Andrew: Here’s a quick way to improve your online business – add a form or a survey to your website and make it easy for your audience to give you feedback. I’ve been using Wufoo for years and I recommend that you use them for your embeddable forms and surveys. Not just because they’re my sponsor, but because they’re so easy to use, and your audience will actually fill out your forms and take your surveys. Check out Wufoo.com, use them for free today, have them embedded on your website in minutes. Wufoo.com.
This interview is also sponsored by Shopify. Many in my audience have said that they’ve heard my sponsorship messages about Shopify here on Mixergy, that they checked it out, and it is ñ just as I’ve been saying ñ easy to set up a store with them. You’ll have all the features that you need in order to sell and maintain inventory and take credit cards and everything else. You can even customize it. Check out one of their themes and customize it and make it your own. With Shopify.com, you can be up and running with the store today; within weeks, you’re be selling; within a month, you’ll know how successful your online store can be. So check out Shopify right now.
Finally, this interview is sponsored by Grasshopper, it’s the virtual phone system that entrepreneurs love. When you set up a phone number with Grasshopper, you can have multiple extensions. If your business doesn’t have multiple departments, that’s okay. You can still set them up and give the impression of size to anyone who calls you. Let them hear that they can call and reach the sales department, IT department, etc. Of course, as your business grows, each one of those of extensions can have a real person and a real department behind it. Check out Grasshopper.com today. Here’s the program.
Hey, everyone. It’s Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart, and you, guys, know what we do here. We bring on entrepreneurs who have a proven track record to talk about how they built their business, what they learned along the way, and bring some of that education to us – the ambitious upstarts who are listening to Mixergy interviews instead of listening to programs that have much better production value and maybe actually have video that work. Though, Chris, you and I have actual great video today.
So, Chris Dixon is here with me today, he is the co-founder of Hunch, a Web app that helps people make decisions. Previously, he co-founded SiteAdvisor, which was sold to McAfee, and BusinessWeek named Chris one of the top angel investors in tech. His early stage investments include Skype, TrialPay, BillShrink, and Postini. Before the interview, I told him that there’s just so much that we can cover in that. We can talk about Hunch, we can talk about SiteAdvisor, we can talk about the angel investments that he’s made, and so much more. I thought we’d focus on those three areas and spend most of our time talking about SiteAdvisor since that’s a business that has a beginning, middle, and an end. We can talk about where the idea came from, how it developed, and why you sold it.
So, Chris, why don’t we start off this way – what was the original idea for SiteAdvisor?
Interviewee: It actually is interesting. It started a friend and I would create little software projects for fun. When phishing, with P-H-I phishing, you know, the email attacks or whatever, started, which was around, I think, 2003 or so that it began, I’d sort of [xx] security market for a long time and I know that every couple of years, there will be a new kind of threat class(?) emerge. Every time there’s a new threat class, there were some new interesting companies created. So, when phishing emerged, I’d sort of immediately say, ‘Hmm, maybe there’s something here.’ I didn’t really know where it’s going to lead or what kind of solution we’d come up with. But, me and friend just created this piece of software, I used to be a computer programmer and was, at the time, working also at a venture capital firm as a junior venture capitalist, I guess.
So, we said, ‘Hey, why don’t we build something that is like a little toolbar that if you’re on a phishing site, it warns you.’ This was around 2003-2004. If you remember that time, it was kind of free, Firefox hadn’t quite come out yet, and it was really the peak of spyware and adware and phishing. It was actually a really bad time on the Web for security. So, we built this thing and it was sort of warn you when you come to a phishing site. Then we said, ‘Well, now you’re on a site that gives you spyware. Now, you’re on a site that gives you all the kinds of malware or maybe a site that’s like a scam.’ It’s says, ‘Buy drugs from Canada,’ but it actually not really going to give you drugs or it’s illegal or something.’ While we’re warning you of those sites, too, wouldn’t it be interesting to have a broad(?) survey tool which kind of would warn you for any kind of threat.
We talked about this with a lot of our technical friends and they were sort of like, ‘Oh, but don’t people really know better than to download screensavers?’ The reality is that most of normal Internet users who are non-tech people weren’t aware of a lot of these things. So, a lot of what we thought that we would do is sort of take knowledge that might be obvious to kind of computer experts, bubble(?) it up, and kind of give it out to the masses.
(10:00)
Interviewee: work for myself, right, and build cool stuff, right. So like, it’s sort of hard for me to draw the line between the two like, yeah. I mean clearly I wanted to build something that would be a business though, I mean because otherwise you can’t sustain yourself and you have to go work for somebody else and do something you don’t…you know. So like, they kind of go hand in hand I guess, in my mind, you know.
Andrew: Okay. And so…
Interviewee: But it wasn’t like…I’m not the kind of guy who would like go and start a shoe company or something. Like I’m very much like I like building software, you know. I like computers and I thought, you know, my kind of career goal was like I’m going to be a person who has the, you know, has the chance to build a lot of cool software. I don’t know.
Andrew: Okay. So now you told us what the idea was, and I’ve got a sense of your frame of mind. You put stuff out there and you’re not just putting it out there for fun. You’re putting it out there for fun with the idea that maybe there’ll be a big business in there. So you come up with this idea. What’s the first thing that you do when this idea occurs to you for Security Bar?
Interviewee: Well, so I don’t always advocate doing this, but I actually wrote up a very detailed 15 page business plan which nobody ever really read but me and my partners. But I thought it was actually a very interesting kind of intellectual exercise to sort of work through all the problems. And I modeled it actually after a…when I worked in Venture Capital I worked at a firm called [Bessimer Prevention] Partners which was, I don’t know, one of these kind of big classic PC firms. And they have an internal process that whenever they do a deal they write like a 15 page memo analyzing market, competitors.
I think that probably the most interesting part of the memo to me is the risks. Like what are the key risks. And actually when I got the job at [Bessimer] the first thing I did was I went back in time. I was really excited because they have this archive and I went and looked up -because they’ve been around for a long time- and I looked at all these investments and I now knew how they turned out, right, because it was like ten years ago. And you go and you look at the risks and like the smart investors you’d see they nailed it. Like they said this one risk is Microsoft will build an identical product. And then you look back and Microsoft built the identical product, you know like… so the risk thing is really interesting. I need to think through, How am I going to fail? You know, like the risks in the case of security. Like the biggest risk is, quite frankly, is that the threat goes away, you know, for organic reasons or something, right. People stop phishing. I don’t know why, but let’s say they do. It happens.
You know, if you’re in the security business, unfortunately you’re, in some sense, rooting for, you know, there to be a security threat. You know another risk, of course, is that you just can’t build what you think you’re going to build. So technical risk, right. Another risk is you partner with people you end up hating and you get, you know, it’s a big mess. And there’s all sorts of personnel risks, right. There’s competitive risk.
In security each market kind of gets analyzed differently and security, you know, you sort of have a duopoly of Mac against Mantec and they control the distribution channels. And it’s something where like most average consumers aren’t like thinking to themselves, ‘Hey, what security product should I buy today? Let me go window shopping,’ right. In real life what happens is you go Dell and they have like the check box and you say, ‘Okay I’ll take MacAfee.’ So whoever controls the distribution channel will have a lot of power and Mac against Mantec have a lot of power there and it’s very hard for starters to break in. And so you kind of think about those kinds of risks. Like how’re you going to market it.
