Andrew: Hey everyone. My name is Andrew Warner the founder of Mixergy where I interview entrepreneurs about how they built their businesses. And a few years ago, man, I remember being at my parent’s house trying to understand wine because I knew that if you really wanted to make it this world, you’re going to have a drink of wine with someone. Well, maybe not have to, but chances are good you’re going to come across a class of wine. You should know what you’re doing. So I got books and I tried to study on it and the whole thing just made me feel so stupid that I’ll be honest, I gave it up, and years later I took up scotch instead.
Today’s guest also tried some wine and he also felt stupid, but instead of giving up on it, he said, “I’m actually going to do something about this. I’m going to create a solution.” And he did. He created a company called Vivino and as a result, he built what many analysts now are calling a unicorn which is a startup that’s worth a billion dollars. I’ll ask him whether he thinks that’s true of not. His name is Heini Zachariassen. He is the founder of Vivino which is the world’s most popular wine community and marketplace. I remember the first time that I saw it, even though I’m not a wine drinker, I had to freaking download this thing because it felt like magic. Use your iPhone, you take a picture of a wine label, and it tells you what it is.
I was like a mad man. Every time I would go into a grocery store in LA with my wife I’d want to take a picture to show her, “Look at what this thing can do.” And then from there, many people use the app to record their opinions and memories of a wine that they drank and they would rate it. And then many other people would take a picture of the label and see all these other people’s ratings and decide whether they wanted to drink the wine or not. And the thing was growing big. And then someone on Kora [SP] came out and said, “How’s this company making any money?” And Heini came on. And Heini, do you remember when you did this? You responded, “We’re not making any money.”
Heini: Yeah. I think it was me or my co-founder, and that’s actually true. Yeah, we don’t make any money yet and that is fine. You know, when you build something big, build it big first and then you monetize after and I think that’s okay.
Andrew: This was 2014. Since then, he did find a way to generate revenue. Now I notice when I see a bottle of wine on there, I can read people’s opinion. Lots of really interesting feedback on it, and then I could buy it, and that’s a revenue source for Heini. That’s where the marketplace comes in. We’re going to find out how he came up with this idea, how figured out what the product would be, whether he was afraid that he’d actually get it wrong after he built up such a big audience and so on. And it’s all thanks to two great companies. The first will host your next great idea well. It’s called HostGator. And the second will let you send out smart email marketing. Look at this guy, he gets a drink wine in an interview. I love that. The second sponsor or the email company is called ActiveCampaign. Heini, is that wine real or you’re just like staging? Can you drink on job?
Heini: I’m definitely staging this. If it were wine, it would be really old because it’s brownish.
Andrew: So it’s soda?
Heini: It’s an ice tea actually.
Andrew: I see that. Okay.
Heini: It’s a really nice ice tea.
Andrew: I remember the founder of [Crispin Cider 00:02:59], the cider, he got to drink in an interview with me. I thought that’s pretty cool that you got to drink on the job. Hey, so are you guys an unicorn officially? Is it a billion-dollar business?
Heini: We are not a unicorn yet. I think we might have a chance to become a unicorn. What I like about the space and people don’t think about this, but wine is such a massive, massive market and people think, you know, “I’ll drink a bottle of wine here and there. How big can it really be?” But a wine from a retail point use, it’s a $300 billion business and much bigger than their books and records and music all together.
Andrew: Three hundred billion dollars’ worth of wine are sold where? In the U.S. every year or around the world?
Heini: Every year. Globally.
Andrew: Globally. Three hundred billion dollars. And what percentage of that would you say is done online or mobile apps?
Heini: Yeah. So first of all, you take a little bit of that out, some of it is retail, some are in the restaurant. But people consider the retail part around 15% is online this days. Which is still a little bit slow. We have a long way to go on wine.
Andrew: All right. One more number of questions and then we’ll get into the story. Revenue, now you actually do have revenue, you figured out, and we’ll talk about how you figured out. What is the revenue now?
Heini: We are still a private company and we don’t disclose that just yet.
Andrew: You know, I think you told our producer. Can I give a sense of whether it’s in a single millions, tens of millions, hundreds of millions?
Heini: Sure, sure. Annually it’s in the two digits and we’ll be rounding to three digits soon as of right now actually.
Andrew: That’s super-fast growth. All right.
Heini: It’s very nice.
Andrew: You know what? So before this, you were working for a company started by Morten Lund, right? The BullGuard which is online virus company.
Andrew: What did you learn by working at this virus company that you’re bringing to the table now That’s not a company you started, Vivino is the first company you started. What did you learn by working with such great people?
Heini: First of all, working with security was not necessarily a passion of mine. It was something . . . it was an opportunity that was there and we build this company with my other cofounder with their two. So it’s the two of us and Morten. And I think what I really learned was to build the business and we definitely didn’t get everything right back then. I’m sure we were not going to get everything on Vivino either. But building a business, motivating people, all that is something that takes a while. People talk about this 10,000 hours. But I spent a lot of hours building a business and a lot of that came through BullGuard. And when you go through those years of building, when it also comes to fundraising, you’re second and some people say, “Wow, he did something before and so on.” It helps you quite [fly 00:05:36].
Andrew: Is there one thing that you remember doing at BullGuard that you said, “My next business I’m going to do or to become a part of `who you are as an entrepreneur.” Ad one thing that you said, “My next time around, I’m going to fix it by doing the opposite.” Do you have one of each?
