Andrew: Hey there, freedom fighters. My name is Andrew Warner, I’m the Founder of Mixergy, where I interview entrepreneurs about how they built their businesses. A lot of the entrepreneurs that I interview come up with innovative models, innovative business models, innovative products. And I have to be honest, today’s guest did something really innovative and I don’t fully understand it, but I think I get the heart of why it’s so exciting for people.
All right. The guest that we’re going to get to meet today is Francesca Roveda. How do you pronounce your last name? I love how you did it, I’m trying to reproduce what you did. Roveda.
Francesca: Right. It’s Roveda.
Andrew: Roveda. When we first connected it was, like, so cool, I said, “I got to say it that way.” So here’s what she did, she is the Founder of a company called SixthContinent. The way it works is you buy gift cards, the same kind of gift cards you can get at the grocery store, buy online from the company, except you can get it and not pay full value for the gift card. Like maybe a $100-dollar Amazon gift card you get for $80 instead of $100. But the difference between the $80 that you pay and the $100 that’s valued on the gift card you make up for in points that you get from SixthContinent for doing things like shopping using the cards that you bought previously on SixthContinent and for filling out your profile and so on.
I see that Francesca is, like, nodding in agreement, but also you’re not. I’m seeing that I’m not fully getting it, the way that I express it. We’re going to find out how she did this, how this model works, and also how she . . . The revenue, from what I could see here, is phenomenal on this.
We’re going to do it all thanks to two great companies. The first will host your website right, hostgator.com/mixergy. And the second, if you’re looking to hire developers, they’ll get your best people out there. Go to toptal.com/mixergy. I’ll talk about the sponsors later. First, Francesca, good to see you here.
Francesca: Yeah, so hi to you all. Andrew, you explained very well the model of SixthContinent.
Andrew: Okay.
Francesca: We are a platform and we are a commerce plus social network, so we combine everything. And we resell the gift card of a lot of the most important brands in the United States, from Amazon to Foodler or whatever.
Andrew: Yeah.
Francesca: And the people can redeem the credit that they earn on SixthContinent with some purchases. So they can redeem the credit and they can pay the gift card of $100 for $80 because they redeem that $20 in credit. So the power of SixthContinent is to growing . . . yeah, to growing the power of purchasing of the people.
Andrew: But, like, look at this. I’m looking at an Apple Store and iTunes gift card for $25.
Francesca: Yeah.
Andrew: I have to pay you guys $20 for that, not $25?
Francesca: Yeah, we sell the gift card of $25 . . .
Andrew: The card says I can buy $25 worth of products at Apple.
Francesca: Yeah, exactly.
Andrew: And how much do I give you guys to get that?
Francesca: You give us $25.
Andrew: Okay.
Francesca: I mean, yeah. $20 [Inaudible 00:03:22] with your credit card and $5 if you earn some credit during the months. You can pay $5 with points and $20 with your credit card.
Andrew: Got it. And then the extra five points, how do I get $5 worth of points on your platform?
Francesca: Yeah, you can . . . I mean you can earn the points with . . . to publish some reviews or to get more gift cards or to . . . if you . . . When you buy something, you can write a review and you can gain some points. So we have on our website all the rules to increase the points.
Andrew: And I would write a review where for an iTunes gift card, where would I write that review?
Francesca: On our social commerce. So we have [Inaudible 00:04:06] e-commerce inside.
Andrew: Got it. So I take all this action, and in return for taking that action I get to pay less cash for more value of the card. That’s basically the heart of it, I’m basically taking a $20-dollar bill out of my pocket, sending it to you, and in return I get $25 worth of Apple Store credit. And the difference between the two is stuff I’m earning by interacting with your platform, doing things like filling out my profile, doing things like writing reviews. I’m starting to get how this works. Bottom-line it for me. If you’re getting a $25-dollar gift card from Apple, how much do you pay Apple for that? Or let’s take it away from Apple, nobody likes to talk about Apple. Let’s say generic main company, they charge you $25 . . . you have a $25-dollar gift card, how much does your company have to pay for that?
Francesca: Yeah, we have an agreement with the big companies and all people, if [Inaudible 00:05:02] work order or whatever. If you were going to the supermarket and [Inaudible 00:05:10] for a book order, you can pay less.
Andrew: No, I mean you, what’s the cost to you of a gift card? Average gift card, let’s say, for $100, how much do you have to pay for it?
Francesca: Yeah, but we . . . I mean we have to pay to the supplier.
Andrew: Yes.
Francesca: Yeah, and what I . . .
Andrew: How much?
Francesca: Yeah, I can’t say the number.
Andrew: Give me a ballpark. $80 for . . . Is it 80% of the value?
Francesca: It depends. I mean for $20 it’s an average of $10 and $10.
Andrew: Wait, so for a $20-dollar gift card on average you pay $10 for that gift card?
Francesca: It depends.
Andrew: Got you.
Francesca: It depends on . . .
Andrew: But that’s possible. $10 to $20 is what you pay?
Francesca: Yeah. And 50% of our gain, so in this example of $10, I give back to the user $5 more.
