Andrew: Hey there Freedom Fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. I better get this mic really close. There we go.
How do you turn your problems into products that companies actually want to buy, are eager to buy? Todd Krizelman was in sales. When he did that, he was frustrated by how little he knew about the ad buys of the companies that he was trying to convince to buy advertising through him. That frustration led him to create MediaRadar, which helps companies get advertising insights and intelligence that empowers their sales professionals to spend more time selling.
Let me explain what that means. Imagine you’re working for ESPN Magazine and you want to pitch Nike on buying ads. Well, before you pitch them, using MediaRadar you can see how many ad buys Nike has had, what kind of ad buys, where they buy them, what those ads look like and so on. So, when you go to pitch to them on advertising in your magazine, you’re prepared to have a real conversation with all the background you need.
We’ll find out how he built it and we’ll do that thanks to LeadPages.net. LeadPages is a company that allows you to create these stunningly effective and beautiful pages that convert users from just hits on your site into email addresses so that you can follow up with your audience.
So, what I do on Mixergy is when someone comes in, I give them an opportunity to join my mailing list and the page that I use to give them that opportunity is a LeadPage page. If you want to see some of my recommended pages, go to Mixergy.com/LeadPages. I’ll tell you more about them later.
But first, I’ve got to welcome Todd. Hey, Todd.
Todd: Hey, how are you?
Andrew: Great. You know, before we get into MediaRadar, I remember when you were at theGlobe.com. I wouldn’t use the word jealous. But I used to watch you guys get insane press, insane success on the public markets. What was that like?
Todd: Oh my goodness. I think it was a mix of emotions. I think we were very fortunate to be growing the company at a time when the tide was high and rising. I think it was exciting. I think we had a lot of success. We had a great product. I think it was very difficult. It was so competitive. It felt like you were firefighting far more than you wanted to just to push back competitors. So, I think it was a mix. Those were amazing times to be part of, though, for sure.
Andrew: You guys were the first, you and your co-founder were among the first internet celebrities. You took theGlobe public. The stock rose faster, higher than any other, biggest percentage gain in the history of the market.
Todd: That’s right.
Andrew: You guys were worth millions of dollars.
Todd: These were frothy times back then.
Andrew: Really frothy. Were you on Oprah? I couldn’t find it online, but I could have sworn I saw you there.
Todd: I was never on Oprah. I’m glad I survived that cut.
Andrew: And then you told me before we started this conversation you built up MediaRadar on your kitchen table. Did you end up with any money at the end of theGlobe? The stock really rose up fast and then it went down pretty fast too. Did you end up with anything at the end of that?
Todd: Absolutely. I think I was really fortunate. We had built a really [inaudible 00:03:31] company. Definitely the stock went up and it did go down over a few years as the market for dot-com businesses in general collapsed.
Andrew: Yeah. How do I explain to people what theGlobe.com was? It was like this online community news site?
Todd: Yeah. I think that’s a good way of describing it. I think all of us who were part of that time think of it as today we would call it a predecessor, a precursor to social. So, at the time, we described things that were social, this sort of interconnectivity between different groups of people. We called it community back then. But it’s definitely the same kind of idea.
Andrew: So then how did you end up in advertising sales after theGlobe?
Todd: So, after I left theGlobe, I went and joined a big German conglomerate called Gruner + Jahr, which is actually a division of Bertelsmann. One of the things we did at the theGlobe when I was part of theGlobe is we actually ended up acquiring a whole bunch of magazines all around video games, around hints, cheats, this sort of thing. A, I thought it was amazing that there was so much business to be done in physical magazines. I realized that I didn’t know anything about it.
So, I went to this big German conglomerate because they’re one of the largest publishers around the world. I spent five years with them, a mix of time at their offices in Spain and then also in New York.
Andrew: But if you want to learn from them, why spend five years working for this giant conglomerate? That’s one of the reasons why I thought, “You know what? Maybe this guy was just sick of entrepreneurship. Maybe he ended up in debt or lost a lot of money and needed to get a job and this was the way to recover.” That’s not what was going on. Why then do it?
Todd: No. So, there were just a couple of reasons, but they were really straightforward. So, I actually grew up in Palo Alto. I grew up around the internet from the very beginning and built this dot-com business in the first wave. When I finished that, I very much felt like I didn’t have, first of all, I was young. We sold the company when I was 29. It was basically like, “I don’t know anything about the rest of the media landscape.” So, I talked to a couple of companies and I talked to Bertelsmann and I thought they were the most representative of my own personal interests. I wanted to work abroad and I really wanted to understand how the other media assets worked.
I think so many people, you’re starting your career, you see the excitement of the internet or mobile and I think you don’t know anything about TV and magazines and newspapers. Yes, these are assets that are being disintermediated and they’re obviously under pressure and distress, but on the other hand, they’re also enormous.
