Case Study: A business idea that could only exist in the chat space

I’ve been looking for a big success in the chat space to bring on Mixergy. I asked Nir Eyal about it and he said, “What about Swelly?”

Nir introduced me to the founder and he agreed to do an interview.

Today’s guest came up with an idea that couldn’t exist outside of chat. Peter Buchroithner is the founder of Swelly, which allows users to get the opinions of their friends.

I want to find out how he did it, what’s working in chat, and what’s not.

Peter Buchroithner

Peter Buchroithner

Swelly.ai

Peter Buchroithner is the founder of Swelly, which allows users to get the opinions of their friends.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the persistent host of a podcast called Mixergy, where I interview entrepreneurs about how they built their businesses. And months ago, I guess it’s been over half a year ago, I had dinner with Nir Eyal and I said, “This whole chatbot thing is really exciting, but is there a big success business in the chat space?” And he said, “Yeah, there’s Swelly.” I said, “Would you please introduce me to the founder?” and he goes, “Yeah, I could do it.” I said, “I want to ask him for an interview.” He says, “Yeah, I could do it.”

It’s actually now that I think about it been a year because Nir hasn’t lived in San Francisco for about half a year at least, so it’s been a while. And so he made the introduction and Nir opens doors, so he made the introduction and I got no interview and then I followed up and I still got no interview, but I persisted, my team persisted because I tried Swelly and I thought it was really interesting, this concept that could not exist outside of a chat, in my opinion. In fact, he tried it.

Founder, Peter, tell me if I’m pronouncing your name wrong because it’s important for me to get everything right. Peter Buchroithner. Oh, can you say . . . ?

Peter: Right, Buchroithner, that was very good though.

Andrew: Buchroithner.

Peter: Exactly, correct.

Andrew: Yeah, had this idea. Look, people want to get feedback from their friends and he actually tried creating an app where anyone could get feedback from their friends within the app but it didn’t work out, and we’ll talk about why this didn’t work in an app. And then he moved to chat where you can use Facebook Messenger to get feedback on something that you’re thinking about, like should I get the iPhone 7 or the iPhone 7 Plus and have feedback from your friends and it took off.

And I think what’s interesting about this is how simply he lays it out in a chat app and how some ideas like this will not work outside of chat. So I invited him here to talk about how he did it. He finally said yes. Last week we were scheduled to do the interview, and last minute he said, “Andrew, I can’t tell you why but I’m not going to show up, but I promise I’ll show up again,” and sure enough he did. He showed up today. We’re going to do the interview to find out how he did it and to find out about the new part of his business called business.swelly.ai, which will allow businesses to pull customers and get tens of thousands of responses within a couple of hours. Sounds like that’s probably going to be where the revenue is going to be made.

We’ll find out in this interview how he got started, how he built it up, what’s working in chat, and I’m frankly also what’s not working. All thanks to two great companies, the first is a conference that I love and I really urge you guys to go check out, it’s called Fireside Conf. And the second is the company that helped me hire a developer, a designer, and a finance person. I’ll tell you more about why you should be hiring from them too, but it’s called Toptal. Peter, good to have you here.

Peter: Yeah, thanks for inviting me, Andrew.

Andrew: Why didn’t you show up last week? What happened?

Peter: So, we got a couple of calls that were interesting for our business moving forward and that’s pretty much all I can tell you right now.

Andrew: All right. I tried pushing you before the interview started. It didn’t work out so I’m not going to try it now. Why don’t I ask you this then? How many people actually use Swelly? The chatbot.

Peter: Yes. So seven million people use Swelly so far.

Andrew: Seven million unique people use Swelly?

Peter: Seven million unique people, yes.

Andrew: Wow, wee. What were you going to say?

Peter:So what’s interesting about this is that all our demographic is really young. So Swelly is a main audience, about 80% of our users are between 13 and 25, which makes it a huge possibility for accessing [inaudible 00:03:31].

Andrew: For accessing what, sorry?

Peter: For accessing Generation Z within chat.

Andrew: Okay. So I get that. I see how this is uniquely fit for Generation Z, frankly, because I went to see some of the polls that were on there and it was the kind of stuff that younger people would want feedback on like clothes. You’re a guy who grew up in Austria.

Peter: That’s right.

Andrew: That’s where the accent and name are from.

Peter: Yes. Just like Arnold, I mean, just look at my muscles and stuff.

Andrew: Yes, though you have less of an accent than Arnold. You told our producer about this thing that you did in Australia about PlayStation games, can you tell the audience what that was?

Peter: Yeah, sure. So in 1999 when eBay started taking off in Germany, I was a 15 year old kid, right? And I was experimenting with this thing called internet and I taught myself programming and the first thing I did on the internet was launching a web store that I call P Game and I would sell things that I would like as a teenager, which was a PlayStation at that time. And since I couldn’t afford to buy PlayStation games, I decided to modify my PlayStation so I could copy games and still be able to play them. And yeah, moving a little bit forward . . .

Andrew: I had no idea that was possible. You copied PlayStation games and sold copy PlayStation games on German eBay.

Peter: Well, I didn’t do that. No, no, no. What I did is I gave like an instruction file to people who would like to modify their PlayStation so they could, if they were interested, make a copy of their own games.

Andrew: Got it. And that’s what you sold?

Peter: So yeah, I sold that on eBay under my own self-developed web store.

Andrew: How much money did you make from there?

Peter: But [inaudible 00:05:24]. Let’s put it that way, the second thing that I was trying to give to my friends and use myself was Nintendo GameCube and since the disks were smaller, there was no way to copy them so the money that I made with selling PlayStations I spend on GameCubes and ended up giving them to my friends.

Andrew: So basically lost it all on GameCube games which is not . . .

Peter: I did, unfortunately, yes.

Andrew: In your teens, you opened up a physical store. What were you selling?

Peter: So, the second business after selling stuff on the internet, after selling PlayStation games, was actually clothing. The second passion that I had as a teenager was skateboarding. And it was very, very clear that I would never become a professional skateboarder, I think I was not that talented, but I knew what skateboarders needed and wanted so I started importing boards and t-shirts from the U.S. and sold it in my own web store and it worked really well. So after the second shipment of hundreds of t-shirts from U.S. that just would sell out within weeks, I decided to open a physical brick and mortar store. And I luckily convinced my parents to lend me some money to actually put it in a physical store and opened my first skate store when I was 18 years old.

