How VinSolutions was built and sold to Autotrader for $150,000,000

Matt Watson is the founder of Stackify which helps developers improve their applications.

The company he started before that was called VinSolutions. They offered a collection of software for auto resellers.

He sold it to Autotrader and there were a bunch of different rumors about what the price of the sale was. Biz Journal said he sold that company for nearly $135 million. It ended up being $150 million.

I want to find out how he did it.

Matt Watson

Matt Watson

Stackify

Matt Watson is the founder of Stackify which helps developers improve their applications.

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Full Interview Transcript

Andrew: Hi everyone, my name is Andrew Warner. I’m the founder of mixergy.com where I interview proven entrepreneurs for an audience of real entrepreneurs and that’s why I like to get deep into the details of how they built their businesses. I, unlike other podcasters who do interviews, I don’t just roll into the interview blindly but, you know, we have producers, pre-interviewers, and a team of researchers to help prep me. And I think that my team was being too nice to my guests so nice that we didn’t even need them to be this nice.

Here’s what I mean. Matt, you kind of caught on to this. So Matt Watson is currently the founder of a company called Stackify which helps developers improve their applications. It provides monitoring and troubleshooting, actually, it enables . . . So much for the team of producers and editors and like and they wrote it for me and I was like misreading it. You provide a combination of tools to help developers monitor and troubleshoot their applications, that’s how you help improve their work, right?

Matt: That’s right, yeah.

Andrew: So they assumed . . . Listen, this guy’s got a good company now, you probably just want to talk about that. Let’s help them focus on that and forget about what he did in the past. But you’re happy to talk about what you did in the past. I’m excited to find out about what you didn’t past. I think we should talk about both companies, right?

Matt: Yeah, absolutely.

Andrew: And the company that you did before that is a company called VinSolutions. They offered a collection of software for auto resellers, right?

Matt: That’s right, yep.

Andrew: And you sold it to Autotrader?

Matt: That’s right, yep. Which is part of Cox Automotive which is part of the same Cox family that owns like Cox Cable and all that stuff?

Andrew: And there was a bunch of different rumors about what the price of the sale was. Biz Journal, their website said that you sold that company for nearly $135 million. Is that right?

Matt: Yeah. It ended up being $150 million. Yeah.

Andrew: $150 million because there was an additional $13 million or so afterward based on performance. Killed it. Yeah.

Matt: Pretty good exit, yeah.

Andrew: Yeah, all right. Let me tell everyone this interview is sponsored by two companies that you’ll hear about later. The first will host your website. It’s called HostGator. The second will help you hire your next great developer. It’s called Toptal. Coming back to you, Matt, this is huge for a guy who started out selling in the flea markets. What did you sell at flea markets?

Matt: Well, my parents did so grew up working in a couple of different flea markets. Yeah, absolutely. I used to go every weekend with my parents, and maybe that’s where I kind of got some of my entrepreneurial spirit.

Andrew: What did they sell at flea markets?

Matt: You know, my dad used to sell toys and miniatures, books, you know, stuff he would find at garage sales, all sorts of stuff, yeah.

Andrew: You know, be honest with me. Right now it makes for great story. You started out as a guy selling at the flea market. You sold this first business. You’re building a second business, you’re a success. But when you were a kid, did you think, or when you’re younger, did you think, “What I’m I doing at these freaking flea markets?”

Matt: I had no idea what I was doing for sure.

Andrew: Did you feel a little resentful to your parents. “Why are you bringing me to these flea markets?”

Matt: No, I think was just part of my life, right? I mean, I didn’t know any different. This is what I did.

Andrew: Where did you grow up?

Matt: I lived Kansas City area for since I was five so for over 30 years now.

Andrew: All right. And did you know you’re going to be an entrepreneur based on that whole flea market experience or something else?

Matt: No, not necessarily. I mean, I went to college, I went to DeVry to study computer programming. And . . .

Andrew: Oh DeVry is the school that I advertises on television, isn’t it?

Matt: Yeah, yeah. They have campuses all over the country.

Andrew: And is it a four-year institution?

Matt: Yeah but you do it in three years. Yeah, you graduate with a full bachelor’s degree.

Andrew: But it’s not like someone who goes to high school, and then their school tells them, “Hey, DeVry is the next place for you to go learn.” Was it?

Matt: No. There were a lot of high school students that went there sure but I mean there were also people who were sort of career changers, you know, that were . . .

Andrew: And is that what you were?

Matt: No, I mean I did it right out of high school.

Andrew: Because you wanted to do what with that?

Matt: Computer programming.

Andrew: You just said, “I know computer programming is the way for me.”

Matt: Yeah.

Andrew: How did you know that you wanted to do that with your life?

Matt: You know, when I when I was younger, I always just loved computers. I always played on computers, all that sort of stuff, and my dad actually went to school for computer programming but never actually used it. But when I was five, six years old, I played around on like Commodore 64 computers all that stuff. And even back then to actually use them was sort of a little bit of programming to like run an app and stuff like that. And yeah, I just always loved computers so that was just kind of . . .

Andrew: So then you took on a job back in the year 2000, am I right? You were a senior application developer.

Matt: Yeah, I worked for a couple of different companies. I actually dropped out of college and got my first job which is why I went to college, right? Was to get a job. And I worked at a couple of different companies before I ended up starting my own company.

Andrew: Do you talk about what those companies are you tend to be private about it?

Matt: Where I used to work?

Andrew: Yeah.

Matt: Yeah, so I started out working in the ticket business. So I worked for a company called Ticket Solutions, it was here in Kansas City. They’re still here. And so, it was like an online reseller of tickets, you know, for like Kansas Chiefs tickets or Royals tickets, you know, on the secondary market, right? But one of the things that we did is I spent a lot of time building bots to buy tickets from Ticketmaster and crap like that so. Which is a lot harder to do and supposedly illegal now but people still do it. But, yeah this was the wild wild west of that stuff, you know, 17 years ago before captchas and all that stuff.

Andrew: That’s fantastic. All right. So you were doing all of that, and that’s how you guys got those tickets, and that’s why when the average person tried to go and buy a ticket from Ticketmaster, they just weren’t able to do it.

Matt: Yep, that’s right.

Andrew: Ticketmaster is a whole big mess anyway because they’re definitely underpricing those tickets and then now they’re basically doing the same thing, aren’t they? Don’t have an arm that takes those tickets and resells them at higher prices?

