Andrew: Hey there, freedom fighters. I’m Andrew Warner. I’m the founder of Mixergy. It is home of the ambitious upstart, as you probably know by now. I’ve probably said this, almost 1,000 times. But I haven’t said this, I haven’t introduced you to today’s guest yet. And she’s about to tell you the story of how she went from not even knowing how to use Twitter, to [laughs] ending up working with a co-founder, who changed her life.
Teri Wilson is the co-founder of Exceptional Cloud Services, a company that was acquired by Rackspace, about two years after its launch. Exceptional offers a deep portfolio of developer focused tools, including Exceptional.io for error tracking, and web applications, Airbrake.io for collecting and aggregating errors, generated by other applications. And Redis To Go, for easy Redis Instance Management. All these things, Teri probably wouldn’t have understood, when she first got connected with this company. But she did, and you will, by the end of this interview, after you hear her story.
It is all, by the way, sponsored by Scott Edward Walker of Walker Corporate Law. I’ll tell you later on, why he is the lawyer to talk to, if you’re an entrepreneur. First, I’ve got to welcome you, Teri. Thanks for doing this interview.
Teri: Andrew, thank you very much. It’s an honor to be on.
Andrew: You actually . . . we had a conversation, just a few blocks here, from my office. And I said, “Teri, you have such a great story. Why don’t you do Mixergy?” And “Why don’t you talk more publicly about yourself?” And do you remember what you said?
Teri: I’m a background [laughs] person. My pleasure comes from executing, and getting things done. And I wouldn’t consider myself shy, but I want to get things done. And being interviewed is not always the best way [laughs] to do that. But you did talk me into it.
Andrew: I’m glad I did. And after I talked you into it, someone on my team said, “Andrew, I see Teri Wilson’s coming on. I’ve done research. I know, Andrew, you always tell us to scrutinize the guest, because some people pretend that they have a background they don’t. To go Google then. And I went, and I Googled her, and I don’t see much. Doesn’t come across as the co-founder.” But you are the co-founder, right?
Teri: I am the co-founder. I was there before we started. I was there when we incorporated. And it’s a matter of a PR choice, that we made as a company, for our CEO Jonathan Siegel, who’s been a serial entrepreneur, to really take that PR stance versus Ben Arent, Stuart Chaney, and I, who are a little bit more novice.
Andrew: Yep. And not to take anything away from him. He is the leader, right? He is . . .
Teri: Correct.
Andrew: He is the guy that, because you got to know him, your life was changed.
Teri: Yes. [laughs]
Andrew: Do you remember the day when you guys sold?
Teri: Yes, yep.
Andrew: Tell me about that.
Teri: [laughs]
Andrew: I see a big smile. That sounds . . .
Teri: I do.
Andrew: . . . like a fun day.
Teri: I had to do almost all the due diligence, and all that work. So the weeks leading up, there was very little sleep. And of course, followed by another evening of not much sleep [laughs] after we closed.
Andrew: How about a celebration? Did you get a chance to do that?
Teri: Yeah, we had opened an office in Vegas, during the process. And so we hopped on the plane. And what happens in Vegas has to stay in Vegas.
Andrew: Really? Congratulations.
Teri: Thanks.
Andrew: And the reason that you didn’t know about this stuff, is not because you were . . . you just weren’t part of the space. You actually worked for the Peace Corp. Why did . . .
Teri: Volunteered at the Peace Corp, yeah.
Andrew: Right, right. I always say, “worked for.”
Teri: [laughs]
Andrew: I assume that, you did work, but you worked as a volunteer. Why the Peace Corp?
Teri: The Peace Corp incorporates the travel and learning about new cultures, that invigorates me. My degree’s in architecture. And I worked in that for a couple of years.
Andrew: Mm-hmm.
Teri: And that’s very much so designing a physical space around you. Found it moved a little slower than I would’ve preferred. And so instead of influencing the area around people, I wanted to impact people. And Peace Corp is an amazing way, that you have a daily impact on people. But more so, in the end, yourself, than anyone else.
Andrew: Give me an example. Tell me, maybe about the family that you stayed with.
Teri: So the family who I ate dinner with, every night, [??] . . .
Andrew: I see. Mm-hmm.
Teri: . . . didn’t speak a word of English. And in my first couple months there, I learned a language called Zarma. It’s not written. It’s not read. And most people in Niger, where I did Peace Corp in West Africa, are illiterate. And yet, this woman cooked dinner for me every night. She had a daughter, who she kept care of. Me not having kids, I don’t think I could even [laughs] take care of a kid here, much less, in Niger, where it is very much so survival. And so I ate with her every night, and I realized . . . I was on my cell phone. And she couldn’t read or write.
And one day, I wrote her daughter’s name in the sand, because you spend all day outside, in a shelter. And so I wrote it down. And she didn’t recognize her own daughter’s name. And that’s something, I realized, just a different world that I was in, than the world I’d grown up in. My brother came to visit. And I think he said it best, “It’s like travelling back in time. It’s the closest thing we’re ever going to get to a time machine.”
Andrew: And so how did you change, because you came into contact with her?
Teri: I think my outlook on life changed. When you first arrive, the pace of life is too slow. And as an American, trying to get things done, you have to adapt. I chose to go into that community, and be part of it. And so I realized I needed to adapt, and be part of that. So I slowed down, and I appreciated life. The circle of life, as corny as it sounds [laughs] is right in your face. Everything, from the peanuts being grown in front of you, it’s a woman’s crop. And so they shell them, roast them, and pound them for peanut oil. To the infant mortality rate in Niger is quite high. And so you just really can’t take life for granted.
Andrew: I think you told Jeremy Weiss, our producer, that one in five infants wouldn’t survive, where you were.
Teri: Yeah, according to the UN, Niger’s one of the least developed countries in the world. But I do wonder, after spending time there, and the amount of time Nigerians spend with their families, and that they laugh, I don’t know if we have it right. They enjoy life, in their own way. And in a way, ignorance is bliss. I couldn’t be happy living there forever, because I know what’s out there, in the rest [laughs] of the world. Most of them don’t. Most of the people from my village, I don’t want to make a vast generalization.
