Andrew W: 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. Joining me is a guy who . . . He started more companies than I think I could keep track of. And he told me that it led him to just drop out of school. He had this fire, he had the sense of ideas, and he had to go out and do it. So he dropped out, started a company, didn’t work out well. We’re going to find out why, few companies.
How would you rate overall your performance before the company we’re about to start today?
Andrew V: Andrew, so starting more companies than you can count, I don’t know that’s necessarily a thing. My performance, to me like as an entrepreneur . . .
Andrew W: Were they like successful before or was it just a bunch of . . . ? A bunch of what? How would you say it? Base hits?
Andrew V: I think right now, overall, it was . . . Right now on my situation, I would say overall successful. Were they all successful? Absolutely not. I mean, we’ve had some total failures. We had some companies that have performed better than we thought they would. I haven’t had like a crazy big home run.
Andrew W: What’s the one that performed the best before this one?
Andrew V: Before this, Safari Juice did pretty well.
Andrew W: This is the e-cigarette company?
Andrew V: That’s the e-cigarette, yeah.
Andrew W: Yeah, the fact that you created an e-cigarette company. Then you created a case for the iPhone that gave it more superpowers, more chips, than Apple decided to put it in. I don’t know how well that went. We’re going to find out about that too. And so many other companies that you tried, I find that fascinating that you’re just constantly taking shots. You and your brother, you guys are not technical, right? Did you guys create the e-cig?
Andrew V: No. No, we’re not technical.
Andrew W: No, and every one of these businesses is a freaking tech company, right?
Andrew V: Safari Juice, I wouldn’t say it’s necessarily a tech company because we weren’t making like the hardware devices. It was more the liquid. But besides that, yeah, all of them are technical.
Andrew W: Who was making hardware? Weren’t you selling hardware?
Andrew V: No, no. So we were just selling the liquid that goes into the hardware. So this was like a . . .
Andrew W: Okay. I thought you pre-selling hardware on those things.
Andrew V: No, no, hardware is all . . . 100% comes from China. So this was before like the era of Juul, where electronic cigarettes really took off. This was a couple years before that. So it was a fairly young industry. I don’t know if you want me to tell the story now, but it’s . . .
Andrew W: We’ll go through it within the interview. This was back in 2015 when you came up with Safari Juice. So the person whose voice you just heard, his name is Andrew, just like mine. His last name is Vasylyk. He founded, as I said, a bunch of companies. And the one that we’re here because of is the one that is the most successful. It’s called StartupSoft. It makes it easy to scale remote teams.
We’re going to do this interview thanks to two phenomenal sponsors. The first, if you’re starting any kind of idea, if you’re following in Andrew’s footsteps or even in your own path, go check out HostGator to host your website. And the second, when you’re ready to hire a developer, go to Toptal. I’ll talk about those later.
How does it sit with you that I’m talking about Toptal? They’re a little bit competitive with you, aren’t they?
Andrew V: They are . . . What’s it? Like a secondary competitor. So a great company, by the way. But they are . . . Toptal is great if you’re looking to hire a freelancer. If you’re looking to hire an employee, come to us. So it’s a little bit of a different use case. If you’re looking for like a short term kind of gig or maybe not like a full-time kind of thing, then Toptal is great. Gigster is a competitor of Toptal, pretty great as well. If you’re looking to hire employees, that’s a bit of a different.
Andrew W: And what you want to do it? I would say that Toptal also consider themselves a place where you can hire full-time people. But I understand the distinction, as you’ve said it, your focus is, I want to help a company get a full-time person in the Ukraine, if they want to do it. In fact, if they need a whole office of developers and they don’t want to deal with how do we pay them, how do we set up a company over there to make it all legal, you want them to call you and you’ll help them set the whole thing up. That’s your company, right?
Andrew V: Yeah, exactly. So, I mean, if you think about any sort of major tech ups, so San Francisco is a good example, you have companies that are raising these massive rounds, like $10 million plus, $20 million plus, rockstar founders backed by like world tier investors and they’re not able to hire. Right? So this sort of issue just plagues tech hubs. Good engineers are in very high demand, this sort of problem is especially problematic when you got to hire fast, right? So if you’re scaling, you have a wonderful problem of having to scale quickly, then that’s a pretty big problem where you’re not able to hire. So more and more companies are . . .
Andrew W: And you know what, Andrew? I saw this when I was living in Argentina. My friends who were running tech companies would message me from time to time saying, “I hear that Argentina is a good place to hire developers. Can you help me get started? Who do I talk to about that? How do I do it? Does it make sense for me to come down and talk to people over there?” Because they were looking for people who were talented, who had the skills, who had peers, but who weren’t going to be as expensive as, say, San Francisco, Boston and many other places.
You’re a guy who started companies a lot. I’m going to talk to you about a lot of the companies that you started. But I’m going to go back in time to when you were, what? Twelve, 13 years old? And before you were even starting companies, you were playing a game for money. What was the game that you were playing for money?
Andrew V: I don’t know, that’s . . . I wasn’t necessarily playing a game for money, but it was a game called Have a Hotel and this . . .
Andrew W: Have a Hotel?
Andrew V: Yes, yes.
Andrew W: Okay.
Andrew V: So that was a pretty popular game like about 15 years ago. And the game is based, it’s like a social kind of chat room with a mixture of a furniture-based game, there’s a gaming component to it, there is a gambling component to it. They have this furniture in the game. So what I was doing is, you know, I was essentially buying this furniture and selling it at a higher price. So I think . . . Yeah.
Andrew W: Within the game?
Andrew V: Within the game.
Andrew W: Did you make good money from it?
Andrew V: Yeah, I think overall it was about a grand or two grand.
Andrew W: Okay.
Andrew V: So at 12 years old, it’s a lot of money.
Andrew W: In Have a Hotel. What did you do with the money back then?
Andrew V: This was all sent to my dad. I actually never saw the money.
Andrew W: What you mean it was sent to your dad?
Andrew V: Well, because you got it cash, you need a PayPal account.
Andrew W: And so he never gave it to you?
Andrew V: Well, I mean, he’s my dad, so, I mean, I’m pretty sure he was paying for things, but yeah, I didn’t like receive a check from my dad for two grand or anything like that.
Andrew W: You weren’t pissed? I would be so upset if my dad took that money away. It’s the product of my hard work. It’s like me playing music and having my dad say, “No, you got to cover your ears. You can’t listen to it. I got to listen to it.”
Andrew V: Yeah. So he actually got banned from PayPal after that. Apparently, there was some breach of contract. So I guess we were even.
Andrew W: All right. So nobody got the money in the end?
Andrew V: No, no, he got the money, it’s just he didn’t have a PayPal account after that.
Andrew W: And then after that, he just wasn’t able to get any more money from PayPal?
Andrew V: Yeah, but he wasn’t using PayPal a lot anyway. So it wasn’t a problem.
Andrew W: What I’m getting from this is that you’re a guy who had the entrepreneurial instinct, fair to say?
Andrew V: I think to some degree, yeah.
Andrew W: And still, you went to school to be a dentist. Why?
Andrew V: Well, I think I mean, if you’re a high school senior, let’s say, you’ve got to make the difficult decision of what are you going to do for the rest of your life, even if you’re usually 17 years old and . . .
Andrew W: As a high-school senior, why did you have to make that decision as a high-school senior?
Andrew V: I mean, you go to university, right? Usually people go to university with things that they think they’re going to end up doing later, then the reality of the situation is . . . I think about like 70% of people don’t actually end up using their bachelor degrees, but that’s beside the point. So when we were in high school, you know, we didn’t really have an idea of what we wanted to do. And this is, me and my brother we’re about five years apart, he’s five years older. So he went through this before I did. And I think our parents forced us to dentistry to some degree. They knew dentists from back in Ukraine. They knew a dentist in Canada. They lived a good life. It was a relatively wealthy stress-free to a certain degree kind of job. So they pushed us to dentistry and we went to university for like pre-dent. So there’s no official like pre-dent program, but, you know, you get your bachelor and then you apply for dental school, so.
Andrew W: Meanwhile, you and your brothers are entrepreneurial, I feel. Why do I see it in your face the hesitation whenever I say that? Why do you not feel like you were entrepreneurial back then?
Andrew V: No, we were. We were.