Andrew: Got it. Okay, so you pay anywhere from half to, say, even a full price for the gift card. That extra difference, instead of pocketing the profit, you give back to your users, but they have to take some kind of action in order to get it. Because . . . Right. I think I’ve got that.
Francesca: Yeah, but it depends on the action. I mean if you want to buy another gift card . . . I mean if you subscribe today on SixthContinent, maybe you are a new user, so you pay $25 of the gift card for the value of $25. But in the same transaction you receive some credit back. It’s not cash back, it’s credit back for the next purchase.
Andrew: Got it. Okay. And now I’m getting it, now I’m understanding why people would want to use you. If you’re going to go buy on . . . if someone is going to go buy on Amazon anyway, or Apple anyway, they might as well get the gift card from you. Even if they’re paying full value, any extra that they get kicked back for next time means that next time they’re going to get to pay less for the same products. And you do have big brands on your site, it’s not like some rando website that you guys are selling gift cards for. It’s all the brands that we know, including, like, Nike, Starbucks, Google Play, Apple, Banana Republic, etc. Okay, I’m getting now how the model works. Revenue, hit me with it. How much revenue did you produce 2018?
Francesca: Yeah, in 2018 we closed, the year, about $60 million.
Andrew: $60 million, 6-0 million dollars?
Francesca: Yeah, exactly. Million dollars. It’s a combination of European markets and U.S. markets.
Andrew: Why is it called SixthContinent?
Francesca: Because it’s a new continent. So, I mean, we have in the world five continents, so that’s why the SixthContinent. It’s the way where all people together can create a new world.
Andrew: I thought we had seven continents?
Francesca: No, it’s six continents. Why seven?
Andrew: I thought North America, South America, Europe . . .
Francesca: [Inaudible 00:08:21]
Andrew: Sorry?
Francesca: But for us it’s the five continents.
Andrew: Oh, you combine Europe and Asia into a continent because they’re a body of land, North America and South America into a continent because until the Americans went and dug a Panama Canal they were one. Got it, I didn’t see that. One thing . . . That’s it.
Francesca: Yeah, I know that sometimes the U.S. markets say seven continents, but we are the SixthContinent.
Andrew: Got it, okay. You know what? What I’m discovering is that the way that we name continents is different. My goal this year is to run a marathon on all seven . . . at least what we consider seven continents. And I’m discovering that for some people some of these continents are together, like Europe and Asia are Eurasia, and for other people there’s another continent that’s north of Australia which we don’t consider a continent. I forget what it’s called, but I get it. All right, now I’m understanding how your business is, I understand how much revenue you’re making, I get why now you’re on such a vast revenue growth. Like this year . . .
Francesca: And sorry, but the great thing is not what we made last year.
Andrew: Yes?
Francesca: The great thing is the growing of the company. I mean we bumped up from $7 million of 2017 to . . .
Andrew: $60 million.
Francesca: Of last year. And we reached in three months . . . I mean for 2019 we reached . . . we already reached $20 million.
Andrew: So a fourth of the month is . . . a fourth of the year is done and you’re already at $20 million this year, got it. I can see the fast growth that you’re on. By the way, watch the desk when you’re making . . . when you’re moving your hands on the desk, for some reason it sounds really loud. I’m getting it, I see how you got here. I want to know why you went to finance and economics in school, because I feel like that gives me a sense of who you are. Talk about that if you could.
Francesca: Yeah, sure. When I was a child my father worked in finance, so I started to hear something about finance and something about women in finance. So my dad told me that I never I’ll never work in finance, too, because it’s a totally masculine sector and whatever, so I decided to study economy and to study finance. And so I started to work in a bank, in [Inaudible 00:10:52] Bank. And then [Inaudible 00:10:54] when I met the Founder with me, the Founder of SixthContinent, I decided that after . . .
Andrew: Wait, let me pause for a second, I just want to hang on what you said earlier. Your dad told you, “Finance is male-dominated, you’re never going to make it in finance, think of something else.” And you said, “No way, I’m going to show you, Dad. This is male-dominated? I’m going to do it. This is harder? I’m going to do it to prove myself.” That’s who you are?
Francesca: Yeah, sure.
Andrew: Is that accurate?
Francesca: Yeah.
Andrew: Because that’s impressive.
Francesca: Yeah, it’s like that. So that’s why when I met the Cofounder with me, we started the crazy stuff. Because in 2008 there was a big crisis, I worked in a bank in brokerage and I decided to stop the work there and start the new adventure of SixthContinent.
Andrew: And what I want to understand is you said to your Cofounder . . . What’s your Cofounder’s name?
Francesca: It’s Fabrizio Politi is my Cofounder, yeah.
Andrew: You said Fabrizio?
Francesca: Yeah.
Andrew: “The way the world is working right now, it’s awful. It’s going to happen again. The way that economics are handled is just not right, I’m going to solve it.” And the way you wanted to solve it was with gift cards? Why was that the solution to the 2008 crisis?