Heini: Good question. I think one of the things that I wanted to do on my second one was doing something that was a little bit more passionate about or just generally a little bit more interesting, you know, security from a business point of view is very interesting because it sells really well and people are willing to pay for it and so on. But I really felt I wanted to do something else that I found a little bit more interesting.
Andrew: I see. Okay. And is there something that you said I’ve got to keep doing? Here is what you guys did well from what I saw at BullGuard, there’s a lot that you guys did well. Competing in the antivirus space is tough, but you guys were great marketers, you were almost pushy about your marketing if I remember.
Heini: And I think something I learned from Morten was always . . . I wouldn’t say it’s marketing as such, but making things look good is very, very important. Like we had great branding and so on, and we really took that on to Vivino to really make sure that things look amazingly good. It’s a Canadian design and so on.
Andrew: I see. By the way, Morten did one of the best Mixergy interviews with me in the early days. This is the guy who was one of the first investors in Skype, made a bunch of money, lost a bunch of money, recovered, great, great entrepreneur, so easy to talk to.
Heini: Yeah. Great guy. Good friend of mine.
Andrew: Fantastic person. All right. So then you walk into the wine world, and what was it about wine that made you feel stupid?
Heini: Well, what made me feel stupid was that when I buy any other product, BullGuard, MuseScore, or whatever, I can usually get a rating, like I can usually go somewhere and say, “Hey, is this good or this bad?” I get a review. So for some reason, there was nothing on wine. You know, before I watch a movie, I want to see the “IMDb” or often “Tomatometer” rating. And I walk into the supermarket sort of relatively blank and think, “Hey, I see wall of wine but what do I buy? What is good or what is bad?” Sure, those guys labeled it but is the wine any good? But for some reason, the wine industry had managed to get through all of this without having a rating on every single wine.
Andrew: I’m sorry to interrupt. My sense is it’s because, I’ve thought about this a bunch, it’s because before the internet, before it was easy for people to give ratings, there’s just too many wines out there drunk by too few people to get enough ratings put together, right?
Heini: It’s like you said, it’s pretty simple math that the only way you can do this is by activating community. So let me give you an example of that. So Robert Parker and those guys, the critics, have done this for the past 30 years or so and it’s great. But the facts are they only rate the top. They only rate the best. But someone like Parker . . .
Andrew: What percentage would you say?
Heini: What’s that?
Andrew: What percentage would you say they rate?
Heini: It is a very low percent. I know numbers actually. So they do around 20, 000 ratings year. And if you want to compare that, we do 100,000 ratings a day. It’s proportionally different.
Andrew: But it’s 100,000 and some of it is of the same wine?
Heini: Oh, yes, definitely. Yeah, definitely. So and nobody knows, but from a revenue of view, from a volume point of view, maybe 10%, 15% is rated by the critics. But if you walk into a supermarket in Copenhagen or something, there probably wouldn’t be any wine rated by a critic.
Andrew: Right. Okay. So that really is huge problem. And why did you say, “I’ve got to go in and solve it?” What was it about . . . did you sense the market? Did you say, “At some point I’ll figure out how to get a share of this hundreds of billions of dollars that are trading hands every year?”
Heini: The question is the problem big enough for us. So building up a product that people want to use, it’s about having a problem that’s big enough that people are willing to take an app, pick it up, and actually use it. And sometimes we get sort of fall in love ourselves, “Oh, this is amazing,” and your friends tell you it’s amazing, but it’s really bullshit. But this, I felt like this was big enough. Like I have a problem here and it’s big enough. And of course, when I started looking into it, I also realized why it hadn’t been solved. It was a hard problem to solve. But then the timing came along, I think, one thing that’s very underestimated generally in startups is timing is so incredibly important.
Andrew: And why do you think that timing . . . actually before I get to the timing, what was it about this market and this problem that made you think it’s a big enough problem?
Heini: So people that drink wine will do this every single week. They go down to the supermarket, they might think of the same stuff and that’s fine, but they want to try something else, and they come home and this is not good. So they invest in something they just don’t get fulfilled by it.
Andrew: I see and at the very list it’s like a $15 of failure that you’ve just invested in and beyond, it’s more money and more of your time and in the evening maybe it goes away because of it. But what about the problem that’s being addressed by the person you’re expecting to upload their ratings? Why did you think they would do that? I wouldn’t have thought that you’ll get ratings that way?
Heini: Yeah. That’s a very good question, right? So we really weren’t sure about that either. Will they do it? Why do they do it? So we’re at this point around 20% of everybody who scans a wine rates it. And we’re the first ones to actually have, to make that happen. But for some reason, this scanning action movement sort of motivates people to rate. And my theory, and I’m a bit of a cynic on this because in general when it comes to using products, people are selfish. And the reason people rate is for themselves. So most people rate because they want to remember this was good or bad. So if I go back to being a little bit cynic, yeah, yeah, well, you do rate because you want to remember it was good or bad. And some people really do it for the community, but I think that’s a big thing.
Andrew: They do it for themselves.
Heini: Yes. To remember if this particular wine, did I like or I didn’t I like it?
Andrew: You know what? So as I was looking online to understand people’s motivation, I did see people say, “This is why I do it.” I didn’t find and I’m sure there are people who would think, “I do it for the community.” I didn’t find that. I found a lot of, “I want to remember what I thought of this wine that I had last night.” The thing that excited me as a non-wine drinker was the ability to take a photo and have the scanner recognize it. I saw a little bit online of the explanation of how you did it. Can you describe the first iteration, how you were able to do it, not today but back then?