So you know, I actually did that. And the most important thing I did was I found very, very good co founders. You know, I’m a firm proponent of having co founders. I think it’s very, very hard to start a company by yourself and you know, and moreover in our case, I was a mediocre computer programmer and this was a difficult technical challenge so I very clearly needed, you know, outstanding engineers. And I think to really have that as part of your sort of core DNA in the company there needs to be a co founder.
Andrew: How did you find your two co founders?
Interviewee: Yeah, good question. It’s one of the hardest things to do. It’s really just like you find employees probably. It’s pounding the pavement, meeting a lot of interesting people. This particular case it was actually a guy, sort of an entrepreneur we both knew in common, that he’d started a company called [Indecka] here in Boston and he was a mutual friend and, you know. One of the ways that Venture Capital can be useful to entrepreneurs is in sort of this kind of thing like finding co founders. The good ones tend to kind of be, you know, know about sort of who the smart people are who are currently “on the beach” they say.
So what happened, like these guys had started Venture Back Company before and sold it and then were looking for their next gig. And there’s sort of a limited number of these people, you know. So a lot of entrepreneurs are just first time entrepreneurs but there’s also people who are like sort of in the bull pen so to speak and that’s one of the benefits of, I think, having decent contacts in Venture world is getting kind of access to those sorts of people.
(15:00)
Andrew: So, who introduced you to Tom and Doug, your two co-founders?
Interviewee: A guy named Jeremy Levine Bessemer, but Entrepreneur been via a guy named Steve Papa, who’s a founder at a company called Endeca. Those are the two main ones.
Andrew: So, you were actively going out there and saying, ‘Who can I partner with? Who has the technical chops to do this? Whose on the beach right now and has the time to do it? Introduce me. Let’s see if it gels, and if it does we’ll go build this business together.’
Interviewee: That’s right.
Andrew: Okay, in order to get…
Interviewee: We spent, like, 50 hours together, probably, before we… Well, I mean, it’s like, you know, it’s a match, it’s a huge decision to partner with somebody, like, in a, you know, potentially for five years. You know, you’re married practically, so you better be sure. And it’s hard to do, you know, I mean, I guess, the ideal thing is you’ve known the person for 10 years, you know, and you have, but if that’s not always the case. So, you, sometimes you just have to do, like, you know, it’s kind of like a really quick, short engagement so to speak. So…
Andrew: Do you remember the moment when you knew that they would be the right co-founders?
Interviewee: The moment, huh, I mean I thought, I don’t think I knew for sure frankly. You don’t know until you’ve already started the company, actually.
Andrew: So, what made you decide to partner up with them?
Interviewee: It’s like founder vesting is a very important term. If anyone reads my blog I talk about it a lot.
Andrew: I’m sorry. Can you repeat the term?
Interviewee: Founder vesting.
Andrew: Founder vesting.
Interviewee: It’s, like, as your stock vests over time, because I think, I would say at least a third of the time, at least in my investing and just observations, the, some initial co-founder leaves, you know, or had, or they had some falling out. Very, very common. So, I don’t think you ever really know until you’ve done it, I mean, you know, with them. But, you know, I think we spent, I think it’s important, so what do you do, I mean, you have to, what do you have to do? You have to first, sort of, assess somebody’s, in the case that their technical, like their technical ability. I mean, you know, you have a lot of, sort of, social prerequisites, say, like in this case, they were MIT grads who’d done well there. We had a lot of people who we knew in common, so I could diligence them pretty effectively without, now that’s important. You know, if you have trusted people who all know, you know, who know them and say things about them. They had a track record in the industry. You know, I think it was the person fit. You, like, have to spend time together to see if you guys get along. There’s the company vision, I mean a lot of people will, like, you know, in our case we wanted, I really wanted to create a consumer security company. There was a lot of pressure from other people, like, including investors, to make a enterprise, b-to-b company. You know, have to make sure they’re on board with that, and they share that sort of goal. You know, you want to make sure you share the same kind of, you know, are you building a company to flip? Or are you building, are you trying to build a big business? Like, those kinds of things. And then, frankly, like terms a lot of people defer these things. Like, who’s the CEO and who’s the, how much equity do you get? And all these other things you should, these are very important things to do up front. A lot of people, sort of, put them off. It’s always a danger sign, like, when I meet startups and they’re, like, ‘We’re both CEO,’ or something. It means, basically means there’s a fight looming at some point.
Andrew: How did you put the business plan together? I mean, who did you talk to? What research did you do? How did you prepare to even put this business plan together?
Interviewee: Well, I’m a big believer in talking to as many people as possible. And not really being secretive. I mean, you know, I wouldn’t go, there would be a few companies who are directly competitive who I might not go and tell them my whole plan, you know. But, like, for the most part, you know, most people aren’t going to, aren’t in a position to go start a company. You know, like, they already have a job, or they already started whatever. And, like, what I find is you talk to the people at incumbents, they call them, McAfee and Symantec, in this case. They’ll, they always, almost by definition, dismiss any new ideas as dumb. Because if it wasn’t dumb they’d have already have done it. So, I usually, when I talk to them, I talk to them much more about, like, about, you know, kind of, factual stuff. Like who’s building what, you know, what threats are increasing, much more, like, factual kind of thing. I talk to other entrepreneurs, people who’ve been in that market, kind of hear their feedback. What are the risks they see? You know, I did some technical diligence, one thing you want to do is analyze every website, right. So, one of the first things I was wondering was how websites, you know, obviously I’m not going to do every website, but, you know, like everything there’s a power curve, kind of. Like, there’s, you know, there’s a fat head or long tail, so, like, in other words, one of the questions I had would be, how many websites would you have to analyze in order to account for 99% of traffic, where people actually go? And it turns out that number wasn’t as massive as you might think. And so, it made this problem more tractable. What else? You know, I actually went so far, I liked to know, really know the market in a sense of, like, I would read all the Wall Street analysts reports.
Interviewee: I read all the Wall Street analysts’ reports about MacAfee and Symantec. So one of the interesting things you learned at the time in 2005 if you read their reports…because basically, what does the CEO of MacAfee and Symantec thinking about? They’re thinking about how to keep their stock price up for the next couple quarters. Unfortunately that’s the way our economy works is they’re quarter by quarter stock driven. That in turn is influenced heavily by the Wall Street analysts who cover their stock. And if you read the reports at the time MacAfee and Symantec’s stock prices were heavily depressed due to the fact that Microsoft was entering the marketplace for the first time with their own anti-virus product. Now, looking back now we know that product was kind of a bomb but at the time it was seen as a massive threat and it was hurting the stock price. All the analysts were saying, ‘Oh, man. These guys have to do things to innovate.’ It’s interesting that these companies…sort of I think two kinds of tech companies. Or maybe three kinds. But there’s basically…MacAfee and Symantec are like…I would probably put them in a class with like Cisco where they don’t try to do a whole lot of R&D themselves, they just acquire companies. So what they do is they, if you take anti-spam as an example, as a category, there are literally 80 anti-spam companies funded by venture capitalists. And MacAfee and Symantec let them have this cage match and duke it out and then the three guys that left the cage, they bought them. And they paid nice [INAUDIBLE]. They paid a lot of money for them but probably a lot less than the VCs put into the space. Which is actually a strategy, right? So these guys…so what ended up…I’ll jump ahead to the [INAUDIBLE] and go back a little bit…
Andrew: One other question.
