Andrew: This interview is sponsored by Grasshopper, the virtual phone system that entrepreneurs love because you can use your own phones, and manage it on the web. Check out Grasshopper.com. It’s also sponsored by WuFoo, where you can go right now to get embeddable forms and surveys that you can add to your website for free. Go to WuFoo.com. And it’s sponsored by Shopify. When you go to Shopify.com, you can create a store within minutes, and have all the support and features that you need to make that store grow. Check out Shopify.com. Here’s the program.Hey, everyone. It’s Andrew Warner, founder of Mixergy.com, Home of the Ambitious Upstart. And today I’ve got with me, and I’ve got the pronounciation down dead-on right. He told me so. Cheni Yerushamli. Tell me if I’ve got it wrong now. How’d I do?
Interviewee: Unbelievable, unbelievable.
Andrew: I’m hit or miss sometimes with the names. Unless it’s Bob, I’m hit or miss. So I’m glad I got yours.
Interviewee: I’m adopting you. You’re adopted, Andrew.
Andrew: [Laughs]
Interviewee: Honestly, good job.
Andrew: And Cheni has a company that I was introduced to through Vainer Media, and let’s see if I’ve got this information right here. According to Inc, you guys are now and Inc 1000 Company because you grew from just under a million dollars in revenue in 2005 to four million dollars in revenue in 2008. True?
Interviewee: True.
Andrew: From one to four in I guess, what is this, three years?
Interviewee: A little less than three years.
Andrew: And Sunshine Suites offers on-demand, shared office space in Manhattan, which is where you’re talking to me from, right?
Interviewee: That’s right.
Andrew: I’ve got to say, the internet connection that you’re coming through to me on is spectacular. I talk to people all the time, all over the world.
Interviewee: [Laughs]
Andrew: Guys who run big internet companies, and they’re connection is shaky. I feel like now I’m looking at you like through a window. It’s that clear. One that’s been Windexed.
Interviewee: Well, the truth is, we try to put as good of services as we possibly can within the community. So any company here, no matter how big or how small, is represented as a Fortune 500 Business.
Andrew: And what does that mean, by the way, to be represented as a Fortune 500 Business? It means you guys keep giving me bureaucracy, and telling me to go fill out forms before I get the internet connection?
Interviewee: Minus the bureaucracy. Minus the red tape. The objective really is to empower the small business owner. You know, anyone starting a business knows the hardships and the difficulties of being in that early-stage position. And when especially coming from Corporate America, leaving that world and coming into the new world, where basically you’re on your own, it’s kind of scary for many people. What we’ve done is we basically created collaborated services, like health insurance and gym membership, airfare, car rentals, as one entity in which we all fall under, and we get affordable services like that, in addition to that. We have T3 internet access. We have really nice offices that look very, very professional. And we don’t nickel and dime. So companies who come in here know that they’re taken care of. They don’t have to worry about all those little things that come with running an office, or signing long-term leases. It’s just about focusing on your business, and getting as much support as you can.
Andrew: This is one of the big trends in business that I see right now. I’m actually in a shared office right here in Buenos Aires. They have them all over the world. People, well actually, do you see this as a trend, and why?
Interviewee: Well, I think working from home is really not the most feasible way of starting a business. I think it’s all about getting out there and networking with as many companies as possible. You know in Sunshine, you have 1,400 entrepreneurs, 600 businesses. So imagine being able to go out there and just stir up business. I mean we have companies here that over half the revenue is based on business that they do internally, within the community. So that’s why. I mean it comes down to opportunity. And opportunity, especially in a city like New York, it’s everywhere. And being from home just doesn’t do yourself justice.
Andrew: How are people getting to know each other within the office?
Interviewee: You know, there’s a lot of different tools and ways we’ve done it. I mean we’ve been in business now for almost nine years. And initially it was like, when we were just maybe 20 people, it was like everyone knows each other by name. And then it grows. And then as it grows, you start doing parties and events. And as that becomes larger and bigger, you know, it starts to become a little bit more personal. So then you do more focus groups. We went out and purchased a vacation home as a corporate getaway, so people could go on a vacation in Vermont. We tend to do pool parties, barbecues. We have corporate sports teams. So people get to know each other on a pretty intimate level.
Andrew: The purpose for this interview, for me, is to find out how you launched this business. And I understand that you had a previous business that was renting office space. And then you ended up in the office space business. I want to find out about that transition. I want to find out how you’re growing your business. But I do want to spend a little bit more time about finding out about the services that you guys offer, because I’m curious. When you say that you’ve got a vacation home, how are people in the office getting access to that vacation home?
Interviewee: Well, we do, once a month, a free trip. We notify people that they could sign up for it.
Interviewee: …notify people that they could sign up for it. There’s a lot of companies out here who go on corporate getaways. So it’s a great way for them to…
Andrew: You’re raffling it off to your people?