Francesca: Yeah, we arrived to create a business of gift cards, but we would like to give to the citizen, to the people more spending power.
Andrew: It’s more spending power, you said, “We’re going to find a way to make it easier for people to get by, to do the same shopping, without spending as much money”?
Francesca: Yeah, exactly. And right now we give to the people per month around 20% more of purchasing power. So that’s why, I mean, it’s more useful, SixthContinent is very useful.
Andrew: Okay. All right. And so did the two of you quit your jobs right away to go start this or did you start SixthContinent before you quit your job?
Francesca: No, we had a lot of debt and we started to create a lot of [Inaudible 00:13:28], because also the website. I mean the first website was [Inaudible 00:13:36], so it’s horrible. But we started to create this [Inaudible 00:13:43] project. We started in India and with a . . . I mean with a technical team. We have around 200 developers in India, we started there.
Andrew: But before you even did that, it seems to me, looking at your background, that you started a company called OverProfit before you even got into this. Am I right?
Francesca: Yeah, exactly.
Andrew: What was OverProfit?
Francesca: Yeah, it’s the algorithm that is based on . . . I mean it’s the base of SixthContinent. It’s an algorithm where the old . . . we started the old company, we take all data of the company, and we started to study the cycle of what the company was doing. So we saw some . . . I mean, some not good companies and we saw the prices and we started to study that. So we also, at the beginning, we sold our products inside Bloomberg, so we used also Bloomberg for that. So it’s all this debt period is what was to study, so that’s why we . . .
Andrew: Was you trying to figure out, “What do we do? What is the new business?” And it seems like, I’m looking at the Internet Archive, you were going to create a company that analyzed other companies, kind of like Bloomberg does, kind of. Right? It says here . . . it says, “Financial analysis of companies and markets with the powerful algorithm MoMoSy.”
Francesca: Exactly.
Andrew: That’s what it was. So it wasn’t . . . it’s not at all the gift card thing, the first business had more to do with finances and international markets, am I right?
Francesca: Yeah, it’s not the business, but it’s something that we started to create. So it’s the basis of SixthContinent. Then we arrive in SixthContinent and we create the SixthContinent, the website, the core business of SixthContinent, too. So . . . but we start from OverProfit, yeah.
Andrew: I’m going through this and it’s really a way for people to understand . . . if I’m understanding this right, a way for people to understand where the markets are going and maybe even where individual stocks are going, am I right?
Francesca: Yeah, exactly.
Andrew: Okay, all right. And so it seems like that didn’t really work out for you, you were even thinking about raising money from, what was it, a crowdfunding site, right? And that wasn’t really going well for you? Am I right about this part of your history?
Francesca: No, not at all. No, we already have 600 shareholders and they are all private, it’s word by word. And they started to finance in SixthContinent because before . . . I mean at the beginning me and Fabrizio started to finance in SixthContinent, then we saw that we needed more money and more time for that. Because we created a huge system with an all-API system with all brands with, all companies. So kind of it’s our baby, but it’s a heavy baby, you know?
Andrew: But the first business, did you raise money for that when it was called OverProfit and it was more . . .
Francesca: No.
Andrew: No, you didn’t? Got it. This was you guys funding it yourselves, then you said, “This is not really the answer, let’s keep looking around.” You looked around, you discovered SixthContinent as an idea of letting people buy gift cards for less cash than they would ordinarily. Where did that idea come from, how did you come up with that idea? That model is brilliant.
Francesca: Yeah, but we started [Inaudible 00:17:43]. I mean we started to give really help to the . . . I mean to the people that needed help. I mean a lot of people have a problem in 2008 because there is a financial crisis. So that’s why we started to . . .
Andrew: But the leap from analyzing markets to suddenly offering gift cards seems like a big one. It seems to me like somewhere you heard something that led to that and I’m trying to understand what that was. Where did that idea come from? Was it that you saw that gift cards cost less than their face value and you said maybe . . . That’s not what it was? What was it that led you to gift cards?
Francesca: Yeah. We arrived also with a lawyer, also with accounting. It’s a combination of . . . We know our goal, I mean we have written the goal, but . . . and sometimes we sat at a table with the lawyer and we talked to the lawyers, “Okay, we want to give to all users much money.” You know? And so they say, “Okay, you have to sign with the old user agreement.” And then we said, “No, it’s impossible.” So we tried to . . . It’s a combination. It’s like two stones that try to . . . you know, to make something better to the people, to us, to everyone. So after a few years, seven years, so after a few years we find . . . finally we find a very useful system, so it’s more than a system.
Andrew: Just constantly looking around, and then there was no one big idea that got to this. Okay, all right. Let me talk about my first sponsor, and then we’ll come back into this story and see what happened next. Because it seems like it’s the Italian market that you went after first.
The first sponsor is a company called HostGator. If you’re looking to host a website right, go to hostgator.com/mixergy. What you’ll get is a one-click install of software, like WordPress for publishing content on the Internet or Magento for publishing or creating an online store, or frankly any one of these open-source projects. But you’re probably going to want to pick WordPress. They’re going to give you an unbelievably low price. And forget about what they say on their website, when it’s time for you to scale up beyond those unbelievably low prices, they have hosting services that will scale with you, that’s what I did. I started out with the cheap plan, and then I just kept going up and up and up as my business kept growing.