Andrew: You sold clothing that was hard to get in Austria, U.S. brands. My dad owned a clothing store in Myrtle Avenue in Brooklyn. He had a hard time getting Nike and Adidas and major brands because they didn’t want to work with an upstart. How did you get it in Austria where other people couldn’t get it?

Peter: One of the most important tasks is really understanding the brands and what they want. And the second part is [inaudible 00:07:15] Americans back then which was the . . . like they saw Europe as one country, right. So I was this one guy from Europe reaching out to brands who didn’t know that there was actually a business for them and I would say, “Hey guys, I have this opportunity for you to go to Europe and start selling your brand there.” And . . .

Andrew: So they didn’t think of it as a 13 year old kid in Austria trying to sell t-shirts, they thought of it as an opportunity to expand into Europe.

Peter: Exactly. I was an 18 year old by then, but I was still a kid.

Andrew: Okay. All right. What’s a name or an example of a brand that you got in your store?

Peter: So I was working with Famous [inaudible 00:07:59], I was working with Iron Fist Clothing. I was working with Metal Mulisha later. You might’ve heard of Komono [SP] which is [inaudible 00:08:07]. I was working with Fly53, which is a British streetwear brand, pretty popular in the UK . . .

Andrew: I’m going to be honest, I never heard of any of these brands. I’m not a brand person, I would not know but I get a sense of now the kinds of people that you got in there and you told our producer, “Look, these were four stores that I expanded to. I had a business here, but as I was looking around in my shoppers, I saw that they were being indecisive.” I got to ask you, this seems like too perfect a fit into Swelly. Is it really that or did you need to have an origin story when you’re talking to my producer?

Peter: Well, I mean, honestly this is what happened but this is a story that came out after 10 years of being in the clothing and technology business. So there were a couple of startups in between and it was not like I was in a store, I took photos with my iPhone, and then I would know, “Oh, I need to make an app so to help people decide.” So it was more of I have an idea and actually it only got out later that it was actually such a perfect fit. So I actually started with a photo app that was helping brands to get more reach on social media. That was the first thing that I did as a startup.

Andrew: A photo app, I see. So you’re saying, “Listen, Andrew, it wasn’t like I saw these kids in the store and I said, ‘I got to create this app or I got to create a chatbot,”‘ it was just like one piece of data that was in your head and helped you think through what to create next and then the stars kind of aligned with this idea. I don’t understand that first thing that you created. I know that you told our producer that you knew a friend who was one of the technical co-founders of Formstack, a guy named Phil and you guys got together and you said, “Let’s think this through and come up with.” But what I’m trying to understand is what did in your gut, what did in your heart did you think the first thing you were going to create would be?

Peter: So the first thing that we created was an app called dvel, D-V-E-L.

Andrew: Dvel is not a great name.

Peter: Well, I know that now.

Andrew: Okay. All right, so dvel was the name of the app, where did the word come from?

Peter: From the English word “duel” and that was my Austrian way of approaching the English language. D-V-E-L, I thought like I should change the U to a V and the V was the point on top . . . was that thought on top with the mathematical sign for O so it was a very nerdy approach as well. And the basic idea was I would take a photo and I would upload it to the developer community and you Andrew would take a photo and would upload it and we would both use the same hashtag so that the photos got matched and it was a battle or a duel of two photos.

Andrew: You know what . . . ?

Peter: And we would ask the community to vote.

Andrew: I see it now. I’ve got to say, it looks nice. I’m in the app store. It’s pronounced “dwell” even though it’s spelled D-V-E-L. It’s kind of like you said, a play on the word duel. It looked good. You created this app instantly? That was the first version?

Peter: Yes.

Andrew: How did you think you were going to make money from this? It’s kind of free already, isn’t it?

Peter: Yes, it is free. So the idea was . . . we didn’t think about making money at that point, we just wanted to create the community and we wanted to create a community, a social network that is fun to use and eventually do something meaningful which is helping people make decisions.

Andrew: Okay. All right. You know what? I don’t mean to be putting any of this down. I’m in awe of what you built. I think you’ve got one of the biggest . . . do you have the biggest chatbot audience out there or I know it’s definitely one of the biggest.

Peter: It’s hard to tell. I can’t say that we’re the biggest chatbot. I know that we are amongst the biggest on Facebook Messenger and we’re also big on other platforms. I would say top 10 for sure, but I can’t tell you exactly.

Andrew: I wonder how much of this was kind of a takeoff of Formspring, which is also what Formstack came up with where they saw that . . . and asking your friends questions and getting answers is highly viral. That once you answer one friend’s question, you can’t help but ask the same friend and others more questions. Was that part of what drove you to create dvel?

Peter: I think the potential of going viral obviously was a part of creating it. We didn’t really think that far to be honest. I had experienced in developing and I had experience in fashion, not in building community. It’s not in apps per se. So it was more of a coincidence that we stumbled upon the power of messaging a little later, which then led to it become a viral product.

Andrew: Okay, so it wasn’t like fully thought out. It was just, “Here’s a cool thing. We think it could grow. We have a sense that people need this because people are indecisive. We have a sense that it could work because when people ask questions, it becomes a viral component of a business.” All right, so you had this whole thing, you put it together. Let’s talk dollars and cents here. How much money were you making with your stores? I want to get a sense of like how much revenue, how profitable it was, give me an understanding of what you even had to spend on this new idea and how much confidence you would have had to pursue it.

Peter: Yeah. So the revenue was in the seven figures but I can’t tell you exactly about profits. What I can tell you is that we had . . . I’d put a little bit of my own money into dvel and it was actually at a time where I already knew that I wanted to move forward. And I had my brother who was also in the clothing business and he wanted to take over that business, which still exists by the way. And yeah, so it really, it wasn’t that hard in terms of financials if you have to cofounder as I had. All the three of us have technical backgrounds so we could create the app design, development, everything ourselves as the first version. And what we did next in terms of marketing, I mean, we had . . . I personally spoke to about 1,000 users in the first 6 to 12 months.