Interviewee: Not raffling it off. It’s a free service once a month, and companies who want to then rent it at a reduced price after that at 10% off from what it normally rents for. And it’s a beautiful home. It can accomodate as many as 30 people. Vainer Media actually went up there a couple months ago, so you could ask them how it is. But the idea is to really, you know, a lot of companies like Google, have vacation homes, getaways. And a small business owner just can’t afford that. So we basically, that’s one of the services we do incorporate.
Andrew: What is your connection, by the way, to VaynerMedia. I saw Gary Vaynerchuk on your website. AJ, his partner and brother, introduced me to you.
Interviewee: Hmm-hmm.
Andrew: How are you guys working together?
Interviewee: Well, they’re in the community. They came to me as a referral, as many of the companies here. About 70% of our clients are referrals. And that’s what makes also Sunshine very special. It’s an extended family.
Andrew: Sounds like they’re renting office space from you guys.
Interviewee: Yeah, their home is here.
Andrew: And are they paying you by helping you out? By make introductions to people like me, and helping you out with other services?
Interviewee: Well, they’re part of our social media marketing campaign. They really, they do much more than just market. What they do is really try and incorporate an internal nucleus within the community. They’re excellent in social media, as we all know. And social media, especially in a community like Sunshine, that’s constantly growing, is how do you create those links within the community. So it becomes more personal, like you say, how do people find one another? So they’re a very important part in that.
Andrew: So it’s kind of a barter relationship. You give them office space, they give you social media expertise.
Interviewee: Something like that, yeah.
Andrew: OK, what have they done for you, beyond introducing you to the great Mixergy.com?
Interviewee: [Laughs] Well you know, I think I’ve learned a lot from them, to be honest with you. We’ve incorporated…
Andrew: Do you have a couple of examples? I’m always curious to see how a company like that helps out real world businesses.
Interviewee: Oh, absolutely. Well, they first of all look at any company, and see where it’s strengths and weaknesses are. And we wanted to focus really on creating a very strong community moving forward. I think as you get bigger, it becomes a lot harder. So we started implementing tools. We did recently a job board that we’re about to launch, which was Gary’s idea. He was very adament about creating this job board, so we’re moving forward with that. We also applied a Yamma application, which is a micro-blogging application, where companies can, within the community, start networking and learning more about one another. So that’s another Vainer idea. And now we’re incorporating other ideas along those lines, that we feel are long-term and short-term. And I think that’s really where they bring a lot of value to the table. I mean creating introductions. I create introductions for all my Shiners, to be honest with you. You know, I’m very passionate about introducing people and helping them. And Gary and AJ are in the same, you know, same boat as me. We love to help as much as we can. We’re very passionate about it.
Andrew: So the job board would be for companies that are using your space to be able to advertise the jobs that they have available. And instead of promoting just the jobs for themselves, they get to promote jobs for the whole community.
Interviewee: Absolutely.
Andrew: And are you guys selling those?
Interviewee: We haven’t really decided. I think right now it’s an add-on benefit.
Andrew: Hmm-hmm.
Interviewee: You know, we are so proud when companies work with one another. So we are always constantly adding new tools to this, some of which I can’t really disclose right now. But it really is exciting to see how people are taking to all these new opportunities we’re offering them. And really things are starting to really work out for them.
Andrew: And Yamma is so that people within the office space can have like a Twitter-like way of finding out what everyone else in the space is working on.
Interviewee: Absolutely. It’a a micro-blogging tool. You can join groups of interest. Then those groups can basically be very specific because you don’t want hear everybody’s story. I don’t think it’s that exciting, you know. But at the end of the day, it’s really focused on you joining groups of interest. For example, if you needed a car ride to Vermont, there’s a group for that. We have corporate sports teams. So if you want to know when the game is, or you want to get an announcement about what’s going on in Sunshine, and barbecues, you could basically join the Yamma and learn all about it.
Andrew: I see. And so it gives people who are maybe single, sole proprietors, or maybe they’re running an office with two or three people, it gives them feeling of a bigger office space, with more people they can interact with, and much more of the social component of being in a real business, not a real business, in a bigger business.
Interviewee: In a bigger business, yeah, absolutely.
Andrew: So let’s talk, before we do actually go to the next segment, Lenny Ramirez is just as impressed as I am by the video quality. I’ve got to tell you, I don’t often see people who have this kind of internet connection, who’s that clear. I’m really grateful. All right. So let’s see. Let’s talk about how we got here. 1999, you were part of a company called Zoom Go Gaming Network. Were you the co-founder?
Interviewee: I was the co-founder. It was…
Andrew: What was Zoom Go?
Interviewee: Zoom Go was a branded, it was basically a gaming network that branded corporate sponsorships within established websites. So let’s say you’re Yahoo, and you didn’t have a gaming area. We incorporated games within the Yahoo brand, and basically were marketing sponsorships through them. So people could play for free. We would host, actually they would host, the games, and we would share the revenue. And this was done way before companies like IGA Worldwide, which actually is a former client of ours, did it, and they did very well. But we didn’t have funding, significant funding, for this project. And it was after the dot bust, that we really had a problem. And we weren’t able to get any support. And we realized that, you know, it was something that we really needed deep pockets to continue. So we were looking at ways to basically cut corners, and cut our expenses. So we ended up taking an office space that was much larger than our needs, but we ended up cutting it up and renting it out, and became profitable doing that. And eventually became more profitable than Zoom Go. So Sunshine was born.