Andrew: What about this, Teri? So if I were starting out my career, and I heard someone talk about that, I’d say, “That’s great, but I’m not going to do it. Because if I spend a year in the Peace Corp, then, yeah, I’ll get an appreciation for life. But if I work as an intern for Rackspace for a year or for an entrepreneur for a year, I’ll absorb so much more practical knowledge, that I’ll go further in life. And then maybe I’ll make more money, and I’ll be able to donate it to someone who could do some good.” But is it the best use of your time?
Teri: For me . . .
Andrew: And am I a jerk for even asking that question?
Teri: You’re not a jerk. You’re honest. And I think volunteers quit, and they need to ask that question beforehand, as well. For me, it was the best thing to do. I’m not saying I didn’t think about quitting. There were days, where it would be a lot easier to have running water. And that’s another thing, the bounce between life versus a career. I think the life lessons and focus on family and friends and relationships that I learned there versus my grades and money, can wrap you up. And Peace Corp allows you to step away from that, and look at the basics of life.
Andrew: Can somebody please clip that, where she says I’m not a jerk? Please put it up on the website. I think that the rest of the community needs to hear it. I do get a lot of emails from people who say, “You ask jerky questions.”
Teri: [laughs]
Andrew: But I think they do need to be asked. So then how do you go from there to working with a startup?
Teri: I wanted to live in San Francisco. I went to Berkeley, so I was familiar with the Bay Area. And I knew the Bay Area would be the softest landing, just with the open-mindness that the community has.
Andrew: Mm-hmm.
Teri: And so I ended up connecting on simplyhired.com. A two line ad, with no company name, no personal name, looking for someone to help start a team in San Francisco. And that was from our CEO Jonathan Siegel. And it spiraled [laughs] all out to that, to tell you the truth.
Andrew: What do you think Jonathan saw in you?
Teri: I think he liked the fact that I was a (?) He has an Irish wife so he was actually living in Dublin at the time and so our first communication was also via Skype. He liked the, kind of, the traveling side and the very first interview he mentioned Twitter and I didn’t know what it was. So first thing I do is I go and I find out what it is and take on the initiative myself and we just very much so connected on that point of being self-directed, getting some influence from him but me being able to build on top of that. (?)
Andrew: Give me another example of how he saw that so early on.
Teri: Um, trying to think. I remember our first interview and one of the tasks was he was actually purchasing a building in San Francisco and with my architectural background he asked me to do some research and I was able to find a city website that had all the information there of historical past ownership past prices for sale and share that and kind of gather a portfolio to be able to determine whether the evaluation was correct even though there was no formal training on my behalf.
Andrew: And you were able to go and do that?
Teri: Mm-hmm.
Andrew: How?
Teri: Google. I mean, knowing that the city had public records because I had worked in architecture firms in the past and department process all of that I knew the city would be a great resource, which I think most lay people I would say don’t realize how many records are held, and the city of San Francisco has an amazing planning website with scanned in drawings and lots of historical information.
Andrew: So, how do you go into- You were eventually the COO of the company but when you go in and you do research like this how do you go in and keep from being Johnathan’s assistant his secretary almost and keep him thinking of you as the kind of person who could run his company?
Teri: He- We worked together because we were so aligned in what the next step was that even though he was the driver it would be a two hour sacred meeting on Monday morning where we would analyze and review what needed to happen for the week and then I was able to move through the whole week without any more direction.
Andrew: I see.
Teri: I was able to make the right decisions and move forward and learn something new every day. There was no option there except for to figure out the next step. Andrew: The building that you helped buy, was that for your company to work out of? This company that eventually you guys created.
Teri: Correct.
Andrew: I see. All right. So you go in and he buys the building.
Teri: Mm-hmm.
Andrew: And he hires you obviously, at what point do you guys start talking about shares in the business?
Teri: We worked together for about six months prior to even finding exceptional and so at that time part of the advantage of being in co- working spaces is you talk to other co-founders, you-
Andrew: I see you turned the, or- Yeah, was it you or he or together you turned this space into a co-working space?
Teri: The building was basically (?) and that was our first six months working together and we turned it into a co-working space largely with our own contacts. The building was a 1920’s leather factory and gorgeous mahogany floors and the space was great. So, we had people over for meetings and literally they would look around and be I want to be in here how do I get in?
Andrew: I see.
Teri: And so we would just keep buying Ikea desks until they were full. It was a fabulous time. It was just hanging out. I didn’t know anyone in San Francisco so I didn’t mind only working. All I did was work and that’s how I built this start up community was just to always be present.
Andrew: I see and if you have all these entrepreneurs renting desks from you renting space from you then you get to really meet them. You get to work with them. I see. So that helped you guys. The part that also is interesting to me about your story is you didn’t know when you started working with Johnathan exactly what the business was going to be you were thinking about it, you were exploring, you were analyzing ideas. How did you go about finding this business that was so good that Rackspace wanted to buy it? What was your process?
Teri: We were working on something that was growing very fast, and in the way of the building. And reaching communities out there, however the startup side wasn’t going as fast. And what we knew is between Jonathon, Ben and Stewart and myself, we had a great team to grow a technical business, but we needed that business.
Andrew: It just needed to be something technical.
Teri: It needed to be something technical.
Andrew: And how do you define technical?
Teri: I guess things that only developers know about.
Andrew: Gotcha. Okay. So developing a web app, or developing an iPhone app is a technical job, but it’s not technical enough. You wanted something that I, as an average user, wouldn’t need, but a developer, maybe someone running my site, would gravitate towards.
Teri: Yeah.
Andrew: Got it. Why that?
Teri: Because that’s not the sexiest of markets. When I tell friends who aren’t developers, or family, I work for AirBrake, and AirBrake has 40,000 customers including Groupon, most people would maybe recognize it if it were a consumer product where the masses know about it. It’s not as attractive to other people to run that business and that’s what we knew we could do.
Andrew: I see. So you reduce competition by working on an unsexy business that’s geared toward technical people. Alright, but reduce competition doesn’t necessarily make for a great idea, right? I can go out there and create, what’s the old college story? I can create a spittoon business, but no one is really doing chewing tobacco anymore and they’re not spitting it into spittoons, and so just because there’s no competition there doesn’t mean there’s a lot of room for growth. How did you know that there was also enough exciting growth in this space?