Interviewee: Sure.
Andrew: You actually called the people at Symantec and MacAfee and you asked them what…you asked them questions around this idea?
Interviewee: No. No. More…not like that directly. Much more like for example, one of my investors, some of my investors, are very well connected to people in the Valley. Like Ron Conway, if you know him. And he introduced me to so-and-so who recently sold his company to Symantec and now he’s gone. That kind of thing. I wouldn’t like 1-800-MacAfee kind of thing. Much more like you go around, you network, you talk to people who are knowledgeable about the industry.
Andrew: I see. So if I’m understanding this right, a light bulb goes off. You say, ‘There needs to be a security company in this space. I have a hunch of where it needs to go and what it needs to be. What I’ll do is I’ll research by looking at what Symantec and MacAfee are working on and see if their heads free enough to be in this space.’ Realize, ‘No. They don’t really have the time for it. They might come by and buy the person who does this right.’ Then you moved on and you talked to people who worked in those companies and you networked and found who they were. Then you started talking to the people at Bessemer Ventures, I think I read on your blog, and you just started to get this idea. You did a couple of tests to see if this was possible to crawl the web and you realized that 99% of the sites that people are on you can look at. The other 1% you don’t need to focus on. You talked to your two co-founders and you bounced ideas off each other. Then this idea was solid enough that you had a business plan and you had an idea of where you were going to go. Am I following it right?
Interviewee: That’s right. Yeah.
Andrew: By the way, before you continue with the story can we see that business plan? Is it online right now or can you give us a copy of it?
Interviewee: I personally would be fine with it but I think officially it’s MacAfee’s property now since they bought the company. So I don’t know if I’m legally or ethically allowed to share it. You know what I mean? Because they bought everything including that. It’s a good question but I think I can talk about it. It’s also been long enough that they probably don’t care anymore…
Andrew: Okay. So you were going to continue with the story.
Interviewee: So we built the product. We sort of sat…we sort of did a very odd thing then which we sat in a room for 12 months and built a product without any customer. And released a product and did about a month of marketing or so and it was…there’s a whole story I could tell about how I have this whole theory of how you do marketing in security versus other markets and why they’re different. I can go to that if you want. But basically we very quickly…and I think this is basically due to the market dynamics we talked about before. Microsoft coming in, etc. Had the most senior people from MacAfee and Symantec in our office and very soon after had offers to acquire the company. And then had multiple offers and the whole process and ended up selling… It was actually a year to the day of initial funding.
Andrew: A year to the day? Of initial funding?
Interviewee: Yeah. It was…
Andrew: That’s when you sold it.
Interviewee: It was like April Fool’s Day.
Andrew: All right. I want to take this…You know in the Matrix where somebody fires a gun, and the bullet goes through its phase slowly and you get to see how the guys move out of the way of the gun? That’s the way I like to go through these stories here. Let’s not brush over twelve months. What happens in those twelve months, from when you… First of all, what’s the launch point for the twelve months? Was it getting funding? Was it getting partners?
Interviewee: I think we incorporated in January of ’05. We closed our financing, I think April 1st, ’05. And then we sold the company April — I think it actually closed April 2nd. And there was a reason it was the day after, because they wanted [inaudible]. But, anyways. So what happened after it?
So first we had to raise money, and no matter whether you work at a VC Firm, no matter whether you raise money before… It doesn’t matter. It’s always a nightmare, it’s always a painful process.
Andrew: So three months of raising and closing money?
Interviewee: Yeah, it was also that it was sort of part of the founder courtship, and still refining the idea the idea. There’s a bunch of stuff going on there, right? There’s also getting the terms set, and even once you sign the term sheet, it takes a month usually to close the financing. So probably, I’m guessing March 1st, we come to terms. And then…
Andrew: I’m assuming you went to Bessemer [sp] Ventures where you were working, and you asked them to invest? What was their reaction?
Interviewee: What VC’s always do… You play poker? “Flip another card over”, is the term that people use. Investors have this attitude of: “Why not flip another card? Why would we ever do something today, when we could do it tomorrow with additional information?”
That [inaudible] works exactly the opposite for entrepreneurs, which is every day that ticks, you’re getting poorer and your money’s running out. It’s like… [Laughs] One of the most important things when you’re raising money, is you need a [xx]. You need something to say: “This train is leaving — are you ready to get on or off?”
In this case, I had a friend who was an angel investor, who offered me an angel term sheet. Bessemer had been good to me… I had been saying, Bessemer, fund me, fund me, fund me. And they were like, maybe, maybe, maybe… Right? My friend who was an angel investor gave me a term sheet. And I said, “I’m gonna give it a go. I’m going to go and take this term sheet.”
And they said, “Wait…” And then there was another month of bickering, and this and that, but they ended up doing it and my angel investor friend also did it as well. So it ended up good for everyone.
Andrew: OK. And you had other investors, right? It was this angel, it was Bessemer…
Interviewee: This angel investor of mine is now one of my partners in my VC fund. There was Bessemer, and there is another firm called General Catalyst [?], which is a Boston-based firm, and Ron Conway and I think a few random friends.
Andrew: How did you decide who to have in there? Who to have as angel investors along with the two VC’s?
Interviewee: Ron, is some sort of legend… I’m a huge, huge proponent. He’s phenomenal. Anyone who can get him, should get him. He’s just like the most entrepreneurl-friendly guy in the world. We were based in the East Coast — he sort of instantly gives you the West Coast, in the sense that you can call him up and say: “I’m flying to the West Coast, trying to meet people in the following five companies.”
He will spend night and day to get you to meet those people. I just think he is the greatest guy. I think almost anyone you talk to who’s involved with him will say that. And will give you advice that’s not necessarily in his financial interest, just because he’s [xx] entrepreneur. So he’s a no-brainer.
And then, the rest of the people in this case were just friends, who were like: “Hey, do you mind if I invest a little bit, because we’re friends?” I think generally in my view is, the more the merrier, as long as they don’t… I had this problem, where we were selling Site Advisor. One person would put in a very, very small investment. We needed that person’s signature in order to sell the company, and she was in the mountains of Italy.
You need to make sure that you have provisions like Drag-Along rights. Those little investors shouldn’t have any control rights, they should have economic rights. It’s just for logistical reasons. They’re not getting screwed, or anything. You just don’t want to have to round up every little person for every decision. You want to sort of keep it a reasonable group of decision-makers.
Andrew: Within reason, anyone who wanted to invest was a friend of yours… You said: “OK, you can have a piece of this.”
Interviewee: Yeah. Yes. Although what tends to happen is, for a variety of reasons, venture-capital routes and [xx] routes tend to be like… No one wants to invest, and everyone wants to invest.