So, to me, I felt like before I wanted to do the next thing, I first needed to really get my own head in order about what all the media assets were. That was the real reason I went there, to really go learn the rest of the media puzzle.
Andrew: And I do remember too that they also got digital. I think they were an early investor in AOL.
Andrew: They were the ones that took the flier on Napster, weren’t they?
Todd: That’s exactly right.
Andrew: So, I see a mix of the old world, a mix of the new world and that’s what you were there to learn. What did you learn that you were able to carry forward? What did you learn that you carried forward now to this business?
Todd: I think there were a few things. Number one, as an entrepreneur, to me it is easier to come up with ideas when you are faced with problems. When I came up with theGlobe company, I was still in college. It was back in ’94. It wasn’t as much that I had identified a problem, I had identified a need that I thought something would be fun and we built that product. To me, it is much easier if you are in a business and you can observe all the problems that exist, then you can just decide can you come up with a solution.
So, I discovered about myself that I am a pragmatic person. I saw these problems and said, “Boy, I now have my next step.” It was really only when I went to Bertelsmann that I had the idea around MediaRadar.
Andrew: Can you describe the problem as you experienced it when you were at Bertelsmann?
Todd: Sure. Of course. So, you’re a sales rep. Let’s say you are a sales rep at ESPN. You’re trying to figure out how to sell ads to, you mentioned, Nike. So, before you’re going to go pitch Nike, for ESPN to be a great partner, you first need to know what Nike really cares about, which models of shoes are they marketing, which shoes are they marketing to which demographics, maybe there’s regional concentrations, maybe they like to be-we already know they like to be around athletic events. So, that makes it easier if we’re ESPN. But they also advertise in hundreds of other media outlets.
So, before I call from ESPN to say, “Hi, my name is Todd. I want to talk to you,” first I need to do some research. What I observed is the job of a sales rep is getting more difficult. Even when I first had the idea before there was Facebook, before there was social media really the way it is today, the job of being a sales person is getting more fragmented. If you work at ESPN, you need to know broadcast, social media, they have a magazine, they have many different cable outlets.
Andrew: So, what would you do? Would you go and look for ads? Would you start Googling to see where their ads were? Would you ask someone who used to work there? When you were doing this, and this was back in the mid-2000s, what did you do back then to figure this out?
Todd: So, there were two things. One, you would certainly use the internet to search. And then you would just use every trick you could come up with. You’d go through phone books looking for advertisers for certain clients. In our offices we’d have big conference rooms where you’d take an intern or a sales assistant and you’d say, “I want you to go through these 30 magazines and see what you find.” And then online you’d say, “Go to sports sites and just keep refreshing until you see something. Maybe you’ll catch one.”
Andrew: See if you can find a Nike ad and then tell me what’s the placement, what are they advertising next to and what do their ads look like and then you start to break down the demographics and so on.
Todd: That’s right.
Andrew: It was that manual?
Todd: It was very manual. That’s exactly right.
Andrew: Okay. So, you were doing this and then you had an idea to automate it, to make it easy so that not everyone has to bring in a bunch of interns into a conference room. You’re next step was you said you talked to industry insiders. Who did you go to talk to to run this idea past?
Todd: So, I was really interested in getting feedback from people I did not know. So, as an example, I didn’t go to industry friends because I thought they would, in their efforts to be supportive of me, be nice about it. So, I really just cold called people in the industry.
I set up about 45 one-on-one interviews over about six months. I would do them over lunch. I would do them especially on the weekend. I would invite them to the Marriott Marquee in New York on the eighth floor. It used to be sort of an abandoned space. I would do the interviews there. I would interview people at different levels.
So, I wanted to know, was the use case as I imagined it going to be good for senior executives? Was it good for sales neophytes who didn’t know much? Was it good for rank and file? And then I also tested it across different industry verticals like would someone from Reed Elsevier and a medical journal have the same needs as Vogue versus Yahoo versus The Wall Street Journal.
Andrew: How would you… well, first of all, before I get to that question, an abandoned space at the Marriott? What do you mean?
Todd: So, they’ve since renovated the space, but ten years ago, in the Marriott, someone from the Marriott will almost certainly call me, but they had an empty floor that looked like it had space, just had couches and chairs. Whenever I was passing through the hotel, I always noticed that this floor was completely empty. It was right around the check in area for those of you that have been there. It just seemed like a very cost-effective way to just sit down with another person and sit down and ask them some questions.
Andrew: And you bring in Starbucks coffee or something? You would. You’d just bring coffee and you’d have your meeting there.
Todd: There’s a Starbucks down in the lobby and we’d get some coffee and come upstairs.