Teri: Exceptional, which is what we ended up, the product we acquired from Contrast Consultancy, already had 10,000 customers and it was a 4 year old product. So we knew they were growing month over month. And I’m someone so analytic that it’s show me the numbers and there’s nothing that speaks louder than the numbers. If you continue to pay and more people go to sign up, we knew that there was space to grow that.
Andrew: I see. And it was important for you that they do pay?
Teri: Correct.
Andrew: Got it. I see. So it’s technical . . .
Teri: We’re not a non-profit business.
Andrew: Sorry?
Teri: We’re not in the non-business, out of the volunteer of Peace Corps.
Andrew: You already did the Peace Corps. This is not Peace Corps 2.0 for you. Alright, I get that. So you want it technical because it was unsexy and there’s no competition. You want it also to be business related so that your customers would also be willing to, number three, pay. Is that right?
Teri: Correct.
Andrew: Am I missing any other criteria? Oh, you also wanted to know that there was a track record, right? So that there were already customers. Why did you want a track record in an existing business as opposed to saying, we’re very smart people, we can figure this out, we’ll launch something from scratch.
Teri: So that largely came from Jonathon. He’s created a lot of things from ground up and been able to grow it quite a lot, but he also found, with say, Rice Signature, which is his, it took him three years before anyone told him I think this will work. And he said no, I know how to run businesses. I know how to do it. I want a base where I can accelerate those existing customers.
Andrew: Okay, and that was another skill that you guys had. It was adding the business back to a business. Making a startup into a real business.
Teri: Correct.
Andrew: Okay. I think I cut you off earlier when you were starting to answer my question about at what point did you start talking about shares, so I should bring it back up. At what point did you say, hey, you know what, I answered your two line ad but I think this is more than just a job where I get paid a salary, it’s a real partnership?
Teri: It was about two months into the Storic building. I ended up getting some equity in there, so that was our first negotiation contract and then by the time we were working with Exceptional and we knew that was being formed, I was doing all the formation, I was the one on the phone with the lawyers and so we knew what the situation, or we discussed what value each of us individually were going to add and we’re very transparent internally about that. We all knew how much everyone had, we also thought about every time we brought more people on, how much each of us would be willing to be watered down.
And then obviously being in the Valley, you always have to potentially take on the conversation about funding, and what happens to you then. So we had decided prior to the formation.
Andrew: Okay. How much of a share of the business did you have?
Teri: I’m not going to share that. [laughs]
Andrew: You did tell me though, in private. And I was surprised that you trusted me enough, to not blab about it. But do you talk about it in private, with other people?
Teri: No.
Andrew: No. Okay.
Teri: The four of us are very close in all of that. And we do know. I think this is part of Peace Corp, is I wouldn’t say my life has changed. I always want to be happy, with how I’m living now or post lottery. And so there’s more comfort. And it’s exciting to think about what you can do for the next thing. But money is not why I did it. I can tell you that. I was learning something new, I was being challenged. I was pushed. I was uncomfortable, most of the time. In most meetings, I sat there, at the beginning, not knowing what was going on. That’s why I did it.
Andrew: Because you were so uncomfortable, and you knew that you could learn it, and grow through it.
Teri: Mm-hmm.
Andrew: While most people say, “I’m uncomfortable. I got to get out of here. I’m uncomfortable. I have to really shrink.” The other interesting thing to me about this conversation, is how much of a boss you are, in this conversation. You’re very clear. You’re very comfortable. You’re willing to own your story, in a way that it takes me some time to get other entrepreneurs comfortable. Meanwhile though, last time I saw you was at this event that you and Sam Parr put together, right? What was it called? Bootstrap Live, right?
Teri: Correct.
Andrew: I wanted to thank you at the end of the event, for inviting me to host it. And you were gone. I wanted you to speak at the event or to say something, and you weren’t around. Why don’t you speak up more in situations like that, when you clearly are able to express yourself, and you have the background to own that limelight?
Teri: Well, thank you very much. I appreciate the compliment. As I said at the beginning, I’m an executor. That’s what drives me. That’s what satisfies me, at the end of the day. Bringing people to an event, having a successful event, in this case, the Bootstrap Live, that’s what I go to sleep thinking, “Good job. Good job.” Going up there, and talking to people, and telling them my story, I want to hear their story. I learn more, when I listen to other people. And I make things happen more so than me going up there, and blabbing away.
Andrew: Okay. All right. I get it. I don’t agree with it, but I get it.
Teri: [laughs]
Andrew: I think it works well together. I understand that you don’t want to just do it, because I think you’re coming from a really good position. Frankly, as a person who has, I’d say easily hundreds of people, who say, “I want to do an interview, because I did something.” And then my team goes and researches, and they didn’t do jack. I really like this attitude.
As someone who lives here now, in San Francisco, who sees people talk about accomplishments that they clearly don’t have. Sometimes, people will say . . . oh, here’s a big showy thing that people will say, “I know a guy who was in a Tesla car.” And then they’ll talk about that. Like that’s an accomplishment for them, for knowing this person who has a Tesla car.
So I get it. And I think it’s coming from a good place. But I’d like your story to be told more. And that’s one of the reasons why I do Mixergy. I think that there’s stories out there that aren’t told, because the people who can tell them, are too busy running companies. Too busy doing . . . it’s my job to get them out here. Exceptional. You buy it. I’ve talked to other entrepreneurs, who bought companies. And afterwards, they say, “This wasn’t what I bargained for. It’s different than I expected.” It’s always different, right? What, for you, is different about Exceptional?
Teri: We, on day one, had 10,000 [laughs] customers, who wanted our attention. And it was priced, at the time, for $2 a month. And we were just, like, “You call us. You Tweeted us, and it’s no longer valuable for us.”
Andrew: Oh, okay. So, if they’re only paying you two bucks a month, and they email you with customer support issues, your response to it, if it takes more than a second, is going to cost you more than two bucks, that they’re paying for the month?
Teri: Correct.
Andrew: Got it. And by the way, just to remind the audience, Exceptional does error tracking for web applications, right? So if a web application is out there, and I, as a user, experience some kind of bug, Exceptional will catch it, and let the people behind it know.
Teri: Yeah, it’s all those 404s and 505s. And now, with how deployment happens, and you basically turn your users into your testers, you need to know how their tests are going and move forward to be able to evaluate the importance of that bug to be resolved.