Interviewee: What tends to happen is for a variety of reasons venture capital rounds and end-arounds, it tends to be like no one wants to invest and everyone wants to invest or else no one ever wants to invest but if you do get it so that people want to invest, you tend to get over-subscribers as they say and so then its always like this argument that you’d see, like we ended up having to expand because I wanted to include, it wasn’t like anyone, you know these are like an old buddy of mine we’ve been in business together . . . you know you feel like you want to involve, give some good advice or whatever, but what actually ends of happening is the vc are like hey want to make sure they had this whole thing where they wanted a percentage most vcs they want a fifteen percent minimum they want to own and so then you start doing the math and you’re like it gets kind of tricky to clear everyone so but I find that its useful if find that its like I’m not a big fan of advisers you know people have advisers in their start up which means that they don’t particularly equity you advise I find that that doesn’t work that well because they don’t have a vested interest in actually, letting somebody invest ten twenty grand or something is like a way of letting them be the adviser but actually have skin in the game and they’ll pay more attention an exception if they are like a professor or something where maybe they don’t have the resources to do investing but if they are a professional entrepreneur they sort of think they should be investing not getting free shares
Andrew: Okay, one more question on this before we move on to the next step. Ron Conway, do you have a story that illustrates how helpful he was?
Interviewee: As an example, when we were going out and first launching a product and looking to get press, its sort of like every vc I ever talk to you say hey you get you know they don’t really know them they don’t spend time with them with Ron like we ended up getting on the cover of the Wall Street Journal and I think its due to his introduction or part of it and you know we had to do a lot of work after that he just opens the door for you but you know he was extremely helpful I remember sitting in his apartment going through the whole sale of the company we had multiple offers and the price basically ended up doubling from the initial offer and that was because we didn’t have an investment banker involved because guy who want also (unintelligible) phenomenally helpful as were all my investors in sort of that process because I hadn’t sold a company before and I didn’t want to hire an investment banker because I thought it was why give it to some guy at four percent when we already had the two best companies bidding on us it seemed excessive or a waste I don’t know and I don’t like investment bankers personally so we just did it ourselves the whole thing he was like a close adviser so I mean he was great
Andrew: okay so April first you get your funding in place you are ready to go what do you do first?
Interviewee: April first they had to do an April fool’s joke so we right after they guys had wired their millions of dollars so we I spent far too long on a fake press release that was Microsoft releasing the exact same product as us and then we sent a little email saying you know it’s only for ie and so we can still do Firefox and Mac and one of the investors actually fell for it and called me up and said you know I don’t think this Firefox answer is sufficient [laughter] anyway then he like you spent like six hours of your time on this you need to spend your time better and so we did that and what did we do we started building stuff we were like sitting in a room coding basically I hadn’t coded in a while and I started notes coding at the beginning and you know just sort of the system and trying to hire people it’s 2005 and remember the consumer web 2.0 thing like 2006 I’d say and it was mostly West coast and we were East coast we were doing engineering in Boston doing consumer company dot comish feeling thing in 2005 in Boston was not a very like we’d go over to MIT and try to recruit people I swear to god we were like martians or something we were like are there still Internet start ups and venture capitalists like yeah there are and so we were just getting over that and then the problem in like the East coast 2005 like there were basically eighty ninety-five percent of the start ups had failed which means all these programmers had been convinced to go work for equity and the equity was worth nothing and there was a very deep skepticism about equity and that remains a problem on the east coast you know I think its better on the West coast getting people to believe in equity and so we were expected to spend a lot of time
Interviewee: And so, we spent a lot of time, I spent probably half my time, trying to recruit engineers.
Andrew: Why did it take so long to launch? Did you have a vision for a product that would be the ideal first release and you weren’t willing to compromise, or were there other things going on?
Interviewee: Yeah, I don’t think there’s like a, You know the whole minimum viable product concept or whatever right like you’re familiar all this.
Andrew: I’ve interviewed Eric Reeves early on when he started talking about this I’ve done several interviews on this
Interviewee: I think I agree with a lot of what they say, it’s good advice. Some products just don’t really, unfortunately the minimum viable product that the security product, in this case wants to warn you about websites, if they warn you about half the websites and not the other half, it’s not very good. There weren’t many ways to slice it, that didn’t involve raiding every website. And that was the problem. We had a pretty high bar for the minimum viable product. And I was very concerned. If we made mistakes, like if we said some website was bad that wasn’t, we’d be liable. And on the flip side, we could get someone infected with spyware. So I thought accuracy of our ratings was very important. Before we finally launched I literally, personally, went through the top ten thousand I think, Myself, and like hand examined every rating and checked them to every extent possible. Like, Q A everything. Like to get all sorts of elaborate Q A testing kind of stuff. I think it depends. If you’re making a game, and it screws up it’s one thing, but, if you’re making a security product that promises to protect people, I feel like maybe there’s a higher bar there.
Andrew: Actually I’d love to get Eric reeves feedback on that. Because you’re making a good point, and I’d like to see how he responds to situations like this
(interruption)
Andrew: Sorry there’s a little bit of lag. That’s why it sounds like we’re stepping on each other. But from what I remember in my interview with him, I asked him that question. Are there some products that take longer, and he said yes. But, not as many as people think there are. So most people think that their product takes a long time to develop and to get that minimum viable product out but, they’re not mostly right. But in this case it’s possible. I don’t see at this though. I looked at wikipedia, wikipedias reference to site advisor, and I could have sworn they said there were still false positives, and false negatives in the product.
Interviewee: Well sure, there always are. Raiding millions of websites. There’s gonna be errors, inevitable. Some of it also is companies I would consider, who have now been sued by the FTC, and settled. Complaining we had false positives. First of all there’s a he said/she said thing going on right, but, even then I’ll admit there were, certainly were. Raiding millions of websites using bots, there’s gonna be errors.
Andrew: How did the product devolve, in that period you guys were working on it?
Interviewee: Almost everything we ended up launching with was in the business plan. Except, what ended up being our most important feature. Which was where we took your ratings and when you searched on Google or Yahoo, you would have a little site-advisor plugin, and then we would put little green or red check marks next to the search results. And that ended up being, I haven’t checked lately but, the last time I went to best buy and looked at the mcaffe box they talked about safe search, and that was our product. And that was the hook that people got, and that was an experiment on the side. Initially we were just going to rate and match to go to the websites. We wanted to use the search, but the search would have been much harder. Let’s suppose we only get 1 in 10 websites, and we search that interface of seeing 10 websites, the holes in your data become much more obvious. It was a very high bar to get that to work. And that came off as a side experiment, and turned out to actually be what mcaffe thinks of us as, their safe-search product. That was just an experiment along the way. I think it’s always important to like, some of you believe in R and D to have everyone in the same room. There’s a lot of, not saying all software mind you, I’m saying R and D. Later on, when you have a fully specced thing, and you’re sort of in iteration 2, I think you do things offshore and all sorts of things. But you’re in this stage where you’re like, “Hey this is ideal let’s split something up at C”. Being in the same room and to have, a certain percentage of your resources allocated to experimentation.
Interviewee: …you know, like re-dorks [?], we call it dark ops or something, like commando. Yeah, we’re total nerds, but we have like these commando, secret operations on the side and sometimes those things lead to interesting new features and sometimes they don’t, but you sort of know that they’re experimental and to leave some room for that. So that was part of the process, but you know…
Andrew: Plug in the holes in the surf results, you were saying that if you give people a search result page that has just one or two sites that are safe, it’ll look empty, what did you guys do about that?