Andrew W: You were, the two of you decided to start a company. What’s the very first company that the two of you started together?
Andrew V: So the very first company was called Muza World. This was in the space of education. It was sort of like an ed-tech company. At that time the idea that we had is that education was pretty archaic. Right? The way that people learn, especially in a very like organizational setting hasn’t changed in ages. Right? You have books, you have lectures. The idea was to take a whole concept or an entire course, let’s say, that you would have in college and create these interactive animations. So we started off with biology. We were actually, I believe, the first in the world to create an entire interactive video of Bio 101. So like introduction to biology.
Andrew W: Buy a video version of the book?
Andrew V: A video version of the book, of the entire book. So at that time there wasn’t a lot of resources available. Keep in mind, this is like 2012. There were some places like for example Khan Academy, but Khan Academy usually covers like the . . . I don’t know what it covers now, but at that time they were covering kind of the major topics. So let’s say, if you take biology, you cover mitosis symbiosis. But it wouldn’t cover the whole book cover to cover.
Andrew W: And your idea was the whole book. I’m listening to a video of it on my iPad right here. Who’s the person who was teaching it?
Andrew V: So we had a bunch of people involved. We have people that we went to school with, we had professors, we had a principal of a school board in Toronto, Canada.
Andrew W: So you went to them and you said, “I’ve got this idea. Will you participate,” as what? As employees or what?
Andrew V: So nobody was being paid. We didn’t have any money to pay anybody. This was a kind of an equity advisory kind of play.
Andrew W: So just help us get started. You’ll get a piece if this thing takes off.
Andrew V: Exactly.
Andrew W: So this guy I’m looking at right now, he was, I guess, a professor recording this in his home, in his living room.
Andrew V: This was the principal of the school board in Canada.
Andrew W: Okay. And he was recording part of education or he was vouching for you?
Andrew V: He was vouching for us. He was advising us.
Andrew W: Okay. This is a pretty interesting idea. And how did you come up with the idea for it?
Andrew V: I think it was just sort of a personal problem that we had. You kind of get sick of reading and going to lectures. So kind of makes you think, you know, “Is there a better way to do this?” This wasn’t necessarily meant to replace books and lectures. This was more of a supplemental kind of thing. So if you want to . . . Yeah, I mean, if you want to add to your knowledge or maybe there’s some concept that you don’t understand or maybe you want to, I don’t know, revisit certain topics, then you would watch a video.
Andrew W: It’s a great idea. I’ve got to say, I’ve noticed over the years that there are people who learn in different ways. I’m someone who takes data in better if I can read it and highlight it and underline it. Like my notes on you. Look at this. I get all the highlights and underlines and everything that I’ve done on.
But I’ve got a friend. All he does is listen to audiobooks and man, he retains so much more than I do, just by listening to an audiobook. And I’m seeing more and more people, instead of going and Googling an answer to something, they’ll go to YouTube and look for a video that explains the answer to the problem they’re trying to solve. I get it. Why did this thing take off then?
Andrew V: Well, I mean, this was our first venture, so I think we made a lot of mistakes. One of the big ones that we made was that we went B2C, initially. So we thought, “Okay, we’re going to create these sort of videos and was going to be almost like a subscription.” This was before subscriptions were cool. So this was before Netflix really took off. “That we’re going to charge some sort of price for this. A student is going to go on. If they’re interested, they’re going to pay.” The reality is that most students don’t really care. Right? I don’t know if you could swear on here.
Andrew W: Be yourself.
Andrew V: Yeah.
Andrew W: And so the kids, they don’t care. They’re not willing to pay.
Andrew V: Exactly. Most students, they don’t care about their grades that much. If this was something that your professor would tell you that, “Okay, go watch this video. If you do, you’ll get an A.” Then yes, you would. But very few people would actually go out of their way to actually supplement their learning. So that was a pretty big mistake.
Then we tried to switch to B2B, which was better. We were trying to sell to some private schools at first, which usually private schools, they have our money, they’re much more flexible, they’re trying to compete with each other. But overall, we just . . . Yeah. In the long term, we just weren’t able to push it through as much as we wanted to.
Andrew W: Did you feel like a failure?
Andrew V: I mean, to some degree, you feel like it hasn’t gone as well as you wanted it to. I wouldn’t say it’s we felt like failures. I mean, we built something pretty cool. We were able to get it off the ground. No, I wouldn’t say we felt like failure.
Andrew W: But you didn’t think, “I got this principle to go along to get equity, I got is teacher, I got these other people who come with my project and now I have to go to tell them that this didn’t really work out, this whole thing that I did to pump them up and to fill them with hope, turns out I was wrong,” you didn’t feel any of that?
Andrew V: Well, I mean, I think it’s important to be transparent with people. Right? So it’s not like, you know, overnight we came to them and we said, “Okay, you know, this thing is not working out.” People knew, you know, what was happening. So it wasn’t that big of a shock.
Andrew W: I get that. So the fact that they knew all along means that it wasn’t a painful thing to tell them, you weren’t breaking the news to them. The next thing you did was create OKO Case.
Andrew V: Yes, yes. So that’s a company that actually, that didn’t get very far at all. And this was before . . . I forget what year this was, but this was before Find My iPhone even existed. Right? So what would happen if you lost your iPhone. At that time iPhones, you had the top tier . . . When iPhone first came out, so let me step back for a second. Your top tier phone was like, I don’t know, $100, $200. Phones didn’t cost that much back then.
And iPhone, I think they came out with like $400 or $500, so it was a pretty high price to pay for a phone. And people lost them. People stole them. There was no Find My iPhone. So there was a concern that we had. What would happen if somebody comes and snatches your iPhone and turns it off? There’s not a whole lot you can do.
So the idea that we had is we wanted to release an iPhone case, very minimalistic. No bells and whistles, it looks just like any regular minimalistic iPhone case. But inside of it has a battery, it has a GPS chip, has a GSM chip . . .
Andrew W: It has an alarm.
Andrew V: So it’s . . . Yeah, so it’s able to track . . . It has a little speaker, right? So it’s able to track your location even when the phone is . . .
Andrew W: Did you even create it? I saw it.
Andrew V: No, no, no. That’s what I said, we didn’t get off the ground very far with it. So we got into a stage of concept. We’re not technical. Neither my brother nor I. And this is a hardware product, right? We’re not technical from a software perspective. And obviously we don’t have any sort of electrical engineering, any kind of knowledge.
Andrew W: It was just you putting it out into the world saying, “This is what we envision. Anyone interested, fill out this Google form to tell us a little bit about it.” That was it.
Andrew V: Yeah. So I mean, the general idea that we had is we wanted to launch on Kickstarter. So we recorded a video for OKO Case. We wanted to put it up on Kickstarter. Gauge demand, maybe get a little more money and then go ahead and build this thing. And then eventually, we got a contact with a bunch of different factories, a bunch of different designers and engineers. And it turned out that this was a lot more difficult to get off the ground. And we realized that, you know, it’s not the easiest thing to run a tech company if you’re not technical, especially a hardware tech company. So, yeah, so that didn’t go very far at all.
Andrew W: What’s Excel Pack? Is that one of your businesses?
Andrew V: No.
Andrew W: No. Okay. I saw you link to it somehow. Maybe they gave you an award or . . . No, I don’t know what. Somehow you link to it on your Facebook page. It seems like this was just a video, a web page and a Facebook page and you gauging interest. And the reason that you backed away was a lack of interest from customers or you saying, “I don’t think this has legs,” or did you just think we can’t make it?
Andrew V: It was more like, “I don’t think we can make.” So it was a lot harder to actually make the case, like to make it thin enough for it to not be overheating. It was just from a technical perspective, it was not as easy as we thought of it.
Andrew W: Dodged a bullet on that one though, don’t you agree? Like that would have been a bad business to get into, considering that, even on your Facebook page, the very first post on your Facebook page was a ReadWrite article about a company called Lookout that’s predicting that Americans are going to lose their phones at whatever rate, and Lookout made of Find My iPhone, for the iPhone and for Android. So I was going to be a software solution, whether Apple and Google came out with it or a third-party vendor like, Lookout. It was going to. And isn’t it great that it didn’t work out?