Andrew: Okay. So, I’m wondering what kind of questions you would ask to test your theory and to learn more about which verticals would be appropriate and how they would use it. How do you tease that out of a potential customer?
Todd: So, the thing at the beginning I was most interested in was is there really a need. It’s tough because this is a case where there was no existing product that we were going to be competing against. As an entrepreneur, I think this is a mixed situation. Any time you introduce something that’s totally new, people don’t have a budget for it. They don’t have a mental model for it.
So, I had story boards. So, I had hired a designer. I had a co-founder in this company, Jesse Keller and he and I basically had the designer come up with these mock-ups of what the product would look like once it was built. To my side, I’m sort of showing. This was very effective. Basically it took something that was abstract to people and it anchored it in some sort of semi-reality and we could say, “What do you think of this design? If this is real and this was information about Gillette, is this something that you would like?”
Andrew: And do you remember any feedback that helped change the way you were thinking about this? I feel like you were already in the ad space long enough that you probably knew all the issues. Were you surprised by anything?
Todd: No, I was very surprised. I think it turned out I had the right idea, but I did not have the details correct at all, actually.
Andrew: What are some of the details you got wrong?
Todd: So, here’s an example. In a magazine, one of the things that really matters to an advertiser is where the ad shows up in the magazine. So, people will describe this as percent of book. So, what percent from the front of the magazine did their ad show? So, one of the things we will show for our print customers, for our magazine customers is we’ll say, “You know, if you’re going to go pitch Gillette or you’re going to go pitch Nike, you need to know they will not buy unless they are in the first 20% of the book.”
Andrew: I see.
Todd: So, that was a very specific example. Even though I knew it from my work experience, I didn’t know it was going to be that important in the product.
Andrew: I see. Just by talking to them and saying, “Here, this is the data I plan to give you,” you were able to hear, “No, we need this other piece of data you’re leaving out and it’s important for us.”
Andrew: I see. I also heard that you’d pay people $50 for an hour conversation. Why pay them money?
Todd: You know, I think all of us are motivated, these are people who I did not know at all. I’m asking for an hour of their time out of their busy day. Some people didn’t have to be paid, but most did. Actually, $50 looking back was a real bargain, I would say. To do one-on-one interviews with real executives is much more expensive, at least today.
Andrew: How would you reach them and persuade them to come and have this conversation with you?
Todd: It was very humbling, Andrew. It wasn’t like I called people and I said, “Thank goodness you called.” No. First of all, I identified them because you could, sales people, their names are available. You can go on LinkedIn or you can look at a masthead if it’s a newspaper or something. But I would call them and email them and I would say, “Take pity on me. I will give you up to $50.”
I was super honest with people. I said, “I’m starting a company. I’m from the industry. This is a tool that you can benefit from explicitly, be an early adopter, help influence the conversation.” People were very generous with their time. Actually, looking back I would say I’m amazed at the investment of time people gave.
Andrew: I guess if they’re sales people then they’re used to asking other people for things, then they might be a little more sympathetic to somebody asking them for a little bit of their time.
Todd: For sure it matters when you call them. If you call a sales person at the end of their quarter, they’re not going to return your call. If you call them in the middle of the summer, maybe it’s a little quieter. I definitely found that different times of year made it harder or easier.
Andrew: How many of these conversations would you say you had?
Todd: Over the years or when we started?
Andrew: I’d say in the beginning, before you actually started to code.
Todd: Almost 50.
Andrew: Over how long?
Todd: Over a year.
Andrew: All right. At any time, were you trying to sell them and say, “Look, this is really early, but if you pay up front, I’ll give you early access to this as you develop it,” or some way of validating by charging?
Todd: So, no, actually. It wasn’t that it never came up for discussion. So, this is a difference that I’ve observed on the B2B side versus the consumer side. On the consumer side, I find that it’s like iterate, iterate, iterate. There are always these beta testers and alpha testers who want in. But my observation in this business has been people want to use finished products.
Todd: They are judgmental. This is another thing. They’re not looking to be your beta tester. A company is not looking to be a beta tester. They want to buy an established product that they can vet and then say to their staff, “Go use this. We endorse it.”
So, I think we did not try, actually. We talked about it internally but we did not even try to sell it. We said we have to build the product out sufficiently so we could go to market and say, “Here it really is.” The good news to that is people then paid full price. The bad news is we did have to take a real leap of faith. We really didn’t know whether we had anything until we were out in the market with the product.
Andrew: How long did it take you to create the first version of the product?
Todd: The first version, about a year and three quarters. So, just shy of two years.
Andrew: I see. So, a year of conversations and then another year and three quarters of development before you sold?
Todd: No, sorry. I’m including that year.