Matt: They do. They have they bought a couple of different companies that do the kind of secondary market of that now for sure.

Andrew: Okay. You did finally finish your bachelor’s degree, right?

Matt: I did, I did.

Andrew: When?

Matt: Like nine years later or something.

Andrew: Why? Why did you bother?

Matt: You know, I only needed like 16 credit hours or something. So I finally figured it was a reason to pay off the student loans. I might as well get it. I took some night classes and weekend classes here and there kind of along the way and chipped away at it and then eventually just kind of finished it.

Andrew: All right, you co-founded VinSolutions. Where did the idea come from and where did you meet your co-founder?

Matt: Yeah, so I was basically kind of the random technical co-founder so I would just tell people it wasn’t my idea, it was another guy’s idea. And the other gentleman basically went to a mutual friend who owned a car dealership and said, “Hey, I’m looking for somebody to help me take photos of cars and some data and upload it to the internet. Do you know any software developers that could help do this?” And this mutual friend basically connected us. We sat down in Applebee’s one day, he described to me what he was trying to do and I was like, “Hey, you know what the heck? I can upload some files on the internet. Seems easy enough.” And, you know, to me, that was always kind of the a little bit of the entrepreneurial spirit of always trying to do side projects and different stuff like that so.

Andrew: I see. And then how did it become more than that?

Matt: Well, you know, immediately this person had like 10 or 20 customers and he was using it himself and it made him a little bit of revenue and it just kind of slowly grew. It was definitely sort of a side project for a year or two. You know, I was putting in a massive amount of hours into it but I was still working my full time job. And it just kind of slowly took off and grew from being a simple product that, you know, the initial concept was basically syndicating inventory data and photos of cars. [crosstalk 00:08:05]

Andrew: And so just to be clear about that, a dealer has a bunch of cars on his lot, and he wants other websites to know what he has so that they could help move it, is that right?

Matt: Yeah. And if you think about it, you have to take say, 10 photos of a car but you got 100 cars to take photos and then you got to upload those photos to cars.com, on Autotrader and all these different places. It’s a lot of data to move a lot of places. So it’s just basically syndicating data in different places.

Andrew: And that was all. Who wrote the original software to do that, to syndicate it?

Matt: Me. That was me.

Andrew: That was you?

Matt: Yeah.

Andrew: So you came in, and you said, “I’ve got a way to do this.” You’re building it up. I know that with Stackify, it was a slower growth. It feels like you had to work harder for it. What do you think it was about VinSolutions that helped it take off so fast when you guys weren’t fully obsessed with it?

Matt: Well, I think the original idea was simple, and we’re able to get kind of the first product to market. Where with Stackify I think we spent a couple of years in R&D of building something that was much more complicated.

Andrew: Okay. And you kept it simple, and then you kept growing and growing and growing. And I heard one of the reasons why you guys were bought out was that you had such a good collection of tools all under one roof, am I right?

Matt: Yeah. So we started out doing the simple inventory management and then it grew into, you know, websites for car dealers and full CRM system for car dealers. Really kind of ran the whole sales and marketing that the salespeople would use, the dealership use.

Andrew: How do you figure out what to add and how to get them? Yeah, how do you figure out what to add? Let me instead of double barreling the question. I’ll have one.

Matt: Well, so a lot of it is just from the data that we had. It was easy to build additional products on to the data. So, for example, you know, once you have the inventory of the cars, it’s pretty easy to take that inventory and build like a website from it. Like the inventory is the heart of the data, right? And same thing when we started doing the CRM related stuff. Say, “Okay, now we have all their customers, we know who their customers are, who the leads are, you know, how do we build different products and services around that data?” So we just kept building more and more products around that.

Andrew: So when our producer asked you, “What is it that you, what would you want to talk to the audience about? Or what’s one thing you could teach?” You said, “Talk to the customers and the problem more than anything else.” And so tell me about how you guys did it back then? Or did you do it back then in a formal way?

Matt: Yeah. I mean, almost everything we did was based on customer feedback. And most of our employees were all people that had worked in the car dealerships too. So my main business partner that kind of came in later down the road who became the CEO was, you know, had worked at car dealerships and stuff before and like all of our employees had worked at car dealerships before, every single one of our salespeople, all that stuff. Our tech team, not so much but, you know, being able to get their feedback and guidance on what the product was supposed to do plus our customers, of course, so.

Andrew: I’m looking at the internet archive VinSolutions. And back in, let me see, 2004, it was redirecting to site called VinStickers? Did you guys have a different name at the time? What’s VinSticker?

Matt: That was the original, yeah, that was the original name. So it was originally called VinStickers, and what we had, the original product did the inventory related stuff, and as part of that, we had the ability to print window stickers that they would, you know, put on the on the car windows that would say like how much the car is and what equipment was in the car. And so, VinStickers was the original name, and then when we decided to do all the CRM related stuff, we changed the name.

Andrew: So first, it was stickers then it was taking all the photos of your cars and moving them online and so on and so forth.

Matt: Yeah. Right, yeah.

Andrew: Interesting. And it’s also kind of interesting to see that you said on the website people could enter to win what’s called VinBuddies. Do remember VinBuddy was?

Matt: You know, it was a mobile app that I built. So . . .

Andrew: Now, by the way, this is long before the iPhone came out. This is before Treo allowed apps. I think the Treo 650 hadn’t even been out there. We’re talking about on a device . . . Well, do you remember what device this was?

Matt: So they were Dell, Compaqs, and small devices, yeah.

Andrew: Yeah. Compaq Pocket PC.

Matt: Yeah. So I built a mobile app that ran on, it was like Windows CE or whatever it was called then. And yeah, this was when they had like a 1.3-megapixel camera or some of them had like an SD card slot on the top and they these watch cameras.

Andrew: They’d have to add the camera to the device from, I’m looking at these old photos of this device. So you would give them the device, the PDA and then you’d give them the camera to go on top and then you fucking created an app that would take pictures using the camera and organize it for them?

Matt: Right. And the camera quality was terrible. People would call in to me like, “Oh, you know, they get real bad like sunspots on the car.” And we have to tell them like, “Oh, we have to take pictures when there’s an overcast.”