Andrew: Okay, and I know you guys are big on customer service. One of the first things you did on the site was that you added an eight hundred number because you wanted to put a human touch you wanted your customers to be able to talk to you. You can do that at two bucks a month. How do you start increasing the prices on people?
Teri: Hopefully, no Exceptional customers are listening, you grandfather some in and then you bump it, in all honesty, in monthly re-occurring it’s on someone’s credit card or PayPal, they don’t always notice.
Andrew: Interesting. So can you actually go and start bumping it without getting them to okay the increase.
Teri: Yea, I think in your terms of service, you have legal review that but they quick through and I think you can do it notification in a newsletter with other activity.
Andrew: This is a real issue and you’re not the only ones who faced it. Jeremy Hitchcock from Dime had a similar situation where basically people who should have been paying like twitter who wanted the service to continue weren’t paying and he needed to figure out a way to go back in and for him what was the answer was in some cases you shame twitter by saying hey look guys you are only paying a couple of bucks a year and I can’t afford to run this and companies don’t have a problem with paying more than two bucks.
Teri: We had drinks with Groupon and they went from fifteen dollars a month to a thousand like that. One think that we found is we had to comb the email addresses because it was at such a low price developers were just putting it on their own credit card and doing it through reimbursement which means the enterprise customer didn’t even realize potential liabilities that their developer had opened themselves up to whereas we were able to fold that and do you know B2B business and that’s where we were able to grow it.
Andrew: Wait, what do you mean? How can you identify if an employee is suddenly putting your service on his personal credit card and maybe remembering to expense it, maybe just saying it’s you know it’s two bucks who cares? How can you identify it so you can tie it back to the company?
Teri: They usually use their company email address as their user name and through intercom or in app messaging system every morning we got an email with all the new users. And at the beginning it was combing through it was searching we were kind of doing queries between larger companies and trying to find out who was in our data base already and going to meet them and that’s really what we had to do was put faces to the names of the customers.
Andrew: Okay. And then how can you still tell if they are using their own personal card as opposed to using a company card that’s in their name?
Teri: A company card in their name isn’t going to be any different to us it’s more so about a contract and bringing them up because they do get to a point where most people aren’t personally willing to up front a thousand dollars a month. At a price point a lot lower double digits they are so that kind of weeds out the company reimbursement versus direct pay.
Andrew: You are saying that if it’s below a certain amount it’s being paid probably by the person individually if it’s above it’s definitely by the company almost definitely by the company. Gotcha. When you say you have drinks with Groupon, it’s just having a conversation with someone at Groupon over a drink saying hey you know what you guys are paying too little we’re raising the prices what do you say, they say what a hundred thousand dollars you go no it’s just a thousand bucks and they say forget it, take it.
Teri: Yeah. Like you mentioned, basically shaming them into it explaining to them that we were a boot strapped company, we were out there wanting to improve the service we go and talk and say what do you guys want and what would make this tool more useful to you well for us to do that is that it costs money and you need to be paying something is that more equivalent for your size and your needs.
Andrew: Mark Suster, the venture capitalist said that when we was an entrepreneur, he had to do that and at the time he said I remember feeling like of course you have to do it if you are struggling and that’s where his company of course you have to do it. And I get it if you are struggling but when your company is not struggling the way yours is it’s harder because you are not coming from a position of I have to do this or we die you are coming from the position of I have to do this to grow and so was there any hesitation at that point because you were- What were you going to say?
Teri: We were struggling.
Andrew: You were. So, even though you acquired this business, you knew where the numbers were, you felt like we were struggling with it.
Teri: For us, I mean, we were re-investing all income directly into the company, the co-founders we weren’t taking, I mean, we were taking what we needed to live.
Andrew: Mm-hmm.
Teri: In a very minimalistic way in San Francisco. Ben and Stuart lived in the building. Yes, Johnathan bought it. Yes we knew there was flexibility there, but that wasn’t the goal. That wasn’t . . . We had aligned ourselves with a certain budget. We knew we only had this much to work with. We had already accumulated some debt in theory by the acquisition so we needed to grow to maintain in the black.
Andrew: What do you mean by debt? What kind of debt did you take on when you acquired the business?
Teri: So we ended up doing different negotiations with every company because we acquired a couple beyond but the . . . It was a little bit of owner-financing on their behalf so we needed that revenue to continue and grow to be able to maintain the budget that I had put together.
Andrew: Sorry, Teri, this never happens to Charlie Rose, but I’ve got a box coming in at the office. You can just leave it on there. Thank you. Thanks. I think I need to have . . . I guess this is more of an office than a studio, but maybe I need to have some kind of on-air sign right there so that they know not to bring things in. By the way you were . . .
Teri: Yeah, in the meeting room (?) a big sign. Hopefully, no one is going to come in.
Andrew: Are we okay to continue to go, or do you think someone has another meeting in that office?
Teri: Oh, I’m good. It’s the evening here.
Andrew: Oh, right. Yeah so you’re doing this now from London.
Teri: Yes.
Andrew: You continue to grow and you continue to travel. All right let’s continue on with our story then. You had people sleeping in the office, which is pretty cool. You had gone back to customers and said we need to increase the prices. Within months- How long did it take you to start making a profit on Exceptional with all these different cost reductions and all the increases in revenue?
Teri: So, we always, we stayed in the black with how we structured it and within a month we also bought because that was one of the first things we did. We bought Exceptional we were obviously evaluating the whole space Exceptional we realized that we could support it, we could do it, we grow it and it gave us the comfort within a month to buy Airbrake from Thoughtbot[SP].
Andrew: What do you mean? How did you know that you were on track within a month? What’s one indicator that said yes Exceptional is on track? We are so good now we can go on and take on another business.
Teri: Revenue for me.
Andrew: I see so since you were able to increase revenue from the same customers then you said we can do this.
Teri: Correct.
Andrew: Got it. Okay. By the way, what company charges only two bucks a month to developers at companies.
Teri: Developers who (?) it for fun.
Andrew: I see.
Teri: They made it for themselves. Developers are amazing but they . . . They don’t do it because they want to make money they do it because they want to build something which is a great passion but that’s not what we are as a business.