Andrew: Got it.
Todd: So, we started developing maybe seven months into the interviews once we had an idea that we were on the right path.
Andrew: I see.
Todd: But it was slow. We’re anchored in data. In this case, for us to really share insights, we had to collect enough data. So, we were eager to actually build the product to collect data right away because we knew that if we didn’t have enough data, no one was going to buy.
Andrew: So, actually, before we get into how you collect the data, I heard from the pre-interviewer here at Mixergy that you guys decided you were going to focus on smaller magazine publishers. Of all the different kinds of companies that you could have focused on, why did you decide this is it? Its smaller magazines, not a certain kind of magazine like an athletic magazine or bigger magazines that have more money to spend. Why did you pick them?
Todd: So, having launched some earlier products, I’ve learned that it’s good to have some fodder.
Andrew: Some what?
Todd: Some fodder. I didn’t want to go into an account like Vogue and if it went wrong, maybe I never win Vogue again and I don’t even get to go back into Conde Nast, which owns Vogue. So, I wanted to have 20 pitches with people who I thought were smaller publishers who didn’t know one another, that were not part of the New York City ecosystem.
I also thought smaller publishers would be, it was a guess at the time. It turned out to be right, fortunately, which is that we thought that they would be really averse to making investments. They’re smaller companies. They’re family-run businesses. This is their money. So, we thought the bar would be very high to get someone to buy. Basically, I wanted time to really test the pitch, evaluate it and see how well it held up with some very tough customers.
Andrew: I see. If the tough customers bought, then it meant that other customers would be more willing to buy or at least it would be a little easier.
Andrew: All right. So, now you know who the focus is. You know what goes into the first version because you kept creating these mock-ups and showing it to real potential customers. You start to code it up. What did that first version look like?
Todd: So, I think there were a handful of parts to the system that we got right, right at the beginning. I’ll give you an example of one of them. Between any two competitors, whether it’s Yahoo and Google or Vogue and Elle or Fortune and Forbes, you get the idea, there is a belief set generally that they know what their number one competitor is doing.
Todd: And one of the insights we had was that this was patently false. We found that any two competitors that are media competitors believe that they are killing each other. They know their market really well. But what we found is that they mostly didn’t.
Andrew: They mostly did not?
Todd: They mostly did not.
Todd: It just turns out that there’s not a lot of transparency. It’s hard to know exactly how your competitor is performing. That light bulb, that insight to be able to say, “Hey, Vogue, here’s how you and Elle are different.” The way that we show it turned out to be enormously popular.
Andrew: What kind of differences do you mean?
Todd: In this case, I mean in terms of ad sales. So, you would look at someone like, you could pick anyone. You might take Forbes and Fortune. They’re both very successful magazines, especially at the time that we started. You could go to each of them and you could say, if you went to Forbes, you’d say, “How much of Fortune’s business do you think you have?”
Andrew: You mean how many of the same advertisers do you have? Oh, and they would say x-percent and it turned out that it was off.
Andrew: It was always off. It was always higher than what was the reality.
Todd: Yeah. That’s right. They were off by a very meaningful amount. This is not to pick on them at all. This could be any two competitors. It’s even more exaggerated today. The discovery is still the same today. But you asked a question, what did this thing look like at the beginning. It was not that we had a fully-baked perfect product if I were comparing it to six years later today. But it had enough of a kernel that was very powerful in helping our customers improve their business.
Andrew: I see.
Todd: So, then Forbes or Vogue could say, “Boy, I now have my path forward for how to compete with Elle better.” That was the reason at the beginning that people subscribed.
Andrew: I see. So, they may not be able to get all the information they want about Nike, but at least they could see which advertisers another magazine has and say, “Let’s go after those. Now we know where they advertise, front or back of the book, etcetera.” Was that in there too, in the first version?
Todd: Yes. It was.
Andrew: It was. How did you know what to charge?
Todd: We had no idea. This is not a unique problem to us. I think if you ask people, they will try to back off from whatever they’re really willing to pay because they know they want this and that you may approach them later. So, instead we did very calculated testing. We’d take a group of 10 prospects and offer one price and then another 10 and another price and another 10 and another price. That is very effective.
Andrew: Because you’re actually asking them to pay.
Todd: Yeah. Then it’s not a survey.
Andrew: Yeah, when they have to really pay, they have to be real. The first 10 customers you got at an event. What was the event?
Todd: So, we debuted the product at a media show called The FOLIO Show, which is now called the Folio MediaNext show. So, it’s evolved a little bit over the years. Look, it’s an event that typically attracts mid-sized and also a lot of B2B publishers. We did not know this event very well. But it turned out to be a great place to debut the product and get some immediate feedback.
