can cook a really nice meal. You have “Top Chef” happening, where people want to emulate these chefs at home where people want to cook these things. I joke around a lot about it, but I have friends who post on Instagram and I can’t tell if they’re at a restaurant or at their house and they pan back and they’re just at their house. It’s a meal they made.

Andrew: Yeah.

Joel: So one of these trends that we’re seeing is that people–and you can get anything delivered now, right? From lots of different places. So your reason to go out to dinner isn’t necessarily about the food anymore because you can cook that food. You can get that food delivered by any of these services that are out there. Your reason for going to the restaurant is the way they’re going to treat you, that experience they’re going to create and the people you’re going to spend time with while you’re there. That will become, in many ways, the number one reason why you decide to go out when everything else is much more convenient.

And because of that, it’s going to be up to the restaurant community and the hospitality industry at large to make sure they can provide that experience for the customer and you can’t do that without the data, unfortunately.

Andrew: All right. So I want to understand, with your advice, for anyone who wants to follow in your footsteps, the first thing is we talked about it, find a problem. You found one yourself and you said we’re going to solve it. The next thing is go outside of your experience and your friend’s experience and talk to the people who you hope to serve and for you it was nightclubs. You talked about how you got into those nightclubs. Let’s close it off with what other advice do you have for extracting the right problem and creating a solution for it. It seems like that’s the thing that you did especially well.

Joel: Yeah. I would say on that note, starting with screenshots–so, before you’d even invest in the product, start with screenshots that you think solve the problem or mockups that you think solve the problem and walk your initial set of customers through that, whether it’s a consumer facing application, whether it’s a B2B application, walk them through that.

Not them being one person, but literally as many people as you possibly can. There’s no magic number, but do as many as possible and get their direct feedback and ask them if this is something that they would use right now, if it’s something that they would pay for right now.

In fact, if you’re more business facing, are they willing to actually sign up a contract to use this product, which isn’t even built yet. You can even say that it’s not even built, but do they believe it enough and does it solve enough problems where they will literally sign something that says they will pay you or agree to use the product if you actually have it. We have enough of those.

Andrew: Did you get people to do that?

Joel: Yeah. We had people do that, where we had them–it was almost a bit of a promise because we showed them mockups and wireframes and said, “Okay, sign up for this.” They said, “Okay, we will.” It was given to them for free for quite a bit at the start and then we were able to get it to a point where we took enough of their feedback, built in enough of the features that really helped them and were able to start charging.

Andrew: When you got them to sign it first, did you say, “Will you sign up and pay for this?” and then you gave it to them for free or was it, “Will you sign up and use it?”

Joel: It was a mixture of the two. Some were like, “Get out of here. Most of them were like, “We’re not going to pay you until it’s valuable.” I don’t think anyone paid us out of the gate. It took us about 12 months to get to our very first customer paying us.

Andrew: But it was commitment for them to at least use it.

Joel: That is worth more than–so, the other piece of advice is looking back, I’d much rather have a customer use the product, commit to provide feedback on how to make it better, then get $1 million from customers and them never give us any feedback.

Andrew: Because it’s not going to improve it and now help you get more customers. But just will bring in money today. That’s not enforceable. You can’t say you guys committed to using this, now get in there. It’s just it’s a personal obligation that they feel internally committed to, but you can’t walk in and say, “You guys told us if we build this, you have to use it now.” You’re nodding in agreement. But they were more likely to use it because they committed when you showed them the mockups.

Joel: It came down to us really providing the value and the hospitality industry is such that there’s not many dollars that go around quite frankly in terms of their margins and how they spend. So, we really had to get it to a point where they felt comfortable paying for it.

Andrew: Where they were seeing enough money.

Joel: They feel compelled just because we had signed this piece of paper at month six to all of a sudden start writing us a check.