Andrew: You talked to how many users?

Peter: About 1,000 users.

Andrew: A thousand, this is back when you were still an app?

Peter:Yes. So what I would do is I would reach out to people in other social communities and would just ask if I could ask them a couple of questions, then I would have Skype interviews. I would reach out to them on Snapchat. I would have conversations on WhatsApp, so it was not in-person interviews or video interviews per se or group, all of them, but I spoke or had some kind of a communication with 1,000 people.

Andrew: How would you . . . ?

Peter: You just verify.

Andrew: You know, I wonder how you get a hold of them. I’ve tried to do that. I’ve been told, “Look, you get a customer, call them up right away. Get them on the phone and talk to them.” So I tried that. You know what? Nobody freaking picks up their phone anymore. I emailed to try to schedule a call. Nobody wants to schedule a call. There’s nothing in it for them. It’s kind of an awkward conversation. People don’t like using the phone, which is why chat’s taking off. How did you even get your people on the phone because I think that’s important if you’re going to build a product to talk to your people?

Peter: Yeah, so there’s a couple of things. So there’s three parts, so the first thing I had my stores, right, and I had this audience in this database of users that are our customers that I could reach out to. And I would ask them about their shopping experience and if they were, you know, ask them some questions that would ultimately let them to tell me that, “Yes, actually there is a certain point where I would rather talk to a friend than talking to you, Peter, because you’re obviously trying to sell me stuff and this XL t-shirt would tell me it looks so good on me just because it’s the last one that you have left,” and so this was a part of the where the conversations were going.

The second part was, there was this app called Frontback, I don’t know if you remember, but they were front back.

Andrew: Frontback, yeah, I do. That thing just went . . . I don’t know if it was viral but it was huge because you take a picture and it would give you your photo in a selfie and then what you’re looking at using the rear facing camera and people were spreading that around and had a nice little community. Okay, so how did that . . . how did Frontback influence you?

Peter: I was myself an influencer on Frontback and . . . you would call it an influencer. Now I had, not millions but tens of thousands of followers there and I’ve had close relationship to a lot of them. So I would just invite them to give me feedback on my idea that I had and I had a lot of them who actually would . . . were willing to have a conversation with me and this just led to the next.

So when we had the first 100 users in Amsterdam for example, or the first 50 users in Rio de Janeiro, we just asked them to give . . . to introduce us to friends to actually talk to them because we always believed that if you want to build a social product and the community, you have to have those one-on-one conversations and do things that actually don’t scale because you need to understand what they really want and need in a product.

Andrew: And so what did you learn by talking to these users of your app?

Peter:So first, we learned that, yes, there is a need for asking for quick feedback. Secondly, we learned that there is a little bit of a language barrier sometimes. So a thing that we did was translating dvel into 27 languages over the course of six months. So which ultimately also led us to decide to move to the U.S. because we felt that there’s a huge market with 300 million people who speak one language, which we thought would make it easier for us.

So a lot of small learnings in terms of how the product needs to look like, which colors to use, that we should eventually change the name from dvel to Swell, which is what one of the first things that we learned once we moved to California where we started interviewing people on the streets and the feedback was, you know, “You guys have a great product and I would use it, but how the fuck do I say that name?” So yeah.

Andrew: I get it. I’m looking at your Product Hunt launch. You guys have 305 uploads on Product Hunt, which is one of the most things you had, you seems like you launched a bunch of different products on Product Hunt . . .

Peter: Yeah, yeah, we did.

Andrew: Despite these flaws that you’re talking about, despite these challenges, I wouldn’t call them flaws, you’re in like an early version. How did you get so many people to vote it up? Were you recruiting friends? What was it?

Peter: So our strategy was always to communicate and to openly talk to people. And when you launch something on Product Hunt, what you want to do is ask people for feedback, which is ultimately what we did, what was actually our mission of helping people sharing opinions, which is asking people for feedback, right, to actually get an unbiased opinion. So we would actually proactively reach out to people that we thought would be interesting to give us feedback and from like famous product people like Hiten Shah for example, who we just chased on Twitter and we started reaching out to him and . . .

Andrew: To who?

Peter: To Hiten Shah.

Andrew: Oh, Hiten Shah. Yeah, he’s a good guy, because right, he’s an influencer in this space for sure.

Peter: Yes, and he was one of our users as well. And so we just started reaching out to people where we thought that they might be interesting to give us actual feedback on the product. We didn’t care so much about uploads on Product Hunt, which is something that obviously happens or matters at some point as well, but more about actually reaching out and finding people to give us feedback on the product.

Andrew: All right, so one of the people on Product Hunt asked a great question, which is, how are you going to get anyone to even download this thing? What’s your plan? And you wrote a plan. I want to get to it in a moment and read it because some of the things just that you said don’t seem to make sense, and others, you didn’t describe and I want to know about them now that it’s been a little while. It’s been three years since that post. Then I want to know how you transitioned to chat and what worked for you in the chat world. First, I got to enlighten you about something, one of my sponsors. I bet that you don’t know anything about Fireside Conf. Am I right?

Peter: I don’t. No.

Andrew: Good. Here’s the thing about Fireside Conf. They said conferences are full of you sitting in a chair watching the kind of stuff that you could watch on freaking YouTube. What’s the point? And once people are done with that, what they end up doing is splitting off in their own little events, looking at their phones, doing their own little meetings and you can’t ever get to talk to anyone. So why freaking fly out to a conference? And they said, “We’re going to do something different.” One of the founders of Fireside Conf used to go to summer camp and he loved how at summer camp everyone became friends. Frankly, if you remember back to summer camp, in most cases, even the geeks who nobody liked ended up having friends at the end because you’re pushed into an environment where there is no escaping each other and you have these transformative experiences.

So he said, “I’m going to rent out my old summer camp grounds,” and he did. And he said, “I’m going to invite people to come in, but before they can come, they have to apply and I have to make sure that they’re the right people to have here. Meaning by right, maybe we’re being a little bit discriminatory, but we’re looking for entrepreneurs, people with tech experience, people who you would want to spend a whole weekend with.” And so he said, “You know, it’s going to be a bit of a pain in the butt, but we’re going to have a full application process for this event,” and so they did and I went to it and it was my favorite conference I’m going to say ever, but I’ll . . . I’m going to say ever for sure.