Andrew V: Yeah, I mean, in hindsight, 20/20. Right? So we were approaching this as a hardware solution. But exactly like you said, Apple, you know, nowadays they essentially break your phone. So even if somebody steals it, there’s not a whole lot you could do with it besides just sell it for parts, which is not as lucrative as if you were to steal and iPhone 11 and sell it on the black market.
Andrew W: And that was damaging.
Andrew V: Yeah. So we dodged the bullet in some ways.
Andrew W: I’m with you on that. All right.
This is a good point for me to tell people that if you’re looking to create a landing page or a web page for an idea of yours, just like Andrew did, go to hostgator.com/mixergy. When you do, you’ll be able to put up a website, a full-on website really easily. And I recommend you use WordPress with them, and then test your idea. If it doesn’t work out, great. Sometimes it means that you dodge a bullet, the people don’t love it. It’s not going to sell. Don’t go too deep into it. And if they do, great, you can continue to grow.
Now, why would you use HostGator when you can use so many other people? Because HostGator has been proven to be around well over a decade, number one. And number two, because they’re inexpensive. And number three, they will scale with you. And number four, I’m going to keep listing these things, number four, I’m going to finish out with this one, if you don’t love them, you take your website and you move on. All these new services now for creating landing pages, for creating websites, they’re terrific, only if you love the company and you’re stuck with them forever. If you ever need to move, you’re in trouble, my friend.
All right. HostGator makes it easy for you to get started. Go to hostgator.com/mixergy. Get started with the lowest price available if you use my URL. And of course, when you use that URL you help support my podcast and all the research that goes into it, complete with all the underlines and highlights that I keep when I prepare for my interviews.
Let’s go onto the next business. The next business was electronic cigarettes. How’d you get into electronic cigarettes, Andrew?
Andrew V: I used to smoke a lot of cigarettes.
Andrew W: You did? Like full on cigarette smoking, the you know, the old tobacco ones?
Andrew V: The old tobacco, yeah. It was like a pack a day. I think that’s how most people used to get into electronic cigarettes after Juul came out, I think it really kind of flipped people for a start, especially kids. They first start with Juul and then move on to cigarettes, a lot of them.
Andrew W: But at the time it was a way for people to smoke tobacco cigarettes to stop lighting up.
Andrew V: Exactly.
Andrew W: Wait, so how did you get started smoking?
Andrew V: How did I get started smoking? I mean, I think like most people are young and stupid. So, yeah, you drink, you smoke, you . . .
Andrew W: Was it outside high school, just standing around smoking?
Andrew V: Yeah, outside of high school, everywhere I mean, parties and like any teenager. You know . . .
Andrew W: Did you practice in the mirror to make sure you look good smoking?
Andrew V: No.
Andrew W: Be honest. You didn’t?
Andrew V: I think I was a natural. My grandpa smoked since he was like, I don’t know, five or six years old. So I think I got the genes for it, so didn’t have to practice.
Andrew W: Did your parents know you smoked?
Andrew V: At that time, no. I think my dad to some degree did. My mom, no.
Andrew W: Hey, you got to know though. Think about it, now that you’re not . . . do you smoke cigarettes now?
Andrew V: No.
Andrew W: No. You could smell when someone smoked cigarettes. How did they deal with it? They didn’t confront you about it?
Andrew V: Well, I mean, I didn’t start off smoking a pack. Right? It’s just something . . . A pack a day. I mean, it’s just something that you have a cigarette, I don’t know, when you drink at night and then you come home. You know, the parents don’t usually notice. Maybe they did know. I don’t know. When I have a kid, I’ll let you know how obvious it is but . . .
Andrew W: I smoked one time, Brooklyn Tech in the bathroom, because that’s what the song says, “Smoking in the boys room.” Right? So I smoked in the bathroom. And then the freaking dean, literally like the dean out of a movie, comes walking in and he grabs me, takes me into the office and has me call my parents. And I remember saying to him, “Why do you stop me?” He goes, “Because you’re the only one smoking.” And I realized, “Oh, the others threw their cigarettes away.” And now, because I was so stupid, I told on them essentially. Well, thankfully, they didn’t have their cigarettes on them. So they didn’t get caught for it.
Andrew V: Did have fire alarms in bathrooms?
Andrew W: How much was I even smoking? It was more to show. I don’t think I was a person who stood in front of the mirror and smoked, but I was a person who was standing in front of other people and smoking, and we’re talking like four cigarettes, seven my whole life. It was definitely more of, “I need to look cool. I need to feel good. This is to look cool, look cool and feel cool. And this is a good way for me to do that.”
Andrew V: Yeah, I mean, I smoked a lot more than that and I smoked for a little while. So with Safari Juice, this was . . . I mean, having electronics cigarettes, they started off in China. Right? They were invented by Chinese, I believe, doctor in the early 2010s. They started slowly making their way to the United States, to Canada, to the Western world. And over like, there was a period where it was a very small market. There were very non-mature market, but a market that was going to explode, especially now that we know what will happen after Juul came out. Was just, you know, a very . . . It was a machine like the . . .
Andrew W: So you found it, you started smoking it, you liked it. And then you said, “Can we create this?” Is that right?
Andrew V: Yes. So kind of. So I found out about electronic cigarettes, I bought an electronic cigarette, I started smoking. At that time, I was smoking a pack a day. And a pack, I think it was around $10, $15 Canadian at that time. So that’s a lot of money. I mean, especially if you’re a student, you know, it’s like $300, $400 bucks per month. That’s not a cheap habit now.
Andrew W: No.
Andrew V: So what I was thinking is, once I quit smoking cigarettes and I moved on to electronic cigarettes, I’m going to save all this money. And I was trying to think I was starting to count what I’m going to do with all this money that I was going to be saving. And then a week goes by, two weeks go by, three weeks go by. And I realized that I’m actually not saving anything at all, because it turns out electronic cigarettes and the liquid, especially for the electronic cigarettes, is very expensive. So it was like, I believe $25, $20, $30 for a 30 ml bottle.
So I started researching, what goes into this liquid? And it turns out it’s a very simple list of ingredients. So really you just have three things. You have the base, and the base is just glycerin and propylene glycol. These are very cheap ingredients, like pennies we’re talking. This is like under $1 per bottle.
Andrew W: And what did they sell it for?
Andrew V: They sell for $20, $25, $30 at a time. So it was a very new market. There was no standard of how much things should cost. It was very overpriced.
Andrew W: And you saw something that was selling for at least 20 times what it cost to make it, what went into it?
Andrew V: So three things. You have the base and the base is what gives the appearance of the vapor. Right? And it’s what carries the . . . It’s the base, right? Then you have the nicotine. You can put a little bit. You can put a lot. You can put nothing at all. You know, it depends what you want. And then the flavoring. The flavoring is optional. But, you know, many people smoke with the flavoring. So with Juul, you have mango, you have menthol, you have tobacco flavor. Essentially, these flavors are food grade. So things that will go into cakes, go into ice cream, that will go into a bunch of different food products that people are putting into the liquid to give it a taste.
All of this combined, including the label, including the bottle itself, this is like under $2. So if you do this at scale, it could be under $1.
Andrew W: How did you know that?
Andrew V: I started researching like, what goes into it, how much these ingredients cost. There was a whole community of people. They call it a DIY, the do it yourself community of e-juice, people doing this themselves. And these people that had kind of a similar experience to me, that they thought, “Okay, I’m going to see a lot of money by quitting smoking, switching to electronic cigarettes, but it turns out, I’m not saving a lot of money.” So they got fed up with it. And they started doing it themselves.
Andrew W: Okay. And you said, “I know how to make it myself.” Did you make the first version yourself?
Andrew V: Yes. So I made the first version myself. We started off with, I believe, six products. Overall, it was a very lean start in a sense . . .
Andrew W: How did you get the ingredients for it?
Andrew V: I mean, in the same way you would get ingredients for anything. You either get it locally or you import it. So in our case, the base . . . I forget where the base comes from. I know that the flavoring came from Russia, the nicotine came from the States. The basic thing was found locally in Canada.
Andrew W: And you just went online and started looking for it? Just Googling around?
Andrew V: Yeah, yeah, man. Yeah, if you just Google, “Buy bulk nicotine,” you could buy bulk nicotine out of [inaudible 00: 25:38]. But you could buy bulk nicotine, and you can buy like 10% pure nicotine.