If you want to get started right, go to hostgator.com/mixergy, they’ll give you the lowest price that they have. If you don’t like your hosting company, just try switching over to HostGator. Hostgator.com/mixergy, they’ll take care of you, they’ll even help you migrate. And not only do they have the lowest prices, but if you’re not happy with them, and I have been for years, if you’re not happy with them, they will even give you your money back with the 45-day money-back guarantee. Hostgator.com/mixergy. Thanks for sponsoring.
Italian market was the first market, and you started out with just one store, one product. What was the first card that you offered?
Francesca: Yeah, it’s a fuel company. And we started off for a fuel company, but everyone said, “Yeah, it’s a good project, but just one brand on board. So how is it possible to make more brands?”
Andrew: How did you get that one place? How did you get that one fuel, that one gas company to say “yes” to you?
Francesca: Yeah, it’s a big deal, commercial dealer. I mean me and Fabrizio going to that company, we were nothing. So we went to the company and said, “Hey, we’re starting to sell your gift card. And we’ll show you that big number,” and blah, blah, blah. But we never sold any gift cards, so it totally . . . the first one, is totally a commercial deal. They believe in us and they started to sell us their gift card. So we created with them a big deal and we started to develop an all-API system. So we started with a gift company, and so our . . . I mean I’m very proud for that because it’s the first card that we started to sell and we said something like, “Okay, now we sell 5,000 fuel. Okay.” And then we said, “Okay,” and started to grow.
Andrew: You just kept watching as you were selling all that, got it. I want to understand why couldn’t you just go out and get gift cards? People sell gift cards all the time, you don’t even have to go to Apple to buy an Apple gift card. There are resellers who you partner up with or you just make a deal with and you get Apple gift cards, don’t you?
Francesca: Yeah, but we give to the people, also. I mean it’s a big . . . it’s a commercial deal with a company and we decided to give to the people a part of our profits.
Andrew: Right, but do you need Apple’s permission to buy an Apple gift card for less than face value? No, right? So why couldn’t you just go out and get more gift cards without waiting for a deal with the company?
Francesca: Yeah, what do you mean for permission?
Andrew: Like why did you have such a hard time getting other stores, other sellers to let you offer their gift cards on your site?
Francesca: Yeah. You have to receive approval for that.
Andrew: You do? You can’t just sell an Apple gift card without their approval?
Francesca: Yeah, sure.
Andrew: You have to have their approval, you’re saying?
Francesca: You have to receive approval, you cannot . . .
Andrew: You buy all these gift cards directly from the company, you can’t just go and buy them from a reseller?
Francesca: It depends. It depends. I mean sometimes directly from the company, sometimes for the time, just for that, to gain the time, to . . .
Andrew: What do you mean “to get the time”?
Francesca: I mean to . . . Because if I have to go to all companies directly, that’s takes more time. If I go to the reseller . . .
Andrew: It takes more time, right.
Francesca: Yeah.
Andrew: So you go to a reseller. But then what I’m trying to understand is why you only had one gas company, why you couldn’t go to a reseller and get cards directly from them. Why was it so hard to get other companies listed?
Francesca: Yeah, because at the beginning we wanted to start . . . at the beginning we didn’t know about the reseller, so that’s why we started with the direct company.
Andrew: Oh, really? Got it. So you just didn’t even know how this whole industry worked and you said, “We have to go to Apple to get Apple’s gift cards, we have to go to Best Buy to get Best Buy’s gift cards.” And so it was taking you too long to get it and all you had was this one gas station only in Italy. For the few months where you had that one gas station, you were starting to build up customers. How did you get customers, how did you get anybody to know to come to your website?
Francesca: It’s word of word.
Andrew: Word of mouth.
Francesca: Yeah, exactly. It’s just that. And just last year we started a promotion on TV.
Andrew: But at first it was just word of mouth? How did you get things started for word of mouth? Who did you e-mail, what did you do?
Francesca: Something like we started to talk . . . to tell on Facebook and to tell on LinkedIn and the people . . . and we made a lot of conventions.
Andrew: A lot of . . . Oh, you went to conventions to get customers?
Francesca: Not customers, but to explain what is the SixthContinent.
Andrew: Okay, all right.
Francesca: And some customers arrived from that, so then it’s word of mouth.
Andrew: Okay.
Francesca: Sorry.
Andrew: No problem, I understand. I’m starting to see how this came about. Did you have any virality built in, meaning did people get points for telling their friends to come back to your site?
Francesca: Yeah. Referral link, you mean?
Andrew: Yeah. So you had some of that built in?
Francesca: Yeah, we have something inside. If you invite someone, you can receive a part of our profit, I mean the profit that we decided before with the company.
Andrew: Yeah.
Francesca: So a part of our profit is going also to the people who invite someone.