Andrew: But I hear the politicians, actually, when they’re out talking to people, we’ll have them sign cards agreeing to vote for someone and those commitment cards actually help encourage the person to vote. So, I see the power of that. When you were showing them the mockups, was there any bit of feedback that you got that adjusted the product that you didn’t know before the mockup, something that stands out?

Joel: All the time. I mean, when we’re taking them through the flows, it was pretty clear when they stopped you and asked you a lot of different questions that they cared about that section a lot and wanted to see changes and asked us about how we were thinking about building and could we add in this or add in that.

The important part there then is again, getting out of that bubble, where you do that enough around enough customers and it starts to become very clear that these different customers are coming back to the same pages and asking the same questions. That’s how, again, you start to reshuffle the deck to figure out, “Okay, these are really the top priorities.” And it’s give and take.

So the more you show the customer, the more they’re going to give back to you. When you start with that initial conversation, you don’t really have anything yet. They can’t really get deep with their feedback. Then you lay mocks in front of them then they can go a little bit deeper.

Then you bring them revised mocks, “Oh, this person actually sent you feedback. Great. Let me give you more stuff.” Then you actually build the product and you start to build that trust even more. This person is doing what they said they’re going to do, and they’re helping my business, great. I’m going to continue to spend more time to give them continuous feedback. I trust that they’re going to continue evolving that product.

Andrew: What’s the revenue today?

Joel: We’re seven figures. We don’t disclose actually numbers, seven figures and growing.

Andrew: I see you have really impressive hotels here and very impressive–the W Hotels. What’s a good restaurant for us to go check out if we want to experience how we can be treated by one of your customers?

Joel: Yeah. There are two that come to mind–Agern, which is the sister properly of the Noma restaurant in Copenhagen. So, it’s in Grand Central Terminal. The person who runs it is Katie Bell. She’s fantastic. She won a James Beard award for service when she was at Blue Hill. She knows how to run front of house and what service should be. They’re one of our customers.

Then another customer is Tom Colicchio’s newest restaurant here in the city called Fowler & Wells. It’s in the Beekman Hotel. If you haven’t been to that hotel, it’s absolutely stunning. The bar scene alone is worth it and the food makes it even extra special.

Andrew: You guys are also at Nobu?

Joel: Nobu, we’re working with–we work with them from a concierge point of view. So they don’t use our full reservation management system.

Andrew: I see how it works. The website is SevenRooms. This is an incredible business. I’m so glad to have you on here because–not just because the product is good. Frankly, I’m never going to use the product. I’m not in the hospitality industry. It might be used on me and I wouldn’t even know it.

The thing that’s most exciting to me as an entrepreneur is you listened to Mixergy and beyond, you learned a process, you refined the process and now you’re coming back and you’re saying, “Hey, guys, if you’re out there and you’re entrepreneurs, here’s how I used this process and improved it. Here’s how I got into these clients’ offices. Here are the gifts that I gave them. Here’s what I listened to. Here’s how I improved it. Here’s how I built the business.”

I know there are going to be lots of people who are going to build their companies with your story in mind. I hope that someday, someone’s going to get to work for you the way that you went and you worked for Rob and learned from him. I’m sure that’s going to happen. I’m proud to have you on here as part of the Mixergy experience.

Joel: Yeah. Thank you so much for having me, Andrew. I’m a big fan, as I mentioned. And as you said, the stories and the podcasts you do have been instrumental for me and I still continue to listen to them to this day.

Andrew: Thanks.

Joel: Even though I’m a little bit along the journey, it’s still helpful to come back and hear stories and hear how people tackle challenges because that’s really what it comes down to.

Andrew: Yeah. Thank you so much for doing this. The two sponsors are Bench, if you need someone to do your books, go to Bench.co/Mixergy and if you need someone to develop, if you need a team of developers, a great site to go to is Toptal.com/Mixergy. And finally, to check out the website we’ve been talking about, go to SevenRooms.com, Seven, the number seven, Rooms.com. Thank you and thank you everyone for being out there. Bye.


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