Andrew: OK. The company that did end up doing well, what was the name of the business that you mentioned?
Interviewee: IGA Worldwide. Darren Herman, actually one of our earlier Shiners, came to me, I think it was like maybe six years ago, five, six years ago, and he started this business, very similar to what I was doing, and then ended up being a huge success.
Andrew: So he was in your office, and he said, “Hey, guess what? I’m doing the same business you are. I’m going to take games and put them on other websites.”
Interviewee: Well, he basically, if you look at IGA Worldwide, I haven’t followed them recently; I don’t know how much that they’ve expanded. But that was one of their business models, was basically incorporating in-game advertising. That’s the reason for IGA.
Andrew: I see. What about you? Why weren’t you able to grow Zoom Go?
Interviewee: I think, you know, a lot of the reason for that was, I made a lot of mistakes. I spent a lot of money, you know.
Andrew: Did you? What kind of mistakes?
Interviewee: You know, when you start off a business, I think the first thing you do is you spend a lot of money on your office, things that you think you need, things that you want to impress people with. And I think that when you do these things, it’s mostly a miss. It very rarely is a hit. And I think at the end of the day, I was making so many mistakes. And I wasn’t really able to feed off people, like I could right now. Being surrounded by other entrepreneurs is pitching your idea. Hearing, you know, other people’s opinion. Is it a good pitch? Is it a bad pitch? Is it a good product? Is it not a good product? Note, entrepreneurs fall into a tunnel vision, very common, where they just see…
Andrew: What was your tunnel vision like?
Interviewee: I have so many. [Laughs] But…
Andrew: But Zoom Go specifically, what was it like?
Interviewee: Specifically, I felt that people who started playing the games were addicted to the games. And I felt there was a lot of time spent on those games. But at the end of the day, it wasn’t the core focused on a lot of companies. It wasn’t the amount of time spent on the website. It was a lot more than that. And I was only focused on that. So I didn’t really see past that picture of how I could basically take these games, and integrate them in other ways, which other companies have successfully done.
Andrew: In what kind of ways?
Interviewee: Well basically, more of sponsorship ways. I was able to get the corporate, I didn’t focus so much on corporate sponsorship as I should have, instead of just focusing on banner ads, and so on and so forth. And it really came down to creating the right relationships. If you’re going to have a sporting game, it’s not a bad idea to get in touch with as many corporate sports leads as you can. And you know, I didn’t do that. I didn’t feel, I felt like spending that kind of investment and time, trying to make those connections, was counter-productive. In essence, it really probably was the best thing I should have done, and I didn’t do.
Andrew: Where were you spending most of your time?
Interviewee: You know, to be honest with you, so many different things. One of them was really trying to keep the office running. [Laughs] We were getting, we were trying to raise money constantly, paying the bills, managing staff, you know, wearing so many hats. And it really became an exhausting toll on me. And I felt that eventually, I just burnt out.
Andrew: You know what? I get that. Now what could you have done differently? I feel that way here at Mixergy. I know a lot of people who are listening to us feel that way, too. You’ve got to pay the bills. You’ve got to deal with all the little things that go into running a business. Got to deal with the accountant. Got to deal with invoicing. And you never get to the parts that are really important, like in your case, which is building, selling sponsorships. How do you deal with all those? How could you have dealt with them?
Interviewee: I think nowadays, with, you know, delegation, it’s really important outsourcing, you know. It wasn’t as readily available then as it is now. In my case, I pretty much outsourced to everyone within the community. My attorney, my accountant, my bookkeeper, everyone is here. So it’s very easy for me to just reach out to them and say, “Hey, I need this done, or I need that done.” And I have an assistant right now. I’m a very slow writer. So for me to type an email, it’s painful. So having these kinds of resources really helped me do what I do best,
Interviewee: …really help me do what I do best, and that’s create relationships and really execute on business development.
Andrew: How do you get all those resources now? I know that now you’re profitable, now you’re doing well, but you’re still… Actually maybe not now. Let’s talk about then in the early days of Sunshine. How were you able to get all those people to help you?
Interviewee: I bartered with them, to be honest with you.
Andrew: Hmm-hmm.
Interviewee: Now we’re all in the same boat. We looked at… You know I just came back from a conference, a panel discussion, about bootstrapping. And one of the things it was really, you know, trying to emphasize is the fact that you want to create relationships with people who get who you are, who aren’t going to try to rape you in terms of taking as much money as they can from you, but actually working on a scale, a scale of success. So as you grow, they grow. And back then, you know we were all very tight on money. But we really collaborated, and helped one another, and it became a very good venture. I pretty much work with the same people now as I did back then. So it worked out.
Andrew: So you had office space. A bookkeeper needed office space. You bartered your space for their services. Those are the kinds of deals.
Interviewee: Not entirely bartered, it would be a partial barter. I mean at the end of the day, you have to keep your core business profitable. But you could do kind of a hybrid of them both, kind of between sales and services.