Andrew: That’s what you would tell them? That was your answer? Because that’s all you could do, there was no iPhone. The alternative was what? Why not tell them, “Hey take your . . . ” I know why actually. I think I know why. “Take your regular Casio, whatever those cameras were at the time, Canon I guess was a camera at the time. Take it out to your lot, take photos and upload them on to the website.” The problem with that is it’s too much work. They have to upload each set of photos under one . . . Right? That’s why you didn’t want to do that?

Matt: Right. And so, later on, we worked with, there was a manufacturer Rico that made a camera that would let you, on the camera device, specify like what the stock number was so then they could put in the stock number basically as they took the photos. And then when we uploaded all the data, it knew what photos went to what car. And so, we later adopted that few years later.

Andrew: Was that VinCamera?

Matt: Yeah. Yeah, that’s what that was called. You’re an expert at this.

Andrew: Okay. So I’m looking here through the years. There’s Vin this, Vin that, lots of different Vin things. You were in the experimental stage, right?

Matt: Though we were, I mean, we were a growing company at the point.

Andrew: But it seems like you said, “Our audio . . . ” It was this old line that Seth Godin once said, “Look, instead of trying to get bigger share of market, right? Going after more and more types of customers, find a way of getting a bigger share of wallet. You’ve got your customers who you are targeting, find more things to do with them that you’re capable of and they need you to do.” Is that what you were doing? Was that your strategy?

Matt: Yeah. I mean, I would say we were doing both. I mean, we were constantly adding additional product features and function at the same time while, you know, adding additional customers depth.

Andrew: And the reason I was saying it looks like you guys were experimenting is because you guys even offered VinBrochures. Right.

Matt: Sure. Yeah, we offered everything.

Andrew: And that’s not like a growing thing for you guys to be focused on. VinBrochures are printable brochures of a car. So was that your strategy, we’re going to figure out what we can do for them, we’ll talk to them, we have a lot of experience because our team now that we’re hiring has this background, and we’re talking to them constantly. We’ll figure out some of the things that they need that we think we could create. We’ll test it if it works, great. If not, we’ll get rid of it.

Matt: Yeah, absolutely. Yep.

Andrew: How did you end up getting a share of the business? What was the process for that?

Matt: Well, you know, me and another gentleman were the original founders. And so it was basically like a 50/50 sort of split in the beginning.

Andrew: So right from the start, you were coming in and helping him, but when it came time to splitting up equity, you said, “We’re going to be 50/50 partners on this”?

Matt: Yeah. Yeah, that’s how it started, yeah. And then like most companies, you know, we had, the original gentleman that we started it with exited the business about probably about three or four years in. And we bought him out and then had some other partners come in and yeah, had a whole sort of stuff go on, you know, from the perspective. The company should have failed two or three times just because of partner exists.

Andrew: Why? Give me one reason why the company should have failed.

Matt: Just issues. I mean, you know, we had two different CEOs. We’ve basically fired to CEO twice that were both partners. You know, never really had an investor. It was all bootstrapped so yeah, we just had different issues with the different partners that were owners of the company but that we’re not providing any value or, in some circumstances.

Andrew: So how do you deal with that?

Matt: It’s hard. I mean, you know, one of the biggest mistakes we made is we had, at one time, we had five partners, and the operating agreement was up in such a way it was took a super majority, so everybody had to agree to do anything. Which makes it impossible if you have one of those partners that nobody wants to be partners with anymore. So yeah, like a lot of companies, we should have failed because of weird legal problems.

Andrew: You know what? I was at a dinner party to friend’s house and this guy who was basically booted out of a partnership that he had. And then he walked into Y Combinator, got funding for, got this whole support for, he was asked to leave. And he was, I could tell, he was hurt by it, he was pissed by it and he didn’t know what to make of this. And he had this conversation with Jessica Livingston, the partner and founder of Y Combinator who said, “Look, these guys now are going to be obsessed with making you rich. You should see this is a good thing. Support them anyway,” I’m paraphrasing. “Support them any way you can but accept now that your life is going to be better if they do well.” And instead of harboring all this resentment, were you able to do the same thing?

Matt: Yeah, I mean we, you know, we alternately bought out the people that left. So, you know, their price was sort of a fixed price.

Andrew: Because of the agreement you had.

Matt: Yeah. I mean, they needed us to succeed so we could afford to, you know, continue to basically pay them out. We were sort of making payments even have the cash to buy them outright. But they needed us to be successful.

Andrew: So your agreement was . . . Was it a fixed amount or fixed amount base sum revenue?

Matt: Yeah, it was a fixed amount.

Andrew: Fixed amount.

Matt: Yeah.

Andrew: So you all five went in there knowing if we need to break up, here is the amount that someone has to get in order to leave?

Matt: No. We had it we had to go through mediation to figure that out later, but we had to figure out later.

Andrew: Wow, yeah. I can’t believe you survived. All right, you know, what else and some kind of like hunting through your past. See, the research is actually showing up. You guys were a virtual company pretty early on and you had to explain to people what a virtual company meant meaning that people didn’t have to work in the office. You started hiring all over the world and I’m wondering . . . Or all over the country. Why did you have to hire people in Arkansas, Connecticut, Florida, Indiana? Is it because you needed someone to go into the dealers and sell and make a commission?

Matt: Yeah. So good question. So the business was a software company, and our office was all in Kansas City. But one of things we did for a while for probably a year or two is we had a services division that would go out and take photos for the dealers.

Andrew: I see now.

Matt: And so we would physically go on the lot, you know, once or twice a week, take photos of cars. And we had employees in. I want to say, it was like 15 to 20 states at one time that were doing that. And . . .

Andrew: So, the sales didn’t happen by them driving around, it was you guys calling up dealers and selling?

Matt: It was probably a mixture of the two when we were doing that. You know, later in the years, we did have a few . . . You know, even past we stopped doing that services business, we had a few external outside salespeople but 98% of the company was always here in Kansas City.

Andrew: So how did you get customers? How did you get all those dealers to trust you to buy your software, to try your software, to do the handheld thing?

Matt: Well, you know selling to car dealers is so much easier than selling to software developers by the way. You just call a car dealership up and say, “Who sells a car like? I want to talk to that guy.” And oh, by the way, I’ve got this awesome thing that going to, you know, revolutionize your job and you got ten minutes for a demo, right? Like it’s pretty easy to get them on the phone.