Interviewee: There’s two issues. There’s basically whether a site is safe or not, and there’s our coverage, coverage meaning we wouldn’t have rated that site at all. If I was saying I was worried about the surf, I was saying I was worried about the lack of coverage, sites would come up that we simply hadn’t crawled yet.
I think what ended up happening when we tested empirically is that there’s a much fatter head of websites that show up in search engines than people realize. So basically, in a million websites we’d almost never see gray, uncovered things. We didn’t know that, it was an empirical question. It was sort of a bet on — you know, over the years I’ve kind of not come to believe in the long tail. I don’t really believe in [? 41:18], all these Vogue things. I think you can actually make a good career off of betting against a lot of these Vogue’ish concepts.
Anyway, they always say 8 billion URLs and all this, but they’re talking about URLs right. Wikipedia has 100 million URLs, but it’s one website. We can just say Wikipedia, they follow certain standards, they this and that, they don’t have any malware, it’s green, it’s one website.
There aren’t actually that many websites, you know. I have some play, little fun side websites that are like the 100,000 most popular websites, and it’s like I’ve barely…I think my blog…it’s like there aren’t that many websites that people actually go to if you’re listening.
Andrew: OK, and you talked on your blog about how you’d market a product like this. You said most people don’t talk about products like this. They don’t think about security. They don’t spread it virally. How did you decide that you were going to market as a site advisor?
Interviewee: I think with every product you need to think about how information flow and decisions are made. I think that varies per product. In security, it tends to be that everyone has what we call the “family sys admin”, which is like everyone has sort of the smartest computer person they know and that person may or may not be really smart, but they know more than the person calling, right.
And what does that person do? That person in turn probably reads…at the time it was probably PC Magazine and Slash Dot; today it’s probably like Digg and something else, like websites, etc. that are related to computers and some of them have security stuff.
In turn those people go and they read Bruce Schneier and Ben Edelman, if you go to security researchers, so there’s sort of a waterfall of influence in security. So what we began with is sort of going to those people at the top of the waterfall and really trying to convince them that this was a useful product and that we’d taken a smart approach to solving it and kind of get their endorsement, not have them attach us or something.
Then I think one of the biggest challenges — in fact the biggest challenge — is that it’s a constant frustration when you’re doing tech startups is unless you’re doing something that’s just like a me too thing like another storage company or a boat on the news company or something, if you do something that’s actually novel people don’t understand that and they always want to pigeon hole you and say oh, it’s another phishing tool bar.
Actually, by the end of the product, we didn’t even do phishing. The reason we didn’t do phishing is we were doing Safe Search and phishing results don’t show up in search results because phishing sites are very ephemeral and for results they have to be around longer. We literally did not have an anti-phishing feature in the product, yet every reviewer would say it’s anti-phishing.
To this day if you search Google for site advisor, I don’t know where…they get it from dmoz…the anti-phishing toolbar onto the word thing. We have never used that word on our website. It actually annoys me. Why does Google take some dmoz thing and put it under theirs. It never occurred in our marketing materials, it never occurred in our website, and yet it occurs in Google.
Then we get all these magazine reviews that sort of compare us against other anti-phishing toolbars and say, wow, that’s a really crappy anti-phishing toolbar. And I say, yeah, because it’s not an anti-phishing toolbar. I could compare your I don’t know what, your…it’s just the completely wrong category.
[minute 45 to minute 50 needs to be redone]
Mixergy-Hunt-Chris-Dixon
Interviewee: — are less likely to do them. Two, websites are getting much richer and more (0:50:06.2 INAUDIBLE) etc. and there is less need for them. I run with a Mac with basically only off the shelf software with the exception of SKYPE which I’m talking to you on and one or two other pieces of software. There’s so much (0:50:16.7 INAUDIBLE) rather now. But security still remains one thing which you typically can’t do with a web browser, right. You need to have it on there for a variety of reasons. So it’s one of the few areas that’sÖ especially been pretty good. I think it’s got (0:50:33.7 INAUDIBLE) to do now. I don’t think you could do SKYPE today for example because it’s justÖbesides the fact that it’s already SKYPE, but that kind ofÖthose kinds of massive viral download software things, I think that they might be mostly over.
Andrew: Why did you sell so soon?
Interviewee: Well I thinkÖwell I’ll tell you my personal motivations. My personal motivation was to beÖI wanted to be an entrepreneur and I wanted toÖI wanted toÖI thought I’d start a series of companies I guess was my goal. And so I knew thatÖfor me it was sort of binary. It was like either (0:51:12.5 INAUDIBLE) as a success or a failure and if it was a success, I would beÖthen you become ‘backable’ as they say in the business which means you’re kind of the main man or something. You’re able to raise money. And I knew that at some return on investment capital I was sort of backable. And so that was sort of what I was first thinking about. I want to be able to startÖand then the second thing was just sort of two times to sell a company. There’s sort of pre-revenue and post-revenue and if you kind of graph it, it would be like you peak pre-revenue and you’re sort of selling your dream so to speak. And then you would takeÖI think it would take us four years to get back to the same evaluation if you did it on a financial basis. So that’s another thing, just price. I think for theÖfor my VCs (phonetic) were less excited about selling because for them it was 10 acts or something but it wasn’tÖit wasn’tÖit’s funny. They care more about the..they tend to care more about the absolute dollar return also than multiple. And contrary to what you read on some of these blogs, VCs are almost never trying to get you to sell. It’s almost always the opposite. They want you to go for it because that’s the business they’re in. So people speculate about that on mints (phonetic) for example. That was very ill informed because (0:52:29.4 INAUDIBLE) almost every bit of the dynamic that happens. But —
Andrew: You convinced them to say yes to the sale.
Interviewee: They were..at the end of the day they were good guys who wereÖit was like look, we’re going to serve a number of companies and we’ll serveÖhopefully we’ll do them again with you and this is a goodÖthis is a good outcome. Let’s take it and let’sÖand it..I went back to them very much. So we went backÖI said, ‘Hey, this is a long partnership and this is a good move for this partnership right now.’ And —
Andrew: So there’s —
Interviewee: And (0:53:01.8 INAUDIBLE) credit is weÖin addition to the equity that the employees already had, we actually carved out a significantÖmillions of dollars extra in bonuses to give to the employees and this was at the VCs expense as well as ours because I told them (0:53:16.5 INAUDIBLE) self interest because I think it makes us good guys but I also think that we want this to be a marketing event and say that we hood our guys up and that you should want to work for us again. And any time we ever hire somebody now and they say theyÖthat question exactly. I’m like, ‘We should call somebody from (0:53:33.9 INAUDIBLE) and ask them how we took care of them.’ So I think it’s the important..if you want to be a serious entrepreneur you’ve got to kind of build up a reputation with these kinds of things I think.
Andrew: That’s a great way to build up a reputation. Okay. What else do I want to ask about this before we move on? TechCrunch estimated $80 million sale. Are they about right?
Interviewee: I think it was probablyÖit was $74 million. I don’t know. But that was probablyÖit’s in the public. It’s in their S1 or whatever it is.
Andrew: What was it likeÖthis is the last question on this. We rarely in business get that finish line. You’re always continuing and there’s always another race. But here you had aÖyou had something..you had a finish line. What was it like when you signed the paperwork and the deal was done for you personally?