Andrew: Okay. By the way, there’s so much noise going on, I’m really concerned that people are not going to want to listen to this. I want to do a good job for you, but it really would help me if you guys helped us listen to it better. So the noise in the background is bleeding into the microphone a lot.
Francesca: Yeah, sorry.
Andrew: Okay. All right, so the virality, the word of mouth was built into this software, people needed to share. You were starting to tell me earlier who built the software for you. It wasn’t . . . You and Fabrizio are not developers, right? How did you get the initial developers?
Francesca: Yeah, we . . . Fabrizio is working on the IT company, I mean he’s a businessman but he worked by himself in IT. So he has some IT background and he decided to take some developers from India. So we have . . . we are hiring some, like . . . we hired a company and we started to develop in India, and then we moved here in Europe.
Andrew: Okay. It was your own money at first.
Francesca: Yeah.
Andrew: How much of your own money did the two of you put in before you went out and got more outside money?
Francesca: It’s around $2 million.
Andrew: $2 million of your own money?
Francesca: Yeah.
Andrew: Wow. And how did the two of you end up with $2 million? I know that you were working at a trading desk, XTB, the online trading company. Is that where it came from? Was it from Morgan Stanley, the two years you spent there?
Francesca: No, it’s mine and Fabrizio’s money. I mean I put something less there, for sure. And Fabrizio was . . . he’s owned a company before, he sold the company, and so he [Inaudible 00:28:21]
Andrew: Got it. Look, I’m looking him up on LinkedIn to see what his previous company was to understand what he did so well with.
Francesca: Yeah.
Andrew: His company was . . . Oh, it’s not even listed on here. He goes from SixthContinent started July 2010 to . . . And then before that he’s just showing that he went to the Università di Pisa. What was his company that he sold after he finished university and before he started SixthContinent?
Francesca: It’s an IT company, but I don’t remember the name of the company. But it’s an IT company.
Andrew: Just some kind of IT company that did development work for people?
Francesca: Yeah, he . . . I don’t know the name in English, sorry for my English, but it’s kind of, how to say? Whatever.
Andrew: Development shop maybe, where they do code for . . .
Francesca: No, no, no.
Andrew: No.
Francesca: Something to create a folder, it’s something like that. Fabrizio is bigger than me and he has 46 years.
Andrew: Okay.
Francesca: So before I think that is not the correct words, but it something like a folder, an online folder, that [Inaudible 00:29:39] company. And he created this folder that is with paper in an electronic way.
Andrew: He created a folder, like a physical paper folder?
Francesca: Yeah, but he transformed it in an electronic way.
Andrew: Oh, like an online folder. Like Dropbox?
Francesca: I don’t know, I don’t know the word in English, but it’s something like that.
Andrew: Got it, okay. I think I’m getting it, but not fully. I’m doing my best to keep here. All right, first set of users, I see how they came in. And then you ended up getting more, more product to sell.
Francesca: Yeah, sure.
Andrew: How did you get the next batch of companies who let you sell their cards?
Francesca: You mean for that period?
Andrew: Yeah, more resellers. So after the gas station, after the gas company, you ended up getting others. You told our producer, “We started pitching ourselves to new channels for sales.” You started going after new retailers. Is that from going to conferences?
Francesca: Yeah, we started to speak with the reseller, them. But before we reached Amazon in Seattle, we go there, we speak about our project, and they say, “It’s amazing, so okay. We want to on-board on SixthContinent.” So they started before in the United States before in Italy. So we started before in United States.
Andrew: It started before in the United States to sell their cards, their Amazon gift cards?
Francesca: Yeah, then in Europe.
Andrew: Got it, okay. And then in Europe. By the way, I went to SimilarWeb to see where you get your traffic. The thing that stood out for me is not where you get your traffic, but where people actually are who come to your site. The vast majority of your audience is still in Italy, right?
Francesca: Yeah, it’s in Europe right now. I mean we expand . . . we move also in Portugal, in Spain, in Germany.
Andrew: And Mozambique is even a little bit, but the majority, over 90%, is still Italian.
Francesca: Still in Italy. Yeah, exactly.
Andrew: The Portugal, then United States.
Francesca: Yeah, exactly, then United States. And we started some advertising, we work with some bloggers in United States. And so there is organic growth in United States, but we would like to make more and to start [Inaudible 00:32:18]. It’s very . . . I mean the market of the gift card, the points created and the credit back, it is not like that and we made great results in Italy. So I think that in United States we can . . . we could . . . no, we can do better.
Andrew: So I do see where people are coming from. The other interesting thing for me is usually when I go to look up somebody on SimilarWeb, I see Facebook, Twitter, YouTube, sometimes Instagram. I don’t think I’ve ever seen WhatsApp web app for anybody. How are people using WhatsApp to promote and talk about you? What are you doing on WhatsApp?
Francesca: I don’t know [Inaudible 00:33:05] but maybe for a viral link. They send by WhatsApp, I don’t know, and maybe that’s why. But I’m never told about WhatsApp, we never do nothing about . . .