Andrew: And the reason you’re able to do it is well, no one wants their job to revolutionize. What these guys want if they’re selling cars is to be able to sell more cars, am I right?

Matt: Exactly.

Andrew: And so the demo was look at how I can sell more cars for you. You use my device. It’s a little bit new, it’s weird to hold a PDA but trust me it’ll work. When you do it, we’re going to list you in all these places, and you’re going to sell. All you have to do is pay me what for each upload.

Matt: I mean, in the early days it was a couple hundred dollars a month.

Andrew: But they’re also not the most techie. Like I look at software developers, they have tons of crap on their phone. They have not only crap on their phone, but they’re also with the gadget they have on their desk to like keep the USB like what is it called? The extender from falling, right? But dealers aren’t willing to try new software, are they? How did you get them to try it?

Matt: You know, there were a certain percentage of them that would. You know, what was funny is, even to this day, there’s a lot of car dealers that use external service providers to come take photos of their cars. But if you walk in any car dealership at random time of day like today, there might be five salespeople just sitting around doing nothing, right? But it’s not their job to take photos of cars because that’s not their job so they won’t do it. And so the dealers were forced to pay some else to do it or hire somebody that was dedicated to their job.

Andrew: Is that because the dealers make money when there’s a sale that happens online without a human but the humans don’t make money on that.

Matt: Well, I mean the salespeople only get a commission for what they sell. So for them to spend three hours going and taking photos of cars, they don’t see that as being part of their job. So what happened in the dealers is they started hiring internet managers that basically managed all the internet aspects of it. You know, all the online lead stuff, all the photos stuff like all the merchandising basically that they would do. And once that wave kind of started, you know, they were definitely a customer of ours.

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Matt: You know, so we actually didn’t really decide to sell as much as we had decided to raise capital. So we were, at that time this was 2010, we went through this whole big long process. You know, a firm in San Francisco helped us reaching out to different like VC and private equity groups and stuff like that. We also talked to some as a strategic acquires in the industry and got a lot of great offers. It was probably the funniest probably three to six months of my life was actually that experience was a ton of fun.

Andrew: Really because so many people were offering money.

Matt: Yeah because it was, you know, me and one of the other guys kind of had this running joke of it was every day. It was like every day we had a better offer, and it was just like . . .

Andrew: Why do you think you guys had such an easy time when so many others who tried what you did didn’t have as easy as your time?

Matt: Well, so at that point in time, we were doing about $30 million a year in revenue. So, you know, we had a great business. We were very profitable and so we had lots of people that were interested in acquiring us or investing at that point.

Andrew: And you guys were thinking of giving up from what I heard 40% of the business even? You basically were also looking to cash out, not just sell.

Matt: Yeah. I mean, we we’re looking to sell 30%, 40% of the company. Take some money off the table, you know, some of the founders, stakeholders could actually see a little bit of a payday. You know, I mean, I was worth a lot of money on paper but didn’t make any money, right? Like . . .

Andrew: What was your salary at the time?

Matt: I think it was 120 grand a year.

Andrew: Wow, okay.

Matt: I mean, I had a strong . . .

Andrew: So that’s [crosstalk 00:26:24] strong for where you were but considering how much you’re generating as a business, you know, you don’t have the millions in your bank.

Matt: Yeah. I mean, I had a lot of . . . I mean, we had salespeople that probably made two or three times that, right?

Andrew: Did you feel like it could all go away if there’s a mistake. If like, what is it? CDK Global comes in then you guys could start getting overwhelmed?

Matt: As far as the competition?

Andrew: Yeah.

Matt: You know we had a lot of competition and, you know, two or three of them were billion dollar companies. I mean we competed with Reynolds and Reynolds and CDK which at that time was ADP. There are dealer services business and we had some other competitors as well, but that didn’t really scare us. I mean, we were kicking their butt so.

Andrew: Reynolds and Reynolds was one of your competitors?

Matt: Yeah.

Andrew: And still they were on your website. I remember one of the early versions of the site, weren’t they?

Matt: They were a partner of ours at one time.

Andrew: Really? There it is, in partnership with Reynolds and Reynolds. What did the partnership give you guys?

Matt: Well, so if you go back in the early days, we had tried to work out a partnership with them where they were going to resell our product, and the reason why is they sold a lot of paper. And so, we’d create a product that would print window stickers and so we would tell the dealers that they needed to call the Reynolds rep and buy the paper custom printed from them. And so that was like the partnership, but it just never really went anywhere.

Andrew: But even back then when you guys had a partnership with them, they were promoting themselves as a software and services company trying to transition away from the paper people.

Matt: Right, yeah. You go back, you know, if you’ve ever bought a car and all the forms that you have to fill out, Reynolds and other companies like that made a fortune selling all that paperwork to the dealers.

Andrew: Oh really? I never thought of that.

Matt: Yeah, they made a fortune.

Andrew: Because it’s all the same, it’s all boilerplate.

Matt: Yep all the intricate forms on the crazy dot matrix printer and all that stuff, yeah.

Andrew: So was it Reynolds and Reynolds who made you an offer for the whole business who said, “Listen, forget about this the strategic investment. We want it.”

Matt: So we had a couple of different companies that made us an offer. I should probably, I think it was for four. About four companies had made us an offer to sell the whole thing. And ultimately, Autotrader ended up just being the best fit for us.

Andrew: Okay. Can you say who were the other ones . . . no. You’re not going to.

Matt: No.

Andrew: There’s no upside for us to know it but there’s a downside for you if you tell it, so I’m not pushing on that. All right. And it was because of this experience, as I understand it, that you said, “There’s got to be a better way to create . . . ” Wait, actually, before I go to the next business. Tell me about the day you signed the contract? It’s over. All this up and down, losing a co-founder, trying to figure things out, not graduating, that whole thing is now done. You’ve got some closure. Tell me about the day when you signed it, maybe when you saw the money hit the bank account.

Matt: I think it was very anti-climactic.

Andrew: Really?

Matt: Yeah. I mean, I think in some ways, I kind of feel like a little bit . . . It’s a little bit like getting off the roller coaster for me.

Andrew: And you didn’t want off the roller coaster?

Matt: Not necessarily but I think it just kind of started a new phase of life, right? And I always say that that probably 6 to 12 months before we sold the company was the best ever. Because the company was doing really well, we were growing, you know, we were . . . I mean we were killing it, like we were living the dream. Like we were just having a blast, right? Like I mean, that was crazy and there were times they were stressful and whatever. We had great business. And then all of a sudden it’s like we don’t. We had a bunch of money but we don’t have a business anymore.