Andrew W: Okay. By the way, I’ve been looking this up. Apparently, the modern electronic cigarette was patented in 2003 and then marketed in the Chinese market the very next year by a pharmacist named Hon Lik.
Andrew V: There you go.
Andrew W: That’s the guy that you’re talking about. All right. And so then, he creates it, you started to see an opportunity, you jumped in there. I thought that you sold a little bit of it before you created it. No?
Andrew V: Yeah. Yeah. So, I mean, at that time I’m a student, right? So you don’t have a lot of money to start something like this. We did a couple of batches ourselves. So meaning, you know, something just for us. So we spent, I don’t know, maybe $50, $100, $150. We played around with recipes, so we ordered a bunch of different flavors. You don’t need a lot, like you go and order like a five 5ml kind of flavor flask and then that cast last you for a while, at least enough for you to be able to test it with a bunch of different recipes.
So what we did is, we posted on a electronic cigarette community. And that time, now it’s pretty big, it’s like a million plus members. But at that time, it was maybe like 100,000, 200,000 people. We made a post saying that, “Look, you know, we’re electronic cigarettes in a way kind of saved my life,” because, you know, half of the people that smoked died. So this is kind of my way of giving back, instead of charging $30 we’re going to charge $5. So we severely undercut everybody pretty much that was out there.
That post went pretty viral on that forum. And we saw, “Okay. You know, we may be onto something.” So the next post that we created, a landing page, we said, “Okay, you know, people were interested in the first post, by popular demand, here’s the landing page. Give us your e-mail if you truly are interested.” So people give their e-mail, we collected a couple thousand e-mails that way. Then we created a Shopify site, that was the next post. We said, “Okay, now we’re accepting pre-orders.” We got, I think it was about $10,000 from the pre-orders. And we said, “We’re going to give you a discount. We’re going to give you a free bottle if you pre-order. If you give us a month or like a month and a half to fulfill your order.” Because by the time we can get everything and put it together. And that give us enough money to buy all the ingredients and to be able to get the first batch off the ground.
Andrew W: Got it. That’s what I meant earlier. I mean, I guess that’s what I misread in my notes from the producer here, Mixergy. You sold cases of it as a way of making enough money to go and produce it.
Andrew V: We pre-sold it. So it was a pre-order of the actual product. And we gave incentive to people to pre-order rather than waiting for it to actually be ready. So we gave it at a discount, and we used that money to buy up the ingredients for the first batch.
Andrew W: I found the website, it is juicebe.com?
Andrew V: No, no, no. Yeah, it’s called safarijuice.com. It’s not live anymore.
Andrew W: Then somebody actually has something on that site.
Andrew V: We actually lost it which is a bit of a shame. Yeah, but it’s safarijuice.com at that time.
Andrew W: It’s not . . . ? Oh, okay. I thought it was this one. This is a different Safari Juice.
Andrew V: Ah, that is . . . No, no, that’s our Juice, JuiceDB.
Andrew W: That’s you?
Andrew V: Yeah. JuiceDB is just a database of all the different juice companies, so. We were on it as like one of the juice companies.
Andrew W: Oh, got it. Got it.
Andrew V: Juice is what they call it, so juice is the liquid that goes into electronic cigarettes.
Andrew W: That’s called juice?
Andrew V: Yeah, they call it juice, e-liquid, e-juice. There’s a bunch of different names for it. I don’t think they call it now, or the mainstream maybe doesn’t call it that. But the hardcore electronics cigarette community that’s what they call it.
Andrew W: So then what happened with the company? Feels like you were ahead of your time. You got a good price, a good product.
Andrew V: Yeah, yeah. I mean, we were doing pretty well. We started off as B2C, so selling directly to consumers. Then we moved on to wholesale. Around the Toronto area, around Canada. Then we started getting contact with distributors. And that was around the time when we were getting started with StartupSoft, and a lot of pretty hardcore regulations were beginning to hit the electronic cigarette industry. So we thought that this is not something, I mean, it was a nice business. We made it, you know, I think overall it was pretty successful, but we just didn’t think that we were going to survive the regulations. Plus, at that time, electronic cigarettes were starting to become very popular, as you could imagine, with something that has a very low barrier of entry, you start getting a lot of competition.
So when we got started, we were the cheapest with pretty good quality around. But when we were shutting everything down, we weren’t anymore. There was a bunch of companies that were selling for $5. So it wasn’t as competitive as it used to be.
Andrew W: Andrew, why not go all-in on this? This thing finally worked. It made sense. Why not stop everything else? Why did you instead create StartupSoft on the side?
Andrew V: Yes, I mean, this was . . . Actually Safari Juice was something that we created on the side. It wasn’t a business that we thought we were going to focus all of our time on. And that time we had a different product-based company. This was like a social network, social media kind of company that did not go far at all. But we raised a little bit of angel money. We spent about a year building it. And we saw, “Okay, you know, for you to be able to get a social network off the ground, it’s not something you’re going to be able to monetize very quickly.” So Safari Juice was as a way for us to get a little bit of income, at least for us. So that was our initial plan. It got a lot further than we thought it would. But eventually, the product based company that we had in parallel to the Safari Juice, that was running out of cash. So that was actually the beginning of StartupSoft in the sense that we had . . .
Andrew W: But then, why not close that company up? What I mean is, you finally had a product that was working, Safari Juice, why not just go all in on Safari Juice? Say to the people who invested in the other company, “We’re going to turn this into an e-cigarette juice company, go along with this. We found a hit.” What was it about it?
Andrew V: I think . . . Well, first of all, we don’t want to put kind of all of our eggs in one basket. So both of the companies were doing, I would say, reasonably well. With Safari Juice it was, I would say, a mixture of competition and regulations that we thought we weren’t going to survive. And I think to a degree, it was also kind of in the back of our heads, we knew that this wasn’t a business that we wanted to focus on for the longest time. So you . . .
Andrew W: Because? That’s what I’m sensing, that you weren’t ready to go all-in on it because there’s something personally missing from your analysis of the business, from your heart, from something. What was that? What was it that kept you from going all-in on this one thing?
Andrew V: Well, like I said, I mean, is the regulations and it’s the competition, right? It’s not an easy business to scale. Even from that you couldn’t even run Facebook ads, right? I don’t think you can even know, you couldn’t run Google ads. All right? So it was your digital marketing possibilities were quite limited. You combine that with the fact that regulations are hitting and making it very, very difficult and very expensive to be able to get these kind of regulations. And we were manufacturing in, you know, like a proper facility that we were contracting. But still, to actually to pass the regulation was quite difficult. And the competition is that kind of discouraged us from going all-in.
Andrew W: Yeah, I see. So the business changed completely from when you got started. When you got started, you saw an opportunity to create something for $1, sell it for $20 and go in and wow your friends and people online. As it was developing, competition came in, regulation came in, limits started to be more apparent. And you said, “Forget it, we’re not going in on this.”
Let me close this part of your story out with one final question, which is, how do you find the place to manufacture it?
Andrew V: So there was a place in Canada. I forget what it’s called . . . Speedo, it’s called Speedo Flavours. And they manufacture . . . Their core business was manufacturing flavors for bakeries. So it was like things that would go into doughnuts, the feeling of doughnuts. And I guess they saw that electronic cigarettes were starting to take off. So they offered kind of a section of their facility. And part of their staff and part of their machinery, to be able to bottle these kind of liquids.
And besides us, I don’t know how we got in contact with them. I think I got to refer to them somehow. But yeah, they were the ones that were manufacturing and they had a proper machinery for it. They had an ISO kind of lab. They had a bunch of different certifications. So it was very . . . It wasn’t like something that we were making in a basement mixing it ourselves, which a lot of people were, to be frank, at that point. But we were, you know, at that price point, we weren’t cheap. We were affordable.
Andrew W: All right, let me take a moment, take a break, talk about my second sponsor, then we’re going to come back in and figure out how you ended up coming up with StartupSoft.
My second sponsor is a company called Toptal. I forget how, but I was invited to somebody’s house for drinks one day here in San Francisco, and it turns out, all the people are who were sitting around the coffee table were, first of all, not real big drinkers, and second, they all got investment from the same angel company, angel organization. And they were all sitting and talking. And one of them said to the other one, “So you coming into my office,” and I was listening in and I like to butt into people’s conversation. So I said, “Why’s he coming into your office? What’s going on?” He said, “Well, I’m about to hire a really important developer. I need somebody to help out, where you’ve become friends the two of us. So he’s coming in to sit in on some of the interviews so that he can help me understand who the right fit is. And if I’m finding people who are the types of people that I want and need in my company.” And I started to recognize something. I’m paying a ton in rent. And Andrew, you’re here in San Francisco. So you know what I’m talking about, a ton in rent, but also a ton in every freaking thing.