Andrew: You’re not doing anything to encourage it, but you do give your members referral links. And when somebody uses a referral link to send their friend over to your site, they get credits, which allows them to buy gift cards for less cash than the value of the card. Got it. And so they’re sending it on WhatsApp because that’s their communication tool.
Francesca: Maybe, yeah.
Andrew: Got it, okay. There was a period there where people weren’t believing in you. In fact, you lost a manager.
Francesca: Yeah, sure.
Andrew: Talk to me about what happened. What was this manager supposed to do, and then what happened that led you to lose the manager?
Francesca: Yeah. Because me and Fabrizio have a vision, but kind of the manager didn’t see the vision and at the beginning you have a lot of fail. I mean you start to some market, and then you see that that market is not enough and is good or whatever. And some manager did not follow the rule, did not follow the vision, but it’s okay. And so we decided . . . One day we . . . And we already started to grow in the SixthContinent website, so we developed the SixthContinent website, we started selling. But one day we, me and Fabrizio, decided to fire everyone.
Andrew: To fire everyone?
Francesca: Yeah.
Andrew: Wow.
Francesca: Exactly. So we say, “Okay, like that we cannot continue it.” Because every time you receive, I don’t know, someone that, “Okay, we cannot do that,” or maybe, “We cannot reach that, we cannot, yeah, reach the goal,” and we know that we can, but the manager doesn’t. So that’s why we decided to rebuild the whole team.
Andrew: Let me see if I understand this right.
Francesca: Yeah.
Andrew: I’m looking at a very old article, “very old” meaning like two years ago.
Francesca: Yeah.
Andrew: It says . . . I’m translating from Italian, this is on Prima Online, it says, “SixthContinent officially launches its shopping cart payment platform in Italy.” This is when you got started. “Fabrizio Politi says 2018 target, 1 million users, $100 million in turnover,” so $100 million in revenue. So you guys launch, immediately you say, “Not only are we launching and this is going to be big, we see this as being $100 million-dollar a year business by 2018,” meaning within a year or two.
So he had this big vision, this manager who was working for you did not believe in the vision and quit. And it could be a little bit of a disappointment, right? It’s somebody who knows you as well as possible who says, “You know what? I don’t believe in you,” manager quits. You look around and you say, “You know what? This manager quit because she didn’t” . . . Is it she or he?
Francesca: Exactly.
Andrew: It doesn’t matter, “Because they didn’t believe in us. Other people here don’t believe in us either. We have a company of people who aren’t believers, we need to replace everybody.” So you fired everyone except for the engineers who, at the time, were India. And you said, “We’re going to start brand new.” Am I right?
Francesca: Yeah, exactly.
Andrew: With a full group of people who are believers like a cult that every start-up needs to be. Got it.
Francesca: Yeah.
Andrew: I’m seeing you shake your head as I said that like you’re stretching because there’s some pain. What’s going on? Be open with me.
Francesca: No, it’s okay. If you want to [Inaudible 00:36:48] me here, but it’s okay.
Andrew: No, I want to know if, like, there’s a tell here that’s saying, “Andrew, you’re not doing this right, I’m stressing out here, my neck hurts.”
Francesca: Yeah, because I’m working too much on the . . .
Andrew: Oh, it’s because of the computer, it’s not because of what I just said. All right, let me talk about my second sponsor, and then we’ll come back in and say, “All right, you let go of everybody, how do you start fresh?”
Second sponsor is a company called Toptal. If you’re looking to hire developers, the best of the best developers are available on Toptal. Now, Francesca, you guys started out with Indian developers, my guess is partially because you were looking for a lower price and you needed a big team of people to do it. I would suggest that if you want to do an Indian team of developers who are inexpensive, maybe Toptal is not the place to go. But if you want to do Indian developers who are killer and cost a little bit more, not crazy like San Francisco prices, but cost a little bit more, that is the place to go. And ditto for any other part of the world, Eastern Europe, South America, I even believe in the U.S. they have them.
What they don’t have is a big contingent of developers who live in San Francisco who have to pay high San Francisco rents. Or, like me, have to now just pay high San Francisco rents, but have to pay high San Francisco schooling and have to beg the schools and apply to schools to let their four-year-old get in, that’s what we were just going through. So San Francisco, really tough place to live.
The people who are top of the top developers who choose to not live here and still are Google quality, San Francisco quality developers, well, they say, “You know what? We want to get good jobs.” They go to Toptal, Toptal puts them in their network. And when you, my dear listener, and you, Francesca, and everybody else out there, when you want to hire the best of the best developers, you go to Toptal and you say, “Look, I need great developers. Andrew says your guys are killer good. I’m going to challenge you, here’s our plan, here’s what we’re looking for.” They will set you up with great developers. If you’re happy, you get to hire them. If you’re not happy, just walk away.