Andrew: In person you sold 10 people who hadn’t gone through your process before, who hadn’t helped inform the product?
Todd: We had a lot of success from that first event.
Andrew: I can imagine.
Todd: I want to be clear. Our product is not sold in a way that it’s like Andrew, I meet you at the booth and you write me a check. It’s not like that at all. At any event in our market, for any of the vendors, at this event you’re looking to create a dialogue. Maybe you show someone the product while you’re there. But afterwards, you’re really going to call them and go through a more formal sales process.
Andrew: I see. What I meant to ask earlier and I didn’t get a chance to is how did you get all the data into your system? We’re really talking about going back to paper-based magazines and getting all the pages into your system and somehow cataloguing them in a way that’s meaningful to your users. How did you do that?
Todd: So, we do this across all different types of media formats now.
Andrew: It’s not just magazines. You’re also doing it online for digital.
Todd: Exactly. So, we’ve learned to do this across about seven different media formats. I think there are different levels of challenges. This is probably true in any company if you’re scaling rapidly. I think it was much more thinking about the process of how do you collect something both with an eye on efficiency as well as an eye on quality. Those are really the two metrics I guess I would really impress for anyone who’s in a data company.
We’ve really said quality was the most important thing for us because it’s the bedrock of all the other insights and findings that we publish. But in the beginning, as it relates to magazines, I started sitting down and on my kitchen table I was scanning them.
Andrew: So, you’d literally scan them in and I imagine you also had to type some information into a database like how many pages does this ad take up, what pages in the magazine does it take up, how many pages in the magazine overall. That’s the kind of stuff that you were typing in and you created the system yourself?
Todd: I was certainly a designer of the system, but I was not the person who coded it. My business partner-
Todd: Jesse Keller was the original person who did the coding. And then today we have 400 people, maybe 40 are coders. Today, they are to be credited with the amazing product that exists, definitely not me.
Andrew: All right. I want to find out about the next advertisers. But first I should say a word about my advertiser. So, anyone who is listening to this has probably gone to my homepage and seen that I ask for an email address. One of the reasons why I ask for an email address from anyone who’s interested is because frankly, if you come to my site and you’re not enthused about the first interview that you see, or maybe I have a bad introduction and you don’t even get to watch the whole interview because you say, “Who is this guy that Andrew is introducing?” well, I might lose you forever.
So, what I’ve decided is by asking you to commit a little bit by giving me your email address and then giving you the interviews that you’re looking for, I have time to, if you don’t find the first interview to the be the best interview out there, I have time to come to you next week and say, “Here’s another program. Here’s another one,” and so on. Well, it took me years to come up with a great page that I use to collect email addresses, one that explains what my site is about, one that gives people a reason to enter their email address, one that actually converts at a high level.
Well, once I got that, what I did was I went to LeadPages and I said, “Here, you can use this as a template so anyone out there who wants to can have the same kind of results as I have.” If you want that template, you can just go to AndrewsWelcomeGate.com and get it added to your site and make it relevant to your audience. There are just a few things that you can tweak to make it available to your audience.
Or if you say, “Andrew, I see you took your site and you turned it into a template on LeadPages, I would like to do it to,” if you want to do that, here’s how to do that. Go to Mixergy.com/LeadPages and you can take any page that you imagine and turn it into a template that LeadPages will sell on your behalf and they’ll ship you 100% of the revenue from it.
So, want my page? Go to AndrewsWelcomeGate.com. Want to create your own page and sell it on LeadPages? Go to Mixergy.com/LeadPages.
All right. Todd, you got the first set of customers. What kind of feedback are you getting from them that is different from what you got from people who you’re sitting with at the Marriott?
Todd: It was like a flood, honestly, at the beginning. So, when we launched, I felt like I had done best practice interviewing people and had really collected ideas and written them down and we built it. But immediately when we launched, the feedback was something like, “Todd, this is wonderful. We can’t believe you’ve done this. But if you can do this, you should also be thinking about this and this and this.”
And in those first 18 months, there was really like a checklist that people gave us of things that they said, “Listen, we’re thrilled to be subscribing. We love this. We love that you’re thinking about how to improve sales rep performance. But we have more ideas.” I think there were like 80 ideas that we executed in the first two years.
Andrew: Eighty? That’s a lot.
Todd: It was an enormous list. Yeah.
Andrew: Did you do everything that they asked for or did you start to pare it down?
Todd: You know, we really just did everything. Today, I think we would be much more discerning. We would say, “All right, this is a good idea but not as good as these other ideas. We’ll also push back. We’ll say if we do this, what is the ROI for you, our customer? Are you sure that this drives it?”