Heini: Sure. Yeah, so we started out, we actually worked with another company. I found this Swiss company that was working on this technology. They had not been working on wine previously. And all of these products, they need to have seen the labels before. Like you have to have the label and then you can compare it. And I went to those guys in Switzerland, the company which was called [Quayabo 00:12:22] back then. And said, “Guys, we want to build this for wine.” And they said to me, “That’s fine but you need start to building labels and so on.” So we started doing that. So for the technology part is definitely really difficult.
But building a label is very, very hard. So we did all kinds of competitions and stuff to get people to submit these pictures. And when we launched the app the first time and this is back in 2011, we told people that, “We know at least 30% of all wines out there.” We probably knew around 10, but we were trying to build this. And then when manually back in [inaudible 00:12:56] we went back to people and matched the two of them manually and say, “Hey, this is the wine we found,” and built the database like that.
Andrew: So it wasn’t that you guys invented the technology, you saw someone who had it out there, you took it, you integrated with your app. The first version of the app was built by who?
Heini: We actually the first version, my cofounder and I, Theis, we sort of designed the product and we found people on these freelancer’s websites . . .
Andrew: Freelancing websites?
Andrew: Do you remember which one you used?
Heini: I definitely used the one that was . . . is now Upwork. Elance I definitely. And we used a couple of different ones.
Andrew: I’m so surprised because of your background in security and software. Why didn’t you go to your network and get someone to build it.
Heini: I think, you know, we wanted . . . back then, it’s obvious that this is going to be amazing. You think, “Oh, wow, everybody is going to want to use it.” But back then you weren’t really sure this was going to work. You weren’t sure if people were going to use it. So we really wanted to bootstrap early on. Get a proof of concept and just take it from there. I think before you have a product market fit, you really don’t want to spend too much money because usually you don’t really know what you’re building yet.
Andrew: That explains why when our producer before the interview said, “Hey, what did that first version look like?” Do you remember what you said?
Heini: I probably said it looked horrible.
Andrew: Yeah. You used the word “shitty.” You said it was a shitty app. But still there was breakthrough in there. And then what you guys did was, you went into a store, you personally did this, went into a wine store and you took pictures and picture and picture and just kept adding to the database?
Heini: Yes. But not any wine store. It was plural. I went into all the stores almost in Copenhagen and took thousands and thousands of pictures.
Andrew: Why? Why you? I’m sorry to interrupt but I’m in owe of what you were able to do. You build up an antivirus company. You sold the antivirus company. I’m imaging from the sale that you did well financially, right? You’re nodding.
Heini: I’m nodding a little bit at least yes and I’m not nodding enough.
Andrew: So why didn’t you say, “Hey, you know what? I’m going to get some 17-year-old who wants to make a little bit of extra money and go send them into a bunch of stores.” Why did it have to be you?
Heini: Yeah. So because I like it. It’s fun. It’s like it does this work. It’s like going against your finger of dirty I think is amazing. I really think that’s important.
Andrew: And so you would take a picture and then you type in a name. Take a picture, type in the name.
Heini: Actually, no. So by then, I’d set up some people in India. So I was actually just taking pictures and then they were populating them.
Andrew: Okay. They were reading it, type into your database. Got it.
Heini:Super manual [inaudible 00:15:32]
Andrew:And then the software that you licensed allowed you do some OCR and visual recognition of the label.
Andrew: Got it. Okay, so now you had that, what came next? Getting users?
Heini: Well, we’ve been very fortunate in a way that we haven’t spent substantial amounts of money in getting users. So what we did was just look at the product and just try to improve as quickly as we could. What I would recommend every startup to do is get the product out there as quickly as possible even though it’s shitty, get it out there. You will learn so much more when it’s out there and listening to the users. Because you’ll get your priority straight. Don’t ever think that you know what people want. You never know what people want.
So we started listening and so on. I guess the first version we built was like . . . it costed us like $200 to build because it was just like a web frame and everything was actually web-based and so on. So we started like spending real resources on building a native app and just making the user experience good. And it took a while, right, because we didn’t really . . . it was not till mid 2012 we started seeing, “Holy crap, this is moving now.” And it took us over a year just to see anything really happen.
Andrew: It wasn’t till 2012. You guys launched 2009 before then.
Heini: No, we launched in ’11.
Andrew: Oh, 2011. But the company was founded in 2009, is that right?
Heini: We started slowly in ’10. Yeah.
Andrew: Okay. I was reading off your LinkedIn profile, but now I get a sense of it.
Heini: No, I think maybe if there’s something there.
Andrew: I had gone back to 2011 and I see articles like this one that I have in front of me from “VentureBeat,” Vivino helps you find that wine with image recognition. The image recognition is the thing that got people’s attention. This was a device that was in there pocket and you used it to make magic. Am I right?
Heini: I think, and that comes back to what we talked about earlier, timing, right? And “VentureBeat” was one of the first articles we got. I can’t remember exactly. There was in ’11 at least. Now there was life hackers or something like that that really got us going a little bit. But that was very, very important. But the thing is that people, like I said, underestimate timing. But what really happens sort of around that time is that the iPhone and the smartphones are starting to pick up, so the cameras are good enough. But people also go online. So we combine those two things, we can now take a proper picture and send it up to a server, and that really felt like magic back then. And honestly, you couldn’t it a year before because everything . . . Camera wasn’t good enough and it was too slow. So getting the timing right and I’m not saying we got anything right or we . . . I’m not saying we got purposely right, we just got it right.
Andrew: There were a lot of other apps at the time that were doing wine. Why do you think the others that went away went away? Now in retrospect as you analyze them, what do you think were some of the big mistakes they made?