Andrew: Hmm-hmm.
Interviewee: So we did that quite a bit. And we worked with a lot of companies helping us with our branding and marketing. And eventually, that’s how Sunshine was born. I mean I learned how to design myself from people within the community. So eventually I ended up designing our own spaces. So it really was a community which helped one another, and fostered growth.
Andrew: I’d like to spend just a little more time on Zoom Go before moving on.
Interviewee: Sure.
Andrew: What about publishers? How were you able to get publishers to work with you?
Interviewee: Back in the day with the gaming?
Andrew: Yeah, what was your success there, and how did you do it?
Interviewee: Not really that successful. I mean at the end of the day, what I think what we offered to any like website, whether they wanted content or entertainment video game content, was basically, it was pretty primitive. We created puzzle games. We created trivia games. We created entertainment for them. But at the end of the day, they saw it as just an add-on, not really a focus. And I felt that as many companies as we had join our network of games, it only grew so much because it wasn’t put on the most emphasis. So if I had a relationship with Yahoo, and they put me on the 20th page. I mean, I would get traffic, but I want to get significant traffic. So, the real value wasn’t there. At least, not for me at that point. I’m sure companies do it a lot better than I do now, I’ve been out of that business for so long. It’s hard to say how it’s changed over the years to be honest with you.
Andrew: All right. We’ve all had set backs. When I’ve gone through them and felt like the loneliest, worst, biggest self-doubt moments in my life. What was it like for you?
Interviewee: It’s an empty feeling. It’s anger. That’s how Sunshine started. I was angry that no one was there helping me, directing me or spending the time. I thought like everyone was trying to get something from me and I felt like it’s a shitty way to start a business. And I started Sunshine with the intention of helping Joe, who’s my best friend since we were 11 years old. He was born in Iraq and I was born in Israel, and we stayed best friends to this day, and that’s probably our greatest accomplishment, hard as it is.
Andrew: He’s a Muslim Arab and you’re an Israeli Jew?
Interviewee: He’s a Jewish Arabl, not really Arab. He left Iraq, and we just became very, very, very good friends. We share the same moral beliefs, and we were both very angry about the failure, and we wanted to do something about it. So I feel there’s a business, of a million dollar business anywhere, might as well do it for good.
Andrew: How did you start renting out your office space?
Interviewee: Well, it was right at 9/11, actually, and all hell was breaking loose. It was a tough, tough time. I remember the first couple of people came to us were displaced, and they weren’t too sure of what was or where they were going to do, or how they were going to grow, and they came to Sunshine. And the one thing that we did is we really focused on trying to network them to as many people as we knew. So, one of them, I remember his name, Fernando, very well. Guy fell behind on his rent, and instead of kicking him out, I found him a business. And he was able to pay his bills by the [referral eye to Eagle].
Andrew: But, you were already, by 9/11, you were already in that business? Sunshine had already existed, you had already started renting out space, you grew the business.
Interviewee: It just started. July of 2001, Sunshine was born. Obviously, September is when 9/11 happened. So it was just the beginning phases of it. We actually put fliers…
Interviewee: We actually put fliers onto telephone poles, and people actually came to us saying, “alright we need space because we can’t go back downtown.” So that’s really how it started.
Andrew: How did you get so much space to begin with?
Interviewee: You know the building in which we were renting from, originally from Zoongo– we were on the sixth floor. And on the fifth floor, a person was there for many years. He had a really good sweetheart lease. He didn’t pay a lot per square foot, and he ended up wanting to sell his business and closing shop. We ended up buying that lease from him, and you know, I thought Joe was crazy when he thought about this. I was like, “Dude, I don’t want to take any more expenses. I’m done with it.” He was like, “This is a good lease.” And I give him all the credit for taking the initiative. We bought the lease from him at a fair value, and we renovated the space. And then we just started subletting it.
Andrew: So you knew instantly that this was more space than you needed, more space than you were ever going to need. You leased it with the idea that you would sublet it.
Interviewee: Absolutely.
Andrew: You knew that that would be a new part of your business.
Interviewee: I knew it would be a way to help with our expenses because our expenses were outgrowing our revenues. So, we needed to come up with other revenue sources, and we thought that could be a very good one. It ended up working out in our favor.
Andrew: How did you know? How did you know the economics of that business?
Interviewee: You really don’t- I think you have a gut feeling. At the end of the day you could do your numbers, but there’s so many unexpected unknowns. Everyone thinks, “Oh, it’s so black and white. Do the construction, this and that.” All of a sudden there’s issues like insurance and things breaking and building things and renting and…
Andrew: So would you be able to charge for this phase? I mean even the basics, your expenses and your income. I understand the expense, there’s sometimes question marks about it, but how do you know what your income could be? what you’re going to be renting your space out for?
Interviewee: Because we saw what other people were charging. You know, for full offices. So I looked at what they were charging and I said, you know what, cut that by more than half. In fact, much more than that and basically offer them really affordable prices. Just see what the market would accept. We raise the prices, but we don’t raise them aggressively. We were very, very fair with our prices. In fact, to this day, we are very hesitant to raise prices. Only because we feel that, you know, this is really our market.