A cup of coffee, at Philz, which is the hot place to get coffee over here. Do you know what that costs? Do you drink at Philz?
Andrew V: I was at Philz today, this morning, I had a meeting there, $9.50 for two cups of coffee.
Andrew W: And that’s because you didn’t go for the top one. Like, I go for the large.
Andrew V: No, it was the regular one.
Andrew W: I have to say, I like it. I thought when I first got here, Philz sounded like a silly name for a coffee, but it’s damn good, especially if you have it done. If you get your coffee Philz’s way, they only do pour over, they don’t do espresso drinks. But anyway, it costs $5.70 for just coffee.
Andrew V: Yeah.
Andrew W: Anyway, so you pay all this and they pay all this because they want access to other CTOs, to other developers, so they could sit down and get feedback from them and help them think through their hiring process. And I realized something, whenever I do these interviews and I ask people like Hiten Shah, “Have you used Toptal?” And they say, “Yes, I did.” And I say, “Why do you Toptal?” The say it’s the matcher. Now I understand why. The person who at Toptal talks to you before anything else happens, before you even commit to anything, before you even pay for anything, before you even do anything, even talk to a developer, that matcher understands what you’re looking for. And does the equivalent of what the CTO did for the entrepreneur who I met at drinks.
What he does is or what she does at Toptal is, they understand your needs. They understand what you’re looking for. They help you frame the job. They help you think through who you want for the company based on your needs. And then they go to their network and they find people that you can hire.
If you want to start with Toptal, and if you just want to experience what the matcher is like, I urge you to go to toptal.com/mixergy. And when you do, you’re going to get to talk to a matcher. If you decide to work with them to hire a developer, you can get 80-hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period. And all you have to do to get all that is go to top as in top of your head, tal as in talent, T-O-P-T-A-L.com/M-I-X-E-R-G-Y, toptal.com/mixergy. And I’m grateful to them for sponsoring.
Where did the idea for StartupSoft come from?
Andrew V: Good question. I wouldn’t say we necessarily had an idea. It wasn’t an intentional. We didn’t StartupSoft in an intentional way. We had a product-based business at that point. This is the social media, social networking app company. And we raised a little bit of angel money. We had a team working on it for quite some time. And we were at a point where we had about two months, two or three months left of run rate. So we had to make the hard decision. Do we put all of our resources and try to see what we could do within these two months and pray that it’s going to work, which obviously is not very likely, or do we . . . At that point we had an engineering team, do we take a couple of these engineers and we see if we can put them on a project and get a little bit of revenue, maybe keep us going for a bit longer?
Within the first months, we had clients, we were profitable. It wasn’t a big profit. It wasn’t a kind of a big revenue. It was a lot of revenue. But it was we had money coming in.
Andrew W: How did you find the clients?
Andrew V: Oh, I think at that time it was a mixture of a bunch of different marketplaces. So Upwork, which at that time was called Elance, I believe you.
Andrew W: Oh, just went and started bidding on those on Upwork or Elance?
Andrew V: It was bidding. It was a mixture of cold e-mails. So we started off, as, I would say, any stereotypical dev shop. I’m sure, you know, you get a lot of LinkedIn ads and like, you know, “Let me build that ad for you,” something like that, I get a couple of those a day. And even though I am in this industry, so I would imagine you get even more. That’s the way we got started. We got clients and the first client was like $300 or something that, it was a ridiculously small amount of money. But to us, it was huge. In a place where for like a year, you’re not getting any revenue, that was a lot of money.
So that was the beginning of StartupSoft. We are now three years in, fairly young, I would say. We have since pivoted from that kind of model. We had a different model before that as well. And yeah, we’re about 80 people now, completely bootstrapped. I think we found a pretty niche service where we’re doing pretty well.
Andrew W: What’s your revenue now?
Andrew V: I can’t tell you the exact number, but we are doing pretty, I mean, we did 3X last year, so.
Andrew W: Give me a ballpark. Millions?
Andrew V: It’s millions. Yeah.
Andrew W: I’ve got the number here in front of me, is the number that you gave us accurate? I’m not going to reveal it if you don’t want to reveal it. But we were using it to screen you.
Andrew V: Yes, yes, yeah.
Andrew W: Okay. So let’s go back to the very first version, was what?
Andrew V: The very first version it was this sort of accelerator-esque kind of model. So if you imagine a founder that is doing a first company and they’re not technical and they have this idea, they want to get it off the ground, they don’t have a huge network, right? So let’s say they don’t have a lot of friends that can join as co-founders and build this thing out essentially for free. What do they do? A lot of them end up outsourcing. So they can go in places like Upwork. And most of them get hurt pretty bad, right? Because the lesson that we learned during the OKO Case times is that if you’re not technical and you’re trying to run a technical company, one, you’re probably going to make a lot of mistakes, two, you’re very easy to be taken advantage of.
So there’s a big misalignment of interests, where if you are a dev shop, a traditional dev shop, your goal is to get as much clientele and as much business as possible. If you are an engineer, your goal . . . Sorry, if you’re a startup founder, your goal is to build a big company. So we saw there was . . . This was first of all, a personal thing that we had, we saw there was an opportunity here. So we built this accelerator-esque kind of company.
Andrew W: And the idea was, they had the idea, they had the willingness to go and get customers and build it out. You would give them the developers that they needed in order to scale it, and you’d get equity in exchange for that, am I right?
Andrew V: Yeah. So we would be essentially like a CTO in a way of their company. So it was like a CTO for hire, almost kind of thing.
Andrew W: And then what share of the business would you get?
Andrew V: Usually a note, right? So we would take a look at what would the market price for our work be, what was the actual cost that we were charging, which usually was just the expense that were, the salaries of the developers that we were paying plus a little bit of a margin on top. And the difference between what the market rate would be and what we were charging, we would put that into a note.
Andrew W: And then it was a convertible note that would convert into equity based on the valuation at the next round?
Andrew V: Yeah, exactly.
Andrew W: Of the next round or so. So I’ve seen a lot of dev shops and creative shops try this approach. And then I lost touch with them. I’m so curious about why it doesn’t work. What happened when you did it? How did you find people? What happened once you started working with these companies and then why didn’t it work? Why doesn’t this model work for anyone?
Andrew V: Yes, that’s a very good question. And I don’t know why it doesn’t work for other companies. I can tell you why it didn’t work for us. Overall, I think it did work for us in a sense that it was a way for us to get started. It was a way for us to build our expertise, to learn many things and to get a base of clients. In the long term, we moved away from it all. And I’ll explain in a second why. I think there is a most fundamental level, I think the business of a . . . First have to realize that if your main business model is based on equity and is based on getting money from equity, then you are essentially an investor. And the business of being an investor and the business of being a service-based company is totally different. And the interests of both of these groups is very different as well.
So, to give you an example, if you are an investor, which in a sense we were, at least from the point of we were trying to make money from some sort of equity events or from the equity that we were getting from these companies, so if you are an investor, you have to be insanely aggressive with filtering the companies that you would want invest in.
So you are essentially filtering for success or for future success of a company, whereas if you are a service-based company, you may not necessarily care if this company is successful or not. So there is a different kind of filter that goes into both of these. And I think that’s the fundamental reason. So what it really boils down to is that, you have to really aggressively filter. And it is just not going to work unless you’re like Y-Combinator and you have, you know, the expertise and the deal flow to be able to.
Andrew W: Do you think if you would have filtered better, would’ve worked?
Andrew V: If we filtered better that it would have worked?
Andrew W: Yeah. Or is it a matter of the founders, the businesses that are going to make it have to have development as part of their skills, otherwise, they’re not going to make it, and if they need you, they’re not going to make it.
Andrew V: To a certain degree. I think it’s fine to outsource your MVP, even if you’re like a very well-connected, very experienced kind of founder. Just because at such an early stage at an MVP stage, you’re just too risky. So to outsource and hand it off to somebody to build it quickly for you, I don’t really see a problem that. I think there is a bit of an inherent problem with people, as blunt as this may be, with people that are not able to get a technical co-founder on board and the people that are not able to raise money. I think are probably don’t have the highest chance of success as . . .