Interviewee: To beÖI mean this is going to sound insane but maybe it was great the first week, but it was actuallyÖI would say the worst year of my career was post-(0:54:29.5 INAUDIBLE) company because I didn’t like working at a big company. I’m not a big company person. I didn’t fit in well because I wasÖas co-founder and CEO, I had raisedÖthis was my tough time raising money, managing the product and selling the company. Everyone else, like engineers, they kept doing what they were doing. So I didn’t really have a role yet I had a contract where I had to stay. So I wasn’t able to do anything. I don’t know. Yeah, obviously I was..I had been broke before and I had made money and that was nice, but —
Interviewee: …I made things I wanted to get back with. Literally the day we were done with our contract, me and three of the other guys left and rented an office and started working on the next thing, we really were eager to start building stuff again. It was great. We were lucky, but we sold in 2006, which was probably our two good years in the last decade to sell, the best years were 06 and 07 I think. So much is timing, right? We might have come up with a product, we didn’t know if it was going to play out, there was so much we didn’t know. That was nice. Early on, you’ve got to remember that when you have an exit or whatever, how lucky you got and that you need to work twice as hard next time so that you don’t become complacent. Now I have the ability to raise money again and now I have some capitol and I can invest it; I really like start-ups in general, if you read my blog you can tell that’s pretty much all I think about. And so…I probably like them too much, it’s both my profession and my hobby. But I just think it’s cool and interesting and try to get involved as much as possible both by either finding them or funding them or whatever. It’s fun for me, and so, another exciting thing for me was starting to that…
Andrew: Now let’s talk then about the investments that you’ve made. Was Skype the biggest exit? Your biggest win as an investor?
interviewee: So Skype I was a personal investor for, but I was an….
Andrew: And alongside Bessemer(??)?
interviewee: Exactly, so in my mind it’s more of a grey area as to how to account that, but in my mind, but I was a personal investor in that and of course it was a really good investment. We did the series A which was the earliest investment. What was your question about investments?
Andrew: I didn’t have one yet, but I was wondering about Skype. Here you are, a guy who’s still working as an associate for Bessemer Ventures, you haven’t pocketed a big win yet, you’ve got your own personal money. Why’d you decide to invest your own personal money into Skype?
interviewee: When I was at Bessemer, I was involved with three deals and that was one of them. So that was one that I shepherded through and whatever. I was a huge advocate and thought it was phenomenal. So I believed big, and invested as much as they allowed me to. And I literally pooled(??) in all my assets at that point because I was basically broke. There’s a thing in adventure where you talk about vintages. And ëvintage’ is the year investment, and it turns out that Venture was very vintage driven, and I felt very strongly that it was a good vintage. When everyone at Excite.com which had millions of users and a great domain name got bought for millions of dollars in 2002, to me that was the symbol that it had hit its all time low. When people on the internet like Pets.com, they would say that it was on the internet, and people would laugh at them, it was just a great time to invest. Like Skype, no wanted to invest in it, it wasn’t like there were these huge users who were trying to invest. It was like, what is this thing? Is it like an IM thing? It was like Google, when people thought you couldn’t make money online. Working Adventure, I was seeing companies make money online. And I was seeing all this interesting stuff happening. So there was this contest; I was being very bullish at this time, I was investing as much as I could.
Andrew: How much did you put into Skype?
Interviewee: I don’t know. I think it’s supposed to be secret; it was not that it was a life-changing outcome.
Andrew: Just to give us a sense. I don’t want you to give a number. Is it around 50, or a 100,000?
Interviewee: Let me say the exit was in the, I don’t know, I don’t think I’m supposed to talk about this.
Andrew: Okay. Alright. I just wanted to get a sense of it. I’m not looking to get any information that you don’t feel comfortable giving out here. But it was a life-changing event obviously. Why did you believe in them back then? I understand that Excite was selling for practically nothing and people had given up on the market, but I also understand that they were kind of like an IM product and that AIM could have easily added them as a phone system into their app and there were all these reasons against them. Why did you, why did Chris say, ‘I believe in them so much, I’m bringing them into Bessemer, I’m investing the little money-‘
[hour 1 to hour 1 and minute 5 needs to be redone]
Interviewee:
so, that began with me and a bunch of …. guys with a kind of technical idea which was similar to what we’ve done now, but started of more on the pure tech side which is kind of be able to build what we call a taste graph which is a kind of social graph. so, you know, obviously it’s based on a sociograph which is you’re hear and you’re connected to your friends and family a taste graph you think of your neighbors are not necessarily your friends, but people with similar movie tastes, computer tastes, you name it, right. and our kind of idea was that that graph is more interesting if for example you’re looking for product recommendations than a sociograph. A sociograph you want when you’re chatting, when you’re making announcements when you’re throwing a party. a taste graph is what you want when you’re looking to buy a camera or go to college or whatever. This is the idea, how do we build this thing. And we started off on a purely technical, being a bunch of computer nerds, on purely technical methods. And then realized that we really couldn’t do it that way. We needed a more user generated, a user contributed kind of approach, and then met Katerina. It was like the entirely serendipitous meeting. Right when we were like, oh man we really need to add more of a kind of user generated component, we met her. The kind of poster woman for user generated content. so we all joined up and then, and have been sort of working on that since then. I think we’re still, I feel like we have a really interesting core technology and product. We’re still sort of iterating on the best nui and applications that are still in R&D mode. Although, we’re out there and we’ve made 1.3 million in each last month.
Andrew: So, you’re vision there is maybe for me, andrew warner, to have a new microphone for this interview, insted of asking my friends who have nothing, no understanding of microphones, because they’re not in this space, or even my audience, because all they want is not to produce this stuff, most of them. I would go no to hunch, I would answer a few questions and at the end of those questions I would get a list of microphones or maybe the one microphone that would be perfect for me.
Interviewee: Yeah, that or there are different methods, it could be that or one of the challenges as a product we have is, some things you want pushed and some things you want pulled. So, for example, the new, if you’re into video games, the new video games that you might like, you might like what I push to you, lets say by RSS or something. You almost never want a real push to your car push to you because you’re only buying one once every few years. You want a pull. And so, there’s this sort of push-pull challenge for the product. You know what I’m, saying? That like, in certain categories lend themselves to push, certain to pull. Also, it might be more that you like, when you’re looking for a car you go to hunch and look up that kind of car but maybe other times, like, media, like other things you consume more often it’s pushed to you kind of as let’s say new recommendations come in or maybe you’re taste-mates say they like it, you know, people who are adjactent to you in the taste graph say hey, I discovered this new video game I love, maybe it’s pushed to you. There’s a bunch of different models for it. The other thing is, we have technology now which lets us solve what we call the cold start problem which is we don’t actually need to even ask you questions, based on your facebook or twitter identity we can make a lot of assumptions, and get pretty far. We always are smarter when we ask you questions, but we can go without it. So then, it lowers the friction for people to get started.
Andrew: I’ve seen that, yes, I’ve seen several bloggers be amazed by how you guys can do that. You pull the data that they have from twitter and give them feedback based, an answer based on that.
Interviewee: Yeah, that was this sort of thing we call the twitter page. It was done as a thechnical demo, but it is, it does work pretty well. Your readers, I’d love if you told you’re viewers to encourage them to try and give some feedback. But, that’s sort of more of a technical demo. We’re going to be building a lot of useful stuff based on that technology.