Andrew: Yeah, I get it. And it was such a good business that other people even wanted it so how could you not want it? Did you have any like pit feelings of depression or a loss because of it?

Matt: No, not really.

Andrew: No.

Matt: I mean, you know, people always ask us, they’re like, “Was it your baby?” or “How does that feel?” But to me, I mean, yeah, it was my baby, but after doing it for eight years, it was like my baby had grown up and got married and moved out and divorced and like, you know, wasn’t a baby anymore.

Andrew: You know what? You seem like a very even-keeled guy. You ever have any periods of depression throughout all this, any periods of difficulty, or was it just life is easy, I got this?

Matt: Oh, no. Lots of bouts with depression for sure.

Andrew: Really? Tell me about one.

Matt: You know I think is being an entrepreneur it’s a never-ending sort of thing, right? I mean, it’s a very stressful thing. I mean, it’s something I fight even to this day of just the stress of being an entrepreneur.

Andrew: How does it hit you when it does?

Matt: You know, for me, it’s probably just feeling like I don’t want to do anything, or I don’t know what to do, or I think that’s probably how it manifests in me.

Andrew: And then is there a way that you get yourself out of that? By the way looking at old photos of your life like because you’ve been at this for so long. I see an old photo of you standing in front of some booth at some expo or something. You look like a twelve-year-old boy except for the fact that you have some chin furs, you know.

Matt: Well, when I started doing it, I was 22, but I’ve always had a little bit of a baby face. So most people today think I still look 22. So, yeah.

Andrew: And you’re wearing a suit which also . . . This one makes us feel like you’re either a banker or a 12-year-old kid on his way to communion or something because that’s how people go to a communion.

Matt: Yeah. I was like [crosstalk 00:31:56]

Andrew: All right. So tell me well, did you get yourself out of depression, and then we’ll go into how you figured out the new idea?

Matt: You know, I think it have and the right mixtures of uppers and downers.

Andrew: Really? Literally, it’s pills.

Matt: Yeah. For me, honestly, I’ve taken an antidepressant medicine.

Andrew: I’m so glad that you talk about that. What do you say to someone who says, “Why does he need antidepressants? He just sold his business for a lot of money. He created something that worked?”

Matt: Mo money, mo problems, man.

Andrew: Like what? What’s the problem that comes up?

Matt: Well, I mean, you know, business is hard no matter what and money doesn’t solve that side of it. But from the personal side of it, when you’re the person who has money, everybody hates you, and it’s a very lonely place. Nobody wants to talk about that side of it, right? You know, my whole family hates me, right? I’m the jerk of the family now.

Andrew: Why? You know what? Every time I look you up I see, and I don’t know if it’s really you or someone else, there’s like wife issues or something or marital issues, relationship issues keep coming up?

Matt: Not for me. No, not for me. I’ve been married for [inaudible 00:33:01] 15 years.

Andrew: Okay. So then why does the family hate you? Actually, yeah. Are you the super mega guy?

Matt: Super mega?

Andrew: Okay, it’s a different Matt Watts super mega guy.

Matt: Not me. No, I mean, so the problem is, you know, for example, I buy my, let’s say I buy my sister a car, right? Like I do some awesome thing. Everybody else hates me because I didn’t buy them a car. You can’t do anything right. I mean, no matter what you do, you don’t make everybody happy.

Andrew: And if you don’t buy anyone a car, and then you’re the jerk who’s keeping it all to yourself?

Matt: Yeah.

Andrew: Got it. Yeah, that would bother me too. All right, at least you and your wife are still together.

Matt: So, rich people problems, man.

Andrew: You know what? I’m seeing that it’s more and more people’s problems. What medication are you on?

Matt: I take Zoloft.

Andrew: Zoloft. And it helps?

Matt: Yeah, absolutely does.

Andrew: All right so you came up with the idea for Stackify because of your experience being the CTO of VinSolutions. What specifically was it that made you say, “There’s got to be a better way”?

Matt: So I was the CTO, as you said, I had two or three developers that work on the lead developers. But we spent 90% of our time chasing fires, chasing problems, and really wanted to build a tool set that would help us troubleshoot things a lot faster and be able to kind of scale that to the 40 other people that worked in IT besides the three or four of us that were probably three of the most important people in the entire company were looking at log files and troubleshooting issues all day.

Andrew: Do you have an example of a problem like that the U.S. had that you needed help with? I think I’m having a hard time visualizing it.

Matt: Yeah. I mean, so the easiest way to look at it is if you’re on a website and it’s slow, or getting errors or it’s not working the right way which is like every day, right? The developers need to know when that kind of stuff happens, you know. Otherwise, somebody calls into the support team, customer service, right? And they basically say, “The sky is falling, your product doesn’t work.” And the next you know the developers are just like trying to figure out what’s wrong and they have no idea. So, they need tools to kind of help highlight what the problem is and where the problem is.

Andrew: I see. I got it right, right, right. And, in fact, it might even be worse if a customer goes to the website, it’s not working, or the software’s slow and they don’t tell you. They don’t complain, so you never know, they just walk away and other people walk away also. Because, in fact, people don’t sit there and say, “I refuse to wait for a website to load.” They just know something’s off and they move. That’s the kind of a thing that you’re talking about.

Matt: Yeah. If I pull up Pizza Hut’s website on my phone, I go to order a pizza for any minute if it’s slow or getting an error. I can go to Papa John’s or Domino’s or 50 other places and order pizza, right?

Andrew: Yeah. I do that all the time. And I hate it because I feel like well, the one I wanted is just a minute away but I can’t, and I’m not hitting their feedback button to tell them. I just, first of all, it’s taken too long. And so you said there needs to be a better way to not just detect it but to also spread the word out to the right people and what else?

Matt: Right. Yes, so what our product does is it sort of like a black box on an airplane. We collect a bunch of performance data about their applications, who their users are. And when there are problems be able to really highlight exactly what the problem is, who is impacted by it, how to fix it.

Andrew: And aren’t there companies that do that doesn’t pay, PagerDuty to do that and others?