Andrew W: But if they can’t find it CTO, they’re less likely at least to make it.
Andrew V: If you can’t find a CTO, how are you going to convince investors? If you can’t convince some engineer to be your CTO, you know, how are you going to convince investors? How are you going to convince . . . ? I’m not saying that it’s impossible. But it’s kind of . . . I think there’s a degree of truth in that logic.
Andrew W: And when you were working with companies did you find that about them, that when you really deep down looked at them, said, “If they can’t find a CTO, that’s a good indication that we probably shouldn’t be working with them.”
Andrew V: Well, I mean, most of these companies, they went under within a year. So, yeah, I mean, there are companies that we work with now that we’ve worked in like since the very beginning. So they’ve . . .
Andrew W: Since you are working with this model.
Andrew V: Exactly. So they’re still around.
Andrew W: And you will get equity at some point in those businesses.
Andrew V: We’ve got equity in them. I don’t know, forget cash from that equity, but they haven’t exited, right?
Andrew W: You know, the other thing I wonder is, in order to do well, as an investor you need to have a lot of investments, you’re not doing two or three or five. You’re doing a dozen or two dozen. And then you have to wait a long time to see it, to see it pan out. Well, that makes sense if you’re investing other people’s money or your money. But if you’re investing a team of people, you have to put them on, what? Five, seven, 10 projects and then wait for years before you see the result? That seems like a really tough payoff. Am I right?
Andrew V: Yeah. So to your point about you have to make a lot of investments, it depends on stage. If we’re talking about like a very late stage, you don’t have to be doing the counter investments per year. If you are at a very early stage, which is the stage that we were at or if you’re like an angel investor or a pre-seed investor or even a seed investor, it’s a numbers game, to a very large degree.
So the point you make, 100% agree. In our case, you know, for any investor, for any like traditional, let’s say, investor, if you’re an angel investor, to make a lot of investments like 30 investments per year, that’s a lot. To be able to find these companies, to be able to meet with them, to be able to filter them. That’s a lot of work. But if you’re not just writing a check, but you’re also executing and you’re also delivering, that’s even harder. Right?
Andrew W: Yeah, that seems like one of the flaws in the business model too. The other one . . .
Andrew V: For our personal perspective, yes. Cashflow perspective, you have a business where . . . Exactly like you said, you’re waiting five, seven years before an exit to maybe get some money. That’s a risky thing to do. That’s a risky business model.
Andrew W: And the other thing that you told our producer that happens is that you went into chaos, that if they don’t have a CTO, if their early stage, they’re by definition in the chaotic stage and you now have to go in and deal with chaotic clients, and that was part of the problem with the model. And you said, “We’re going to shift.” Am I right about that?
Andrew V: Yes, yeah. So part of it . . . I mean, there was a couple of reasons. And the reasons you just mentioned, that was one of them. Startups do not always make the best clients. They are, like you said, a lot of them, first of all, are going to go under within a year. They are chaotic. If you’re building a product that’s just, you know, it’s a huge headache. You know, one day the want an app on Android, another day they don’t want an app on Android. Engineers, they don’t just appear from thin air. So from an operational perspective, it’s a hard business to run. From a financial perspective, it’s a hard model to run as well. So we’ve decided to pivot from that.
But I think one of, probably the most compelling reason that we saw is that, there was a lot of demand from the market for this new model that we’ve pivoted to. So that was the biggest . . .
Andrew W: How did you know that there was demand and what did people say? What did you hear that told you there’s a different way to do this?
Andrew V: It’s just talking to people, talking to founders, hearing the difficulties that they have with hiring people. That’s, you know, that’s not a secret, I mean, you live in Silicon Valley . . .
Andrew W: How were talking to founders? Did you move from Toronto at that point?
Andrew V: Yeah. So I was in San Francisco at that point. So you just, you know, you meet founders all the time.
Andrew W: What brought you to San Francisco?
Andrew V: I mean, that’s a good question. It was startups. I mean, ever since my brother and I, during the times of York University and undergrad, ever since then, we knew the San Francisco was the Mecca for startups. So it was always we had to . . .
Andrew W: You said, “We got to come here. If we’re going to be entrepreneurs, we’ve got to be here.”
Andrew V: Yeah, it wasn’t, I would say, a very thought out decision. We didn’t have a clear plan of what exactly am I going to be doing here. But it’s just, if you’re an entrepreneur, you’re here. If you’re an actor, you’re in LA. So, yeah, so I lived here . . .
Andrew W: Where did you end up living when you got here?
Andrew V: I’m sorry?
Andrew W: Where did you end up living when you got here?
Andrew V: It was North Beach. So . . .
Andrew W: It’s a pretty good area.
Andrew V: Yeah, it’s not bad.
Andrew W: What do you think of it?
Andrew V: Yeah, I’m on Embarcadero area, so it’s like a 50 minute walk, which is San Francisco’s a luxury to be able to walk to work.
Andrew W: Yeah. I’m in the Embarcadero too, the area, the Embarcadero area, I’m on a Mission and Beale, couple of blocks away from the Ferry Building. That’s where I work.
Andrew V: We could have done this in person. It’s like five minutes away from each other.
Andrew W: We could have. Let me just take a moment and just ask you, quality of life. You like living here?
Andrew V: Quality of life? Yeah. Like, I mean, it’s not a perfect city. There are certain things that I don’t like, not hard to guess what it is. Overall, I think it’s one of the most unique places in the world. I think it’s perfect for career building. If you’re young, you want to grow as an engineer, as a founder, as a whatever, you come here . . .
Andrew W: And you have conversations that lead to new business pivots like you just told me about.
Andrew V: You have conversations. You are in an environment where everybody’s doing something, right? If you are like, for example, in Ukraine, I spent a year in Ukraine last year, to some degree you’re not progressing at all, right. People they are not very entrepreneurial, the ones that are they’re not starting apps or they’re not building websites. They’re starting restaurants or bars. It’s the very kind of traditional business kind of environment.
Here, people are doing crazy things. And I actually spent a good amount of time thinking about like what makes Silicon Valley, Silicon Valley, and besides the money, besides the kind of the concentration of talent and the concentration of company is here, I think it’s the culture. It’s the mentality. There’s no idea that’s too crazy or too stupid here. Sure, I mean, there’s a lot of stupid ideas, but nobody is going to turn you away or nobody is going to say, “This guy is completely cuckoo.” People will take you seriously. And I think if you have a thousand of those people, one of them is going to make. So.
Andrew W: Yeah, I put out, the guy who you saw here in the office is a guy who responded to a tweet that I put out that said, “I’ve got a space here where I record interviews. If anyone needs it to start their podcast, just stop on by.” And I don’t know who was going to come in, what they were going to work on. But you know, because we’re in San Francisco, there’s a good chance he’s working on something interesting. And the guy who is in here was actually building something in the construction space. I don’t know if he wants me to talk about the details of what he’s doing, but it’s fascinating.
He decided he was going to start by building an audience first. In the past, that meant just going and building a blog. Instead, he built a following on Instagram for construction photos, photos of construction projects. And there are tons of people. He showed me a photo of a meetup. These construction guys, who all knew him and he knew them because of this community he built on Instagram, came to a live event, signed some wall that he had, it’s just . . . And he’s building this thing, the software for them. He’s building a community for them. And it was fascinating to see what he did. And the reason that I knew that he was going to be interesting is partially because he’s following me or someone he knows follow me on Twitter. And the fact that he’s here in San Francisco, means that he has access to me and I have access to people like him. I do like that about San Francisco. And I tend to feel down about living here, but there are a bunch of really good upsides to it.
Andrew V: Yeah, I agree.
Andrew W: I’m with you. So you had this idea that you should be offering people instead for price, just helping companies hire because of the conversations that you had here in San Francisco. Do you remember the first company that took you up on this? That said, “all right, fine, Andrew, we’ll pay you to build us a team.”