I freaking loved it and here’s why. First thing that happened when I got there, I said, “I’m an active person. I don’t like sitting around. I’d love to go and paddle a boat in this lake.” One of the founders says, “Hey, somebody get Andrew into the lake, he wants to go paddle.” And so a bunch of us just went in because I had this interest.

Same thing happened throughout the evening. We were all together at dinner. We were all together. I decided I want to be in a room with a bunch of people, we were all together in the room. We were all together fire . . . like campfires, altogether drinking whiskey, altogether talking. It was fan freaking-tastic. Anyone who’s listening to the sound of my voice, who wants to get to know other entrepreneurs, I ended up with good business from this, good business relationships from this and a fun experience.

If you want to get to know other entrepreneurs, I urge you to go check out firesideconf.com/mixergy. Because you come in from Mixergy, they’re going to make it easier for you to get into the event. There is no way to buy it right now. Frankly, you’re going to be a little disappointed if you want to buy. What I’m going to urge you to do is just apply. Once you apply, you’ll get to know a little bit more about it and see if it’s the right fit for you. I thought it was my favorite freaking conference ever.

Fuck it. I saw your domain name. I’m going to say it’s my favorite fucking conference ever. Make that the tagline of Fireside Conf. Go check them out. firesideconf.com/mixergy. I say that because I saw your old domain was Swelly, not swelly.ai, it was swelly.wtf.

Peter: It was.

Andrew: I’m not going to hold back with you. All right, so here is what I saw on Product Hunt for you. Somebody asked you a question, “What’s your marketing?” You said, “One of our marketing ideas is to place stickers in changing rooms of clothing stores.” That I’m guessing was not a huge marketing campaign, right?

Peter: It was not a scalable model. It worked . . .

Andrew: It did?

Peter: . . . and also it didn’t worked . . . well, it didn’t work in the changing room but outside. What’s in the changing room, obviously people had some, which I obviously found out now is have some sort of stance for privacy that they would not necessarily want to have their cameras out there. But once you leave it and you know, that you go out there and you want to see on a bigger mirror, you want to see how you look like in this outfit, then that’s the right point to actually approach people.

Andrew: So guerrilla style. You just slapped your stickers on all those places.

Peter: Not guerilla style. We were trying it with partner stores and that was the thing that made it hard to scale. So we thought we’ll end up partnering with big corporate department stores, which to date we didn’t do but let’s see how this goes in the future. I’m still a confident that it would work and it would give a big uplift for [crosstalk 00:24:17]

Andrew: What do you give the partner store? You give the partner store like exposure in your app or in your chatbot?

Peter: So it’s free exposure. Just think this though. So you go into a sneaker store, you see sneakers that you like, you try them on, you snap photos and you shared them with the Swelly community. What happens is within seconds you get some feedback from the community, which means for department store, you make a quicker decision to actually end up buying the sneakers and not leaving the store without buying. And secondly, the partners will get free exposure because you’re actually sharing it with other people who then say, “I like this better,” or “I like that better,” which is some sort of a purchase intent.

Andrew: All right, this does make sense. It does make sense. Okay, I see what you’re thinking. I could see how it’d take a lot of legwork, which you probably didn’t have the time for at that stage in your business. Let me ask you about the next answer, the next part of your answer. This is from like three years ago, I’m digging up old stuff. But you said, “In addition, we have unconventional, can’t say yet, unconventional formats for upcoming social platforms including Meerkat, Bean,” Bean shut down, “Yik Yak,” Yik Yak shut down. So all these things where were big with generation Z, as you said. What was your plan? What were you going to do with them?

Peter: So the plan was really to ask questions within their communities and linking back to Swelly when people wanted to answer, which was something that honestly didn’t really work that well because it’s . . . it was actually high checking a community that was not that stable at this point so none of those networks really took off. They only had a little bit of a hype. So it was also a strategy that was worth trying but didn’t really work very well.

Andrew: All right. Now that I see your thinking and it makes sense, it’s kind of like how a Formspring was kind of built on Twitter in that you would ask a question of your friends and the way you would help promote it was by tweeting it out. And because Twitter was a growing platform at the time and this type of thing was accepted, people would see your tweet asking a question, they click over to Formspring, they’d answer and then after they answered, Formspring would say, “Don’t you want to ask your own question?” And then you know, and then they’d have that whole virality.

Peter: Exactly. That was a part of the viral. What we learned doing that though is that influencer marketing works really well for us and if people think about influencer marketing, they will think about either it doesn’t work or that it’s crazy expensive because Campbell [SP] channel charges $100,000 for picture Instagram, right?

What we learned though is really one . . . also one of the reasons why we ended up moving to LA is that micro-influencers or smaller influencers between 5 and 50K followers work really well for us because they actually could see the benefit of our product, meaning that if they ask a question to the Swelly community and also to their own audience about what should I talk about in my next video? Should have talked about a cooking recipe or about my favorite food. If I’m a food influencer, right? And then my community could actually vote on that and I will get the results back and I would actually get to know my own community, my own audience better and with no extra effort.

So we pitched on influencers to use it and give them the details so we basically gave them the insight into their own community for free, at the same time, they gave us reach and they were pulling in a lot of users into our community.

Andrew: Right. That makes sense. Were you paying those influencers or just or what? What was in it for them for trying this?

Peter:So I can tell you that to date, we never spent more than $5,000 a month on marketing. So we did pay some influencers a little bit of money for certain things but you could do your own math and figure out that it’s not been a lot.

Andrew: Okay. All right. Now, you’re starting to learn from people and you’re starting to see another thing, which is that the app is not the way to go.

Peter: Correct.

Andrew: How did you know that?

Peter:Well, so we rebranded from dvel to Swell after moving to Los Angeles. Within a few months, we did a rebranding, we launched Swell app at South by Southwest in 2016 and 6 months in, we had about 100,000 users downloading the app and we thought 6 months of 100,000 users, it doesn’t sound like no users at all or like no growth, but at the same time it didn’t get us excited. We thought there was something more to that.