But in the beginning, we felt like we were new to the industry. The industry was getting used to us. We were getting used to them. I wanted to demonstrate that we were just purely fantastic listeners. You still have to be a fantastic listener. But you have so many ideas coming in now, you do have to prioritize them. In the beginning, we didn’t really have that many customers. In the first year maybe we had 50 customers. So, we really sat down with them and we said, “Come up with your list. Let’s go through it together and make sure we can be an amazing partner.”
Andrew: Would you advise us if we’re going through your process to do the same thing and just give customers every feature they’re looking for or would you suggest that we become more discerning at first?
Todd: I think this is a common challenge for entrepreneurs, all of us. In the beginning, you’re trying to figure out if you even have a business. You’re trying to figure out is this a growing concern. So, I think we definitely spent a lot of time debating internally when an idea would come in. We’d say, “Boy, they’re asking for this. But is this really necessary? We haven’t heard it from the other 49.”
So, definitely in the beginning, I think we indulged probably more than we needed to on everything. But I think the sort of collateral to that or the impact of that internally inside the organization was very much religious and evangelical about being very pro-customer, that customer ideas were right, these things that have lasted with us over the years.
Culturally inside the company, there isn’t a feeling like, “We come up with the great ideas and then we put them on the customers.” I think internally our culture is, “We are very good listeners. We scribble your ideas down and we productize your ideas very well.” But I think that mindset was one that was born out of those first couple of years.
Andrew: Is it also that your price point is high enough that you can afford to do it? Is that what allowed you to do it?
Todd: So, the pricing is determined, I think, more by what we think the ROI is. So, I think we look and try to say, “All right, how much money can we make a client.” So, in this case, how much incremental ad sales will they make?
Andrew: I see.
Todd: Separately, I just personally aspire to be in a company where you have enough of a margin that you can invest in the next big thing or things. I think if you look at the history of successful companies, they are companies that do a lot of trial and error.
So, I think in the beginning, you have to do everything right or you’re just out. As an entrepreneur, it’s very breathtaking. It either works or this does not work and that’s it. You get a shot. But as your business grows, then you’re going to get more than one shot. This is a good thing.
This was something that even around my kitchen table growing up I can remember my parents talking about this, like what percent of revenue in a company should go back into R&D? If you look at some of the most successful Silicon Valley tech companies, they have enormous R&D budgets, either as a percent of total revenue or as a whole number. When you look at Microsoft’s R&D budget, it is massive. That fuels the growth of the company over the next few years.
Andrew: At what point did you start raising money, before you got customers? Before you developed? After?
Todd: So, we raised a little bit of seed capital right after we had basically all the 50 customer interviews and we had started to develop the product but we did not have paying customers. No, we did not have any paying customers.
Andrew: I see. So, you raised seed and then you raised, what was it? A few million dollars and you ended up with a $20 million raise total? Do I have that right?
Todd: That’s right. That’s more recently. But in the very beginning, we did not try to over capitalize it. I think I and Jesse both wanted to see if we had raised a few million dollars, what could we do with it to prove that we were on the right path. As an entrepreneur, your time is scarce. If you have an idea and you’re a good salesman, you can raise capital. But you don’t want to chew up years of your life pitching something that’s not going to work.
So, we really took more of an incremental approach right at the beginning. We wanted to make sure we were on to it. We felt great conviction based on the interviews, but it was only after we started to sell for a couple years where we said, “Okay, we’re on to something. This is right. We know how to deploy capital in the right way.”
Andrew: What was the seed amount?
Todd: The seed amount was a little over $2 million.
Andrew: Okay. So, here’s the other thing before we get into the next batch of customers. When you started theGlobe, you basically just launched it almost as soon as you had the idea. You saw something cool, you realized that it was part of this thing called the internet and you just went for it. Why not do the same thing here and say, “I have this cool idea. I’m just going to create the seed of this idea and I’ll just start going for it?” I think a lot of people would not have waited as long as you did. Why did you wait?
Todd: So, this was very deliberate. This was really just a belief that in a B2B market, it would be much less forgiving than a consumer market. The consumer market, we felt like you sort of put stuff out, there’s always some early adopters who are just excited to be part of something. We have not seen that in the B2B market. We actually see over the years, people made us really prove that we were filling a concern, that we had customers, that we had service level agreements in place, that we had everything, support, that all this stuff in the ecosystem around our product was in place before they bought with us.
Andrew: I see.
Todd: So, that was number one. Number two was, having been through the prior experience, I feel like a lot of entrepreneurs, you get excited. You just want to run in there and get going. But the truth is to me, if you want to build a product, you will build it. That’s not the question.
I find that most companies, if you have money plus coders, you can build a product. This is not to trivialize this meaning. I think most new businesses, it’s much more about, “Did you get the product ingredients right? Do you know how to sell it? Who in the organization are you going to sell to?” It’s all these other things that don’t seem as sexy or as exciting that actually end up being hugely predictive of whether you’re going to work out or not.