Matt: Yeah. So PagerDuty is more focused on alerts, So essentially we would integrate with them potentially to give them data about kind of what the problems are. But yeah, we compete with companies like New Relic and AppDynamics and some other companies

Andrew: Right. I just interviewed the founder about AppDynamics. I couldn’t think of a name for a second there. And they existed before you guys got started, didn’t they?

Matt: They did, or about the same time.

Andrew: So why not say this is handled. There are a couple of companies doing this or just do something else?

Matt: You know, because to this day, all the companies we compete with are focused on really like the Fortune 100, the like super large enterprises. And they’re focused on IT operations. They’re not focused on the developers and what the developers are trying to do.

Andrew: So then you said, “I have this idea.” My produce asked you what’s the first step you took and I don’t know if anyone’s ever said this before. You said, “I had to figure out a name, man. And it was one of the hardest things to do.” Why was it still hard to figure out a name?

Matt: I don’t know. It’s just one of those things where like if you’re starting a business, like you want to build a website, you got to figure out an e-mail address, you know, like all that stuff and it’s like till you figure out a name. You know, you kind of stops in your tracks.

Andrew: Was there one that you wanted, but you couldn’t buy the domain of?

Matt: Originally, it was actually Stackify. That was . . .

Andrew: That is, and you had to buy it from someone.

Matt: We did. So Stackify was . . . So we ended up using kind of a temporary name of knock systems [SP]. And so to this day it was still a knocksystems.com. And I bought like stackify.me and some other variants but stackify.com was owned by somebody I think that was in Hong Kong or in Asia or something somewhere. And I emailed them about wanting to buy it, and they never responded. And then I randomly emailed them again like a month later, and they responded, and I bought it from them. I think it was like for $5,000 or something like that.

Andrew: That’s expensive for that domain, but it’s a good price if you love the domain.

Matt: Yeah, yeah.

Andrew: But I’m still . . . As we’re talking, I’m hunting through the site to get a sense of what you’re doing. You have one of the clearest privacy policies online. Usually, I can find a lot of stuff buried in the privacy policy because people don’t see it like an old name or something.

All right, you know what? Let me take a moment to talk about my second sponsor, and then we’ll come back and ask you, now that you had your name, you had your idea, how did you get your first customers? How did you build the first version? But my sponsors a company called Toptal. I bet many of their developers are the developers that anyone could hire from Toptal actually probably very familiar with Stackify.

Let me ask you this, if someone is listening to me and they want to hire a developer, do you have a tip for them about how to find the right developer, how to ask the right questions, what to look for or anything like that?

Matt: You know developers are so hard to find. You know, they say were short a million of them and they’re hard to . . .

Andrew: You mean as a society?

Matt: Yeah. I mean yeah, like, you know as a country we’re short like a million software developers. They’re so hard to find. I don’t know if I have really great tip on how to find them except potentially through your current employees and their friends and stuff, their network. But outside of that I mean, it’s tough. It’s hard.

Andrew: You know what? The friends network is probably the best way to do it and to give people a bonus who are on your team to find them, recruit their friends, makes a lot of sense. What top Toptal said was, you know what? This is a big problem. What if this answer was not a better way to do help wanted or to syndicate the help wanted ads. What if a better way is to find a way to get the best developers to come to us?

So they came up with the set of tests that most people will fail. And they realize that even the people who failed will then go tell their developer friends I failed, this is actually a really too tough a task knowing that that’s the best way to get the good developers to come in to pass the test, to be on Toptal’s Developer Network. Now once the developers in the developer network, first of all, they’re proud. They get this elevation within their peer group and I’ve seen people post on Medium that they got in or also post on Medium when they didn’t get in so it’s an achievement to strive for.

But the next thing that happens is any business that wants to hire developer part time, full time as a project basis, they could go to Toptal, tell them what they’re working on, tell them what their quirks are in the company, and then Toptal will go to their network, find the right person or two, make an introduction. And if the business is happy, they can often get started within a day or two.

Anyone out there including frankly, Matt, you as you come across companies that need developers, you guys should check out Toptal. This is one of the best companies that I’ve ever met. They raise money from Andreessen Horowitz and I stopped hearing about them raising more money because I happened to know from an inside track they’re just killing it financially. Because people, once they go to Toptal, they just love working with Toptal and they continue getting their developers from there.

So anyone who is out there who’s listening to me first of all, do your own research, go look it up. I’m telling you there are blog posts about people who want to get into Toptal’s network who don’t. I’ve read some of them to you before, go look them up. And when you’re ready to sign up, when you’re ready to have a conversation and get the best developer that you possibly can or developers, go to not toptal.com. But go to the special URL I’m going to give you where as a Mixergy the listener, you’re going to 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. That’s a lot. All you have to do is go to top as in top of your head, tal as in talent. That’s toptal.com/mixergy. All right, toptal.com/mixergy.

Matt: You know, I want to go take that test. I know the knowledge is on.

Andrew: You know what? Interesting. Do you think you could pass their test and be on their network?

Matt: I think so.

Andrew: All right. Here is my bet to you. What’s your favorite charity?

Matt: Oh man. Let’s say Big Brothers Big Sisters.

Andrew: Okay, that’s a good one. How about if you pass their test, I’ll give $2,000 to Big Brother Big Sister?

Matt: All right, that’s heck of a challenge.

Andrew: Okay. All right. I don’t know how we can get you in the test but that’s a great idea. All right. How do I even tell people what happened? Tell you what guys? I don’t have a way to tell you guys what how this turns out, email us, contact at mixergy.com ask for the update, give us a little bit of time to make this work. And when we finally get the answer, we’ll also put it on the page with Matt’s interview.

This is a great idea. How do we make this happen? 2K Challenge. I’m e-mailing Satchit and who knows them. Yeah, we’ll find a way to make this work. All right so, on to the next. You had this idea, you finally started to build it, how far did you get before you were ready to take it out there and actually get customers?

Matt: You know, I think it took a couple of years. I think the first, you know, the first three to six months, was after I had just left Vin and I had moved and was doing a little remodeling around the house and sort of adopting to live a new lifestyle in different things. And I don’t want to I was messed around for the first three to six months, but I don’t think I was quite putting 100% into it. But, you know, I think it took a couple of years before we saw our first revenue for sure.

Andrew: What do you think you could have done differently at that point now that you got some hindsight?

Matt: You know, I think there are a million things. I mean, it’s been six years now so I think there’s a million things that I would do differently looking back today for sure.