Then when Facebook started or it was actually Telegram that started with chatbots and then Facebook also opened the platform, we thought, “Hey, this might make sense,” because we always said we want to be wherever the user is and we don’t want to force another product to a user to download to in order to give a friend feedback. We wanted again to be wherever the user is and make it as easy as possible to answer question. So therefore a bot makes sense.

I want to tell you a secret though that I usually don’t share because it’s kind of embarrassing for me. When Telegram started with chatbots, my CTO, Phil, came to me and said, “Hey Peter, you know, the app is not growing the way we wanted. We should actually start building chatbots,” and I said, “No.” I said, “No way. This is going to work.” I said, you know, “We have those two images super nicely placed within an app screen and you have this full screen, two bullets and it’s very visual, very image based, no way this is going to work within text.” So I told him no, and months later, eventually, I changed my mind.

Andrew: You know what? I could see it. I’m looking at the second version of Swell. That’s the one that links to swell.wtf. And it looks nice. It looks really nice. It’s like you said, two clean, beautiful pictures, the word “or” in a circle in the center of it. And all I have to do to get my friend feedback on it or an influencer who I’m following feedback is just tap the one that I like.

Peter: Exactly.

Andrew: How did you know that people did not want to download an app to give their friends feedback and that it wasn’t about improving the app downloading process and the messaging? That was a big change. How did you know? What gave you that direction?

Peter: Well, we didn’t know really. We were just experimenting with a lot of things and we always had up sharing function through WhatsApp and through publicly through Facebook. We realized that social Facebook, Twitter, etc., people were very open and were sharing everything on social. I’m having pizza right now. I would share it on Facebook, right? But this is not what’s happening anymore.

What’s happening right now is we are . . . conversations become more private and I want to . . . I leverage my friends’ opinions much, much more than I would leverage a stranger’s opinion and that’s . . . those are the two things that we learned already by our sharing pictures that we had implemented within the Swell app. And initially we . . . my CTO would convinced me to start building a chatbot because he was saying that this is a great way to find new users into our app because it’s actually free distribution. Right?

So we will have this chatbot, Swelly integrated within Kik, which was the first bot that we launched. And we thought, “Hey, if Swelly is on Kik and people can answer questions but not ask their own questions, then they would have to download an app for that.”

Andrew: I think a lot of people today are skeptical about chatbots still. And I could understand how you said, “Listen, this is not the platform. It’s just another place for us to spread the word. It’s just like putting our sticker on a mirror at a clothing store. This is a way to get people to see that we exist.”

The logo, people really like the logo. How did you come up with a logo of a whale? What’s the connection to Swelly?

Peter: So Swelly is the whale which when we did the rebranding from dvel to Swell, I figured we’re in Venice Beach now, right? So we relocated from Vienna, Austria to Venice Beach, California. Also, we sorted our audience is very young and predominantly female at the time. So we wanted to have something cute, something young, something with more bright colors. And my idea was two things. So we wanted to have a cute animal, that was the one thing that I had in mind as a logo.

And the second thing I had in mind was we wanted actually to own an emoji. I also was thinking like if an emoji, you know, if you could think about my company, our company, and whenever you see a certain emoji, that will be the most amazing thing. And then we thought, okay, the heart emoji, or like a thumbs up emoji, those are too obvious. We’re never going to own a heart emoji or a thumbs up emoji.

So we were looking into animals and emojis and figured out that actually the whale is this huge animal, it lives very long, it’s wise, we thought it would be like a very wise big animal, so we thought that that’s a good way of putting it. And then we took the whale emoji and changed the water that would splash out of the whale’s hat and replaced it with a heart and that’s what we ended up doing.

Andrew: So you tattooed it on your wrist and you just pointed it for anyone who’s listening to say, “Look, I am committed to this and this emoji from now on is going to be associated with my brand and now we’re going to use this to spread the word and get other people to understand us.” And I could see that people were reacting positively to it. Now you went from what does this name mean and how do I pronounce it to, “Hey, that’s a cool whale, which I wouldn’t have expected.” That’s such a hard place to get a tattoo. I’ve never had a tattoo but just for some reason, the inside of my wrist is just so sensitive. Was that painful?

Peter: It is. It was my first tattoo as well. And we had about . . . No, we had 100 users within the Swell app when I got the tattoo, so that was . . .

Andrew: A hundred.

Peter: About 100, yeah.

Andrew: Yeah, the only other company that I think that owns an emoji is Snapchat, right? They own a ghost emoji. Anytime you want to say Snapchat, you just use the ghost emoji and people connect it with them.

Peter: Right.

Andrew: All right, so you’re all in on this thing. You again go back to Product Hunt. You again go back to the world and you launch it. And one thing that I noticed was, and this was at this point like two years ago, people didn’t even know what a chatbot was. For some reason, even though they didn’t even have to download and install anything, you link them directly to the chat where they could experience it. There was one person, at least here who said, “What exactly does this do? What is a chatbot?” That was a big thing, wasn’t it?

Peter: Totally. It took us six months, about six months to understand and learn that we shouldn’t really use the word chatbot, we call it messenger experience now and we call it . . . first, actually we called it a lightweight app that sits on top of . . .

Andrew: You call it a what?

Peter: A lightweight app.

Andrew: A lightweight app, okay

Peter: So a lightweight version of an app was the first thing we ended up calling it after the chatbot. And now we call it the messenger experience because it just makes Messenger or another messaging app better for you and your experience this. Swelly as your decision-making pal or it’s your little whale friend that can help you make that decision. And I think that’s also why people like talking and communicating with Swelly is because it has this persona behind it. It’s not just a bot that is a robot that instead stops talking to you, which is kind of scary. Or it’s also not pretending to be a super smart AI, which causes a lot of problems when you can’t really manage your users’ expectations but it’s actually a cute little whale that does one thing. It does one thing really, really well, which is helping people decide, giving you feedback from a community really quickly.

Andrew: I went into the app. It basically anyone who wants to try, can try it at, tell me if I’ve got this wrong, m.me/swell.bot.