Andrew: It also feels, and tell me if I’m wrong, but it feels like by creating a more solid foundation, spending more time on the foundation of the business, you now have a business that’s a lot more defensible, a lot stronger, a lot more capable of growing in a way that you can bank on.
Todd: Yeah. I totally agree with this. It’s interesting. Running a data company, in our business, we had to collect the data essentially for a year before we got started. So, this forced upon us a lot of discipline. It was very difficult at the beginning. But I think it’s been good.
Andrew: Let’s give the connection a moment to catch up. There we go.
Todd: We were thinking about 2016 six months ago pretty actively. We were thinking a lot about 2016 and where revenue comes from a year and a half before it came. It’s still the same way today. I have to think a meaningful amount of time ahead for us to build products.
Andrew: So, it wasn’t all so simple. One of the challenges you had came up when you had a meeting with 20 major publishers. You finally get in the door with these guys who you waited to grow into the ability to sell. Do you remember what happened? Do you know the story I’m talking about?
Todd: Painfully. That’s one of my life lessons. It falls flat. So, this was a meeting that we had with a major New York City publisher. We had worked very hard over a period of months to convince them to give us an audience of all of the major publishers in their organization. They have a monthly meeting with all of the VPs. The meeting is like at 7:30 to 8:30 in the morning.
Knowing that there’s Murphy’s Law always lurking out there, we said, “Boy, we want this to go really well.” So, we talked to the assistant and the person who was coordinating and we said, “We want to show up a half hour early. I want to come the day before, check out the internet connection, make sure it works with my laptop, get a feel for the room.”
We do all of this, but the morning of the presentation, the person we were going to be meeting with was out that day and her assistant was sick that morning. And then the IT person wasn’t there because it was 7:30 in the morning. This was like a pre-office hour executive meeting. We brought two laptops. The laptops both wouldn’t start for some reason. It was similar to today. You know how Microsoft releases their patches on Tuesday nights and then you come in on Wednesday. So, because of the patch, something didn’t work. And then the projector that they provided, no one could figure out how to turn it on.
Andrew: Oh wow.
Todd: So, long story short, there is no presentation. I verbalize or try to explain what we do for a living, poorly, I might add. They’re very nice. They understand the problem was their fault. It’s not us. They’re super apologetic. But it set us back with that firm six months easily.
Andrew: Six months even though it was their fault? You couldn’t just say, “Hey, we’ll come back in tomorrow?”
Todd: They do the meeting once a month and they had people booked for six more months. The meeting originally was in the fall. So, it was meant to be around the time people evaluate new vendors. No. It was a total failure. The lesson for me after that was we travel with redundancy on everything. We bring our own projectors. We bring our own Wi-Fi. This way you’re de-risking. Even though this situation happens very infrequently, but when it happens, it can be very costly.
Andrew: It is a huge cost.
Todd: It was a very expensive learning lesson for me.
Andrew: Here’s another great story that I heard about the time that you wanted to pitch Elle magazine.
Todd: Yeah. This is a good VC story. It’s true. It’s totally true. It was a good story. So, we were working with a venture capital firm. They were trying to prove that they could make introductions for us. So, you’re not just looking for money. You’re looking for people who could make introductions and give you advice. But we didn’t think they were going to be a very good partner because we didn’t think they did anything with media.
So, they said, “Well, let us prove it. What’s a company you really want a meeting with?” I said it would be great to meet with Elle, which is a really wonderful brand name with top talent and a celebrity in the world of fashion. So, we said, “If you can get that meeting, we would definitely consider working with you and that would be wonderful.”
We said, “Your diligence on us is you should come to this meeting. You should come to this meeting and see if they even like it and can I correctly convey the value proposition.” I said, “If you do see us and you do like it, this is your due diligence. You’re going to still do due diligence, but this is meaningful due diligence because you can really see the client’s reaction.”
We got to the meeting and the publisher actually was not there. But the publisher of Elle Decor, a very lovely woman, took the meeting and definitely she was like, who knows how they got this meeting? She clearly had been asked to come to this meeting.
Andrew: Instead of the person who you wanted because the person who you wanted didn’t think you were important enough?
Todd: I don’t know. I don’t actually know that. But for sure, she had been asked to do this meeting. It was like I could have sent eight months of invitations and nothing and then they just said, “Hey, we’ve got this meeting.” We showed up. This turned out to be one of these really positive moments in your career, in your company’s career where she saw it. She immediately saw the value. She said, “I love it.” She turned to the group of guys in the suits. She said, “I love it.” And then off we went. They made the investment.