Andrew: Is there one, by the way, that you’d like for me to link this interview to? Is there one series of questions or anything that you’d want me to link to?
Interviewee: I’ll link, I’ll give you a link to the twitter page. That’s just a nice technical demo.
Andrew: Ok
Interviewee: And more stuff is coming out soon.
Andrew: Alright, we’ve got a couple of questions from the audience. I heard you saying that there’s an affiliate link on, if we’re talking about the microphone, on that microphone response, isn’t there?
Interviewee: On hunch?
Andrew: Yeah.
Interviewee: So, on hunch our model is to have affiliate links so that if we recommend something, just like Google, we’ll have a sponsored link. That will be labled, sponsored link. so, yeah that’s our business model.
Andrew: So, he’s asking, how do you control quality, how you, as a user know that you’re not pushing out the affiliate link with the most…
Andrew: So now, he is asking how do you control quality? How does a user know that you are not pushing out the affiliate link with the most profit and not favoring that over the best product match?
Interviewee: That’s a good question. One of the nice things is that the affiliate world has been sort of standardized. First of all, control quality on the retailer side we select which retailers they are. So we don’t let just anyone come on and do it, we select them. We get a standard percentage payout per product. Now I guess you can argue that we would have some incentive to push more expensive products. I think that would be very short sided because people would see that and say Hunch sucks why are we going to use this thing. So we don’t do that. We expose a lot of statistics and data, for example if you get recommended something and then you go to this little actions thing and say why did I get this hunch and it will show you the reason behind it. So we threw a lot of transparency to expose and stuff. The main reason I think, it would be just silly from a product perspective to have the sense that Hunch is always trying to up sell you or something. Give you that sparkling water and not the regular. I can personally guarantee that we are not doing that and I just think it would be bad business to do that. We try to reassure people with just as much transparency as possible.
Andrew: Let’s see Jeng is asking, what kind of do diligence do you do before investing in a company?
Interviewee: It was different when I was a personal angel investor, because when you are a person angel investor you have no fadushy** or duty to anyone but yourself. So I would do, I would call it some diligence but very casual diligence. Now I invest through a fund that I co-founded, so now we have people who invest with us. One advantage of having a fund is that we have two full time people, I’m not one of them,work on it so they can actually go, call customers,and do background checks and things. We do stuff that is more like, make sure this person doesn’t have a shady background, make sure what they are saying about their customers are true, etcetera. For the most part at this stage we do not believe in, lets come up with a big analysis of the market and make a bet on it. We believe betting on really talented people going after big problems and that’s kind of vague. If you read my blog, I wrote one recently a post about U size markets using stories not numbers. Which is the idea being it is much more powerful to come in and say the world is changing and people are going to start storing everything in the cloud. You tell the whole story and say this is a huge opportunity to encrypt that stuff. You can tell some story versus coming in with a spreadsheet and showing numbers, sort of bottom up analysis kind of way. Any sort of compelling narrative.
Andrew: Fred Wilson picked up on that and had a great blog post showing how he does that. How he used a narrative to explain the power of social media, instead of just pulling in numbers and using spreadsheets.
Interviewee: I mean I am big fan and follower of him. I consider him someone I learned a lot from.
Andrew: Aprabbit in the audience, I am going to rephrase your question actually change it a little bit. I am going to ask Chris instead, what companies do you wish existed out there? What start ups do you wish somebody would go and launch, so you would back them, use them, or get excited about them?
Interviewee: That’s such a hard question. Basically you are saying, what would I start now if I was starting another company.
Andrew: Or back now since you are working on Hunch.
Interviewee: I think broadly areas that are interesting are things that involve artificial intelligence and large data sets. I think there are just tons of interesting opportunities there. I am a believer in kind of the science fiction future where we have intelligent robots and machines, and augmented reality and all these things. As much as you are building technology that kind of gets you towards that, I am a fan of that stuff. I think someone said we are trying to get the Hunches**. We are obviously at an early stage in some ways but I think using big statistical data sets you can do phenomenal things. I like to see kind of the stuff that is more ended, maybe this is a mis-characterization of the leading start up movement thing. What I worry about is that, along with a lot of other things going on in the tech world right now. There is a lot about flipping companies instead of building, I know they would complete object to this. Maybe i’m charactering them out and if I am I apologize but I just sort of like to see something more like I am the build something big chief of the world.
Interviewee: But I just sort of like to see more of the like, I’m the build something big, change the world kind of…you know, we just raised a round of financing from Coastal Ventures. I don’t know if [inaudible] you there. One of the things I really loved about them is I think they really are believers in that in a way that, you know, like the most important thing they cared about was like, they were like, ‘Do you want to flip your company into Google?’ And I was like, ‘I do not want to flip my company.’ This is all they care…like, ‘Do you want to build a big company?’ And I said, ‘Yes. I’m crazy and I want to build a big company.’ That’s what they want to hear. So like, I like more of the wild-eyed crazyness of the just like, Let’s go do something big and, you know, you may very well fail. You fail big or you succeed big when you try something out.
Andrew: So one of your concerns with the lean startup movement is that they’re not thinking too big. They’re thinking too much about the minimum viable product and not enough on the big hairy problem and the kind of problem that needs a big solution that you can’t build overnight, that sometimes takes April to April the way that does [inaudible].
Interviewee: Yeah. I mean I said that before and they always jump on me and say that I misunderstand it. So maybe I misunderstand it but maybe it’s not the lean startup movement maybe it’s just because of the mentality of it of like let’s…forget about lean startup. Maybe it’s just, there seems to be a mentality now of like let’s create little apps and flip them and, you know, keep it…you know, there’s a reason…
Andrew: I have to say though Chris that that was your idea with Site Advisor, that you took the first opportunity to sell the business, that you didn’t have a big process to convince your investors but you did. You sold it as soon as you could.
Interviewee: Yeah, so I’m hypocritcal. No look I understand why people sell their companies and like I’ve had a few companies that I’ve been invested in and have sold that, like I was recently invested in a company called [inaudible] which was an [investoring] required by Google. And that was sort of, you know, was like that kind of scale that it wasn’t a huge thing it was a good one.
I was a big advocate of that and I thought if the founders wanted that, that was good for them, you know. Like especially look, I think it’s also different if you’re a first-time founder. I mean I think those guys will go on and they’ll do something [inaudible], and they’ll go on and do another thing. I hope to invest in it and I hope next time they’ll, like us, they’ll say next time we’re going to do it differently, you know. We’re going to aim bigger or whatever, you know.
I like those different risk profiles like once in your life and I would never begrudge somebody for making that decision but I also like just to, in fairness, with Site Advisor like we weren’t just trying…when we got a good offer we took it. And by the way, like you know the sale price got to the point where like previously it was half of that we probably weren’t going to take it. So like, you know, it wasn’t like… it also depends on like the numbers. [It frankly] comes down to that. But like…
Andrew: Okay, and I saw you post from the Time. What you launched wasn’t what you were hoping to end up with. You did plan to add features and to itterate and to improve and to grow.
Interviewee: In fact, I think you would have had a, if you…what’s really interesting is that I think the business model that we…we’re always like thinking about different possible business models for Site Advisor and I think now we know what it would be which it would probably be the [Open DNS] one. You’re familiar with [Open DNS] which was like…yeah, it would actually be a very good business model for Site Advisor.