Peter: Yes, that’s . . .

Andrew: Or at swelly.ai.

Peter: Exactly. Swelly.ai works as well.

Andrew: All right. And so I went in and I did it and I said, “Let me vote,” because I don’t want to do anything more than that. I want to get a sense of what it’s like and here’s one of the things that I got to vote on. This person wanted to know, should she get the big iPhone or the small iPhone. Seventy two percent said, “Get the big iPhone.” Another person said, “Should I get the black iPhone or the gray iPhone?” Let me vote on that. I’m going to vote on the gray because it’s a nicer looking one and immediately when I hit the vote on the gray, I get to see the 69% of people agree with me, 31 said no, and then I get another question from another dude who wants to know, should he get the Nikon camera or the Canon camera and I could just keep voting all day.

Peter: You can.

Andrew: And that’s the way it works, right? For anyone who doesn’t know.

Peter: Funny enough, there is . . . so one person spent 17 hours voting on Swelly, I still wonder how this person did it. I never managed to get hold of him, but it was a real person.

Andrew: Seventeen hours?

Peter: Yeah. I don’t know why.

Andrew: I guess he had a lot of time to kill, probably watching something on Netflix just hitting, hitting mindlessly.

Peter:Yeah.

Andrew: You know what? I tried the new Oculus Go VR headset, it’s $200, I bought one, I wanted to see what it’s like and watching videos in there is beautiful because the videos are in big screen. It feels like you’re in a gorgeous room outside the windows of this gorgeous room is snowcap mountains, the whole thing. The big problem is beautiful as it looks, the big problem is I can’t do something mindless while watching a video, so I’m just sitting there watching the video. I can’t do that. What I would want to do is Swelly voting or click through mindlessly on something and so I think that we’re in a world where people can’t just sit still and they need something to do and I could see this person sitting for 17 hours.

Peter: So you’re saying we should expand into Oculus as well.

Andrew: I think Oculus should have . . . I think there are few things that Oculus is missing. One thing that they’re missing is the social component. It’s too lonely. You’re sitting there watching a video by yourself. There’s no one to say, “Hey, did you see that scene?” And the second thing I think they should definitely do is have a second thing you can do while you’re doing the main thing. So if you’re watching a video, even if it’s 3D, give me like a phone, a thing that I could see or a little window that I could do something while I’m watching the video. I can’t just sit there and watch it. It doesn’t work.

Peter: Yes. Share an opinion.

Andrew: Okay. So I’m watching again the evolution of your business. It’s dvel on Product Hunt, then it becomes Swell, which is the software. Then I see the next submission is for Swell Bot and then as you said, the bot goes away and now you’re saying Swell for Kik, then it just becomes Swell 3.0 and so on.

Let me come back and ask you in a moment why Kik first and how it went on Kik, and then find out what worked for you to promote your chatbot. Because if people don’t know what a chatbot is, how do you get them to sign up? And then what happened when F8? You got a lot of attention. That’s the Facebook event.

But first, I’ve got to talk about a company called Toptal. I’m going to tell you and everyone else that I’m not going to do a long ad for them, but if you need to hire a great developer, the best place that I’ve found to hire them, and I’ve hired developers a lot and I’ve worked with people who have hired a lot of developers and my audiences, hire developers, my interviewees have hired developers, it’s one of the biggest . . .

Actually, here’s the pain of entrepreneurship, coming up with a great idea. That’s one of the big things, getting revenue, getting product market fit, and other one getting revenue, getting profit. Once you have all your act together, finding talent. Hiring is one of the hardest things, if not the hardest thing. So if you’re out there and you’re listening to the sound of my voice, hiring is tough for you, I urge you to go check out Toptal.

As soon as you go to the Toptal website that I’m about to give you, there’s a green button, you press that and then you get connected to a matcher. A matcher will listen to you, talk about your problems with hiring, your vision for your hiring, how you work, like are you guys all on Slack? Are you all on Asana? What’s the work situation? What languages do you program in? What’s the vision for the person or the team that you’re hiring and then they’ll match you with someone or a couple of people and if you like, you could hire them and get started often within a couple of days. Here’s the URL that many people who I’ve interviewed have gone to, it’s top as in top of your head, tal as in talent, toptal.com/mixergy, toptal.com/mixergy.

When you go there, you’re going to get 80 hours of Toptal developer credit. When you pay for your first 80 hours and that’s an addition to a no risk trial period of up to 2 weeks. Really, look at that page. You’re going to love the model on that page and you’re also going to love that they have this 100% satisfied guarantee right on their homepage. Read it, get a sense of it on toptal.com/mixergy, toptal.com/mixergy. Right, Kik, why Kik?

Peter: So for the exact same reason that you asked me the second question, like how would we get people to adopt to something that they have no idea about? And Kik had two things. They had a very young audience, teenagers and young adults, also a very big female audience so teenage girls on Kik exploring new stuff. We already knew that our biggest categories were beauty and fashion at that time. So we thought for them to give a fun and fast experience on voting on trends within beauty and fashion. This is certainly a thing that they would be interested in and that it would spread faster than on Messenger where you have a big about a much broader audience. So you could have a 14 year old kid but also a 70 year old who might not necessarily care about it.

So we thought that there was just a much better match between the potential audience and what we do. And then also the ability to spread because Kik had a very, very good early version of a bot shop, a way to discover bots and that’s also something that we really liked and the Kik team was always very helpful and great to work with.

Andrew: Yeah, Kik had so many head starts. They were one of the first chat apps that was working cross platform. They were one of the first bot accepting platforms. The problem with them is that they didn’t really expand beyond that youth market, right?

Peter: Well I think so, yeah. The main market is still the youth market. I find it interesting what they did now with cypto though as well, with launching Kin.

Andrew: Again, they were first . . . I think they were first. They beat Telegram with crypto coins, right?

Peter: They did. They did. Yeah, they launched $100 million ICO, which is pretty awesome.

Andrew: A hundred million dollar ICO. Yeah, they’re fantastic company. I hope they do well, but it stinks that they innovate and then somebody else comes in, they innovate and somebody else comes in and it’s like they’re the R&D lab for the chat space in the world. All right, so you got on there. How did the userbase react?