Andrew: Is there one that stands out they can share with us even if it’s not the biggest issue?

Matt: I think it’s who we hired and when we hired them. Like so, for example, early on, we hired and I kind of brought in a little bit of like a VP of sales person, right? But we didn’t have a product to sell. So it was kind of really pointless. And their job was to do kind of more enterprise-level sells bigger sales. That was their background, and that was allure of why we hired them but then we ended up creating a product that we didn’t even sell to enterprise accounts. So, you know, we hired too many too soon from that perspective.

Andrew: Distraction basically.

Matt: Yeah.

Andrew: You know what? So I interviewed a president in a Warner Brothers collection of companies and he said when he finally went out on his own, he just turned to hiring all these people because he was used to having that many, that much talent around him. And he had to realize no, it’s not what I want to do. All right. I see that that’s what was going on. When you finally started getting customers, you told our producer, “I went after family and friends.” You’ve got family and friends who are developers who need this?

Matt: Yeah, absolutely. I mean who . . . I mean, I’m a developer, right?

Andrew: So these friends I see family, I was surprised to see in there.

Matt: Yeah. Not so much family but friends. Yeah. I mean, we’ve got . . . Yeah. I mean, we all have, I mean, I have other friends who are software developers and stuff so yeah, absolutely.

Andrew: And so, what was their feedback when you were taking this out to them asking them to try it?

Matt: You know, the original product . . . So our software today doesn’t even do what the original product was. So like most things we kind of changed directions or pivoted a little bit. But it’s one of things like we had a cool product and it solved a problem, but it wasn’t really a big enough pain point that people were really willing to pay for it, right?

Andrew: Yeah. So can you describe what that was and how you knew that that wasn’t a big enough pain point? I’m by the way also going back to the original Stackify site to see how you expressed the problem and solution. How was it?

Matt: Yeah. So our original, one of the original things that we were after was how do we give developers access to the production servers and environments to do troubleshooting and stuff without giving them you know full access so they can’t log in and mess things up? And so we had a lot of stuff that kind of did remote access sort of things. And so they could remotely access files and different data and stuff like to do troubleshooting with which was great. But that also caused some security concerns because they could get remote access even though it was supposedly locked down and read-only and whatever, but that still cause security concerns.

Andrew: And so was the people who had to pay for it who said actually, “No way,” or the people who wanted to install it?

Matt: Yeah. I mean, we got a lot of negative pushback because of that.

Andrew: Even from friends?

Matt: Sure, yeah.

Andrew: Yeah, I’m looking at one of the first versions of the site. There was what looks like a backstage pass on it, and it says Stackify back page backstage pass VIP production access. As in the idea was you would hand that virtual backstage pass to your developers and let them have access to certain things. And so even your friends were saying, “This doesn’t work.” Was one of the issues then that you didn’t try to sell it before you built it? That you didn’t go to your friends and say, “If I build this, will you guys pay to put this in place?”

Matt: You know, I think we got some feedback but most of your friends and stuff are probably not going to give you the true feedback too. But just as we started to kind of grow and scale became kind of a sticking point. And so, the product continued to grow and more often and the feature set over time has really grown. So we don’t even do that exact feature anymore, but we solved the same problem that we just solved in a different way.

Andrew: So one of the things that stood out for me when I looked at the original website was a products plural button at the top, and then a list of one, two, three, four, five, six, seven, let’s say, eight or so different products listed there. Is that a lot of the products for a new company or is it just your way of displaying the features and giving each one a name?

Matt: Those are probably just all the different features. Yeah, but to your point, it’s still a lot of features, right? It’s a lot of functionality. It’s a lot of different things.

Andrew: And if you could do it again, you would probably focus on one or two of them it seems like?

Matt: I think so, yeah, going back in time. I mean, it’s one of our biggest differentiators today, right? Is all these things that we do and we’ve figured it out, but it took, you know, six years.

Andrew: Tell me if I’m reading too much into it that it seems like with Vin what you, the reason that you were such an attractive prospect for the acquisition was you did so much, and you unified it under one site and you said, “I want to do the same thing.” Yeah.

Matt: Yeah. You’re exactly right, yeah.

Andrew: I see. How did you figure out what the right thing was? How did you finally get yourself out of that?

Matt: You know, the piece that we were really missing all along was kind of the deeper level application performance part of it. And so, we built that, it’s probably been two or three years ago now that we got that part of it and that was really the kind of big piece that we’re missing that everybody was asking for. And from then on out, we’ve just kind of been growing and growing.

Andrew: And then getting customers beyond your friends. I heard that guys had some trouble finding the right way to do it. One of the things that you considered was buying ads that you said, “This should be an advertiser-supported or that advertising should be our main channel.” Why didn’t that work?

Matt: Yeah. I mean, like most companies, you think that you build it and they’re going to come or do you do a few ads and that’s all going to work and whatever but it really didn’t. So a lot of the advertising we did online, even to this day, doesn’t produce very good customer acquisition cost. You know, I mentioned earlier how easy it was to sell a car dealers because you could just call them and get on the phone, right? But software developers hate ads, they hate spam, they hate all that stuff. They’re very finicky about those things. But there’s one universal truth to it. If they have a problem, they go to Google and they search for it. So a big focus we have today is on organic content marketing. So we’ve put a lot of resources into that.

Andrew: Yeah. You know what? So I was looking you guys up on SimilarWeb to see where you’re getting traffic and Feedly is one of your top traffic sources. Which means that the blog is actually being read by people in Feedly which also shows you have a techie audience and then they’re coming to your site from there.

Matt: That’s cool.

Andrew: Yeah. At what point did you figure out the content was going to work for you?

Matt: So we originally did some content marketing back in about 2014 I think and had some good success with it and then we just kind of stopped doing it. So if you go back to the end of 2016, we decided to put a big focus on it on again. And I believe, I was just looking at these numbers the other day. So the first quarter of last year, we had about 100,000 organic website visitors for the whole quarter, which is quite a few. But this quarter this year, it’s like 1.5 million so it’s like 15 times what it was a year ago. So over the last 12 to 18 months, we just put a huge focus on growing the content marketing side of it.

Andrew: Do you guys also on stackify.io?

Matt: No, we don’t.