Andrew: I’m seeing a couple of questions here from Lenny Ramirez. Can you clear up that last question, Lenny, and I’ll do my best to ask it? He’s asking about your operating budget, and I just want to know a little bit more about his question. So you looked at what you were selling, so you had a sense of what other people were charging, so you had a sense of what you’d be able to charge. What about marketing? How’d you know and how’d you figure out how to get people in the door?
Interviewee: That was easy. We just put a flier up.
Andrew: So that was your marketing idea. You said, “We’re gonna get this space. We’re gonna carve it up. We’re gonna rent it to people. We’re gonna charge less than these other offices are charging. And we’re gonna get our people in the door by posting fliers all over the city.”
Interviewee: It wasn’t the prettiest of space. I have to be honest with you, Andrew. I mean, I sanded the floors and I painted the walls myself. Believe me, you do not want me to do this in your apartment. It was really not a pretty job, but it was a lot more than that. It was about the attitude. I mean, I think everyone has their own attitude and their own way of doing things, and I think when you go into a space that the people are there to help you, I think it’s much more welcoming. And I think people will pay more for that really- that security blanket of sorts. And the flexibility. We only did month-to-month terms. Everybody else did six-month, one-year terms, and we refused to do it. We did one month at a time, and we gave companies the option of leaving. We had to earn their business every month.
Andrew: Why? Why did you do it that way? Why not lock in some guaranteed revenue?
Interviewee: You know what? Again, you never know as a business where you’re going to be down the road, and I think by locking a company down for a year- I mean, even the argument of six months is too long. Three months you could say, “Okay, you know what, you could lock them down for three months.” But we just started with month-to-month, and that was part of our selling pitch. We have to earn your money every month. And people like it, and it stuck. And we’ve been doing it to this day.
Andrew: We’ve got a question here from the audience. They’re asking, “Where did you purchase the furniture, the cubicles? What kind of furniture did you have?”
Interviewee: Everything was second-hand. We went out to get- what was the name of that company? Dog. A really cute name. Something dog. I don’t remember. But they were based on the west coast. We purchased the furniture from them, from a company that went under. We had it shipped over, and Joe and I built it ourselves. We had some heated fights building this goddamn furniture. It was terrible. But we became cubicle building experts after a while.
Interviewee: …and it just went on that way. Our next place, actually, we ended up getting the furniture from Dunkin’ Donuts University in Massachusetts. You’d be amazed where you could get the stuff. So, we got it for $500 per, a little bit more, like $600 per workstation, and we just bought just as many as we could afford, and we bought more as we could afford more.
Andrew: $600 per workstation, and what were you renting the workstations out per month?
Interviewee: At that time, about $450
Andrew: Four hundred and fifty dollars?
Interviewee: Yeah.
Andrew: I see. OK, that’s pretty good. Of course, it doesn’t take the rent into account. What kind of rents were you paying on that first place?
Interviewee: We were paying at about $15 to $16 per square foot. But at the same time, there was the purchase price we agreed to to buy off the lease from the previous leaseholder. And there’s always the expenses that come with operating an office space, which, if you’re a business owner, you just want to avoid altogether. So, figure in all those. I mean, there’s a lot of expenses, but at the end of the day, our margins were healthy at the time.
Andrew: So, when you got into it, you knew [ZoomGo], know more, were really going to start inching our way towards real estate and eventually end up in this place. This is our next move.
Interviewee: We didn’t think ZoomGo was done. We were preparing for slow-down, we were preparing to put it not on the back burner, but just see how the market shifts, and then at that. But Sunshine started taking so much of our time that really, we had no more time. We had to make a decision, and we chose going with Sunshine, and I guess that was a very good decision?
Andrew: How soon after you launched did you guys get profitable? On a monthly basis?
Interviewee: We were pretty much profitable from the beginning. I mean, we took loans, we took credit card debt, so we paid off that credit card debt, and our first actual money that we were able to raise was a loan from one of our shiners who really liked what we did and gave us a $50,000 loan for us to take another floor. So we grew that way. The people who were in the community were very helpful. They even helped us sand the floors and paint and do construction and give massages when we were falling apart
Andrew: And this was when you were charging $450?
Interviewee: Yeah.
Andrew: So someone was paying $450 and dealing with the floors?
Interviewee: Yep, because they really had a sense of what we were trying to do, and many of them are still with us to this day.
Andrew: What were you trying to do? It sounds to me like you’re just trying to give people rent, you’re just trying to give people office space. Why is that such a great mission that people are going to be willing to sand the floors with you?
Interviewee: I think you create friendships at the end of the day.
Andrew: You’re a landlord. How does a landlord create friendships?
Interviewee: I’m not a landlord. I never…
Andrew: How do make yourself not a landlord?
Interviewee: Because I know at the end of the day you’re all in the same boat, you’re all small business owners. I’m a small business owner. No matter what someone else says, that’s the way I see myself. And I never talk down to someone, I don’t look at them as someone who is beneath me. And I see us all as equal working together trying to achieve together. I’m very happy when a company outgrows me.