Peter: So within the first month, we had 100,000 users, organically, within Kik?

Andrew: So organic means that . . . First of all, Kik promoted you a little bit, didn’t they?

Peter: Kik started promoting us after about two weeks on the platform, yes.

Andrew: They started getting people to sign up for this.

Peter: Exactly. But they started promoting us because they obviously liked the fit to their brand, but also they saw that people would actually use it, like their young audience would like Swelly and interact with it. And you know, the product itself is intrinsically viral, which means that if you, Andrew, have a question and you want your friends to answer, you take photos, you share it within the Kik bot and you will select your friends to answer those questions. Which is also something that . . .

Andrew: Sorry, go ahead. Yes, I got all excited about that, yes.

Peter: It brought new users to Swelly and Kik saw that there was something, right? There was a great brand and great fit and it sort of went . . . it had the Swell component as well and it was a good fit.

Andrew: Yeah. That you guys still do very well. If I see a poll that I like and I want to show to someone else because it’s outrageous, I could share it by hitting the share button and you guys use it really well because first of all, I think nobody, hardly anyone uses it in their chatbots, right? There is the feature in Messenger chat where when you have something like an image or a link to a site, you can have a share button underneath it and encourage people who see it, to share it with their friends. And if someone presses that share button, all the friends that they have on their network are listed and all they have to do is select the friends that they want to get it, hit submit and go.

That’s a really nice viral hook and you guys were good with that from the beginning, where I add something and I’m on feedback and you encouraged me . . . am I right? Right in the beginning to share that thing, that poll that I created with my friends and then my friends were brought into the bot.

Peter: Exactly, and that was accepted as missing part of our whole concept. If you think about the app, because if you would done this with an app and you have five friends who you would want to answer for it, let’s say you want to create a new company logo, you want your five design friends or experts in design to answer, and if they don’t have the app and they’re not going to download it, then you have no answer. And I think that was the missing link, why it works so well within the chat.

Andrew: Wow, yeah, things really took off. You told our producer 1,000 users within the first week and getting promoted at this point is fairly easy. I had this bot that I just created for the Mixergy audience, just like to experiment. I called it Mixergy bot. I don’t even keep it up. I just wanted to try it. Freaking Facebook was looking for bots to promote. They promoted me. I had no idea they promoted me because there was nothing on there.

All I saw was a bunch of people sign up, so I started messaging them individually saying, “Who told you about this? How’d you find out? How do you know me?” Many of them did not respond. I had to translate to their language because I could see that they spoke French or something else and then I started to understand by talking to them, Facebook promoted it. They were curious what a chatbot was. They were willing to experiment. They understood English well enough to take in my information but not well enough to talk to the founder about the bot in his native language. And so I get it. I like that kind of hype. I see how that worked for you.

You told our producer, “Look, well, despite all this, one of our big challenges is managing expectations. People see that we’re doing well, that this is growing fast and they start to run away with the idea. What’s the hype cycle that people create for you?

Peter: You’re saying that like what is the challenge with [crosstalk 00:47:16] or . . . ?

Andrew: Yeah, you told our producer, “Look, there’s hype in that.” A lot of venture capitalists, for example, were super excited about you. Maybe we should take this step first before talking about that. When Facebook said, “We’re going to allow bots on our platform, on Messenger the chat app,” you guys were one of the first, weren’t you to create a bot?

Peter: We were one of amongst the first, yeah. Not in the first month but a few months later, yeah.

Andrew: Okay. And then that created a bunch of headlines around you. I think I saw there was a headline that said apps are dead, chatbots are you going to replace apps. That’s basically the thrust of the coverage at the time, right?

Peter: Yeah, yeah, yeah. Everybody was talking about that.

Andrew: So then, why is that a bad thing for you?

Peter: It was not necessarily a bad thing, it was . . . the problem for us back then was actually comparing apps to bots so much and that . . . and chat was a completely different thing that an app is so it’s never going to replace apps for certain use cases, right? And also a chatbot, if you think about a social community and the product that wherever you would go to get quick feedback, you don’t want to use this product for two hours a day, right? You want to use it for 5 minutes, 10 minutes to help your friends out, and then that’s it. Or you want to go there if you had your own question and you want quick feedback and you want the chatbot to be done within a minute out, otherwise you could actually download an app because you have that long experienced within that.

So I think managing the expectation on the VC and investors market back then when it came to a retention and engagement and what that would actually mean, what it means if somebody is online twice a week on Swelly and not every single day, right? It’s just the nature of the platform that you would use Swelly when you actually need somebody’s feedback.

Andrew: Okay, so the hype is that people are expecting it to be like an app and it clearly is not. People are not going to use a chatbot as often as they’re going to use an app. And I do think that in some places, apps are going to be replaced with chatbots. Like your use case is better with a bot than it is with an app. But I think that you’re right, a lot of bot makers, we’re taking this narrative way to or they were talking about it as if it’s happening now and it’s not going to happen for a long time,

Peter: Yeah, you’re right. And also it makes you think about back then I would check my phone and I would think which apps could be replaced, right, which is a good way of thinking and it’s instinct. Hundreds of thousands or even millions of developers have the same thought. So they were trying to replace things that actually are much better in a UI than in a conversational interface.

Andrew: All right. F8 is Facebook’s big conference for developers, 2017, F8 conference, you guys were featured, as a result of that, venture capitalists said what?

Peter: Everybody wants to talk to us.

Andrew: And so did you take any of the money from the VCs?

Peter: We didn’t take any VC money. We . . .

Andrew: You did not?

Peter: No.

Andrew: Why not?

Peter: We decided to go with an angel round because we thought that our product was at a stage where we had a lot of things to learn yet and we were just very early on in that space and we thought that angels . . . we were lucky to get a bunch of really awesome angel investors that were supportive and also we had to move quickly and the VC process at that time was taking a long time.

Andrew: I don’t know your investors. I see there is . . . who Startup 300 for example?

Peter: So at the Austria Business Angel Network from our hometown.

Andrew: How much money did you raise?

Peter: We raised about $1.5 million to date.