Heini: Yeah. So we did some . . . at least someone else in the industry said that there was 600 apps out there when we launched. So 600 different wine apps already out there. So we are extremely product focused. What we want to do is to build the best possible product. And what we found out very rapidly was that the actual product was the data. What people want to get that magic moment, you know, we need to have the picture and then we need to have the data on top of that. And we put all our focus on that and that’s the bet you’d take. Like all of us took bets on the app looking amazing and then Apple featured it because it looks amazing. They’re not there anymore. And we focused on the data and felt that was the best possible way to use our resources. Like doing a startup is about taking the few resources and using them, right, and doing right priorities on that.
Andrew: It seems also like one of the things that worked for you in the early days was . . . you know what? I’ve got everything in front of me. I want to pause for a moment, talk about my sponsor, and then I’ll come back and say what I’m looking, which is an early version of your site. The sponsor for everyone who knows me is a company called ActiveCampaign. Do you know ActiveCampaign or I’m about to introduce you to them?
Heini: You’re about to introduce them.
Andrew: All right. Here is the deal behind ActiveCampaign, and I know that you’ve gotten some benefit. I did a little research on you. You guys at Vivino got some benefit from doing smart emailing marketing and it’s especially tough considering how you wanted to personalize your email for tons, millions of people. And by doing it right, I heard from Andrew Chadi [SP] that you guys got a good growth hack he called. The thing is that, for many people to do smart emailing marketing, it means being aware of what people have told you and done on your website in the past, and it’s been too difficult.
Like if somebody watches one of my videos about starting a business and another one about starting a business and another about starting a business, I shouldn’t be sending an email about how to grow your business to $10 billion, right? There is a disconnect. But most people do because they don’t know how to say, “Find me all the people who have new companies and send them this email. And all the people who don’t have a company, send them this email. And all the people who have an experience in big companies send them that email.” It’s just too tough. What ActiveCampaign said is, “We’re going to make it super easy so you don’t need to have funding the way the Vivino does. You don’t need to have a marketing expert on stuff the way that many online marketers do. We’re going to make it super easy.” And they did.
And so now when someone watches a video, you can use that as trigger for the next email that they get. Or when somebody clicks on certain things, use that as a trigger for future emails, whether you send them or not depending on what people clicked. And if somebody bought, you tag them as purchased and you don’t keep selling to them. Anyone out there who wants that kind of magical power of their marketing, it’ll grow your sales, it will also sound more intelligent to your users. You can go to ActiveCampaign right now.
The advantage though of going to the special URL that I’m about to give you and everyone else is they’re going to let you guys out here if you’re listening to me, use ActiveCampaign for free to see how it works and to see that this is really easy to do. And if you decide to sign up because you’re going to use the special URL I’m about to give you, you’re going to get your second month free. Because you’re going to use the URL I’m about to give you, you’re going to get two free one-on-one session with their consultants, so you’ll get some personalized advice. Go act on it and then come back and get another consolation.
And then finally, after you get those two free consultation, they’ll even migrate you. In fact, before though, they’ll migrate you if you’re using another Boso software. You should not be using Boso [SP] software for email. You should use the smartest tool out there. I highly recommend you check out ActiveCampaign. Go to the special URL which is activecampaign.com/mixergy. It’s so easy to send out smart email marketing. Go check it out. I’m so glad they’re a sponsor. I can tell that you’re not knee-deep in the marketing space because people who are knee-deep and in love to tell me about ActiveCampaign. What is your personal passion in business before I get into this thing on my screen? I’m trying to get a read on who you are.
Heini: So, I think people get motivated by different things. You know, some people are motivated by money. And I’m really motivated by building stuff. I really like building stuff. You know, when we were kids, we built Legos and I remember my brother and I were talking about, you know, we built this but as soon as he build that I want to play with it. So I think that sort of illustrates what really drives me. I want to build something. And on top of that, you know, people coming over and saying, you know, “I really like what you’ve built and I enjoy using the product. I think that really drives me. I’m very proud of what we’ve done,” and that’s a big motivator for me.
Andrew: Like a craftsman. I get the sense, speaking of your childhood, that your dad was a big influence on you. He was a professor, but you’ve said that he’s entrepreneurial. Give me a sense of the things that he that were entrepreneurial.
Heini: So he always had some kind of project. You know, he was an employee by this university, but he was entrepreneurial because he was always building something. Like they did a science magazine, but there was always something. Even when we went off to the mountains for a hike and if there was a creek, you know we had to build a dam. We got to build something here and we did that. So there was always a project, something going on. I think we were definitely inspired by that.
Andrew: And do you feel that you want to be like him or that by seeing him, he showed you what was possible?
Heini: Yeah. I think with your father or your parents and so I think sometimes it’s complicated because of difference you think or we’re not like at all but in the real world we’re probably are pretty similar to our parents. And we really, we get inspired by them and we learn from them and so on. So I’m definitely inspired that, yes.
Andrew: A thing I was going to mention earlier is SEO that every page on your site was like a page. I’m looking at a version of your site going back to 2011, July 30th 2011, the URL has very clear description of the wine. Once I get on the page, it’s very clearly labelled with the description of the wine, the ranking and so on. How smart were you guys at the time about SEO or I might just like superimposing the superman ability on you guys back then?
Heini: So we definitely had it in our mind from day one. I think what we saw earlier on that we knew this was a long-tail space and we also knew that when we took this particular supermarket wine, which is only sold in one chain store in Denmark, there wasn’t a lot of data on this. So we put on it, we put the picture on that, Google is going to love this. And we were very conscious of that very early on. And obviously over time, that builds in a big way. It’s not about having 1 page that gives you 1,000 visits, it’s about having 100,000 pages to give you 2 visits.