Andrew: See that’s another reason why I’d like you to speak out more because more people need to know to charge more than two bucks. If someone is making a decision to pay for something online going from two bucks to even twenty dollars it’s not a big difference. You know. The big difference is going from nothing to paying something. Once you’ve decided to pay something two, twenty bucks doesn’t make a huge difference.
Teri: Well one thing that we had is we maintained the free tier. Particularly in the developer community you want your side projects that maybe aren’t making any money to be able to have that access. So you have to dig deep to find it but it’s there. So we figures if you aren’t paying you’re doing it for a business that you find worth making that effort for and so that . . .
Andrew: How do you know what to charge and what to give free? David Handmyer Hansen [SP] talked about this that he actually doesn’t I don’t think he likes the free option at all but there is some line of what you give away for free and what you don’t. How did you guys decide where that should be?
Teri: We figured if it was a side project it’s one user. You don’t need multiple logins. You’re also not getting enough traffic where we would limit the number of errors that we would report to you and that’s kind of where we grew that, we played with it. In a way we had the perfect AB test because we had an Exceptional [??]. And so we couldn’t stake on one and figure it out on the other.
Andrew: I see. Okay. So Exceptional is what would tell Groupon, for example, that the user hit a 404 page and then Groupon would get the email and they could handle it. Airbrake does what?
Teri: The exact same thing.
Andrew: For desktop applications? No.
Teri: They both do the exact same thing. They’re both Ruby-based support, multiple different languages but the same service. Airbrake had about 30,000 customers when we acquired it. So it was a larger base compared to Exceptional’s 10,000, and there was more variety in Airbrake. Airbrake is more of a bust. If you see Exceptional now, it’s basically the exact same landing pages at launch. And so really we’re always able to go back and forth.
Andrew: And so I didn’t realize that they were so similar. Okay. Vegas, why did you guys decide to relocate to Las Vegas?
Teri: So we were in San Francisco loving it, but we realized what we needed to do to differentiate ourselves from the competitors, there are a number of air tracking services. During our time some of them received funding and it’s a little scary to be competing with that. And so we wanted to offer the best support out there, and we weren’t able to find the talent at the right price point in San Francisco. We evaluated local areas, San Jose, Sacramento, and Las Vegas.
Las Vegas is an hour’s flight away. We were out in the suburbs. So you could really bid on any talent USA, and we met people there. We had so many applicants, and we met people who were so excited to be part of this tech scene. They saw this as their chance at the lotto in a way and their chance to grow. And so they were asking us versus people looking at us and going, “Well, how much have you raised” Because that’s what people talk about in the valley. And so we relocated. There’s also tax advantages to Nevada.
Andrew: But only if you have a profit.
Teri: Yes.
Andrew: Okay. All right. It makes sense. And so you guys were profitable. You were continuing to grow. I do think I want to correct something that I’m understanding the differences between the two businesses. It seems like Groupon is a customer of Airbrake, not of Exceptional.
Teri: Yes.
Andrew: Exceptional has store and v-stock twits. And let me see who else people would know. Think Vitamin is a past interviewee. Less Accounting also a past interviewee, right?
Teri: Correct.
Andrew: I didn’t realize that they were so similar that the products were so similar. All right. Even though I kind of imagined that you guys had tons of money, you were operating a Gorilla marketing campaign. Can you give me an example of the kind of Gorilla marketing you guys did?
Teri: So we wanted to take care of the whole developer. Every piece of swag has already been made, and we found two for the last couple of holidays that haven’t been. We made some underwear. That was a couple of years ago, and we realized no one sees it. It was the best swag room [??] out there to share our brand. So recently we actually did slippers and sent them to offices because who doesn’t like to kick off their shoes at the office and wear around Airbrake slippers.
So we take care of the whole developer. We often would do things that have to do because you say “you throw an air” is the term. So we centered a number of our swag products to throwing. A couple, I think it was 2012 summer, we gave away Frisbees and we had Task Rabbit deliver them throughout San Francisco. And so we said Frisbees instead of throw airs. It was a little quirky, bit it gets people’s attention.
Andrew: It looks like some of it is still going on. I’m looking at ads that are still being run, according to WhatRunsWhere.com. You guys are still giving away socks. Deploy Airbrake, get socks. That’s one of the little banner ads you guys are running.
Teri: Yep.
Andrew: You also did, and I didn’t see this. I didn’t know you guys were doing Airbrake cribs. What’s that?
Teri: So because we were short on resources, we didn’t have any marketing people for the first year and a half. One of the easiest things we found, was to take pictures, and put them on a blog. So anytime we went for personal work or travel, we would go to a customer’s office, and interview them, take pictures and share it. It got to highlight some of our customers. They always like getting their name out. And pretty pictures is a great way [laughs] to fill a blog, when you don’t have a lot of time.
Andrew: I see Kickstarter’s Crib on your blog, right now. Boy, the entrance into their office. I don’t know if they’re still in this office, I don’t think so, but it looks God awful. It’s just [laughs] . . .
Teri: [laughs]
Andrew: . . . horrible. It looks very much like The Tenderloin, I guess. But it’s not. It’s in East Village. All right. And so all this is, is just you guys taking pictures of people in their offices, when you’re going there anyway?
Teri: Yep.
Andrew: All right. How effective was that?
Teri: It was very effective. The customers would direct their traffic there, because it was good for them.
Andrew: Mm-hmm.
Teri: And it was just able to fill up and give more of a social media presence.
Andrew: How was blogging, in general, for you guys?
Teri: It was always a bit of a challenge. At our weekly meeting, it would look around and, “Who’s going to blog?” Because my biggest challenge is always keeping the wheels on the bus. And keeping everyone aligned, and in the right direction. And we knew blogging was important, to reach our customers. But when you feel like everything’s on fire over here, and you’re worried about getting money from this company, it doesn’t seem to prioritize. So we definitely struggled with that. Which is why we came up with creative, simple solutions.
Andrew: Like?
Teri: Like, the Airbrake Cribs.
Andrew: Oh, I see. Okay. All right. You also printed out, I’m looking here, at the notes from the pre-interview. You printed out Tweets on toilet paper.
Teri: [laughs]
Andrew: Why?