Andrew V: I don’t know who the first one is because it was a kind of a gradual transition. So some companies were transitioning from the old model to a new model. But let me back up for a second, so people can understand kind of how we even came up with this kind of setup. So if you’re in a place like San Francisco, you raise a bunch of money where you can raise $10, $20 million and you could be a very experienced founder who has a big network, you could raise from top tier investors, but you have issues with hiring, right? So you are . . . Kind of you even the initial assumption that we made of why this new model was going to be successful or what’s the main value prop, we thought was going to be cash.
Like you made that the example when you were Argentina is that, why thought, “Okay, just because it’s cheaper to be outside of San Francisco with higher rates of services, because that’s going to be the main value prop.” But it turns out that was probably the number three reason. The number one reason is that people are simply not able to hire. Even if you’re like a top hot startup, you are not able to hire fast enough. So that’s a problem, right? That’s a problem that’s pretty obvious if you live here or if you live in any sort of tech hub, it’s not a secret, right? So that wasn’t anything kind of revolutionary.
But what we realized is that, you know, what sort of issues, if a company wants to go remote, what’s sort of options do they have? And it turns out the options are pretty, pretty, pretty limited. If you look at the global kind of outsourcing, global software services industry, it’s mostly tailored for enterprises, it’s mostly tailored for huge companies, because not a lot of people necessarily want to work with startups, especially startups, the ones that we work we used to work with before.
And what that means is that a service offering for an enterprise company is quite different than what a startup would need. And what do startups need? Well, one of the things is a high degree of ownership. They don’t want to have freelancers. For example, they don’t want to be hiring people that are like part-time, 20-hours per week for two months. They want to have employees that are truly theirs. So they want to embed their culture.
Andrew W: Because who care about the business, care about the product and not just coming in to get paid.
Andrew V: Yeah, I mean, you can’t build a company with freelancers. An employee and a freelancer is a completely different thing. You want somebody who’s going to be with you for a while. You want to have somebody that you can embed your culture into. You want to have somebody you can manage properly, that you can trust. Obviously, I mean, it’s a matter of scale. That’s something that, you know, is harder to do if you have 1,000 people. But in any case, you want to have a team, you want to have a team that’s truly yours.
And there were not a lot of companies that were offering that. I mean, most of the dev shops in Ukraine and in Argentina and India, they were essentially renting their people to companies. So what that means is that they could rent an employee to you for four hours per day or 20 hours per week. That employee would feel like that they’re working for a dev shop because to them is just a project, number five, with their career, within that dev shop.
So we took a different approach because we wanted to have as high of ownership as we possibly . . . We wanted to give American startups as high of an ownership as we possibly could with a remote team. So that was kind of our premise and it resonated with people very well, is that we were not renting employees, we were not renting engineers to companies. We were staffing engineers directly with San Francisco based or Boston based companies.
Andrew W: How did you find the engineers?
Andrew V: Well, at that time, I think we were like a year and a half into StartupSoft. So we had . . . I don’t know, I think was like 30, 40 people, employees already. We had recruiters. We had a network. So we had engineers at that point.
Andrew W: How do you find the early engineers when you were doing this for equity? Was the first version only equity? You weren’t taking any cash?
Andrew V: No, it was cash and equity.
Andrew W: Cash and equity.
Andrew V: Exactly. So it was minimal cash, and it was cash just to cover essentially salaries of people. But it wasn’t like a huge markup or anything of that, it was just essentially enough for us to scrape by, not go under. But the main business model was not cash, it was the equity piece.
Andrew W: You from Ukraine, right?
Andrew V: I’m from Ukraine, yeah.
Andrew W: So you had friends in Ukraine? Is that what it is? I know it’s been years and years since you ever lived in Ukraine at that point. But what was your connection to Ukraine? Did you have an advantage because you were born there?
Andrew V: Yeah, absolutely. I mean, I was born in Ukraine. I moved in 2004. So it’s been like 15 years about when we started with this company and we raised a little bit of money. And we wanted to . . . This is the company before StartupSoft that we wanted to hire engineers. Then my brother ended up going to Ukraine to actually set up the team there. So that was how we kind of we went back . . .
Andrew W: And when you say set up the team there, what was he doing that allowed him to find developers there? You, again, were removed from the Ukraine because he hadn’t lived there for years. What did he do? Did place ads online? Did he ask friends, did he . . . ? What did he do?
Andrew V: You ask friends. So it’s network.
Andrew W: Okay, who’s a developer, who’s good. He’s just working his networks, finding a couple of people was good.
Andrew V: You ask around. Yeah, exactly. So I mean, you ask around to see, you know, who people can put us in touch with and eventually we built a small team then they had friends and it kind of grew like that.
Andrew W: Okay. All right. So now you had that, you decided, “We’re going all in on just asking for money.” And you decided, “We’re not going for the early, early stage startups. They’re too chaotic. They don’t have money. And they’re probably not going to make it if they don’t have development chops internally. Fantastic. We’re going to go to people who are still startups, but who have raised money, significant amount of money or have enough revenue to cover our costs.” Am I right?
Andrew V: Yeah, I mean, that wasn’t the main reason. That was one of the reasons is that you go very early stage startups are not the best clients. That’s one of the reasons. The other reason is that we saw strong demand from the market for what we’re doing now, which is it resonated with people a lot more. It solved the problem of hiring in San Francisco, hiring in Boston in a way that was startup friendly. In a way the startups wanted. So we saw market demand. That’s probably the main reason why we switched to this new model.
Andrew W: I see how the thing worked. By the way, I don’t love the name, StartupSoft.
Andrew V: Yeah.
Andrew W: Right?
Andrew V: Why not?
Andrew W: No one wants to start up soft. They want to start up strong. And fi . . .
Andrew V: Well, Microsoft has done pretty well.
Andrew W: But I guess what it is, it’s a combination of startup and software, right? That’s what you’re doing.
Andrew V: Startup and software, yeah.
Andrew W: It’s a mash up of the two words. In that sense, it makes sense. But the thing is, the other thing that’s more significant in this business versus the other ones that you had is, it’s harder to scale it. If you had jungle juice and you had double sales, it wouldn’t take you double the number of people, double the expenses, more than double the work to get more juice in people’s hands, right? With this, you have to scale people, every time you double your business, it means you have to double the number of people that you hire. It’s harder to find more people as you grew, right? Isn’t that? Doesn’t that stink?
Andrew V: Yeah, year, exactly. I mean.
Andrew W: How do you deal with that?
Andrew V: That is something that plagues any sort of service-based company. And if at the most fundamental level, what you are selling is people’s time, which is what a service-based company is, then for you to go 2x on your revenue, then you have to go 2x on your headcount. And going 2x on your headcount is not an easy thing to do and it’s not a thing that you would necessarily want to do. So if you take a company like WhatsApp and it was like an almost $20 billion exit. They had a ridiculously small headcount. In a service-based company, that’s not something that you’re able to do.
So it’s, yeah, I mean, there’s a lot of operational issues that come with that. You can’t copy and paste like you would in a software-based product-based company, even in Safari Juice, Safari Juice is not a service-based company, but it’s a physical product kind of company. You cannot just copy paste and, you know, you have 2x the amount of whatever you’re selling.
Andrew W: It’s definitely harder than with software, but it’s much easier than it is now with StartupSoft for you, right?
Andrew V: It’s much easier than it is service . . .
Andrew W: So how do you deal with that? And why are you dealing with that?
Andrew V: Well, I think it’s a good, stable business, right? So we have . . . I think we’re fortunate enough at this point in the company’s history, three years in, to have a strong enough client base where we don’t really do a whole lot of marketing. Actually, our marketing activities are actually pretty limited. So we are primarily a referral-based company. So the happy clients that we have now, founders usually know a bunch of other founders, we get referred a lot.
So we’re in a pretty fortunate situation where we could actually turn people away. And we do, like if we filter our clients that are not a good fit for us and we look for even things like culture, the one thing that we realized is that it’s better to have no clients than to have a bad client. And people talk a lot about culture when it comes to employees. But we realize that culture is also important when it comes to clients.
So if I don’t want to have a drink with this founder, you know, I would kind of think again, if we would want to have him or her as a client of ours.
Andrew W: That seems to me like you had a bad client at one point, one they taught you, “We’re not going to deal with jerks.”
Andrew V: We had a bad client more than at one point.
Andrew W: Tell me that one of them, without mentioning their name so that you can feel free to be open. What happened with this client?
Andrew V: Well, I mean that there was a lot of different instances.