Andrew: The long tail which was just started and make . . . actually by then it was already accepted. There’s collection of articles that I have found about you, was that intentional, was that something that guys were good at, or did it just happen to people who discovered you?
Heini: Well, most of it, honestly, so over the past two years we really invested in doing this things. But most of it it’s organic, you know, we’re incredibly privileged in the sense that people find us, love us, and write about us. So yeah, so most of it . . . there are a couple of things there. Like one of them, when you introduced me earlier, like you took up your phone and then you showed how to use it. This might matter more than we think because if you’re on Facebook on your phone, you’re just looking down at your phone and not really . . . I don’t know what you’re doing. But if you’re in a supermarket or at a dinner party, you take the wine and people are going to say, “What are you doing?” That is super viral.
Andrew: The act of seeing somebody else do it makes you wonder what it is and makes you get it. And these articles like the ones that I see here in “Forbes” “Say hello to the wine app for normal people” from 2011. I mentioned earlier, the “VentureBeat” article.” I see a few others. That wasn’t you guys reaching out to them, that just happened?
Heini: Yes. Most of it, yes.
Andrew: All right. It looks like 2011 articles are mostly about a company called Vivino Law, a law firm. Vivino Law and . . . wait, Vivino Law, Vivino and Vivino Law, I guess the stack their name Vivino twice. It’s a family-owned law firm. They out SEO’ed you for your own name at the time.
Andrew: All right. So now you’re starting to get users. You don’t want to keep going to supermarkets or hiring people to go to supermarkets all over the world to take pictures. You start to come up with ideas to get people to take photos, to scan, what were some of the ideas and then what’s the one big one that took off for you?
Heini: Yeah. So very early on we did this. So this is even before the proper app launches. We did a strict competition app which was basically an app which counted how labels you’ve submitted. So we said to people, you know, “Go on this app, download it, and then take pictures of wine labels. We’ll tell you what number you are in the competition and if you win after a month or whatever it was, we’ll give you a [yellow corkscrew 00:27:39].” I was like, “Some people just go crazy on these things.”
Andrew: For a corkscrew?
Heini: Corkscrew, yeah, yeah. But a fancy one. It was a fancy one.
Heini: And that really got the going. We really started building the database. The other thing is because then when we launched the product, it wasn’t very that good because the tail was obviously much longer than we had anticipated. And we didn’t know a lot of wines. What we did there is try to give people at service level meaning, you know, “Honestly, hey, we don’t know this wine but we will match it for you.” So people go the impression that we actually went in and search for the wine and so on and we did that manually. And people said, “You know what? It mind not have been an amazing experience, but they went in and did it manually. I’m impressed that I’m going to try this again.”
Andrew: Wait, wait, so if they didn’t get a quick match, that was a disappointment, but you say, “We will try to match it for you,” and that means that you took the picture or you’d have somebody in India or wherever in the world start matching it up and then you send them the data and go, “Whoa, they eventually got it. They didn’t give up on me.”
Heini: It’s like a late magic moment
Andrew: That makes sense because it feels like you didn’t forget about it. You’re still there, you’re still working on. Okay, and why did you want . . . why put such an emphasis on getting more data into your app as opposed to saying, “I’m going to get more users.” Was it about getting more photos, more data in?
Heini: Because it’s all about the product and it’s all about building the best product. If you know people are using your app, they will do that if the product is good. If people use it, then that drives more usage, right? So you can push users to the app at this point but you might not improve the product, but if you keep improving the product, this will drive growth. And this is like really the core of our belief is that you just keep improving the product and there’s a very, very good chance that users will come.
Andrew: You said you’re willing to put out a bad first version because you wanted to see whether this thing had legs. How did you know that it did have legs especially considering that for it to really be good, you needed more labels, and so how did you know that it was going to be good?
Heini: Yeah. So we didn’t, like we really didn’t know it was going to be good. We just knew that we had this problem we wanted to fix it and I think, you know, we thought that if we could fix it well and fix it meaning is it going to work sort of more often than it doesn’t, I think that comes back to 2012 when we really started picking off, was sort of human psychology where people said, “You know what? This product might not be great, but at this point, it works more than it doesn’t.” And there is some kind of tipping point there when you growth starts taking off.
Andrew: Was there a number that you were looking for to see that growth was taking off? Was it users per month or something like that?
Heini: No, so we just saw that on the growth rate, but we think we have a number I mind, yes. When you have a product that you use and if, say, less than maybe 60%, somewhere between 60% and 70% get sort of a gratifying experience, if it’s lower than that, you’re going to have a hard time keeping people. But when you get over that, it actually improves quite a lot.
Andrew: Meaning 60% of people who take a photo of their label get . . . okay, got it.
Andrew: So for a long time it was, “Can we get more people to scan and can we get a 60 plus percent of those people are result that actually is meaningful?” That was the big metric that you kept driving towards.
Heini: Yes. We didn’t know exactly where it was, but when we hit around that point, it really started to go on.
Andrew: Do you remember when you got a million scans a day? That sounds huge.
Heini: I believe that must have been Christmas like three/four years ago. I remember like 2011 or like we’re a year in like we haven’t really haven taken off and like we had like 10,000 scans in a day or something like that. And looked up at Cooper [SP] and said, “You know, imagine if you can get a million people scan in a day,” and I was like, “Well, yeah, that could actually happen.” And this Christmas we had 2.2 million people scanning in Christmas.