Andrew: Okay. I’m looking you up to see how are you doing online. It looks like stackify.com is in Hacker News quite a bit, you guys are getting traffic from that. It looks like overall, again going back to SimilarWeb now, over a million hits a month. And that’s because of the content. It’s not because there’s some other reason why users would need to be on the site?

Matt: Most of it is all the content marketing, yeah.

Andrew: Wow. So that’s the thing. So you didn’t say that to Brian, and I just kept trying to figure out, what is the thing that he figured out? You did say, “Look, we finally figured out. I get it.” I’m telling you I’m hunting you down. I’m looking at you. We were speaking about how used it looked like a baby. You had a baby face. But there’s this AngelList profile for you. There’s like a high school photo almost. But right next to it, very little information except funding, $2 million, stage, no stage. It’s just there it is. Where do the money come from? It’s not like, you know, what is it?

Matt: Well, so on the Stackify side, I’ve self-funded it all myself until recently.

Andrew: And what happened recently?

Matt: We recently raised our, what we called our series A but it was our first like outside investment money. And we actually didn’t raise it for a VC it was all really money from local Kansas City Angels. Basically, kind of super angels.

Andrew: Anyone that we’d now?

Matt: No. Probably not. No. Just local individuals.

Andrew: Was it originally $2 million that you put into the business?

Matt: Probably the first year back in 2012 or yeah.

Andrew: Oh and then it was even more than that.

Matt: Yeah, the [crosstalk 00:53:21]

Andrew: I see. So how that ended up in AngelList. It’s interesting to me because AngleList has become such a startup investor, must-have profile that when someone doesn’t have much in here like you, it’s curious. It stands out for me, and now I understand why you’re not looking to raise money from people on AngelList. What you do though have is really good video collection, some description of what the company does which often people don’t have.

All right. Why don’t I close it out with this one question, and that is, we asked you, we asked so many other guests, “What book would you recommend?” Often they give us the same book over and over. Number one book is the . . . Try to guess what the number one book is these days from entrepreneurs?

Matt: Is it like the Lean Startup or something?

Andrew: No. I think the philosophy from Lean Startup is maybe most influential, but it’s Tim Ferriss’ book, 4-Hour Workweek. And I think the reason is many people understood about entrepreneurship from that, but also there’s so many different things he covers in that. That if one thing touches you, you connect with it.

Matt: Yes. So something interesting about me, I hate books. I don’t read books.

Andrew: You don’t. So why do you recommend this one that I thought was interesting “Rocket Fuel”?

Matt: So that is the one book I read the last in five, probably three or four years. And you know what? The only reason I read it is our Chief Operating Officer Craig. He’s like, “Matt, I know you don’t like to read books, but you need to read this book.” And I’m like all, “All right, I better read this book.”

Andrew: And did it help or was it just . . . okay, it did.

Matt: Yeah, I really liked. So the premise of the book was basically about how somebody like myself is more of kind of the product guy, visionary guy. What my relationship should be in the need that I have to have somebody like Craig is more of an operations person and how we should work together and the balance of that, and how that can help grow the company.

Andrew: So Craig’s guy who recommended the book?

Matt: Yeah.

Andrew: So basically he said, “Here’s the book that’ll teach you why you need me”?

Matt: Yeah.

Andrew: But it’s more than that. Why you need me and how we should be working together.

Matt: Yeah, yeah. So it’s was a great book. [crosstalk 00:55:33]

Andrew: So then if you don’t read, where are you learning all this stuff?

Matt: I don’t know. I do a lot of reading online, but I don’t, I just don’t read books.

Andrew: Is there a place where you go to read?

Matt: I read a lot of fake news everywhere, man.

Andrew: Really? Oh, you know what? So I was looking to see maybe he’s a bit of a jerk. Let’s go and check out Glassdoor. Glassdoor does have you at a very low rating, but it’s because only one person reviewed the company which I think is not very meaningful. All right, is that hurtful that I just said that? I shouldn’t have ended with that.

Matt: That’s okay.

Andrew: Why don’t we end with what is startuphustle.xyz?

Matt: Yeah. It’s a podcast that me and Matt DeCoursey hosts, it’s about once a week or so. And yeah, it’s just mostly Kansas City startup related stuff. Local Kansas City companies and just other, you know, cool startup related stuff so yeah.

Andrew: And Matt is, the other Matt is also really interesting person. I’m looking at the about page on startuphustle.xyz. The xyz name now, the top-level domain must be big because Alphabet, the Google parent company, I think Alphabet or abc.xyz or something isn’t that their domain?

Matt: Yeah. Think you’re right, yeah.

Andrew: But looking at that, based in a spare bedroom in his home, Matt DeCoursey built companies that generated millions of dollars in revenue and huge amounts of profit and he started it all with only an American Express card and $8,000 limit and a determined vision to succeed. He is the founder and CEO of GigaBook, an online appointment scheduling and business tools platform. Seems like a really interesting guy.

All right. Anyone want to go check it out, that might be your next listen right after this podcast is over or what you want to do is go check out the website stackify.com. Costs $5,000 to get and frankly, I have a feelings that for many people in the audience, it is a good fit. And if you’re looking to hire a developer, did you see how Matt, as soon as he heard that it was tough to pass the test for Toptal, he said, “I’m going to try it.”

Matt: It’s on.

Andrew: That’s the way the developers feel about the Toptal test which is why it attracts some of the best developers in the world. Don’t take my word for it. Frankly, it’s not like you have to pay to learn it. If you’re looking for a developer, go to toptal.com/mixergy, tell them you’re looking for a developer. The first thing you’ll do is get to talk to a person and then a developer right after that, and then you can judge for yourself is he good? Is she the right person or whatever? And you’ll know, you don’t have to take . . . This is one of those things you don’t take my word for it.

It’s not even like if we were having dinner and I said, “Try this. Have a bite in my food and see if it’s good.” No. You first get to see it and then decide. All right. Go to toptal.com/mixergy, and if you want a website hosted right go to hostgator.com/mixergy. I’m grateful to them for sponsoring. So you’re really going to do? You’re going to take the Toptal test?

Matt: Yeah, let’s do it.

Andrew: All right. I want to follow up with Satchit, and we’ll see how we can make it done, make it happen, and we’ll tell everyone what happened.

Matt: All right, let’s do it.

Andrew: Cool, man. Congratulations. Thanks for being on here and being so open.

Matt: Yeah, thank you.

Andrew: Cool. Bye. Bye, everyone.

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

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