Andrew: So, they invested in your software and the venture capitalists, did they get to invest in your business?
Todd: Yeah. They did.
Andrew: They did. Cool. So, what kind of revenues are you guys doing now?
Todd: So, we don’t share the exact revenue levels, but today we’re a little over $20 million a year.
Andrew: Okay. And the company is now about six years old?
Andrew: Wow. I can’t believe that you’ve done so much here with… it’s the process that I think we need to get the word out about, the idea that it’s not just about creating something and hoping it works, but going through a process that ensures that it works. How did you even learn to do that?
Todd: I have all the scars. Look, I’ll tell you one thing that I think has been useful for me. I’ve really had an amazing active board of directors that is not just for show. I have an outside director who I recruited a few years ago who is amazing. We created an advisory group who was not just for show. It was not just to sort of say we have one. But we gave them homework assignments about new product ideas.
Andrew: I know what you mean. A lot of people have advisors just so they can put on their pitch deck, “Here are the people that are advising me,” and get some credibility.
Todd: That’s right.
Andrew: So, when you do it, you give them homework so that you get better feedback? What kind of homework do you give them?
Todd: So, it depends on the person, but here’s an example. There’s one person on our board who’s done a lot of subscription businesses over his whole career. You asked the question about how do you do pricing. My gosh, Andrew, there are so many different models between freemium models today and do you give some teaser data away? Do you charge per person or by site license? There are bewildering number of choices. You do not have the time to test them all.
So, it has been helpful for us to talk to people who have been through it and say, “You know what? I’ve tried that, failed. I tried that, failed. Start here.” That helped, very much helpful.
Andrew: What is the price point now?
Todd: So we charge for our base module a little over $27,000 per year for a site license.
Andrew: I see.
Todd: That’s like for the base unit of MediaRadar.
Andrew: That dinging that people might have heard is when you go to MediaRadar, there’s a box that comes up and someone says, “Hey, I’m here. If you need any help, just chat away.” That’s what that little ding was. I asked you at the earlier part of the interview how do you talk to customers and you said, “Do you mean now or in the beginning?” We talked about the beginning. What about now? What is the process that you go through to keep learning from your customers and figure out what to create next for them?
Todd: So I think there are more touch points than there used to be. So, that’s what’s changed the most. Before, it was really the relationship between the sales person and the client, where today, it’s really the relationship between an account manager and the client and also the sales person. It might also be a relationship with product management.
So, account managers, these are the people who work and service a client day-to-day. Sales rep does just what you think. But product management are people internally at MediaRadar who are designing new product ideas. They will definitely go direct to the client and say, “Hey, I see that you’re actively using this one part of your product a lot. Can I ask you some questions about how you’re using it? What do you like about it? How can I make it better for you?”
So, there are people inside MediaRadar who their full time jobs are just thinking about how you improve the product. That has been very, very, not illuminating, it’s made the process of product development that much faster and smoother internally.
Andrew: I see, to introduce the customer to the people who are creating the products for that customer.
Andrew: But there’s one last thing that I noticed. I use SimilarWeb to see where my interviewees get their traffic. One of the things that I notice for you, top five sites for traffic, here’s number one: NYTM.org. That’s the New York meet-up for tech, New York Tech Meet-up. So, you guys are there. I see number four on the list is NYC.Uncubed.com. That is a New York event, another New York Event. You guys are at New York events a lot.
My guess is that it’s not all you going to these events. I’m checking out all the other places too. You have a team of people that are out there. My suggestion is that my audience, when they go to an event, they should stop by and say, “Look, I saw your founder, Todd, on a Mixergy interview or I saw him online. I like what you guys are doing.” Is there something else they can follow-up with to get to know you or your company a little bit better?
Todd: Absolutely. Certainly going to our website. We think of the website for two audiences. One is for prospective customers to learn about our product and what we do and how we can partner. The second half is we’re a very fast-growing company and we’re committed to really growing and staying in New York City.
So, that means that’s why we sponsor so many tech meet-ups and Uncubed and other events. Certainly that’s also a great place to get a sense of not just the company, but also the culture, the sort of people we are. We post lots of things around us to give you a sense of what the flavor of the company feel is. I think that’s just as important as how smart you are. So, that’s definitely the right first stop, the website.
Andrew: All right. Go to the website and if you see anyone at one of the events, go over, say hi, say that you heard about the company and get to know the people there. It’s tons of it. You guys are a part of Tech Week. You guys are really embedded in the New York City tech community.
I’m so honored to have you on here. I’ve heard so much about your success, but the way that you achieved it is the part that I’ve learned so much from. Thanks for sharing it.
Todd: Andrew, thank you for having me. I appreciate it.
Andrew: You bet. Thank you all for being a part of it. Bye everyone.