Andrew: Unique people scanning in a day?
Heini: Yeah, 2.2 million on Christmas day.
Andrew: That is shocking. All through the app?
Heini: Yes, yes, exactly.
Andrew: You don’t have partnerships with like Google for Google Search or any of that?
Andrew: Okay. Data, you’ve said . . . I keep coming back to data because you said it to our producer. I saw you say it online. I saw other people say about you. You did a partnership in the beginning with the supermarket where you were giving them ratings. They were giving you what in exchange?
Heini: Yeah. So they were really giving us eyeballs and marketing. So this is the biggest supermarket chain in Denmark, they call it Netto. And they really want to also to help all their buyers buy wine. So we put this shelf cards on there, not all of the wines, but some of the wines. And the people can see the ratings and so on. And the funny thing is that, you know, this is many years after we started, but it’s the same problem, right? They’re still trying to solve the same problem and they still do that. It’s kind of cool. We want ratings out there for everybody to see.
Andrew: Okay. And so that’s why data is so valuable. You can go to a supermarket and say, “We’ll give you guys the kind of data that you can’t get from Robert . . . ” what’s his name?
Andrew: Robert Parker, excuse me, Robert Parker, for everyone because Robert Parker would only cover a small percent, if any, within that supermarket. Okay, so that was starting to help you guys out. You still kept going along the way when you were answering that question with such brash, the one that I saw quoted in “Business Insider” and other places, where someone on “Kora” said, “How do you make money?” and you said, “We don’t.” You seem confident. Internally, did you say, “Maybe we’ll never figure out how to make money with this?”
Heini: I think I was confident because I was always confident we were going to do it because I’ve been doing this pitch to investors for a long time and the story has always been the same. It’s pretty simple. You sit at a restaurant, you scan a bottle of wine, you look at it, and you can buy it. Like it’s a great story. People say, “Yeah, if can do that while I’m sitting there half-drunk with my friends, amazing. I’ll definitely buy six bottles.” So I think I was always pretty confident that that was going to happen. I think that’s probably why I was like, saying, “No, no, not making money at this point is fine. We have an idea and we’ll figure it out.”
Andrew: Do you have any internal doubt at this point, or throughout this business?
Heini: You know, as an entrepreneur I think everybody has a lot of doubt because you’re super optimist all the time and suddenly, “Oh, that didn’t work. I got to try something else.”
Andrew: I don’t see it. Where did you have doubt about? If you could go back in time with anything.
Heini: Well, the things is, so sometimes it’s very basic. It’s like, “Hey, are people going to stop using this app at some point?” Like you don’t know that. And like, “Oh, things are amazing. Like we have this many scans and people are super engaged,” but you don’t know if it’s going to stop. You don’t know if it’s a fad or not. We have been very consistent on our growth, but the facts are you don’t know for sure and really what drives you, you can actually be that doubt. So I think a lot of entrepreneurs that build companies, what drives them is that doubt, “Is this going to work or not?” and we just keep grinding through.
Andrew: I’m looking at your Wikipedia page. I still can’t believe that the corkscrew was the thing that got so many pictures. It’s in there. And I must have missed before. The Wikipedia page does that you guys manually used to process photos using 50 Indian contractors. The next line in the Wikipedia entry is in 2013, Vivino raised $10.3 million in capital. Was it tough to raise money at that point?
Heini: Yeah. So raising money is always like a complexity. When people ask me that question, everybody says, “It’s so hard to raise money.” And there’s some truth in that in the sense that, yeah, you need to rally people around, you need to find out what the deal is and all the legal stuff that were not easy to deal with. But really what is hard here is building a product that people want to use. That’s hard. If you build a product that people want to use and has some commercial thing going on at some point, you will find the money, I guarantee you that. So that what’s hard. Like doing that is hard. I’m not going to say the money is going to come by itself, but if you get those things right and people start believing in you, then you will get the money. For sure it was a lot of work, it was a lot of trouble, it was a lot of all kind of stuff.
Andrew: But if you can get people to use it then you’ll get the money meaning from investors and also from the product itself. This was the second raise. It seems like before then, you guys had $2.1 million. When did the first 70 come in?
Heini: Yes. So this was A round, like our big round was $10.7 million back then, yes.
Andrew: And so how far did you have to get before you can make your first round?
Heini: Again, it comes back to when me being an entrepreneur before and so my partner, I think, was maybe a little bit easier for us to raise money when we said, “Hey, we have something, not much. We think we’re going to build something.” They said, “Sure, we believe you.” And if you’re an 18-year-old kid, that might be a little bit harder. But when it comes to building an A round, doing A round of $10 million, then you have to get to a point where you have a working product that has traction. And we have . . .
Andrew: Okay. So the first couple million, people would bank based on your background. The next 10 plus million, you have to actually have something to do, something to show for it. Look at this “VentureBeat” article, the headline is, “Vivino uncorks $10.3 million to turn anyone into a wine snob.” Sorry?
Heini: That’s poetry. That’s definitely poetry.
Andrew: Yeah. You must have been so proud of that headline. The thing though about it is it’s kind of a funny headline and that it’s such a typical like newspaper headline is what it feels like. But the second part actually still standout because it’s true to something I’ve seen you guys talk a lot. You wanted to appeal to anybody person. The person who does not have big wine collection. You knew from like throughout as I read these stories, you knew who your customer was. How did you know who that customer was and what did you do to hammer that home into your product?