Andrew: Does that mean you shared in the early days your financial situation with them? Did you tell them where you were? Did you go out and have a beer with them? How did you bond?
Interviewee: All of the above. We went out, we started a softball team together, we went on bike rides together. We answered each other’s questions. We helped each other with problems. We did things as a unit instead of being individuals. And at the end of the day, it helped a lot of us get through these tough times. There was a lot of times I was falling behind personally on my rent because I was put all my money interest in Sunshine. And people within the community were kind enough to say ‘here, let me spot you a couple hundred bucks here and there.’ And it was that kind of an environment, and eventually it grew, and you don’t have to ask people for assistance any more. At the end of the day, you create that kind of mentality.
Andrew: I want to understand, this is where I get a little dorky, because I try to understand human relationships like most people try to understand computers. But, I’m curious about it. I would imagine if I were in your place, I’m the guy collecting rent from people. I can’t start telling them that I can’t pay my own rent at home. How you get to a place where you feel comfortable enough to talk to them about that and in a way that helps bring them in and gets them to help you out?
Interviewee: Well, because I think at the end of the day, they saw what I was doing, they saw what kind of risk I took. It was really an investment that I made. And at the end of the day, I think, you have to respect someone who takes a chance, who really puts it all on the table and says ‘you know what, I’m going to roll the dice.’ And I took the low road, Joe and I really sweated it out, and we worked really hard, day and night…
Interviewee: …and we worked very hard, day and night. And I think you earn the respect of people when they see you, by example, working so hard, and not just leaving at six, showing up at ten, and that way. So, I think it’s really a healthy, it’s actually, it’s quite therapeutic to talk to people about your situation. I think by creating a facade that everything is OK, I think that’s not the way to go. I think you should really talk to people and say ‘this is my problem. This is what I need help with. What do you think?’
Andrew: You’re tossing out a bunch of different activities that you guys did together: softball, cycling, a bunch of other things. What was the first thing you did as a group that wasn’t just a business relationship?
Interviewee: First thing we did as a group, actually, well besides going for drinks together, I would have to say we did an organized hike. So that was probably the first thing that we did. As far as sporting teams, we had our softball team, I remember this. And we had our first co-ed softball team. We were terrible. No matter, win or lose, we would always go for a drink after the game. And that was the best part. And it was just we did trivia game, we had all kinds of activities. We had soccer leagues, dodge ball, basketball, so really, it was…
Andrew: Softball was the first one? When did you do it?
Interviewee: It was when we opened our [Nahoo] space on the fourth floor when we actually had enough people so we could actually have a softball team.
Andrew: All right, you were angry at the first business that didn’t work out, who was determined to make this business work out. You’re not playing softball just to play softball, you’re not doing things just to do them. You’re thinking through, what do I need to do to make this work? And then later on, I could do things just for fun, right?
Interviewee: I think it comes as a whole. I think, first of all, you don’t plan this, to be honest with you. Everyone says ‘oh, what you got right now, that’s amazing. Did you plan it from the beginning?’ No, the reality is, a lot of the people who are in this space asked for it. I did a lot of surveys. I asked a lot of questions, ‘what you like to see us incorporate? Do you want us to do this or do that?’ And then we as a group decided. And softball came because everyone wanted it. Well, not everyone, but enough, that we had enough to do a softball team. I always believe that I am a very bad guesser. So assuming and guessing just didn’t work in my eyes. So, it’s always better to ask and see what they want, and then based on that, implement.
Andrew: All right, you’re handing people actual paper surveys, you’re saying ‘here’s a survey, can you give me some feedback?’ Do they fill it out, or is it more informal?
Interviewee: Informal, and later on we did Survey Monkey.
Andrew: OK, let’s talk a little bit about bootstrapping, since you just got back from a talk about bootstrapping. What kind of bootstrapping techniques did you tell people who were listening to you earlier about?
Interviewee: Well, I saw two ways. The majority of [Billuses] and Sunshine, there’s two reasons why they tend to fail. Number one, cash flow. They run out of cash, so that becomes a problem. And number two, making poor business decisions is also another major problem small businesses face. So, some of the things we try to implement at Sunshine is by doing micro blogging, where people can actually ask questions. And having, let’s say you have a legal question and asking a bunch of attorneys. Let the attorneys earn that kind of business that you feel comfortable with instead of me sending a referral, because by me giving you a referral, that means I’m being biased. If I give a referral to one lawyer and not another lawyer, it becomes problematic. So we’re constantly trying to find ways so people can become, shall we say, earn their business. We’re trying not to implement a rating system, where companies can rate each other for their work. So, you work with a company and you’re unhappy with it, you could give a negative rating for it. So, it creates a higher level of professionalism. So, that’s one thing we talked about. Another thing we talk about is never signing any long-term leases, not committing to anything under personal guarantees. A lot of people tend to put their personal life in their business, and if things don’t work out, they’re personally liable for everything, which is a problem I see time and time again. So, I try to advise people not to do that because they’re playing a dangerous game.