Teri: So things go wrong. Things will always go wrong. And we wanted to remember, even when it goes wrong, eventually it goes down. And it will flush away the toilet, which, works with our overall analogy. I often say, error tracking is a bit like the sewer. It’s something necessary, in the Internet age.
And we, with the frequent deployments, you always have to know what’s going on. And we need to aggregate all of those, and bring it together, for the developers. And so it goes along with our sewer analogy. And reminds us what our customers can think of us. And we’ve all had trolls out there. Sometimes, you just [laughs] have to let some relief out.
Andrew: So what was the most effective for getting new customers?
Teri: It was honestly the in-person events, which is not the best return on investment. That takes quite a lot, but we hosted Tech Trivia for a couple months, in San Francisco. And that was actually one of the ways that we end up on the radar of potential acquirers. We had people come and they really liked the feel and the community that we were able to bring out.
When I say, “10% month over month growth,” which is what we were performing, that is on the revenue side. So it was finding those gems in our customer service. You could never have them all, but we had a vast majority of all the developers, that we would ever want. And it was a matter of serving those customers better.
Andrew: I see. So was getting the customers that you already had, that when you acquired the business, came along with the business. Getting them to upgrade, and to pay more, that was the most effective?
Teri: Correct.
Andrew: I see. And for bringing in new customers, I imagine that the events weren’t most effective. They helped you network, and they helped get your name out there. And they helped introduce you to acquirers, but that wasn’t what brought in the biggest number of new customers, was it?
Teri: No, you are right. I guess, I was thinking more on the revenue side. Our Google Ads actually worked really well. We have a very talented designer, particularly if you’re looking at the sock ad or we have Ghostbusters ad, where we have these guys shooting down errors. So it’s something a little funny. I think actually our most successful ad to date, has been a magnifying glass, that you actually have to move to find the bug.
Andrew: Within the ad?
Teri: Yes.
Andrew: Gotcha. And I do see that you do paid search. Looks like you guys buy, JavaScript is a keyword, Airbrake, IP Tracking, PHP, Bug List, profiling tools. I mentioned earlier, the ads, that was helpful for you too, right?
Teri: Correct.
Andrew: You buy ads on YouTube. Here’s another thing that seems to work well for you guys, you’re on Stack Overflow a lot.
Teri: Correct.
Andrew: Did you do anything? Is that you guys helping the community, to know that they could find their answers on Airbrake or is it the community just taking off on its own, and talking about you?
Teri: I think a lot of that is our community taking off. As far as I know, I actually don’t know of anyone maintaining that, in-house, per se.
Andrew: Okay. If someone wanted to do events like you did, Trivia Night, what goes into putting together Trivia Night?
Teri: This is a lot of connections. It was actually my roommate in San Francisco, [laughs] who was able to do it. But we came up with it, from an event that we had previously. So we ended up [??] with them, a really simple deal with the bars. And so it didn’t cost us much. And we were promoting it amongst our customers. And bars on Tuesday nights, are willing to just get people in the door.
Andrew: And so what did they give you in return, for bringing people in? Did they give you free beer?
Teri: No, well, the people had to pay for the beer, which is what the bars wanted.
Andrew: Right.
Teri: And then we didn’t have to pay for the event coordinator, basically.
Andrew: I see. You didn’t have to pay for some space. Which . . .
Teri: Correct.
Andrew: . . . isn’t that a surprise, that you have to still pay for space often?
Teri: Yeah. [laughs]
Andrew: I did a wine event, just for some friends. I said goodbye to the owner, who just seemed really happy to have us in there. Every one of my guests bought their wine. It was a great little event. And then on the way out, he goes, “Well, your assistant didn’t pay. How would you like to settle?” And I thought, “Wait, that’s not how it works. Is it?” It is how it works. I had no idea.
Teri: Yep.
Andrew: So I gave him a credit card, and I paid for the space, which is why now I have a house or . . . yeah, [???] how people live here.
Teri: [laughs]
Andrew: I have a place that’s big enough for me to host friends over there, so I don’t have to pay rent anymore on local spaces. I should do a quick sponsorship spot for my lawyer. But I will not. Instead, what I will do is I will ask you, Teri Wilson, you’ve dealt with lawyers as an entrepreneur.
Do you have any advice? And we’ll make that the spot for Scott Edward Walker. And I’ll sandwich what your advice is between saying, “Scott Edward Walker is the entrepreneur’s lawyer. Go to walkercorporatelaw.com if you need a startup lawyer.” Teri, do you have any advice for entrepreneurs, about how to pick a lawyer or work with a lawyer, etcetera?
Teri: With professional services, I always made sure to interview three to five. And I don’t want to say, “cheated the system,” but I would always ask them, in theory, what answers should be. And so I would always try to get as much free advice as possible. And I would put the people who I thought were the least likely to actually be the right fit, at the beginning. So that way, I can learn the terminology, and learn what made me sound sophisticated to the people. And so they took me serious because I had to learn how to do a P&L on Khan Academy. And if I went into an accountant, and said, “Hey CPA, we need help filing our taxes for our little startup.” They’re going to go, “Okay, well I’m going to show you out the door, because you don’t [laughs] have a real startup. What are you talking about?”
And so I always would interview multiple people, and just get little nuggets from every interview possible.
Andrew: I see. Wow. Khan Academy is how you learned how to create a Profit and Law Statement?
Teri: Yes. [laughs]
Andrew: Wow. All right. So I’ll say this to the audience, do not start by talking to Scott Edward Walker.
Teri: [laughs]
Andrew: If you’re going to use this technique, find a lawyer who’s not going to be a good fit for you. Maybe go talk to the big guys who you don’t want as your lawyers. Who you don’t want to take a big share of your business, which is the way they often like to operate. Talk to them, and then come back, once you’ve [laughs] learned the terminology, if you’re using Teri’s system, and talk to Scott Edward Walker. He will be, I believe, your lawyer. And frankly, be good to him.
Because if he’s not your lawyer, when you get acquired, there’s a good chance he’ll be lawyer of the company that acquires you or he’ll be the lawyer of the company that you want to acquire. So if you’re looking for a lawyer who will be there for you, throughout the life of your business, as you’re getting started, as you’re raising money, as you’re selling or acquiring, talk to Scott. His website is walkercorporatelaw.com. What was the hardest part, Teri, of doing all of this? Of sprinting to learn how to build a business? Of building this company, and putting it all together, in two years?