Andrew W: Yes, so pick one and give me a sense, give me the story. What happened?
Andrew V: So I think, okay, I’ll give you one client. So it was a client that was, I would say pretty . . . It wasn’t like idea stage kind of client. They had some revenue. They had a product out of the market, but it was a client that was quite unexperienced. So I think it was his first startup, a client he was not very . . . He didn’t really know how to run kind of the tech side of things. And that kind of goes back to our issues that we had with OKO Case, an issue that many founders that are not technical and trying to run a tech company. You have very unrealistic expectations of how software is built.
If you combine that with a lack of trust. And I don’t know, a lack of trust can come from, I don’t know, many different places and for many different reasons, then you have a . . .
Andrew W: So this person was not experienced and didn’t trust you, and as a result, what did they say to you?
Andrew V: We didn’t . . . Yeah, we didn’t have a trust between each other. So anytime something would go wrong, then it was like an immediate kind of very over-the-top reaction that we are at fault, we did this wrong, we did this wrong.
Andrew W: You screwed them over? Is that what it was? It was like, “Why do you take advantage of us?”
Andrew V: We screwed this over. It was like . . . Yeah, yeah, exactly. Exactly. So it was . . . I think you’ve got to have trust, you know, in any sort of relationship. If there is a lack of trust, you’re always going to be kind of looking over your shoulder or else you may be thinking, “Oh, this guy is trying to screw me over, this guy did this, this guy did that.”
So there’s been multiple stories like this. And these are the kind of things where, you know, it’s kind of hard to predict, right? You don’t just have a chat with somebody and you say, “Okay, this guy is an asshole.” But that’s kind of the . . . When you get referred, you kind of . . . There’s less chance of that, right? Because you’re working with a company, you’re happy and they refer you. They refer another client to you. Then, you know, there’s a certain degree of trust already because of the referral.
So we made the decision, not too long ago, that we’re not going to try to scale StartupSoft as much as we can. Even though we could, in a sense that, I mean, we did 3x last year, I believe I mentioned that, so I don’t think we’re going to be doing 3x this year, but you know, who knows? We’re not going to try to scale as much as we possibly can. So we’re not going to go crazy with marketing. We’re not going to hire this huge marketing machine and do a bunch of ads. We’re rather going to kind of focus more on this boutique kind of service. So we’re going to keep it steady. We’re going to make sure we have a stable, steady company. And we’re going to go back to startups. So that’s the general plan.
Andrew W: All right. Speaking of, you mentioned earlier over your shoulder, what is that thing over your shoulder, that monitor and what’s on it?
Andrew V: That’s a TV. And that’s . . . That thing is conferencing software.
Andrew W: It looks like there’s text on one side. There is a changing screen, something screensaver on the other . . . No. It’s just a screen saver.
Andrew V: It’s a screen every, yeah.
Andrew W: All right.
Andrew V: Conferencing TV software screensaver.
Andrew W: Where you working from your house or somewhere else?
Andrew V: No, no, this is WeWork.
Andrew W: WeWork?
Andrew V: Yeah.
Andrew W: How? Turn around, let me see. Can you turn the camera around? Let me have a look at what WeWork looks like right now. Oh, you at the Embarcadero WeWork?
Andrew V: Yeah, yeah. This is the 29th floor.
Andrew W: Ah, the one with two floors. I thought it was all glass. Yeah, there’s the glass, I see it on one side and then on the other side, what do we see? That’s out the window.
Andrew V: That’s out the window. The other side you go out here on the parking window too.
Andrew W: There you go, yeah. That’s a glass. But it doesn’t reverberate. It looks good.
Andrew V: Yeah. Yeah, they got five floors actually, five floors.
Andrew W: Is it kind of weird now to be into WeWork after what’s going on with them or no issue?
Andrew V: No. I mean, I’m not an investor, so I don’t care.
Andrew W: What are you paying for? What you have desk space there?
Andrew V: Yeah, it’s Hot Desk starts $600, dedicated, I think $800, and office like 1K plus. I don’t know what an office. But it’s just me here now, so it doesn’t make sense to get an office.
Andrew W: I use Regus. I love it. They are the more like staid, less exciting office space. But . . .
Andrew V: You get a free beer?
Andrew W: I don’t want a free beer. I don’t want anyone chatting. I want no chatting here, we work, give me space to have people over here and get out of my way. And beer, I have whiskey here. I still don’t want people drinking whiskey while . . .
Andrew V: Do you get free coffee?
Andrew W: They do. Here’s the weird thing. This is the newest . . . So Regus has gotten kind of interesting. I think what they’re doing is, slowly separating each Regus location into almost its own business. So if one goes under in the next economic downturn, I think they’re trying to structure it so that the whole organization doesn’t go under, right? So that’s one thing that they’re doing. The other thing that they’re doing is . . . Where is that? So recently I had a guest in here earlier, I took him for coffee, I couldn’t just go pour coffee from the machine. I had to have this card. I guess I should . . . Look at that, like a coffee card and I could get all kinds of specialty . . .
Andrew V: Is it like a limit on how much coffee you can have?
Andrew W: No, I have unlimited coffee. But it’s kind of weird that I’ve got to justify that I live here before or work year before I can get coffee. That’s kind of a weird thing.
Andrew V: How much is it? Like how much are you paying over there?
Andrew W: I’m paying about $1,600 for an office that could probably accommodate four people if it was structured differently. But it’s just me. And then I have a second desk here for people who will just come into San Francisco and need desk space and want to hang out.
Andrew V: You see, I don’t think that’s expensive. I mean, if you take a look at . . .
Andrew W: No, they’re not.
Andrew V: People that work out of Starbucks. Like even Philz Coffee, like you mentioned, you pay, what? Like $5.50 for a coffee? So one coffee per day, $5.50 times 30. You know, you can afford WeWork or you can afford Regus or whatever. So if you’re taking account coffee and all the events and the networking and all that they do here, if that’s your kind of thing, I think it’s worth the money.
Andrew W: I don’t do any of the networking, but I do like the quiet space. And I like things just to work. When my guest came in, we needed a quiet space to sit. I knew I could get him coffee and we could sit down quiet and have space. If you would come over here one day and we’d have scotch, I’d know that there’s, basically the weird thing about Regus is by 5:00 everyone’s out of their office in every city that I’ve been in, except for Tel Aviv, people are out of their office by 5:00. And then I get to have scotch with whoever comes in to visit. It’s wonderful.
All right, but there’s not a Regus ad. I did have Regus ads, I couldn’t make it work, I guess. I couldn’t even find out whether it worked or not. We had them as sponsor and then they disappeared. Then they came back and we had them as a sponsor again. And then they disappeared. I don’t know what happened there, but I genuinely loved Regus. And I wish that we would’ve done better together. Wish that they would have loved me back.
Andrew V: You never know.
Andrew W: You never know. You know? For all I know, they’re also a little more bureaucratic than I would’ve expected. For all I know, the ads did great, but they’re just not equipped to do podcast ads.
All right. The website, for anyone who wants to go check you out is, startupsoft.org, am I right?
Andrew V: Yes.
Andrew W: Why dot org?
Andrew V: That’s a good question. We should buy the dot com. Actually, we should now.
Andrew W: Or the dot co was a good one.
Andrew V: We have dot co. We just started off. We have dot co. We have dot net. We have . . .
Andrew W: You should just startupsoft.co, dot co is a cooler domain name now, in many ways cooler that a dot com though I could see the need for a dot com.
Andrew V: Yeah, I think we’ll get a dot com. I think it’s like $4,000 but it’s not something we could’ve afford initially, but now we should get it.
Andrew W: All right. I have to get you in on one of my tricks. One of the reasons why I kind of laugh at people’s company names or make light of it is, it lets people remember a little bit more. I think they’re going to connect it back to Microsoft. See you laughing at dot org and going to remember the dot org and otherwise, it just becomes a name that goes in one ear and out the other.
Speaking of, another name that I want you guys to remember. Don’t forget, this interview is sponsored by two phenomenal companies. If you need a website hosted, go to hostgator.com/mixergy, if you need to hire . . . You know what? If you need to hire a developer, designer or a finance person, go to toptal.com/mixergy.
And finally, thank you all for listening. Andrew, thanks so much for being here.
Andrew V: Thanks, Andrew. Bye.
Andrew W: Bye.