Andrew: And you do that, though. You got credit cards and took out debt on them in order to create Sunshine Suites. Didn’t that help you, though? Didn’t it force you to keep going when you might have given up otherwise?
Interviewee: If I didn’t have such a great partner like Joe, I would probably say ‘not do it’. Joe is incredibly organized, incredibly diligent with that. In fact, I’ve never seen anyone so good at it, and I don’t think I could do anywhere near the job he’s done, and I’ve never seen anyone who could do it, either. So, it really is identifying your strengths and weaknesses. I, for example, knew my weaknesses very well, and that’s why I found a partner like Joe…
Interviewee: …and that’s why I found a partner like Joe who complemented my weaknesses and vice versa. And that’s something we also talked about is finding the right partnerships, and creating relationships that are long term, not short term gains for anyone.
Andrew: Joe is Joe Robbe, am I pronouncing it right?
Interviewee: Joe Robbe. Yeah, Joe Robbe, he’s actually in Israel right now. He recently got engaged to a wonderful woman, [Abivid], who also works at the Sunshine. And they’re planning their wedding, and so they’re in Israel right now, and she’s going finishing up school.
Andrew: And it’s just the two of you, each of you 50/50 on the business?
Interviewee: No, we actually took a small round of friends and family before we opened up our latest space in Tribeca. And so it’s only between us and their friends and family, but at this point, that’s it.
Andrew: That’s it. How does the responsibility break down between the two of you? Who does what?
Interviewee: I’m involved with marketing and sales, a lot of [biz-def]. Joe is also involved in [biz-def], but he does more of the accounting and managing of the staff. Even by working remotely, we created a system, a back-end system that allows us to do checks and balances. And the key of running an office space like Sunshine is constantly keeping the level of satisfaction at a very high point, quick turnaround time. So, we invested a tremendous amount of energy and money in creating a back end that we’re able to monitor and be able to get feedback from the shiners and our employees.
Andrew: [Biz-def] you said is your responsibility. How are you developing business? How are you bringing the people in?
Interviewee: Well, Gary was a [biz-def] in our initial relationship. I mean, we’re constantly creating business, developing relationships.
Andrew: Talk about one person first and then we’ll broaden out the ideas to others. How did you get Gary Vanderchuck in?
Interviewee: Gary actually approached me, to be honest with you. He heard about me through mutual friends. He was just starting the InterMedia with his brother. He starts every business the way I start it- with zero. He doesn’t believe in dumping a lot of money into it. He believes it should be profitable and bootstrapping it as well, and that’s what he did. And he heard about Sunshine through a friend. We cut to the meat. Actually, I didn’t, I accidentally did not think it was Gary I was meeting. I was supposed to meet another Gary, so I thought. And I walked right by him. So, it was kind of embarrassing when I realized, oh wait a minute, I’m talking to the wrong guy. But Gary and I started that relationship based on a mutual introduction.
Andrew: How does he convince you to partner up with him? What does he say?
Interviewee: I think he’s very convincing. I think he’s very passionate. I think Gary is a genuine sales person.
Andrew: What does he say? He says ‘I’ll [grine] for you. Henny, I’ll [grine] for you, I’ll work like mad, I’ll get people in the door. I’ll show…’ What does he say?
Interviewee: Well, he doesn’t, I don’t want to say the word ‘slutter’ or anything like that because he’s not. He’s just a genuine guy who believes in something and he will work as hard as he can in order to get the message across, to tell the people what he believes in. And let them make the decisions. I don’t have a key.
Andrew: Did he have a vision for you from the beginning, said ‘look, here’s what I can do for you. You give me this office space, I’m going to make sure that I can get you in here, in there, in that place, and I’ll add you a couple of other ideas.’
Interviewee: We didn’t look at it from that point. We looked at it from a perspective of saying ‘what’s going to help Sunshine?’ Well, we want to create a whole new community element, which I think he could help, and sales are always important. So, it’s not just selling a space, or telling him ‘hey, just push Sunshine’. That’s not the way to go. It’s really believing in the product, and over time, he came up with all the ideas himself. It’s not something you forced Gary to do. Gary will just do it, based on what he’s comfortable with. And I think…
Andrew: You didn’t have the ideas Dave wanted. What was it about it that convinced you, beyond who he was and how genuine he was at expressing it? What are the reasons for doing it?
Interviewee: What are the factors?
Andrew: Yeah, what are the factors?
Interviewee: Facts. The facts are you have to really look. I mean, we’ve had a lot of fortunate situations where most of our clients are referrals. And Gary came to me as a referral from a good friend. And we felt ‘you know what, what’s the worst that could happen from it?’ We’re committing a year to each other, we have the space we opened in Tribeca not too long ago. Let’s see what comes from it. There’s nothing bad I could see that comes from it, other than the fact that we tried. And at that point, as long as you try, that’s it. I’m more than content with it.
Andrew: And you knew his reputation before?