Heini: Yeah. A couple of things. But first of all, we knew it because we were the customer. And we found out early on a lot of these, more of like fancy drinkers, they were looking at Parker and all those things, anyway, they were fine. They knew where to look at Parker, Wine Spectator, and so on. The middle group of like everybody as we call it now, well, they are the ones that were lost. They were underserved and also being a very, very attractive group because that’s where a lot of the money is because people drink a lot and don’t know a lot about it.
Andrew: All right. In a moment I’m going to come back and I’m going to ask you about the time that your data seemed to have disappeared and you were on Amazon Services. Let’s come back to that in a moment. First, I’ve got to tell everyone about a company called HostGator. I started, I got to tell you, a second business where I wanted to help create chat bots. I needed to create my own website for it of course. We call the Bot Academy. I bought the domain for like 1,000, 3,000, 5,000, I don’t know what it was but it wasn’t that much, but I wanted a good domain.
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All right. We were at a place right now where people are starting to use it, you’re raising money, and it’s time to figure out where the revenue was coming from. We’ll get into their Amazon Services issue in a moment. What did you experiment with to get revenue?
Heini: I think we honestly we didn’t experiment that much. I think the original story that this is so close to a purchase anyway, you know, even if we’re not part of the loop of you scanning a bottle of wine in the grocery store, you still are very, very close to actually buying a bottle. So we just kept telling the story but we didn’t really start doing e-commerce like at a scale till like slowly in ’14 but in really in ’15, ’16 really started scaling.
Andrew: I thought at first I read . . . again, I was going back in history looking at trolled articles. I thought I saw that you guys at first were selling ads, it was like some kind of promotion that you guys would sell to advertisers. Am I right about that?
Heini: So we do deal on wines. So we find providers that say, “We’ve got 100 case of this, can you help us sell?” and we’ll put in front of their users. We do that and we do that today.
Andrew: Was that one of the first revenue?
Andrew: Got it. Okay.
Heini: But it’s all sort of e-commerce space.
Andrew: And the thing is I wouldn’t have guessed. If you came to me and said, “Andrew, you’re an investor?” I’d say, “Yeah, here’s our plan. People are going to scan the wine and then we’re going to let them buy from us.” I’d say, “If they’re scanning the wine, they’re holding the wine in their hand. Even if you can give them $2, $5, $7 off, it’s in their hand. Why would they wait for it to come in the mail as opposed to just going to the register?”
Heini: So that’s completely true and that’s not how we see it. We see that as an engagement. You know, for us to figure out what they drink and people just to use and engage with the app. There are plenty of other opportunities to buy. It could be by email, it could be that we’ve now seen that you rated [eight 00:43:35] Cabernet Sauvignon saying, “It seem like, you know, it looks like you like cab,” and then we’ll put something in front of you. And we’re not going to monetize every single situation and we don’t monetize the supermarket scenario there and we’re really fine with that.
Andrew: And so the typical use case is somebody I imagine installs the app, goes to look a wine, gets that wow experience, decides whether they wants to buy it or not. And then at what point, what do you before you can get the sale from them and make it feel right?
Heini: Yeah. So right now the app has changed quite a lot. So when you open the app now, you open it up in the full marketplace. It looks like a . . . and we call it like a Netflix for wine. So when you open it up, you can move these bands which gives you all kinds of wines that you can buy. But it’s all based on your behavior. So the prices levels that we see you do. It’s the different wine styles that you like and it’s all wines that we’re going to deliver to you like within a few days. And what we really also found out throughout is that shipping is a challenge. People do not . . . like Amazon trained people not to want to pay for shipping. So we just launched a premium product, $47, you get a full year of free shipping of wine. It means now when you open your email, you have the biggest selection of wines out there, and if you have premium, you have free shipping on all of them.
Andrew: And it’s 30-day free trial for the premium. So if I just want to go and order a whole bunch of wine today, I could get it, cancel on premium, and owe nothing to that.
Heini: But you’ll be so pleased with it and you’ll definitely wouldn’t do that.
Andrew: Yeah. It doesn’t sound like it’s that much frankly for shipping of wine. So I see. So it’s the photo maybe in that moment if I’m taking a picture of a bottle of wine that I’m holding in my hand, that’s not the sale opportunity, that’s just me seeing the app and doing it. It’s later on when I say, “What wine do I want? What should I have for a party that I go in and I see some that are recommended automatically to me or maybe I do some searches and find something that I like? Got it. I like actually as a non-wine drinker that when I do a search you guys recommend stuff to me that gives me an opportunity to see how I can find wines by you giving me search words. I also was skeptical that really was a social network, a community. But you guys are really good about not adding all my friends from Facebook immediately and slamming them. In fact, I don’t think you ever did. But instead saying, “I could find my friends, but maybe I prefer all these other people like Mark Gudgel.” Do you know Mark Gudgel?
Heini: I don’t think I do. No.
Andrew: He’s one of the active users. He’s got 31,000 followers on your app.
Heini: There you. Then I probably should know him and I probably have met him.
Andrew: Twenty one badges. He’s number three in the U.S. And so you show me him and I get to see his opinion on different wines and I get to buy wines that he likes.
Andrew: This is the heart of it, you keep using the word “marketplace” and my sense is that it’s got to be a marketplace because of the laws in the U.S. Am I right about that?
Heini: Yes. So we’re never going to be the retailer of record in the U.S. But the thing about a marketplace is also . . . first of all, we now have 500,000 merchants on there. It means that when you open the app here in California, you have a selection of maybe 100,000 different wines. And we’re not going to send you to any shitty wines. We’re going to send you to the best wines. And based in our data, we can see that if you like Chardonnay, this particular 4.2 for $30 bucks is really good for you. So with the marketplace, we can show whatever is best for you. We don’t have to sell everything.