Teri: So for me, it was not being technical. I felt very helpless, whenever we had an outage, and I couldn’t actually go into the code base and do anything. I could communicate. And if anything’s ever going wrong, communicating to the customers that you’re actively taking care of it, and trying to resolve as quickly as possible, is effective, but it’s not the resolution. Luckily, having a developer base, they would understand if it was a AWS outage, what that meant, and how beyond our control that can be.
As a team, it was challenges of infrastructure back in. We acquired multiple different companies, that were all on different . . . [??] to Amazon. And we were trying to bring them all together, tried a couple different companies, before we found our home at Rackspace Infrastructure. And unfortunately, that sort of work isn’t as visible to users, as you would like it to be. So they’re thinking you’re sitting on your hands, because you haven’t done a new UI. And you’re, like, “No, long term, what we’re working on, is going to make our site more sustainable and consistent. But it’s not visible at the beginning.”
Andrew: I get that. Why did you continue to acquire so many companies? Why not just build out the ones that you have?
Teri: So Redis To Go is a very opportunistic purchase.
Andrew: Mm-hmm.
Teri: We had about a 20% overlap, with our current customer base. But we thought “We’re looking to grow customers. We want to be able to offer more. And we can partner these together. It’s going to be the same users, in theory, for both the error tracking services and Redis To Go.” And so we already had a team assembled. And we went for it. Redis To Go actually tailed off a little bit, the first couple months. And that was scary. We thought, “Oh, we hit the peak. We evaluated at that. And then it didn’t work.” But it came back with a vengeance, and really moved forward, into space.
Andrew: Why? What happened?
Teri: I think there was a couple other competitors out there. Heroku moved us off Featured. And being the only Redis provider under Add-On. We’ve had multiple conversations with those guys. They took a massive part [laughs] of our revenue every month. And Redis To Go has pretty substantial infrastructure costs, as well. And it just came back and saved. We never figured out exactly what happened. But we were . . .
Andrew: But not being Featured . . .
Teri: . . . grateful.
Andrew: . . . had that kind of impact on you?
Teri: It could be. I hate to give Heroku that much [laughs] credit, though. But it was pretty critical.
Andrew: I see. Even to this day, Heroku is sending more traffic than, as far as I can tell, any other site, to redistogo.com.
Teri: Correct.
Andrew: Why did you guys decide to sell? Why not continue these acquisitions, continue growth, continue building?
Teri: So Redis To Go is actually key in that. We’re thinking about decoupling. We asked the same question to ourselves, as you did, “Why did we buy this? We added more work, in a different space.” So we were actually circulating Redis To Go, and seeing who out there would find a good home.
Andrew: Mm-hmm.
Teri: And Rackspace was one of the companies looking at that. And they came back, and basically said, “We want the whole thing.” And after talking to the team, we had just re-evaluated where we were going to be. I had made three different spreadsheets. One called, “Tightening the Belt,” one, “Status Quo,” and one, “Cash Money,” where I had secured a line of credit, and we were going to go for it. That was what we wanted to do. And it came at a point where it made sense for us. We were all excited about being part of a bigger company. As you mentioned, I’m actually in the London office now. For me to have an opportunity to live and work in another country is a huge advantage.
Andrew: I see. But I still don’t understand why you would sell it? Why? I get that you had different options, but you wouldn’t sell the business just because you had an opportunity to go to work in London. You weren’t struggling.
Teri: We weren’t struggling, but it was for Ben Arent and I. It was one of our first opportunities to cash in a little.
Andrew: I see.
Teri: That definitely plays . . . Everyone has their number in their head and we . . .
Andrew: What’s your personal number?
Teri: Correct.
Andrew: I see. How did your life change after you hit your personal number?
Teri: My lifestyle, I would say didn’t change a lot, but I’m generally quite frugal. I’ve gone on a bit more vacations, but we really didn’t have that much time to think about it. I mean, integration was immediate. We didn’t share. We’re only ten people when we were acquired so we’re still quite small, but in the whole four month due diligence process we didn’t share the news with our team outside of the four co-founders.
And so all of this due diligence was going on, and then we had to integrate and bring the whole team up to speed for both Rackspace’s business and make sure that the customers were well look after because that’s always a fear that are you going to get acquired and get shut down.
And we ended up rolling out a completely new UI on Airbrake, I think, four months after acquisition. So we didn’t really have any lag time. It was continuing full speed ahead.
Andrew: And as we talked about before, the startup companies that don’t want to acquire a team and see it all walk out the door, they’ve actually gotten smarter and smarter about keeping people around.
Teri: Yep.
Andrew: Can you say how long you need to be thee?
Teri: I’ll be at Rackspace for a couple of years, but I do enjoy working here so I want to grow the business as a whole and learn from a different perspective as to how to work and operate at this scale versus the smaller business that Exceptional Cloud Services was.
Andrew: All right. A quick thank you to someone in my audience who I didn’t get to thank when I recorded my thousandth interview. It sent me a note afterwards and said, “Andrew, I’ve learned so much” and I wanted to thank him but I didn’t get his email in time. Afterwards, Teri, I’d like to ask your advice for an entrepreneur who’s listening to this who says, “You know what? The idea of buying a company and growing it the way that Teri and his team did is appealing to me, much more so than starting from scratch, looking for a product fit, market, et cetera.”
If you have any advice for them, I think we should close it with that. First, the person I want to thank is J.B. Uy. J.B., I hope I’m pronouncing your name right. Uy, how do I pronounce that? NPR always says to people in their audience, please tell us how to pronounce your name so I can let it right. Maybe I should that. J.B., I do know how to pronounce your first name. J.B., thank you for being a Mixergy Premium member.
And when I asked you what you got out of being a Premium member, you said two things. First, here’s the quote, “I watch interview courses while walking on a treadmill in the morning so I’d be excited to do this and almost never miss a day.” So I’ve helped him stay fit that being a Mixergy Premium member.
I kept him excited about staying on the treadmill, and the other thing he said is, “After hearing interviews with real struggling founders who eventually found success, Mixergy helped me realize that building a business takes time and does not happen overnight like we see in the news.” And he’s absolutely right.