Andrew: Oh, okay. Wow. All right. That’s a pretty sizable angel round. I get the sense that you regret that you didn’t listen to those VCs and take their money while it was available.

Peter: Well, I think I’m not regretting that we didn’t take the money, but it would have been another good option to do that. Yeah, we could have raised $10 million, probably but I think . . .

Andrew: Should you have?

Peter: Well we could. I’m saying we could have. You know, I always . . . I’m an entrepreneur. I started my first business 12 years ago. I just turned 30 and I always had a problem, personal problem with a taking a lot of money in where I couldn’t see yet how to return it and I don’t like to spend out of people’s money without the business model and I think we’re getting to a point right now where it gets more interesting on a revenue perspective.

Andrew: So you’re thinking your business model is going to be charge businesses to reach this audience of people who are willing to give feedback.

Peter: Yep.

Andrew: Got it. And so what do you charge for that?

Peter: Businesses can sign up at business.swelly.ai, they can get a free account, then asked their own questions, same as our community can do within the bot. When they do so to want to get more insights out of them. Just 70 percent voted for the first product and 30% voted for a second thought, but also want to know what geographic and demographic data and just know and understand more about who actually voted and that where my product would actually sell best. That’s where an insights package comes in that they can subscribe to. But then also we have a second product that is just a reach, which is basically a very simple to what Instagram or Facebook does with sponsored posts where you say, “I want to reach a thousand, 10,000 people, go,” and I just pay as I go.

Andrew: And you will send those messages to the Swelly subscribers?

Peter: Yes, but we don’t spam users, so we don’t just send it all this broadcast messages but replace it after people actually start initially started a vote session.

Andrew: Started what? Sorry.

Peter: A voting session within Swelly. So you open up Swelly, Andrew, and you start voting in the tech category. Let’s say you vote on an iPhone and then a question by Huawei pops up and comparing two smartphones and they want your feedback on which color is would be best for the American market.

Andrew: That makes sense.

Peter: You just keep voting because you’re interested in that category and you’re interested in voting on phone designs and at some point, yeah, the brand question pops up.

Andrew:All right. So you’ve got me thinking about Huawei. I’m also selecting which color I would want. Does Huawei get to come back to people who voted for a color that they ended up creating and say, “Hey, you voted for this is now available.”

Peter: That’s an excellent idea and something that we are thinking about. We don’t do it yet, but I think that could be an interesting model.

Andrew: And the demographic data that you get for businesses who use business.swelly.ai, does that come from Facebook because they give you some data or is that you guys asking and saving that data?

Peter: We asking about every type of data that we explained to them, why we need it and why we use it and how we use it. And then we store it so we’d give it to . . . We don’t give use that data to brands but rather show users some content from brands that they’re interested in and help basically use the data for targeting. So let’s say like Red Bull is a client of ours and if they want to understand which social media posts they would put up on Instagram, rather than really thinking about it and make a gut based decision, they can put it up on Swelly and within a few hours to have a large enough sample size so that they can make an educated decision that is data driven.

Andrew: What’s heroes.ai?

Peter: Heroes is a side project that we did last year, an influencer marketing bot platform, which we had to build any way. It’s because of the functionality that we use within Swelly and it’s currently on hold because we saw that the Swelly is doing really well and the business side is doing really well and we had to focus.

Andrew: But you were testing a bunch of things like waves.ai was one of the things you were testing.

Peter: We were testing a lot of things. Yeah.

Andrew: It’s not like out of left field. You’re saying, “Here’s what we do, here’s a little part of it. What if we productize that? Here’s another little part. Let’s productize that and see what works.”

Peter: Exactly, exactly. [crosstalk 00:56:00]

Andrew: So I think Heroes is pretty interesting. It was going to be for someone like me who doesn’t want to create a whole chatbot but does want to reach his fans. I tell my fans to subscribe, but they subscribed to the heroes.ai bot, right?

Peter: Yeah, totally.

Andrew: And then I get to reach just to people who subscribed to the heroes.ai bot through my links and send them messages and say things like, “I’ve got a new interview. Go click this to see it,” or “I’ve got a question. Click this to ask.”

Peter: You know what, Andrew, that’s right. I think if anybody listening is interested in that concept and you want to go with it and proceed it. I’m happy to give you, give you, even give you the domain and some insights and help you get started. I think it should be done, but we’re not the ones doing it because we fully focused on Swelly.

Andrew: I agree. I kind of liked that idea also. One of the things that I like about it is I really don’t think . . . I think there’s some people just don’t need a full-on chatbot. That if there was, they didn’t have to create a new Facebook page, link it up to a chatbot, like all that stuff that goes into it is just too much work for people. All they want to do is have people subscribe and send messages and that’s what you’re doing with heroes.ai.

Peter: Yeah. It’s a simple broadcasting tool initially planned for influencers, yes.

Andrew: I freaking love it. All right. Congratulations on the success with swelly.ai or swelly.wtf. When you’re talking to, what’s the audience? Like 21 year-olds basically. When you’re talking to that audience, it’s fun to be able to do things like that. That top level domain guys good. Just go try it out.

Here’s the thing that I want to leave everyone with. There is something happening in chat. It’s pretty underappreciated. If you’re listening to the sound of my voice and you’ve heard this interview all the way through, you recognize the value of it. Go try Swelly. Get a sense of what’s there. Try business.swelly.ai. See what’s possible and start creating your own chatbots. I create mine. If anyone wants to go check it out, they should go check it out at botacademy.com. That’s botacademy.com.

I’m kind of married to the name bot even though I understand that it’s not the right word going forward in the future, but I think it’s very descriptive right now, so go check out botacademy.com. Also, the two sponsors that I mentioned are the company that will help you hire your next phenomenal developer toptal.com/mixergy and finally go checkout fireside comp. If you are accepted, I think you’re going to love it and frankly, if you are accepted, check it out with them and see if you . . . let them convince you. But go apply, Fireside Conf as in conference, firesideconf.com/mixergy. Is it kind of awkward to sit here and listen to me do all those ads at the end, Peter?

Peter: It is.

Andrew: A little bit.

Peter: I’m going to check it out. [inaudible 00:58:42]

Andrew: Cool. All right. Thanks. Bye, everyone.


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