Interviewee: I learned about his reputation as time moved on. I wasn’t so much aware of his reputation part to be honest with you. I wasn’t following him on Twitter, I saw one video of him, actually, and I didn’t realize it was him until after the fact. So, it was a pleasant surprise.
Andrew: So, if you didn’t really know him, he kind of knew about you, and he convinced you based on what he said, not on the reputation that he had before, and maybe the person who introduced you?
Interviewee: We come from very similar backgrounds. He came from Russia. You know, he’s an immigrant.
Interviewee: You know, he’s an immigrant. He also has a tough time reading and writing. I share very common elements with him. And I felt very comfortable with him. And at the end of the day, you really want to feel comfortable because it’s a marriage. A partnership, in many ways, is as a marriage. And you really have to like the people. And I genuinely like Gary and AJ very much.
Andrew: Everybody genuinely likes Gary and AJ. Very impressive, how’s he’s able to just go in there, and communicate who he is to you that quickly, and how you trust him enough to give him office space, with the idea that at some point, you’ll get something back.
Interviewee: I think there’s a couple of weeks that we were going back and forth a couple of weeks on the logistics, logistics and you know, what he needs. But at the end of the day, you want to make sure you can meet everybody’s needs. So we both felt comfortable with it, and then we moved forward with it.
Andrew: OK.
Interviewee: So it was a feeling out process.
Andrew: You said that you’ve got some kind of deal on airfare, on gym membership. Does that mean you’re buying in bulk, that all the people in the office kind of go in together, that you got a discount because you’re representing the office? Is it something like that?
Interviewee: No, it’s done in different ways. Every deal is different. To be honest with you, that’s what I’m best at. There’s no universal way of conducting/structuring a deal. It really comes down to who you’re working with.
Andrew: What about the gym membership then? What is the gym membership perk, and how do you work it out?
Interviewee: Well, we approached Crunch Fitness, which was a logical choice. They had a gym right in front of our Nolow location. We created a partnership where we said OK, let’s do month to month, where traditionally, they did not do month to month. We modeled it after the Sunshine model. And we basically said we needed to have affordable rates, at a month to month, with someone who could basically help them get through the process of signing up. And we met a very helpful person there, who we’re very good friends with to this day. And we sent him like two or three hundred members over the course of from then ’til now, which is, you know, who wouldn’t take it?
Andrew: And you get a commission on that?
Interviewee: No, no commission.
Andrew: So you don’t get a commission. It’s just your way of helping out your people.
Interviewee: Absolutely.
Andrew: OK. And because you’re sending them so many, you can get better deals than if they worked it out individually.
Interviewee: Absolutely.
Andrew: OK.
Interviewee: And you know, at the end of the day, I really want to help companies have every opportunity possible.
Andrew: What kind of net margins do you have on four million dollars that you brought in 2008?
Interviewee: I won’t go into the numbers. That’s more Joe’s category. But you know, we are a profitable company. We have grown. And, you know, I think every relationship, you can make money. There’s nothing wrong with it. In fact, if you don’t make money, that’s the number one rule in business is making money. It’s just a question of making money where everyone feels good about it.
Andrew: Is it over 25% net?
Interviewee: I won’t go into it.
Andrew: So, you can’t say that. OK.
Interviewee: I won’t go into it.
Andrew: Why did you give Inc. magazine your numbers?
Interviewee: No, Joe actually wanted to do that. And he felt it was an opportunity of recognition. We were in the process right now of strategic partnerships outside of New York. And I think it gives credibility to a company especially that doesn’t have financial backing or VC money. It’s basically take what you have and basically put it out there. And give a little bit of, make some waves. So, it was a strategic plan, and it worked out. It really, it opened doors for us.
Andrew: What kind of information did they want? Did they want audited numbers? Did they send one, they wouldn’t send an auditor? How did they verify the information?
Interviewee: Again, that’s Joe’s category, but I think you had to get tax, your accountant
had to give verification to your numbers, year-in, year by year. And they went about it that way.
Andrew: All right. Well, any last bit of advice for an entrepreneur who’s building a business?
Interviewee: There’s so many bits of advice that I could give. Just I would strongly recommend is, talk as much as you can to as many people as you can. Interact, and try to find out as many synergies as you can, because the reality is, everybody knows someone. You may not be a direct fit, the right fit with the person you just spoke with. But if you share enough of yourself with them, I’m sure they know someone that probably can create that right fit for you. And that happens every day for me. So, I think it’s letting yourself out there a little bit can’t hurt.
Andrew: All right. Well, thank you for doing it thanks for coming on here and talking about your business, and where can people see you, what’s the web site?
Interviewee: You can check us out at www.sunshineny.com.
Andrew: OK, and if they’re in New York, they could stop by the office, say hi, maybe even stop in at one of your parties.
Interviewee: Absolutely. Whatever we’re planning on. Barbeque. Starting to get warmer around here, so barbeque time.
Andrew: All right, cool. I hope a lot of people go out and check it out and go to the barbeque and hopefully send me pictures. Thank you for doing the interview, guys, thanks for watching. I’ll see you on the web site.
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[This interview was suggested by AJ Vaynerchuk.]