And then, I will even say this, if you try working with them and they don’t live up to expectations, Toptal even gives you an opportunity to not pay and back out. Don’t worry, Toptal will pay the developer for you. If you’re not happy, they don’t want your money, but they do want to make sure that you get the best of the best developers easily. And the way that you do it is by going to toptal.com/mixergy. That’s “top” as in “top of your head,” “tal” as in “talent,” T-O-P-T-A-L.com/mixergy. Do I have to spell Mixergy? Yes. T-O-P-T-A-L.com/M-I-X-E-R-G-Y. When you go, you’ll get 80 hours of Toptal developer credit when you pay for your first 80 hours, in addition to a no-risk trial period of up to two weeks.
Wowee. So things are going good, things are going well, you decide, “You know what? Let’s start buying online ads.” I looked you up, you guys do do some online ads, but you said to our producer, “So far they haven’t worked great for us,” right? What’s going on? Talk to me about the online ads. When you decided, “We can’t just count on word of mouth, we need to bring more people in,” what did you do?
Francesca: We started to decide to . . . [Inaudible 00:39:31] We started to decide to work with some publishers here. So it’s a big . . . the most famous company of TV here, it’s a TV company. And, I don’t know, we started. And I think it went very well for TV. Because we were using Facebook and Google, but it’s not going very well. So we started to go through the television and we brought in a lot.
Andrew: Television worked for you?
Francesca: Yeah, exactly.
Andrew: Wow. Because? Why do you think television worked where other platforms didn’t for you?
Francesca: Because it’s something trustable, so that’s why it’s working. Because we are a new company. If you go on Google and on Facebook, no one clicked on that. I mean we have a few maybe clicks, but no one subscribed, maybe one, two people if they know you. So I think that television is huge advertising because it’s something trustable. So that’s why we started with television, and we continue some television.
Andrew: It’s something trackable?
Francesca: Yeah, trustable.
Andrew: Trustable?
Francesca: Yeah.
Andrew: Meaning people trust what they see on TV?
Francesca: Yeah, exactly.
Andrew: Got it, okay. And so that did it. But you also do something with a company called . . . What is it called? ClixSense Research, where . . . I guess that’s where . . . You don’t know them. I’ll tell you what I’ve discovered about them. It’s a website where people go on to get paid to give reviews. So it’s some kind of review site. This is one of the top platforms that you guys advertise on. How connected are you to the advertising system in the company? You don’t micromanage?
Francesca: That company, I don’t know the name. So we don’t pay for that company, so I don’t know who paid for that.
Andrew: Oh, maybe it’s a different ad that then gets placed there, but it seems like you guys get some good traffic from them. What apparently they do is . . .
Francesca: Maybe, I can imagine, that someone for the referral link made something like that. I don’t know.
Andrew: Okay.
Francesca: [Inaudible 00:41:54] Sometimes to receive more credits, they make, I don’t know, some kind of . . . this kind of company. But I don’t know about this company and we never cooperate with that company.
Andrew: That’s kind of interesting. You’re saying that because you give your people referral credit, they just go hog-wild. Whatever they want, they come up with crazy ideas that you could never have thought of and that you don’t even have to pay attention to.
Francesca: Yeah, I think that people . . . Because for people, the referral link can be enough. They receive some peanuts, some credit back, some peanuts. And I think that, I can suppose, I can imagine, I don’t know, but I think that they try to make some advertising for that. And they receive for every purchase of the people on a referral link. So if I invite you, I receive. But it’s linear, it’s one to one. So if I invite you, I receive forever the credit, the peanuts, the credit of your purchases.
Andrew: Got it.
Francesca: Okay. If you invite someone else, I don’t receive nothing.
Andrew: Yeah, it’s just every time I invite you, I get credit for you. But when you invite someone else, I don’t get any credit. But there’s still an incentive, there’s still incentive for every user to go refer other users. And is it possible for somebody to use so many referral credits that they don’t have to pay anything for a $25-dollar gift card?
Francesca: What do you mean?
Andrew: Can somebody get a $25-dollar gift card using nothing but credits on your platform?
Francesca: Mm-hmm.
Andrew: They can?
Francesca: Yeah, they can. But, I mean, they can if they have $25,000, they can redeem what . . . the credit they have.
Andrew: So it’s possible that somebody is getting so many different referrals that they end up not having to pay anything for a gift card just because of referrals?
Francesca: No, because you can . . . Absolutely not, because for our internal low you can pay . . .
Andrew: They always have to pay some cash?
Francesca: Yeah, some cash, until half. So if $25, it’s, yeah, $12.50.
Andrew: Got it. It’s still a good deal. And now, as I’m looking around, a lot of this is making sense. So because you kick back so much to your users, they have an incentive to tell other people about this, they have incentive to go and be actively participating in your social network, they have an incentive to find things like there’s some kind of Chinese website, Chinese in HI. I don’t even know what this website is about, but I can see that there’s a lot of posting in here, a lot of news on there, that’s sending you traffic. So somebody probably said, “Hey, I’m going to list this on a Chinese website,” that you have no idea about, Francesca, but still it’s kicking traffic to you. That is one of the brilliant parts of your business plan.
Francesca: Yeah, exactly. That’s why it’s organic growth. You know?