Andrew: The problem with marketplaces like this is it’s really hard to do quality, especially considering you have a lot to have consistent quality. What do you do about that in marketplace where you don’t have control? How do you get results? Sorry, go ahead.
Heini: Exactly. So first of all, the wine itself is a big part of the product, right? On that, we know exactly what’s good or bad because we have these unique dataset with ratings and so on. But the other part of quality obviously is operations and so on. And we just have very, very clear guidelines to all of our merchants. They have to ship right away. They have to ship quickly, all those things. So we really try and motivated them to give an amazing experience when they come to . . .
Andrew: And how can you check in? What’s your follow-up process to make sure that they . . .
Heini: Yeah. So everything goes to our system so we know . . . they say to us, “Hey, we’ve now shipped it. We can track it and so on.” And it’s all inside the app, right? So just like with Amazon, you’ll have a full order history inside the app. So we track all these things very, very closely.
Andrew: Let’s talk about these time when Amazon Web Services went down, what happened?
Heini: I think this is for me kind of sensitive thing because it was not easy, but no. When it comes to building a startup, I believe in building it fast. And honestly, you should not build for scale. Like building for scale can be very, very expensive and you don’t know what’s going to work yet and so on. So just get going, just build quickly. And we really live that which meant that we had built some things and it wasn’t Amazon that went down like our stuff went down on Amazon and it wasn’t their fault. And suddenly our server went down and we had lost quite a bit . . . we hadn’t lost any user data we never did that. But a lot of our code in some our images, it was a mess and we just had a hard time recovering. And also we weren’t running for, like more than 24 hours. And it’s insanely painful when you sort of sleep on the couch if you sleep at all and here comes, “All this I worked for it could be gone.” And that’s rough, really rough.
Andrew: How did you guys get back up and what did you do to avoid it?
Heini: Yeah. So we didn’t have any real infrastructure and so on. So we moved things and set things up properly on Amazon. So we used all their services for hosting pictures and data and so on and then everything is fine. We just set it up like a very minimum way and, you know, weren’t that good honestly.
Andrew: You know what? One final challenge I think we should talk about, when I go to Trustpilot and I do a search for reviews, I see some negative reviews about things like, “Someone paid for overnight delivery but it wasn’t delivered overnight. Someone else paid to have a bottle of wine delivered but it was damaged.” This issue of customer satisfaction and experience when it’s so many different people were shipping it out and managing your customer experience, that’s a tough question. It seems like maybe it’s one that you still haven’t mastered.
Heini: Yeah. No, definitely. It’s something that we will master at some point but it’s really so ongoing work here. But we just have to keep the bar high for these merchants and say goodbye to merchants that aren’t performing. These things are going to happen. It’s about just getting small as possible, you know, percentage that get that. I’m sure like on Amazon it happens too. We’re just driving down the number of problems on there.
Andrew: All right. Yeah, I can see that. It stinks that in the U.S. you’re now allowed to just buy the wine yourself and ship it out. Doesn’t it?
Heini: Maybe we wanted to do it sometimes. I do like the idea of being a marketplace. Like Uber doesn’t have any cars and so on. I like that idea too in its core. But we’ll get it to work for sure and customer satisfaction, that was very, very high and people keep buying more and more because they have the data to figure out what’s good and what’s bad and just do a real quick purchase. On the iPhone you can also do Apple pay, so it’s like seconds [inaudible 00:51:23].
Andrew: All right. Let’s close it out with a celebration. So you’ve done a lot. Do you guys as a team, as a company celebrate, do you individually celebrate? Have you done a big celebration of some milestone that you could share with us?
Heini: Yes. We hit a million we did a big party. We did 10 million we had another big party.
Andrew: Ten million what? Scans a day?
Heini: Like 10 million, sorry, users and that’s been a while. But just recently, we did 4,000 a day and I had promised everyone a bottle of Dom when we did over 3,000. They beat through with 4,000 orders in a day. So that was pretty amazing too.
Andrew: All right. The app is really cool. So I have to be honest with you, I downloaded it a while back and I hadn’t gone back to it in a while. You guys just improved it dramatically. It went from this thing where it was all about the camera to now being all about the community. I’m just amazed that you’ve found so many people who are . . . it’s like you’ve got your own little Facebook in here with people who are real wine connoisseurs except I’m not intimidated by any of them. Look at this guy, Christian . . .
Heini: It’s true. That’s important.
Andrew: How’s Christian going to intimidate anyone? The guy I had mentioned earlier, he’s drinking wine with a straw.
Heini: Yes. We want to make wine for everybody . . .
Andrew: Mark Gudgel is drinking wine with a straw with a baseball cap on.
Heini: Yeah, exactly. That’s what you want to do.
Andrew: People love this freaking ratings. All right. Thanks so much for being on here. Congratulations everyone who wants to go check it out can go frankly, just go to the App Store or the Google Play Store and look for Vivino or go to their website or frankly do a search so law firm is no longer the number one Vivino is Google search results. And I’m grateful to you for doing this interview and I’m also grateful to the two sponsors for being here, the company that will host your website right, it’s called hostgator.com/mixergy. And the company that will let anyone sent out smart email marketing even if they don’t have much time to master the software or a team to get it right, activecampaign.com/mixergy. We’ll make it simple. You owe it to yourself to try them both. Thanks so much for being here.
Heini: Thank you very much for having me.
Andrew: You bet. Bye, everyone.