So, you know, it would have been interesting to see it play out but yeah. I think it was also like we’re in our career we can go start another company and I think, you know…I mean if you see me flip another company or two then I think you can call me a hypocrite. Right now I think with this first company it was opportunistic, you know. But I’m now in it for the long haul and trying to do something big so.
Andrew: What about this…Business Week -I said in the introduction- called you -what did I say- one of the top angel investors in Tech. They called you actually THE number one angel investor. I didn’t see you respond to that on your blog. I might have missed it if you responded somewhere else. What’s your response to that?
Interviewee: I mean it’s very flattering. I think any list that puts me ahead of Ron Conway, it’s just kind of crazy. To be honest with you and a lot of other people there, just nominal investors and…I’m flattered to be on the list. I think it’s like one of these things where it’s like fun to have some new guy on the list or something but I’m not the best angel investor in the country.
Andrew: I see. If they would have put an obvious answer on there like Ron Conway it wouldn’t have been as exciting. Nobody would have talked about it the same way.
Interviewee: I’m not the top angel investor in the country. I’ll just say that. It’s just, there’s no way.
Andrew: Alright. You say that at the end of this interview, in order to get more people to download this I might as the headline have to say “The top angel investor here on Mixergy.” I don’t know, I’ll see how it comes across.
Interviewee: I have to say that I am not the top…the fact is, I mean, nothing against your methodology but all these things are basically evaluations of all these things that are private. There’s no way they would know who has the best return. And I’ll tell you right now, I don’t have the best return. I have a decent one but I don’t have the best return. I would rather be Ron Conway probably and also like there’s a lot of different criteria. I mean there’s like, you know, a guy like Ron is just like, he’s personally, you know, created and made the careers of hundreds of people. You know, you can’t even compare that to kind of the level of influence. But like I said
Mixergy-Hunch-Chris-Dixon
Interviewee: But that’sÖI’m flattered and it’s very nice of them. I don’t want to —
Andrew: You don’t want to put them down for putting you on the list. It’s like being invited to the party and then turning around and saying, ‘Why aren’t all these other people invited? Thank you for inviting me and — ‘
Interviewee: I’m flattered but I think there are better people on the list.
Andrew: WhoÖyou and I met through Howard Lindsey (phonetic) and he was good enough to introduce me to you and suggest to you that you accept my invitation to do an interview here. Howard, thank you for doing that. He’s been a big supporter here.
Interviewee: I love Howard. He’s a character.
Andrew: He is. I forget what crazy questions he wanted me to ask you but they had a lot to do with those guys.
Interviewee: His show, it was likeÖhe played this game Hedge Fund or Porn Star or something. You had to nameÖhe gave a name and you had to say which of the two they were or something preposterous like that. He kept asking me about what it feels like to make money. He wanted me to describe this (1:20:51.1 INAUDIBLE) which I’m notÖI refuse to do. It’s (1:20:55.1 INAUDIBLE).
Andrew: I’ve got to doÖdo you know what? I’ve got to sex up this show the way that he does. I tried doing that. I didn’t come across well. I have to keep at it because it’sÖhe’s right. It does make it more interesting even to see you refuse to answer questions like that I think is interesting. But I’m going to go back to my more business-y, more square question and that is, which of your friends, who do you know in this space that I should interview?
Interviewee: Well there are so many people. Well, entrepreneur, investor, which ñ
Andrew: I guess actually my audience is asking for more and more invest- excuse me, entrepreneurs, especially bootstrap entrepreneurs, but anyone who is proven, not starting out, but proven.
Interviewee: I think the best..the most interesting start-up in New York and no one know about is (1:21:40.9 INAUDIBLE) group. Do you know that company?
Andrew: What is it called?
Interviewee: (1:21:43.8 INAUDIBLE, sounds like: Girs and Lanman Company).
Andrew: No.
Interviewee: (1:21:46.2 INAUDIBLE) markers and it’s basically bootstrap. They raise very little money and it’s now a massive, multi-billion dollar company. Over the last decade it’sÖthey basicallyÖtheir idea was to kind of have an eBay for Experts so thatÖwhat they do is they have hundreds of thousands of experts in different areas and they sell a service. For example, the company Hedge Funds, other people who are like, if you’re a hedge fund you’re 1:22:10.3 INAUDIBLE) top to a ten (1:22:12.7 INAUDIBLE) specialist. They put you in touch with them so it’s marketplace of expertise. And it’s just phenomenal. Because it sort of sells the hedge fund..it’s not glamorousÖthey started thatÖI don’t know if that number is up to $500,000 or something so it’s technically bootstrap.
Andrew: Yeah. Would you introduce me to them after this interview?
Interviewee: He’s a friend of mine, a really, really interesting guy and I always justÖyeah. I think because they’re an in an unsexy area no one know them but they’re probablyÖat least in New York they’re the most successful start up I know in the last decade.
Andrew: Perfect. Do you have another one like that? Somebody else who the rest of us wouldn’t have known of?
Interviewee: If one of my partnersÖin fact (1:22:52.4 INAUDIBLE) interesting, but again it’s a very unsexy area. It’s a dental company, dental technology company sold to 3M for a lot of money. And that wasÖI think that was an interesting case because heÖwhen he literally went to MIT and found the technology that no one knew what to do with and he was likeÖhe was at a business plan, a case study or something. They went out and tried 20 different applications for it including Hollywood and airplane engines, lots of other things and then finally figured out that dental was the best one and (1:23:20.6 INAUDIBLE) sold it. I don’t know but that was a really cool story. His name is Eric Paley (phonetic).
Andrew: Alright.
Interviewee: Yeah, I don’t know. I’m just sort ofÖI think that there’s a lot ofÖI guess what I would say is there’s a lot of interesting companies that are outÖI do consumer internet and that gets a lot of attention, but there’s a lot of stuff outside of that, like (1:23:39.5 INAUDIBLE) and just kind of cool stuff going on that maybe doesn’t get as much attention as it should. So maybe that would be my suggestion.
Andrew: Yeah, absolutely and I don’t know enough about them because they’re so busy building their businesses and they’re not cover boys because they’re working on unsexy businesses that you don’t get to find out about them. I’d love it.
Interviewee: That would be great.
Andrew: Thank you. I’ll follow-up with that. Thank..one more thing I had a note here to tell people that the Wall Street company that Chris talked about earlier was called Arbitrade. I don’t know if anyone needs it but I might as well be clear about that. Am I right?
Interviewee: That was the one I worked at. One that’s successful that I just called (1:24:16.6 INAUDIBLE) is called Girs and Lanman Group.
Andrew: Lanman Group.
Interviewee: So the website is GLgroup.com.
Andrew: Oh, okay.
Interviewee: Arbitrade is a company I worked at that —
Andrew: Yeah, you kept saying it earlier in the interview and I didn’t want to interrupt just to add that one point that it’s Arbitrade but I figured I’d get that fact in there.
Interviewee: Awesome.
Andrew: Cool. Chris, thank you so much for doing this interview. You spent extra time with me so I am extra grateful to you. Guys, thank you all for watching and I’ll see you in the comments.
Interviewee: Thanks for having me.
Andrew: Thanks Chris.