That’s one of my problems with a lot of the ways that the tech scene is reported on. Everyone seems to be an overnight success with a billion dollar business. And if you don’t have that you feel like a failure, and I like that entrepreneurs here feel comfortable talking about their struggles. If you want to hear more . . . If you like this interview and want more, I have over a thousand other interviews for you.
Go to MixergyPremium.com, sign up. You’ll get access to all of them. And as a follow up to this, there’s one interview that I especially recommend. Listen to Rob Walling [SP] who all he does . . . He’s a guy who’s bootstrapped. He doesn’t have tens of millions of dollars. Actually I don’t even know how much money he has, but he’s a smaller entrepreneur who decided, “I don’t want to build everything, I want to start acquiring companies. And so he talked about how he found the company so acquired, and how his heart stopped beating when he decided to pay up a few thousand bucks for a business, when he did to turn that business around, how he grew it and so on. It’s very similar to this interview with Teri.
So if you want to follow up, check out Rob Walling [SP]. He talked about that in his interview, and he did a course where he teaches how to roll out a business, how to roll out a new product and get customers excited about it. Rob Walling, in general, is a great entrepreneur to follow and study. But we have him several times on Mixergy teaching you. So go to MixergyPremium.com, sign up and learn from Rob Walling. I guarantee you’ll love it. And I guarantee you’ll be fit.
Can I say that, Teri? I guarantee you’ll be fit. I guarantee you’ll be handsome or beautiful just like J.B. and I guarantee that you’ll build an overnight success. Now I can’t promise any of that. How many times, Teri, do you see people who have courses online and they promise everything, and then if you look at the bottom in the disclosure part the disclosure aren’t bigger than the sales page.
The only thing bigger than the sales is the face of the guy who’s selling like these get rich quick overnight thing. His disclosures would say these are atypical results. No one actually gets rich with this product. I’m just kidding around. Send your money in anyway.
Teri: Well, I kind of feel like if you’re fool enough to fall for it . . .
Andrew: I see.
Teri: . . . it’s your own problem.
Andrew: I guess we all have to fall off a bike one time so that we don’t get hurt in traffic in the future to respect that you have to be smart about riding a bike. Sorry. So guys if you’re out there, don’t sign up for Mixergy Premium, look for the guy who is standing in front of the biggest Lamborghini out there, who’s offering you the most money overnight. Just throw a few hundred bucks.
Actually they charge thousands. Throw a few thousand bucks, try to get rich overnight, and then when you fail come back to Mixergy. We’ll take it very seriously here, and we’ll get you a much more sober approach to business.
That’s my sales pitch. Don’t spent money on me, go buy from someone else and you’ll get hurt a little. It’s no way to build a business, is it, Teri?
Teri: No, Andrew, you’re doing a great job.
Andrew: Thank you.
Teri: You have the faithful followers, and that’s really how people hear about it. Entrepreneurs listen, and they learn. So you come back.
Andrew: I know it. You know what? When I was starting out, Teri, there were a couple of things that made me feel like I wasn’t doing the right thing. I wasn’t taking the right approach. There are a few bloggers especially who are very combative, who would rip people apart, who would take on fights with people who are bigger. They get so much more attention, and I thought maybe that’s the right direction for me.
Maybe because I went to Dale Carnegie and I learned from Dale Carnegie “How To Win Friends And Influence People” I’ve ruined myself as a person, as a broadcaster in the blogosphere. And those guys have learned to shut up, and so I realized, all right, I was not wrong to avoid their approach.
That’s one thing that really made me feel like maybe I’m on the wrong track. The other is the guys who would offer to make people rich overnight, and then they would talk about how they were going to do it. And I thought, maybe you need to be more of a boasty, showy person. And I thought that’s just not me. And I stayed away from that and, yes, those guys would show me their finances. They showed me their revenues in private and, yes, they made a ton of money, but I don’t think that’s a good long-term approach.
I think that in the end people are going to discover that it doesn’t work and, yes, they’ll make money quickly, but the guys who sell these get rich schemes will eventually fail. I’m not in it to make money quickly. I’m not in it for a quick hit. I’m in it for a legacy. I was watching — this is the last thing about me, Teri, and then I’ve got to get back to you.
I was watching this documentary about Johnny Carson, and it starts off with Johnny Carson’s tapes, all his shows. And they’re put in some kind of secret underground vault in a salt mine or something to really preserve every one of them. And then the documentary starts to show what’s in every one of the tapes and it’s just some goofy comic falling on the floor. It’s Johnny Carson in a loin cloth, very funny stuff, but really worth preserving for all ages.
My goal here is to have something that is worth preserving for all ages. I would like 100 years from now an entrepreneur would be listening to your voice saying, “Yes, Teri is guiding me, the way that she worked things out. That is me. Yes, starting out by helping people and being in the Peace Corps is the right approach for me, and I’m going to learn from her. And that’s my mission here. All right, enough from me back to you and the audience.
If someone wants to build a company by acquiring, what advice do you have for them?
Teri: Do it. I think it’s not a very popular idea. People want to start it from the beginning. There’s challenges. Check out the competition. I would talk to everyone because you have to figure out which product you want to buy. And then if you end up not going with one of them, you always want to be friendly with the competition. So that is good. A lot of people, I think, would say, “No because I don’t have any money.” Everything is negotiable.
If you get a sense that they’re not passionate about it, you give them an opportunity to move to their next product and have a successful act. That’s it. You partner with them. You make sure your outcome is aligned for the good of all parties involved. I think it’s fun too. You end up with different problems and potentially harder problems to solve because you’re not familiar with, let’s say, the code base or the customers. But it is good problems, particularly when you have such a large customer base that you are able to acquire in our example.
Andrew: All right. There’s so many other questions I’d like to ask you, but we will leave it there and I hope you’ll come back here and do an interview with me. I am so excited that the audience has gotten to see your story, gotten to learn from you. I think that you’re one of the most interesting founders out there, and unfortunately you’re not getting enough exposure. I’m glad that I have the opportunity to do it here.
Thank you so much for doing this, Teri.
Teri: Thank you, Andrew. It’s been awesome.
Andrew: And let me say also this, Sam Parr, thank you for introducing us. All right. Bye.