Andrew: I heard that in the very beginning you used to have four monitors up around your office just to keep track of your users to see how well you’re doing. And you used to have just 100 users at the time when you first did this. So the first year you had no more than 100 users, but you still would look at the four monitors to see all your data?
Francesca: Yeah.
Andrew: Are you still doing that?
Francesca: Yes, exactly.
Andrew: You still have those different monitors set up all over?
Francesca: Yeah, sorry.
Andrew: I’m seeing what’s going on, by the way. There are people who want their jackets because it’s the end of day for you, right? You’re still in Milan today?
Francesca: Yeah, we are in Milan, and I’m so sorry for that. And also have two dogs.
Andrew: Who are running around the office?
Francesca: Yeah. In the office we have eight dogs, but, by the way, here we have two dogs.
Andrew: You spent a little bit of time here in San Francisco at Click N’ Play, right? Isn’t that that big co-working space?
Francesca: Yeah, we have an office there in WeWork.
Andrew: Oh, it’s WeWork?
Francesca: Yeah, we were there.
Andrew: How is that helping you to be here in the U.S.?
Francesca: We have an office there, and so we have one employee and one team of marketing team [Inaudible 00:46:19], but they’re helping us a lot.
Andrew: To try to get . . . to try to become bigger in the U.S. market?
Francesca: Yeah, but also for user experience. I mean the user experience from here, I mean from Europe, it’s totally different to United States. So in Europe we want to see all things beautiful. I mean the website is not very useful, very easy to understand. The United States want some website that makes a few things, but makes them very well. So it’s kind of . . . And this company helps us to convert the user experience of the European market into user experience in the U.S. market. And the big company is from, big company being a start-up, and the new company is from United States, not from Europe.
Andrew: Are you guys profitable?
Francesca: Yeah, we are profitable.
Andrew: How much last year?
Francesca: The EBITDA is around 80%, so it’s 80% of $60,000.
Andrew: Wait, 80% of $60,000 is profit?
Francesca: Million. $60 million, sorry.
Andrew: Of $60 million. 80% of $60 million? .8 times $60 million. Wait, you guys did $48 million in profits before interest, taxes, etc.?
Francesca: Yeah, we earn in profits, but we still pay the TV bit by ourself. So we could be in profit, but we still pay a TV team. Sorry, a TV company, so a TV company.
Andrew: So out of the 48 that’s left, you still pay for the cards? No?
Francesca: No. No, no, no. We could be profitable, I mean we are profitable, we could be profitable, but we still pay by ourself the advertising, I mean the advertising on TV.
Andrew: The TV advertising, right. So after television ads, after all the expenses, office, etc., how much profit do you have?
Francesca: It’s something like 1.2%, it’s a net margin.
Andrew: 1.2% net margin, got it, okay. That makes more sense. So 1% . . .
Francesca: [Inaudible 00:48:54]
Andrew: So about a million.
Francesca: Yeah, about a million.
Andrew: About a million dollars off of $80 million in sales. And the $80 million in sales is all the gift cards that are sold on your platform?
Francesca: Yeah. And gift card and B2B, but it’s the same we sell. Because we started to sell also advertising on our website.
Andrew: Yeah, I saw that, I saw that there are some ads on the platform. Again, SimilarWeb is so helpful for this type of thing. And so after costs of cards . . . Well, how much are you spending on cost of these gift cards? If it’s $80 million in sales, what’s the cost of the gift cards? 60?
Francesca: It’s around, yeah, 60. It’s around . . . we have around . . . We consider the advertising with the gift cards, so we have around 33% of the margin. So advertising plus gift cards. If we consider only gift cards, we have around 10% of margin.
Andrew: Oh, on gift cards it’s only 10%? So if you sell $50 million worth of gift cards, it’s $45 million that you’re paying to get those gift cards?
Francesca: Yeah, exactly.
Andrew: Got it.
Francesca: With these we give to . . . half of these we give to the clients.
Andrew: Okay. I’m with you on this. I get it. For anyone who wants to go check you out, the website is SixthContinent. My wife says I don’t know how to pronounce “sixth,” I’m too much of a New Yorker, so I’ll say it. S-I-X-T-H, sixth. Sixth. I always say “six.” Sixthcontinent.com is the website, for anyone who wants to go check it out. I’ve got to try you guys for gift cards. What do I have to lose? I might as well try to pay a little bit less for stuff, number one.
And number two, I want to thank the two sponsors who made this interview happen. The first is the company that will host your website right, bring your idea to hostgator.com/mixergy. And the second is a company that will help you hire phenomenal developers, go check them out at toptal.com/mixergy.
Finally, you guys know I’m kind of obsessed with chat bots. Or maybe I should tell you so you’ll know, I’m kind of obsessed with chat bots. If you’re interested to see what I’m up to with chat, got to botacademy.com. Bot Academy, B-O-T. Chat bots is what I’m into, botacademy.com.
All right. Francesca, thanks so much for being here.
Francesca: Thank you to you, Andrew.
Andrew: You bet. Good evening, bye. Bye, everyone.